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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



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FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2001

Commission file number 1-7310

Michigan Consolidated Gas Company, a Michigan corporation, meets the conditions
set forth in General Instruction I (1) (a) and (b) of Form 10-K and is,
therefore, filing this form with the reduced disclosure format.

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

|                                         |  |                    
|---------------------------------------- |  | -------------------
|Michigan                                 |  | 38-0478040         
|(State or other jurisdiction of          |  | (I.R.S. Employer   
|incorporation or organization)           |  | Identification No.)
|                                         |  |                    
|2000 2nd Avenue, Detroit, Michigan       |  | 48226-1279         
|(Address of principal executive offices) |  | (Zip Code)         

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

Securities registered pursuant to Section 12(b) of the Act:

|                                             |  |                                          
|-------------------------------------------- |  | -----------------------------------------
|Title of each class                          |  | Name of each exchange on which registered
|                                             |  |                                          
|6.85% Senior Secured Insured Quarterly Notes |  | New York Stock Exchange                  
|6 1/8% Senior Notes                          |  | New York Stock Exchange                  

Securities registered pursuant to Section 12(g) of the Act:

None

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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 IN BALLOT BOX No OPEN BALLOT BOX

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. X IN BALLOT BOX

All of the registrants 10,300,000 outstanding shares of common stock, par
value $1 per share, are indirectly owned by DTE Enterprises Inc.

DOCUMENTS INCORPORATED BY REFERENCE

None



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TABLE OF CONTENTS



|                                                  |                                                                                              |  |  |  |  |  |  | 
|------------------------------------------------- | -------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|DEFINITIONS                                      
|PART I                                           
|                                                  | Item 1. Business                                                                            
|                                                  | Item 2. Properties                                                                          
|                                                  | Item 3. Legal Proceedings                                                                   
|                                                  | Item 4. Submission of Matters to a Vote of Security Holders                                 
|PART II                                          
|                                                  | Item 5. Market for Registrants Common Equity and Related Stockholder Matters               
|                                                  | Item 6. Selected Financial Data                                                             
|                                                  | Item 7. Managements Narrative Analysis of Results of Operations                            
|                                                  | Item 7A. Quantitative and Qualitative Disclosures About Market Risk                         
|                                                  | Item 8. Financial Statements and Supplementary Data                                         
|                                                  | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|PART III                                         
|                                                  | Item 10. Directors and Executive Officers of the Registrant                                 
|                                                  | Item 11. Executive Compensation                                                             
|                                                  | Item 12. Security Ownership of Certain Beneficial Owners and Management                     
|                                                  | Item 13. Certain Relationships and Related Transactions                                     
|PART IV                                          
|                                                  | Item 14. Exhibits, Financial Statement Schedule, and Reports On Form 8-K                    
|SIGNATURES                                       
|Form 10-K405 For The Fiscal Year Ended 12/31/01  
|Computation of Ratio of Earnings to Fixed Charges
|Consent of Deloitte & Touche LLP                 



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MICHIGAN CONSOLIDATED GAS COMPANY

ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 2001

TABLE OF CONTENTS

|            |  |          |    |                                                                                      |  |      |    | 
|----------- |  | -------- | -- | ------------------------------------------------------------------------------------ |  | ---- | -- | 
|            |  |          |    |                                                                                      |  | PAGE |   
|            |  |          |    |                                                                                      |  |      |   
|DEFINITIONS |  |          | 3  |                                                                                     
|            |  |          |    |                                                                                      |  |      |    | 
|PART I      |  |          |    |                                                                                     
|            |  | Item 1.  |    | Business                                                                             |  |      | 5  | 
|            |  | Item 2.  |    | Properties                                                                           |  |      | 10 | 
|            |  | Item 3.  |    | Legal Proceedings                                                                    |  |      | 10 | 
|            |  | Item 4.  |    | Submission of Matters to a Vote of Security Holders                                  |  |      | 11 | 
|            |  |          |    |                                                                                      |  |      |    | 
|PART II     |  |          |    |                                                                                     
|            |  | Item 5.  |    | Market for Registrants Common Equity and Related Stockholder
Matters                |  |      | 12 | 
|            |  | Item 6.  |    | Selected Financial Data                                                              |  |      | 12 | 
|            |  | Item 7.  |    | Managements Narrative Analysis of Results of Operations                             |  |      | 12 | 
|            |  | Item 7A. |    | Quantitative and Qualitative Disclosures About Market Risk                           |  |      | 16 | 
|            |  | Item 8.  |    | Financial Statements and Supplementary Data                                          |  |      | 17 | 
|            |  | Item 9.  |    | Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure |  |      | 42 | 
|            |  |          |    |                                                                                      |  |      |    | 
|PART III    |  |          |    |                                                                                     
|            |  | Item 10. |    | Directors and Executive Officers of the Registrant                                   |  |      | 42 | 
|            |  | Item 11. |    | Executive Compensation                                                               |  |      | 42 | 
|            |  | Item 12. |    | Security Ownership of Certain Beneficial Owners and Management                       |  |      | 42 | 
|            |  | Item 13. |    | Certain Relationships and Related Transactions                                       |  |      | 42 | 
|            |  |          |    |                                                                                      |  |      |    | 
|PART IV     |  |          |    |                                                                                     
|            |  | Item 14. |    | Exhibits, Financial Statement Schedule, and Reports on Form
8-K                      |  |      | 43 | 
|            |  |          |    |                                                                                      |  |      |    | 
|SIGNATURES  |  |          | 45 |                                                                                     

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DEFINITIONS

|                            |  |                                                                                                                                                                                                                                                                                                                                                   
|--------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Customer Choice             |  | The choice program is a statewide initiative
giving customers in Michigan the option to
choose alternative suppliers for gas.                                                                                                                                                                                                                     
|                            |  |                                                                                                                                                                                                                                                                                                                                                   
|End User Transportation     |  | A gas delivery service historically provided
to large-volume commercial and industrial
customers who purchase natural gas directly
from producers or brokerage companies. Under
MichCons Customer Choice Program that began
in 1999, this service is also provided to
residential customers and small-volume
commercial and industrial customers.
|                            |  |                                                                                                                                                                                                                                                                                                                                                   
|Enterprises                 |  | DTE Enterprises Inc. (formerly MCN Energy)                                                                                                                                                                                                                                                                                                        
|                            |  |                                                                                                                                                                                                                                                                                                                                                   
|FERC                        |  | Federal Energy Regulatory Commission; a
federal agency that determines the rates and
regulations of interstate pipelines.                                                                                                                                                                                                                         
|                            |  |                                                                                                                                                                                                                                                                                                                                                   
|Gas Sales Program           |  | A three-year program that ended in December
2001 under which MichCons gas sales rate
included a gas commodity component that was
fixed at $2.95 per Mcf.                                                                                                                                                                                         
|                            |  |                                                                                                                                                                                                                                                                                                                                                   
|Gas Storage                 |  | For MichCon, the process of injecting, storing
and withdrawing natural gas from a depleted
underground natural gas field.                                                                                                                                                                                                                         
|                            |  |                                                                                                                                                                                                                                                                                                                                                   
|GCR                         |  | A gas cost recovery mechanism that was
reinstated by MichCon in January 2002 that
permits MichCon to pass on the cost of natural
gas to its customers.                                                                                                                                                                                            
|                            |  |                                                                                                                                                                                                                                                                                                                                                   
|Intermediate Transportation |  | A gas delivery service provided to producers,
brokers and other gas companies that own the
natural gas, but are not the ultimate
consumers.                                                                                                                                                                                                       
|                            |  |                                                                                                                                                                                                                                                                                                                                                   
|DTE Energy                  |  | DTE Energy Company and its subsidiaries.                                                                                                                                                                                                                                                                                                          
|                            |  |                                                                                                                                                                                                                                                                                                                                                   
|MCN Energy                  |  | MCN Energy Group Inc. and its subsidiaries.                                                                                                                                                                                                                                                                                                       
|                            |  |                                                                                                                                                                                                                                                                                                                                                   
|MichCon                     |  | Michigan Consolidated Gas Company; an
indirect, wholly owned natural gas
distribution and intrastate transmission
subsidiary of Enterprises.                                                                                                                                                                                                      

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|                      |  |                                                                                                                       
|--------------------- |  | ----------------------------------------------------------------------------------------------------------------------
|MichCon Pipeline      |  | MichCon Pipeline Co., a wholly owned subsidiary of
MichCon that engages in pipeline projects through
its subsidiaries.
|                      |  |                                                                                                                       
|Normal Weather        |  | The average daily temperature within MichCons
service area during a recent 30-year period.                           
|                      |  |                                                                                                                       
|Spot Market           |  | The buying and selling of natural gas on a
short-term basis, typically month-to-month.                                
|                      |  |                                                                                                                       
|                      |  |                                                                                                                       
|                      |  |                                                                                                                       
|Units of Measurement: |  |                                                                                                                       
|                      |  |                                                                                                                       
|Bcf                   |  | Billion cubic feet of gas.                                                                                            
|                      |  |                                                                                                                       
|Mcf                   |  | Thousand cubic feet of gas.                                                                                           
|                      |  |                                                                                                                       
|MMcf                  |  | Million cubic feet of gas.                                                                                            
|                      |  |                                                                                                                       
|/d                    |  | Added to various units of measure to denote units
per day.                                                            

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FORWARD-LOOKING STATEMENTS

This Form 10-K includes forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
involve certain risks and uncertainties that may cause actual future results to
differ materially from those contemplated, projected, estimated or budgeted in
such forward-looking statements. Factors that may impact forward-looking
statements include, but are not limited to, the following: the effects of
weather; the effects of competition, including the gas Customer Choice program;
the capital intensive nature of MichCons business; the economic climate and
growth in the geographic areas in which MichCon does business; the uncertainty
of gas reserve estimates; the timing and extent of changes in commodity prices
for natural gas, electricity and crude oil; access to capital and equity
markets; the effects of changes in governmental policies and regulatory
actions, including income taxes, environmental compliance and authorized rates;
and the timing of the accretive effects of DTE Energy Companys (DTE Energy)
merger with MCN Energy Group Inc. (MCN Energy).




PART I




Item 1. Business

GENERAL

Michigan Consolidated Gas Company (MichCon or the Company) is a Michigan
corporation organized in 1898 and with its predecessors, has been in business
for more than 150 years. MichCon, an indirect, wholly owned subsidiary of DTE
Enterprises Inc. (Enterprises), an exempt holding company under the Public
Utility Holding Company Act of 1935, successor to MCN Energy, is a natural gas
utility primarily engaged in the purchase, distribution, storage and
transmission of natural gas in the state of Michigan. MichCon also has
subsidiaries involved in the gathering and transmission of natural gas in
northern Michigan. MichCon operates one of the largest natural gas
distribution and transmission systems in the United States and the largest in
Michigan. MichCons non-regulated operations are not significant.

MichCon serves approximately 1.2 million residential, commercial and industrial
customers in the Detroit, Grand Rapids, Ann Arbor, Traverse City, Marquette and
Muskegon metropolitan areas and in various other communities throughout
Michigan. MichCon had approximately $2.4 billion in assets at December 31,
2001 and revenues of approximately $1.2 billion in 2001.

On May 31, 2001, DTE Energy completed the acquisition of MCN Energy. At that
time, MCN Energy merged with Enterprises, with Enterprises being the surviving
corporation (Note 2).

A discussion of the services provided by MichCon, and the amount and percentage
of revenue contributed from such services follows:

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Revenue by Service(in Thousands)

|                            |  |      |           |  |      |  |       |      |  |   |           |  |  |  |       |   |  |   |           |  |  |  |       |  
|--------------------------- |  | ---- | --------- |  | ---- |  | ----- | ---- |  | - | --------- |  |  |  | ----- | - |  | - | --------- |  |  |  | ----- | -
|                            |  | 2001 |           |  | 2000 |  |       | 1999 | 
|                            |  |      |           |  |      |  |       |      | 
|Gas Sales                   |  | $    | 1,005,989 |  |      |  | 82.6  | %    |  | $ | 909,270   |  |  |  | 79.5  | % |  | $ | 907,471   |  |  |  | 79.9  | %
|End User Transportation     |  |      | 101,788   |  |      |  | 8.4   |      |  |   | 117,116   |  |  |  | 10.2  |   |  |   | 103,556   |  |  |  | 9.1   |  
|Intermediate Transportation |  |      | 45,659    |  |      |  | 3.7   |      |  |   | 52,577    |  |  |  | 4.6   |   |  |   | 57,783    |  |  |  | 5.1   |  
|Other                       |  |      | 64,176    |  |      |  | 5.3   |      |  |   | 65,379    |  |  |  | 5.7   |   |  |   | 66,929    |  |  |  | 5.9   |  
|                            |  |      |           |  |      |  |       |      |  |   |           |  |  |  |       |   |  |  
|                            |  | $    | 1,217,612 |  |      |  | 100.0 | %    |  | $ | 1,144,342 |  |  |  | 100.0 | % |  | $ | 1,135,739 |  |  |  | 100.0 | %
|                            |  |      |           |  |      |  |       |      |  |   |           |  |  |  |       |   |  |  



| |  | Gas SalesIncludes the sale and delivery of natural gas primarily to
residential and small-volume commercial and industrial customers.                                                                                                                                                                                                                                                                                                                                                                                                    
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | End User TransportationA gas delivery service provided primarily to
large-volume commercial and industrial customers. Additionally, the
service is provided to residential customers, and small-volume
commercial and industrial customers who have elected to participate in
MichCons Customer Choice program that began in April 1999. End user
transportation customers purchase natural gas directly from producers
or brokerage companies and utilize MichCons pipeline network to
transport the gas to their facilities or homes.
| 
| |  | Intermediate TransportationA gas delivery service provided to
producers, brokers and other gas companies that own the natural gas,
but are not the ultimate consumers. Intermediate transportation
customers utilize MichCons gathering and high pressure transmission
system to transport the gas to storage fields, processing plants,
pipeline interconnections or other locations.                                                                                                                                                  
| 
| |  | OtherIncludes revenues from providing appliance maintenance, facility
development, meter reading, and other energy-related services.                                                                                                                                                                                                                                                                                                                                                                                                     

MichCon expects to achieve modest revenue growth through initiatives to expand
its gas markets, its residential, commercial and industrial customer base, as
well as by continuing to provide energy-related services that capitalize on its
expertise, capabilities and efficient systems.

MichCons operations are not dependent upon a limited number of customers, and
the loss of any one or a few customers would not have a significant impact.

Effects of Weather:MichCons gas sales, end user transportation and
intermediate transportation volumes, revenues and net income are impacted by
weather. Given the seasonal nature of the business, revenues and net income
are concentrated in the first and fourth quarters of the calendar year. By the
end of the first quarter, the heating season is largely over, and MichCon
typically incurs substantially reduced revenues and earnings in the second
quarter and losses in the third quarter.

Gas Supply:MichCon obtains its natural gas supply from various sources in
different geographic areas (the Gulf Coast, the Midcontinent, Canada and
Michigan) under agreements that vary in both pricing and terms. As part of its
gas acquisition strategy, MichCon has entered into fixed-price contracts for
approximately 155 billion cubic feet (Bcf) or approximately 75%  80% of its
expected 2002 supply requirements. The balance of the gas supply requirements
will be met primarily by purchasing gas at market prices. Because of MichCons
geographic diversity of supply and its 124 Bcf of storage capacity, it
anticipates it will be able to

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meet its supply requirements. Gas costs for 2002 are expected to be recovered
through the gas cost recovery (GCR) mechanism.

Following is a listing of MichCons sources of gas supply:

|                                   |                      |  |       |      |  |      |       |      |      |  |       |      | 
|---------------------------------- | -------------------- |  | ----- | ---- |  | ---- | ----- | ---- | ---- |  | ----- | ---- | 
|                                   |                      |  | 2001  |      |  | 2000 |       |      | 1999 | 
|                                   |                      |  |       |      |  |      |       |      |      | 
|Gas Supply(Bcf)                    |                      |  |       |      |  |      |       |      |      |  |       |     
|Long Term                          |                      |  |       |      |  |      |       |      |      |  |       |     
|                                   | Michigan suppliers   |  |       | 76.5 |  |      |       | 73.5 |      |  |       | 99.4 | 
|                                   | Interstate suppliers |  |       | 77.6 |  |      |       | 56.1 |      |  |       | 63.9 | 
|                                   | Canadian suppliers   |  |       | 28.2 |  |      |       | 28.0 |      |  |       | 29.9 | 
|Spot Market                        |                      |  | 1.7   |      |  |      | 1.2   |      |      |  | 1.2   |     
|Exchange Gas Receipts (Deliveries) |                      |  | (0.6  | )    |  |      | (1.0  | )    |      |  | (7.5  | )   
|Gas From (To) Storage              |                      |  | 19.6  |      |  |      | 24.5  |      |      |  | (7.6  | )   
|                                   |                      |  |       |      |  |      |       |      |      | 
|                                   |                      |  | 203.0 |      |  |      | 182.3 |      |      |  | 179.3 |     
|                                   |                      |  |       |      |  |      |       |      |     

MichCon has long-term firm transportation agreements expiring on various dates
through 2011 with ANR Pipeline Company (ANR), Panhandle Eastern Pipeline
Company (Panhandle), Viking Gas Transmission Company (Viking) and Great Lakes
Gas Transmission Limited Partnership (Great Lakes). ANR was obligated to
transport for MichCon up to 375 million cubic feet per day (MMcf/d) of supply
through October 1999. Effective in November 1999, MichCon permanently released
capacity with ANR thereby reducing contracted capacity to 285 MMcf/d and
resulting in roughly $13 million in annual cost savings. The ANR capacity
delivers 117.5 MMcf/d of supply sourced from the Gulf Coast, 117.5 MMcf/d
sourced from the Midcontinent and 50 MMcf/d from Canada. Viking transports 50
MMcf/d of Canadian supply to the ANR system for delivery to MichCon, and
Panhandle transports 2 MMcf/d of Gulf Coast supply from the ANR system for
delivery to MichCon. Additional Canadian supplies of 30 MMcf/d are delivered
through firm transport agreements with Great Lakes.

MichCon has supply contracts with independent Michigan producers, which expire
on various dates through 2007. Many of these contracts tie prices to spot
market indices coupled with transportation rates.

At December 31, 2001, MichCon owned and operated four natural gas storage
fields in Michigan with a working storage capacity of approximately 124 Bcf.
These facilities play an important role in providing reliable and
cost-effective service. MichCon uses its storage capacity to supplement its
supply during the winter months, replacing the gas in April through October
when demand and prices are generally at their lowest levels. The use of
storage capacity also allows MichCon to lower its peak-day entitlements,
thereby reducing interstate pipeline charges. MichCons gas distribution
system has a planned maximum daily send-out capacity of 3.0 Bcf, with
approximately 56% of the volume coming from underground storage for 2002.

REGULATION

MichCon is subject to the regulatory jurisdiction of the Michigan Public
Service Commission (MPSC), which issues orders pertaining to rates, recovery of
certain costs, including the cost of regulatory assets, conditions of service,
accounting and operating related matters. MichCon is subject to the
requirements of other regulatory agencies with respect to safety, the
environment and health.

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Regulatory Reform Plan: 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 December 2001, the
MPSC issued an order that continues the gas Customer Choice program on a
permanent and expanding basis beginning with the conclusion of the three-year
temporary program on March 31, 2002. Under the expanded program, beginning
April 1, 2002, up to approximately 40% of customers could elect to purchase gas
from suppliers other than MichCon. Beginning in April 2003, up to
approximately 60% of customers could participate and beginning April 2004, all
1.2 million of MichCons gas customers could choose to participate. MichCon
will continue to transport and deliver the gas to the participating customers
premises at prices that generate favorable margins. As of December 2001,
approximately 30,000 customers were participating in the temporary gas Customer
Choice program.

Under the MPSC order, MichCon returned to a GCR mechanism upon termination of
its three-year experimental Gas Sales Program in December 2001. MichCons gas
sales rates will now include a gas commodity component designed to recover its
actual gas costs. Under the Gas Sales Program, MichCons sales rates included a
gas commodity component that was fixed at $2.95 per thousand cubic feet (Mcf).
Under this program, MichCon had commodity price risk associated with its
ability to secure gas supplies at prices less than $2.95 per Mcf.

For further information concerning the gas Customer Choice and Gas Sales
Programs, see Item 8. Financial Statements and Supplementary Data, Notes to
Consolidated Financial Statements, Note 4  Regulatory Matters.

General Rate Proceedings:MichCon received MPSC authorization to defer
manufactured gas plant investigation and remediation costs in excess of the
$11.7 million previously reserved. In 1999, MichCon depleted the initial
reserve. Costs incurred in excess of the initial reserve are being deferred
and amortized over a 10-year period beginning in the year subsequent to the
year environmental investigation and remediation costs are paid. The recovery
of any investigation and remediation costs incurred will be reviewed in a
future rate case.

Energy Assistance Programs:Energy assistance programs funded by the federal
government and the state of Michigan, including the Home Heating Credit for
low-income customers and the Family Independence Agencys State Emergency
Relief Program, remain critical to MichCons ability to control its
uncollectible gas account expenses.

The state of Michigan provides assistance in the form of Michigan Home Heating
Credits that are funded almost exclusively by the Federal Low-Income Home
Energy Assistance Program (LIHEAP). Congress approved funding for fiscal 2001
and 2000 at $1.8 billion and $1.1 billion, respectively. During the year 2000,
an additional $600 million was appropriated in an emergency fund for fiscal
2000. MichCon received $21.3
million of funds in 2001 compared to $15.1 million in 2000. Home Heating
Credits assisted 75,800 MichCon customers in 2001 compared to 75,600 in 2000.
For fiscal 2002, Congress increased the LIHEAP funding level to $1.7 billion
and provided an additional $300 million in emergency funds. Additionally, $300
million in unused contingency funds appropriated for fiscal year 2001 carry
over to fiscal year 2002, bringing the total contingency available to $600
million. According to the allocation formula used to distribute funds, the
state of Michigan would receive approximately $92.1 million of the base $1.7
billion appropriated. Unlike some prior years, advance funding for the 2003
fiscal year, which begins October 1, 2002, was not included in the 2002
appropriations bill. Additionally, the Bush Administrations 2003 budget

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proposes reducing the amount earmarked for LIHEAP to a total of $1.7 billion,
$1.4 billion in base funding and a $300 million contingency.

A discussion of regulatory matters is included in Item 8. Financial Statements
and Supplementary Data, Notes to Consolidated Financial Statements, Note 4 
Regulatory Matters.

ENVIRONMENTAL MATTERS

A discussion of environmental matters is included in Item 8. Financial
Statements and Supplementary Data, Note 11  Commitments and Contingencies
under the heading Environmental Matters.

COMPETITION

MichCon generates approximately 95% of its revenues from providing gas sales,
and end user and intermediate transportation services. MichCon continues to
take steps to become the preferred provider of natural gas and high-value
energy services within Michigan in order to achieve competitive financial
results. To accomplish this, MichCon continues to position itself to respond
to changes in regulation and increased competition by reducing its cost of
operations, maintaining a safe and reliable system for customers, and focusing
on meeting the needs of the marketplace.

Gas Sales:Competition in the gas sales market comes primarily from other
natural gas providers, and alternative fuels such as electricity, propane and,
to a lesser degree, oil and wood.

Other natural gas provider As previously discussed,MichCon is operating
under the gas Customer Choice program that allows customers to purchase natural
gas from suppliers other than MichCon. As a result of MichCon returning to a
GCR mechanism in January 2002, MichCon does not profit nor does it have risk
associated with selling gas. MichCon continues to transport and deliver gas
to customers who choose to purchase gas from other suppliers thereby retaining
favorable margins.

Alternative fuels Natural gas continues to be the preferred space and
water-heating fuel for Michigan residences and businesses. Nearly every
residential and commercial developer in MichCons service territories selects
natural gas in new construction because of the convenience, cleanliness and
relative price advantage compared to propane, fuel oil and other alternative
fuels.

End User Transportation: The primary focus of competition in this market is
cost and reliability. Some large commercial and industrial customers have the
ability to switch to alternative fuel sources such as coal, electricity, oil
and steam. If these customers were to choose an alternative fuel source, they
would not have a need for MichCons end user transportation service. In
addition, some of these customers could bypass MichCons pipeline system and
have their gas delivered directly from an interstate pipeline. However, price
differentials must be sufficient to offset the costs, risks and loss of service
flexibility associated with fuel switching or bypass. Since 1988, only one
MichCon industrial customer has bypassed its distribution system. MichCon
competes against alternative fuel sources by providing competitive pricing and
reliable service, supported by its extensive storage capacity.

Intermediate Transportation:MichCons extensive transmission pipeline system
has enabled it to develop a 500 to 600 Bcf annual market for transportation
services for Michigan gas producers, marketers, distribution companies and
other pipeline companies. MichCon operates in a pivotal geographic location
with links to major interstate pipelines that reach markets elsewhere in the
Midwest, the eastern United States and eastern Canada. Michigan gas production
has also increased significantly

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over the past several years, resulting in a growing demand by gas producers and
brokers for intermediate transportation services.

EMPLOYEES

As of December 31, 2001, MichCon had 2,302 employees.




Item 2. Properties

MichCon owns distribution, transmission, production and storage properties and
facilities that are all located in the state of Michigan.

At December 31, 2001, MichCons distribution system included 17,570 miles of
distribution mains, 1,124,258 service lines and 1,220,623 active meters.
MichCon owns 2,590 miles of transmission and production lines that deliver
natural gas to the distribution districts and interconnect its storage fields
with the sources of supply and the market areas. MichCon owns
properties relating to
four underground natural gas storage fields with an aggregate working gas
storage capacity of approximately 124 Bcf.

Substantially all of MichCons property is subject to the lien of MichCons
Indenture of Mortgage and Deed of Trust under which MichCons First Mortgage
Bonds are issued. Some properties are being fully utilized, and new properties
are being added to meet the expansion requirements of existing areas.
MichCons capital investments for 2001 totaled $111 million, which compares
with $118 million in 2000 and $136 million in 1999.

MichCons subsidiaries own a 67-mile gathering pipeline that transports natural
gas and natural gas liquids from reserves in east-central Michigan to natural
gas processing plants in northern Michigan and 134 miles of gathering lines
and a 2,400 horsepower compressor station located in northern Michigan. Other
MichCon subsidiaries have a 46% interest in a partnership that owns lateral
lines related to the 67-mile gathering pipeline and an 83% interest in an
additional 32-miles of gathering pipelines in northern Michigan. MichCon
leases a portion of its pipeline system to the Vector Pipeline Partnership
through a capital lease arrangement (Note 9).




Item 3. Legal Proceedings

The Company is involved in certain legal (including commercial matters),
administrative and environmental proceedings before various courts, arbitration
panels and governmental agencies concerning claims arising in the ordinary
course of business. These proceedings include certain contract disputes,
environmental reviews and investigations, and pending judicial matters.
Management cannot predict the final disposition of such proceedings.
Management regularly reviews legal matters and records provisions for claims
that are considered probable of loss. The resolution of pending proceedings is
not expected to have a material effect on the Companys financial statements in
the period they are resolved.

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Environmental

A predecessor of the Company, Detroit City Gas Company, operated a manufactured
gas plant (MGP) from 1913 to 1945 in Detroit, Michigan (Site). The U.S.
Environmental Protection Agency (EPA) has alleged that the past MGP operations
impacted the soil at the Site. In July 1998, the Company entered into an
Administrative Order by Consent to conduct an analysis for the Site and is
currently negotiating with the EPA over the scope of the Sites remediation.
The analysis evaluated feasible remedial alternatives and was approved by the
EPA on May 2, 2001. MichCons recommended remedial action was selected by the
EPA and is estimated to costs between $860,000 and $1,250,000. MichCon has
been implementing the selected remedy and to date has three remaining
activities, which include backfill and compaction, restoration and
demobilization.

The Company has asserted that it is not responsible for remediating certain
contaminants at the Site since those contaminants were not the result of the
former MGP operations. Such contamination was likely caused by subsequent uses
of the property unrelated to the Company. A neighboring property owner, Gutter
Suppliers, Inc., alleged that the Site has impacted groundwater that has
migrated to the Gutter Suppliers, Inc. property. The EPA issued a letter on
January 11, 2001 indicating that it did not believe that the Site was impacting
the Gutter Suppliers, Inc. property. Since remediation is not complete, and
issues with Gutter Suppliers, Inc. may not be resolved, it is not possible to
ascertain the ultimate cleanup costs for the Site at this time.

Other

Since 1996, MichCon and 200 other natural gas transmission companies,
producers, gatherers and processors of natural gas from across the United
States have been defending claims filed by Jack Grynberg on behalf of the U.S.
Government under the False Claims Act, seeking unspecified damages for alleged
underpayment of royalties on federal and Indian lands due to purported improper
measurement of gas. The initial suit was dismissed in 1997, and that dismissal
was affirmed by the District Court of Appeals in October 1998. Mr. Grynberg
refiled that suit in September 1997 in 77 separate federal district courts.
MichCon and MichCon Pipeline Company (MichCon Pipeline), a 100% owned
subsidiary of MichCon, have been named in one suit in the U.S. District Court,
Eastern District of Michigan. In April 1999, the U.S. Department of Justice
declined intervention, and subsequently, the 77 separate cases were
consolidated by the Multidistrict Litigation Panel for pre-trial proceedings in
Wyoming. MichCon and MichCon Pipeline are defending against the claims and
believe they lack merit.

In May 1999, a class action suit was filed in Kansas state court naming
approximately 200 pipeline companies and producers, seeking unspecified damages
for alleged underpayment of royalties due to purported mismeasurement of gas on
all natural gas purchased in the U.S. since 1974. MichCon and MichCon Pipeline
are among those named in this suit. The case was removed to U.S. District
Court, Southern Division of Kansas, and consolidated with the Grynberg False
Claims Act case in Wyoming. In January 2001, the court granted plaintiffs
request to remand the case back to state court agreeing there was no federal
court jurisdiction over the state law claims. The company is defending against
these claims and believes they lack merit.




Item 4. Submission of Matters to a Vote of Security Holders

Omitted per general instruction I (2) (c) of Form 10-K for wholly owned
subsidiaries (reduced disclosure format).

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##### Table of Contents






PART II




Item 5. Market for Registrants Common Equity and Related Stockholder Matters

All of the 10,300,000 issued and outstanding shares of common stock of MichCon,
par value $1 per share, are indirectly owned by DTE Energy, and constitute 100%
of the voting securities of MichCon. Therefore, no market exists for MichCons
common stock.

MichCon paid cash dividends of $75 million in 2001, $100 million in 2000 and
$17.5 million in 1999 on its common stock.




Item 6. Selected Financial Data

Omitted per general instruction I (2) (a) of Form 10-K for wholly owned
subsidiaries (reduced disclosure format).




Item 7. Managements Narrative Analysis of Results of Operations

The Results of Operations discussion for MichCon is presented in accordance
with General Instruction I (2) (a) of Form 10-K for wholly owned subsidiaries
(reduced disclosure format).

Certain losses reflected in the accompanying consolidated financial statements
have been eliminated at DTE Energy Company (DTE Energy) as a result of purchase
accounting adjustments.

MichCon had losses of $41.1 million in 2001, compared to earnings of $109.5
million in 2000. As subsequently discussed, the comparison was impacted by
costs associated with the merger between MichCons previous parent company, MCN
Energy Group Inc. (MCN Energy), and DTE Energy (Note 2). Excluding merger and
restructuring costs, 2001 earnings were $26.1 million, a decline of $86.1
million from 2000 results reflecting lower gross margins and higher operating
costs. The lower gross margins were due to losses in 2001 from the Gas Sales
Program and the impact of unfavorable weather.

MichCons earnings in 2000 were $3.2 million higher than earnings in 1999 of
$106.3 million. Merger costs also impacted the comparison. Excluding merger
costs, 2000 earnings declined $10.7 million from 1999 results reflecting lower
gross margins from the Gas Sales Program and higher operating costs, partially
offset by the impact of more favorable weather.

Increase (Decrease) in Income Compared to Prior Year

|                                 |  |      |        |   |      |   |       |  
|-------------------------------- |  | ---- | ------ | - | ---- | - | ----- | -
|                                 |  | 2001 |        |   | 2000 |  
|                                 |  |      |        |   |      |  
|(in Millions)                    |  |      |        |   |      |   |       |  
|Operating revenues               |  | $    | 73.3   |   |      | $ | 8.6   |  
|Cost of gas                      |  |      | (156.2 | ) |      |   | (22.6 | )
|Gross margin                     |  |      | (82.9  | ) |      |   | (14.0 | )
|Operation and maintenance        |  |      | (44.5  | ) |      |   | 13.0  |  
|Depreciation and depletion       |  |      | (9.1   | ) |      |   | (4.8  | )
|Taxes other than income          |  |      | 5.0    |   |      |   | (16.0 | )
|Merger and restructuring charges |  |      | (99.4  | ) |      |   | 21.4  |  
|Other income and deductions      |  |      | (1.0   | ) |      |   | 2.1   |  
|Income tax provision             |  |      | 81.2   |   |      |   | 1.5   |  
|                                 |  |      |        |   |      |  
|Net income                       |  |      | (150.7 | ) |      |   | 3.2   |  
|                                 |  |      |        |   |      |  

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Operating revenues increased $73.3 million in 2001 and increased $8.6 million
in 2000. As subsequently discussed, operating revenues reflect the operations
of MichCons Gas Sales Program and the impact of weather, which was 6.6% warmer
in 2001 and 3.5% colder in 2000. MichCons three-year Gas Sales Program is
part of its Regulatory Reform Plan (Note 4) which ended in December 2001. Under
the Gas Sales Program, MichCons gas sales rates included a gas commodity
component that was fixed at $2.95 per thousand cubic feet (Mcf).

|                   |                             |   |         |         |  |      |         |       |      |   |         |       | 
|------------------ | --------------------------- | - | ------- | ------- |  | ---- | ------- | ----- | ---- | - | ------- | ----- | 
|                   |                             |   | 2001    |         |  | 2000 |         |       | 1999 |  
|                   |                             |   |         |         |  |      |         |       |      |  
|(in Millions)      |                             |   |         |         |  |      |         |       |      |   |         |      
|Operating Revenues |                             |   |         |         |  |      |         |       |      |   |         |      
|                   | Gas Sales                   |   | $       | 1,006.0 |  |      | $       | 909.3 |      |   | $       | 907.5 | 
|                   | End User Transportation     |   |         | 101.8   |  |      |         | 117.1 |      |   |         | 103.5 | 
|                   |                             |   |         |         |  |      |         |       |     
|                   |                             |   | 1,107.8 |         |  |      | 1,026.4 |       |      |   | 1,011.0 |      
|                   | Intermediate Transportation |   |         | 45.7    |  |      |         | 52.6  |      |   |         | 57.8  | 
|                   | Other                       |   |         | 64.1    |  |      |         | 65.3  |      |   |         | 66.9  | 
|                   |                             |   |         |         |  |      |         |       |      |  
|                   |                             | $ | 1,217.6 |         |  | $    | 1,144.3 |       |      | $ | 1,135.7 |      
|                   |                             |   |         |         |  |      |         |       |     
|Gas Markets (Bcf)  |                             |   |         |         |  |      |         |       |      |   |         |      
|                   | Gas Sales                   |   |         | 199.8   |  |      |         | 178.9 |      |   |         | 178.2 | 
|                   | End User Transportation     |   |         | 149.2   |  |      |         | 163.5 |      |   |         | 151.7 | 
|                   |                             |   |         |         |  |      |         |       |     
|                   |                             |   | 349.0   |         |  |      | 342.4   |       |      |   | 329.9   |      
|                   | Intermediate Transportation |   |         | 565.1   |  |      |         | 598.9 |      |   |         | 531.9 | 
|                   |                             |   |         |         |  |      |         |       |      |  
|                   |                             |   | 914.1   |         |  |      | 941.3   |       |      |   | 861.8   |      
|                   |                             |   |         |         |  |      |         |       |     

Effect of Weather on Gas Markets and Earnings

|                              |                          |  |       |       |   |      |      |       |      |  |      |       |  
|----------------------------- | ------------------------ |  | ----- | ----- | - | ---- | ---- | ----- | ---- |  | ---- | ----- | -
|                              |                          |  | 2001  |       |   | 2000 |      |       | 1999 | 
|                              |                          |  |       |       |   |      |      |       |      | 
|Percentage Warmer Than Normal |                          |  | (12.1 | )%    |   |      | (5.5 | )%    |      |  | (9.0 | )%   
|Decrease From Normal in:      |                          |  |       |       |   |      |      |       |      |  |      |      
|                              | Gas markets (in Bcf)     |  |       | (26.4 | ) |      |      | (12.4 | )    |  |      | (18.7 | )
|                              | Net income (in Millions) |  | $     | (23.3 | ) |      | $    | (11.7 | )    |  | $    | (18.6 | )

Gas sales and end user transportationrevenues in total increased $81.4 million
in 2001 and $15.4 million in 2000. Revenues primarily reflect higher gas sales
that increased 20.9 billion cubic feet (Bcf) in 2001 and .7 Bcf in 2000 due to
more customers choosing to purchase their gas from MichCon rather than other
gas suppliers. There were approximately 30,000 customers participating in the
gas Customer Choice program in 2001, compared to approximately 55,000 customers
in 2000 and 70,000 customers in 1999. Higher gas sales in 2001 were impacted
by sales to off system customers allowed under the Gas Sales Program. The
impact of weather also affected sales revenues and volumes.

Revenues were also affected by end user transportation deliveries, which
decreased 14.3 Bcf in 2001 and increased 11.8 Bcf in 2000. The decrease in
2001 reflects volumes associated with the fewer gas Customer Choice program
participants. 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 from these customers due to the gas commodity component included in
gas sales rates. The 2000 increase in end user transportation deliveries
reflects the impact of weather, partially offset by fewer gas Customer Choice
program participants.

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Intermediate transportationrevenues decreased $6.9 million in 2001 and $5.2
million in 2000, whereas intermediate transportation deliveries decreased 33.8
Bcf in 2001 and increased 67.0 Bcf in 2000. A significant portion of the
volumes are associated with 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 $1.2 million in 2001 and $1.6 million in
2000. The 2001 decrease was primarily attributable to lower other gas-related
services, partially offset by higher revenues from storage and facility
development services and higher late payment fees. The decline in 2000 was
primarily attributable to lower revenues from storage and facility development
services and appliance maintenance services mitigated by an increase in late
payment fees and other gas-related services.

Cost of gasis affected by variations in sales volumes and the cost of
purchased gas as well as related transportation costs. Cost of gas sold
increased $156.2 million in 2001 and $22.6 million in 2000, due in part to
higher sales volumes. MichCon recorded the benefits of an inventory liquidation
of 19.6 Bcf in 2001 (Note 1) that was priced at $0.38 per Mcf. In 2001,
MichCons average gas purchase rate was $3.23 per Mcf higher than the average
LIFO liquidation rate. The effect of the inventory liquidation lowered cost of
gas for 2001 by $63.2 million. Cost of gas was also affected by the number of
customers who have chosen to purchase gas from MichCon rather than other
suppliers under the gas Customer Choice program. As previously discussed,
MichCon retains margins from these customers by continuing to transport and
deliver the gas to the customers premises.

Operation and maintenanceexpenses increased $44.5 million in 2001 and
decreased $13.0 million in 2000. The 2001 increase is due to allocated expenses
from DTE Energy, higher employee medical costs and accruals for injuries and
damages. The decrease in 2000 is due primarily to lower employee benefit costs,
primarily pension costs. The comparability of both periods is impacted by a
benefit recorded in 2000 for insurance proceeds resulting from the settlement
of environmental claims with certain insurance carriers. The settlement has
allowed MichCon to recover previously incurred costs and resolved the carriers
liabilities for future costs of environmental investigation and remediation.
The decrease in 2000 also reflects lower advertising costs, partially offset by
higher uncollectible gas accounts expense.

MichCons uncollectible gas accounts expense increased $2.2 million in 2001 and
$2.6 million in 2000. Both periods were affected by the impact of weather on
accounts receivable balances, a more aggressive collection program, as well as
the continuation of home heating assistance funding obtained by low-income
customers.

Depreciation and depletionincreased $9.1 million in 2001 and $4.8 million in
2000. The increases reflect higher plant balances resulting from capital
expenditures of $111.2 million in 2001 and $117.6 million in 2000. The 2001
increase was also impacted by an adjustment of $8.0 million recorded in
settlement in an MPSC proceeding that required a MichCon subsidiary to
record additional depreciation expense.

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##### Table of Contents



Taxes other than incomedecreased $5.0 million in 2001 and increased $16.0
million in 2000. The improvement in 2001 is attributed to lower Single Business
Taxes. Partially offsetting the 2001 decline and resulting in the 2000
increase were property taxes associated with higher property balances. The
comparisons also reflect an adjustment in property tax expense resulting from a
change in method of calculating 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.

Merger and restructuring chargesincreased $99.4 million in 2001 and decreased
$21.4 million in 2000. The costs represent legal, consulting, accounting,
employee benefit and other expenses associated with the merger between MCN
Energy and DTE Energy (Notes 2 and 3). In 2001, MichCon recorded a
restructuring charge in connection with the merger which reflects the costs
associated with 273 employees electing to retire early and other employees
leaving voluntarily under programs designed to reduce the workforce in
overlapping corporate support functions.

Other income and deductionsincreased $1.0 million in 2001 and decreased $2.1
million in 2000. The 2001 results were impacted by higher investment income
and by lower interest expense, offset by an impairment loss on the Harbortown
joint venture (Note 14). The 2001 increase in interest income of $6.4 million
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 (Note 9). The decrease in interest expense is the result of lower market
rates. The loss on the Harbortown joint venture totaled $9.3 million in 2001
which is attributable to write-downs associated with the expected sale of
MichCons 33% to 50% interests in a series of partnerships that own a
residential community on the Detroit riverfront.

Income taxesdecreased $81.2 million in 2001 and $1.5 million in 2000 (Note 5).
Income tax comparisons were affected by variations in pre-tax earnings, tax
credits and tax adjustments recorded upon filing MichCons tax returns.
Additionally, 2000 was impacted by higher non-taxable investment income.

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##### Table of Contents






Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Prior to the reinstatement of the GCR mechanism in January 2002, MichCons
primary market risk arose from fluctuations in natural gas prices. MichCon
managed such natural gas price risk by entering into fixed-price contracts for
a large portion of its expected supply requirements. If MichCon did not enter
into these fixed-price supply contracts, its exposure to such risk would have
been substantially higher. See Item 8. Financial Statements and Supplementary
Data, Note 10  Financial and Other Derivative Instruments.

MichCon currently has market risk from fluctuations in interest rates. MichCon
manages interest rate risk through the use of various derivative instruments
and limits the use of such instruments to hedging activities. If MichCon did
not use derivative instruments, its exposure to such risk would be higher. A
further discussion of MichCons risk management activities is included in Note
10 to the Consolidated Financial Statements. MichCon is subject to interest
rate risk in connection with the issuance of variable-and fixed-rate debt. In
order to manage interest costs, MichCon uses interest rate swap agreements to
exchange fixed- and variable-rate interest payment obligations over the life of
the agreements without
exchange of the underlying principal amounts. MichCons exposure to interest
rate risk arises primarily from changes in U.S. Treasury rates and London
Inter-Bank Offered Rates (LIBOR).

A sensitivity analysis model was used to calculate the fair values or cash
flows of MichCons debt and interest rate swaps, utilizing applicable forward
interest rates in effect at December 31, 2001. The sensitivity analysis
involved increasing and decreasing the forward rates by a hypothetical 10% and
calculating the resulting change in the fair values or cash flows of the
interest rate sensitive instruments.

The results of the sensitivity model calculations follow:

|                                    |               |              |             |   |              |             |      |              |             |   |              |             |   |           |               |    |  |            |           |  | 
|----------------------------------- | ------------- | ------------ | ----------- | - | ------------ | ----------- | ---- | ------------ | ----------- | - | ------------ | ----------- | - | --------- | ------------- | -- |  | ---------- | --------- |  | 
|                                    |               |              | 2001        |   |              | 2000        |      |              |             |   |             
|                                    |               |              |             |   |              |             |      |              |             |   |             
|                                    |               |              | Assuming    |   |              | Assuming    |      |              | Assuming    |   |              | Assuming    |   |           |               |    | 
|                                    |               |              | a 10%       |   |              | a 10%       |      |              | a 10%       |   |              | a 10%       |   |           | Favorable     |   
|                                    |               |              | Increase in |   |              | Decrease in |      |              | Increase in |   |              | Decrease in |   |           | (Unfavorable) |   
|Market Risk (in Millions)           |               | Prices/Rates |             |   | Prices/Rates |             |      | Prices/Rates |             |   | Prices/Rates |             |   | Change In |              
|                                    |               |              |             |   |              |             |      |              |             |   |              |             |   |           |              
|Interest Rate Sensitive             |               |              |             |   |              |             |      |              |             |   |              |             |   |           |               |    |  |            |           | 
|Debt:     Fixed rate                |               | $            | (23.6       | ) |              | $           | 26.2 |              |             | $ | 12.6         |             |   | $         | (12.6         | )  |  | Fair Value
|                                    | Variable rate |              | $           |  |              |             | $    |             |             |   | $            | (.1         | ) |           | $             | .1 |  |            | Cash Flow
|Swaps:   Pay variable/receive
fixed |               | $            | (0.5        | ) |              | $           | 0.5  |              |             | $ | (2.0         | )           |   | $         | 2.0           |    |  | Fair Value

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##### Table of Contents






Item 8. Financial Statements and Supplementary Data

|                                             |                                                 |  |      |    | 
|-------------------------------------------- | ----------------------------------------------- |  | ---- | -- | 
|                                             |                                                 |  | Page |   
|                                             |                                                 |  |      |   
|                                            
|Consolidated Statement of Operations         |                                                 |  | 18   |   
|                                            
|Consolidated Statement of Financial Position |                                                 |  | 19   |   
|                                            
|Consolidated Statement of Cash Flows         |                                                 |  | 20   |   
|                                            
|Consolidated Statement of Retained Earnings  |                                                 |  | 21   |   
|                                            
|Notes to Consolidated Financial Statements   |                                                 |  | 22   |   
|                                            
|Independent Auditors Report                 |                                                 |  | 40   |   
|                                            
|Financial Statement Schedule                |                                                 |  |      |   
|                                             | Schedule II  Valuation and Qualifying Accounts |  |      | 41 | 

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MICHIGAN CONSOLIDATED GAS COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS

|                                  |                                      |                                     |         |                        |           |   |         |         |           |      |         |         |           |  
|--------------------------------- | ------------------------------------ | ----------------------------------- | ------- | ---------------------- | --------- | - | ------- | ------- | --------- | ---- | ------- | ------- | --------- | -
|                                  |                                      |                                     |         | Year Ended December 31 |          
|                                  |                                      |                                     |         |                        |          
|                                  |                                      |                                     |         | 2001                   |           |   | 2000    |         |           | 1999 |        
|                                  |                                      |                                     |         |                        |           |   |         |         |           |      |        
|(in Thousands)                    |                                      |                                     |         |                        |           |   |         |         |           |      |         |        
|Operating Revenues                |                                      |                                     |         |                        |           |   |         |         |           |      |         |        
|                                  | Gas Sales                            |                                     | $       | 1,005,989              |           |   | $       | 909,270 |           |      | $       | 907,471 |          
|                                  | Transportation and storage services  |                                     |         | 153,393                |           |   |         | 172,248 |           |      |         | 165,245 |          
|                                  | Other                                |                                     |         | 58,230                 |           |   |         | 62,824  |           |      |         | 63,023  |          
|                                  |                                      |                                     |         |                        |           |   |         |         |          
|                                  |                                      | Total Operating Revenues            |         |                        | 1,217,612 |   |         |         | 1,144,342 |      |         |         | 1,135,739 |  
|                                  |                                      |                                     |         |                        |           |   |         |         |          
|Operating Expenses                |                                      |                                     |         |                        |           |   |         |         |           |      |         |        
|                                  | Cost of gas                          |                                     |         | 662,699                |           |   |         | 506,522 |           |      |         | 483,925 |          
|                                  | Operation and maintenance            |                                     |         | 297,639                |           |   |         | 253,117 |           |      |         | 266,104 |          
|                                  | Depreciation and depletion           |                                     |         | 112,794                |           |   |         | 103,650 |           |      |         | 98,879  |          
|                                  | Taxes other than income              |                                     |         | 56,250                 |           |   |         | 61,260  |           |      |         | 45,230  |          
|                                  | Merger and restructuring charges     |                                     |         | 103,447                |           |   |         | 4,058   |           |      |         | 25,429  |          
|                                  |                                      |                                     |         |                        |           |   |         |         |          
|                                  |                                      | Total operating expenses            |         |                        | 1,232,829 |   |         |         | 928,607   |      |         |         | 919,567   |  
|                                  |                                      |                                     |         |                        |           |   |         |         |          
|Operating Income (Loss)           |                                      |                                     | (15,217 | )                      |           |   | 215,735 |         |           |      | 216,172 |        
|                                  |                                      |                                     |         |                        |           |   |         |         |          
|Other Income and (Deductions)     |                                      |                                     |         |                        |           |   |         |         |           |      |         |        
|                                  | Interest income                      |                                     |         | 9,694                  |           |   |         | 3,247   |           |      |         | 2,604   |          
|                                  | Interest on long-term debt           |                                     |         | (46,293                | )         |   |         | (48,320 | )         |      |         | (47,265 | )        
|                                  | Other interest expense               |                                     |         | (10,600                | )         |   |         | (11,501 | )         |      |         | (8,626  | )        
|                                  | Loss on investment in joint venture  |                                     |         | (9,342                 | )         |   |         |        |           |      |         |        |          
|                                  | Equity in earnings of joint ventures |                                     |         | 2,593                  |           |   |         | 3,453   |           |      |         | 1,976   |          
|                                  | Other                                |                                     |         | 1,841                  |           |   |         | 1,873   |           |      |         | (2,036  | )        
|                                  |                                      |                                     |         |                        |           |   |         |         |          
|                                  |                                      | Total other income and (deductions) |         |                        | (52,107   | ) |         |         | (51,248   | )    |         |         | (53,347   | )
|                                  |                                      |                                     |         |                        |           |   |         |         |          
|Income (Loss) Before Income Taxes |                                      |                                     | (67,324 | )                      |           |   | 164,487 |         |           |      | 162,825 |        
|Income Tax Provision (Benefit)    |                                      |                                     | (26,200 | )                      |           |   | 54,953  |         |           |      | 56,489  |        
|                                  |                                      |                                     |         |                        |           |   |         |         |          
|Net Income (Loss)                 |                                      | $                                   | (41,124 | )                      |           | $ | 109,534 |         |           | $    | 106,336 |        
|                                  |                                      |                                     |         |                        |           |   |         |         |          

See Notes to Consolidated Financial Statements

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##### Table of Contents



MICHIGAN CONSOLIDATED GAS COMPANY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION

|                                     |                                                          |                                                                                                   |                                                                                      |           |             |         |           |           |           |         | 
|------------------------------------ | -------------------------------------------------------- | ------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------ | --------- | ----------- | ------- | --------- | --------- | --------- | ------- | 
|                                     |                                                          |                                                                                                   |                                                                                      |           | December 31 |        
|                                     |                                                          |                                                                                                   |                                                                                      |           |             |        
|                                     |                                                          |                                                                                                   |                                                                                      |           | 2001        |         |           | 2000      |          
|                                     |                                                          |                                                                                                   |                                                                                      |           |             |         |           |           |          
|(in Thousands)                       |                                                          |                                                                                                   |                                                                                      |           |             |         |           |          
|ASSETS                               |                                                          |                                                                                                   |                                                                                      |           |             |         |           |          
|                                     | Current Assets                                           |                                                                                                   |                                                                                      |           |             |         |           |           |          
|                                     |                                                          | Cash and cash equivalents                                                                         |                                                                                      | $         | 3,929       |         |           | $         | 12,673    |        
|                                     |                                                          | Accounts receivable                                                                               |                                                                                      |           |             |         |           |           |           |        
|                                     |                                                          |                                                                                                   | Customer (less allowance for doubtful accounts of $21,428 and $18,912, respectively) |           |             | 243,118 |           |           |           | 157,793 | 
|                                     |                                                          |                                                                                                   | Accrued unbilled revenues                                                            |           |             | 110,300 |           |           |           | 135,465 | 
|                                     |                                                          | Property taxes assessed applicable to future periods                                              |                                                                                      |           | 52,289      |         |           |           | 54,767    |        
|                                     |                                                          | Other                                                                                             |                                                                                      |           | 35,584      |         |           |           | 49,054    |        
|                                     |                                                          |                                                                                                   |                                                                                      |           |             |        
|                                     |                                                          |                                                                                                   | 445,220                                                                              |           |             |         | 409,752   |          
|                                     |                                                          |                                                                                                   |                                                                                      |           |             |        
|                                     | Property, Plant and Equipment                            |                                                                                                   |                                                                                      | 3,065,415 |             |         |           | 2,980,627 |          
|                                     |                                                          | Less accumulated depreciation and depletion                                                       |                                                                                      |           | 1,626,015   |         |           |           | 1,538,311 |        
|                                     |                                                          |                                                                                                   |                                                                                      |           |             |        
|                                     |                                                          |                                                                                                   | 1,439,400                                                                            |           |             |         | 1,442,316 |          
|                                     |                                                          |                                                                                                   |                                                                                      |           |             |        
|                                     | Other Assets                                             |                                                                                                   |                                                                                      |           |             |         |           |           |          
|                                     |                                                          | Investment in and advances to joint ventures                                                      |                                                                                      |           | 8,835       |         |           |           | 20,068    |        
|                                     |                                                          | Long-term investments                                                                             |                                                                                      |           | 68,526      |         |           |           | 70,643    |        
|                                     |                                                          | Investment in capital lease                                                                       |                                                                                      |           | 83,740      |         |           |           | 76,395    |        
|                                     |                                                          | Deferred environmental costs                                                                      |                                                                                      |           | 26,920      |         |           |           | 26,372    |        
|                                     |                                                          | Prepaid
benefit costs and due from affiliate                                                      |                                                                                      |           | 229,530     |         |           |           | 214,068   |        
|                                     |                                                          | Other                                                                                             |                                                                                      |           | 61,330      |         |           |           | 52,324    |        
|                                     |                                                          |                                                                                                   |                                                                                      |           |             |        
|                                     |                                                          |                                                                                                   | 478,881                                                                              |           |             |         | 459,870   |          
|                                     |                                                          |                                                                                                   |                                                                                      |           |             |        
|                                     |                                                          | $                                                                                                 | 2,363,501                                                                            |           |             | $       | 2,311,938 |          
|                                     |                                                          |                                                                                                   |                                                                                      |           |             |        
|LIABILITIES AND SHAREHOLDERS EQUITY |                                                          |                                                                                                   |                                                                                      |           |             |         |           |          
|                                     | Current Liabilities                                      |                                                                                                   |                                                                                      |           |             |         |           |           |          
|                                     |                                                          | Accounts payable                                                                                  |                                                                                      | $         | 137,104     |         |           | $         | 98,357    |        
|                                     |                                                          | Short-term borrowings                                                                             |                                                                                      |           | 256,862     |         |           |           | 278,762   |        
|                                     |                                                          | Federal income, property and other taxes payable                                                  |                                                                                      |           | 52,461      |         |           |           | 67,636    |        
|                                     |                                                          | Other                                                                                             |                                                                                      |           | 95,124      |         |           |           | 101,714   |        
|                                     |                                                          |                                                                                                   |                                                                                      |           |             |        
|                                     |                                                          |                                                                                                   | 541,551                                                                              |           |             |         | 546,469   |          
|                                     |                                                          |                                                                                                   |                                                                                      |           |             |        
|                                     | Long-term debt, including capital lease obligations      |                                                                                                   |                                                                                      | 778,577   |             |         |           | 641,369   |          
|                                     |                                                          |                                                                                                   |                                                                                      |           |             |        
|                                     | Other
Liabilities                                        |                                                                                                   |                                                                                      |           |             |         |           |           |          
|                                     |                                                          | Deferred income taxes                                                                             |                                                                                      |           | 123,246     |         |           |           | 141,552   |        
|                                     |                                                          | Unamortized investment tax credits                                                                |                                                                                      |           | 24,129      |         |           |           | 25,867    |        
|                                     |                                                          | Regulatory liabilities                                                                            |                                                                                      |           | 144,172     |         |           |           | 138,161   |        
|                                     |                                                          | Accrued
postretirement benefit costs                                                              |                                                                                      |           | 70,805      |         |           |           | 27,464    |        
|                                     |                                                          | Accrued environmental costs                                                                       |                                                                                      |           | 20,743      |         |           |           | 25,608    |        
|                                     |                                                          | Minority interest                                                                                 |                                                                                      |           | 644         |         |           |           | 635       |        
|                                     |                                                          | Other                                                                                             |                                                                                      |           | 39,450      |         |           |           | 27,916    |        
|                                     |                                                          |                                                                                                   |                                                                                      |           |             |        
|                                     |                                                          |                                                                                                   | 423,189                                                                              |           |             |         | 387,203   |          
|                                     |                                                          |                                                                                                   |                                                                                      |           |             |        
|                                     | Commitments and Contingencies (Notes 1, 4, 9, 10 and 11) |                                                                                                   |                                                                                      |           |             |         |           |           |          
|                                     | Shareholders Equity                                     |                                                                                                   |                                                                                      |           |             |         |           |           |          
|                                     |                                                          | Common stock $1 par value, 15,100,000 shares authorized,
10,300,000 shares issued and outstanding |                                                                                      |           | 10,300      |         |           |           | 10,300    |        
|                                     |                                                          | Additional paid in capital                                                                        |                                                                                      |           | 231,728     |         |           |           | 231,949   |        
|                                     |                                                          | Retained earnings                                                                                 |                                                                                      |           | 378,156     |         |           |           | 494,648   |        
|                                     |                                                          |                                                                                                   |                                                                                      |           |             |        
|                                     |                                                          |                                                                                                   | 620,184                                                                              |           |             |         | 736,897   |          
|                                     |                                                          |                                                                                                   |                                                                                      |           |             |        
|                                     |                                                          | $                                                                                                 | 2,363,501                                                                            |           |             | $       | 2,311,938 |          
|                                     |                                                          |                                                                                                   |                                                                                      |           |             |        

See Notes to Consolidated Financial Statements

19



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##### Table of Contents



MICHIGAN CONSOLIDATED GAS COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS

|                                                     |                                                                           |                                                |                                                      |                                                      |        |                        |          |          |        |        |          |          |        |        |          |  
|---------------------------------------------------- | ------------------------------------------------------------------------- | ---------------------------------------------- | ---------------------------------------------------- | ---------------------------------------------------- | ------ | ---------------------- | -------- | -------- | ------ | ------ | -------- | -------- | ------ | ------ | -------- | -
|                                                     |                                                                           |                                                |                                                      |                                                      |        | Year Ended December 31 |         
|                                                     |                                                                           |                                                |                                                      |                                                      |        |                        |         
|                                                     |                                                                           |                                                |                                                      |                                                      |        | 2001                   |          |          | 2000   |        |          | 1999     |       
|                                                     |                                                                           |                                                |                                                      |                                                      |        |                        |          |          |        |        |          |          |       
|(in Thousands)                                       |                                                                           |                                                |                                                      |                                                      |        |                        |          |          |        |        |          |         
|Operating Activities                                 |                                                                           |                                                |                                                      |                                                      |        |                        |          |          |        |        |          |         
|                                                     | Net income                                                                |                                                | $                                                    | (41,124                                              | )      |                        | $        | 109,534  |        |        | $        | 106,336  |       
|                                                     | Adjustments to reconcile net income to net cash
from operating activities |                                                |                                                      |                                                      |        |                        |          |          |        |        |          |          |       
|                                                     |                                                                           |                                                | Depreciation and depletion:                          |                                                      |        |                        |          |          |        |        |          |          |        |        |         
|                                                     |                                                                           |                                                |                                                      | Per statement of income                              |        |                        | 112,794  |          |        |        | 103,650  |          |        |        | 98,879   |  
|                                                     |                                                                           |                                                |                                                      | Charged to other accounts                            |        |                        | 9,847    |          |        |        | 9,779    |          |        |        | 8,892    |  
|                                                     |                                                                           |                                                | Deferred income taxes  current                      |                                                      |        | (5,830                 | )        |          |        | (4,837 | )        |          |        | 1,416  |         
|                                                     |                                                                           |                                                | Deferred income taxes and investment tax credit, net |                                                      |        | (14,033                | )        |          |        | 36,215 |          |          |        | 20,894 |         
|                                                     |                                                                           |                                                | Other                                                |                                                      |        | (1,283                 | )        |          |        | (4,985 | )        |          |        | (823   | )       
|                                                     |                                                                           |                                                | Changes in assets and liabilities:                   |                                                      |        |                        |          |          |        |        |          |          |        |        |         
|                                                     |                                                                           |                                                |                                                      | Accounts receivable, net                             |        |                        | (85,793  | )        |        |        | (15,671  | )        |        |        | (6,055   | )
|                                                     |                                                                           |                                                |                                                      | Accrued unbilled revenues                            |        |                        | 25,165   |          |        |        | (36,599  | )        |        |        | (12,099  | )
|                                                     |                                                                           |                                                |                                                      | Accrued/deferred gas cost recovery revenues, net     |        |                        |         |          |        |        | (241     | )        |        |        | (14,980  | )
|                                                     |                                                                           |                                                |                                                      | Gas in inventory                                     |        |                        | 7,409    |          |        |        | 60,564   |          |        |        | (17,181  | )
|                                                     |                                                                           |                                                |                                                      | Property taxes assessed applicable to future periods |        |                        | 2,478    |          |        |        | 5,822    |          |        |        | 10,576   |  
|                                                     |                                                                           |                                                |                                                      | Prepaid
benefit costs and due from affiliate, net    |        |                        | (15,462  | )        |        |        | (57,777  | )        |        |        | (42,411  | )
|                                                     |                                                                           |                                                |                                                      | Accounts payable                                     |        |                        | 39,129   |          |        |        | 4,808    |          |        |        | (5,342   | )
|                                                     |                                                                           |                                                |                                                      | Federal income, property and other taxes payable     |        |                        | (15,175  | )        |        |        | (3,779   | )        |        |        | 10,356   |  
|                                                     |                                                                           |                                                |                                                      | Exchange gas payable                                 |        |                        |         |          |        |        | (1,366   | )        |        |        | (21,739  | )
|                                                     |                                                                           |                                                |                                                      | Other current assets and liabilities, net            |        |                        | 482      |          |        |        | (2,153   | )        |        |        | (1,701   | )
|                                                     |                                                                           |                                                |                                                      | Other deferred assets and liabilities, net           |        |                        | 40,456   |          |        |        | 24,425   |          |        |        | (14,429  | )
|                                                     |                                                                           |                                                |                                                      |                                                      |        |                        |          |          |       
|                                                     |                                                                           |                                                |                                                      | Net cash from operating activities                   |        |                        | 59,060   |          |        |        | 227,389  |          |        |        | 120,589  |  
|                                                     |                                                                           |                                                |                                                      |                                                      |        |                        |          |          |       
|Investing Activities                                 |                                                                           |                                                |                                                      |                                                      |        |                        |          |          |        |        |          |         
|                                                     | Capital expenditures                                                      |                                                |                                                      | (111,221                                             | )      |                        |          | (117,645 | )      |        |          | (135,933 | )     
|                                                     | Other                                                                     |                                                |                                                      | 7,241                                                |        |                        |          | (5,013   | )      |        |          | (8,108   | )     
|                                                     |                                                                           |                                                |                                                      |                                                      |        |                        |          |          |       
|                                                     |                                                                           |                                                |                                                      | Net cash used for investing activities               |        |                        | (103,980 | )        |        |        | (122,658 | )        |        |        | (144,041 | )
|                                                     |                                                                           |                                                |                                                      |                                                      |        |                        |          |          |       
|Financing Activities                                 |                                                                           |                                                |                                                      |                                                      |        |                        |          |          |        |        |          |         
|                                                     | Issuance of long-term debt                                                |                                                |                                                      | 198,382                                              |        |                        |          |         |        |        |          | 106,535  |       
|                                                     | Short-term borrowings, net                                                |                                                |                                                      | (21,821                                              | )      |                        |          | 40,977   |        |        |          | 16,616   |       
|                                                     | Retirement of long-term debt                                              |                                                |                                                      | (65,385                                              | )      |                        |          | (42,740  | )      |        |          | (79,097  | )     
|                                                     | Dividends paid                                                            |                                                |                                                      | (75,000                                              | )      |                        |          | (100,000 | )      |        |          | (17,500  | )     
|                                                     |                                                                           |                                                |                                                      |                                                      |        |                        |          |          |       
|                                                     |                                                                           |                                                |                                                      | Net cash from (used for) financing activities        |        |                        | 36,176   |          |        |        | (101,763 | )        |        |        | 26,554   |  
|                                                     |                                                                           |                                                |                                                      |                                                      |        |                        |          |          |       
|Net Increase (Decrease) in Cash and Cash Equivalents |                                                                           |                                                | (8,744                                               | )                                                    |        |                        | 2,968    |          |        |        | 3,102    |         
|Cash and Cash Equivalents at Beginning of Period     |                                                                           |                                                | 12,673                                               |                                                      |        |                        | 9,705    |          |        |        | 6,603    |         
|                                                     |                                                                           |                                                |                                                      |                                                      |        |                        |          |          |       
|Cash and Cash Equivalents at End of Period           |                                                                           | $                                              | 3,929                                                |                                                      |        | $                      | 12,673   |          |        | $      | 9,705    |         
|                                                     |                                                                           |                                                |                                                      |                                                      |        |                        |          |          |       
|Supplementary Cash Flow Information                  |                                                                           |                                                |                                                      |                                                      |        |                        |          |          |        |        |          |         
|                                                     |                                                                           | Interest paid (excluding interest capitalized) |                                                      | $                                                    | 58,249 |                        |          | $        | 59,466 |        |          | $        | 58,467 |       
|                                                     |                                                                           | Income taxes paid                              |                                                      | $                                                    | (3,142 | )                      |          | $        | 22,959 |        |          | $        | 25,340 |       

See Notes to Consolidated Financial Statements

20



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##### Table of Contents



MICHIGAN CONSOLIDATED GAS COMPANY
CONSOLIDATED STATEMENT OF RETAINED EARNINGS

|               |                                 |  |                        |         |   |      |   |          |      |  |   |         |  
|-------------- | ------------------------------- |  | ---------------------- | ------- | - | ---- | - | -------- | ---- |  | - | ------- | -
|               |                                 |  | Year Ended December 31 |        
|               |                                 |  |                        |        
|               |                                 |  | 2001                   |         |   | 2000 |   |          | 1999 | 
|               |                                 |  |                        |         |   |      |   |          |      | 
|(in Thousands) |                                 |  |                        |         |   |      |   |          |      |  |   |        
|               | Balance  beginning of period   |  | $                      | 494,648 |   |      | $ | 494,803  |      |  | $ | 406,144 |  
|               | Net income (loss)               |  |                        | (41,124 | ) |      |   | 109,534  |      |  |   | 106,336 |  
|               | Common stock dividends declared |  |                        | (75,368 | ) |      |   | (109,689 | )    |  |   | (17,677 | )
|               |                                 |  |                        |         |   |      |   |          |     
|               | Balance  end of period         |  | $                      | 378,156 |   |      | $ | 494,648  |      |  | $ | 494,803 |  
|               |                                 |  |                        |         |   |      |   |          |     

See Notes to Consolidated Financial Statements

21



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##### Table of Contents



Michigan Consolidated Gas Company
Notes to Consolidated Financial Statements

NOTE 1 SIGNIFICANT ACCOUNTING POLICIES

Company Description

Michigan Consolidated Gas Company (MichCon or the Company) is a public utility
engaged in the distribution and transmission of natural gas in the state of
Michigan. The Company is subject to the accounting requirements of and rate
regulation by the Michigan Public Service Commission (MPSC) with respect to the
distribution and intrastate transportation of natural gas. The major services
provided by the Company are gas sales, end user transportation and intermediate
transportation. The Company serves more than 1.2 million residential,
commercial and industrial customers throughout Michigan. Its principal markets
are located in the Detroit, Grand Rapids, Ann Arbor, Traverse City, Marquette,
and Muskegon metropolitan areas and in various other communities throughout
Michigan. The Companys non-regulated operations are not significant. The
Company is an indirect, wholly owned subsidiary of DTE Enterprises Inc.
(Enterprises), an exempt holding company under the Public Utility Holding
Company Act of 1935.

Principles of Consolidation

The Company consolidates all majority owned subsidiaries. The Company accounts
for non-majority owned investments under the equity method when the Company is
able to influence the financial operating policies of the investee.

Basis of Presentation

The accompanying consolidated financial statements were prepared in conformity
with accounting principles generally accepted in the United States. In
connection with their preparation, management makes estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and expenses,
and the disclosure of contingent assets and liabilities. Actual results could
differ from those estimates.

The Company reclassified certain prior year balances to conform to the 2001
presentation.

Revenues and Cost of Gas

Revenues from the transportation and storage of natural gas are recognized as
services are provided. The Company accrues revenues for gas services provided
but unbilled at month-end. Through December 2001, MichCons rates included a
component for cost of gas sold that was fixed at $2.95 per thousand cubic feet
(Mcf). Effective January 2002, MichCon implemented a gas cost recovery (GCR)
mechanism that will allow it to recover the prudent and reasonable cost of gas
sold through annual proceedings before the MPSC.

Cash Equivalents

For purposes of the Consolidated Statement of Cash Flows, the Company considers
investments purchased with a maturity of three months or less to be cash
equivalents.

Inventories

Materials and supplies are valued at average cost.

22



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##### Table of Contents



Gas inventory is determined using the last-in, first-out (LIFO) method. At
December 31, 2001, the replacement cost of gas remaining in storage exceeded
the $6,177,000 LIFO cost by $90,929,000. During 2001, MichCon liquidated 19.6
Bcf of prior years LIFO layers at and average cost of $0.38 per thousand cubic
feet. MichCons average purchase rate in 2001 was $3.23 per Mcf higher than
the average LIFO liquidation rate. Applying LIFO cost in valuing the
liquidation, as opposed to using the average gas purchase rate, decreased 2001
cost of gas by $63,172,000 and increased earnings by $41,062,000, net of taxes.

Property, Retirement and Maintenance, and Depreciation and Depletion

Property is stated at cost and includes construction-related labor and
materials. Expenditures for maintenance and repairs are charged to expense as
incurred. The cost of properties retired plus removal costs, less salvage are
charged to accumulated depreciation.

MichCon bases depreciation provisions on straight-line rates and units of
production rates approved by the MPSC. Unit of production depreciation and
depletion is used for certain production and transmission property. The
composite depreciation rate for MichCon was 3.9% in 2001, 3.6% in 2000 and 3.5%
in 1999.

Allowance for Funds Used during Construction

MichCon capitalizes an allowance for both debt and equity funds used during
construction in the cost of major additions to utility plant. The total amount
capitalized was $1,202,000, $1,722,000 and $2,521,000 in 2001, 2000 and 1999,
respectively.

Long-Lived Assets

Long-lived assets held and used by the Company are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. If the carrying amount of the asset
exceeds the expected future cash flows expected to be generated by the asset,
an impairment loss is recognized, and the asset is written down to its
estimated fair value. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.

Software Costs

The Company capitalizes the cost of software developed for internal use. These
costs are amortized on a straight-line basis beginning with a projects
completion.

Deferred Debt Costs

The costs related to the issuance of long-term debt are amortized over the life
of each issue. In accordance with MPSC regulations, the unamortized discount,
premium and expense related to debt redeemed with a refinancing are amortized
over the life of the replacement issue.

Recently Issued Accounting Pronouncements

Derivatives- Effective January 1,
2001, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 133,
Accounting for Derivative Instruments and Hedging Activities, as amended.
SFAS No. 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in


23Table of Contents

other contracts, and for hedging activities. SFAS No. 133 requires that
companies recognize all derivatives as either assets or liabilities measured at
fair value on the statement of financial position. SFAS No. 133 provides an
exception for certain contracts that qualify as normal purchases and sales.
To qualify for this exception, certain criteria must be met, including that it
must be probable that the contract will result in physical delivery.

See Note 10  Financial and Other Derivative Instruments herein for additional
information.

Asset Retirement Obligations- In June 2001, the FASB issued SFAS No. 143,
Accounting for Asset Retirement Obligations. This statement requires that
the fair value of an asset retirement obligation be recognized in the period in
which it is incurred. The associated asset retirement costs would be
capitalized as part of the carrying amount of the long-lived asset. It would
apply to legal obligations associated with the retirement of long-lived assets
that result from the acquisition, construction, development and (or) the normal
operation of a long-lived asset. This statement is effective for financial
statements issued for fiscal years beginning after June 15, 2002. The Company
has not yet determined the impact of this statement on the consolidated
financial statements.

Long-Lived Assets- In August 2001, the FASB issued SFAS No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets. This statement
supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of. This statement establishes a
single accounting model for long-lived assets to be disposed of by sale,
whether previously held and used, or newly acquired. This statement is
effective for financial statements issued for fiscal years beginning after
December 15, 2001. The Company adopted this statement on January 1, 2002, with
no impact on the consolidated financial statements.

NOTE 2  MCN ENERGY ACQUISITION

On May 31, 2001, DTE Energy Company (DTE Energy) completed the acquisition of
MCN Energy Group Inc. (MCN Energy), the parent company of MichCon, by acquiring
all of its outstanding shares of common stock for a combination of cash and
shares of DTE Energy common stock. MCN Energy was merged with and into
Enterprises, the surviving corporation in the merger and a wholly owned
subsidiary of DTE Energy. The acquisition by DTE Energy was accounted for
using the purchase method. MichCons assets and liabilities included in the
accompanying consolidated financial statements have not been adjusted to
allocate the purchase price to their fair values. Certain losses reflected in
the accompanying consolidated financial statements have been eliminated at DTE
Energy as a result of purchase accounting adjustments.

NOTE 3  MERGER AND RESTRUCTURING CHARGES

MichCon incurred merger-related charges and restructuring charges associated
with the acquisition of MCN Energy. The merger-related charges of $22,486,000
($14,616,000 after tax) in 2001, $4,058,000 ($2,638,000 after tax) in 2000 and
$25,429,000 ($16,530,000 after tax) in 1999, consisted primarily of system
integration, relocation, legal, accounting and consulting costs. Restructuring
charges of $80,961,000 ($52,625,000 after tax) in 2001, were primarily
associated with a workforce reduction plan. The plan included early retirement
incentives along with voluntary separation arrangements for 273 employees,
primarily in overlapping corporate support functions. The merger and
restructuring charges had the effect of decreasing earnings by $103,447,000
($67,240,000 after tax) in 2001, $4,058,000 ($2,638,000 after tax) in 2000 and
$25,429,000 ($16,530,000 after tax) in 1999. Approximately


24Table of Contents

$24,986,000 of the merger and restructuring charges have been paid as of
December 31, 2001, including approximately $2,500,000 of benefits, and it is
anticipated that the remaining benefits of $78,461,000 have been or will be
paid from retirement plans.

NOTE 4  REGULATORY MATTERS

Regulation

MichCon is subject to the regulatory jurisdiction of the MPSC, which issues
orders pertaining to rates, recovery of certain costs, including the costs of
generating facilities and regulatory assets, conditions of service, accounting
and operating-related matters.

MichCon operations meet the criteria of SFAS No. 71, Accounting for the
Effects of Certain Types of Regulation. This accounting standard recognizes
the cost-based ratemaking process, which results in differences in the
application of generally accepted accounting principles between regulated and
non-regulated businesses. SFAS No. 71 requires the recording of regulatory
assets and liabilities for certain transactions that would have been treated as
revenue and expense in non-regulated businesses. Regulatory assets represent
costs that will be recovered from customers through the ratemaking process.
Regulatory liabilities represent benefits that will be refunded to customers
through reduced rates. Continued applicability of SFAS No. 71 requires that
rates be designed to recover specific costs of providing regulated services and
be charged to and collected from customers. Management believes that currently
available facts support the continued application of SFAS No. 71. Future
regulatory changes or changes in the competitive environment could result in
the Company discontinuing the application of SFAS No. 71 for some or all of its
businesses and require the write-off of the portion of any regulatory asset or
liability that was no longer probable of recovery through rates or refund. If
MichCon were to have discontinued the application of SFAS No. 71 at December
31, 2001, it would have had an extraordinary non-cash increase to income of
approximately $60 million.

Regulatory Assets and Liabilities

MichCon recorded the following regulatory assets and liabilities as of December
31:

|                        |  |                                        |         |   |         |   |         |      |         |  | 
|----------------------- |  | -------------------------------------- | ------- | - | ------- | - | ------- | ---- | ------- |  | 
|                        |  |                                        |         |   | 2001    |   |         | 2000 |        
|                        |  |                                        |         |   |         |   |         |      |        
|(in Thousands)          |  |                                        |         |   |         |   |         |     
|Regulatory Assets:      |  |                                        |         |   |         |   |         |     
|                        |  | Deferred environmental costs           |         | $ | 26,920  |   |         | $    | 26,372  | 
|                        |  | Unamortized loss on retirement of debt |         |   | 16,436  |   |         |      | 14,655  | 
|                        |  | Gas Cost Recovery                      |         |   | 14,401  |   |         |      | 414     | 
|                        |  | Other                                  |         |   |        |   |         |      | 60      | 
|                        |  |                                        |         |   |         |   |         |     
|                        |  | $                                      | 57,757  |   |         | $ | 41,501  |     
|                        |  |                                        |         |   |         |   |         |     
|Regulatory Liabilities: |  |                                        |         |   |         |   |         |     
|                        |  | Tax benefits amortizable to customers  |         | $ | 144,172 |   |         | $    | 138,161 | 
|                        |  | Other                                  |         |   |        |   |         |      | 97      | 
|                        |  |                                        |         |   |         |  
|                        |  | $                                      | 144,172 |   |         | $ | 138,258 |     
|                        |  |                                        |         |   |         |  

Tax benefits amortizable to customers represents the net revenue equivalent of
the difference in property-related accumulated deferred income taxes computed
in accordance with


25Table of Contents

SFAS No. 109, Accounting for Income Taxes, as compared
to the amounts previously reflected in setting utility rates. This amount is
primarily due to current tax rates being lower than the rates in effect when
the original deferred taxes were recorded and because of temporary differences,
including accumulated investment tax credits, for which deferred income taxes
were not previously recorded in setting utility rates. These net tax benefits
are being amortized, in accordance with the regulatory treatment, over the life
of the related plant as the temporary differences reverse.

Gas Industry Restructuring

Regulatory Reform Plan Through December 2001, MichCon was operating under an
MPSC-approved Regulatory Reform Plan which included a comprehensive
experimental three-year gas Customer Choice program, a Gas Sales Program and
an income sharing mechanism. The gas Customer Choice program allowed a limited
number of customers to purchase gas from suppliers other than MichCon. The Gas
Sales Program suspended the GCR mechanism for customers who continue to
purchase gas from MichCon, and fixed the gas commodity component of MichCons
sales rates at $2.95 per Mcf. The income sharing mechanism allowed customers
to share in profits when actual returns on equity from utility operations
exceed predetermined thresholds. Based on the MPSC approved formula, the
Company believes that no income sharing is required in 2001.

Regulatory Changes- MichCon returned to the GCR mechanism in January 2002 when
the Gas Sales Program expired. Under the GCR mechanism, the gas commodity
component of MichCons gas sales rates will be based on market prices and set
through the GCR process. In December 2001, the MPSC issued an order that
permitted MichCon to implement GCR factors of up to $3.62 per Mcf for January
2002 billings and up to $4.38 per Mcf for the remainder of 2002. The order also
allowed MichCon to recognize a regulatory asset of approximately $14 million
representing the difference between the $4.38 factor and the $3.62 factor for
volumes that were unbilled at December 31, 2001. The regulatory asset will be
subject to the 2002 GCR reconciliation process.

In December 2001, the MPSC also approved MichCons application for a voluntary,
expanded permanent gas Customer Choice program which would replace the
experimental program that expires in March 2002. Effective April 2002, up to
approximately 40% of MichCons customers could elect to purchase gas from
suppliers other than MichCon. Effective April 2003, up to approximately 60% of
customers would be eligible and by April 2004, all of MichCons 1.2 million
customers can participate in the program. The MPSC also approved the use of
deferred accounting for the recovery of implementation costs of the gas
Customer Choice program.

Other Rate Matters

As of December 31, 2001, MichCon had transportation contracts with four
interstate natural gas companies. One such company filed a rate case at FERC
to increase its rates effective July 1, 2002. The proposed rate increase would
result in an annual reservation cost increase for MichCon of $1.4 million.
MichCon has intervened and filed a protest of the rate increase. The FERC is
expected to issue an initial order in 2002. In a related matter, one of the
transportation contracts is due to expire on March 31, 2002. MichCon is in the
process of reviewing all supply options and will determine shortly renewal
levels and associated costs.

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NOTE 5  INCOME TAXES

MichCon is part of the consolidated federal income tax return of DTE Energy.
The federal income tax expense for MichCon and its subsidiaries is determined
on an individual company basis with no allocation of tax benefits or expenses
from other affiliates of DTE Energy.

Total income tax expense as a percent of income before tax varied from the
statutory federal income tax rate for the following reasons:

|                          |  |      |      |   |      |  |      |      |  |  |      |  
|------------------------- |  | ---- | ---- | - | ---- |  | ---- | ---- |  |  | ---- | -
|                          |  | 2001 |      |   | 2000 |  |      | 1999 | 
|                          |  |      |      |   |      |  |      |      | 
|Statutory income tax rate |  |      | 35.0 | % |      |  | 35.0 | %    |  |  | 35.0 | %
|Investment tax credit     |  |      | (2.6 | ) |      |  | (1.2 | )    |  |  | (1.2 | )
|Depreciation              |  |      | 4.7  |   |      |  | 1.9  |      |  |  | 1.2  |  
|Other-net                 |  |      | 1.8  |   |      |  | (2.5 | )    |  |  | (0.6 | )
|                          |  |      |      |   |      |  |      |      | 
|Effective income tax rate |  |      | 38.9 | % |      |  | 33.2 | %    |  |  | 34.4 | %
|                          |  |      |      |   |      |  |      |      | 

Components of income tax expense (benefit) were as follows:

|                                                       |  |      |         |   |      |   |        |      |  |   |        |  
|------------------------------------------------------ |  | ---- | ------- | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                       |  | 2001 |         |   | 2000 |   |        | 1999 | 
|                                                       |  |      |         |   |      |   |        |      | 
|(in
Thousands)                                         |  |      |         |   |      |   |        |      |  |   |        |  
|Current federal and other income tax expense (benefit) |  | $    | (6,297  | ) |      | $ | 23,575 |      |  | $ | 34,180 |  
|Deferred federal income tax expense (benefit)          |  |      | (18,165 | ) |      |   | 33,289 |      |  |   | 24,316 |  
|Investment tax credit                                  |  |      | (1,738  | ) |      |   | (1,911 | )    |  |   | (2,007 | )
|                                                       |  |      |         |   |      |   |        |      | 
|Total                                                  |  | $    | (26,200 | ) |      | $ | 54,953 |      |  | $ | 56,489 |  
|                                                       |  |      |         |   |      |   |        |      | 

Deferred tax assets and liabilities are recognized for the estimated future tax
effect of temporary differences between the tax basis of assets or liabilities
and the reported amounts in the financial statements. Deferred tax assets and
liabilities are classified as current or noncurrent according to the
classification of the related assets or liabilities. Deferred tax assets and
liabilities not related to assets or liabilities are classified according to
the expected reversal date of the temporary differences.

Deferred income tax assets (liabilities) were comprised of the following at
December 31:

|                                |  |      |          |   |      |   |          |  
|------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                                |  | 2001 |          |   | 2000 |  
|                                |  |      |          |   |      |  
|(in
Thousands)                  |  |      |          |   |      |   |          |  
|Property                        |  | $    | (52,324  | ) |      | $ | (60,227  | )
|Property taxes                  |  |      | (7,231   | ) |      |   | (13,823  | )
|Employee benefits               |  |      | (43,963  | ) |      |   | (59,012  | )
|Other                           |  |      | (19,728  | ) |      |   | (14,320  | )
|                                |  |      |          |   |      |  
|                                |  | $    | (123,246 | ) |      | $ | (147,382 | )
|                                |  |      |          |   |      |  
|Deferred income tax liabilities |  | $    | (171,145 | ) |      | $ | (171,549 | )
|Deferred income tax assets      |  |      | 47,899   |   |      |   | 24,167   |  
|                                |  |      |          |   |      |  
|                                |  | $    | (123,246 | ) |      | $ | (147,382 | )
|                                |  |      |          |   |      |  

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NOTE 6  PREFERRED AND PREFERENCE SECURITIES

At December 31, 2001, MichCon had 7 million shares of preferred stock with a
par value of $1 per share and 4 million shares of preference stock with a par
value of $1 per share authorized, with no shares issued.

NOTE 7  LONG-TERM DEBT

MichCons long-term debt outstanding at December 31 was:

|               |                                                         |                        |  |       |         |  |      |        |         | 
|-------------- | ------------------------------------------------------- | ---------------------- |  | ----- | ------- |  | ---- | ------ | ------- | 
|               |                                                         |                        |  | 2001  |         |  | 2000 |       
|               |                                                         |                        |  |       |         |  |      |       
|(in Thousands) |                                                         |                        |  |       |         |  |      |       
|               | First Mortgage Bonds, interest payable semi-annually    |                        |  |       |         |  |      |        |        
|               |                                                         | 8% series due 2002     |  | $     |        |  |      | $      | 17,314  | 
|               |                                                         | 6.72% series due 2003  |  |       | 4,150   |  |      |        | 4,150   | 
|               |                                                         | 6.8% series due 2003   |  |       | 15,850  |  |      |        | 15,850  | 
|               |                                                         | 7.15% series due 2006  |  |       | 40,000  |  |      |        | 40,000  | 
|               |                                                         | 7.21% series due 2007  |  |       | 30,000  |  |      |        | 30,000  | 
|               |                                                         | 7.06% series due 2012  |  |       | 40,000  |  |      |        | 40,000  | 
|               |                                                         | 8.25% series due 2014  |  |       | 80,000  |  |      |        | 80,000  | 
|               |                                                         | 7.6% series due 2017   |  |       | 14,645  |  |      |        | 14,747  | 
|               |                                                         | 7.5% series due 2020   |  |       | 28,513  |  |      |        | 28,663  | 
|               |                                                         | 9.5% series due 2021   |  |       |        |  |      |        | 40,000  | 
|               |                                                         | 6.75% series due 2023  |  |       | 14,802  |  |      |        | 15,301  | 
|               |                                                         | 7% series due 2025     |  |       | 40,000  |  |      |        | 40,000  | 
|               | Remarketable securities, interest payable semi-annually |                        |  |       |         |  |      |        |        
|               |                                                         | 6.2% series due 2038   |  |       | 75,000  |  |      |        | 75,000  | 
|               |                                                         | 6.45% series due 2038  |  |       | 75,000  |  |      |        | 75,000  | 
|               | Senior notes, interest payable semi-annually            |                        |  |       |         |  |      |        |        
|               |                                                         | 6.125% series due 2008 |  |       | 200,000 |  |      |        |        | 
|               | Senior notes, interest payable quarterly                |                        |  |       |         |  |      |        |        
|               |                                                         | 6.85% series due 2038  |  |       | 52,640  |  |      |        | 53,732  | 
|               |                                                         | 6.85% series due 2039  |  |       | 55,000  |  |      |        | 55,000  | 
|               | Other long-term debt                                    |                        |  | 8,896 |         |  |      | 11,876 |        
|               | Net unamortized premium (discount)                      |                        |  | 1,998 |         |  |      | 2,476  |        
|               | Long-term capital lease obligations                     |                        |  | 2,083 |         |  |      | 2,260  |        
|               |                                                         |                        |  |       |         | 
|               |                                                         | Total                  |  | $     | 778,577 |  |      | $      | 641,369 | 
|               |                                                         |                        |  |       |         | 

In 2001, MichCon issued $200,000,000 of 6.125% senior secured notes, due
September 2008. These notes are fall-away mortgage debt and, as such, are
secured debt as long as MichCons other first mortgage bonds are outstanding
and become senior unsecured debt thereafter. The notes are redeemable at any
time at the option of the Company using a redemption price of par or the
present value of the remaining payments of principal and interest discounted to
the redemption date on a semiannual basis at the adjusted treasury rate plus 25
basis points.

In 2001, MichCon redeemed $40,000,000 of 9.5% first mortgage bonds, which were
due in 2021.

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

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In 1999, MichCon issued $55,000,000 of 6.85% senior secured notes, due June
2038, and $55,000,000 of 6.85% senior secured notes, due June 2039. These notes
are fall-away mortgage debt and, as such, are secured debt as long as
MichCons other first mortgage bonds are outstanding and become senior
unsecured debt thereafter. The notes are insured by a financial guaranty
insurance policy and are rated AAA or its equivalent by the major rating
agencies. The notes are redeemable at par on or after June 1, 2004.

In 1999, MichCon redeemed $18,000,000 of 9.125% first mortgage bonds, which
were due in September 2004.

In 1998, MichCon issued a total of $150,000,000 of remarketable debt securities
with various interest rates. These securities are fall-away mortgage debt
and are structured such that the interest rates of the issues can be reset at
various remarketing dates over the life of the debt. The initial remarketing
dates are in June 2003 and 2008. MichCon received option premiums in return
for granting options to the underwriters to reset the interest rate for a
period of ten years at the initial remarketing dates. The option premiums
received, net of financing costs incurred, totaled $3,052,000 and are being
amortized to income over the initial interest and corresponding option periods.
If the underwriters elect not to exercise their reset options, the securities
become subject to the remarketing feature or may be redeemed by MichCon at par.
If MichCon and the remarketing agent cannot agree on an interest rate or the
remarketing agent is unable to remarket the securities, MichCon will be
required to repurchase the securities at their principal amounts.

Non-utility subsidiaries of MichCon have amounts outstanding under a
nonrecourse credit agreement. Under the terms of the agreement, certain
alternative variable interest rates are available at the borrowers option
during the life of the agreement. Quarterly principal payments are made, with
a final installment due November 2005. The loan is secured by a pledge of
stock of the borrowers and a security interest in certain of their assets.
MichCon may be required to support the credit agreement through limited capital
contributions to the subsidiaries if certain cash flow and operating targets
are not met. At December 31, 2001 and 2000, $10,819,000 and $15,190,000 were
outstanding at weighted average interest rates of 2.5% and 7.1%, respectively.

MichCon has variable interest rate swap agreements with notional principal
amounts aggregating $80,000,000 in connection with its first mortgage bonds.
Swap agreements of $40,000,000 through May 2002 have reduced the average cost
of the related debt from 7.3% to 5.4% for the year ended December 31, 2001.
Swap agreements of $40,000,000 through May 2005 have reduced the average cost
of the related debt from 7.1% to 5.0% for the year ended December 31, 2001.

Substantially all of the property of MichCon is pledged as security for the
payment of outstanding first mortgage bonds.

Maturities and sinking fund requirements during the next five years for
long-term debt outstanding at December 31, 2001 are $21,130,000 in 2002,
$98,588,000 in 2003, $3,366,000 in 2004, $2,458,000 in 2005 and $40,193,000 in
2006.

NOTE 8  SHORT-TERM CREDIT ARRANGEMENTS AND BORROWINGS

During 2001, MichCon entered into a bank facility arrangement used to support
commercial paper in the amount of $300,000,000. Commercial paper is usually
issued in lieu of an equivalent amount of borrowings under these lines of
credit. Commercial paper outstanding at December 31, 2001 and 2000


29Table of Contents

totaled $254,750,000 and $277,716,000 at weighted average interest rates of
2.1% and 7.2%, respectively.

NOTE 9  CAPITAL AND OPERATING LEASES

Lessee- MichCon leases certain property (principally a warehouse, office
building and parking structure) under capital lease arrangements expiring at
various dates to 2006, with renewal options extending beyond that date.
Portions of the office building and parking structure are subleased to various
tenants. Long-term capital lease obligations are not significant.

Operating lease payments for the years ended December 31, 2001, 2000 and 1999
were $2,302,000, $2,233,000 and $2,073,000, respectively.

Lessor- MichCon leases a portion of its pipeline system to the Vector Pipeline
Partnership through a capital lease arrangement that expires in 2020, with
renewal options extending for five years. The components of the net investment
in the capital lease at December 31 follows:

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|                                         |  |      |          |  
|---------------------------------------- |  | ---- | -------- | -
|                                         |  | 2001 |         
|                                         |  |      |         
|(in Thousands)                           |  |      |          |  
|2002                                     |  | $    | 9,000    |  
|2003                                     |  |      | 9,000    |  
|2004                                     |  |      | 9,000    |  
|2005                                     |  |      | 9,000    |  
|2006                                     |  |      | 9,000    |  
|Thereafter                               |  |      | 125,250  |  
|                                         |  |      |         
|Total minimum future lease receipts      |  |      | 170,250  |  
|Residual value of leased pipeline        |  |      | 39,742   |  
|Less  unearned income                   |  |      | (125,384 | )
|                                         |  |      |         
|Net investment in direct financing lease |  |      | 84,608   |  
|Less   current portion                  |  |      | (868     | )
|                                         |  |      |         
|                                         |  | $    | 83,740   |  
|                                         |  |      |         

NOTE 10  FINANCIAL AND OTHER DERIVATIVE INSTRUMENTS

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133, as amended, establishes
accounting and reporting standards for derivative instruments and for hedging
activities. It requires that all derivative instruments be recognized as
either assets or liabilities, measured at fair value. The accounting for
changes in fair value depends upon the purpose of the derivative instrument and
whether it is designated as a hedge and qualifies for hedge accounting. To the
extent derivative instruments qualify as hedges and are designated as hedges of
the variability of cash flows associated with forecasted transactions, the
effective portion of the gain or loss on such derivative instruments is
reported in other comprehensive income. The ineffective portion, if any, is
reported in net income. Such amounts reported in other comprehensive income
are reclassified into net income when the forecasted transaction affects
earnings. If a cash flow hedge is discontinued because it is probable that the
forecasted transaction will not occur, the net gain or loss is immediately
reclassified into earnings. To the extent derivative instruments qualify as
hedges and are designated as hedges of changes in fair value of an existing
asset, liability or firm commitment, the gain or loss on the hedging instrument
is recognized in earnings along with the changes in fair value of the hedged
asset, liability or firm commitment attributable to the hedged risk.

SFAS No. 133 requires that as of the date of initial adoption, the difference
between the fair value of derivative instruments and the previous carrying
amount of those derivatives be reported in net income or other comprehensive
income, as appropriate, as the cumulative effect of a change in accounting
principle in accordance with Accounting Principles Board (APB) Opinion 20,
Accounting Changes. 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.

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RISK MANAGEMENT ACTIVITIES

Interest Rate Risk

In order to manage interest 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 principal 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 operations.
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.

At December 31, 2001 and 2000, MichCon had interest rate swap agreements with
notional principal amounts totaling $80,000,000 and a weighted average
remaining life of 1.9 and 2.9 years, respectively. The notional principal
amounts are used solely to calculate amounts to be paid or received under the
interest rate swap agreements and approximate the principal amount of the
underlying debt being hedged.

Commodity Price Risk

MichCon has firm-priced contracts for a substantial portion of its expected gas
supply requirements though 2002. These contracts qualify for the normal
purchases exception under SFAS No.133. Accordingly, MichCon does not account
for such contracts as derivatives.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of financial instruments is determined by reference to various
market data and other valuation techniques as appropriate. The carrying amount
of financial instruments, except for long-term debt, approximate fair value.
The estimated fair value of total long-term debt at December 31, 2001 and 2000
was $778,981,000 and $632,097,000, respectively, compared to the carrying
amount of $776,494,000 and $639,109,000, respectively.

NOTE 11  COMMITMENTS AND CONTINGENCIES

Personal Property Taxes

MichCon and other Michigan utilities have asserted that Michigans valuation
tables result in the substantial overvaluation of utility personal property.
Valuation tables established by the Michigan State Tax Commission (STC) are
used to estimate the reduction in value of personal property based on the
propertys age. In November 1999, the STC approved new valuation tables that
more accurately recognize the value of a utilitys personal property. The new
tables became effective in 2000 and are being used for current year assessments
in most jurisdictions. However, several local taxing jurisdictions have taken
legal action attempting to prevent the STC from implementing the new valuation
tables and have continued to prepare assessments based on the superseded
tables. The legal actions regarding the appropriateness of the new tables are
currently before the Michigan Tax Tribunal (MTT) which issued an order in June
2000 stating that the tables are presumed to be correct, thus assigning the
burden of proving otherwise to the taxing jurisdictions. The hearing before
the MTT concluded in June 2001, with the STC

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subsequently filing a motion for summary judgment. All briefs related to that
motion have been filed, and the parties now await the MTT decision.

Beginning in 2000, MichCon accrues property tax expense based on the new
tables. MichCon will seek to apply the new tables retroactively and to
ultimately settle the pending tax appeals related to 1997 through 1999. This is
a solution supported by the STC in the past. The legal action, along with
possible additional appeals by local taxing jurisdictions, is expected to delay
any recoveries realized by MichCon related to the new valuation tables.

Environmental Matters

Former manufactured gas plant sites Prior to the construction of major
natural gas pipelines, gas for heating and other uses was manufactured from
processes involving coal, coke or oil. MichCon owns, or previously
owned, 16
such former manufactured gas plant (MGP) sites.

During the mid-1980s, MichCon conducted preliminary environmental
investigations at former MGP sites, and some contamination related to the
by-products of gas manufacturing was discovered at each site. The existence of
these sites and the results of the environmental investigations have been
reported to the Michigan Department of Environmental Quality (MDEQ). None of
these former MGP sites is on the National Priorities List prepared by the U.S.
Environmental Protection Agency (EPA).

MichCon is involved in an administrative proceeding before the EPA regarding
one of the former MGP sites. MichCon has executed an order with the EPA,
pursuant to which MichCon is legally obligated to investigate and remediate the
MGP site. MichCon is remediating eight of the former MGP sites and is
conducting more extensive investigations at three other former MGP sites. In
1998, MichCon received state closure of one of the former MGP sites.
Additionally, the MDEQ has determined with respect to two other former MGP
sites that MichCon is not a responsible party for the purpose of assessing
remediation expenditures. In September 2001, MichCon was advised of one
additional MGP site for which it has some responsibility. After review of the
extent of the necessary environmental clean-up required, remediation costs for
this site are expected not to exceed $500,000.

In 1984, MichCon established an $11,700,000 reserve for environmental
investigation and remediation. During 1993, MichCon received MPSC approval of a
cost deferral and rate recovery mechanism for investigation and remediation
costs incurred at former MGP sites in excess of this reserve.

MichCon employed outside consultants to evaluate remediation alternatives for
these sites, to assist in estimating its potential liabilities and to review
its archived insurance policies. The findings of these investigations indicate
that the estimated total expenditures for investigation and remediation
activities for these sites could range from $30,000,000 to $170,000,000 based
on undiscounted 1995 costs. As a result of these studies, MichCon accrued an
additional liability and a corresponding regulatory asset of $32,000,000 during
1995.

During 2001, 2000 and 1999, MichCon spent $4,826,000, $1,260,000 and $724,000,
respectively, investigating and remediating these former MGP sites. At
December 31, 2001, the reserve balance was $25,400,000, of which $4,700,000 was
classified as current. Any significant change in assumptions, such as
remediation techniques, nature and extent of contamination and regulatory
requirements, could impact the estimate of remedial action costs for the sites
and, therefore, have an effect on MichCons financial position and cash flows.
However, management believes that the cost deferral and rate recovery

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mechanism approved by the MPSC will prevent environmental costs from having a
material adverse impact on MichCons results of operations.

Formerly owned storage field In 1998, MichCon received written notification
from ANR Pipeline Company (ANR), alleging that MichCon has responsibility for a
portion of the costs associated with responding to environmental conditions
present at a natural gas storage field in Michigan currently owned and operated
by an affiliate of ANR. At least some portion of the natural gas storage field
was formerly owned by MichCon. ANRs allegations are being evaluated to
determine whether and to what extent, if any, MichCon may have legal
responsibility for these costs. Management does not believe this matter will
have a material adverse impact on MichCons financial statements.

Commitments

To ensure a reliable supply of natural gas at competitive prices, MichCon has
entered into long-term purchase and transportation contracts with various
suppliers and producers. In general, purchases are under fixed price and volume
contracts or formulas based on market prices. MichCon has firm purchase
commitments through 2007 for approximately 298 Bcf of gas. MichCon expects that
sales, based on warmer-than-normal weather, will exceed its minimum purchase
commitments. MichCon has long-term transportation contracts with various
pipeline companies expiring on various dates through the year 2011. MichCon is
committed to pay demand charges of approximately $36,600,000 during 2002
related to firm transportation agreements.

MichCon expects that its 2002 capital investments
will approximate $97,000,000.
Certain commitments have been made in connection with such capital
expenditures.

A subsidiary of MichCon and an unaffiliated corporation have formed a series of
partnerships engaged in the construction and development of a residential
community on the Detroit riverfront (Harbortown). One of the partnerships
obtained $12,000,000 of tax-exempt financing due June 2004 through the Michigan
State Housing Development Authority. Both partners and their parent
corporations have issued guaranties for the full amount of this financing, and
each parent corporation has agreed to reimburse the other for 50% of any
payments made as a result of these guaranties.

Other Contingencies

Gas is sold to numerous companies operating in the steel, automotive, energy
and retail industries. A number of customers have filed for bankruptcy in
2001, including certain Enron Corporation affiliates. MichCon had open
transactions under a variety of agreements with bankrupt Enron affiliates, and
had an aggregate net liability of $15 million to Enron. There are various
netting agreements with Enron affiliates. Internal and external counsel are
working to determine MichCons rights within these agreements. MichCon has not
reserved for any exposure, in addition to the net liabilities already recorded,
as management cannot estimate a probable loss exposure and currently does not
believe the resolution of this matter will have a material impact to MichCon.

MichCon is involved in certain legal (including commercial matters),
administrative and environmental proceedings before various courts, arbitration
panels and governmental agencies concerning claims arising in the ordinary
course of business. These proceedings include certain contract disputes,
environmental reviews and investigations, and pending judicial matters.
Management cannot predict the final disposition of such proceedings. Management
regularly reviews legal matters and records provisions for claims that are
considered probable of loss. The resolution of pending proceedings is not
expected to have a material effect on MichCons financial statements in the
period they are resolved.

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NOTE 12  RETIREMENT BENEFITS AND TRUSTEED ASSETS

Pension Plan Benefits

MichCon participates in separate defined benefit retirement plans for union and
nonunion employees. The plans are
noncontributory, cover substantially all employees and provide retirement
benefits based on the employees years of benefit service, average final
compensation and age at retirement. Currently these plans meet the full
funding limitations of the Internal Revenue Code. Accordingly, no
contributions for the 2001, 2000, or 1999 plan years were made.

Effective December 31, 2001, the MCN Energy Group
Retirement Plan, that covered nonunion employees, merged into Detroit
Edison's retirement plan. Therefore, for accounting purposes, the
nonunion employees of MichCon now participate in a multiemployer
plan. Accordingly, the liabilities and assets associated with this
Plan are no longer reflected in the tables below, and the
associated prepaid pension asset of  $144,527,000 is now reflected as
an amount due from affiliate at December 31, 2001. MichCon is allocated an expense each year as a result of its participation in the
Detroit Edison plan. The annual cost for 2001 was $4,353,000, which included a $52,453,000
charge for special termination benefits and a $6,239,000 curtailment gain associated
with the early retirement window offered during the year.

Net pension credit for the years ended December 31 includes the following
components:

|                                    |                      |   |         |        |   |        |         |         |        |   |         |        |  
|----------------------------------- | -------------------- | - | ------- | ------ | - | ------ | ------- | ------- | ------ | - | ------- | ------ | -
|                                    |                      |   | 2001*   |        |   | 2000** |         |         | 1999** |  
|                                    |                      |   |         |        |   |        |         |         |        |  
|(in Thousands)                      |                      |   |         |        |   |        |         |         |        |   |         |       
|Service Cost                        |                      | $ | 3,398   |        |   | $      | 9,500   |         |        | $ | 11,686  |       
|Interest Cost                       |                      |   | 13,784  |        |   |        | 35,896  |         |        |   | 34,764  |       
|Expected Return on Plan Assets      |                      |   | (32,772 | )      |   |        | (86,724 | )       |        |   | (78,489 | )     
|Amortization of                     |                      |   |         |        |   |        |         |         |        |   |         |       
|                                    | Net gain             |   |         | (4,440 | ) |        |         | (11,200 | )      |   |         | (5,263 | )
|                                    | Prior service cost   |   |         | 1,580  |   |        |         | 1,711   |        |   |         | 1,711  |  
|                                    | Net transition asset |   |         | (1,373 | ) |        |         | (4,821  | )      |   |         | (4,821 | )
|Curtailments/Settlement Recognition |                      |   |        |        |   |        | (2,140  | )       |        |   | (1,999  | )     
|                                    |                      |   |         |        |   |        |         |         |       
|Net Pension Credit                  |                      | $ | (19,823 | )      |   | $      | (57,778 | )       |        | $ | (42,411 | )     
|                                    |                      |   |         |        |   |        |         |         |       

The following table sets forth a reconciliation of the obligations, assets and
funded status of the plans as well as the amounts recognized as prepaid pension
cost in the consolidated statement of financial position at December 31:

|                                                            |                      |   |          |         |   |        |         |          |  
|----------------------------------------------------------- | -------------------- | - | -------- | ------- | - | ------ | ------- | -------- | -
|                                                            |                      |   | 2001*    |         |   | 2000** |        
|                                                            |                      |   |          |         |   |        |        
|(in Thousands)                                              |                      |   |          |         |   |        |         |         
|Accumulated Benefit Obligation at the End of the Period     |                      | $ | 166,068  |         |   | $      | 413,702 |         
|                                                            |                      |   |          |         |   |       
|Projected Benefit Obligation at the Beginning of the Period |                      | $ | 485,433  |         |   | $      | 478,622 |         
|Service Cost                                                |                      |   | 3,398    |         |   |        | 9,500   |         
|Interest Cost                                               |                      |   | 13,784   |         |   |        | 35,896  |         
|Plan Amendments                                             |                      |   | 5,000    |         |   |        |        |         
|Actuarial Gain                                              |                      |   | (11,457  | )       |   |        | (2,793  | )       
|Settlements Due to Lump Sums                                |                      |   |         |         |   |        | (5,544  | )       
|Benefits Paid                                               |                      |   | (16,335  | )       |   |        | (30,248 | )       
|Non-union
liabilities allocated to multiemployer plan       |                      |   | (297,330 | )       |   |        |        |         
|                                                            |                      |   |          |         |   |       
|Projected Benefit Obligation at the End of the Period       |                      | $ | 182,493  |         |   | $      | 485,433 |         
|                                                            |                      |   |          |         |   |       
|Plan Assets at Fair Value at the Beginning of the Period    |                      | $ | 989,967  |         |   | $      | 932,294 |         
|Actual Return on Plan Assets                                |                      |   | (11,842  | )       |   |        | 93,151  |         
|Settlements Due to Lump Sums                                |                      |   |         |         |   |        | (4,109  | )       
|Benefits Paid                                               |                      |   | (16,335  | )       |   |        | (31,369 | )       
|Non-union
assets allocated to multiemployer plan            |                      |   | (643,034 | )       |   |        |        |         
|                                                            |                      |   |          |         |   |       
|Plan Assets at Fair Value at the End of the Period          |                      | $ | 318,756  |         |   | $      | 989,967 |         
|                                                            |                      |   |          |         |   |       
|Funded Status of the Plans                                  |                      | $ | 136,263  |         |   | $      | 504,534 |         
|Unrecognized                                                |                      |   |          |         |   |        |         |         
|                                                            | Net gain             |   |          | (64,556 | ) |        |         | (287,653 | )
|                                                            | Prior service cost   |   |          | 15,408  |   |        |         | 15,876   |  
|                                                            | Net transition asset |   |          | (2,112  | ) |        |         | (18,689  | )
|                                                            |                      |   |          |         |   |       
|Prepaid Pension Cost                                        |                      | $ | 85,003   |         |   | $      | 214,068 |         
|                                                            |                      |   |          |         |   |       

|   |  |                                  
|-- |  | ---------------------------------
|*  |  | MichCon union plan only          
|** |  | MichCon union and non-union plans

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In determining the actuarial present value of the projected benefit obligation,
the weighted average discount rate was 7.25% for 2001 and 7.5% for 2000 and
1999. The rate of increase in future compensation levels used was 4% for 2001
and 5% for 2000 and 1999. The expected long-term rate of return on plan
assets, which are invested primarily in equity and fixed income securities, was
9.5% for 2001, 2000 and 1999.

MichCon also sponsors defined contribution retirement savings plans.
Participation in one of these plans is available to substantially all union and
nonunion employees. MichCon matches employee contributions up to certain
predefined limits based upon salary and years of credited service. The cost of
these plans was $4,700,000 in 2001, $4,800,000 in 2000, and $4,700,000 in 1999.

Other Postretirement Benefits

MichCon provides certain postretirement health care and life insurance benefits
for retired employees who may become eligible for these benefits if they reach
retirement age while working for MichCon. MichCons policy is to fund certain
trusts to meet its postretirement benefit obligations. Separate qualified
Voluntary Employees Beneficiary Association (VEBA) trusts exist for union and
nonunion employees. No contributions were made to the VEBA trusts in 2001, 2000
or 1999. The expected long-term rate of return on plan assets that are
invested in life insurance policies, equity securities and fixed income
securities, was 9.8% for 2001, 2000, and 1999.

Net postretirement cost for the years ended December 31 includes the
following components:

|                                      |                           |   |         |        |   |      |         |        |      |   |         |        |  
|------------------------------------- | ------------------------- | - | ------- | ------ | - | ---- | ------- | ------ | ---- | - | ------- | ------ | -
|                                      |                           |   | 2001    |        |   | 2000 |         |        | 1999 |  
|                                      |                           |   |         |        |   |      |         |        |      |  
|(in Thousands)                        |                           |   |         |        |   |      |         |        |      |   |         |       
|Service Cost                          |                           | $ | 3,016   |        |   | $    | 3,950   |        |      | $ | 4,272   |       
|Interest Cost                         |                           |   | 18,270  |        |   |      | 18,779  |        |      |   | 16,180  |       
|Expected Return on Plan Assets        |                           |   | (18,489 | )      |   |      | (16,319 | )      |      |   | (14,788 | )     
|Amortization of                       |                           |   |         |        |   |      |         |        |      |   |         |       
|                                      | Net gain                  |   |         | (6,268 | ) |      |         | (5,364 | )    |   |         | (4,484 | )
|                                      | Net transition obligation |   |         | 12,224 |   |      |         | 12,702 |      |   |         | 12,702 |  
|Special Termination Benefits (Note 3) |                           |   | 22,790  |        |   |      |        |        |      |   |        |       
|Curtailment/Settlement Recognition    |                           |   | 5,285   |        |   |      |        |        |      |   |        |       
|                                      |                           |   |         |        |   |      |         |        |     
|Net Postretirement Cost               |                           | $ | 36,828  |        |   | $    | 13,748  |        |      | $ | 13,882  |       
|                                      |                           |   |         |        |   |      |         |        |     

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The following table sets forth a reconciliation of the obligations, assets and
funded status of the plans as well as the amounts recorded as accrued
postretirement cost in the consolidated statement of financial position:

|                                                                             |                           |   |          |          |   |      |         |          |  
|---------------------------------------------------------------------------- | ------------------------- | - | -------- | -------- | - | ---- | ------- | -------- | -
|                                                                             |                           |   | 2001     |          |   | 2000 |        
|                                                                             |                           |   |          |          |   |      |        
|(in Thousands)                                                               |                           |   |          |          |   |      |         |         
|Accumulated Postretirement Benefit Obligation at the Beginning of the Period |                           | $ | 239,351  |          |   | $    | 250,383 |         
|Service Cost                                                                 |                           |   | 3,016    |          |   |      | 3,950   |         
|Interest Cost                                                                |                           |   | 18,270   |          |   |      | 18,779  |         
|Actuarial Gain                                                               |                           |   | (5,809   | )        |   |      | (20,713 | )       
|Plan Amendments                                                              |                           |   | (542     | )        |   |      |        |         
|Special Termination Benefits (Note 3)                                        |                           |   | 17,971   |          |   |      |        |         
|Benefits Paid                                                                |                           |   | (17,393  | )        |   |      | (13,048 | )       
|                                                                             |                           |   |          |          |   |     
|Accumulated Postretirement Benefit Obligation at the End of the Period       |                           | $ | 254,864  |          |   | $    | 239,351 |         
|                                                                             |                           |   |          |          |   |     
|Plan Assets at Fair Value at the Beginning of the Period                     |                           | $ | 192,749  |          |   | $    | 189,531 |         
|Actual Return on Plan Assets                                                 |                           |   | (23,042  | )        |   |      | 15,163  |         
|Benefits Paid                                                                |                           |   | (20,927  | )        |   |      | (11,945 | )       
|                                                                             |                           |   |          |          |   |     
|Plan Assets at Fair Value at the End of the Period                           |                           | $ | 148,780  |          |   | $    | 192,749 |         
|                                                                             |                           |   |          |          |   |     
|Funded Status of the Plans                                                   |                           | $ | (106,084 | )        |   | $    | (46,602 | )       
|Unrecognized                                                                 |                           |   |          |          |   |      |         |         
|                                                                             | Net gain                  |   |          | (100,946 | ) |      |         | (142,936 | )
|                                                                             | Prior service cost        |   |          | (542     | ) |      |         |         |  
|                                                                             | Net transition obligation |   |          | 140,294  |   |      |         | 162,622  |  
|Regular Benefits Made After Measurement Date                                 |                           |   | (2,703   | )        |   |      | (548    | )       
|                                                                             |                           |   |          |          |   |     
|Accrued Postretirement Liability                                             |                           | $ | (69,981  | )        |   | $    | (27,464 | )       
|                                                                             |                           |   |          |          |   |     

The discount rate used in determining the accumulated postretirement benefit
obligation was 7.25% for 2001 and 7.5% for 2000 and 1999.

Benefit costs were calculated assuming health care cost trend rates beginning
at 8.5% for 2002 and decreasing to 5% in 2008 and thereafter for persons under
age 65 and decreasing from 9% to 5% for persons age 65 and over. A one
percentage point increase in the health care cost trend rates would have
increased the aggregate of the service cost and interest cost components of
benefit costs by $2,613,000 and would have increased the accumulated benefit
obligation by $29,812,000 at December 31, 2001. A one percentage point decrease
in the health care cost trend rates would have decreased the aggregate of the
service cost and interest cost components of benefit costs by $2,296,000 and
would have decreased the accumulated benefit obligation by $26,426,000 at
December 31, 2001.

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Grantor Trust

MichCon maintains a Grantor Trust which invests in life insurance contracts and
income securities. Employees and retirees have no right, title or interest in
the assets of the Grantor Trust, and MichCon can revoke the trust subject to
providing the MPSC with prior notification.

NOTE 13  RELATED PARTY TRANSACTIONS

MichCon had transactions with affiliated companies to provide transportation
and storage services and for the purchase natural gas. Under a service
agreement with DTE Energy, MichCon receives various tax, financial and legal
services and provides construction, engineering, human resources, information
technology and other services. The following is a summary of transactions with
affiliated companies:

|               |                                                     |  |      |        |  |      |   |        |      |  |   |        | 
|-------------- | --------------------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|               |                                                     |  | 2001 |        |  | 2000 |   |        | 1999 | 
|               |                                                     |  |      |        |  |      |   |        |      | 
|(in Thousands) |                                                     |  |      |        |  |      |   |        |      |  |   |       
|Revenues       |                                                     |  |      |        |  |      |   |        |      |  |   |       
|               | Transportation and storage services                 |  | $    | 4,055  |  |      | $ | 13,293 |      |  | $ | 13,810 | 
|               | Other services                                      |  |      | 3,041  |  |      |   | 4,558  |      |  |   | 6,057  | 
|               | Interest                                            |  |      | 6      |  |      |   | 587    |      |  |   | 390    | 
|Costs          |                                                     |  |      |        |  |      |   |        |      |  |   |       
|               | Gas purchases                                       |  |      | 69,204 |  |      |   | 77,542 |      |  |   | 75,151 | 
|               | Corporate expenses, merger costs and other services |  |      | 28,130 |  |      |   | 19,017 |      |  |   | 30,809 | 

MichCons accounts receivable from affiliated companies totaled $12,926,000 and
$7,186,000, and accounts payable to affiliated companies totaled $36,187,000
and $13,852,000 at December 31, 2001 and 2000, respectively.

NOTE 14  LOSS ON INVESTMENT IN HARBORTOWN

During 2001, MichCon recorded a $9.3 million pre-tax ($6.1 million net of
taxes) loss from the expected sale of its 33% to 50% interests in a series of
partnerships that own a residential community on the Detroit riverfront
(Harbortown). The carrying value of the investment was reduced to fair value
based on the estimated selling price less cost to sell. The sale of Harbortown
is no longer expected to take place within one year, therefore, MichCons share
of the partnerships results have been recognized.

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NOTE 15  SUPPLEMENTARY QUARTERLY FINANCIAL
INFORMATION (UNAUDITED)

Due to the seasonal nature of MichCons business, revenues and net income tend to be higher in the first and fourth
quarters of the calendar year.

|                        |  |   |  |  |  |         |         |  |         |   |          |         |  |   |         |   |  |      |         |  |  |   |           |  
|----------------------- |  | - |  |  |  | ------- | ------- |  | ------- | - | -------- | ------- |  | - | ------- | - |  | ---- | ------- |  |  | - | --------- | -
|                        |  |   |  |  |  | First   |         |  | Second  |   |          | Third   |  |   | Fourth  |   |  |      |         | 
|                        |  |   |  |  |  | Quarter |         |  | Quarter |   |          | Quarter |  |   | Quarter |   |  | Year |        
|                        |  |   |  |  |  |         |         |  |         |   |          |         |  |   |         |   |  |      |        
|(in Thousands)          |  |   |  |  |  |         |         |  |         |   |          |         |  |   |         |   |  |      |         |  |  |   |           |  
|2001                    |  |   |  |  |  |         |         |  |         |   |          |         |  |   |         |   |  |      |         |  |  |   |           |  
|Operating Revenue       |  | $ |  |  |  |         | 476,459 |  |         | $ | 181,931  |         |  | $ | 121,876 |   |  | $    | 437,346 |  |  | $ | 1,217,612 |  
|Operating Income (Loss) |  |   |  |  |  |         | 160,104 |  |         |   | (166,847 | )       |  |   | (54,366 | ) |  |      | 45,892  |  |  |   | (15,217   | )
|Net Income (Loss)       |  |   |  |  |  |         | 97,350  |  |         |   | (120,144 | )       |  |   | (43,255 | ) |  |      | 24,925  |  |  |   | (41,124   | )
|2000                    |  |   |  |  |  |         |         |  |         |   |          |         |  |   |         |   |  |      |         |  |  |   |           |  
|Operating Revenue       |  |   |  |  |  | $       | 442,747 |  |         | $ | 187,488  |         |  | $ | 132,269 |   |  | $    | 381,838 |  |  | $ | 1,144,342 |  
|Operating Income (Loss) |  |   |  |  |  |         | 116,883 |  |         |   | 18,235   |         |  |   | (842    | ) |  |      | 81,459  |  |  |   | 215,735   |  
|Net Income (Loss)       |  |   |  |  |  |         | 66,940  |  |         |   | 3,987    |         |  |   | (8,811  | ) |  |      | 47,418  |  |  |   | 109,534   |  

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INDEPENDENT AUDITORS REPORT

To the Board of Directors and Shareholder of
Michigan Consolidated Gas Company:

We have audited the consolidated statements of financial position
of Michigan Consolidated Gas Company and subsidiaries (the Company) as of
December 31, 2001 and 2000, and the related consolidated statements of
operations, cash flows, and retained earnings for each of the three years in
the period ended December 31, 2001. Our audits also included the
financial statement schedule listed in the Index at Item 8. These financial
statements and the financial statement schedule are the responsibility of the
Companys management. Our responsibility is to express an opinion on the
financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Michigan Consolidated Gas Company
and subsidiaries at December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles generally accepted
in the United States of America. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statements of the Company taken as a whole, present fairly, in all material respects, the
information set forth therein.

/s/ DELOITTE & TOUCHE LLP

Detroit, Michigan
February 26, 2002

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SCHEDULE II

MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
(Thousands of Dollars)

|                                                                                                                                    |                                 |                       |                      |        |            |       |   |        |                       |       |          |                |   |           |               |        |     |         |   |        |        |       | 
|----------------------------------------------------------------------------------------------------------------------------------- | ------------------------------- | --------------------- | -------------------- | ------ | ---------- | ----- | - | ------ | --------------------- | ----- | -------- | -------------- | - | --------- | ------------- | ------ | --- | ------- | - | ------ | ------ | ----- | 
|                                                                                                                                    |                                 |                       |                      |        |            |       |   |        | Additions             |       |          |                |   |           |               |        |     |        
|                                                                                                                                    |                                 |                       |                      |        |            |       |   |        |                       |       |          |                |   |           |               |        |     |        
|                                                                                                                                    |                                 |                       |                      |        |            |       |   |        | Provisions charged to |       |          | Deductions     |   |           |               |        |    
|                                                                                                                                    |                                 |                       |                      |        |            |       |   |        |                       |       |          | for Purposes   |   |           |               |        |    
|                                                                                                                                    |                                 |                       |                      |        | Balance at |       |   |        |                       |       |          | Utility Plant/ |   |           | for Which the |        |     | Balance |  
|                                                                                                                                    |                                 |                       |                      |        | Beginning  |       |   |        |                       |       |          | Regulatory     |   |           | Reserves Were |        |     | at End  |  
|Description                                                                                                                         |                                 | of Period             |                      |        | Income     |       |   | Asset  |                       |       | Provided |                |   | of Period |              
|                                                                                                                                    |                                 |                       |                      |        |            |       |   |        |                       |       |          |                |   |           |              
|Year Ended December 31, 2001                                                                                                        |                                 |                       |                      |        |            |       |   |        |                       |       |          |                |   |           |               |        |     |         |   |       
|Reserve deducted from Assets in
Consolidated Statement of Financial Position:                                                       |                                 |                       |                      |        |            |       |   |        |                       |       |          |                |   |           |               |        |     |         |   |       
|                                                                                                                                    | Allowance for doubtful accounts |                       | $                    | 18,912 |            |       | $ | 16,347 |                       |       | $        |               |   |           | $             | 13,831 |     |         | $ | 21,428 |       
|                                                                                                                                    |                                 |                       |                      |        |            |       |   |        |                       |       |          |                |   |           |              
|Reserve included in Current Liabilities  Other
and in Accrued Environmental Costs
in Consolidated Statement of Financial Position: |                                 |                       |                      |        |            |       |   |        |                       |       |          |                |   |           |               |        |     |         |   |       
|                                                                                                                                    | Environmental                   |                       | $                    | 30,458 |            |       | $ |       |                       |       | $        |               |   |           | $             | 5,214  |     |         | $ | 25,244 |       
|                                                                                                                                    |                                 |                       |                      |        |            |       |   |        |                       |       |          |                |   |           |              
|Reserves included in Deferred Credits and
Other Liabilities  Other in Consolidated
Statement of Financial Position:                |                                 |                       |                      |        |            |       |   |        |                       |       |          |                |   |           |               |        |     |         |   |       
|                                                                                                                                    | Injuries and damages            |                       | $                    | 2,610  |            |       | $ | 14,901 |                       |       | $        | 331            |   |           | $             | 3,649  |     |         | $ | 14,193 |       
|                                                                                                                                    |                                 |                       |                      |        |            |       |   |        |                       |       |          |                |   |           |              
|Year Ended December 31, 2000                                                                                                        |                                 |                       |                      |        |            |       |   |        |                       |       |          |                |   |           |               |        |     |         |   |       
|Reserve deducted from Assets in
Consolidated Statement of Financial Position:                                                       |                                 |                       |                      |        |            |       |   |        |                       |       |          |                |   |           |               |        |     |         |   |       
|                                                                                                                                    | Allowance for doubtful accounts |                       | $                    | 17,777 |            |       | $ | 14,148 |                       |       | $        |               |   |           | $             | 13,013 |     |         | $ | 18,912 |       
|                                                                                                                                    |                                 |                       |                      |        |            |       |   |        |                       |       |          |                |   |           |              
|Reserve included in Current Liabilities  Other
and in Accrued Environmental Costs
in Consolidated Statement of Financial Position: |                                 |                       |                      |        |            |       |   |        |                       |       |          |                |   |           |               |        |     |         |   |       
|                                                                                                                                    | Environmental                   |                       | $                    | 31,368 |            |       | $ |       |                       |       | $        | 350            |   |           | $             | 1,260  |     |         | $ | 30,458 |       
|                                                                                                                                    |                                 |                       |                      |        |            |       |   |        |                       |       |          |                |   |           |              
|Reserves included in Deferred Credits and
Other Liabilities  Other
in Consolidated Statement of Financial Position:                |                                 |                       |                      |        |            |       |   |        |                       |       |          |                |   |           |               |        |     |         |   |       
|                                                                                                                                    |                                 |                       | Injuries and damages |        | $          | 2,726 |   |        | $                     | 2,341 |          |                | $ | 627       |               |        | $   | 3,084   |   |        | $      | 2,610 | 
|                                                                                                                                    |                                 |                       |                      |        |            |       |   |        |                       |       |          |                |   |           |              
|Year Ended December 31, 1999                                                                                                        |                                 |                       |                      |        |            |       |   |        |                       |       |          |                |   |           |               |        |     |         |   |       
|Reserve deducted from Assets in
Consolidated Statement of Financial Position:                                                       |                                 |                       |                      |        |            |       |   |        |                       |       |          |                |   |           |               |        |     |         |   |       
|                                                                                                                                    | Allowance for doubtful accounts |                       | $                    | 8,928  |            |       | $ | 11,512 |                       |       | $        |               |   |           | $             | 2,663  |     |         | $ | 17,777 |       
|                                                                                                                                    |                                 |                       |                      |        |            |       |   |        |                       |       |          |                |   |           |              
|Reserve included in Current Liabilities  Other
and in Accrued Environmental Costs in
Consolidated Statement of Financial Position: |                                 |                       |                      |        |            |       |   |        |                       |       |          |                |   |           |               |        |     |         |   |       
|                                                                                                                                    |                                 | Environmental testing |                      | $      | 32,092     |       |   | $      |                      |       |          | $              |  |           |               | $      | 724 |         |   | $      | 31,368 |      
|                                                                                                                                    |                                 |                       |                      |        |            |       |   |        |                       |       |          |                |   |           |              
|Reserves included in Deferred Credits and
Other Liabilities  Other
in Consolidated Statement of Financial Position:                |                                 |                       |                      |        |            |       |   |        |                       |       |          |                |   |           |               |        |     |         |   |       
|                                                                                                                                    |                                 |                       | Injuries and damages |        | $          | 2,515 |   |        | $                     | 1,716 |          |                | $ | 416       |               |        | $   | 1,921   |   |        | $      | 2,726 | 
|                                                                                                                                    |                                 |                       |                      |        |            |       |   |        |                       |       |          |                |   |           |              

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##### Table of Contents






Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None.




PART III




Item 10. Directors and Executive Officers of the Registrant




Item 11. Executive Compensation




Item 12. Security Ownership of Certain Beneficial Owners and Management




Item 13. Certain Relationships and Related Transactions

All omitted per general instruction I (2) (c) of Form 10-K for wholly owned
subsidiaries (reduced disclosure format).

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##### Table of Contents






PART IV




Item 14. Exhibits, Financial Statement Schedule, and Reports On Form 8-K

(a)  The following documents are filed as part of this Annual Report on Form
10-K.

1.     For a list of the financial statements included herein, see the section
titled Financial Statements and Supplementary Data in Part II, Item 8 of this
report.

2.     For the financial statement schedule included herein, see the section
titled Financial Statements and Supplementary Data in Part II, Item 8 of this
report.

Schedules other than those referred to above are omitted as not applicable or
not required, or the required information is shown in the financial statements
or notes thereto.

3.     Exhibits, including those incorporated by reference:

|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(i)         |  | Exhibits filed herewith                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|12-2        |  | Computation of Ratio of Earnings to Fixed Charges                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|23-2        |  | Consent of Deloitte & Touche LLP                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(ii)        |  | Exhibits incorporated herein by reference                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|3-1         |  | Restated
Articles of Incorporation (Exhibit 3-1 to Form 10-Q for quarter ended
March 31, 1993, file number 1-7310).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|3-2         |  | By-Laws (Exhibit
3-2 to Form 10-Q for quarter ended
March 31, 1993, file number 1-7310).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|4-1         |  | Indenture between MichCon and Citibank, N.A. related to Senior
Debt Securities dated as of June 1, 1998 (Exhibit 4-1 to
Registration Statement No. 333-63370); First Supplemental
Indenture dated as of June 18, 1998 (Exhibit 4-1 to June 18,
1998 Form 8-K); Second Supplemental Indenture dated as of June
9, 1999 (Exhibit 4-1 to June 4, 1999 Form 8-K); and Third
Supplemental Indenture dated as of August 15, 2001 (Exhibit
4-2 to Form 10-Q for quarter ended September 30, 2001)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|4-2         |  | Indentures defining the rights of the holders of MichCons
First Mortgage Bonds: MichCons Indenture of Mortgage and Deed
of Trust dated as of March 1, 1944 (Exhibit 7-D to
Registration Statement No. 2-5252); Twenty-ninth Supplemental
Indenture, dated as of July 15, 1989, providing for the
modification and restatement of the Indenture of Mortgage and
Deed of Trust dated as of March 1, 1944; Thirtieth
Supplemental Indenture, dated as of September 1, 1991 (Exhibit
4-1 to September 27, 1991 Form 8-K); Thirty-first Supplemental
Indenture dates as of December 15, 1991 (Exhibit 4-1 to
February 28, 1992 Form 8-K); Thirty-second Supplemental
Indenture, dated as of January 5, 1993 (Exhibit 4-1 to 1992
Form 10-K); Thirty-third Supplemental Indenture, dated as of
May 1, 1995 (Exhibit 4-2 to Registration Statement No.
33-59093); Thirty-fourth Supplemental Indenture dated as of
November 1, 1996 (Exhibit 4-2 to Registration Statement No.
333-16285); Thirty-fifth Supplemental

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##### Table of Contents



|            |  |                                                                                                                                                                                                              
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                  
|            |  |                                                                                                                                                                                                              
|            |  | Indenture, dated as of
June 18, 1998 (Exhibit 4-2 to June 18, 1998 Form 8-K); and
Mortgage Supplemental Indenture dated as of August 15, 2001
(Exhibit 4-3 to Form 10-Q for quarter ended September 30,
2001)
|            |  |                                                                                                                                                                                                              
|10-1        |  | MichCon Investment and Stock Ownership Plan, as amended
(Exhibit 10-12 to 1998 Form 10-K)                                                                                                                    
|            |  |                                                                                                                                                                                                              
|99-1        |  | $300 Million Credit Agreement dated as of November 7, 2001
(Exhibit 99-1 to Form 10-Q for quarter ended September 30,
2001)                                                                                  

(b)  Registrant did not file any Current Reports on Form 8-K during the fourth
quarter of 2001.

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##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Annual Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

|                     |                                                                |     |                                   |                              
|-------------------- | -------------------------------------------------------------- | --- | --------------------------------- | -----------------------------
|                     |                                                                |     | MICHIGAN CONSOLIDATED GAS COMPANY
|                     |                                                                |     | (Registrant)                     
|                     |                                                                |     |                                  
|Date:
March 28, 2002 |                                                                | By: | /s/ DANIEL G. BRUDZINSKI         
|                     |                                                                |     |                                   |                              
|                     |                                                                |     |                                   | Daniel G. Brudzinski         
|                     |                                                                |     |                                   | Chief Accounting Officer,    
|                     |                                                                |     |                                   | Vice President and Controller
|                     |                                                                |     |                                  
|By                   | /s/ ANTHONY F. EARLEY, JR                                      |     |                                   |                              
|                     |                                                                |     |                                   |                              
|                     | Anthony F. Earley, Jr.                                         |     |                                   |                              
|                     | Chairman of the Board,                                         |     |                                   |                              
|                     | Chief Executive Officer, President and Chief Operating Officer |     |                                   |                              
|                     |                                                                |     |                                   |                              
|By                   | /s/ SUSAN M. BEALE                                             |     |                                   |                              
|                     |                                                                |     |                                   |                              
|                     | Susan M. Beale                                                 |     |                                   |                              
|                     | Director, Vice President and Corporate Secretary               |     |                                   |                              
|                     |                                                                |     |                                   |                              
|By                   | /s/ DAVID E. MEADOR                                            |     |                                   |                              
|                     |                                                                |     |                                   |                              
|                     | David E. Meador                                                |     |                                   |                              
|                     | Director                                                       |     |                                   |                              

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##### Table of Contents



|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(i)         |  | Exhibits filed herewith                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|12-2        |  | Computation of Ratio of Earnings to Fixed Charges                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|23-2        |  | Consent of Deloitte & Touche LLP                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(ii)        |  | Exhibits incorporated herein by reference                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|4-1         |  | Indenture between MichCon and Citibank, N.A. related to Senior
Debt Securities dated as of June 1, 1998 (Exhibit 4-1 to
Registration Statement No. 333-63370); First Supplemental
Indenture dated as of June 18, 1998 (Exhibit 4-1 to June 18,
1998 Form 8-K); Second Supplemental Indenture dated as of June
9, 1999 (Exhibit 4-1 to June 4, 1999 Form 8-K); and Third
Supplemental Indenture dated as of August 15, 2001 (Exhibit
4-2 to Form 10-Q for quarter ended September 30, 2001)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|4-2         |  | Indentures defining the rights of the holders of MichCons
First Mortgage Bonds: MichCons Indenture of Mortgage and Deed
of Trust dated as of March 1, 1944 (Exhibit 7-D to
Registration Statement No. 2-5252); Twenty-ninth Supplemental
Indenture, dated as of July 15, 1989, providing for the
modification and restatement of the Indenture of Mortgage and
Deed of Trust dated as of March 1, 1944; Thirtieth
Supplemental Indenture, dated as of September 1, 1991 (Exhibit
4-1 to September 27, 1991 Form 8-K); Thirty-first Supplemental
Indenture dates as of December 15, 1991 (Exhibit 4-1 to
February 28, 1992 Form 8-K); Thirty-second Supplemental
Indenture, dated as of January 5, 1993 (Exhibit 4-1 to 1992
Form 10-K); Thirty-third Supplemental Indenture, dated as of
May 1, 1995 (Exhibit 4-2 to Registration Statement No.
33-59093); Thirty-fourth Supplemental Indenture dated as of
November 1, 1996 (Exhibit 4-2 to Registration Statement No.
333-16285); Thirty-fifth Supplemental



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##### Table of Contents



|            |  |                                                                                                                                                                                                               
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                   
|            |  |                                                                                                                                                                                                               
|            |  | Indenture, dated as of
June 18, 1998 (Exhibit 4-2 to June 18, 1998 Form 8-K); and
Mortgage Supplemental Indenture dated as of August 15, 2001
(Exhibit 4-3 to Form 10-Q for quarter ended September 30,
2001).
|            |  |                                                                                                                                                                                                               
|10-1        |  | MichCon Investment and Stock Ownership Plan, as amended
(Exhibit 10-12 to 1998 Form 10-K)                                                                                                                     
|            |  |                                                                                                                                                                                                               
|99-1        |  | $300 Million Credit Agreement dated as of November 7, 2001
(Exhibit 99-1 to Form 10-Q for quarter ended September 30,
2001).