TABLE OF CONTENTS




|                                                                                      |  |  |  |  |  |  |  | 
|------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|Index to Form 10-Q                                                                   
|Managements Discussion and Analysis of Financial Condition and Results of Operations
|Notes to Consolidated Financial Statements                                           
|Other Information                                                                    
|Signature                                                                            
|Letter RE Unaudited Interim Financial Information                                    



---



##### Table of Contents






UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




---

FORM 10-Q

|                                               |  |                                                                                          
|---------------------------------------------- |  | -----------------------------------------------------------------------------------------
|(Mark One)                                     |  |                                                                                          
|                                               |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934 
|For the quarterly period ended March 31, 2001,
|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)                                

313-965-2430

(Registrants telephone number, including
area code)


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 10, 2001:

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



---



---



##### Table of Contents








INDEX TO FORM 10-Q


FOR QUARTER ENDED MARCH 31, 2001


|                                |                                                                                                |        |    |    | 
|------------------------------- | ---------------------------------------------------------------------------------------------- | ------ | -- | -- | 
|                                |                                                                                                | PAGE  
|                                |                                                                                                | NUMBER
|                                |                                                                                                |       
|COVER                           |                                                                                                |        | i  |   
|                               
|                               
|                               
|                               
|                               
|INDEX                           |                                                                                                |        | ii |   
|                               
|                               
|                               
|                               
|                               
|PART I   FINANCIAL INFORMATION |                                                                                                |        |    |   
|                               
|                               
|                               
|                               
|                                | Item 1. Financial Statements                                                                   |        |    | 8  | 
|                               
|                               
|                               
|                               
|                                | Item 2. Managements Discussion and Analysis of
	Financial Condition and Results of Operations |        |    | 1  | 
|                               
|                               
|                               
|                               
|                               
|PART II  OTHER INFORMATION     |                                                                                                |        |    |   
|                               
|                               
|                               
|                               
|                                | Item 6. Exhibits and Reports on Form 8-K                                                       |        |    | 15 | 
|                               
|                               
|                               
|                               
|                               
|SIGNATURE                       |                                                                                                |        | 16 |   

ii



---



##### Table of Contents








MANAGEMENTS DISCUSSION AND ANALYSIS


OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS


RESULTS OF OPERATIONS

Results reflect increased contributions from Gas Sales
Program and colder weather  MichCons
earnings were $97.3 million for the 2001 first quarter, an
increase of $30.4 million from the comparable 2000 period
of $66.9 million. The earnings improvement for the 2001
first quarter reflects higher gross margins resulting from
increased contributions from the Gas Sales Program and the
impact of colder weather. Gross margins under the Gas Sales
Program benefited from lower gas cost attributable to a
reduction in inventory gas.




|                                          |  |         |      |         |  |  |       |  
|----------------------------------------- |  | ------- | ---- | ------- |  |  | ----- | -
|                                          |  |        
|                                          |  | Quarter
|                                          |  |        
|                                          |  | Dollar  |      | Percent
|Earnings Components (Dollars in Millions) |  | Change  |      | Change 
|Comparing 2001 to 2000                    |  |         |      |        
|Operating Revenues                        |  | $       | 33.7 |         |  |  | 7.6   | %
|                                         
|                                         
|                                         
|                                         
|Cost of Gas                               |  |         | (8.2 | )       |  |  | (3.8  | )
|                                         
|                                         
|                                         
|                                         
|Gross Margin                              |  |         | 41.9 |         |  |  | 18.5  |  
|                                         
|                                         
|                                         
|                                         
|Operation and Maintenance                 |  |         | .5   |         |  |  | .7    |  
|                                         
|                                         
|                                         
|                                         
|Depreciation and Depletion                |  |         | .4   |         |  |  | 1.5   |  
|                                         
|                                         
|                                         
|                                         
|Property and Other Taxes                  |  |         | (2.8 | )       |  |  | (15.0 | )
|                                         
|                                         
|                                         
|                                         
|Merger Costs (Note 2)                     |  |         | .7   |         |  |  | N/M   |  
|                                         
|                                         
|                                         
|                                         
|Other Income and Deductions               |  |         | (3.4 | )       |  |  | (24.5 | )
|                                         
|                                         
|                                         
|                                         
|Income Tax Provision                      |  |         | 16.2 |         |  |  | 44.8  |  
|                                         
|                                         
|                                         
|                                         
|Net Income                                |  |         | 30.4 |         |  |  | 45.4  |  




N/M  not meaningful


Gross Margin

Gross margin (operating revenues less cost of gas) increased
$41.9 million in the 2001 first quarter. As previously
discussed, gross margins reflect increased contributions from
the Gas Sales Program as well as higher gas sales due to colder
weather.

MichCons three-year Gas Sales Program is part of its
Regulatory Reform Plan (Note 4a) which was implemented in
January 1999. 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). Margins generated under
the sales program were approximately $32 million higher in
the 2001 first quarter, primarily as a result of lower cost gas
supply. The average cost of gas sold during the 2001 first
quarter was $2.44 per Mcf, a decline of $.38 per Mcf
from the 2000 first quarter. As discussed in the Cost of
Gas section that follows, the decrease in MichCons
average cost of gas sold during the 2001 first quarter is due to
a 25 billion cubic feet (Bcf) liquidation of inventory gas
that was priced at $.38 per Mcf (Note 3). Higher
prices for gas purchased, partially offset the favorable impact
on margins of the inventory liquidation.

1



---



##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)


Margins generated under the Gas Sales Program reflect an
increase in the number of customers choosing to purchase gas
from MichCon rather than other suppliers under MichCons
three-year Customer Choice Program. There were 55,000 customers
participating in year two of the program that commenced in April
2000, a decrease of 15,000 customers from year one of the
program. Distribution margins were retained from participating
customers as MichCon continued to transport and deliver the gas
to the customers premises. As discussed in the
Outlook section that follows, year three of the
program commenced in April 2001 with approximately 30,000
customers choosing to participate.

The significant improvement in gross margins was also due to an
increase in gas sales due to colder weather. Although weather
was 5.5% warmer than normal in the 2001 first quarter, it was
still 8.7% colder than the comparable 2000 period. Partially
offsetting the favorable impact on margins from the Gas Sales
Program and the colder weather were declines in end user and
intermediate transportation revenues, as well as revenues from
other gas-related services.




|                                              |                          |         |      |      |   |  |       |       |  
|--------------------------------------------- | ------------------------ | ------- | ---- | ---- | - |  | ----- | ----- | -
|                                              |                          |        
|                                              |                          | Quarter
|                                              |                          |        
|                                              |                          | 2001    |      | 2000
|Effect of Weather on Gas Markets and Earnings |                          |         |      |     
|Percentage Warmer Than Normal                 |                          |         | (5.5 | )%   |   |  | (14.2 | )%   
|                                             
|                                             
|                                             
|                                             
|Decrease From Normal in:                      |                          |         |      |      |   |  |       |      
|                                             
|                                             
|                                             
|                                             
|                                              | Gas markets (in Bcf)     |         |      | (6.3 | ) |  |       | (16.1 | )
|                                             
|                                             
|                                             
|                                             
|                                              | Net income (in Millions) |         | $    | (4.9 | ) |  | $     | (15.0 | )




Gas sales and end user transportation revenuesin total
increased $36.1 million for the 2001 first quarter.
Revenues reflect an increase in gas sales volumes, partially
offset by a decline in end user transportation deliveries. Gas
sales volumes rose 8.3 Bcf in the 2001 first quarter due
primarily to the colder weather and the addition of 15,000
customers who chose to purchase their gas from MichCon rather
than other suppliers under MichCons Customer Choice
Program. End user transportation deliveries decreased
5.0 Bcf in the 2001 first quarter, reflecting the impact of
a slowing economy as well as volumes associated with the fewer
number of customers participating in the Customer Choice
Program. Customers participating in this program are classified
as end user transportation customers rather than gas sales
customers. Accordingly, gas sales revenues have increased,
partially offset by a decrease in end user transportation
revenues, resulting in a net increase in total operating
revenues due to the gas commodity component included in gas
sales rates. The impact of colder weather partially offset the
decrease in end user transportation volumes attributable to the
Customer Choice Program.

2



---



##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)




---

|                         |                             |         |       |       |  |   |       |       | 
|------------------------ | --------------------------- | ------- | ----- | ----- |  | - | ----- | ----- | 
|                         |                             |        
|                         |                             | Quarter
|                         |                             |        
|                         |                             | 2001    |       | 2000 
|                         |                             |         |       |      
|Gas Markets(in Millions) |                             |         |       |       |  |   |       |      
|                        
|                        
|                        
|                        
|                         | Gas Sales                   |         | $     | 408.3 |  |   | $     | 370.7 | 
|                        
|                        
|                        
|                        
|                         | End User Transportation     |         |       | 37.3  |  |   |       | 38.8  | 
|                         |                             |         |       |       |  |   |       |      
|                         |                             |         | 445.6 |       |  |   | 409.5 |      
|                        
|                        
|                        
|                        
|                         | Intermediate Transportation |         |       | 12.5  |  |   |       | 14.5  | 
|                        
|                        
|                        
|                        
|                         | Other                       |         |       | 18.4  |  |   |       | 18.8  | 
|                         |                             |         |       |       |  |   |       |      
|                         |                             | $       | 476.5 |       |  | $ | 442.8 |      
|                         |                             |         |       |       |  |   |       |      
|Gas Markets(in Bcf)      |                             |         |       |       |  |   |       |      
|                        
|                        
|                        
|                        
|                         | Gas Sales                   |         |       | 85.0  |  |   |       | 76.7  | 
|                        
|                        
|                        
|                        
|                         | End User Transportation     |         |       | 46.6  |  |   |       | 51.6  | 
|                         |                             |         |       |       |  |   |       |      
|                         |                             |         | 131.6 |       |  |   | 128.3 |      
|                        
|                        
|                        
|                        
|                         | Intermediate Transportation |         |       | 171.9 |  |   |       | 182.9 | 
|                         |                             |         |       |       |  |   |       |      
|                         |                             |         | 303.5 |       |  |   | 311.2 |      
|                         |                             |         |       |       |  |   |       |      




Intermediate transportation revenuesdecreased
$2.0 million in the 2001 first quarter, and intermediate
transportation deliveries decreased 11.0 Bcf. A significant
portion of the volume decrease was due to 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 attributable
to the expiration of some fixed-fee contracts and the
dissolution of a partnership that owned a 126-mile northern
Michigan natural gas gathering system. MichCon held a 66%
interest in the partnership that was dissolved in
June 2000. Under the terms of the dissolution, MichCon
received the 67-mile northern portion of the gathering system in
return for its partnership interest. Although there are lower
revenues attributable to the gathering system, such decline
represents the joint venture partners share of revenues.
Accordingly, the decline in revenues was offset by a reduction
in minority interest expense.

Other operating revenuesdecreased $.4 million in
the 2001 first quarter due to a decline in revenues from
providing appliance maintenance services and was partially
offset by an increase in late payment fees.

Cost of Gas

Cost of gas is affected by variations in sales volumes and cost
of purchased gas as well as related transportation costs. Cost
of gas sold decreased $8.2 million in the 2001 first
quarter, primarily due to the impact of the 25 Bcf
liquidation of inventory gas (Note 3). The cost of gas
decrease was partially offset by the effect of higher gas sales
volumes and prices paid for fixed-price supply. As previously
discussed, the increase in sales volumes reflects colder weather
and customers who have chosen to purchase gas from MichCon
rather than other suppliers. The average price paid for gas
purchased in the 2001 first quarter increased $.34 per Mcf (12%)
compared to the 2000 first quarter.

3



---



##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)


Other Operating Expenses

Operation and maintenanceexpenses increased
$.5 million in the 2001 first quarter. The increase is
attributable to higher employee medical costs and the benefit to
the 2000 first quarter of insurance proceeds resulting from the
settlement of environmental claims with certain insurance
carriers. Partially offsetting the increase were lower pension
and retiree healthcare costs.

Depreciation and depletionincreased $.4 million in
the 2001 first quarter reflecting depreciation on higher plant
balances.

Property and other taxesdecreased $2.8 million in
the 2001 first quarter reflecting a change in the taxable value
of personal property subject to taxation by local taxing
jurisdictions. New valuation tables approved by the Michigan
State Tax Commission more accurately recognize the impact of
regulation on the value of a utilitys personal property
based on the propertys age. The new tables impacted
property tax expense beginning in mid-2000.

Merger costsincreased $.7 million in the 2001 first
quarter and represent legal, consulting, accounting, employee
benefit and other expenses associated with the pending merger
between MCN and DTE Energy Company (Note 2).

Other Income and Deductions

Other income and deductions decreased $3.4 million in the
2001 first quarter. The decrease is attributable to lower
interest costs and an increase in interest income. The increase
in interest income results from MichCon leasing a portion of its
pipeline system to the Vector Pipeline Partnership through a
capital lease arrangement that began in December 2000.

Income Taxes

Income taxes increased $16.2 million in the 2001 first
quarter due to an increase in pre-tax earnings.

Outlook

Strategy MichCons strategy
is to expand its role as the preferred provider of natural gas
and high-value energy services within Michigan. Accordingly,
MichCons objectives are to increase revenues and control
costs in order to deliver strong shareholder returns and provide
customers with high-quality service at competitive prices.

Regulatory Reform Plan MichCon
has capitalized 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 designed to
offer all sales customers added choices and greater price
certainty. The Customer Choice Program began in April 1999
and allows a limited number of customers to purchase their gas
from suppliers other than MichCon. Year two of the program began
in April 2000, with approximately 55,000 customers

4



---



##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)


choosing to participate. The final year of the program began in
April 2001, and the number of participating customers
declined to approximately 30,000. MichCon will continue to
transport and deliver the gas to the participating
customers premises at prices that generate favorable
margins.

The Regulatory Reform Plan also includes the Gas Sales Program,
which suspended the gas cost recovery (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 for the three-year period ending in
December 2001. The suspension of the GCR mechanism allows
MichCon to profit from its ability to purchase gas at less than
$2.95 per Mcf. The program also increases MichCons risk
associated with generating positive margins.

As part of its gas acquisition strategy, MichCon has entered
into fixed-price contracts for nearly 90% of its expected 2001
gas supply requirements assuming normal weather. MichCon expects
to meet the balance of its gas supply requirements for 2001 with
withdrawals from storage. In the 2001 first quarter, MichCon
supplemented its fixed-price purchases with a 25 Bcf
liquidation of inventory gas at prices significantly lower than
$2.95 per Mcf to mitigate the effect on earnings of current high
gas prices. Although this strategy produced favorable margins in
the 2001 first quarter, MichCon does not expect to generate
profits from the Gas Sales Program in 2001. The average cost of
MichCons fixed-price supplies for the remainder of 2001 is
higher than $2.95 per Mcf.

MichCon expects negative margins from selling gas in the 2001
second through fourth quarters, essentially offsetting the
positive margins generated in the 2001 first quarter. While
MichCon has fixed the prices on a substantial portion of its
expected 2001 gas purchases, the level of margins ultimately
generated from selling gas will be affected by a number of
factors. Such factors include: (i) the actual level of gas
sales volumes; (ii) the timing and location of gas
purchases; and (iii) the level of gas consumed in
December 2001 that will be billed at GCR rates. The actual
level of gas sales volumes will fluctuate with changes in
weather and the number of customers who ultimately choose to
purchase gas from suppliers other than MichCon. By changing the
timing and location of gas purchases, MichCon can capture
favorable price differentials within certain operational and
contractual limits. More significantly, volumes delivered in
December 2001 that remain unbilled at December 31, 2001
will be billed at the January 2002 GCR rate. Therefore, actual
gas margins in 2001 will be impacted by the level of unbilled
volumes and the January 2002 GCR rate. Based on current forward
gas prices, the unbilled volumes would be billed at rates
significantly higher than $2.95 per Mcf.

The plan also encompasses an income sharing mechanism that
allows customers to share in profits when actual returns on
equity from utility operations exceed predetermined thresholds.
Based on the MPSC approved formula, management believes that no
income sharing was required in 1999 and 2000, and does not
expect income sharing will be required in 2001.

Proposed Regulatory Changes The
MPSC is continuing its initiatives designed to give all of
Michigans natural gas customers added choices and the
opportunity to benefit from lower gas costs resulting from
competition. In October 2000, the MPSC issued an order that
provides uniform terms and conditions for a new voluntary
customer choice program in Michigan. Key aspects of the order
include: (i) continuing customer choice on a permanent and
expanding basis; (ii) eliminating fixed commodity rates in
favor of GCR rates that reflect market prices; and
(iii) investigating the potential unbundling of additional
services offered by Michigan gas utilities.

5



---



##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)


As discussed in MichCons 2000 Annual Report on
Form 10-K, MichCon filed applications with the MPSC in
December 2000 to modify the experimental Customer Choice
and Gas Sales Programs as outlined in the MPSCs
October 2000 order. MichCon had proposed the modifications
to become effective in April 2001. On March 22, 2001,
MichCon withdrew its applications with the MPSC. MichCon will
return to a GCR mechanism in January 2002 when the current
Regulatory Reform Plan expires.

Pending Merger As a condition of
the Federal Trade Commission approving MCNs proposed
merger with DTE Energy Company (Note 2), MichCon agreed to
transfer a property interest to a unit of Exelon Corporation
allowing for the utilization of natural gas transportation
capacity on its system. The contract remains subject to
consummation of the merger. If the contract becomes effective,
it will allow for increased competition for end user
transportation and gas sales services that could reduce earnings
by an estimated $5 million annually beginning in 2002.

CAPITAL RESOURCES AND LIQUIDITY




|                                                     |                      |         |      |        |   |   |    |        |  
|---------------------------------------------------- | -------------------- | ------- | ---- | ------ | - | - | -- | ------ | -
|                                                     |                      |        
|                                                     |                      | Quarter
|                                                     |                      |        
|                                                     |                      | 2001    |      | 2000  
|                                                     |                      |         |      |       
|Cash and Cash Equivalents(in Millions)               |                      |         |      |        |   |   |    |       
|                                                    
|                                                    
|                                                    
|                                                    
|Cash Flow Provided From (Used For):                  |                      |         |      |        |   |   |    |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Operating activities |         | $    | 189.2  |   |   | $  | 199.2  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Financing activities |         |      | (176.4 | ) |   |    | (176.3 | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Investing activities |         |      | (18.1  | ) |   |    | (22.2  | )
|                                                     |                      |         |      |        |   |   |    |       
|Net Increase (Decrease) in Cash and Cash Equivalents |                      | $       | (5.3 | )      |   | $ | .7 |       
|                                                     |                      |         |      |        |   |   |    |       




Operating Activities

Cash flow from operating activities decreased $10.0 million
during the 2001 first quarter as compared to the same 2000
period. The decrease was due primarily to higher working capital
requirements which were partially offset by an increase in
earnings, after adjusting for non-cash items (depreciation and
deferred taxes).

Financing Activities

Cash flow used for financing activities increased
$.1 million during the 2001 first quarter as compared to
the 2000 first quarter. Financing activities reflect the
repayment of less short- and long-term debt, and an increase in
dividends paid to MCN. A summary of MichCons financing
strategies and its significant financing activities follows.

6



---



##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS(CONCLUDED)


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 $200 million
under a 364-day revolving credit facility, and up to
$150 million under a three-year revolving credit facility,
both of which expire in July 2001. During the first three
months of 2001, MichCon repaid $103.4 million of commercial
paper, leaving borrowings of $177.2 million outstanding
under this program at March 31, 2001.

In May 2001, MichCon repaid $20 million of maturing
long-term debt.

Investing Activities

MichCons cash used for investing activities decreased
$4.1 million in the 2001 first quarter as compared to the
same 2000 period. The change reflects proceeds from the sale of
securities associated with MichCons Grantor Trust.

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 and manages such 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 2000 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.

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 without exchange of the underlying principal
amounts. During the 2001 first quarter, there were no material
changes to MichCons interest rate risk.

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 2000 Annual Report on Form 10-K.

7



---



##### Table of Contents



CONSOLIDATED STATEMENT OF INCOME(UNAUDITED)




|                              |                                      |                                     |         |         |         |   |         |         |         |  
|----------------------------- | ------------------------------------ | ----------------------------------- | ------- | ------- | ------- | - | ------- | ------- | ------- | -
|                              |                                      |                                    
|                              |                                      | Three Months Ended                 
|                              |                                      | March 31                           
|                              |                                      |                                    
|                              |                                      | 2001                                |         | 2000   
|(in Thousands)                |                                      |                                     |         |        
|                              |                                      |                                     |         |        
|                             
|                             
|                             
|                             
|Operating Revenues            |                                      | $                                   | 476,459 |         |         | $ | 442,747 |        
|                              |                                      |                                     |         |         |         |   |         |        
|Operating Expenses            |                                      |                                     |         |         |         |   |         |        
|                             
|                             
|                             
|                             
|                              | Cost of gas (Note 3)                 |                                     |         | 208,317 |         |   |         | 216,520 |        
|                             
|                             
|                             
|                             
|                              | Operation and maintenance            |                                     |         | 64,520  |         |   |         | 64,063  |        
|                             
|                             
|                             
|                             
|                              | Depreciation and depletion           |                                     |         | 26,339  |         |   |         | 25,944  |        
|                             
|                             
|                             
|                             
|                              | Property and other taxes             |                                     |         | 16,150  |         |   |         | 18,990  |        
|                             
|                             
|                             
|                             
|                              | Merger costs (Note 2)                |                                     |         | 1,029   |         |   |         | 347     |        
|                              |                                      |                                     |         |         |         |   |         |        
|                              |                                      | Total operating expenses            |         |         | 316,355 |   |         |         | 325,864 |  
|                              |                                      |                                     |         |         |         |   |         |        
|Operating Income              |                                      |                                     | 160,104 |         |         |   | 116,883 |        
|                              |                                      |                                     |         |         |         |   |         |        
|Other Income and (Deductions) |                                      |                                     |         |         |         |   |         |        
|                             
|                             
|                             
|                             
|                              | Interest income                      |                                     |         | 2,533   |         |   |         | 726     |        
|                             
|                             
|                             
|                             
|                              | Interest on long-term debt           |                                     |         | (10,194 | )       |   |         | (12,273 | )      
|                             
|                             
|                             
|                             
|                              | Other interest expense               |                                     |         | (4,180  | )       |   |         | (3,009  | )      
|                             
|                             
|                             
|                             
|                              | Equity in earnings of joint ventures |                                     |         | 713     |         |   |         | 587     |        
|                             
|                             
|                             
|                             
|                              | Other                                |                                     |         | 713     |         |   |         | 181     |        
|                              |                                      |                                     |         |         |         |   |         |        
|                              |                                      | Total other income and (deductions) |         |         | (10,415 | ) |         |         | (13,788 | )
|                              |                                      |                                     |         |         |         |   |         |        
|Income Before Income Taxes    |                                      |                                     | 149,689 |         |         |   | 103,095 |        
|                             
|                             
|                             
|                             
|Income Tax Provision          |                                      |                                     | 52,339  |         |         |   | 36,155  |        
|                              |                                      |                                     |         |         |         |   |         |        
|Net Income                    |                                      | $                                   | 97,350  |         |         | $ | 66,940  |        
|                              |                                      |                                     |         |         |         |   |         |        



---

CONSOLIDATED STATEMENT OF RETAINED
EARNINGS(UNAUDITED)




|                              |                             |                    |         |        |  |   |         |        | 
|----------------------------- | --------------------------- | ------------------ | ------- | ------ |  | - | ------- | ------ | 
|                              |                             |                   
|                              |                             | Three Months Ended
|                              |                             | March 31          
|                              |                             |                   
|                              |                             | 2001               |         | 2000  
|(in Thousands)                |                             |                    |         |       
|                              |                             |                    |         |       
|                             
|                             
|                             
|                             
|Balance  Beginning of Period |                             | $                  | 494,648 |        |  | $ | 494,803 |       
|                             
|                             
|                             
|                             
|                              | Add  Net income            |                    |         | 97,350 |  |   |         | 66,940 | 
|                              |                             |                    |         |        |  |   |         |       
|                              |                             |                    | 591,998 |        |  |   | 561,743 |       
|                             
|                             
|                             
|                             
|                              | Deduct  Dividends declared |                    |         | 75,368 |  |   |         |       | 
|                              |                             |                    |         |        |  |   |         |       
|Balance  End of Period       |                             | $                  | 516,630 |        |  | $ | 561,743 |       
|                              |                             |                    |         |        |  |   |         |       



---

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
|                                                    |                                                                                                          |          |           |            
|                                                    |                                                                                                          | 2001     |           | 2000        |  | 2000
|(in Thousands)                                      |                                                                                                          |          |           |             |  |     
|ASSETS                                              |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                                   
|                                                   
|                                                   
|                                                   
|Current Assets                                      |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Cash and cash equivalents                                                                                |          | $         | 7,334       |  |      | $         | 10,366    |  |   | $         | 12,673    | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Accounts receivable, less allowance for doubtful accounts of
	$21,202, $18,276 and $18,912, respectively |          |           | 215,567     |  |      |           | 201,207   |  |   |           | 157,793   | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Accrued unbilled revenues                                                                                |          |           | 89,246      |  |      |           | 67,744    |  |   |           | 135,465   | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Gas in inventory (Note 3)                                                                                |          |           | 2,391       |  |      |           | 34,014    |  |   |           | 13,586    | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Property taxes assessed applicable to future periods                                                     |          |           | 45,713      |  |      |           | 49,525    |  |   |           | 54,767    | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Other                                                                                                    |          |           | 28,754      |  |      |           | 31,742    |  |   |           | 35,468    | 
|                                                    |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                                    |                                                                                                          |          | 389,005   |             |  |      | 394,598   |           |  |   | 409,752   |          
|                                                    |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|Deferred Charges and Other Assets                   |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Investment in and advances to joint ventures                                                             |          |           | 20,779      |  |      |           | 19,802    |  |   |           | 20,068    | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Long-term investments                                                                                    |          |           | 65,354      |  |      |           | 68,104    |  |   |           | 70,643    | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Investment in capital lease                                                                              |          |           | 84,399      |  |      |           |          |  |   |           | 76,395    | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Deferred environmental costs                                                                             |          |           | 25,281      |  |      |           | 26,067    |  |   |           | 26,372    | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Prepaid benefit costs                                                                                    |          |           | 230,367     |  |      |           | 170,563   |  |   |           | 214,068   | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Other                                                                                                    |          |           | 56,964      |  |      |           | 58,138    |  |   |           | 52,324    | 
|                                                    |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                                    |                                                                                                          |          | 483,144   |             |  |      | 342,674   |           |  |   | 459,870   |          
|                                                    |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|Property, Plant and Equipment, at cost              |                                                                                                          |          | 2,996,762 |             |  |      | 3,004,736 |           |  |   | 2,980,627 |          
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Less  Accumulated depreciation and depletion                                                            |          |           | 1,559,069   |  |      |           | 1,486,590 |  |   |           | 1,538,311 | 
|                                                    |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                                    |                                                                                                          |          | 1,437,693 |             |  |      | 1,518,146 |           |  |   | 1,442,316 |          
|                                                    |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                                    |                                                                                                          | $        | 2,309,842 |             |  | $    | 2,255,418 |           |  | $ | 2,311,938 |          
|                                                    |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                                   
|LIABILITIES AND SHAREHOLDERS EQUITY                |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                                   
|                                                   
|                                                   
|                                                   
|Current Liabilities                                 |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Accounts payable                                                                                         |          | $         | 83,057      |  |      | $         | 81,071    |  |   | $         | 98,357    | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Notes payable                                                                                            |          |           | 178,897     |  |      |           | 79,416    |  |   |           | 278,762   | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Current portion of long-term debt and capital lease obligations                                          |          |           | 24,581      |  |      |           | 26,150    |  |   |           | 24,652    | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Gas inventory equalization (Note 3)                                                                      |          |           | 67,187      |  |      |           | 80,844    |  |   |           |          | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Federal income, property and other taxes payable                                                         |          |           | 90,011      |  |      |           | 78,328    |  |   |           | 67,636    | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Customer deposits                                                                                        |          |           | 15,962      |  |      |           | 16,944    |  |   |           | 17,696    | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Other                                                                                                    |          |           | 47,206      |  |      |           | 55,333    |  |   |           | 59,366    | 
|                                                    |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                                    |                                                                                                          |          | 506,901   |             |  |      | 418,086   |           |  |   | 546,469   |          
|                                                    |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|Deferred Credits and Other Liabilities              |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Deferred income taxes                                                                                    |          |           | 152,576     |  |      |           | 117,250   |  |   |           | 141,552   | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Unamortized investment tax credit                                                                        |          |           | 25,393      |  |      |           | 27,300    |  |   |           | 25,867    | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Tax benefits amortizable to customers                                                                    |          |           | 137,917     |  |      |           | 135,616   |  |   |           | 138,161   | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Accrued environmental costs                                                                              |          |           | 25,240      |  |      |           | 24,711    |  |   |           | 25,608    | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Minority interest                                                                                        |          |           | 642         |  |      |           | 6,524     |  |   |           | 635       | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Other                                                                                                    |          |           | 60,737      |  |      |           | 58,703    |  |   |           | 55,380    | 
|                                                    |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                                    |                                                                                                          |          | 402,505   |             |  |      | 370,104   |           |  |   | 387,203   |          
|                                                    |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|Long-Term Debt, including capital lease obligations |                                                                                                          |          | 641,432   |             |  |      | 664,786   |           |  |   | 641,369   |          
|                                                    |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|Contingencies (Note 6)                              |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                                   
|                                                   
|                                                   
|                                                   
|                                                   
|Common Shareholders Equity                         |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Common stock                                                                                             |          |           | 10,300      |  |      |           | 10,300    |  |   |           | 10,300    | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Additional paid-in capital                                                                               |          |           | 232,074     |  |      |           | 230,399   |  |   |           | 231,949   | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Retained earnings                                                                                        |          |           | 516,630     |  |      |           | 561,743   |  |   |           | 494,648   | 
|                                                    |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                                    |                                                                                                          |          | 759,004   |             |  |      | 802,442   |           |  |   | 736,897   |          
|                                                    |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                                    |                                                                                                          | $        | 2,309,842 |             |  | $    | 2,255,418 |           |  | $ | 2,311,938 |          
|                                                    |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          




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                                                                 
|                                                                          |                                                                                          |                                                                          
|                                                                          |                                                                                          | 2001                                                                      |                           | 2000                                       
|(in Thousands)                                                            |                                                                                          |                                                                           |                           |                                            
|Cash Flow From Operating Activities                                       |                                                                                          |                                                                           |                           |                                             |        |        |          |         
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Net income                                                                               |                                                                           | $                         | 97,350                                      |        |        | $        | 66,940   |        
|                                                                          | Adjustments to reconcile net income to net cash flow provided
	from operating activities |                                                                           |                           |                                             |        |        |          |          |        
|                                                                          |                                                                                          | Depreciation and depletion                                                |                           |                                             |        |        |          |          |         |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          |                                                                                          |                                                                           | Per statement of income   |                                             |        | 26,339 |          |          |         | 25,944 |         
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          |                                                                                          |                                                                           | Charged to other accounts |                                             |        | 2,624  |          |          |         | 2,391  |         
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          |                                                                                          | Deferred income taxes  current                                           |                           |                                             | (3,494 | )      |          |          | (4,266  | )     
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          |                                                                                          | Deferred income taxes and investment tax credit, net                      |                           |                                             | 10,306 |        |          |          | 10,801  |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          |                                                                                          | Other                                                                     |                           |                                             | (2,355 | )      |          |          | (3,002  | )     
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          |                                                                                          | Changes in assets and liabilities, exclusive of changes shown
	separately |                           |                                             | 58,428 |        |          |          | 100,413 |       
|                                                                          |                                                                                          |                                                                           |                           |                                             |        |        |          |         
|                                                                          |                                                                                          |                                                                           |                           | Net cash provided from operating activities |        |        | 189,198  |          |         |        | 199,221  |  
|                                                                          |                                                                                          |                                                                           |                           |                                             |        |        |          |         
|Cash Flow From Financing Activities                                       |                                                                                          |                                                                           |                           |                                             |        |        |          |         
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Notes payable, net                                                                       |                                                                           |                           | (99,865                                     | )      |        |          | (158,369 | )      
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Retirement of long-term debt                                                             |                                                                           |                           | (1,583                                      | )      |        |          | (17,925  | )      
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Dividends paid                                                                           |                                                                           |                           | (75,000                                     | )      |        |          |         |        
|                                                                          |                                                                                          |                                                                           |                           |                                             |        |        |          |         
|                                                                          |                                                                                          |                                                                           |                           | Net cash used for financing activities      |        |        | (176,448 | )        |         |        | (176,294 | )
|                                                                          |                                                                                          |                                                                           |                           |                                             |        |        |          |         
|Cash Flow From Investing Activities                                       |                                                                                          |                                                                           |                           |                                             |        |        |          |         
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Capital expenditures                                                                     |                                                                           |                           | (20,635                                     | )      |        |          | (20,963  | )      
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Other                                                                                    |                                                                           |                           | 2,546                                       |        |        |          | (1,303   | )      
|                                                                          |                                                                                          |                                                                           |                           |                                             |        |        |          |         
|                                                                          |                                                                                          |                                                                           |                           | Net cash used for investing activities      |        |        | (18,089  | )        |         |        | (22,266  | )
|                                                                          |                                                                                          |                                                                           |                           |                                             |        |        |          |         
|Net Increase in Cash and Cash Equivalents                                 |                                                                                          |                                                                           | (5,339                    | )                                           |        |        | 661      |         
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Cash and Cash Equivalents, January 1                                      |                                                                                          |                                                                           | 12,673                    |                                             |        |        | 9,705    |         
|                                                                          |                                                                                          |                                                                           |                           |                                             |        |        |          |         
|Cash and Cash Equivalents, March 31                                       |                                                                                          | $                                                                         | 7,334                     |                                             |        | $      | 10,366   |         
|                                                                          |                                                                                          |                                                                           |                           |                                             |        |        |          |         
|Changes in Assets and Liabilities, Exclusive of Changes Shown
	Separately |                                                                                          |                                                                           |                           |                                             |        |        |          |         
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Accounts receivable, net                                                                 |                                                                           | $                         | (58,142                                     | )      |        | $        | (53,909  | )      
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Accrued unbilled revenues                                                                |                                                                           |                           | 46,219                                      |        |        |          | 31,122   |        
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Gas in inventory                                                                         |                                                                           |                           | 11,195                                      |        |        |          | 40,136   |        
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Property taxes assessed applicable to future periods                                     |                                                                           |                           | 9,054                                       |        |        |          | 11,064   |        
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Prepaid benefit costs, net                                                               |                                                                           |                           | (16,300                                     | )      |        |          | (14,273  | )      
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Accounts payable                                                                         |                                                                           |                           | (15,300                                     | )      |        |          | (12,478  | )      
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Gas inventory equalization                                                               |                                                                           |                           | 67,187                                      |        |        |          | 80,844   |        
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Federal income, property and other taxes payable                                         |                                                                           |                           | 22,375                                      |        |        |          | 6,913    |        
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Other current assets and liabilities, net                                                |                                                                           |                           | (12,526                                     | )      |        |          | (9,934   | )      
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Other deferred assets and liabilities, net                                               |                                                                           |                           | 4,666                                       |        |        |          | 20,928   |        
|                                                                          |                                                                                          |                                                                           |                           |                                             |        |        |          |         
|                                                                          |                                                                                          | $                                                                         | 58,428                    |                                             |        | $      | 100,413  |         
|                                                                          |                                                                                          |                                                                           |                           |                                             |        |        |          |         
|Supplemental Disclosures                                                  |                                                                                          |                                                                           |                           |                                             |        |        |          |         
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Cash paid (received) for:                                                                |                                                                           |                           |                                             |        |        |          |          |        
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          |                                                                                          | Interest, net of amounts capitalized                                      |                           | $                                           | 10,314 |        |          | $        | 13,450  |       
|                                                                          |                                                                                          |                                                                           |                           |                                             |        |        |          |         
|                                                                          |                                                                                          | Federal income taxes                                                      |                           | $                                           | 6,588  |        |          | $        | (857    | )     
|                                                                          |                                                                                          |                                                                           |                           |                                             |        |        |          |         
|                                                                          | Noncash investing and financing activities:                                              |                                                                           |                           |                                             |        |        |          |          |        
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          |                                                                                          | Dividends in kind and other                                               |                           | $                                           | 368    |        |          | $        |        |       
|                                                                          |                                                                                          |                                                                           |                           |                                             |        |        |          |         




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


10



---



##### Table of Contents








NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  GENERAL

The accompanying consolidated financial statements should be
read in conjunction with the Michigan Consolidated Gas Company
(MichCon) 2000 Annual Report on Form 10-K. Certain
reclassifications have been made to the prior years
financial statements to conform to the 2001 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 2000 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, which
was amended on February 28, 2001, under which DTE will
acquire all outstanding shares of MCN common stock. The amended
merger agreement imposes more stringent restrictions on
MichCons ability to take significant actions without
DTEs consent.

The boards of directors of both companies approved the merger
under the October 1999 and the February 2001 merger
agreements. In December 1999, shareholders of both
companies approved the merger under the terms of the
October 1999 agreement. The revised merger agreement is
subject to the approval of MCN shareholders at a special meeting
scheduled for May 15, 2001. In March 2001, the
proposed merger received clearance from the Federal Trade
Commission. The transaction is also subject to the approval of
the Securities and Exchange Commission which has set a
May 17, 2001 deadline for public comments. Although no
assurances can be given, and the merger may be completed later,
MCN and DTE are currently targeting May 31, 2001 as the
completion date for the merger. Under any circumstances, DTE
intends to issue a press release that will provide shareholders
with five business days notice of the definitive closing
date.

As a result of the pending merger, MCN incurred merger-related
costs, a portion of which were allocated to MichCon.
Additionally, MichCon incurred merger-related costs. The
merger-related costs include legal, accounting, consulting,
employee benefit and other expenses that had the effect of
decreasing earnings by $1,029,000 pre-tax ($669,000 net of
taxes) and $347,000 pre-tax ($226,000 net of taxes) for the
three-month period ended March 31, 2001 and 2000,
respectively.

3.  GAS IN INVENTORY

Inventory gas is priced on a last-in, first-out
(LIFO) basis. During the first quarter of 2001, MichCon
liquidated 43.9 billion cubic feet (Bcf) of prior
years LIFO layers. Approximately 18.9 Bcf of such
liquidation will be replaced prior to December 31, 2001 and
the remaining 25.0 Bcf will not be replaced prior to the end of
the year. For the portion of the interim inventory reduction that

11



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS(CONTINUED)


will be replaced, the cost of gas for net withdrawals 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.

The 25.0 Bcf of prior years LIFO layers that will not be
replaced were liquidated at an average cost of $0.38 per
thousand cubic feet (Mcf). MichCons estimated average gas
purchase rate in 2001 is $3.26 per Mcf higher than the average
LIFO liquidation rate. Applying LIFO costs in valuing the
liquidation, as opposed to using the estimated average gas
purchase rate, decreased 2001 reported cost of gas by
$81,508,000 and increased earnings by $52,980,000, net of taxes.

4.  REGULATORY MATTERS

a.  Regulatory Reform Plan



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 program began in April 2000 with approximately
55,000 customers choosing to participate. Year three of the
program began in April 2001, and the number of
participating customers decreased to approximately 30,000.
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 from utility operations exceed predetermined thresholds.
MichCon filed its income sharing report with the Michigan Public
Service Commission (MPSC) in March 2001, using the
MPSC approved formula, indicating that no income sharing was
required for 2000.

b.  Proposed Regulatory Changes



12



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS(CONCLUDED)


In December 2000, MichCon filed applications with the MPSC
to modify the experimental Customer Choice and Gas Sales
Programs as outlined in the MPSCs October 2000 order.
MichCon had proposed the modifications to become effective in
April 2001. On March 22, 2001, MichCon withdrew its
applications with the MPSC. MichCon will return to a gas cost
recovery mechanism in January 2002 when the current
Regulatory Reform Plan expires.

5.  CHANGE IN ACCOUNTING FOR DERIVATIVES

Effective January 1, 2001, MichCon adopted Statement of
Financial Accounting Standards (SFAS) No. 133,
Accounting for Derivative Instruments and Hedging
Activities.The Statement, as amended, requires all
derivatives to be recognized in the statement of financial
position 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 identified its interest rate swaps, firm-priced supply
contracts, and options embedded in certain debt instruments as
derivatives. The cumulative effect of adopting SFAS No. 133
was not material.

In order to manage interest rate costs, MichCon has interest
rate swap agreements to exchange fixed- and variable-rate
interest payment obligations over the life of the agreements
without the exchange of the underlying principle amounts. While
the swaps are effective in managing MichCons interest
costs, they do not qualify for hedge accounting under SFAS
No. 133. Accordingly, the interest rate swaps are recorded
at fair value and shown within Other Deferred Assets or
Liabilities in the Consolidated Statement of Financial
Position. Unrealized gains or losses resulting from marking to
market these swaps are recognized as an adjustment to interest
expense in the Consolidated Statement of Income. Furthermore,
SFAS No. 133 required adjusting the carrying value of
the related debt that substantially offset the transition
adjustment from marking to market the interest rate swaps. The
adjustment to debt will be accreted to interest expense over the
life of the related swaps.

MichCon has firm-priced contracts for a substantial portion of
its expected gas supply requirements though 2001. These
contracts are designated and qualify for the normal
purchases exception under SFAS No. 133. Accordingly,
MichCon does not account for such contracts as derivatives.
Additionally, MichCon has debt outstanding with embedded options
that will not be accounted for as derivatives as a result of a
grandfather provision in SFAS No. 133.

6. CONTINGENCIES

MichCon is involved in certain legal and administrative
proceedings before various courts and governmental agencies
concerning claims arising in the ordinary course of business.
These proceedings include certain contract disputes between
MichCon and gas producers. Management cannot predict the final
disposition of such proceedings, but believes that adequate
provision has been made for probable losses. After discussion
with legal counsel, it is managements belief 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



We have reviewed the accompanying condensed consolidated
statements of financial position of Michigan Consolidated Gas
Company and subsidiaries (the Company) as of
March 31, 2001 and 2000, and the related condensed
consolidated statements of income, retained earnings and cash
flows for the three-month periods ended March 31, 2001 and
2000. 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, 2000, 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 13, 2001, 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, 2000 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





14



---



##### Table of Contents








OTHER INFORMATION


EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

|        |     |             |  |                                                  
|------- | --- | ----------- |  | -------------------------------------------------
|Exhibit |     |            
|Number  |     | Description
|        |     |            
|        | 15- | 1           |  | Letter re Unaudited Interim Financial Information

(b)  Reports on Form 8-K

MichCon filed a report on Form 8-K dated March 22,
2001, under Item 5, with respect to the issuance of a press
release. The press release, which was included in the
Form 8-K, noted that MichCon withdrew its request before
the Michigan Public Service Commission to eliminate the current
experimental Customer Choice and Gas Sales Programs and to
implement a permanent gas customer choice program effective
April 1, 2001.

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          



| |     |                  
| | --- | -----------------
| | By: | /s/ ROBERT KASLIK

| |              
| | -------------
| |              
| | Robert Kaslik
| | Controller   

Date: May 11, 2001

16