==============================================================================

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                                   ---------
                                   FORM 10-K
(Mark One)

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

For the fiscal year ended December 31, 1995, or

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

For the transition period from _________________ to _________________

Commission file number 1-7310

     Michigan Consolidated Gas Company, a Michigan corporation, meets the
conditions set forth in general instruction J (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.)

 500 Griswold Street, Detroit, Michigan                          48226
(Address of principal executive offices)                       (Zip Code)

Registrant's telephone number, including area code 313-965-2430

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
None

      Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.  Yes __ X __   No _______

     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 __

     All of the registrants 10,300,000 outstanding shares of common stock, par
value $1 per share, are owned by MCN Corporation. 

                     Documents Incorporated by Reference:

None

==============================================================================

<PAGE>

                           KEY TO ABBREVIATED TERMS



Antrim  Gas .................    Natural gas produced from shallow wells
                                 in the Devonian (Antrim) shale formations.

Base Pressure ...............    Pressure at which measurements of a
                                 volume of gas are measured. MichCon's common
                                 base pressure is 14.65 pound per square inch
                                 absolute.

Bcf .........................    One billion cubic feet, which is a unit of
                                 measurement of gas volume. 1 Bcf = 1,000
                                 MMcf.

BTU .........................    British Thermal Unit; the amount of heat
                                 required to raise the temperature of one
                                 pound of water one degree Fahrenheit. One
                                 cubic foot of natural gas contains
                                 approximately 1,000 BTUs.

Degree Days .................    A measure of the coldness of the weather
                                 based on how much the average daily
                                 temperature is below 65 degrees Fahrenheit.

End User Transportation .....    A gas delivery service provided to
                                 large-volume commercial and industrial
                                 customers who purchase natural gas directly
                                 from producers or brokerage companies for the
                                 customers' own use.

FERC ........................    Federal Energy Regulatory Commission; a
                                 federal agency that determines the rates and
                                 regulations of interstate pipelines.

Gas Markets .................    Gas sales, end user transportation and
                                 intermediate transportation deliveries.

Gas Storage .................    The process of injecting and
                                 withdrawing natural gas from a depleted
                                 underground natural gas field or salt cavern.

GCR  ........................    Gas Cost Recovery; a process by which
                                 MichCon, through annual gas cost proceedings
                                 before the Michigan Public Service
                                 Commission, can recover the prudent and
                                 reasonable cost of gas sold.


                                      ii

<PAGE>

                           KEY TO ABBREVIATED TERMS
                                  (concluded)


Intermediate Transportation ..   A gas delivery service
                                 provided to gas producers, gas brokers and
                                 other gas companies that own the natural gas,
                                 but are not the ultimate consumers.

Mcf ..........................   One thousand cubic feet, which is a unit of
                                 measurement of gas volume.

MCN ..........................   MCN Corporation and subsidiaries.

MichCon ......................   Michigan Consolidated Gas Company; a
                                 wholly-owned natural gas distribution and
                                 intrastate transmission subsidiary of MCN.

MMcf .........................   One million cubic feet, which is a unit of
                                 measurement of gas volume. 1 MMcf = 1,000
                                 Mcf.

MPSC .........................   Michigan Public Service Commission; the
                                 regulator of intrastate aspects of the
                                 natural gas industry within the State of
                                 Michigan.

Normal Weather ...............   The average daily temperature within
                                 MichCon's service area during a recent
                                 30-year period.

Order No. 636 ................   An order issued in 1992 by the FERC, and
                                 subsequent related orders, which require
                                 interstate pipeline companies to separate or
                                 unbundle their various pipeline services.

Spot Market ..................   The buying and selling of natural gas
                                 on a short-term basis, typically monthly.

Supply Realignment Plan  .....   MichCon's plan, approved by the MPSC, to use
                                 additional underground storage capacity to
                                 provide reliable and lower-priced service by
                                 purchasing natural gas during periods of low
                                 demand.

Trading Company ..............   MichCon Trading Company; a former
                                 subsidiary of MichCon that was sold to
                                 subsidiaries of MCN in the second quarter of
                                 1993.

Transition Costs .............   Costs incurred by interstate pipeline
                                 companies under FERC Order No. 636 to reduce
                                 or eliminate gas supply related obligations.


                                      iii

<PAGE>

                               TABLE OF CONTENTS

                                                                     Page
Contents                                                            Number
--------                                                            ------

Part I

   Item 1.    Business .........................................       1

   Item 2.    Properties .......................................      10

   Item 3.    Legal Proceedings ................................      10

   Item 4.    Submission of Matters to a Vote
               of Security Holders .............................      10

Part II

   Item 5.    Market for Registrant's Common Equity
               and Related Stockholder Matters .................      11

   Item 6.    Selected Financial Data ..........................      12

   Item 7.    Management's Discussion and Analysis of
               Financial Condition and Results of Operations ...      13

   Item 8.    Financial Statements and Supplementary Data ......      22

   Item 9.    Changes in and Disagreements with Accountants
               on Accounting and Financial Disclosure ..........      47

Part III

   Item 10.   Directors and Executive Officers of the Registrant      47

   Item 11.   Executive Compensation ...........................      47

   Item 12.   Security Ownership of Certain Beneficial
               Owners and Management ...........................      47

   Item 13.   Certain Relationships and Related Transactions ...      47

Part IV

   Item 14.   Exhibits, Financial Statement Schedule, and
               Reports on Form 8-K .............................      48

Signatures .....................................................      50


                                      iv

<PAGE>

                                    PART I

ITEM 1.  BUSINESS

      MichCon is a Michigan corporation that was organized in 1898 and, with
its predecessors, has been in business for nearly 150 years. MichCon is a
public utility engaged in the distribution and transmission of natural gas in
the state of Michigan. MichCon, a wholly-owned subsidiary of MCN, is one of
the largest natural gas distributors in the United States and the largest in
Michigan.

      At December 31, 1995, MichCon and its subsidiaries employed 3,128
persons. Of this amount, approximately 45% are covered by five collective
bargaining agreements. Two of the agreements expire in December 1997, while
the remaining three agreements will expire in June 1998.

Gas Sales & Transportation

      MichCon serves 1.2 million customers in the Detroit, Grand Rapids, Ann
Arbor, Traverse City and Muskegon metropolitan areas and in various other
communities throughout the state of Michigan. The following services are
provided by MichCon:

      o   Gas Sales - Includes the marketing and delivery of natural gas to
          residential, commercial and industrial customers.

      o   End User Transportation - Through this service, large volume
          customers that purchase gas directly from producers or marketers
          utilize the Company's gas distribution network to transport the gas
          to their facilities.

      o   Intermediate Transportation - MichCon also provides transportation
          service within Michigan to pipelines, gas marketers, producers and
          other local distribution companies that own the natural gas, but are
          not the ultimate consumer.

<TABLE>
<CAPTION>
                                                        1995       1994       1993
                                                      --------   --------   --------
<S>                                                   <C>        <C>        <C>     
Revenue (In millions of dollars)
Gas Sales .........................................   $  917.2   $  954.8   $1,075.9
End User Transportation ...........................       80.4       76.2       71.4
Intermediate Transportation .......................       31.9       28.7       19.6
                                                      --------   --------   --------
    Total Sales and Transportation ................    1,029.5    1,059.7    1,166.9
                                                      --------   --------   --------
Conservation Programs, Storage Service and other ..       51.3       52.0       56.6
                                                      --------   --------   --------
    Total Operating Revenues ......................   $1,080.8   $1,111.7   $1,223.5
                                                      ========   ========   ========

Markets (Bcf)
Gas Sales
  MichCon .........................................      206.9      201.4      201.8
  Trading Company .................................       --         --         48.7
                                                      --------   --------   --------
    Total Sales ...................................      206.9      201.4      250.5
End User Transportation ...........................      145.3      139.8      128.4
Intermediate Transportation .......................      341.6      303.6      281.1
                                                      --------   --------   --------
    Total Sales and Transportation ................      693.8      644.8      660.0
                                                      ========   ========   ========
<FN>
      Note: During the second quarter of 1993, MichCon sold the businesses of
Trading Company to subsidiaries of MCN. See Note 5 of the consolidated
financial statements for details.
</TABLE>


                                    1

<PAGE>

      Effect of Weather: MichCon's gas sales and end user transportation
volumes, revenues and net income are impacted by the weather. Given the
seasonal nature of the business, revenues and net income tend to be higher in
the first and fourth quarters of the calendar year.


<TABLE>
<CAPTION>
Effect of Weather on Gas Markets and Earnings
------------------------------------------------------------------------------

                                                1995       1994      1993
                                              -------    --------   -------
<S>                                            <C>       <C>        <C>    
Percentage Colder (Warmer) than Normal ..       0.3 %     (4.2) %    (2.2) %
Increase (Decrease) from Normal in:
    Gas Markets (in Bcf) ................       1.5       (4.4)      (4.3)
    Net Income (in Millions) ............      $1.4      $(4.0)     $(3.7)
</TABLE>

      Gas Sales: Revenues declined by $37.6 million in 1995 due to the pass
through to customers of lower cost of gas purchased. This market represents
30% of total deliveries and produced approximately 79% of MichCon's gross
profit margin from sales and transportation services (Gross Profit Margin).
The average margin per Mcf from gas sales in 1995 was $2.09.

      Competition in the gas sales market comes primarily from alternative
fuels such as electricity, propane, and to a lesser degree, oil and wood, and
in a few areas from other natural gas providers. Natural gas continues to be
the preferred 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
price advantage of natural gas compared to propane, fuel oil and other
alternative fuels. Service and price are the primary factors affecting 
this market.

      MichCon continues to focus on the needs of customers and the marketplace
in order to position itself as the preferred provider of natural gas within 
Michigan. To accomplish this, MichCon will increase efforts to reduce cost of 
gas and operating costs, and will take advantage of growth opportunities to 
expand to new geographic areas. For example, MichCon offers the financing of
distribution lines and gas appliances to encourage potential customers to
utilize natural gas. Offering a variety of gas-related services, such as
appliance repair and equipment leasing, should also increase MichCon's
penetration into existing markets.

      MichCon continues its commitment to maintain low gas costs. During 1995,
MichCon's annual average cost of gas rate of $2.36 per Mcf was at the lowest
level since 1979, meeting its objective of being in the lowest quartile for
costs of gas in Michigan as well as neighboring states. In addition, MichCon
is continuously striving to reduce the cost of operating the business. In
1994, MichCon aligned its operations along core business processes to make the
company more efficient, competitive and customer focused.

      MichCon's Area Expansion Program (AEP) is intended to spur demand for
natural gas in areas currently not served. The program is primarily in the
residential and small commercial markets. By financing the cost of main
extensions, this program makes it easier for users of other higher cost
fuels, such as propane and fuel oil, to consider using natural gas for space
heat and other appliances. The AEP, which reaches rural and developing areas
not currently using natural gas, has contributed to the 17,677, 12,047 and
11,478 net increases in customers in 1995, 1994 and 1993, respectively. In
1995, 17 new areas of Michigan were served by MichCon, bringing to 117 the 
total number of new areas added since 1984.


                                 2
<PAGE>

      MichCon's market share for residential heating customers in the
communities in which it serves is approximately 85%. While this saturation
rate is high, there continues to be significant growth opportunities through
conversion of existing homes as well as from new construction. MichCon
continues to grow the industrial and commercial markets by aggressively
facilitating the use of existing gas technologies and equipment.

      End User Transportation: End user transportation deliveries increased in
1995 due to a higher level of usage by large-volume commercial and industrial
customers. Additional deliveries to gas cogeneration facilities and colder
weather also contributed to the increased deliveries. In 1995, this market
accounted for 21% of total gas deliveries and produced approximately 15% of
MichCon's Gross Profit Margin.

      At December 31, 1995, MichCon had end user transportation agreements
representing annual volumes of 143 Bcf. Approximately 69% of these volumes are
under contracts that extend to 1997 or beyond and include virtually all of the
large, and most price sensitive, customers. The contracts for the remaining
volumes are typically one-year contracts that expire at various times during
1996 and relate to a large number of low volume users with relatively low
price sensitivity. Negotiations have commenced with customers whose contracts
expire in 1996.

      Through technical and financial assistance, customers have been
encouraged to increase the use of natural gas in their industrial and
commercial facilities. Gas-fueled cogeneration has been an expanding market
for natural gas. In 1995, this market accounted for approximately 24 Bcf of
gas deliveries. Air compressors and other small engines in certain commercial
applications also provide possibilities for conversion to natural gas-powered
equipment. The efficiencies and price competitiveness of natural gas can
significantly reduce operating costs for customers, even though a higher
initial outlay for gas-burning equipment may be required.

      The primary focus of competition in this market is total cost of fuel.
Some large commercial and industrial customers have the capacity to
switch to alternative fuel sources including coal, electricity, oil and steam.
In addition, some of these customers could bypass MichCon's distribution system
and obtain service directly from a pipeline company. However, cost
differentials must be sufficient to offset the substantial investment costs
and risk associated with fuel switching or bypass. MichCon competes against
alternative fuel sources by providing competitive pricing and reliable supply
through the use of the company's extensive storage capacity and multiple
supply sources. Almost all significant customers that are in proximity to
pipeline facilities are under long-term contracts.

      In the past several years, MichCon has been successful in converting
many customers' facilities to natural gas from alternative fuels and in
retaining those customers after conversion. Also, in the past several years,
MichCon has not experienced any fuel switching of any significance by its
customers. In 1995, approximately 27 Bcf of MichCon's transportation
deliveries were to customers who displaced coal with natural gas.

      End user transportation expanded further in 1995 with the completion of
the Michigan Power cogeneration facility. During the third quarter of 1994,
MCN and Destec Energy began construction of a 123 megawatt cogeneration plant
in Ludington, Michigan. In October 1995, the plant was completed and MichCon
began providing end user transportation of the natural gas needed to fuel the
plant, approximately nine Bcf annually.


                                  3
<PAGE>

      Intermediate Transportation: This service accounts for 49% of total gas
volumes, but, due to the lower rate charged for the service, represents only
6% of MichCon's Gross Profit Margin.

       In January 1996, a subsidiary of MCN transferred its northern Michigan
pipeline operations to MichCon in order to unify MCN's Michigan
gathering pipeline activities within one business unit. Effective in January
1996, the transportation rate of a major customer of the transferred pipeline
operations will decrease 40% in accordance with the terms of a 15-year
contract that reduces the transportation rate for the last ten years of the
agreement. Revenues from the customer subject to the rate decrease totaled
$6.0 million in 1995. This decrease in revenue is expected to be more than
offset by the increased revenues from the Antrim expansion project discussed
below. MichCon will continue to look at new sources of volume and revenue
to increase the profitability of this asset.

      MichCon's extensive transmission pipeline system has enabled it to
increase the volumes transported for Michigan gas producers, ANR Pipeline
Company (ANR) and other shippers. 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. In 1995,
transportation volumes increased due to additional volumes transported for ANR
and increased transportation of Antrim gas for Michigan gas producers and
brokers.

      There has been a significant increase in Michigan Antrim gas production
over the past few years, resulting in a growing demand by gas producers and
brokers for intermediate transportation services. Intermediate transportation
deliveries have more than tripled since 1991, and have resulted from time to
time in capacity constraints on MichCon's northern Michigan pipeline system.
In order to meet the increased demand, MichCon filed a proposal before the
MPSC in 1994 to construct facilities to expand transportation capacity. In
March 1995, the MPSC approved MichCon's proposal. Construction of the 65 mile
pipeline began during the 1995 second quarter and will be completed by June
1996. The expansion project will total approximately $40 million for
additional pipeline and related facilities and is expected to transport
approximately 135 Bcf of Antrim gas annually, generating new revenues of
approximately $8 million per year.

      In June 1995, the MPSC approved MichCon's request to construct and
operate a 59-mile loop of the Milford-to-Belle River Pipeline for
approximately $80 million. The pipeline will improve the overall reliability
and efficiency of MichCon's gas storage and transmission system and will
enable MichCon to expand its intermediate transportation capabilities.
Construction of the pipeline is expected to be completed in early 1997.

Energy Assistance and Conservation 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 Department of Social Services' (DSS) Heating Assistance Program,
remain critical to MichCon's ability to control its uncollectible expenses.
MichCon has historically obtained favorable regulatory treatment of its
uncollectible costs, including those related to these energy assistance
programs.

      MichCon receives a significant amount of its heating assistance funding
from the Low-Income Home Energy Assistance Program (LIHEAP). Congress has
reduced a substantial portion of the program's funding for the 1996 fiscal
year, and there are proposals to eliminate all program funding in future
years. Michigan's share of LIHEAP funds were reduced from $78 million in
fiscal year 1995 to $47.5 million in 1996. During 1995 and 1994, $27.3 million
and $27.0 million in LIHEAP funds assisted approximately 112,000 and 131,000
MichCon customers, respectively. A portion of the decreased funding may result
in 


                                  4
<PAGE>

increased uncollectibles expense. MichCon is currently working with federal
and state officials to identify ways to obtain energy assistance for
low-income customers from other avenues, and is taking actions to minimize any
impact that reductions in LIHEAP funding would have on MCN's financial
statements.

      In September 1994, MichCon filed for MPSC approval to implement its
three-year, $26 million Demand Side Management Plan (DSM Plan). The DSM Plan
included proposals for continuation of several energy conservation programs
targeted at low-income customers and several innovative programs intended to
help other MichCon customers reduce their energy costs. MichCon intended to
implement its surcharge-funded DSM Plan by October 1995. In its order issued
in November 1995, the MPSC rejected the plan and found that MichCon's energy
conservation program surcharge should be discontinued.

Gas Supply

      MichCon obtains its natural gas supply from various sources in different
geographic areas under agreements that vary in both pricing and terms. This
geographic and contractual diversity of supply ensures that MichCon will be
able to meet the requirements of its present and future customers with
reliable supplies of natural gas at competitive, market responsive prices. The
company's objective is to rank in the lowest quartile for cost of gas in
Michigan as well as neighboring states. As a result of MichCon's efforts to
lower its cost of gas, including extensive contract renegotiations, increased
use of spot market-priced purchases and the use of available storage, its gas
costs declined to $2.36 per Mcf in 1995, a reduction of 12% from 1994.
MichCon's gas costs have decreased 45% in the last ten years.

<TABLE>
<CAPTION>

Gas Supply Purchases(Bcf)
------------------------------------------------------------------------------

                                   1995       1994       1993
                                  -----      -----      -----
<S>                               <C>        <C>        <C>  
Firm Suppliers:
   Michigan Producers ......       90.9       85.9       92.7
   Interstate Suppliers ....       18.2       64.3       80.4
   Canadian Suppliers ......       31.5       29.4       15.4
Spot Market ................       52.2       34.3        9.5
                                  -----      -----      -----
                                  192.8      213.9      198.0
                                  =====      =====      =====
</TABLE>

      MichCon purchased 47% of its 1995 supply from Michigan producers, 37%
from producers in the southern and midcontinent regions of the United States
and 16% from Canadian producers. These supplies are complemented by 130 Bcf of
working storage capacity from storage fields owned and operated in Michigan.

      The 1995 and 1994 increases in volume associated with Spot Market are
due to the subsequent discontinuance of MichCon purchases of gas from ANR as a
result of FERC Order No. 636, as discussed below.

      FERC Order No. 636: In 1992, the FERC issued Order No. 636 which
required interstate pipelines to separate their pipeline sales service into
its various service components. The order also permitted interstate pipelines
to recover their prudently incurred transition costs including costs resulting
from restructuring. As a result of ANR's FERC Order No. 636 restructuring, its
long-term relationship with MichCon changed significantly. MichCon no longer
purchases natural gas supply directly from ANR, but instead utilizes ANR
solely as a transporter of gas. MichCon purchases gas 


                                   5
<PAGE>

directly from producers and marketers with access to natural gas 
supplies in Texas, Oklahoma, Louisiana and Canada.

      In November 1993, ANR, MichCon's primary interstate natural gas
transporter, implemented its FERC Order No. 636 service restructuring. ANR
discontinued its merchant function and modified its rates to reflect the
Straight Fixed/Variable rate design (SFV) mandated by Order No. 636. Under
SFV, pipelines recover fixed costs through monthly demand charges based upon
capacity entitlement and recover only variable costs through volume-sensitive
commodity charges. SFV significantly increases costs to many weather-sensitive
local distribution companies who do not have on-system storage capacity. In
contrast, through the use of its extensive underground storage facilities,
MichCon has been able to lower its pipeline capacity entitlement thereby
minimizing pipeline fixed charges.

      During 1995 and 1994, ANR filed several requests for recovery of these
transition costs. MichCon accrued its portion of these costs totaling $6.8
million and $5.4 million, of which $5.0 million and $3.9 million are reflected
in cost of gas, in 1995 and 1994, respectively. The MPSC has held that these
transition costs are recoverable through the GCR mechanism as paid and,
therefore, a regulatory asset has been recorded for the unrecovered costs. As
periodic filings are made by ANR, MichCon will accrue its allocated portion.
It is management's belief that the transition costs will have no significant
effect on MichCon's financial statements.

      General Supply: To ensure continuous, uninterrupted service to
customers, MichCon has in place long-term firm transportation agreements with
ANR and Great Lakes Gas Transmission Limited Partnership (Great Lakes). ANR is
obligated to transport approximately 395 MMcf per day of supply for MichCon
under these agreements, while Great Lakes is obligated to transport 30 MMcf
per day. These transportation contracts expire on various dates between 1999
and 2011.

      MichCon also has contracts with independent Michigan producers that
expire on various dates through 2009. A portion of these contracts expire in
1996. MichCon has begun discussions with several producers to limit the costs
of gas purchases after 1996.

      In 1993, Panhandle Eastern Pipe Line Company (Panhandle) refunded to
MichCon the costs of certain direct billings totaling $5.4 million plus
interest of $4.4 million in compliance with a FERC order. During 1994, the
FERC issued an order permitting Panhandle to seek reimbursement of the $4.4
million in interest from MichCon. MichCon's request for rehearing of the 1994
order was denied. MichCon has appealed the issue to the D.C. Circuit Court. If
MichCon is ultimately unsuccessful in defeating Panhandle's claim, it is
anticipated that these costs will be recoverable through the GCR mechanism
and, therefore, a regulatory asset has been recorded for their future
recovery.

      At December 31, 1995, MichCon owned and operated five natural gas
storage fields in Michigan with a working storage capacity of approximately
130 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 is at its lowest. The use of this storage capacity also allows
MichCon to lower its peak day entitlement, thereby reducing interstate
pipeline costs. During 1995, MichCon's maximum one-day sendout exceeded 2.2
Bcf, of which approximately 70% came from its underground storage fields.
MichCon's gas distribution system has a maximum daily sendout capability of
2.7 Bcf, with approximately 70% coming from underground storage. MichCon 
also sells a portion of its natural gas storage capacity to an affiliated 
company and third parties.


                                  6

<PAGE>

Regulation and Rates

      MichCon is subject to the jurisdiction of the MPSC as to various phases
of its operations, including gas sales rates, service and accounting. MichCon
is also subject to the requirements of other regulatory agencies with respect
to safety, the environment and health.

      Michigan offers an environment of progressive and reasonable rate
regulation. This is evident by the efforts underway to change the current form
of regulation. In January 1996, the Governor of Michigan submitted to the MPSC
his recommendations for utility reform, designed to make Michigan more
competitive in energy costs. If the Governor's recommendations are adopted,
the current form of regulation, based on rate of return and cost of service, 
may be replaced by a form that is based on price caps or other 
incentives. The proposed form of regulation is consistent with a
competitive environment and would promote efficient and cost-effective
products and services. The gas industry is moving towards the unbundling of
locally provided gas services. If this occurs, all customers, including those
at the residential level, may be able to choose their own gas supplier while
MichCon continues to move the gas to the ultimate consumer. MichCons'
efficient operations and well managed gas supply portfolio will prepare it to
take full advantage of this opportunity. As the MPSC evaluates expanded
competition for the electric and natural gas industries within the State,
MichCon will continue its active involvement.

      General Rate Proceedings: In October 1993, MichCon received approval
from the MPSC in its general rate case to increase rates $15.7 million
beginning in January 1994. The higher rates include $28.7 million for retiree
health care benefits recognized under new accounting requirements and $8.1
million for higher depreciation rates. Additionally, the MPSC's decision
lowered MichCon's allowed rate of return on common equity to 11.5%. This was
consistent with other rate of return percentages being authorized for local
distribution companies in the United States during 1993.

      In addition, MichCon received authorization to defer manufactured gas
plant (MGP) investigation and remediation costs in excess of the $11.7 million
previously reserved by MichCon. The remaining balance of this initial reserve
at December 31, 1995 is approximately $3.5 million. Any excess costs are to be
amortized over a ten year period beginning in the year subsequent to the year
environmental investigation and remediation costs are paid. The recovery of
any remediation costs incurred will be reviewed in a future rate case.

      In June 1994, the MPSC approved the property tax stipulation and
settlement agreement which addresses the treatment of reduced state property
tax and increased state sales tax and federal income tax. The estimated net
decrease in MichCon's operating expense was approximately $4.0 million for
1994 and $6.2 million annually thereafter. The agreement allows MichCon to
accelerate the amortization of its 1993 deferred costs associated with the
implementation of Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pension," by the
net decreased tax expense.

      Gas Cost Recovery: The GCR process allows MichCon to recover its cost of
gas sold if the MPSC determines that such costs are reasonable and prudent.
This determination includes an annual Gas Supply and Cost Review, in which the
MPSC approves maximum monthly GCR factors. A subsequent annual GCR
reconciliation proceeding provides a review of gas costs incurred during the
year, determines whether approved gas costs have been overcollected or
undercollected and, as a result, whether a refund or surcharge, including
interest, is required.


                                     7
<PAGE>

      In May 1994, the MPSC issued an order in MichCon's 1993 GCR
reconciliation case approving a partial settlement allowing MichCon to refund
$11.6 million to its natural gas customers on their June 1994 bills. The
refund consisted primarily of supply realignment overcollections and excess
transportation and storage revenues, partially offset by 1993 GCR
undercollections. In September 1994, the MPSC approved the final settlement,
which provides for additional refunds of $0.4 million applicable to GCR sales
customers and $0.1 applicable to transportation customers.

      In February 1995, MichCon filed its 1994 GCR reconciliation case
indicating an over-recovery of $19 million, including interest, which will be
returned to GCR customers using the new rolled-in prospective refunding
methodology approved by the MPSC on June 30, 1994. In February 1996, the MPSC
issued an order finding that all of MichCon's 1994 gas costs were reasonable
and prudent, and made no disallowance of gas costs as a result of MichCon
fixing gas prices on a portion of its gas purchases.

      In February 1996, MichCon filed its 1995 GCR reconciliation case
indicating an under-recovery of less than $0.1 million, including interest,
which will be collected from GCR customers using the new rolled-in prospective
refunding methodology. In July 1995, MichCon filed its 1996 plan case. An MPSC
order is expected in the first half of 1996.

Environmental Matters

      Manufactured Gas Plants: 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 former
manufactured gas plant (MGP) sites.

      During the mid-1980s, MichCon conducted preliminary environmental
investigations at these former MGP sites, and some contamination related to
the byproducts 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. None of these
former MGP sites are on the National Priorities List prepared by the U.S.
Environmental Protection Agency.

      MichCon is not involved in any administrative proceedings regarding
these former MGP sites. MichCon is currently remediating a former MGP site in
Muskegon, Michigan. The remedy consists of limited excavation and disposal of
soils, a new soil cover and, if necessary, a ground water capture and
treatment system. MichCon is also conducting more extensive investigations at
three other former MGP sites.

      MichCon has employed outside consultants to evaluate remediation
alternatives at these sites, to assist in estimating its potential liabilities
and to review its archived insurance policies. MichCon notified more than 40
current and former insurance carriers of the environmental conditions at these
former MGP sites and requested insurance coverage for costs associated with
the investigation and remediation of these sites. MichCon is pursuing its
claims against these carriers. The findings of these investigations indicated
that the estimated total expenditures for investigation and remediation
activities for these sites could range from $30 million to $170 million.

      In 1984, MichCon established an $11.7 million reserve for environmental
investigation and remediation. During 1993, MichCon received MPSC approval of
a cost deferral and rate recovery mechanisms for reasonable and prudent
investigation and remediation costs incurred at former MGP sites in excess of
the reserve. During 1995, 1994 and 1993 MichCon spent $2.1 million, $0.6
million and $2.1 million, respectively, investigating and remediating these
former MGP sites. As a result of 


                                8
<PAGE>

the studies discussed above, MichCon added $32 million to the reserve 
and established a corresponding regulatory asset during the fourth 
quarter of 1995. At December 31, 1995, the reserve balance was 
approximately $35.5 million. 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 insurance coverage and the cost deferral and
rate recovery mechanism approved by the MPSC will prevent environmental costs
from having a material adverse impact on MCN's results of operations.

Franchises

      MichCon operates in numerous cities, villages, and townships under
franchises or permits that typically are revocable at will and have a 30-year
maximum duration. In Grand Rapids and a number of other municipalities where a
significant part of MichCon's service is furnished, MichCon's operations
originated under franchises that have since expired. In 1993, MichCon began
renewing or re-establishing formal franchises in those municipalities in order
to avoid uncertainty with regard to MichCon's ability to continue and expand
service in those areas. Regarding the franchises which have not been renewed,
MichCon's gas distribution systems are rightfully occupying the streets with
the consent or acquiescence of the municipalities. While MichCon could be
ordered by any municipality in which its franchise has expired to remove its
property, it could be deprived of ownership only by its consent and the
payment of an agreed price, or by condemnation and the payment of the fair
value of such property. Should any of these municipalities seek to terminate
MichCon's operations therein and substitute another gas utility operation,
publicly or privately owned, the municipality must either (i) acquire and
operate MichCon's system, (ii) construct a new system or (iii) grant a
franchise to another privately owned utility to construct or acquire its own
distribution system.

      During 1995, MichCon gained 37 franchises with aggregate gas sales
volumes of approximately 0.6 Bcf annually. Approximately 81 major franchises
have been renewed in 1995, including Detroit, which accounts for gas sales
volumes of approximately 66.5 Bcf annually.

      Public utility franchises in Michigan are non-exclusive. Construction
under a second franchise granted to another public utility requires
authorization by the MPSC which must consider, among other things, the service
rendered by the existing utility, the investment by such utility, and the
benefit, if any, to the public of having a second utility serve in the area.
In one township where MichCon formerly served approximately 450 residential
customers (representing 78,400 Mcf) under an expired franchise, and upon the
suit of a competing utility with a franchise overlapping the area, a local
circuit judge entered an order to enjoin MichCon from expanding its service in
that township. However, the Michigan Court of Appeals reversed that decision.
This matter is presently pending before the Michigan Supreme Court. On October
1, 1994, MichCon sold its distribution facilities in that township to the
competing utility. Management expects that issues involving franchise rights
will continue to be actively pursued in judicial and regulatory proceedings.


                                    9

<PAGE>

ITEM 2.  PROPERTIES

      MichCon operates natural gas distribution, transmission and storage
facilities in the state of Michigan. At December 31, 1995, MichCon's
distribution system included 15,804 miles of distribution mains, 1,051,094
service lines and 1,175,020 active meters. MichCon owns 2,515 miles of
transmission and production lines which deliver natural gas to the
distribution districts and interconnect its storage fields with the sources of
supply and the market areas. MichCon also owns properties relating to five
underground storage fields with an aggregate storage capacity of approximately
130 Bcf. Additionally, MichCon owns district office buildings, service
buildings and gas receiving and metering stations. MichCon occupies its
principal office buildings, located in Detroit and Grand Rapids, Michigan
under long-term leases. Portions of these buildings are subleased to
affiliates and others.

      Most of MichCon's properties are held in fee, by easement, or under
lease agreements expiring at various dates to 2006, with renewal options
extending beyond that date. The principal plants and properties of MichCon are
held subject to the lien of MichCon's Indenture of Mortgage and Deed of Trust
under which MichCon's First Mortgage Bonds are issued. Some existing
properties are being fully utilized and new properties are being added to meet
the requirements of expansion into new areas. MichCon's capital expenditures
for 1995 totaled $235.8 million and could reach $220 million in 1996.


ITEM 3.  LEGAL PROCEEDINGS

      In addition to the regulatory proceedings and other matters described in
Item 1, "Business," MichCon is also involved in a number of lawsuits and
administrative proceedings in the ordinary course of business with respect to
taxes, environmental matters, personal injury, property damage claims and
other matters.

      The management of MichCon believes that the resolution of these matters
will not have a material adverse effect on the financial statements of
MichCon.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

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


                                      10<PAGE>

                                    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 owned by MCN and constitute 100% of the
voting securities of MichCon. Therefore, no market exists for MichCon common
stock. On January 31, 1996, MichCon called for redemption the remaining
104,732 shares of its redeemable cumulative preferred stock.

      MichCon paid cash dividends of $6.5 million in 1995, $8.5 million in
1994 and $75 million in 1993 on its common stock.


                                      11
<PAGE>
<TABLE>
<CAPTION>

                  ITEM 6. SELECTED FINANCIAL DATA (UNAUDITED)


Selected Financial Data                            1995            1994            1993             1992          1991
-----------------------                            ----            ----            ----             ----          ----
(Dollars in thousands)

<S>                                             <C>            <C>             <C>             <C>             <C>        
Income Available for Common Stock ...........   $    71,488    $    59,387     $    61,649     $    49,848     $    36,082
                                                ===========    ===========     ===========     ===========     ===========

Cash Dividends Declared on Common Stock .....   $     6,500    $     8,500     $    75,000     $      --       $    12,900
                                                ===========    ===========     ===========     ===========     ===========

Return on Average Common Shareholder's Equity          15.8%          15.2%           16.6%           14.6%           12.3%
                                                ===========    ===========     ===========     ===========     ===========

Property, Plant and Equipment ...............   $ 2,413,120    $ 2,189,150     $ 2,084,516     $ 1,966,009     $ 1,851,721

Less - accumulated depreciation and depletion     1,151,160      1,071,588       1,024,009         965,661         906,694
                                                -----------    -----------     -----------     -----------     -----------

Net property, plant and equipment ...........   $ 1,261,960    $ 1,117,562     $ 1,060,507     $ 1,000,348     $   945,027
                                                ===========    ===========     ===========     ===========     ===========

Total Assets ................................   $ 1,798,493    $ 1,571,910     $ 1,509,120     $ 1,475,439     $ 1,381,495
                                                ===========    ===========     ===========     ===========     ===========

Capital Expenditures ........................   $   235,767    $   145,421     $   141,279     $   128,849     $   117,852
                                                ===========    ===========     ===========     ===========     ===========

Capitalization
Long-term debt ..............................   $   501,396    $   431,870     $   353,214     $   306,573     $   275,393
Long-term capital lease obligations .........        15,168         16,459          17,625          18,253          19,190
Redeemable cumulative preferred stock .......          --            2,618           5,618           9,000          12,000
Common shareholder's equity .................       489,821        417,833         365,785         379,136         304,288
                                                -----------    -----------     -----------     -----------     -----------

Total capitalization ........................   $ 1,006,385    $   868,780     $   742,242     $   712,962     $   610,871
                                                ===========    ===========     ===========     ===========     ===========

Sources of Operating Revenues
Gas sales ...................................   $   896,707    $   954,537     $ 1,079,020     $ 1,170,567     $ 1,075,519
Application of (provision for) refunds-net ..        20,473            223          (3,164)         43,792         (15,799)
End user transportation .....................        80,360         76,228          71,412          69,889          63,039
Intermediate transportation .................        31,913         28,745          19,638          17,824           7,866
Storage services ............................         8,857          8,054           9,084           7,438          13,826
Conservation and other assistance programs ..        14,499         18,716          23,935          27,677          30,803
Other .......................................        28,004         25,175          23,590          20,598          14,862
                                                -----------    -----------     -----------     -----------     -----------

Total operating revenues ....................   $ 1,080,813    $ 1,111,678     $ 1,223,515     $ 1,357,785     $ 1,190,116
                                                ===========    ===========     ===========     ===========     ===========

Disposition of Gas (MMcf)
Gas sales ...................................       206,951        201,423         250,510         309,162         272,648
End user transportation .....................       145,288        139,800         128,409         129,504         119,639
Intermediate transportation .................       341,550        303,617         281,116         183,978         105,496
                                                -----------    -----------     -----------     -----------     -----------
                                                    693,789        644,840         660,035         622,644         497,783
Company use and lost gas ....................         2,990          2,239           3,828           3,748           1,061
                                                -----------    -----------     -----------     -----------     -----------

Total disposition of gas ....................       696,779        647,079         663,863         626,392         498,844
                                                ===========    ===========     ===========     ===========     ===========

Degree Days
For calendar period .........................         6,777          6,489           6,675           6,607           6,092
Percent colder (warmer) than normal .........           0.3%          (4.2)%          (2.2)%          (3.7)%         (10.7)%

Utility Customers
Residential .................................     1,077,668      1,061,300       1,050,188       1,039,378       1,034,637
Total .......................................     1,159,140      1,141,463       1,129,416       1,117,938       1,112,796

Employees ...................................         3,128          3,273           3,364           3,564           3,517
</TABLE>
                                    12
<PAGE>

          ITEM 7. MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS


RESULTS OF OPERATIONS

      Earnings for 1995 were $71.5 million, an increase of $12.1 million
compared to 1994. The 1995 increase is due primarily to higher gas deliveries
resulting from colder weather and increased transportation deliveries. Lower
operating costs also contributed to the 1995 increase, reflecting corporate
initiatives to reduce costs. Earnings for 1994 decreased by $2.3 million from
1993 earnings due primarily to the lower return on equity authorized in the
rate order which went into effect in January 1994 and lower gas deliveries
resulting from warmer weather.

<TABLE>
<CAPTION>
                 Effect of Weather on Gas Markets and Earnings

                                              1995    1994     1993
                                              ----    ----     ----

<S>                                         <C>     <C>      <C>    
Percentage Colder (Warmer) than Normal ..      0.3%   (4.2)%   (2.2)%

Increase (Decrease) from Normal in:
  Gas Markets (Bcf) .....................      1.5    (4.4)    (4.3)
  Net Income (in millions) ..............   $  1.4  $ (4.0)  $ (3.7)
</TABLE>


<TABLE>
<CAPTION>

                       Earnings Components (in Millions)

                                  Comparing 1995 to 1994   Comparing 1994 to 1993
                                 ------------------------ ------------------------
                                   Dollar     Percentage    Dollar   Percentage
                                   Change       Change      Change     Change
                                 ----------  ------------ ---------  -------------

<S>                                 <C>          <C>      <C>          <C>   
Operating Revenues ............     $ (30.9)     (2.8)%   $ (111.8)     (9.1)%
Cost of Gas ...................       (45.5)     (8.6)      (156.3)    (22.8)
                                    -------                  -----
Gross Margin ..................        14.6       2.5         44.5       8.3
Operation and Maintenance .....       (19.2)     (6.1)        33.4      11.9
Depreciation and Depletion ....         4.9       5.8         10.4      14.0
Property and Other Taxes ......        (1.1)     (1.9)        (0.5)     (0.1)
Other Income and Deductions ...         6.6      17.7          3.5      10.4
Income Tax Provision ..........        11.2      37.4         (1.1)     (3.6)
</TABLE>


Gross Margin

      Gross Margin (operating revenues less cost of gas) increased in 1995
reflecting increased gas sales due to colder weather and increased
transportation deliveries. The 1994 increase of $44.5 million reflects
revenues from increased transportation deliveries and higher gas sales rates.


                                 13
<PAGE>

            MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
            MANAGEMENT'S DISCUSSION AND ANALYSIS - (Continued)


      In October 1993, the MPSC issued an order in MichCon's general rate case
authorizing a $15.7 million rate increase, beginning in January 1994. The
higher rates included $28.7 million for retiree health care benefits
recognized under new accounting requirements and $8.1 million for higher
depreciation rates. The MPSC's decision also lowered MichCon's allowed rate of
return on common equity to 11.5%. MichCon has no plans to file a general rate
increase request with MPSC.

      Gas sales rates are set to recover lost gas costs using an averaging
method based on historical lost gas experience. Prior to 1993, MichCon
deferred or accrued revenues for differences between historical average lost
gas amounts and the actual amount experienced. However, as a result of the
order issued in MichCon's last general rate case, MichCon no longer defers or
accrues revenues for these differences in lost gas amounts. Amortization of
previously deferred amounts was completed in 1995 and increased revenues by
$3.4 million, $3.1 million and $4.7 million in 1995, 1994 and 1993,
respectively.


Gas Markets
<TABLE>
<CAPTION>
                                      1995     1994      1993
                                     -----     -----     -----
Gas Markets (Bcf)
<S>                                  <C>       <C>       <C>  
  Gas Sales ..................       206.9     201.4     250.5
  End User Transportation ....       145.3     139.8     128.4
  Intermediate Transportation        341.6     303.6     281.1
                                     -----     -----     -----
                                     693.8     644.8     660.0
                                     =====     =====     =====
</TABLE>
    Gas sales volumes in 1995 were higher than in 1994 due to colder weather.
Gas sales volumes for 1993 include the brokering operations of Trading
Company. As discussed in Note 5 to the consolidated financial statements, in
June 1993, MichCon sold the businesses of Trading Company to subsidiaries of
MCN.

      The increase in end user transportation deliveries for both 1995 and
1994 reflects higher usage and expanded markets. The 1995 increase was further
impacted by the colder weather as well as the October 1995 completion of a
123-megawatt cogeneration plant constructed by MCN and Destec Energy. MichCon
provided end user transportation deliveries of natural gas to the plant, which
contributed approximately two Bcf to the 1995 increase. MichCon will provide
approximately nine Bcf annually to fuel the plant.

      The increases in intermediate transportation deliveries in both 1995 and
1994 are due primarily to additional volumes transported for ANR Pipeline
Company (ANR) and increased transportation of Antrim gas for Michigan gas
producers and brokers. Profit margins on intermediate transportation services
are considerably less than margins on gas sales or for end user transportation
markets.

      In order to meet the increased demand by gas producers and brokers for
intermediate transportation services resulting from the significant increase
in Michigan Antrim gas production, MichCon began construction of facilities
during 1995 to expand transportation capacity of its Northern Michigan
gathering system. A significant portion of the project was completed in 1995,
and the remainder is to be completed by June 1996. The expansion project will
total approximately $40 million for additional pipeline and 


                                  14

<PAGE>

            MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
            MANAGEMENT'S DISCUSSION AND ANALYSIS - (Continued)


related facilities and is expected to transport approximately 135 Bcf of 
Antrim gas annually, generating new revenues of approximately $8 million 
per year.

      In January 1996, a subsidiary of MCN transferred its Michigan pipeline
operations to MichCon in order to consolidate MCN's Michigan gathering
pipeline activities within one business unit. Effective in January 1996, the
transportation rate of one customer of the transferred pipeline operations
will decrease 40% in accordance with the terms of a 15-year contract that
reduces the transportation rate for the last ten years of the agreement.
Revenues from the customer subject to the rate decrease totaled $6.0 million
in 1995.

Cost of Gas

      Cost of gas is affected by variations in sales volumes and prices paid
for gas purchased. Through the Gas Cost Recovery (GCR) mechanism, MichCon's
rates are set to recover 100% of prudently and reasonably incurred gas costs.
Therefore, fluctuations in total gas costs have little or no effect on gross
margins or earnings.

      Cost of gas sold decreased in 1995 as a result of significantly lower
prices for natural gas purchased, partially offset by higher gas sales volumes
due to colder weather. Lower natural gas prices, as well as lower gas sales
volumes due to warmer weather, resulted in the 1994 decrease in cost of gas
sold. Cost of gas sold per thousand cubic feet for 1995 was $2.36, a decrease
of $.31 (12%) from 1994. Cost of gas sold per thousand cubic feet for 1994
decreased from 1993 by $.12 (4%). MichCon will continue its supply strategy of
purchasing gas under contracts that tie purchase prices to spot market prices.

      To mitigate price volatility associated with gas purchases, MichCon
reserved the right to fix the prices it pays under some of these contracts. In
order to capture declining gas prices during 1994, MichCon fixed the price on
approximately 34 Bcf of gas in advance of the month of purchase. Subsequently,
there was a further decline in gas prices during 1994. Had MichCon not fixed
these prices, its cost of gas would have been approximately $10 million (1.9%)
lower for 1994. MichCon did not fix any gas prices during 1995. In February
1996, the MPSC issued an order finding that all of MichCon's 1994 gas costs
were reasonable and prudent, and made no disallowance of gas costs as a result
of MichCon fixing its gas prices.

      As previously discussed, MichCon's rates are set to recover its lost gas
costs using an averaging method based on historical lost gas experience. The
difference between the historical average lost gas amount and the actual lost
gas amount is recorded to income at the end of the seasonal cycle ended August
31 of each year. For the seasonal cycles ended August 1995 and August 1994,
the actual lost gas experienced was lower than the historical average lost gas
amount, resulting in reductions to cost of gas of $1.5 million and $5.9
million during 1995 and 1994, respectively. No significant adjustment occurred
during 1993.

      The Federal Energy Regulatory Commission (FERC) issued Order No. 636 in
1992 which required interstate pipelines to separate their pipeline sales
service into its various service components. The order also allows interstate
pipelines to recover their prudently incurred transition costs resulting from
restructuring. ANR, MichCon's primary interstate natural gas transporter,
implemented its Order No. 636 


                                  15

<PAGE>

            MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
            MANAGEMENT'S DISCUSSION AND ANALYSIS - (Continued)


restructuring in November 1993. During 1995 and 1994, ANR filed 
several transition cost recovery requests. MichCon accrued its
portion of these costs in 1995 and 1994 totaling $6.8 million and $5.4
million, of which $5.0 million and $3.9 million is reflected in cost of gas,
respectively. These transition costs are recovered through the GCR mechanism
as paid, and therefore, a regulatory asset has been recorded for the
unrecovered costs. As periodic filings are made by ANR, MichCon will accrue
its allocated portion. It is management's belief that there will be no
significant effect on MichCon's financial statements.

      In 1993, the FERC issued an order which required Panhandle Eastern Pipe
Line Company (Panhandle) to refund to MichCon the costs of certain direct
billings totaling $5.4 million plus interest of $4.4 million. During 1994, the
FERC issued an order permitting Panhandle to seek reimbursement of the $4.4
million in interest from MichCon. MichCon is currently seeking rehearing of
the FERC order. Should MichCon be ultimately unsuccessful in defeating
Panhandle's claim, it is anticipated that these costs will be recoverable
through the GCR mechanism and therefore, a regulatory asset has been recorded
for their future recovery.

Operation and Maintenance

      Operation and maintenance expenses decreased during 1995 due to lower
benefit costs, primarily pension and retiree healthcare costs. Operation and
maintenance expenses increased in 1994 due to higher postretirement healthcare
costs being recognized in 1994 as a result of the new accounting requirements
under Statement of Financial Accounting Standards (SFAS) No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions." These costs are
being recovered in rates that became effective in January 1994. Management's
efforts to reduce operating costs also contributed to the 1995 decrease in
operation and maintenance expenses, and helped moderate the 1994 increase.
Management is continuously assessing ways to improve cost competitiveness and
the quality of customer service. During 1994, MichCon reorganized along core
business processes, which has streamlined its organizational structure.

      Operation and maintenance expenses in future years may be affected by
investigation and remediation costs associated with several environmentally
contaminated sites, as discussed in detail in the "Environmental Matters"
section that follows. Management anticipates that these costs will not
materially affect earnings because any amounts not covered by insurance are
expected to be recoverable in rates.

      MichCon receives a significant amount of its heating assistance funding
from the Low-Income Home Energy Assistance Program (LIHEAP). Congress has
reduced a substantial portion of the program's funding for the 1996 fiscal
year, and there are proposals to eliminate all program funding in future
years. Michigan's share of LIHEAP funds were reduced from $78 million in
fiscal year 1995 to $47.5 million in 1996. During 1995 and 1994, $27.3 million
and $27.0 million in LIHEAP funds assisted approximately 112,000 and 131,000
MichCon customers, respectively. A portion of the decreased funding may result
in increased uncollectibles expense. MichCon is currently working with federal
and state officials to identify ways to obtain energy assistance for
low-income customers from other avenues, and is taking actions to minimize the
impact any reduction in LIHEAP funds would have on MichCon's financial
statements.


                                 16
<PAGE>

            MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
            MANAGEMENT'S DISCUSSION AND ANALYSIS - (Continued)


Depreciation and Depletion

      The increases in depreciation and depletion in 1995 and 1994 are due to
higher plant balances, reflecting capital expenditures of $522.5 million over
the past three years. In addition, higher depreciation rates implemented in
January 1994 contributed to the 1994 increase. Depreciation and depletion
expenses are expected to increase in future years due to higher planned
capital investments.

Property and Other Taxes

      Property and other taxes decreased slightly in both 1995 and 1994. The
1995 decrease was due mainly to a decrease in Michigan single business taxes
resulting from changes made by the State of Michigan to the method of
computing the tax. The decrease in 1994 resulted from Michigan legislation
which lowered property taxes, partially offset by increased taxes due to
higher property balances and higher Michigan single business taxes.

Other Income and Deductions

      Interest on long-term debt rose in 1995 as a result of the average
amount of long-term debt outstanding increasing $95.7 million and a slight
increase in the weighted average interest rate on long-term debt. Interest on
long-term debt also rose in 1994 as a result of the average amount of
long-term debt outstanding increasing $56.1 million, partially offset by a
decrease in the weighted average interest rate on long-term debt of 0.6%. The
increases in the average amount of long-term debt outstanding were the result
of issuing first mortgage bonds in the aggregate of $70 million in 1995, $80
million in 1994 and $120 million in 1993.

      Other interest expense in 1995, 1994 and 1993 reflects interest on
varying levels of pending customer refunds during the periods.

Income Taxes

      Income taxes increased in 1995 and decreased in 1994 primarily as a
result of changes in earnings. In addition, excess book depreciation over tax
depreciation rose in 1995 contributing to the increase in 1995 income taxes.
Income taxes were reduced by $1.3 million, $3.9 million and $1.2 million
during 1995, 1994 and 1993, respectively, due to the favorable resolution of
prior years' tax issues.

Environmental Matters

      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 these former MGP sites, and some contamination related to
the byproducts of gas manufacturing was discovered at each site. The existence
of these sites and the results of the environmental investigations have been
reported to 


                                 17
<PAGE>

            MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
            MANAGEMENT'S DISCUSSION AND ANALYSIS - (Continued)


the Michigan Department of Environmental Quality. None of these
former MGP sites are on the National Priorities List prepared by the U.S.
Environmental Protection Agency.

      MichCon is not involved in any administrative proceedings regarding
these former MGP sites, but is currently remediating one of the sites. The
remedy consists of limited excavation and disposal of soils, a new soil cover
and, if necessary, a ground water capture and treatment system. More extensive
investigations are underway at three sites.

      In 1984, MichCon established an $11.7 million 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 has employed outside consultants to evaluate remediation
alternatives at these sites, to assist in estimating its potential liabilities
and to review its archived insurance policies. MichCon has notified more than
40 current and former insurance carriers of the environmental conditions at
these former MGP sites and requested insurance coverage for costs associated
with the investigation and remediation of these sites. MichCon is pursuing its
claims against these carriers. The findings of these investigations indicate
that the estimated total expenditures for investigation and remedial
activities at all 16 former MGP sites will be between $30 million and $170
million based on undiscounted 1995 costs. As a result of these studies,
MichCon accrued an additional liability and a corresponding regulatory asset
of $32 million during the fourth quarter.

      During 1995, 1994 and 1993, MichCon spent $2.1 million, $0.6 million,
and $2.1 million, respectively, investigating these former MGP sites. At
December 31, 1995, the reserve balance is approximately $35.5 million, of
which $3.5 million is 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 and, therefore, have an effect on MichCon's financial
position and cash flows. However, management believes that insurance coverage
and the cost deferral and rate recovery mechanism approved by the MPSC will
prevent environmental costs from having a material adverse impact on MichCon's
results of operations.

Outlook

      MichCon's objectives are to grow revenues and reduce its cost structure
in order to maintain strong returns and provide customers with quality service
at competitive prices. MichCon expects to provide natural gas to approximately
20,000 new customers in 1996, continuing its strategy to aggressively expand
its residential, commercial and industrial markets in Michigan. MichCon's
market share for residential heating customers in the communities in which it
serves is approximately 85%. While this saturation rate is high, there
continues to be significant growth opportunities through conversion of
existing homes as well as from new construction. MichCon continues to grow the
industrial and commercial markets by aggressively facilitating the use of
existing gas technologies and equipment as well as by developing new natural


                                 18
<PAGE>

            MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
            MANAGEMENT'S DISCUSSION AND ANALYSIS - (Continued)


gas technologies.

      MichCon continues to focus on challenges and opportunities resulting
from increased competition with other natural gas distribution companies and
other energy providers. The MPSC is scheduling hearings to explore major
reforms of Michigan's gas utility regulatory process. MichCon is positioning
itself to respond to changes in regulation and increased competition by
successfully reducing its cost of operations while maintaining a high level of
customer satisfaction. MichCon remains focused to continue this trend in 1996
and beyond. The success is due to targeted productivity initiatives and the
alignment of the Company's organization around core business processes and
customer services. The ongoing benefits of these efforts are a strengthened
competitive position in the gas industry.


CAPITAL RESOURCES AND LIQUIDITY

Operating Activities

      MichCon's cash flow from operating activities totaled $158.2 million in
1995, decreasing $15.9 million compared to 1994. The decrease is due primarily
to higher working capital requirements partially offset by higher net income.
Operating cash flows were sufficient for the payment of cash dividends on
common and preferred stock and a portion of capital investments. Cash flow
from operating activities in 1994 increased $27.8 million compared to 1993
primarily due to lower working capital requirements.

Financing Activities

      During the latter part of each year, short-term debt is generally
incurred to finance increases in gas inventories and customer accounts
receivable. Short-term debt is normally reduced in the first part of each year
as gas inventories are depleted and funds are received from winter heating
sales. To meet its seasonal short-term borrowing needs, MichCon normally
issues commercial paper which is backed by credit lines with several banks.
MichCon has established credit lines to allow for borrowings of up to $100
million under a 364-day revolving credit facility and up to $150 million under
a three-year revolving credit facility. Commercial paper of $194.8 million was
outstanding as of December 31, 1995, under these lines.

      During 1995, MichCon filed a shelf registration statement with the
Securities and Exchange Commission for the issuance of up to $150 million of
first mortgage bonds. This filing, along with MichCon's existing shelf
registrations of $30 million, provided MichCon the ability to issue up to $180
million of first mortgage bonds. MichCon issued $70 million of first mortgage
bonds under these shelf registration statements in 1995. In addition, MCN
Corporation invested $7 million in MichCon as an additional equity investment
during 1995. The proceeds from the bonds and equity investment were used to
repay short-term obligations, to finance MichCon's capital expenditures and
for general corporate purposes.

      MichCon issued $80 million and $120 million of first mortgage bonds in
1994 and 1993, respectively. The 1994 proceeds were used to repay short-term
obligations and for general corporate purposes. The 1993 proceeds were used to
redeem approximately $74.9 million of its outstanding first mortgage bonds and
for general corporate purposes. These redemptions allowed MichCon to lower its
interest costs.


                                 19
<PAGE>

            MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
            MANAGEMENT'S DISCUSSION AND ANALYSIS - (Continued)


      During 1995, MichCon renewed its Trust Demand Note program which allows
MichCon to borrow up to $25 million through April 1996. No borrowings were
outstanding as of December 31, 1995, but $25 million was borrowed in January
1996.

      MichCon's capital requirements for 1996 are anticipated to be
approximately $220 million for capital investments. These investments will be
made to add new customers, develop new gas transportation markets and make
improvements to existing storage and transmission systems. These capital
requirements and general financial market conditions will affect the timing
and amount of future debt issuances. MichCon's capitalization objective is to
maintain a ratio of approximately 50% debt and 50% equity. At December 31,
1995, the common equity ratio was 48.7% of total capitalization.

The following table sets forth the ratings for securities issued by MichCon:

<TABLE>
<CAPTION>
                         Standard                                    Duff &
                         & Poor's              Moody's               Phelps                Fitch
                     -----------------    ------------------    ------------------    -----------------

<S>                         <C>                  <C>                   <C>                   <C>
Commercial paper ...        A1                   P1                    D1                    F1
Long-term debt .....        A                    A2                    A+                    A

</TABLE>
These ratings are considered investment grade by each rating agency.

Investing Activities

      MichCon's capital expenditures for 1995 totaled $235.8 million. This
amount represents an increase of $90.4 million compared to 1994. Capital
expenditures in 1994 increased by $4.1 million over 1993. Increased capital
expenditures are due primarily to the construction of pipelines to transport
gas and construction of new distribution lines to reach communities not
previously served by MichCon. The majority of the company's capital
expenditures are devoted to adding new customers to its service area.

     In January 1996, MichCon began construction of a 59-mile loop of its
existing Milford to Belle River Pipeline. The pipeline is anticipated to be
completed in early 1997 at a cost of approximately $80 million. The pipeline
will improve the overall reliability and efficiency of MichCon's gas storage
and transmission system by serving as a back-up means of transportation in the
event of disruptions in the operation of the existing pipeline or other
facilities used to supply gas to MichCon's system.

      It is management's opinion that MichCon will have sufficient capital
resources, both internal and external, to meet anticipated capital
requirements.


                                   20
<PAGE>

            MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
            MANAGEMENT'S DISCUSSION AND ANALYSIS - (Concluded)


EFFECTS OF INFLATION

      MichCon's operations are subject to inflationary pressures. Such
inflationary pressures exist because the Company's ability to adjust its rates
to recover increases in non-gas related operating costs is dependent upon
obtaining approval from the MPSC. The effects of inflation on operating
results, however, are mitigated to the extent that assets are financed with
debt that will be repaid with dollars of less purchasing power.


                                  21

<PAGE>
 
             ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                                                          Page
                                                          ----

Consolidated Statement of Income .....................     23

Consolidated Statement of Financial Position .........     24

Consolidated Statement of Capitalization .............     25

Consolidated Statement of Cash Flows .................     26

Notes to the Consolidated Financial Statements .......     27

Independent Auditors' Report .........................     44

Supplementary Financial Information - Quarterly
  Operating Results (Unaudited) ......................     45

Financial Statement Schedule for each of the three
  years in the period ended
  December 31, 1995, unless otherwise noted-
    Schedule II - Valuation and Qualifying Accounts ..     46


                            22
<PAGE>

<TABLE>
<CAPTION>
              MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
                       CONSOLIDATED STATEMENT OF INCOME


Year ended December 31,                                             1995          1994             1993
-----------------------                                             ----          ----             ----
(Thousands of Dollars)                            Note(s)

Operating Revenues
<S>                                                 <C>        <C>              <C>              <C>        
  Gas Sales ..............................            7,11     $   917,180      $   954,760      $ 1,075,856
  Transportation and storage services ....              11         121,130          113,027          100,134
  Other ..................................                          42,503           43,891           47,525
                                                               -----------      -----------      -----------
    Total Operating Revenues .............                       1,080,813        1,111,678        1,223,515
                                                               -----------      -----------      -----------

Operating Expenses
  Cost of gas ............................              11         483,962          529,426          685,679
  Operation and maintenance ..............              11         294,424          313,575          280,182
  Depreciation and depletion .............                          89,128           84,230           73,866
  Property and other taxes ...............                          57,012           58,129           58,177
                                                               -----------      -----------      -----------
    Total operating expenses .............                         924,526          985,360        1,097,904
                                                               -----------      -----------      -----------

Operating Income .........................                         156,287          126,318          125,611
                                                               -----------      -----------      -----------

Equity in Earnings of Joint Ventures .....                             739            1,043            1,826
                                                               -----------      -----------      -----------

Other Income and (Deductions)
  Interest income ........................                           3,983            4,064            4,205
  Interest on long-term debt .............                         (35,820)         (27,948)         (25,594)
  Other interest expense .................                          (7,053)          (9,093)          (7,961)
  Other ..................................                          (5,409)          (4,677)          (4,772)
                                                               -----------      -----------      -----------
    Total other income and (deductions) ..                         (44,299)         (37,654)         (34,122)
                                                               -----------      -----------      -----------

Income Before Income Taxes ...............                         112,727           89,707           93,315
Income Tax Provision .....................              12          41,004           29,839           30,939
                                                               -----------      -----------      -----------
Net Income ...............................                          71,723           59,868           62,376
Dividends on Preferred Stock .............                             235              481              727
                                                               -----------      -----------      -----------
Net Income Available for Common Stock ....                     $    71,488      $    59,387      $    61,649
                                                               ===========      ===========      ===========

<FN>
The notes to the consolidated financial statements are an integral part of 
this statement.
</TABLE>

                                     23

<PAGE>
<TABLE>
<CAPTION>

              MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF FINANCIAL POSITION


December 31                                                                                1995         1994
-----------                                                                                ----         ----
(Thousands of Dollars)                                                      Note(s)
<S>                                                                                     <C>          <C>       
ASSETS
  Current Assets
    Cash and cash equivalents, at cost (which approximates market value)                $    8,469   $    1,305
    Accounts receivable, less allowance for doubtful accounts of
      $13,250 and $15,322, respectively ................................                   175,103      134,980
    Accrued unbilled revenues ..........................................                    91,134       82,233
    Gas in inventory ...................................................       2            40,191       77,843
    Property taxes assessed applicable to future periods ...............                    56,949       52,163
    Other ..............................................................                    32,498       23,102
                                                                                        ----------   ----------
                                                                                           404,344      371,626
                                                                                        ----------   ----------
  Deferred Charges and Other Assets
    Investment in and advances to joint ventures .......................                    20,318       20,791
    Deferred postretirement benefit costs ..............................    7b, 9b          12,372       19,887
    Deferred environmental costs .......................................    6b, 7b          32,000           --
    Prepaid pension costs ..............................................      9a            25,438        8,298
    Other ..............................................................                    42,061       33,746
                                                                                        ----------   ----------
                                                                                           132,189       82,722
                                                                                        ----------   ----------
  Property, Plant and Equipment, at cost ...............................       8         2,413,120    2,189,150
    Less - Accumulated depreciation and depletion ......................                 1,151,160    1,071,588
                                                                                        ----------   ----------
                                                                                         1,261,960    1,117,562
                                                                                        ----------   ----------
                                                                                        $1,798,493   $1,571,910
                                                                                        ==========   ==========
LIABILITIES AND CAPITALIZATION
  Current Liabilities
    Accounts payable ...................................................                $  108,208   $   80,671
    Notes payable ......................................................        4          196,635      168,457
    Current portion of long-term debt, capital lease obligations
      and redeemable cumulative preferred stock ........................     3b, 8           3,969        4,225
    Federal income, property and other taxes payable ...................                    85,195       85,806
    Customer deposits ..................................................                    11,531       11,563
    Refunds payable to customers .......................................                       728       19,559
    Other ..............................................................                    63,859       50,670
                                                                                        ----------   ----------
                                                                                           470,125      420,951
                                                                                        ----------   ----------
  Deferred Credits and Other Liabilities
    Accumulated deferred income taxes ..................................       12           61,146       52,396
    Unamortized investment tax credit ..................................       7b           36,437       38,294
    Tax benefits amortizable to customers ..............................       7b          114,487      114,906
    Accrued postretirement benefit costs ...............................       9b           12,661       23,507
    Accrued environmental costs ........................................       6b           32,000           --
    Other ..............................................................                    65,252       53,076
                                                                                        ----------   ----------
                                                                                           321,983      282,179
                                                                                        ----------   ----------
  Commitments and Contingencies ........................................      6, 8
  Capitalization (see accompanying statement)
    Long-term debt, including capital lease obligations ................    3a, 8, 10      516,564      448,329
    Redeemable cumulative preferred stock ..............................      3b, 10           --         2,618
    Common shareholder's equity ........................................                   489,821      417,833
                                                                                        ----------   ----------
                                                                                         1,006,385      868,780
                                                                                        ----------   ----------
                                                                                        $1,798,493   $1,571,910
                                                                                        ==========   ==========

<FN>
The notes to the consolidated financial statements are an integral part of
this statement.
</TABLE>
                                    24
<PAGE>

<TABLE>
<CAPTION>
              MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
                   CONSOLIDATED STATEMENT OF CAPITALIZATION

Year Ended December 31                                                             1995             1994             1993
----------------------                                                             ----             ----             ----
(Thousands of Dollars)                                               Note(s)

<S>                                                                  <C>       <C>              <C>              <C>
Long-Term Debt, excluding current requirements                       3a, 10
  First Mortgage Bonds, interest payable semi-annually
    6-1/4 % series due 1997 ......................................             $    50,000      $    50,000      $    50,000
    6-3/10 % series due 1998 .....................................                  20,000             --               --
    5-3/4 % series due 2001 ......................................                  60,000           60,000           60,000
    8 % series due 2002 ..........................................                  70,000           70,000           70,000
    6.72 % series due 2003 .......................................                   4,150             --               --
    6-4/5 % series due 2003 ......................................                  15,850             --               --
    9-1/8 % series due 2004 ......................................                  55,000           55,000           55,000
    8-1/4 % series due 2014 ......................................                  80,000           80,000             --
    9-1/2 % series due 2019 ......................................                   5,000            5,000            5,000
    7-1/2 % series due 2020 ......................................                  30,000             --               --
    9-1/2 % series due 2021 ......................................                  40,000           40,000           40,000
    6-3/4 % series due 2023 ......................................                  18,416           19,109           20,000
    7 % series due 2025 ..........................................                  40,000           40,000           40,000
    Unamortized premium and (discount) - net .....................                  (1,390)          (1,508)            (920)
  Unsecured Notes - 9-3/4 % series due 2000
    interest payable semi-annually ...............................                  12,000           12,000           12,000
  Long-term capital lease obligations ............................       8          15,168           16,459           17,625
  Other long-term debt ...........................................                   2,370            2,269            2,134
                                                                               -----------      -----------      -----------
  Total ..........................................................                 516,564          448,329          370,839
                                                                               -----------      -----------      -----------
Preference Stock, par value $1 per share-authorized 4,000,000
   shares, outstanding - none
Redeemable Cumulative Preferred Stock, excluding current 
  requirements, par value $1 per share - authorized 7,000,000
  shares, outstanding none, 104,732 and 224,732 shares,  
  respectively, $2.05 Series ......................................      3b            --            2,618            5,618
                                                                               -----------      -----------      -----------
Common Shareholder's Equity
  Common Stock, par value $1 per share - authorized, for
    all periods, 15,100,000 shares; issued 10,300,000 shares ......                 10,300           10,300           10,300
                                                                               -----------      -----------      -----------
  Additional Paid-In Capital
    Balance - beginning of period .................................                204,777          203,616          203,616
    Equity Investment .............................................                  7,000            1,161             --
                                                                               -----------      -----------      -----------
    Balance - end of period ......................................                 211,777          204,777          203,616
                                                                               -----------      -----------      -----------
  Retained Earnings
    Balance - beginning of period ................................                 202,756          151,869          165,220
    Net income ...................................................                  71,723           59,868           62,376
    Cash dividends declared:
      Common stock ...............................................                  (6,500)          (8,500)         (75,000)
      Preferred stock ............................................                    (235)            (481)            (727)
                                                                               -----------      -----------      -----------
    Balance - end of period ......................................                 267,744          202,756          151,869
                                                                               -----------      -----------      -----------
Total common shareholder's equity ................................                 489,821          417,833          365,785
                                                                               -----------      -----------      -----------
Total capitalization .............................................             $ 1,006,385      $   868,780      $   742,242
                                                                               ===========      ===========      ===========

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

</TABLE>
                                     25

<PAGE>



<TABLE>
<CAPTION>

              MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
                     CONSOLIDATED STATEMENT OF CASH FLOWS



Year ended December 31,                                                       1995            1994           1993
-----------------------                                                       ----            ----           ----
(Thousands of Dollars)                                            Note(s)

Cash Flow from Operating Activities
<S>                                                                  <C>    <C>            <C>            <C>      
  Net income ...................................................            $  71,723      $  59,868      $  62,376
  Adjustments to reconcile net income to net cash flow provided
    from operating activities:
      Depreciation and depletion
        Per consolidated statement of income ...................               89,128         84,230         73,866
        Charged to other accounts ..............................                7,318          7,229          6,451
      Deferred income taxes and investment tax credit ..........     12        16,213        (25,394)        20,619
      Other ....................................................                  878           (297)        (3,350)
      Changes in assets and liabilities, exclusive of changes
        shown separately .......................................              (27,033)        48,532        (13,599)
                                                                            ---------      ---------      ---------
          Net cash provided from operating activities ..........              158,227        174,168        146,363
                                                                            ---------      ---------      ---------

Cash Flow from Financing Activities
  Notes payable - net ..........................................      4        28,178        (91,847)        19,083
  Issuance of long-term debt ...................................     3a        68,764         78,620        118,129
  Cash dividend paid:
    Common stock ...............................................               (6,500)        (8,500)       (75,000)
    Preferred stock ............................................                 (276)          (522)          (768)
  Retirement of long-term debt and preferred stock .............     3b        (4,757)        (4,809)       (84,160)
  Equity Investment ............................................                7,000          1,161           --
                                                                            ---------      ---------      ---------
          Net cash provided from (used for) financing activities               92,409        (25,897)       (22,716)
                                                                            ---------      ---------      ---------

Cash Flow from Investing Activities
  Capital expenditures .........................................             (235,767)      (145,421)      (141,279)
  Sale of unconsolidated entities of Trading Company ...........      5          --             --           19,898
  Other - net ..................................................               (7,705)        (3,968)        (1,821)
                                                                            ---------      ---------      ---------
          Net cash used for investing activities ...............             (243,472)      (149,389)      (123,202)
                                                                            ---------      ---------      ---------

Net Increase (Decrease) in Cash and Cash Equivalents ...........                7,164         (1,118)           445
Cash and Cash Equivalents, January 1 ...........................                1,305          2,423          1,978
                                                                            ---------      ---------      ---------
Cash and Cash Equivalents, December 31 .........................            $   8,469      $   1,305      $   2,423
                                                                            =========      =========      =========

Changes in Assets and Liabilities, Exclusive of Changes
  Shown Separately
    Accounts receivable - net ..................................            $ (37,782)     $  27,936      $  27,015
    Accrued unbilled revenues ..................................               (8,901)        17,983         (9,831)
    Gas in inventory ...........................................               37,652        (42,744)        12,748
    Accounts payable ...........................................               27,537        (12,080)       (18,666)
    Federal income, property and other taxes payable ...........                 (611)        25,263        (23,347)
    Refunds payable to customers ...............................              (18,831)         8,766          7,493
    Other current assets and liabilities .......................              (10,723)        (1,817)        11,159
    Deferred assets and liabilities ............................              (15,374)        25,225        (20,170)
                                                                            =========      =========      =========
                                                                            $ (27,033)     $  48,532      $ (13,599)
                                                                            =========      =========      =========
Supplemental Disclosures
  Cash paid for:
    Interest, net of amounts capitalized .......................            $  40,037      $  34,863      $  33,839
                                                                            =========      =========      =========
    Federal income taxes .......................................            $  30,874      $  41,786      $  18,087
                                                                            =========      =========      =========
<FN>
The notes to the consolidated financial statements are an integral part of
this statement.
</TABLE>
                                      26

<PAGE>

              MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


1.    SUMMARY OF ACCOUNTING POLICIES

      Nature of Operations

           MichCon is a public utility engaged in the distribution and
      transmission of natural gas in the state of Michigan. MichCon 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
      MichCon are gas sales, end user transportation, and intermediate
      transportation. MichCon serves more than 1.2 million residential,
      commercial and industrial customers. The Company is not dependent upon
      any one customer or group of customers. Its principle markets are
      located in the Detroit, Grand Rapids, Ann Arbor, Traverse City, and
      Muskegon metropolitan areas. MichCon's non-utility operations are
      insignificant.

           Forty-five percent of MichCon's labor force is covered by
      collective bargaining agreements, with the earliest agreements set to
      expire in December 1997.

      Principles of Consolidation

           The consolidated financial statements include the accounts of
      MichCon and all of its subsidiaries. Investments in 50% or less owned
      entities have been accounted for under the equity method because MichCon
      has significant but not controlling influence over these entities.
      Certain reclassifications have been made to prior years' statements to
      conform with the 1995 presentation.

      Basis of Presentation

           The preparation of financial statements in conformity with
      generally accepted accounting principles requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the
      date of the financial statements and the reported amounts of revenues
      and expenses during the reporting period. Actual results could differ
      from those estimates.

      Revenues and Cost of Gas

           MichCon accrues revenues for gas service provided but unbilled at
      month end equal to the recoverable cost of gas sold. Annual gas cost
      recovery (GCR) proceedings before the MPSC permit MichCon to recover the
      prudent and reasonable cost of gas sold. Any overcollection or
      undercollection of costs, including interest, will be reflected in
      future rates.

      Property, Plant and Equipment

           Property, plant and equipment is stated at cost and includes
      amounts for labor, materials, overhead and an allowance for funds used
      during construction. Upon retirement, the cost of property, plant and
      equipment and net removal costs are charged to accumulated depreciation.


                                   27
<PAGE>

              MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


      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. MichCon's subsidiaries also capitalize an allowance for debt
      funds used during construction. The total amount capitalized was
      $1,644,000, $839,000 and $1,997,000 in 1995, 1994 and 1993,
      respectively.

      Depreciation and Depletion

           MichCon provides depreciation for a major portion of its property,
      plant and equipment on the basis of straight-line rates prescribed by
      the MPSC. Unit of production depreciation and depletion is used for
      certain production and transmission property. Depreciation rates vary by
      class of property. The ratio of the provision for depreciation to the
      average cost of depreciable property was 4.4%, 4.5% and 4.2% in 1995,
      1994 and 1993, respectively.

      Financial Instruments

           In order to manage interest rate exposure, MichCon engages in
      interest rate swap agreements that exchange fixed and variable rate
      interest payment obligations over the life of the agreements without the
      exchange of the underlying principal amounts. The principal amounts of
      such agreements are used solely to measure interest to be paid or
      received. Interest rate swaps are subject to market risk as interest
      rates fluctuate. The difference to be paid or received on these swaps is
      accrued and recorded as an adjustment to interest expense over the life
      of the agreements.

          The fair values of financial instruments are estimated based on
      quotes from brokers or current rates offered for instruments with
      similar characteristics.

      Refunds Payable to Customers

           MichCon accrues amounts to be paid to customers in accordance with
      various refund requirements including gas cost overcollections.

      Deferred Debt Costs

           In accordance with MPSC regulations, MichCon defers reacquisition
      and unamortized issuance costs of reacquired long-term debt when such
      debt is refinanced. These costs are amortized over the term of the
      replacement debt.

      Income Taxes and Investment Tax Credit

           Effective January 1993, MichCon adopted Statement of Financial
      Accounting Standards No. 109, "Accounting for Income Taxes," which
      requires the use of the liability method of accounting for deferred
      income taxes.


                                    28

<PAGE>

              MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


           Due to current tax rates being lower than the tax rates in effect
      when the original deferred taxes were recorded, net excess deferred
      taxes on existing utility plant in service are included in a tax
      benefits amortizable to customers account. Also included in this account
      is the reduction in income taxes that will result from amortization of
      accumulated investment tax credits. These tax benefits are being
      amortized to customers through reduced rates over the life of the
      related plant.

           In accordance with MPSC requirements, investment tax credits
      relating to utility property placed into service were deferred and are
      being credited to income over the life of the related property.

      Consolidated Statement of Cash Flows

           MichCon considers all highly liquid investments purchased with a
      maturity of three months or less to be cash equivalents.

      Accounting Pronouncements

           During 1995, MichCon adopted Statement of Financial Accounting
      Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived
      Assets," which requires the impairment of property and intangibles to be
      considered whenever evidence suggests a lack of recoverability. Under
      the current ratemaking process, adoption of this statement had no impact
      on the Company's financial statements.

           In the first quarter of 1996, MichCon will adopt SFAS No. 123,
      "Accounting for Stock-Based Compensation," which establishes a fair
      value based method of accounting for stock-based compensation plans.
      Adoption of this Statement is not expected to have a significant effect
      on MichCon's financial statements.


2.    GAS IN INVENTORY

      Inventory gas is priced on a last-in, first-out (LIFO) basis. At
December 31, 1995, the replacement cost exceeded the $40,191,000 LIFO cost by
$135,635,000 and at December 31, 1994, the replacement cost exceeded the
$77,843,000 LIFO cost by $128,338,000. MichCon's current GCR tariff provisions
prevent MichCon from retaining any benefits from a lower cost of gas sold
resulting from liquidating its LIFO inventory. MichCon's LIFO inventory
balance was 64.2 Bcf as of December 31, 1995.


                                 29
<PAGE>

              MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


3.    CAPITALIZATION

      a.   Long-Term Debt

           The following long-term debt was issued during 1995 and 1994:

           <TABLE>
           <CAPTION>
           Issue
           Date                          Description          Amount
           -----                         -----------          ------
            <S>                     <C>                       <C>
            June 1995               First Mortgage Bonds,
                                     6.30%, due June 1998     $20,000
                                     6.72%, due June 2003     $ 4,150
                                     6.80%, due June 2003     $15,850

            May 1995                First Mortgage Bonds,
                                     7.50%, due May 2020      $30,000

            September 1994          First Mortgage Bonds,     $80,000
                                     8.25%, due May 2014
</TABLE>

           Substantially all of the net properties of MichCon in the
      approximate amount of $1,066,000,000 are pledged as security for the
      payment of outstanding first mortgage bonds.

           MichCon has a variable interest rate swap agreement through April
      2000 on $12,000,000 of unsecured notes which has effectively reduced the
      cost of this debt from 9.8% to 6.2% for the year ended December 31,
      1995.

           Maturities and sinking fund requirements during the next five years
      for long-term debt outstanding at December 31, 1995, are $60,000 in
      1996, $50,061,000 in 1997, $20,063,000 in 1998, $20,065,000 in 1999, and
      $32,067,000 in 2000.

      b.   Redeemable Cumulative Preferred Stock

           At December 31, 1995, 104,732 shares of Redeemable Cumulative
      Preferred Stock, $2.05 Series were outstanding. During January 1996,
      MichCon redeemed all outstanding shares at the sinking fund redemption
      price of $25 per share.

      c.   Additional Capital

           During 1995, MCN Corporation invested $7,000,000 in MichCon as an
      additional equity investment.


                               30
<PAGE>

              MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


4.    CREDIT FACILITIES AND SHORT-TERM BORROWINGS

      During 1995, MichCon renewed its annual bank lines of credit to allow
for borrowings of up to $100,000,000 under a 364-day revolving credit facility
and up to $150,000,000 under a three-year revolving credit facility. MichCon
usually issues commercial paper in lieu of an equivalent amount of borrowings
under these lines of credit. Commercial paper outstanding at December 31, 1995
and 1994, totaled $194,760,000 and $143,457,000, respectively, at weighted
average interest rates of 5.7% and 5.8%, respectively. This debt is classified
as short-term based upon management's intent to repay it within one year. Fees
are paid to compensate banks for lines of credit.

      During 1995, MichCon renewed its Trust Demand Note program which allows
MichCon to borrow up to $25,000,000 through April 1996. No borrowings were
outstanding at December 31, 1995; however, during January 1996 borrowings of
$25,000,000 were made under this program at an interest rate of 5.6%.
Borrowings of $25,000,000 were outstanding under this program at December 31,
1994 at a weighted average interest rate of 6.1%.


5.    MICHCON SUBSIDIARIES

      In January 1996, MCN's Michigan pipeline operations were transferred, at
book value, to MichCon in order to consolidate MCN's Michigan gathering
pipeline activities within one business unit.

      On June 30, 1993, MichCon discontinued the businesses of its gas
marketing subsidiary, Trading Company, and sold the net assets to subsidiaries
of MCN Corporation, its parent company. MichCon accounted for the transaction
as a sale of part of a line of business. The final sales price of the
transaction equaled the book value of Trading Company's net assets of
approximately $42,000,000. As a result of the independent evaluation performed
in the fourth quarter of 1993, no further price adjustment was required.
Trading Company's contribution to MichCon's consolidated net income was
approximately $579,000 for the year ended 1993.

      MichCon received approximately $42,000,000 as payment for the sale.
Consistent with MichCon's objective to maintain a balanced capital structure,
MichCon then paid a $21,000,000 special dividend to MCN in July 1993.


6.    COMMITMENTS AND CONTINGENCIES

      a.   Guaranty

           A subsidiary of MichCon and an unaffiliated corporation have formed
      a series of partnerships which are 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 through the Michigan State Housing Development Authority due
      June 2004. Both partners and their parent corporations have issued
      guaranties for the full amount of this 


                                  31

<PAGE>

              MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


      financing and each parent corporation has agreed to reimburse the 
      other for 50% of any payments made as a result of these guaranties.

      b.   Environmental Matters

           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 these former MGP sites, and some contamination related
      to the byproducts 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 are on the
      National Priorities List prepared by the U.S. Environmental Protection
      Agency (USEPA).

           MichCon is not involved in any administrative proceedings regarding
      these former MGP sites, but is currently remediating one of the sites.
      The remedy consists of limited excavation and disposal of soils, a new
      soil cover and, if necessary, a ground water capture and treatment
      system. More extensive investigations are underway at three sites.

           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 reasonable and prudent investigation and remediation costs incurred
      at former MGP sites in excess of this reserve.

           MichCon has employed outside consultants to evaluate remediation
      alternatives at these sites, to assist in estimating its potential
      liabilities and to review its archived insurance policies. MichCon has
      notified more than 40 current and former insurance carriers of the
      environmental conditions at these former MGP sites and requested
      insurance coverage for costs associated with the investigation and
      remediation of these sites. MichCon is pursuing any claims it may have
      against these carriers. The findings of these investigations indicate
      that the estimated total expenditures for investigation and remedial
      activities at all 16 former MGP sites will be between $30,000,000 and
      $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 the fourth quarter.

           During 1995, 1994 and 1993, MichCon spent $2,100,000, $600,000, and
      $2,100,000, respectively, investigating these former MGP sites. At
      December 31, 1995, the reserve balance is approximately $35,500,000, of
      which $3,451,000 is 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 and therefore have an effect on MichCon's
      financial position and cash flows. However, management believes that
      insurance coverage and cost deferral and rate recovery mechanism
      approved by the MPSC will prevent environmental costs from having a
      material adverse impact on MichCon's results of operations.


                                   32
<PAGE>

              MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


      c.   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, purchase prices under
      these contracts are determined by formulas based on market prices. In
      1996, MichCon has firm purchase commitments for approximately 131 Bcf of
      gas. The Company expects that sales will exceed its minimum purchase
      commitments. To ensure that there is sufficient flexibility to obtain
      the lowest cost natural gas supplies in the future, MichCon is reducing
      the length of its long-term gas purchase contracts. As longer-term
      contracts expire, they will be replaced with contracts of one year or
      less, ensuring that MichCon's supply portfolio is compatible with the
      market at any point in time. MichCon has long-term transportation
      contracts with various interstate pipeline companies which expire on
      various dates through the year 2011. The Company is also committed to
      pay demand charges of $66,060,000 during 1996 related to firm purchase
      and transportation agreements. These demand charges are recoverable
      through the GCR mechanism.

           Capital investments for 1996 are estimated to be $220,000,000 and
      certain commitments have been made in connection therewith.

      d.   Interstate Pipeline Restructuring

           The Federal Energy Regulatory Commission (FERC) issued Order No.
      636 in 1992 which required interstate pipelines to separate their
      pipeline sales service into its various service components. The order
      also allows interstate pipelines to recover their prudently incurred
      transition costs resulting from the restructuring.

           ANR, MichCon's primary interstate natural gas transporter,
      implemented its Order No. 636 restructuring in November 1993. During
      1995 and 1994, ANR filed several requests for recovery of these
      transition costs. MichCon accrued its portion totaling $6,800,000 and
      $5,400,000 in 1995 and 1994, respectively. These transition costs are
      recovered through the GCR mechanism as paid, and therefore, a regulatory
      asset has been recorded for the unrecovered costs. As periodic filings
      are made by ANR, MichCon will accrue its allocated portion. It is
      management's belief that there will be no significant effect on the
      Company's financial statements.

           In 1993, the FERC issued an order in which Panhandle refunded to
      MichCon the costs of certain direct billings totaling $5,400,000 plus
      interest of $4,400,000. During 1994, the FERC issued an order permitting
      Panhandle to seek reimbursement of the $4,400,000 in interest from
      MichCon. MichCon is currently seeking rehearing of the FERC order.
      Should MichCon be ultimately unsuccessful in defeating Panhandle's
      claim, it is anticipated that these costs will be recoverable through
      the GCR mechanism, and therefore, a regulatory asset has been recorded
      for their future recovery.


                                    33
<PAGE>

              MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


      e.   Other

           MichCon receives a significant amount of heating assistance funding
      for the Low-Income Home Energy Assistance Program (LIHEAP) through its
      customers. A substantial portion of the program funding has been reduced
      by Congress in 1996, with Michigan's share of the funds being reduced
      from $78,000,000 in 1995 to $47,500,000 in 1996. MichCon customers
      currently receive 35% of the funds available in Michigan. MichCon is
      currently working with federal and state officials to identify ways to
      obtain energy assistance for low-income customers from other avenues,
      and is taking actions to minimize any impact that reductions in LIHEAP
      funding would have on the Company's financial statements.

           MichCon is involved in certain legal and administrative proceedings
      before various courts and governmental agencies concerning claims
      arising in the ordinary course of business. Management cannot predict
      the final disposition of such proceedings, but believes that adequate
      provision has been made for probable losses. It is management's belief,
      after discussion with legal counsel, that the ultimate resolution of
      those proceedings still pending will not have a material adverse effect
      on the Company's financial position and results of operations.


7.    RATE MATTERS

      a.   General Rate Proceedings

           In October 1993, MichCon received approval from the MPSC in its
      general rate case to increase rates $15,700,000, beginning in January
      1994. The higher rates include $28,700,000 for retiree health care
      benefits recognized under new accounting requirements and $8,100,000 for
      higher depreciation rates. Additionally, the MPSC's decision lowered
      MichCon's authorized rate of return on common equity to 11.5%.

      b.   Regulatory Assets and Liabilities

           MichCon's operations are subject to the provisions SFAS No. 71,
     "Accounting for the Effects of Certain Types of Regulation." As a result,
     several regulatory assets and liabilities are recorded in MichCon's
     financial statements. Regulatory assets represent costs which will be
     recovered from customers through the ratemaking process.


                                    34
<PAGE>

              MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


           Regulatory liabilities represent benefits which will flow through to
     customers as refunds or reduced rates. The following regulatory assets
     and liabilities were reflected in the Consolidated Statement of Financial
     Position as of December 31:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------

  (Thousands of Dollars)                                 1995           1994
  -------------------------------------------------    --------      --------

   <S>                                                 <C>         <C>
   Regulatory Assets:
     Deferred postretirement benefit costs (Note 9)    $ 12,372    $ 19,887
     Unamortized loss on retirement of debt .......       9,773      10,248
     Environmental costs (Note 6b) ................      32,000          --
     Conservation program costs ...................       7,792      13,170
     Panhandle and transition costs (Note 6d) .....       6,242       5,938
                                                       --------    --------
                                                       $ 68,179    $ 49,243
                                                       ========    ========

   Regulatory Liabilities:
     Refunds payable ..............................    $    728    $ 19,559
     Unamortized investment tax credit ............      36,437      38,294
     Tax benefits amortizable to customers ........     114,487     114,906
                                                       --------    --------
                                                       $151,652    $172,759
                                                       ========    ========
</TABLE>
-------------------------------------------------------------------------------

           MichCon currently has regulatory precedents and orders in effect
      which provide for the probable recovery or refund of its regulatory
      assets and liabilities. Future regulatory changes or changes in the
      competitive environment could result in MichCon discontinuing the
      application of SFAS No. 71 for all or part of its business and require
      the write-off of the portion of any regulatory asset or liability which
      was no longer probable of recovery or refund. If MichCon were to have
      discontinued the application of SFAS No. 71 as of December 31, 1995, it
      would have had a non-cash increase to net income from extraordinary
      items of approximately $54,000,000, net of related tax effects.
      Management believes that evidence currently available supports the
      continued application of SFAS No. 71 and the recorded regulatory assets
      and liabilities.


8.    CAPITAL AND OPERATING LEASES

      MichCon leases certain property (principally an office building, a
warehouse and a parking structure) under 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.

      The gross amount of assets recorded under capital leases and the related
accumulated depreciation at December 31, 1995, are $26,887,000 and
$10,429,000, respectively. The gross amount of assets and related accumulated
depreciation at December 31, 1994, were $26,887,000 and $9,261,000,
respectively.


                                 35
<PAGE>

              MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     Minimum rental commitments under noncancelable leases at December 31,
1995 are as follows:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
                                                    Capital          Operating
   (Thousands of Dollars)                           Leases            Leases
   -------------------------------------------      --------         ---------

   <C>                                               <C>              <C>   
   1996.......................................       $ 2,908          $1,707
   1997.......................................         2,908           1,343
   1998.......................................         2,908           1,343
   1999.......................................         2,908           1,343
   2000.......................................         2,908           1,343
   2001 and thereafter........................        10,470           2,369
                                                     -------          ------
   Total minimum lease payments...............        25,010          $9,448
                                                                      ======
   Less:  Amount representing interest........         8,552
                                                     -------
   Present value of minimum lease payments....       $16,458
   Less:  Current portion.....................         1,290
                                                     -------
   Long-term obligations......................       $15,168
                                                     =======
</TABLE>
-------------------------------------------------------------------------------

      Total minimum lease payments for capital and operating leases have not
been reduced by future minimum sublease receipts of $8,547,000 under
noncancelable subleases.

      Capital and operating lease payments for the years ended December 31
consist of the following:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
       (Thousands of Dollars)            1995     1994     1993
       ---------------------------      ------   ------   ------

       <S>                              <C>      <C>      <C>
       Capital lease expense:
         Depreciation expense .......   $1,167   $1,056   $  941
         Interest expense ...........    1,741    1,853    1,923
                                        ------   ------   ------

       Total capital lease expense ..   $2,908   $2,909   $2,864
                                        ======   ======   ======

       Operating lease expense ......   $3,241   $2,400   $2,400
                                        ======   ======   ======

</TABLE>
-------------------------------------------------------------------------------


9.    RETIREMENT BENEFITS

      a.   Pension Plan Benefits

           MichCon maintains separate defined benefit retirement plans for
      union and nonunion employees. The plans are noncontributory, cover
      substantially all employees and provide for normal retirement at age 65,
      but with the option to retire earlier or later under certain conditions.
      The plans provide pension benefits that are based on the employee's
      compensation and years of 


                                   36
<PAGE>

              MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


      credited service. MichCon's funding policy is to fund each year's 
      actuarially determined funding requirements of the plans, subject 
      to regulations issued by the Internal Revenue Service. Currently, 
      these plans meet the full funding limitations of the Internal
      Revenue Code. Accordingly, no contributions for the 1995, 1994 or 1993
      plan years were made and none will be made for the 1996 plan year.

           Net pension cost for these plans included the following components:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
    (Thousands of Dollars)                                    1995        1994         1993
  ------------------------------------------------------   ----------   ---------   ---------

    <S>                                                    <C>          <C>         <C>
    Service cost - benefits earned during the period ...   $   8,735    $ 12,267    $  10,579
    Interest cost on projected benefit obligation ......      31,197      29,742       29,393
    Net amortization and deferral ......................      64,435     (59,427)      64,016
    Actual (return) loss on plan assets ................    (121,508)     15,101     (105,373)
                                                           ---------    ---------   ---------

   Net pension credit .................................    $ (17,141)   $ (2,317)   $ (1,385)
                                                           =========    =========   =========

</TABLE>
           The following table sets forth a reconciliation of the funded
      status of the plans and the amounts recorded as prepaid pension cost in
      the Consolidated Statement of Financial Position:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------

          (Thousands of Dollars)                                         1995          1994
          ---------------------------------------------------------   -----------  -----------

          <S>                                                          <C>          <C>
          Measurement date ........................................    October 31   October 31
          Actuarial present value of:
            Accumulated vested benefit obligation .................     $350,657     $317,409
            Accumulated nonvested benefit obligation ..............       31,914       23,344
                                                                        --------     --------

              Total accumulated benefit obligation ................     $382,571     $340,753
                                                                        ========     ========

          Projected benefit obligation for service rendered to date     $443,490     $389,076
          Plan assets at measurement date .........................      657,044      561,592
                                                                        --------     --------

          Plan assets in excess of projected benefit obligation ...      213,554      172,516
          Less:  Unrecognized net asset at transition .............       44,695       49,688
                    Unrecognized prior service cost ...............        1,765        3,004
                    Unrecognized net gain .........................      141,656      111,526
                                                                        --------     --------
          Prepaid pension cost recognized in the Consolidated
            Statement of Financial Position .......................     $ 25,438     $  8,298
                                                                        ========     ========

</TABLE>
-------------------------------------------------------------------------------

                                      37
<PAGE>

              MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


           In determining the actuarial present value of the projected benefit
      obligations, the weighted average discount rate was 7.5% for 1995 and
      8.0% for 1994. The rate of increase in future compensation levels used
      was 5.0% for 1995 and 1994. The expected long-term rate of return on
      plan assets, which are invested primarily in equity and fixed income
      securities, was 9.0% for 1995 and 7.5% for 1994 and 1993.

           MichCon also sponsors several defined contribution pension plans.
      Participation in one of these plans is available to substantially all
      union and non-union employees. Company contributions to these plans are
      based upon salary and the matching of employee contributions up to
      certain predefined limits. The cost of these plans was $5,200,000 in
      1995, $5,100,000 in 1994, and $4,900,000 in 1993.

      b.    Other Postretirement Benefits

           MichCon provides certain health care and life insurance benefits
      for retired employees. Substantially all of MichCon's employees may
      become eligible for these benefits if they reach retirement age while
      working for the Company.

           Effective January 1993, MichCon adopted SFAS No. 106, "Employers'
      Accounting for Postretirement Benefits Other Than Pensions," which
      requires the use of accrual accounting for postretirement benefits.
      Consistent with a December 1992 MPSC order, MichCon deferred its 1993
      postretirement benefit costs in excess of claims paid (including the
      amortization of the initial transition obligation) until January 1994
      when new rates to recover such costs became effective.

           The deferred 1993 costs were initially being amortized over a
      period of 19 years. However, in June 1994, the MPSC approved a
      settlement agreement allowing MichCon to offset the impact of a net
      reduction in property and other taxes, resulting from federal and
      Michigan legislative changes, against its deferred 1993 postretirement
      costs. This will accelerate the amortization of the deferred
      postretirement cost from 19 years to approximately four years.

           MichCon's policy is to fund its postretirement benefit costs to the
      extent such amounts are recoverable in rates. Separate qualified
      Voluntary Employees' Beneficiary Association (VEBA) trusts exist for
      union and nonunion employees. Funding to the VEBA trusts totaled
      $27,300,000, $8,300,000 and $28,700,000 in 1995, 1994 and 1993,
      respectively. An additional contribution of $34,600,000 was made in
      January 1996. The expected weighted average long-term rate of return on
      plan assets, which are invested in life insurance policies, equity
      securities and fixed income securities, was 8.9% for 1995 and 7.4% for
      1994.


                                   38
<PAGE>

              MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


           Net postretirement cost for the years ended December 31, includes
      the following components:
<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------

          (Thousands of Dollars)                                       1995        1994       1993
          --------------------------------------------------------  --------    --------    ---------

          <S>                                                       <C>         <C>         <C>     
          Service cost - benefits earned during the period ...      $  5,017    $  7,464    $  7,334
          Interest cost on accumulated benefit obligation ....        18,315      21,139      19,890
          Amortization of transition obligation ..............        13,528      14,207      14,207
          Net amortization and deferral ......................         7,445      (2,607)         --
          Actual (return) loss on plan assets ................       (15,634)        489          --
                                                                    --------    --------    --------
          Total postretirement cost ..........................        28,671      40,692      41,431
          Regulatory adjustment ..............................         7,515       5,303     (25,190)
                                                                    --------    --------    --------

          Net postretirement cost ............................      $ 36,186    $ 45,995    $ 16,241
                                                                    ========    ========    ========

</TABLE>
-------------------------------------------------------------------------------

           The following table sets forth a reconciliation of the funded
      status of the plans and the amounts recorded as accrued postretirement
      cost in the Consolidated Statement of Financial Position:
<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------

       (Thousands of Dollars)                                             1995        1994
       -----------------------------------------------------------     ----------  ----------

       <S>                                                             <C>          <C>
       Measurement Date ..........................................     October 31   October 31

       Accumulated postretirement benefit obligation:
         Retirees ................................................     $154,967     $152,748
         Fully eligible active participants ......................       27,516       30,207
         Participants with less than 30 years of service .........       63,084       68,874
                                                                       --------     --------
                                                                        245,567      251,829
       Plan assets at measurement date ...........................       74,052       28,211
                                                                       --------     --------
       Accumulated postretirement benefit obligation in excess
         of plan assets ..........................................      171,515      223,618
       Less:
         Unrecognized transition obligation ......................      227,510      255,726
         Unrecognized net gain ...................................      (74,752)     (63,922)
         Contributions and adjustments made after measurement date        6,096        8,307
                                                                       --------     --------

       Accrued postretirement liability recognized in the
         Consolidated Statement of Financial Position ............     $ 12,661     $ 23,507
                                                                       ========     ========

</TABLE>
-------------------------------------------------------------------------------

                                   39
<PAGE>

              MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     The rate at which health care costs are assumed to increase is the most
significant factor in establishing MichCon's postretirement benefit
obligation. MichCon used a rate of 12% for 1996 and a rate that gradually
declines each year until it stabilizes at five percent in 2003. A one
percentage point increase in the assumed rate would increase the accumulated
postretirement benefit obligation at December 31, 1995 by 12% and increase the
sum of the service cost and interest cost by 17% for the year then ended. The
discount rate used in determining the accumulated postretirement benefit
obligation was 7.5% and 8.0% for 1995 and 1994, respectively.


10.   FINANCIAL INSTRUMENTS

      MichCon has estimated the fair value of its financial instruments using
available market information and appropriate valuation methodologies.
Considerable judgment is required in developing the estimates of fair value
presented herein and therefore, the values are not necessarily indicative of
the amounts that MichCon could realize in a current market exchange. The
carrying amounts of certain financial instruments such as notes payable and
customer deposits are assumed to approximate the fair value due to the
short-term nature of these items.

      The carrying amount and the estimated fair value of other financial
instruments consist of the following:
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------
(Thousands of Dollars)                                    1995                    1994
----------------------------------------------    ----------------------  ----------------------
                                                  Carrying    Estimated   Carrying    Estimated
                                                   Amount     Fair Value   Amount     Fair Value
                                                  ---------   ----------  --------    ----------
<S>                                               <C>         <C>         <C>         <C>
Assets:
   Notes receivable and advances .............    $  1,436    $  1,436    $  1,436    $  1,436

Liabilities and Shareholders' Equity:
   Long-term debt, excluding capital
      lease obligations ......................     501,396     543,642     431,870     412,532
   Redeemable cumulative preferred securities,
      including current portion ..............       2,618       2,684       5,618       5,658

Off-Balance Sheet Unrealized Gains:
   Interest rate swap ........................                   1,778                     693

</TABLE>
-------------------------------------------------------------------------------

The estimated fair values are determined based on the following:

      Notes receivable and advances - interest rates available to MichCon for
      investments with similar maturities and credit quality assumptions.

      Long-term debt - interest rates available to MichCon for issuance of
      debt with similar terms and remaining maturities.


                                40
<PAGE>

              MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


      Redeemable cumulative preferred stock - quoted market price.

      Interest rate swap - the estimated amount that MichCon would receive or
      pay to terminate the swap agreements, taking into account current
      interest rates and the creditworthiness of the swap counterparties.

      Guaranty - management is unable to practicably estimate the fair value
      of the Harbortown guaranty (Note 6a) due to the nature of the related
      party transaction.

      The fair value estimates presented herein are based on information
available to management as of December 31, 1995 and 1994. Management is not
aware of any subsequent factors that would significantly affect the estimated
fair value amounts.


11.   RELATED PARTY TRANSACTIONS

      MichCon enters into transactions with affiliated companies to sell and
purchase natural gas and to purchase computer operations services. Under a
service agreement with its parent company, MichCon receives various tax,
financial and legal services. The following is a summary of transactions with
the affiliated companies:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------

       (Thousands of Dollars)                       1995       1994       1993
       ----------------------------------------    -------    -------    -------

<S>                                                <C>        <C>        <C>    
       Gas, storage and transportation sales ..    $ 7,200    $ 4,300    $14,200
       Gas purchases ..........................         --         --     12,900
       Purchase of computer operations services     15,300     15,700     15,300
       Corporate Expenses .....................     15,561     14,098     11,757

</TABLE>
-------------------------------------------------------------------------------

                                     41

<PAGE>

              MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


12.   SUMMARY OF INCOME TAXES

      Effective January 1993, MichCon adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which supersedes
Statement of Financial Accounting Standards No. 96. No cumulative adjustment
was necessary for the adoption of this standard because its provisions are not
materially different than those applied under the previous standard which
MichCon adopted in 1987.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------

     (Thousands of Dollars)                                  1995           1994          1993
     -------------------------------------------------     --------      ---------      --------

     <S>                                                   <C>           <C>           <C>  
     Effective Federal Income Tax Rate ................        36.4%         33.3%         33.9%
                                                           ========      ========      ========

     Income taxes consist of:
        Current provision .............................    $ 22,873      $ 55,560      $ 10,075
        Deferred provision ............................      19,988       (23,864)       22,757
        Investment tax credits ........................      (1,857)       (1,857)       (1,893)
                                                           --------      --------      --------
     Total income taxes ...............................    $ 41,004      $ 29,839      $ 30,939
                                                           ========      ========      ========

     Reconciliation between statutory and actual
       income taxes:
     Statutory federal income taxes at a rate of 35% ..    $ 39,454      $ 31,397       $32,660

     Adjustments to federal tax expense:
        Excess of book over tax depreciation allowed ..       7,365         6,119         4,302
        Adjustments to federal income taxes provided in
          prior periods ...............................      (1,343)       (3,888)       (1,187)
        Amortization of investment tax credit .........      (1,857)       (1,857)       (1,893)
        Other - net ...................................      (2,615)       (1,932)       (2,943)
                                                           --------      --------      --------
     Total income taxes ...............................    $ 41,004      $ 29,839      $ 30,939
                                                           ========      ========      ========

</TABLE>
-------------------------------------------------------------------------------

                                   42
<PAGE>

              MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)


     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. The tax effect of
temporary differences that gave rise to MichCon's deferred tax assets and
liabilities consisted of the following:
<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------

       (Thousands of Dollars)                                     1995        1994
       -------------------------------------------------        --------    --------
<S>                                                             <C>         <C>
       Deferred tax assets:
          Uncollectibles ...................................    $  4,570    $  5,293
          Vacation accrual .................................       3,150       3,101
          Other ............................................       2,003       9,879
                                                                --------    --------
       Total deferred tax assets ...........................       9,723      18,273
                                                                --------    --------

       Deferred tax liabilities:
          Depreciation and other property related basis
             differences, net ..............................      54,340      49,559
          Property taxes ...................................      13,333      12,183
          Other ............................................      11,575       7,567
                                                                --------    --------
       Total deferred tax liabilities ......................      79,248      69,309
                                                                --------    --------
       Net deferred tax liability ..........................      69,525      51,036
       Less:  Net deferred tax (asset) liability-current ...       8,379      (1,360)
                                                                --------    --------
       Net deferred tax liability-noncurrent ...............    $ 61,146    $ 52,396
                                                                ========    ========
</TABLE>
------------------------------------------------------------------------------


      MichCon is part of the consolidated federal income tax return of MCN.
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 MCN.

                                     43

<PAGE>



                         INDEPENDENT AUDITORS' REPORT



         We have audited the accompanying consolidated statements of financial
position of Michigan Consolidated Gas Company and subsidiaries as of December
31, 1995 and 1994, and the related consolidated statements of income, cash
flows and capitalization for each of the three years in the period ended
December 31, 1995. Our audits also included the consolidated financial
statement schedule listed in Item 8. These financial statements and 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 generally accepted
auditing standards. 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, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Michigan Consolidated Gas Company and subsidiaries as of December 31, 1995 and
1994, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. Also, in our opinion, such
consolidated financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information shown therein.




DELOITTE & TOUCHE LLP
Detroit, Michigan

February 8, 1996



                                     44

<PAGE>

              MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
                      SUPPLEMENTARY FINANCIAL INFORMATION


Quarterly Operating Results (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.

<TABLE>
<CAPTION>

                                                         First           Second            Third            Fourth
                                                        Quarter          Quarter          Quarter           Quarter
                                                        -------          -------          -------           -------
(Thousands of Dollars)

<S>                                                    <C>              <C>               <C>               <C>      
1995
Operating revenues ............................        $ 421,812        $ 184,968         $ 107,522         $ 366,511
Operating income (loss) .......................        $  95,693        $   3,347         $  (9,096)        $  66,343
Net income (loss) .............................        $  55,610        $  (3,448)        $ (13,328)        $  32,889
Net income (loss) applicable to common stock ..        $  55,536        $  (3,502)        $ (13,382)        $  32,836


1994
Operating revenues ............................        $ 534,356        $ 171,857         $ 107,289         $ 298,176
Operating income (loss) .......................        $ 107,753        $   5,594         $ (20,916)        $  33,887
Net income (loss) .............................        $  64,962        $  (1,576)        $ (19,096)        $  15,578
Net income (loss) applicable to common stock ..        $  64,826        $  (1,691)        $ (19,211)        $  15,463

</TABLE>

                                   45
<PAGE>
                                                                   SCHEDULE II
<TABLE>
<CAPTION>
              MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
                 SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
                            (Thousands of Dollars)
Column A                                                 Column B                 Column C            Column D       Column E

                                                                                  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
-----------                                             ---------       ------      ------------     -------------   ------------
<S>                                                      <C>            <C>            <C>            <C>             <C>     
Year Ended December 31, 1995

Reserve deducted from Assets in
  in Consolidated Statement of Financial Position:
    Allowance for doubtful accounts ..............       $ 15,322       $ 15,367       $   --         $ 17,439        $ 13,250
                                                         ========       ========       ========       ========        ========

Reserve included in Current Liabilities - Other
  and in Accrued Environmental
  Costs in Consolidated Statement
  of Financial Position:
    Environmental testing ........................       $  5,540       $   --         $ 32,000       $  2,089        $ 35,451
                                                         ========       ========       ========       ========        ========

Reserves included in Deferred Credits and
  Other Liabilities - Other
  in Consolidated Statement of Financial Position:
      Injuries and damages .......................       $  8,402       $  1,026       $    686       $  2,101        $  8,013
                                                         ========       ========       ========       ========        ========

Year Ended December 31, 1994

Reserve deducted from Assets in
  in Consolidated Statement of Financial Position:
    Allowance for doubtful accounts ..............       $ 18,776       $ 19,938       $   --         $ 23,392        $ 15,322
                                                         ========       ========       ========       ========        ========

Reserve included in Current Liabilities - O
  Other in Consolidated Statement of
  Financial Position:
    Environmental testing ........................       $  6,179       $   --         $   --         $    639        $  5,540
                                                         ========       ========       ========       ========        ========

Reserves included in Deferred Credits and
  Other Liabilities - Other
  in Consolidated Statement of Financial Position:
      Injuries and damages .......................       $  9,090       $  1,656       $    387       $  2,731        $  8,402
                                                         ========       ========       ========       ========        ========

Year Ended December 31, 1993

Reserve deducted from Assets in
  in Consolidated Statement of Financial Position:
    Allowance for doubtful accounts ..............       $ 24,554       $ 20,865       $   --         $ 26,643        $ 18,776
                                                         ========       ========       ========       ========        ========

Reserve included in Current Liabilities -
  Other in Consolidated Statement of
  Financial Position:
    Environmental testing (1) ....................       $  1,677       $   --         $   --         $ (4,502)       $  6,179
                                                         ========       ========       ========       ========        ========

Reserves included in Deferred Credits and
  Other Liabilities - Other
  in Consolidated Statement of Financial Position:
      Injuries and damages .......................       $ 10,105       $  1,895       $    372       $  3,282        $  9,090
      Environmental testing (1) ..................          6,575           --             --            6,575            --
                                                         --------       -------       ---------       -------         --------
                                                         $ 16,680       $  1,895       $    372       $  9,857        $  9,090
                                                         ========       ========       ========       ========        ========
<FN>
Note(1): Reference is made to Note 6b to the Consolidated Financial
         Statements, page 32. During the year ended December 31, 1993,
         $6,575,000 was transferred from Deferred Credits and Other
         Liabilities -- Other to Current Liabilities -- Other.
</TABLE>
                                46<PAGE>

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

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

ITEM 11.  EXECUTIVE COMPENSATION

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

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

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

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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


                                     47
<PAGE>
                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 10-K

(A)  LIST OF DOCUMENTS FILED AS PART OF THE REPORT:

      1. For a list of financial statements included herein, see the section
entitled "Financial Statements and Supplementary Data", page 23 in Part II,
Item 8 of this Report.

      2. For a list of the financial statement schedule included herein, see
the section entitled "Financial Statements and Supplementary Data", page 23 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
--------           ------------

3-1   Restated Articles of Incorporation of MichCon (Exhibit 3-1 to March 31,
      1993 Form 10-Q).

3-2   By-Laws of MichCon (Exhibit 3-2 to March 31, 1993 Form 10-Q).

                     MORTGAGE AND SUPPLEMENTAL INDENTURES

4-1   MichCon's Indenture of Mortgage and Deed of Trust dated March 1, 1944
      (Exhibit 7-D to Registration Statement No. 2-5252); Supplemental
      Indenture dated March 1, 1944 (Exhibit 7-E to Registration Statement No.
      2-5252); Second Supplemental Indenture dated March 1, 1947 (Exhibit 7-C
      to Registration Statement No. 2-7434); Third Supplemental Indenture
      dated March 1, 1948 (Exhibit 7-D to Registration Statement No. 2-7434);
      Fourth Supplemental Indenture dated November 1, 1950 (Exhibit 7-G to
      Registration Statement No. 2-8641); Fifth Supplemental Indenture August
      1, 1951 (Exhibit 7-G to Registration Statement No. 2-9089); Sixth
      Supplemental Indenture dated January 15, 1954 (Exhibit 4-H to
      Registration Statement No. 2-10282); Seventh Supplemental Indenture
      dated November 15, 1955 (Exhibit 4-9**); Eighth Supplemental Indenture
      dated December 2, 1955 (Exhibit 4-10**); Ninth Supplemental Indenture
      dated December 5, 1956 Exhibit 4-1 to 1984 Form 10-K); Tenth
      Supplemental Indenture dated June 15, 1957 (Exhibit 4-12**); Eleventh
      Supplemental Indenture dated May 15, 1961 (Exhibit 4-13**); Twelfth
      Supplemental Indenture dated January 15, 1962 (Exhibit 4-14**);
      Thirteenth Supplemental Indenture dated March 15, 1963 (Exhibit 4-15**);
      Fourteenth Supplemental Indenture dated May 15, 1964 (Exhibit 4-16**);
      Fifteenth Supplemental Indenture dated May 15, 1966 (Exhibit 4-17**);
      Sixteenth Supplemental Indenture dated May 15, 1967 (Exhibit 4-18**);
      Seventeenth Supplemental Indenture dated September 1, 1968 (Exhibit
      4-19**); Eighteenth Supplemental Indenture dated November 15, 1968
      (Exhibit 4-20**); Nineteenth Supplemental Indenture dated June 1, 1970
      (Exhibit 4-21**); Twentieth Supplemental Indenture dated July 1, 1972
      (Exhibit 4-21 to Registration Statement No. 2-81665); Twenty-first
      Supplemental Indenture dated July 1, 1973 (Exhibit 4-1 to 1984 Form
      10-K); Twenty-second Supplemental Indenture dated July


                                      48
<PAGE>

      15, 1974 (Exhibit 4-1 to 1984 Form 10-K); Twenty-third 
      Supplemental Indenture dated April 15, 1975 (Exhibit 4-1 
      to 1984 Form 10-K); Twenty-fourth Supplemental Indenture 
      dated September 15, 1976 (Exhibit 4-1 to 1984 Form 10-K); 
      Twenty-fifth Supplemental Indenture dated November 15, 1977 (Exhibit
      20-10**); Twenty-sixth Supplemental Indenture dated November 15, 1981
      (Exhibit 4-27 to Registration Statement No. 2-74580); Twenty-seventh
      Supplemental Indenture dated February 15, 1983 (Exhibit 29 to Form 8-A
      dated February 10, 1983); Twenty-eighth Supplemental Indenture dated
      February 1, 1987 (Exhibit 4-1 to 1986 Form 10-K); Twenty-ninth
      Supplemental Indenture dated July 15, 1989 (Exhibit 4-1 to Form 8-K
      dated July 27, 1989); Thirtieth Supplemental Indenture dated as of
      September 1, 1991 (Exhibit 4-1 to Form 8-K dated September 27, 1991);
      and Thirty-first Supplemental Indenture (Exhibit 4-1 to Form 8-K dated
      February 28, 1992); Thirty-second Supplemental Indenture (Exhibit 4-1 to
      1992 Form 10-K); Thirty-third Supplemental Indenture (Exhibit 4-2 to
      Registration Statement No. 33-59093).

10-1  MCN Stock Option Plan Post-Effective Amendment No. 1 (MCN Registration
      Statement No. 33-21930-99).

10-2  Executive Deferred Compensation Plan (Exhibit 10-4 to MCN's 1989 Form
      10-K).

10-3  MCN Corporation Stock Incentive Plan (Exhibit 10-5 to MCN's 1989 Form
      10-K).

10-4  Form of Employment Agreement (Exhibit 10-1 to MCN's March 31, 1990 Form
      10-Q).

10-5  MCN Corporation Annual Management Performance Plan (Exhibit 10-6 to 
      MCN's 1992 Form 10-K).

10-6  MCN Mandatory Deferred Compensation Plan (Exhibit l0-8 to MCN's 1994 
      Form 10-K).

12-1  Computation of Ratio of Earnings to Fixed Charges.*

23-1  Independent Auditors' Consent - Deloitte & Touche LLP.*

24-1  Powers of Attorney.*

27-1  Financial Data Schedule.*

99-1  MichCon Investment and Stock Ownership Plan, as amended (Exhibit 28-1 to
      1989 Form 10-K).

99-2  MichCon Savings and Stock Ownership Plan, as amended (Exhibit 28-2 to
      1989 Form 10-K).

(B)  REPORTS ON FORM 8-K:

   None.
----------
*  Indicates document filed herewith.

** Exhibit number reference to MichCon's 1980 Annual Report on Form 10-K.

References are to MichCon (File No. 1-7310) for MichCon documents incorporated
by reference. References are to MCN (File No. 1-10070) for MCN documents
incorporated by reference.


                                     49
<PAGE>
                                  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)

                                    By:      /s/ David R. Nowakowski
                                             ----------------------------
                                                David R. Nowakowski
                                               Controller, Treasurer and
                                               Chief Accounting Officer

      Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
registrant and in the capacities and on the dated indicated.
<TABLE>
<CAPTION>

                                                            Title                                      Date
                                                            -----                                      ----
<S>                                                  <C>                                         <C> 

                *                                    
------------------------------------                 Director and Chairman                       March 1, 1996
    Alfred R. Glancy III

                *                    
------------------------------------                 Director, President and Chief               March 1, 1996
       Stephen E. Ewing                              Executive Officer

 /s/ David R. Nowakowski                             
------------------------------------                 Controller, Treasurer and Chief             March 1, 1996
   David R. Nowakowski                               Accounting Officer

              *                                       
-----------------------------------                  Director, Vice President                    March 1, 1996
     Howard L. Dow III                               Marketing and Regulatory Affairs
                                                     and Chief Financial Officer

                *                                    
------------------------------------                 Director, Senior Vice President             March 1, 1996
        Carl J. Croskey                              Gas Operations

                *                                    
------------------------------------                 Director                                    March 1, 1996
   William K. McCrackin

                *                                    
------------------------------------                 Director                                    March 1, 1996
       Daniel L. Schiffer

                *                                    
------------------------------------                 Director, Senior Vice President             March 1, 1996
       John E. vonRosen                              Corporate Resources

*By: /s/ David R. Nowakowski
     -----------------------
      David R. Nowakowski
      Attorney-in-Fact
</TABLE>

                                 50