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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

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

For the fiscal year ended December 31, 2002

Commission file number 1-7310

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

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

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

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

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

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

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

None

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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.                
Yes X      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 registrants 10,300,000 outstanding shares of common stock, par
value $1 per share, are indirectly owned by DTE Energy Company.

DOCUMENTS INCORPORATED BY REFERENCE

None



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|                                                  |                                                                                              |  |  |  |  |  |  | 
|------------------------------------------------- | -------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|DEFINITIONS                                      
|FORWARD-LOOKING STATEMENTS                       
|PART I                                           
|                                                  | Items 1 & 2. Business & Properties                                                          
|                                                  | Item 3. Legal Proceedings                                                                   
|                                                  | Item 4. Submission of Matters to a Vote of Security Holders                                 
|PART II                                          
|                                                  | Item 5. Market for Registrants Common Equity and Related Stockholder Matters               
|                                                  | Item 6. Selected Financial Data                                                             
|                                                  | Item 7. Managements Narrative Analysis of Results of Operations                            
|                                                  | Item 7A. Quantitative and Qualitative Disclosures About Market Risk                         
|                                                  | Item 8. Financial Statements and Supplementary Data                                         
|                                                  | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|PART III                                         
|                                                  | Item 10. Directors and Executive Officers of the Registrant                                 
|                                                  | Item 11. Executive Compensation                                                             
|                                                  | Item 12. Security Ownership of Certain Beneficial Owners and Management                     
|                                                  | Item 13. Certain Relationships and Related Transactions                                     
|PART IV                                          
|                                                  | Item 14. Controls and Procedures                                                            
|                                                  | Item 15. Exhibits, Financial Statement Schedule, and Reports on Form 8-K                    
|SIGNATURES                                       
|CERTIFICATIONS                                   
|Computation of Ratio of Earnings to Fixed Charges
|Consent of Deloitte & Touche LLP                 
|Chief Executive Officer Certification            
|Chief Financial Officer Certification            



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MICHIGAN CONSOLIDATED GAS COMPANY

ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 2002

TABLE OF CONTENTS

|                           |  |                                                                                      |    |      |    | 
|-------------------------- |  | ------------------------------------------------------------------------------------ | -- | ---- | -- | 
|                           |  |                                                                                      |    | PAGE
|                           |  |                                                                                      |    |      |    | 
|DEFINITIONS                |  |                                                                                      | 1  |     
|                           |  |                                                                                      |    |      |    | 
|FORWARD-LOOKING STATEMENTS |  |                                                                                      | 3  |     
|                           |  |                                                                                      |    |      |    | 
|PART I                     |  |                                                                                      |    |      |    | 
|Items 1 & 2.               |  | Business & Properties                                                                |    |      | 4  | 
|Item 3.                    |  | Legal Proceedings                                                                    |    |      | 10 | 
|Item 4.                    |  | Submission of Matters to a Vote of Security Holders                                  |    |      | 11 | 
|                           |  |                                                                                      |    |      |    | 
|PART II                    |  |                                                                                      |    |      |    | 
|Item 5.                    |  | Market for Registrants Common Equity and Related Stockholder
Matters                |    |      | 11 | 
|Item 6.                    |  | Selected Financial Data                                                              |    |      | 11 | 
|Item 7.                    |  | Managements Narrative Analysis of Results of Operations                             |    |      | 12 | 
|Item 7A.                   |  | Quantitative and Qualitative Disclosures About Market Risk                           |    |      | 16 | 
|Item 8.                    |  | Financial Statements and Supplementary Data                                          |    |      | 18 | 
|Item 9.                    |  | Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure |    |      | 44 | 
|                           |  |                                                                                      |    |      |    | 
|PART III                   |  |                                                                                      |    |      |    | 
|Item 10.                   |  | Directors and Executive Officers of the Registrant                                   |    |      | 44 | 
|Item 11.                   |  | Executive Compensation                                                               |    |      | 44 | 
|Item 12.                   |  | Security Ownership of Certain Beneficial Owners and Management                       |    |      | 44 | 
|Item 13.                   |  | Certain Relationships and Related Transactions                                       |    |      | 44 | 
|                           |  |                                                                                      |    |      |    | 
|PART IV                    |  |                                                                                      |    |      |    | 
|Item 14.                   |  | Controls and Procedures                                                              |    |      | 45 | 
|Item 15.                   |  | Exhibits, Financial Statement Schedule, and Reports on Form 8-K                      |    |      | 45 | 
|                           |  |                                                                                      |    |      |    | 
|SIGNATURES                 |  |                                                                                      | 48 |     
|                           |  |                                                                                      |    |      |    | 
|CERTIFICATIONS             |  |                                                                                      | 49 |     





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DEFINITIONS

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

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|                      |  |                                                                                            
|--------------------- |  | -------------------------------------------------------------------------------------------
|MPSC                  |  | Michigan Public Service Commission.                                                        
|                      |  |                                                                                            
|Normal Weather        |  | The average daily temperature within MichCons
service area during a recent 30-year period.
|                      |  |                                                                                            
|SFAS                  |  | Statement of Financial Accounting Standards.                                               
|                      |  |                                                                                            
|Spot Market           |  | The buying and selling of natural gas on a
short-term basis, typically month-to-month.     
|                      |  |                                                                                            
|Units of Measurement: |  |                                                                                            
|                      |  |                                                                                            
|Bcf                   |  | Billion cubic feet of gas.                                                                 
|                      |  |                                                                                            
|Mcf                   |  | Thousand cubic feet of gas.                                                                
|                      |  |                                                                                            
|MMcf                  |  | Million cubic feet of gas.                                                                 
|                      |  |                                                                                            
|/d                    |  | Added to various units of measure to denote units
per day.                                 

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FORWARD-LOOKING STATEMENTS

Certain information presented herein includes forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve certain risks and uncertainties that may
cause actual future results to differ materially from those contemplated,
projected, estimated or budgeted in such forward-looking statements. There are
many factors that may impact forward-looking statements including, but not
limited to, the following:



| |  | the effects of weather and other natural phenomena on operations and sales to customers;                                               
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------
| |  | economic climate and growth in the geographic areas where we do business;                                                              
| |  | environmental issues, including changes in the climate, and regulations;                                                               
| |  | implementation of gas Customer Choice programs;                                                                                        
| |  | implementation of gas utility restructuring in Michigan;                                                                               
| |  | employee relations;                                                                                                                    
| |  | access to capital markets and capital market conditions and other financing efforts which can be affected by credit agency
ratings;    
| |  | the timing and extent of changes in interest rates;                                                                                    
| |  | the level of borrowings;                                                                                                               
| |  | changes in the cost of natural gas;                                                                                                    
| |  | effects of competition;                                                                                                                
| |  | impact of FERC and MPSC proceedings and regulations;                                                                                   
| |  | changes in federal or state tax laws and their interpretations, including the code, regulations, rulings, court proceedings
and audits;
| |  | ability to recover costs through rate increases;                                                                                       
| |  | property insurance;                                                                                                                    
| |  | the cost of protecting assets against or damage due to terrorism; and                                                                  
| |  | changes in accounting standards and financial reporting regulations.                                                                   

New factors emerge from time to time. We cannot predict what factors may arise
or how such factors may cause our results to differ materially from those
contained in any forward-looking statement. Any forward-looking statement
speaks only as of the date on which such statements are made. We undertake no
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which such statement is made or to reflect the
occurrence of unanticipated events.

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PART I







Item 1 & 2. Business & Properties

DESCRIPTION

Michigan Consolidated Gas Company (MichCon or the Company) is a Michigan
corporation organized in 1898. MichCon is an indirect, wholly-owned subsidiary
of Enterprises, an exempt holding company under the Public Utility Holding
Company Act of 1935, successor to MCN Energy. MichCon is a natural gas utility
subject to regulation by the MPSC. MichCon is engaged in the purchase,
storage, transmission and distribution of natural gas in the state of Michigan.
MichCon also has subsidiaries involved in the gathering and transmission of
natural gas in northern Michigan. MichCon operates one of the largest natural
gas distribution and transmission systems in the United States and the largest
in Michigan.

MichCon serves approximately 1.2 million residential, commercial and industrial
customers located throughout Michigan. MichCon had approximately $2.4 billion
in assets at December 31, 2002 and revenues of approximately $1.3 billion in
2002.

On May 31, 2001, DTE Energy completed the acquisition of MCN Energy. At that
time, MCN Energy merged with Enterprises, with Enterprises being the surviving
corporation. See Note 3 for a further discussion of the MCN Energy merger.

References in this report to we, us, and our are to MichCon.

A discussion of the services we provide, and the amount and percentage of
revenue contributed from such services follows:

|                            |  |      |           |      |  |      |       |   |  |   |           |  |  |  |       |   |  |   |           |  |  |  |       |  
|--------------------------- |  | ---- | --------- | ---- |  | ---- | ----- | - |  | - | --------- |  |  |  | ----- | - |  | - | --------- |  |  |  | ----- | -
|                           
|Revenue by Service          |  |      |           |      |  |      |       |   |  |   |           |  |  |  |       |   |  |   |           |  |  |  |       |  
|(in Thousands)              |  | 2002 |           | 2001 |  | 2000
|                            |  |      |           |      |  |     
|Gas Sales                   |  | $    | 1,077,705 |      |  |      | 82.1  | % |  | $ | 1,005,989 |  |  |  | 82.6  | % |  | $ | 909,270   |  |  |  | 79.5  | %
|End User Transportation     |  |      | 122,272   |      |  |      | 9.3   |   |  |   | 101,788   |  |  |  | 8.4   |   |  |   | 117,116   |  |  |  | 10.2  |  
|Intermediate Transportation |  |      | 48,522    |      |  |      | 3.7   |   |  |   | 45,659    |  |  |  | 3.7   |   |  |   | 52,577    |  |  |  | 4.6   |  
|Other                       |  |      | 63,972    |      |  |      | 4.9   |   |  |   | 64,176    |  |  |  | 5.3   |   |  |   | 65,379    |  |  |  | 5.7   |  
|                            |  |      |           |      |  |      |       |   |  |   |           |  |  |  |       |   |  |   |           |  |  |  |       |  
|                            |  | $    | 1,312,471 |      |  |      | 100.0 | % |  | $ | 1,217,612 |  |  |  | 100.0 | % |  | $ | 1,144,342 |  |  |  | 100.0 | %
|                            |  |      |           |      |  |      |       |   |  |   |           |  |  |  |       |   |  |   |           |  |  |  |       |  
|                           



| |  | Gas SalesIncludes the sale and delivery of natural gas primarily to
residential and small-volume commercial and industrial customers.                                                                                                                                                                                                                                                                                                                                                               
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | End User TransportationA gas delivery service provided primarily to
large-volume commercial and industrial customers. Additionally, the
service is provided to residential customers, and small-volume
commercial and industrial customers who have elected to participate in
our Customer Choice program. End user transportation customers
purchase natural gas directly from producers or brokerage companies
and utilize our pipeline network to transport the gas to their
facilities or homes.

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| |  | Intermediate TransportationA gas delivery service provided to
producers, brokers and other gas companies that own the natural gas,
but are not the ultimate consumers. Intermediate transportation
customers utilize our gathering and high-pressure transmission system
to transport the gas to storage fields, processing plants, pipeline
interconnections or other locations.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | OtherIncludes revenues from providing appliance maintenance, facility
development and other energy-related services.                                                                                                                                                                                                                                                             

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

Our operations are not dependent upon a limited number of customers, and the
loss of any one or a few customers is not reasonably likely to have a material
adverse effect on MichCon.

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

We obtain our natural gas supply from various sources in different geographic
areas (the Gulf Coast, the Mid-Continent, Canada and Michigan) under agreements
that vary in both pricing and terms. Because of our geographic diversity of
supply and our 124 Bcf of storage capacity, we are able to reliably meet our
supply requirements.

We have purchase commitments of approximately 140 billion cubic feet (Bcf), or 89% of our
normal 2003 gas supply requirement. We have entered into fixed-price contracts
for approximately 97 Bcf or 62% of our expected 2003 supply requirements. The
balance of the gas supply requirement is expected to be met by purchasing gas
at market prices. At December 31, 2002, we owned and operated four natural gas
storage fields in Michigan with a working storage capacity of approximately 124
Bcf. These facilities play an important role in providing reliable and
cost-effective service to our customers. Generally, we use our storage
capacity to supplement our supply during the winter months, replacing the gas
in April through October when demand and prices are historically at lower
levels. The use of storage capacity also allows us to lower our peak-day
entitlements, thereby reducing interstate pipeline charges. Our gas
distribution system has a planned maximum daily send-out capacity of 3.0 Bcf,
with approximately 56% of the volume coming from underground storage for 2002.
Gas costs are recovered through the gas cost recovery (GCR) mechanism.

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Following is a listing of our sources of gas supply:

|                                   |                               |  |       |      |  |      |       |      |      |  |       |      | 
|---------------------------------- | ----------------------------- |  | ----- | ---- |  | ---- | ----- | ---- | ---- |  | ----- | ---- | 
|                                  
|                                   |                               |  | 2002  |      |  | 2001 |       |      | 2000 | 
|Gas Supply (Bcf)                   |                               |  |       |      |  |      |       |      |     
|Long Term                          |                               |  |       |      |  |      |       |      |      |  |       |     
|                                   | Citygate suppliers            |  |       | 70.8 |  |      |       | 76.5 |      |  |       | 73.5 | 
|                                   | Interstate pipeline suppliers |  |       | 80.1 |  |      |       | 77.6 |      |  |       | 56.1 | 
|                                   | Canadian pipeline suppliers   |  |       | 28.5 |  |      |       | 28.2 |      |  |       | 28.0 | 
|Spot Market                        |                               |  | 8.5   |      |  |      | 1.7   |      |      |  | 1.2   |     
|Exchange Gas Receipts (Deliveries) |                               |  | 0.8   |      |  |      | (0.6  | )    |      |  | (1.0  | )   
|Gas From (To) Storage              |                               |  | (11.1 | )    |  |      | 19.6  |      |      |  | 24.5  |     
|                                   |                               |  |       |      |  |      |       |      |      |  |       |     
|                                   |                               |  | 177.6 |      |  |      | 203.0 |      |      |  | 182.3 |     
|                                   |                               |  |       |      |  |      |       |      |      |  |       |     
|                                  

We have long-term firm transportation agreements expiring on various dates
through 2011 with ANR Pipeline Company (ANR), Panhandle Eastern Pipeline
Company (Panhandle), Viking Gas Transmission Company (Viking) and Great Lakes
Gas Transmission Limited Partnership (Great Lakes). The ANR capacity delivers
153.5 MMcf/d of supply sourced from the Gulf Coast, 41.5 MMcf/d sourced from
the Midcontinent and 50 MMcf/d from Canada. Viking transports the 50 MMcf/d of
Canadian supply to the ANR system for delivery to us. Panhandle transports 2
MMcf/d of Gulf Coast supply from the ANR system for delivery to us and 40
MMcf/Day from the Mid-Continent production area to our system. Additional
Canadian supplies of 30 MMcf/d are delivered through firm transport agreements
with Great Lakes.

ANR will transport for us up to 245 million cubic feet per day (MMcf/d) of
supply through October 2003. Effective in November 2003, 100 MMcf/Day of this
capacity is due to expire. We intend to replace this capacity through a
competitive bid process among several reliable transport service gas supply
providers.

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

REGULATION

We are subject to the regulatory jurisdiction of the MPSC, which issues orders
pertaining to rates, recovery of certain costs, including the costs of
regulatory assets, conditions of service, accounting and other
operating-related matters. We are subject to the requirements of other
regulatory agencies with respect to safety, the environment and health.

In the late 1990s, the MPSC began an initiative designed to give all of
Michigans natural gas customers added choices and the opportunity to benefit
from lower gas costs resulting from competition. In 1999, the MPSC approved a
comprehensive, experimental three-year gas Customer Choice program that allowed
an increasing number of customers to purchase natural gas from suppliers other
than their local utility. The local utility would continue to transport the
natural gas supply to the customers facilities, thereby retaining distribution
margins. In December 2001, the MPSC issued an order that continues the gas
Customer Choice program on a permanent and expanding basis beginning with the
conclusion of the three-year temporary program on March 31, 2002. Under the
expanded program, which began April 1, 2002, up to approximately 40% of our
customers could elect to purchase gas from suppliers other than MichCon.
Beginning in April 2003, up to approximately 60% of customers could participate
and

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beginning April 2004, all 1.2 million of our gas customers could choose to
participate. We will continue to transport and deliver the gas to the
participating customers premises at prices that generate favorable margins.

Under the December 2001 MPSC order, we returned to a GCR mechanism in January
2002 upon termination of the temporary Gas Sales Program. The GCR permits us to pass the cost of natural gas to our customers.
Under the Gas Sales Program, the MPSC suspended the GCR mechanism and our sales
rates included a gas commodity component that was fixed at $2.95 per thousand
cubic feet (Mcf). Under this program, we incurred commodity price risk
associated with our ability to secure gas supplies at prices less than $2.95
per Mcf. Beginning in January 2002, our gas sales rates include a gas commodity
component designed to recover our actual gas costs.

In November 2002, the MPSC requested Michigan gas and electric utilities to
justify why their retail rates should not be lowered due to potential personal
property tax reductions. We have responded and await further MPSC action.

For additional information regarding our regulatory environment, see Note 5 -
Regulatory Matters.

PROPERTIES

We own distribution, transmission and storage properties and facilities that
are all located in the state of Michigan.

At December 31, 2002, our distribution system included 17,774 miles of
distribution mains, 1,136,863 service lines and 1,241,516 active meters. We own
2,581 miles of transmission lines that deliver natural gas to the distribution
districts and interconnect our storage fields with the sources of supply and
the market areas. We own properties relating to four underground natural gas
storage fields with an aggregate working gas storage capacity of approximately
124 Bcf.

Substantially all of our property is subject to the lien of our Indenture of
Mortgage and Deed of Trust under which our First Mortgage Bonds are issued.
Some properties are being fully utilized, and new properties are being added to
meet the expansion requirements of existing areas. Our capital investments for
2002 totaled $90 million, which compares with $111 million in 2001 and $118
million in 2000.

Our subsidiaries own a 67-mile gathering pipeline that transports natural gas
and natural gas liquids from reserves in east-central Michigan to natural gas
processing plants in northern Michigan and 134 miles of gathering lines and a
2,400 horsepower compressor station located in northern Michigan. Other MichCon
subsidiaries have a 46% interest in a partnership that owns lateral lines
related to the 67-mile gathering pipeline and an 83% interest in an additional
32-miles of gathering pipelines in northern Michigan. We lease a portion of
our pipeline system to the Vector Pipeline Partnership through a capital lease
arrangement (Note 10).

STRATEGY & COMPETITION

We generate approximately 95% of our revenues from providing gas sales, and end
user and intermediate transportation services. We continue to take steps to
become the preferred provider of natural gas and high-value energy services
within Michigan in order to achieve competitive financial results. We expect
modest growth and to control costs in order to provide customers high-quality
service at competitive prices. To accomplish this, we continue to position
ourselves to respond to changes in regulation and

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increased competition by reducing our cost of operations, maintaining a safe
and reliable system for customers, and focusing on meeting the needs of the
marketplace.

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

Other natural gas providers As previously discussed,we are operating under
the gas Customer Choice program that allows our customers to purchase natural
gas from other suppliers. As a result of MichCon returning to a GCR mechanism
in January 2002, we do not profit from selling gas. We continue to transport
and deliver gas to customers who choose to purchase gas from other suppliers
thereby retaining favorable margins.

Alternative fuels Natural gas continues to be the preferred space and
water-heating fuel for Michigan residences and businesses. Developers in our
service territories select natural gas in new construction because of the
convenience, cleanliness and relative price advantage compared to propane, fuel
oil and other alternative fuels.

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

Our extensive transmission pipeline system has enabled us to develop a 500 to
600 Bcf annual market for transportation services for Michigan gas producers,
marketers, distribution companies and other pipeline companies. We operate in a
pivotal geographic location with links to major interstate pipelines that reach
markets elsewhere in the Midwest, the eastern United States and eastern Canada.
Michigan gas production has also increased significantly over the past several
years, resulting in a growing demand by gas producers and brokers for
intermediate transportation services.

ENVIRONMENTAL MATTERS

We are subject to extensive environmental regulation. Additional costs may
result as the effects of various chemicals on the environment are studied and
governmental regulations are developed and implemented. We expect to continue
recovering environmental costs related to utility operations through rates
charged to our customers. Greater details on environmental issues are provided
in the following Notes to the Consolidated Financial Statements:

|     |  |                              
|---- |  | -----------------------------
|Note |  | Title                        
|    
|5    |  | Regulatory Matters           
|12   |  | Commitments and Contingencies

Prior to the construction of major natural gas pipelines, gas for heating and
other uses was manufactured from processes involving coal, coke or oil. We
own, or previously owned, 16 such former manufactured gas plant (MGP) sites.
Investigations have revealed contamination related to the by-products of gas
manufacturing at each site. We are remediating eight of the former MGP sites
and are conducting more

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extensive investigations at three of the sites. We have received Michigan
Department of Environmental Quality (MDEQ) closure of one site and a
determination that we are not a responsible party for two other sites. While
we cannot make any assurances, we believe that a cost deferral and rate
recovery mechanism approved by the MPSC will prevent these costs from having a
material adverse impact on our results of operations.

RISK FACTORS

There are various risks associated with the operations of our business. To
provide a framework to understand our operating environment, we are providing a
brief explanation of the more significant risks associated with our business.
Although we have tried to identify and discuss key risk factors, others could
emerge in the future. Each of the following risks could affect our
performance.

Weather Weather significantly affects our operations. Deviations from normal
cold weather conditions affect our earnings and cash flow. Mild temperatures
can result in decreased utilization of our assets, lowering income and cash
flow.

Regional and national economic conditions Our business follows the economic
cycles of the customers we serve. Should national or regional economic
conditions decline, reduced volumes of gas we supply will result in decreased
earnings and cash flow.

Environmental laws and liability We are subject to numerous environmental
regulations. Compliance with these regulations can significantly increase
capital spending and operating expenses. These laws and regulations require us
to seek a variety of environmental licenses, permits, inspections, and other
regulatory approvals. The regulatory environment is subject to significant
change, and therefore we cannot predict future issues.

Additionally, we may become a responsible party for environmental clean up at
sites identified by a regulatory body. We cannot predict with certainty the
amount and timing of future expenditures related to environmental matters
because of the difficulty of estimating clean up costs. There is also
uncertainty in quantifying liabilities under environmental laws that impose
joint and several liability on all potentially responsible parties.

Rate regulation We operate in a regulated industry. Our rates are set by the MPSC
and cannot be increased without their authorization. We may be impacted by new
regulations or interpretations by the MPSC or other regulatory bodies. New
legislation, regulations or interpretations could change how our business
operates, impact our ability to recover costs through rate increases or may
require us to incur additional expenses.

Competition Deregulation and restructuring in the gas industry, including the
customer choice program, could result in increased competition and unrecovered
costs that could affect the financial condition, results of operations or cash
flows of our regulated business.

Supply and price of raw materials Our access to natural gas supplies is
critical to ensure reliability of service for our regulated gas customers.

Labor relations Unions represent a majority of our employees. A union
choosing to strike as a negotiating tactic could have an impact on our
business.

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Access to capital markets and interest rates Our ability to access capital
markets is important to operate our business. Heightened concerns about the
energy industry, the level of borrowing by other energy companies and the
market as a whole could limit our access to capital markets. Changes in
interest rates could increase our borrowing costs.

Property tax reform We are one of the largest payers of property taxes in the
state of Michigan. Should the legislature change how schools are financed, we
could face increased property taxes on our Michigan facilities.

Credit ratings Increased scrutiny of the energy industry and regulatory
changes could result in credit agencies reexamining our credit rating. A change
in our rating could restrict our ability to access capital markets at
attractive rates and increase our borrowing costs.

Property insurance While we seek to adequately insure our property,
catastrophic damage as a result of acts of God, terrorism, war or a combination
of significant unforeseen items occurring at one time could impact our
operations and economic losses might not be covered in full by insurance.

Terrorism Damage to downstream infrastructure or our own assets by terrorist
groups would impact our operations. We may be required to increase security or
assist other energy companies if terrorists were to strike their energy
facilities.

EMPLOYEES

We had 2,246 employees at December 31, 2002, of which 1,508 were represented by
unions.







Item 3. Legal Proceedings

We are involved in certain legal (including commercial matters), administrative
and environmental proceedings before various courts, arbitration panels and
governmental agencies concerning claims arising in the ordinary course of
business. These proceedings include contract disputes, environmental reviews
and investigations, and pending judicial matters. We cannot predict the final
disposition of such proceedings. We regularly review legal matters and record
provisions for claims that are considered probable of loss. The resolution of
pending proceedings is not expected to have a material effect on our financial
statements in the period they are resolved. For additional discussion on legal
matters, see the following Notes to the Consolidated Financial Statements:

|     |  |                              
|---- |  | -----------------------------
|Note |  | Title                        
|     |  |                              
|5    |  | Regulatory Matters           
|12   |  | Commitments and Contingencies

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

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







PART II







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

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

We did not pay cash dividends in 2002. We paid cash dividends on our common
stock of $75 million in 2001 and $100 million in 2000.







Item 6. Selected Financial Data

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

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

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

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

We had earnings of $20.3 million in 2002, compared to losses of $41.1 million
in 2001. As subsequently discussed, the comparison was impacted by $103.4
million ($67.2 million net of taxes) of merger and restructuring charges
recorded in 2001. Excluding merger and restructuring costs, 2001 earnings were
$26.1 million, a decline of $86.1 million from 2000 results reflecting lower
gross margins and higher operating costs.

|                                                     |  |      |       |      |  |   |        |  
|---------------------------------------------------- |  | ---- | ----- | ---- |  | - | ------ | -
|                                                    
|Increase (Decrease) in Income Compared to Prior Year |  |      |       |     
|                                                     |  | 2002 |       | 2001
|(in Millions)                                        |  |      |       |     
|Operating revenues                                   |  | $    | 94.9  |      |  | $ | 73.3   |  
|Cost of gas                                          |  |      | (91.5 | )    |  |   | (156.2 | )
|                                                     |  |      |       |      |  |   |        |  
|Gross margin                                         |  |      | 3.4   |      |  |   | (82.9  | )
|Operation and maintenance                            |  |      | 20.4  |      |  |   | (44.5  | )
|Depreciation, depletion and amortization             |  |      | 6.0   |      |  |   | (9.1   | )
|Taxes other than income                              |  |      | 4.9   |      |  |   | 5.0    |  
|Merger and restructuring charges                     |  |      | 103.4 |      |  |   | (99.4  | )
|Property write-down and contract loss                |  |      | (47.8 | )    |  |   |       |  
|Other income and deductions                          |  |      | 9.4   |      |  |   | (1.0   | )
|Income tax provision                                 |  |      | (38.2 | )    |  |   | 81.2   |  
|                                                     |  |      |       |      |  |   |        |  
|Net income                                           |  | $    | 61.5  |      |  | $ | (150.7 | )
|                                                     |  |      |       |      |  |   |        |  
|                                                    

Operating revenues increased $94.9 million in 2002 and increased $73.3 million
in 2001. As subsequently discussed, operating revenues reflect the operations
of our Gas Sales Program and the impact of weather, which was warmer than
normal in 2002 and 2001. Our three-year Gas Sales Program is part of its
Regulatory Reform Plan (Note 5) which ended in December 2001.

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|                   |                             |      |         |         |  |      |         |         |  |   |         |       | 
|------------------ | --------------------------- | ---- | ------- | ------- |  | ---- | ------- | ------- |  | - | ------- | ----- | 
|                  
|                   |                             | 2002 |         | 2001    |  | 2000
|(in Millions)      |                             |      |         |         |  |     
|Operating Revenues |                             |      |         |         |  |      |         |         |  |   |         |      
|                   | Gas Sales                   |      | $       | 1,077.7 |  |      | $       | 1,006.0 |  |   | $       | 909.3 | 
|                   | End User Transportation     |      |         | 122.3   |  |      |         | 101.8   |  |   |         | 117.1 | 
|                   |                             |      |         |         |  |      |         |         |  |   |         |      
|                   |                             |      | 1,200.0 |         |  |      | 1,107.8 |         |  |   | 1,026.4 |      
|                   | Intermediate Transportation |      |         | 48.5    |  |      |         | 45.7    |  |   |         | 52.6  | 
|                   | Other                       |      |         | 64.0    |  |      |         | 64.1    |  |   |         | 65.3  | 
|                   |                             |      |         |         |  |      |         |         |  |   |         |      
|                   |                             | $    | 1,312.5 |         |  | $    | 1,217.6 |         |  | $ | 1,144.3 |      
|                   |                             |      |         |         |  |      |         |         |  |   |         |      
|Gas Markets (Bcf)  |                             |      |         |         |  |      |         |         |  |   |         |      
|                   | Gas Sales                   |      |         | 170.2   |  |      |         | 199.8   |  |   |         | 178.9 | 
|                   | End User Transportation     |      |         | 169.5   |  |      |         | 149.2   |  |   |         | 163.5 | 
|                   |                             |      |         |         |  |      |         |         |  |   |         |      
|                   |                             |      | 339.7   |         |  |      | 349.0   |         |  |   | 342.4   |      
|                   | Intermediate Transportation |      |         | 492.1   |  |      |         | 565.1   |  |   |         | 598.9 | 
|                   |                             |      |         |         |  |      |         |         |  |   |         |      
|                   |                             |      | 831.8   |         |  |      | 914.1   |         |  |   | 941.3   |      
|                   |                             |      |         |         |  |      |         |         |  |   |         |      
|                  

|                                              |                          |  |      |       |      |  |       |       |   |  |      |       |  
|--------------------------------------------- | ------------------------ |  | ---- | ----- | ---- |  | ----- | ----- | - |  | ---- | ----- | -
|                                             
|                                              |                          |  | 2002 |       | 2001 |  | 2000 
|Effect of Weather on Gas Markets and Earnings |                          |  |      |       |      | 
|Percentage Warmer Than Normal                 |                          |  | (5.8 | )%    |      |  | (12.1 | )%    |   |  | (5.5 | )%   
|Decrease From Normal in:                      |                          |  |      |       |      |  |       |       |   |  |      |      
|                                              | Gas markets (in Bcf)     |  |      | (12.6 | )    |  |       | (26.4 | ) |  |      | (12.4 | )
|                                              | Net income (in Millions) |  | $    | (11.1 | )    |  | $     | (23.3 | ) |  | $    | (11.7 | )
|                                             

Gas sales and end user transportationrevenues in total increased $92.2 million in 2002 and $81.4 million in 2001. Revenues in 2002 reflect an increase in the gas commodity component of sales rates. During 2001 we operated under the Gas
Sales Program in which the gas commodity component of our sales rates was fixed
at $2.95 per thousand cubic feet (Mcf). In January 2002, the Gas Sales Program
ended and we returned to a gas cost recovery mechanism (GCR) that allows for
the recovery of reasonably and prudently incurred gas costs. Our sales rates
included a gas commodity component of $3.62 per Mcf for January 2002 and $4.38
per Mcf for the remainder of 2002 compared to $2.95 per Mcf in 2001 and 2000.  Revenues in 2002 were adversely affected by a $26.5 million accrual for the possible disallowance of gas cost in the 2002 GCR reconciliation case.
See Note 17. Higher revenues in 2001 reflect more customers choosing to
purchase their gas from us rather than other gas suppliers. There were
approximately 190,000 customers participating in the gas Customer Choice
program in 2002, compared to approximately 30,000 customers in 2001. Higher
gas sales in 2001 were impacted by sales to off system customers allowed under
the Gas Sales Program. Revenues were also impacted by weather that was warmer
than normal.

End user transportation volumes and revenues also reflect deliveries associated
with a varying number of customers participating in the Customer Choice
program. Customers participating in this program purchase gas from other
suppliers, while we continue to deliver the gas to their premises.

Upon returning to the GCR mechanism in January 2002, we have no commodity price
risk associated with our prudently incurred gas costs. Accordingly, no margin
was earned from selling gas in 2002. Margins generated from providing end user
transportation services were not affected by the return to a GCR.

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Intermediate transportationrevenues increased $2.8 million in 2002 and
decreased $6.9 million in 2001, whereas intermediate transportation deliveries
decreased 73.0 Bcf in 2002 and decreased 33.8 Bcf in 2001. A significant
portion of the volume decrease was due to weather, slightly offset by a volume
increase attributable to customers who pay a fixed fee for intermediate
transportation capacity regardless of actual usage. Although volumes associated
with these fixed-fee customers may vary, the related revenues are not affected.

Cost of gasis affected by variations in sales volumes, cost of purchased gas
and related transportation costs, and the effects of any permanent liquidation
of inventory gas. Cost of gas sold increased $91.5 million in 2002 and $156.2
million in 2001 primarily due to prices paid for gas supply and the impact in
2001 of a reduction in inventory gas. The average cost of gas sold increased
$1.05 per Mcf (32%) and increased $0.49 per Mcf (17%) for 2002 and 2001,
respectively. We recorded the benefits of a 19.6 Bcf inventory liquidation in
2001. The inventory liquidation was priced at $0.38 per Mcf compared to an
average gas purchase rate in 2001 of $3.61 per Mcf. The effect of the
inventory liquidation lowered cost of gas for 2001 by $63.2 million.

Operation and maintenanceexpenses decreased $20.4 million in 2002 and
increased $44.5 million in 2001. The 2002 decrease was due
primarily to lower accruals for injuries and damages and
costs allocated from DTE Energy corporate for corporate support services,
partially offset by higher uncollectible accounts expense. The
2001 increase is due to costs allocated from DTE Energy corporate for corporate
support services, higher employee medical costs and accruals for injuries and
damages.

Depreciation, depletion and amortizationdecreased $6.0 million in 2002 and
increased $9.1 million in 2001. The 2001 increase was impacted by an
adjustment of $8 million recorded in settlement in an MPSC proceeding that
required a MichCon subsidiary to record additional depreciation expense.

Taxes other than incomedecreased $4.9 million in 2002 and decreased $5.0
million in 2001. The improvement is attributed to lower Michigan Single
Business Taxes. The comparisons also reflect an adjustment in property tax
expense resulting from a change in method of calculating the taxable value of
personal property subject to taxation by local taxing jurisdictions.

Merger and restructuring chargeswere not incurred in 2002 and increased $99.4
million in 2001. Merger costs associated with the DTE Energy acquisition of
MCN Energy consist primarily of system integration, relocation, legal,
accounting and consulting costs (Notes 3 and 4). Restructuring charges consist
of charges associated with a work force reduction plan.

Property write-down and contract losstotaled $47.8 million in 2002 due to a
$33.2 million loss from the planned sale of our former headquarters and a $14.6
million charge related to the termination of a contract for computer services.

Other income and deductionsdecreased $9.4 million in 2002 and increased $1.0
million in 2001. The variance is primarily due to a $9.3 million loss in 2001
from our 33% to 50% interests in a series of partnerships that own a
residential community on the Detroit riverfront (Harbortown). Partially
offsetting the decrease for the 2002 period were higher interest costs. The
2001 increase in interest income of $6.4 million results from leasing a portion
of our pipeline system to the Vector Pipeline Partnership through a capital
lease arrangement that began in December 2000 (Note 10).

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Income taxesincreased $38.2 million in 2002 and decreased $81.2 million in
2001 (Note 6). Income tax comparisons were affected by variations in pre-tax
earnings and tax adjustments recorded upon filing our tax returns.

CAPITAL RESOURCES AND LIQUIDITY

|                                                     |                      |                        |      |       |      |   |      |        |   |   |     |        |  
|---------------------------------------------------- | -------------------- | ---------------------- | ---- | ----- | ---- | - | ---- | ------ | - | - | --- | ------ | -
|                                                    
|                                                    
|Cash and Cash Equivalents                            |                      |                        |      |       |      |   |      |        |   |   |     |       
|(in Millions)                                        |                      | Year Ended December 31
|                                                     |                      |                       
|                                                     |                      |                        | 2002 |       | 2001 |   | 2000
|                                                     |                      |                        |      |       |      |   |     
|Cash Flow From (Used For)                            |                      |                        |      |       |      |   |      |        |   |   |     |       
|                                                     | Operating activities |                        | $    | 44.6  |      |   | $    | 58.5   |   |   | $   | 227.4  |  
|                                                     | Investing activities |                        |      | (85.1 | )    |   |      | (103.4 | ) |   |     | (122.6 | )
|                                                     | Financing activities |                        |      | 43.6  |      |   |      | 36.2   |   |   |     | (101.8 | )
|                                                     |                      |                        |      |       |      |   |      |        |   |   |     |       
|Net Increase (Decrease) in Cash and Cash Equivalents |                      | $                      | 3.1  |       |      | $ | (8.7 | )      |   | $ | 3.0 |       
|                                                     |                      |                        |      |       |      |   |      |        |   |   |     |       
|                                                    

Operating Activities

Net cash from operating activities decreased $13.9 million in 2002 due to
higher working capital requirements, partially offset by higher net income,
after adjusting for noncash items (depreciation, depletion and amortization,
property write-down and contract losses and deferred taxes). The higher working
capital requirements primarily reflect a significant increase in gas
inventories due to managements decision to utilize storage gas during 2001
that resulted in a gas inventory decrement during the 2001 calendar year. Net
cash from operating activities decreased $168.9 million in 2001 due to lower
net income, after adjusting for noncash items, partially offset by lower
working capital requirements.

Investing Activities

Net cash used for investing activities decreased $18.3 million in 2002 and
$19.2 million in 2001, respectively, reflecting declines in capital
expenditures.

Financing Activities

Net cash related to financing activities increased $7.4 million in 2002 and
increased $138.0 million in 2001. The 2002 increase reflects a $200 million
capital contribution by our parent company which was offset by the repayment of
short-term borrowings. The 2001 increase reflects the issuance of long-term
debt which was offset by a $75 million dividend payment.

In February 2003, MichCon issued $200 million of 5.7% senior notes, due in
2033. The proceeds were used for debt redemption.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Commodity Price Risk

Prior to the reinstatement of the GCR mechanism in January 2002, our primary
market risk arose from fluctuations in natural gas prices. We managed such
natural gas price risk by entering into fixed-price contracts for a large
portion of our expected supply requirements. If we did not enter into these
fixed-price supply contracts, our exposure to such risk would have been
substantially higher. See Note 11  Financial and Other Derivative
Instruments.

Interest Rate Risk

We currently have market risk from fluctuations in interest rates. We manage
interest rate risk through the use of various derivative instruments and limit
the use of such instruments to hedging activities. If we did not use
derivative instruments, our exposure to such risk would be higher. We are
subject to interest rate risk in connection with the issuance of fixed- and
variable-rate debt. In order to manage interest costs, we use interest rate
swap agreements to exchange fixed- and variable-rate interest payment
obligations over the life of the agreements without exchange of the underlying
principal amounts. Our exposure to interest rate risk arises primarily from
changes in U.S. Treasury rates, commercial paper rates and London Inter-Bank
Offered Rates (LIBOR).

At December 31, 2002 and 2001, we had interest rate swap agreements with
notional principal amounts totaling $40 million and $80 million and a weighted
average remaining life of 2.4 and 1.9 years, respectively. The notional
principal amounts are used solely to calculate amounts to be paid or received
under the interest rate swap agreements and approximate the principal amount of
the underlying debt being hedged.

A sensitivity analysis model was used to calculate the fair values of our debt
and interest rate swaps, utilizing applicable forward interest rates in effect
at December 31, 2002. The sensitivity analysis involved increasing and
decreasing the forward rates by a hypothetical 10% and calculating the
resulting change in the fair values or cash flows of the interest rate
sensitive instruments.

The results of the sensitivity model calculations follow:

|                                  |  |              |       |              |  |              |      |              |  |   |       |   |  |   |      | 
|--------------------------------- |  | ------------ | ----- | ------------ |  | ------------ | ---- | ------------ |  | - | ----- | - |  | - | ---- | 
|                                 
|                                  |  | 2002         |       | 2001        
|                                  |  |              |       |             
|                                  |  | Assuming     |       | Assuming     |  | Assuming     |      | Assuming    
|                                  |  | a 10%        |       | a 10%        |  | a 10%        |      | a 10%       
|                                  |  | Increase in  |       | Decrease in  |  | Increase in  |      | Decrease in 
|                                  |  | Prices/Rates |       | Prices/Rates |  | Prices/Rates |      | Prices/Rates
|Market Risk (in Millions)         |  |              |       |              |  |              |      |             
|Interest Rate Sensitive           |  |              |       |              |  |              |      |              |  |   |       |   |  |   |      | 
|Debt: Fixed rate                  |  | $            | (27.7 | )            |  | $            | 30.3 |              |  | $ | (23.6 | ) |  | $ | 26.2 | 
|                                 
|Swaps: Pay variable/receive
fixed |  | $            | (0.2  | )            |  | $            | 0.2  |              |  | $ | (0.5  | ) |  | $ | 0.5  | 
|                                 
|                                 

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Credit Risk

We sell gas to numerous companies operating in the steel, automotive, energy
and retail industries. During 2002 and 2001, a number of customers have filed
for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code,
including certain Enron Corporation affiliates. We regularly review contingent
matters relating to purchase and sale contracts and record provisions for
amounts considered probable of loss. We believe our previously accrued amounts
are adequate for probable losses. The final resolution of these matters is not
expected to have a material effect on our financial statements in the period
they are resolved.

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Item 8. Financial Statements and Supplementary Data

|                                                                               |  |      |    | 
|------------------------------------------------------------------------------ |  | ---- | -- | 
|                                                                               |  | Page
|                                                                               |  |     
|Independent Auditors Report                                                   |  |      | 19 | 
|Consolidated Statement of Operations                                           |  |      | 20 | 
|Consolidated Statement of Financial Position                                   |  |      | 21 | 
|Consolidated Statement of Cash Flows                                           |  |      | 22 | 
|Consolidated Statement of Retained Earnings                                    |  |      | 23 | 
|Notes to Consolidated Financial Statements                                     |  |      | 24 | 
|Financial Statement Schedule 
Schedule II  Valuation and Qualifying Accounts |  |      | 47 | 

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INDEPENDENT AUDITORS REPORT

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

We have audited the consolidated statement of financial position
of Michigan Consolidated Gas Company and subsidiaries (the Company) as of
December 31, 2002 and 2001 and the related consolidated statements of
operations, cash flows, and retained earnings for each of the three years in
the period ended December 31, 2002. Our audits also included the consolidated
financial statement schedule listed in the Index at Item 15. These financial
statements and the financial statement schedule are the responsibility of the
Companys management. Our responsibility is to express an opinion on the
consolidated financial statements and financial statement schedule based on our
audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Michigan Consolidated Gas Company
and subsidiaries at December 31, 2002 and 2001, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2002 in conformity with accounting principles generally accepted
in the United States of America. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.

/s/ DELOITTE & TOUCHE LLP

Detroit, Michigan
February 11, 2003 (March 12, 2003 as to Note 17)

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MICHIGAN CONSOLIDATED GAS COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS

|                                        |                                          |   |                        |         |      |   |           |         |   |   |           |         |  
|--------------------------------------- | ---------------------------------------- | - | ---------------------- | ------- | ---- | - | --------- | ------- | - | - | --------- | ------- | -
|                                       
|                                        |                                          |   | Year Ended December 31
|                                        |                                          |   |                       
|                                        |                                          |   | 2002                   |         | 2001 |   | 2000     
|                                        |                                          |   |                        |         |      |   |          
|(in Thousands)                          |                                          |   |                        |         |      |   |           |         |   |   |           |        
|Operating Revenues                      |                                          | $ | 1,312,471              |         |      | $ | 1,217,612 |         |   | $ | 1,144,342 |        
|                                        |                                          |   |                        |         |      |   |           |         |   |   |           |        
|Operating Expenses                      |                                          |   |                        |         |      |   |           |         |   |   |           |        
|                                        | Cost of gas                              |   |                        | 754,222 |      |   |           | 662,699 |   |   |           | 506,522 |  
|                                        | Operation and maintenance                |   |                        | 277,209 |      |   |           | 297,639 |   |   |           | 253,117 |  
|                                        | Depreciation, depletion and amortization |   |                        | 106,790 |      |   |           | 112,794 |   |   |           | 103,650 |  
|                                        | Taxes other than income                  |   |                        | 51,308  |      |   |           | 56,250  |   |   |           | 61,260  |  
|                                        | Merger and restructuring charges         |   |                        |        |      |   |           | 103,447 |   |   |           | 4,058   |  
|                                        | Property write-down and contract loss    |   |                        | 47,844  |      |   |           |        |   |   |           |        |  
|                                        |                                          |   |                        |         |      |   |           |         |   |   |           |        
|                                        |                                          |   | 1,237,373              |         |      |   | 1,232,829 |         |   |   | 928,607   |        
|                                        |                                          |   |                        |         |      |   |           |         |   |   |           |        
|Operating Income (Loss)                 |                                          |   | 75,098                 |         |      |   | (15,217   | )       |   |   | 215,735   |        
|                                        |                                          |   |                        |         |      |   |           |         |   |   |           |        
|Other Income and Deductions             |                                          |   |                        |         |      |   |           |         |   |   |           |        
|                                        | Interest on long-term debt               |   |                        | 49,647  |      |   |           | 46,293  |   |   |           | 48,320  |  
|                                        | Other interest expense                   |   |                        | 9,325   |      |   |           | 10,600  |   |   |           | 11,501  |  
|                                        | Interest income                          |   |                        | (10,406 | )    |   |           | (9,694  | ) |   |           | (3,247  | )
|                                        | Loss on investment in joint venture      |   |                        |        |      |   |           | 9,342   |   |   |           |        |  
|                                        | Equity in earnings of joint ventures     |   |                        | (2,555  | )    |   |           | (2,593  | ) |   |           | (3,453  | )
|                                        | Other                                    |   |                        | (3,260  | )    |   |           | (1,841  | ) |   |           | (1,873  | )
|                                        |                                          |   |                        |         |      |   |           |         |   |   |           |        
|                                        |                                          |   | 42,751                 |         |      |   | 52,107    |         |   |   | 51,248    |        
|                                        |                                          |   |                        |         |      |   |           |         |   |   |           |        
|Income (Loss) Before Income Taxes       |                                          |   | 32,347                 |         |      |   | (67,324   | )       |   |   | 164,487   |        
|                                        |                                          |   |                        |         |      |   |           |         |   |   |           |         |  
|Income Tax Provision (Benefit) (Note 6) |                                          |   | 12,018                 |         |      |   | (26,200   | )       |   |   | 54,953    |        
|                                        |                                          |   |                        |         |      |   |           |         |   |   |           |        
|Net Income (Loss)                       |                                          | $ | 20,329                 |         |      | $ | (41,124   | )       |   | $ | 109,534   |        
|                                        |                                          |   |                        |         |      |   |           |         |   |   |           |        
|                                       

See Notes to Consolidated Financial Statements.

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MICHIGAN CONSOLIDATED GAS COMPANY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION

|                                     |                                                     |                                                                                                    |                                                                                      |           |             |         |           |           |           |         | 
|------------------------------------ | --------------------------------------------------- | -------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------ | --------- | ----------- | ------- | --------- | --------- | --------- | ------- | 
|                                    
|                                     |                                                     |                                                                                                    |                                                                                      |           | December 31
|                                     |                                                     |                                                                                                    |                                                                                      |           |            
|                                     |                                                     |                                                                                                    |                                                                                      |           | 2002        |         | 2001     
|                                     |                                                     |                                                                                                    |                                                                                      |           |             |         |          
|(in Thousands)                       |                                                     |                                                                                                    |                                                                                      |           |             |         |           |          
|ASSETS                               |                                                     |                                                                                                    |                                                                                      |           |             |         |           |          
|                                     | Current Assets                                      |                                                                                                    |                                                                                      |           |             |         |           |           |          
|                                     |                                                     | Cash and cash equivalents                                                                          |                                                                                      | $         | 7,025       |         |           | $         | 3,929     |        
|                                     |                                                     | Accounts receivable                                                                                |                                                                                      |           |             |         |           |           |           |        
|                                     |                                                     |                                                                                                    | Customer (less allowance for doubtful accounts of $26,894 and $21,428, respectively) |           |             | 156,476 |           |           |           | 143,660 | 
|                                     |                                                     |                                                                                                    | Accrued unbilled revenues                                                            |           |             | 116,061 |           |           |           | 110,300 | 
|                                     |                                                     |                                                                                                    | Other                                                                                |           |             | 73,233  |           |           |           | 99,458  | 
|                                     |                                                     | Accrued gas cost recovery revenue                                                                  |                                                                                      |           | 21,706      |         |           |           | 14,401    |        
|                                     |                                                     | Inventories                                                                                        |                                                                                      |           |             |         |           |           |           |        
|                                     |                                                     |                                                                                                    | Gas                                                                                  |           |             | 54,623  |           |           |           | 6,178   | 
|                                     |                                                     |                                                                                                    | Material and supplies                                                                |           |             | 14,460  |           |           |           | 15,013  | 
|                                     |                                                     | Other                                                                                              |                                                                                      |           | 53,193      |         |           |           | 16,053    |        
|                                     |                                                     |                                                                                                    |                                                                                      |           |             |         |           |          
|                                     |                                                     |                                                                                                    | 496,777                                                                              |           |             |         | 408,992   |          
|                                     |                                                     |                                                                                                    |                                                                                      |           |             |         |           |          
|                                     | Property, Plant and Equipment                       |                                                                                                    |                                                                                      | 3,108,176 |             |         |           | 3,065,415 |          
|                                     |                                                     | Less accumulated depreciation, depletion and amortization                                          |                                                                                      |           | 1,722,746   |         |           |           | 1,626,015 |        
|                                     |                                                     |                                                                                                    |                                                                                      |           |             |         |           |          
|                                     |                                                     |                                                                                                    | 1,385,430                                                                            |           |             |         | 1,439,400 |          
|                                     |                                                     |                                                                                                    |                                                                                      |           |             |         |           |          
|                                     | Other Assets                                        |                                                                                                    |                                                                                      |           |             |         |           |           |          
|                                     |                                                     | Other investments                                                                                  |                                                                                      |           | 79,355      |         |           |           | 76,231    |        
|                                     |                                                     | Notes receivable                                                                                   |                                                                                      |           | 84,220      |         |           |           | 85,176    |        
|                                     |                                                     | Regulatory assets                                                                                  |                                                                                      |           | 42,459      |         |           |           | 43,356    |        
|                                     |                                                     | Prepaid benefit costs and due from affiliate                                                       |                                                                                      |           | 291,834     |         |           |           | 229,530   |        
|                                     |                                                     | Other                                                                                              |                                                                                      |           | 31,194      |         |           |           | 30,108    |        
|                                     |                                                     |                                                                                                    |                                                                                      |           |             |         |           |          
|                                     |                                                     |                                                                                                    | 529,062                                                                              |           |             |         | 464,401   |          
|                                     |                                                     |                                                                                                    |                                                                                      |           |             |         |           |          
|                                     |                                                     | $                                                                                                  | 2,411,269                                                                            |           |             | $       | 2,312,793 |          
|                                     |                                                     |                                                                                                    |                                                                                      |           |             |         |           |          
|LIABILITIES AND SHAREHOLDERS EQUITY |                                                     |                                                                                                    |                                                                                      |           |             |         |           |          
|                                     | Current Liabilities                                 |                                                                                                    |                                                                                      |           |             |         |           |           |          
|                                     |                                                     | Accounts payable                                                                                   |                                                                                      | $         | 104,457     |         |           | $         | 137,181   |        
|                                     |                                                     | Short-term borrowings                                                                              |                                                                                      |           | 122,918     |         |           |           | 256,862   |        
|                                     |                                                     | Current portion of long-term debt, including capital leases                                        |                                                                                      |           | 98,588      |         |           |           | 21,130    |        
|                                     |                                                     | Federal income, property and other taxes payable                                                   |                                                                                      |           | 32,391      |         |           |           | 172       |        
|                                     |                                                     | Regulatory
liabilities                                                                             |                                                                                      |           | 29,696      |         |           |           |          |        
|                                     |                                                     | Other                                                                                              |                                                                                      |           | 83,015      |         |           |           | 74,772    |        
|                                     |                                                     |                                                                                                    |                                                                                      |           |             |         |           |          
|                                     |                                                     |                                                                                                    | 471,065                                                                              |           |             |         | 490,117   |          
|                                     |                                                     |                                                                                                    |                                                                                      |           |             |         |           |          
|                                     | Other Liabilities                                   |                                                                                                    |                                                                                      |           |             |         |           |           |          
|                                     |                                                     | Deferred income taxes                                                                              |                                                                                      |           | 129,912     |         |           |           | 124,828   |        
|                                     |                                                     | Regulatory liabilities                                                                             |                                                                                      |           | 142,198     |         |           |           | 144,172   |        
|                                     |                                                     | Unamortized investment tax credit                                                                  |                                                                                      |           | 22,100      |         |           |           | 24,129    |        
|                                     |                                                     | Accrued postretirement benefit costs                                                               |                                                                                      |           | 76,765      |         |           |           | 69,981    |        
|                                     |                                                     | Accrued environmental costs                                                                        |                                                                                      |           | 17,535      |         |           |           | 20,743    |        
|                                     |                                                     | Other                                                                                              |                                                                                      |           | 34,165      |         |           |           | 40,062    |        
|                                     |                                                     |                                                                                                    |                                                                                      |           |             |         |           |          
|                                     |                                                     |                                                                                                    | 422,675                                                                              |           |             |         | 423,915   |          
|                                     |                                                     |                                                                                                    |                                                                                      |           |             |         |           |          
|                                     | Long-term debt, including capital lease obligations |                                                                                                    |                                                                                      | 678,101   |             |         |           | 778,577   |          
|                                     |                                                     |                                                                                                    |                                                                                      |           |             |         |           |          
|                                     | Commitments
and Contingencies (Notes 5 and 12)      |                                                                                                    |                                                                                      |           |             |         |           |           |          
|                                     |                                                     |                                                                                                    |                                                                                      |           |             |         |           |           |           |         | 
|                                     | Shareholders Equity                                |                                                                                                    |                                                                                      |           |             |         |           |           |          
|                                     |                                                     | Common stock, $1 par value, 15,100,000 shares authorized,
10,300,000 shares issued and outstanding |                                                                                      |           | 10,300      |         |           |           | 10,300    |        
|                                     |                                                     | Additional paid in capital                                                                         |                                                                                      |           | 430,643     |         |           |           | 231,728   |        
|                                     |                                                     | Retained earnings                                                                                  |                                                                                      |           | 398,485     |         |           |           | 378,156   |        
|                                     |                                                     |                                                                                                    |                                                                                      |           |             |         |           |          
|                                     |                                                     |                                                                                                    | 839,428                                                                              |           |             |         | 620,184   |          
|                                     |                                                     |                                                                                                    |                                                                                      |           |             |         |           |          
|                                     |                                                     | $                                                                                                  | 2,411,269                                                                            |           |             | $       | 2,312,793 |          
|                                     |                                                     |                                                                                                    |                                                                                      |           |             |         |           |          
|                                    

See Notes to Consolidated Financial Statements.

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MICHIGAN CONSOLIDATED GAS COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS

|                                                     |                                                                            |                                               |                                                      |                                                  |         |                        |         |          |          |         |         |          |          |         |         |  
|---------------------------------------------------- | -------------------------------------------------------------------------- | --------------------------------------------- | ---------------------------------------------------- | ------------------------------------------------ | ------- | ---------------------- | ------- | -------- | -------- | ------- | ------- | -------- | -------- | ------- | ------- | -
|                                                    
|                                                     |                                                                            |                                               |                                                      |                                                  |         | Year Ended December 31
|                                                     |                                                                            |                                               |                                                      |                                                  |         |                       
|                                                     |                                                                            |                                               |                                                      |                                                  |         | 2002                   |         | 2001     |          | 2000   
|                                                     |                                                                            |                                               |                                                      |                                                  |         |                        |         |          |          |        
|(in Thousands)                                       |                                                                            |                                               |                                                      |                                                  |         |                        |         |          |          |         |         |         
|                                                     |                                                                            |                                               |                                                      |                                                  |         |                        |         |          |          |         |         |          |          |         |         |  
|Operating Activities                                 |                                                                            |                                               |                                                      |                                                  |         |                        |         |          |          |         |         |         
|                                                     | Net income (loss)                                                          |                                               | $                                                    | 20,329                                           |         |                        | $       | (41,124  | )        |         | $       | 109,534  |         
|                                                     | Adjustments to reconcile net income to net cash from
operating activities: |                                               |                                                      |                                                  |         |                        |         |          |          |         |         |          |         
|                                                     |                                                                            |                                               | Depreciation, depletion and amortization             |                                                  |         | 115,691                |         |          |          | 122,641 |         |          |          | 113,429 |        
|                                                     |                                                                            |                                               | Property write-down and contract loss                |                                                  |         | 34,861                 |         |          |          |        |         |          |          |        |        
|                                                     |                                                                            |                                               | Deferred income taxes and investment tax credit, net |                                                  |         | 5,354                  |         |          |          | (25,875 | )       |          |          | 31,378  |        
|                                                     |                                                                            |                                               | Changes in assets and liabilities:                   |                                                  |         |                        |         |          |          |         |         |          |          |         |        
|                                                     |                                                                            |                                               |                                                      | Accounts receivable, net                         |         |                        | 13,409  |          |          |         | (85,672 | )        |          |         | (15,671 | )
|                                                     |                                                                            |                                               |                                                      | Accrued unbilled revenues                        |         |                        | (5,760  | )        |          |         | 25,165  |          |          |         | (36,599 | )
|                                                     |                                                                            |                                               |                                                      | Inventories                                      |         |                        | (47,892 | )        |          |         | 6,568   |          |          |         | 60,564  |  
|                                                     |                                                                            |                                               |                                                      | Prepaid benefit costs and due from affiliate     |         |                        | (62,304 | )        |          |         | (15,463 | )        |          |         | (57,777 | )
|                                                     |                                                                            |                                               |                                                      | Accounts payable                                 |         |                        | (32,724 | )        |          |         | 39,122  |          |          |         | 4,808   |  
|                                                     |                                                                            |                                               |                                                      | Federal income, property and other taxes payable |         |                        | 32,219  |          |          |         | (15,176 | )        |          |         | (3,779  | )
|                                                     |                                                                            |                                               |                                                      | Other                                            |         |                        | (28,596 | )        |          |         | 48,307  |          |          |         | 21,502  |  
|                                                     |                                                                            |                                               |                                                      |                                                  |         |                        |         |          |          |         |         |         
|                                                     | Net cash from operating activities                                         |                                               |                                                      | 44,587                                           |         |                        |         | 58,493   |          |         |         | 227,389  |         
|                                                     |                                                                            |                                               |                                                      |                                                  |         |                        |         |          |          |         |         |         
|Investing Activities                                 |                                                                            |                                               |                                                      |                                                  |         |                        |         |          |          |         |         |         
|                                                     | Capital expenditures                                                       |                                               |                                                      | (90,224                                          | )       |                        |         | (111,219 | )        |         |         | (117,645 | )       
|                                                     | Other                                                                      |                                               |                                                      | 5,163                                            |         |                        |         | 7,806    |          |         |         | (5,013   | )       
|                                                     |                                                                            |                                               |                                                      |                                                  |         |                        |         |          |          |         |         |         
|                                                     |                                                                            | Net cash used for investing activities        |                                                      |                                                  | (85,061 | )                      |         |          | (103,413 | )       |         |          | (122,658 | )      
|                                                     |                                                                            |                                               |                                                      |                                                  |         |                        |         |          |          |         |         |         
|Financing Activities                                 |                                                                            |                                               |                                                      |                                                  |         |                        |         |          |          |         |         |         
|                                                     | Capital contribution by parent company                                     |                                               |                                                      | 200,000                                          |         |                        |         |         |          |         |         |         |         
|                                                     | Issuance of long-term debt                                                 |                                               |                                                      |                                                 |         |                        |         | 198,382  |          |         |         |         |         
|                                                     | Redemption of long-term debt                                               |                                               |                                                      | (22,486                                          | )       |                        |         | (65,385  | )        |         |         | (42,740  | )       
|                                                     | Short-term borrowings, net                                                 |                                               |                                                      | (133,944                                         | )       |                        |         | (21,821  | )        |         |         | 40,977   |         
|                                                     | Dividends paid                                                             |                                               |                                                      |                                                 |         |                        |         | (75,000  | )        |         |         | (100,000 | )       
|                                                     |                                                                            |                                               |                                                      |                                                  |         |                        |         |          |          |         |         |         
|                                                     |                                                                            | Net cash from (used for) financing activities |                                                      |                                                  | 43,570  |                        |         |          | 36,176   |         |         |          | (101,763 | )      
|                                                     |                                                                            |                                               |                                                      |                                                  |         |                        |         |          |          |         |         |         
|Net Increase (Decrease) in Cash and Cash Equivalents |                                                                            |                                               | 3,096                                                |                                                  |         |                        | (8,744  | )        |          |         | 2,968   |         
|Cash and Cash Equivalents at Beginning of Period     |                                                                            |                                               | 3,929                                                |                                                  |         |                        | 12,673  |          |          |         | 9,705   |         
|                                                     |                                                                            |                                               |                                                      |                                                  |         |                        |         |          |          |         |         |         
|Cash and Cash Equivalents at End of Period           |                                                                            | $                                             | 7,025                                                |                                                  |         | $                      | 3,929   |          |          | $       | 12,673  |         
|                                                     |                                                                            |                                               |                                                      |                                                  |         |                        |         |          |          |         |         |         
|Supplementary Cash Flow Information                  |                                                                            |                                               |                                                      |                                                  |         |                        |         |          |          |         |         |         
|                                                     |                                                                            |                                               | Interest paid (excluding interest capitalized)       |                                                  | $       | 58,741                 |         |          | $        | 58,249  |         |          | $        | 59,466  |        
|                                                     |                                                                            |                                               | Income taxes paid                                    |                                                  |         |                       |         |          |          | (3,142  | )       |          |          | 22,959  |        
|                                                    

See Notes to Consolidated Financial Statements.

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MICHIGAN CONSOLIDATED GAS COMPANY
CONSOLIDATED STATEMENT OF RETAINED EARNINGS

|                                |  |                        |         |      |  |      |         |   |  |   |          |  
|------------------------------- |  | ---------------------- | ------- | ---- |  | ---- | ------- | - |  | - | -------- | -
|                               
|                                |  |                        |         |      |  |      |         |   |  |   |          |  
|                                |  | Year Ended December 31
|                                |  |                       
|                                |  | 2002                   |         | 2001 |  | 2000
|                                |  |                        |         |      |  |     
|(in Thousands)                  |  |                        |         |      |  |      |         |   |  |   |          |  
|                                |  |                        |         |      |  |      |         |   |  |   |          |  
|Balance  beginning of period   |  | $                      | 378,156 |      |  | $    | 494,648 |   |  | $ | 494,803  |  
|Net income (loss)               |  |                        | 20,329  |      |  |      | (41,124 | ) |  |   | 109,534  |  
|Common stock dividends declared |  |                        |        |      |  |      | (75,368 | ) |  |   | (109,689 | )
|                                |  |                        |         |      |  |      |         |   |  |   |          |  
|Balance  end of period         |  | $                      | 398,485 |      |  | $    | 378,156 |   |  | $ | 494,648  |  
|                                |  |                        |         |      |  |      |         |   |  |   |          |  

See Notes to Consolidated Financial Statements.

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MICHIGAN CONSOLIDATED GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 SIGNIFICANT ACCOUNTING POLICIES

Corporate Structure

Michigan Consolidated Gas Company (MichCon) is a public utility engaged in the
purchase, storage, transmission and distribution 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 throughout Michigan. MichCons non-regulated
operations are not significant. MichCon is an indirect, wholly owned
subsidiary of DTE Enterprises Inc. (Enterprises), an exempt holding company
under the Public Utility Holding Company Act of 1935.

References in this report to we, us, and our are to MichCon.

Principles of Consolidation

We consolidate all majority owned subsidiaries and investments in entities in
which we have controlling influence. Non-majority owned investments are
accounted for using the equity method when the company is able to influence the
operating policies of the investee. Non-majority owned investments include
investments in limited liability companies, partnerships or joint ventures.
When we do not influence the operating policies of an investee, the cost method
is used.

Basis of Presentation

The accompanying consolidated financial statements are prepared using
accounting principles generally accepted in the United States of America.
These generally accepted accounting principles require us to use estimates and
assumptions that impact reported amounts of assets, liabilities, revenues,
expenses and the disclosure of contingent assets and liabilities. Actual
results may differ from our estimates.

We reclassified some prior year balances to match the 2002 financial statement
presentation.

Revenues and Cost of Gas

Revenues from the transportation and storage of natural gas are recognized as
services are provided. We record revenues for gas services provided but
unbilled at the end of each month. Through December 2001, our rates included a
component for cost of gas sold that was fixed at $2.95 per thousand cubic feet
(Mcf). In 2002, we implemented a gas cost recovery (GCR) mechanism that will
recover the prudent and reasonable cost of gas sold subject to annual
proceedings before the MPSC. See Notes 5 and 17.

Cash Equivalents

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

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Inventories

Materials and supplies are valued at average cost. Gas inventory is determined
using the last-in, first-out (LIFO) method. At December 31, 2002, the
replacement cost of gas remaining in storage exceeded the $54.6 million LIFO
cost by $186.5 million. During 2001, we liquidated 19.6 Bcf of prior years
LIFO layers at an average cost of $0.38 per thousand cubic feet. Our average
purchase rate in 2001 was $3.23 per Mcf higher than the average LIFO
liquidation rate. Applying LIFO cost in valuing the liquidation, as opposed to
using the average gas purchase rate, decreased 2001 cost of gas by $63.2
million and increased earnings by $41.1 million, net of taxes.

Property, Retirement and Maintenance, and Depreciation and Depletion

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

We base depreciation provisions on straight-line and units of production rates
approved by the MPSC. Unit of production depreciation and depletion is used
for certain production and transmission property. Our composite depreciation
rate was 3.6% in 2002, 3.9% in 2001 and 3.6% in 2000.

The average estimated useful life for gas distribution and transmission
property was 26 years and 29 years, respectively, at December 31, 2002.

Allowance for Funds Used during Construction

We capitalize an allowance for both debt and equity funds used during
construction in the cost of major additions to utility plant. The total amount
capitalized was $1,992,000, $1,202,000 and $1,722,000 in 2002, 2001 and 2000,
respectively.

Long-Lived Assets

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

Software Costs

We capitalize the cost of software developed for internal use. These costs are
amortized on a straight-line basis over five years. Amortization begins when
the software project is complete.

Excise and Sales Taxes

We record the billing of excise and sales taxes as receivables with an
offsetting payable to the applicable taxing authority, with no impact on the
statement of operations.

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Deferred Debt Costs

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

See the following notes for other accounting policies impacting our financial
statements:

Note
    
    Title2
    
    New Accounting Pronouncements5
    
    Regulatory Matters6
    
    Income Taxes11
    
    Financial and Other Derivative Instruments13
    
    Retirement Benefits and Trusteed Assets


NOTE 2  NEW ACCOUNTING PRONOUNCEMENTS

Derivatives

Effective January 1, 2001, we adopted SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended. SFAS No. 133 establishes
accounting and reporting standards for derivative instruments and for hedging
activities. SFAS No. 133 requires that companies recognize all derivatives as
either assets or liabilities measured at fair value on the statement of
financial position. SFAS No. 133 provides an exception for certain contracts
that qualify as normal purchases and sales. To qualify for this exception,
certain criteria must be met, including a high probability the contract will
result in physical delivery. See Note 11  Financial and Other Derivative
Instruments for additional information.

Goodwill and Other Intangible Assets

Effective January 1, 2002, we adopted SFAS No. 142, Goodwill and Other
Intangible Assets, which addresses the financial accounting and reporting
standards for the acquisition of intangible assets outside of a business
combination and for goodwill and other intangible assets subsequent to their
acquisition. As of the date of adoption, we had no recorded goodwill.

In connection with the adoption of SFAS No. 142, we also reassessed the useful
lives and the classification of identifiable intangible assets and determined
that they continue to be appropriate. Our intangible assets consist primarily
of software and are subject to amortization. Intangible assets amortization
expense was $10 million in 2002 and $9 million in 2001. There were no material
acquisitions of intangible assets during 2002. The gross carrying amount and
accumulated amortization of intangible assets at December 31, 2002 were $160
million and $45 million, respectively. Amortization expense of intangible
assets is estimated to be $9 million annually for 2003 through 2007.

Asset Retirement Obligations

On January 1, 2003, we adopted SFAS No. 143, Accounting for Asset Retirement
Obligations, which requires the fair value of an asset retirement obligation
be recognized in the period in which it is

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incurred. It will apply to legal obligations associated with the retirement of
long-lived assets resulting from the acquisition, construction, development and
(or) the normal operation of a long-lived asset. When a new liability is
recorded, an entity will capitalize the costs of the liability by increasing
the carrying amount of the related long-lived asset. The liability is accreted
to its present value each period, and the capitalized cost is depreciated over
the useful life of the related asset. Upon settlement of the liability, an
entity settles the obligation for its recorded amount or incurs a gain or loss
upon settlement. The adoption of SFAS No. 143 is expected to have an immaterial
impact on the consolidated financial statements.

SFAS No. 143 also requires the quantification of the estimated cost of removal
obligations, arising from other than legal obligations, which have been accrued
through depreciation charges. At January 1, 2003 we estimate that we had
approximately $400 million of previously accrued asset removal costs related to
our regulated operations, for other than legal obligations, included in
accumulated depreciation

Long-Lived Assets

SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets
supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of. This statement establishes a
single accounting model for long-lived assets to be disposed of by sale,
whether previously held and used, or newly acquired. We adopted this statement
on January 1, 2002, with no impact on the consolidated financial statements.

Reporting Gains and Losses from Extinguishment of Debt and Accounting for
Leases

SFAS No. SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of
FASB Statement No. 13, and Technical Corrections, eliminates SFAS No. 4
Reporting Gains and Losses from Extinguishment of Debt and allows for only
those gains or loses on the extinguishment of debt that meet the criteria of
extraordinary items to be treated as such in the financial statements. SFAS
No. 145 also amends SFAS No. 13 Accounting for Leases to require
sale-leaseback accounting for certain lease transactions. We adopted the
provisions of this statement in 2002 with no impact on the consolidated
financial statements.

Exit and Disposal Activities

SFAS No. 146, Accounting for Costs Associated with Exit or Disposal
Activities, requires that the liability for costs associated with exit or
disposal activities be recognized when incurred, rather than at the date of a
commitment to an exit or disposal plan. Application of SFAS No. 146 is
required prospectively for exit or disposal activities entered into on or after
January 1, 2003.

Guarantors Accounting and Disclosure

FASB Interpretation No. 45 requires a guarantor to recognize, at the inception
of a guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee. It also requires disclosure in interim and annual
financial statements of its obligations under certain guarantees it has issued.
The initial recognition and measurement provisions of Interpretation No. 45 are
to be applied prospectively to guarantees issued or modified after December 31,
2002. The disclosure requirements are effective for financial statements for
periods ending after December 15, 2002. We expect no impact on the
consolidated financial statements upon adoption.

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Consolidation of Variable Interest Entities

FASB Interpretation No. 46 requires variable interest entities, previously
referred to as special-purpose entities or off-balance sheet structures, be
consolidated by a company if that company is subject to a majority of the risk
of loss from the entitys activities or is entitled to receive a majority of
the entitys returns or both. The consolidation provisions of Interpretation
No. 46 apply immediately to variable interest entities created after January
31, 2003 and to existing entities in the first fiscal year or interim period
beginning after June 15, 2003. Certain disclosure provisions apply in financial
statements issued after January 31, 2003. We expect no impact on the
consolidated financial statements upon adoption.

NOTE 3  MCN ENERGY ACQUISITION

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

NOTE 4  MERGER AND RESTRUCTURING CHARGES

On May 31, 2001, DTE completed the acquisition of MCN Energy. We incurred the
following costs:

|                 |  |      |         |      |  |   |       | 
|---------------- |  | ---- | ------- | ---- |  | - | ----- | 
|                
|(in Thousands)   |  |      |         |      |  |   |       | 
|                 |  | 2001 |         | 2000
|                 |  |      |         |     
|Merger related   |  | $    | 22,486  |      |  | $ | 4,058 | 
|Restructuring    |  |      | 80,961  |      |  |   |      | 
|                 |  |      |         |      |  |   |       | 
|Total pre-tax    |  |      | 103,447 |      |  |   | 4,058 | 
|                 |  |      |         |      |  |   |       | 
|Total net of tax |  | $    | 67,240  |      |  | $ | 2,638 | 
|                 |  |      |         |      |  |   |       | 
|                

Merger related charges represent systems integration, relocation, legal,
accounting and consulting costs. Restructuring charges were primarily
associated with a work force reduction plan. The plan included early retirement
incentives and voluntary separation agreements for 273 employees, primarily in
overlapping corporate support areas. Approximately $25 million of the merger
and restructuring charges were paid as of December 31, 2001 and remaining
benefit payments have been or will be paid from retirement plans.

NOTE 5  REGULATORY MATTERS

Regulation

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

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Our operations meet the criteria of SFAS No. 71, Accounting for the Effects of
Certain Types of Regulation. This accounting standard recognizes the
cost-based ratemaking process, which results in differences in the application
of generally accepted accounting principles between regulated and non-regulated
businesses. SFAS No. 71 requires the recording of regulatory assets and
liabilities for certain transactions that would have been treated as revenue
and expense in non-regulated businesses. Continued applicability of SFAS No.
71 requires that rates be designed to recover specific costs of providing
regulated services and be charged to and collected from customers. Management
believes that currently available facts support the continued application of
SFAS No. 71. Future regulatory changes or changes in the competitive
environment could result in the company discontinuing the application of SFAS
No. 71 for some or all of its business and require the write-off of the portion
of any regulatory asset or liability that was no longer probable of recovery
through regulated rates.

Regulatory Assets and Liabilities

The following are the balances of the regulatory assets and liabilities as of
December 31:

|                                |                                                |       |             |             |  |   |         |         | 
|------------------------------- | ---------------------------------------------- | ----- | ----------- | ----------- |  | - | ------- | ------- | 
|                               
|(in Thousands)                  |                                                | 2002  |             | 2001       
|                                |                                                |       |             |            
|Regulatory
        Assets:      |                                                |       |             |             |  |   |         |        
|                                | Deferred
        environmental costs           |       | **$**       | **26,990**  |  |   | $       | 26,920  | 
|                                | Unamortized
        loss on retirement of debt |       | ****        | **15,469**  |  |   |         | 16,436  | 
|                                | Accrued gas cost recovery revenue              |       | ****        | **21,706**  |  |   |         | 14,401  | 
|                                |                                                | ****  |             |             |  |   |         |        
|                                |                                                | **$** | **64,165**  |             |  | $ | 57,757  |        
|                                |                                                | ****  |             |             |  |   |         |        
|Regulatory
        Liabilities: |                                                | ****  | ****        |             |  |   |         |        
|                                | Tax benefits
        amortizable to customers  |       | $           | **142,198** |  |   | $       | 144,172 | 
|                                | Accrued
2002 GCR potential disallowance        |       | ****        | **26,500**  |  |   |         |        | 
|                                | Other                                          |       | ****        | **3,196**   |  |   |         |        | 
|                                |                                                | ****  |             |             |  |   |         |        
|                                |                                                | **$** | **171,894** |             |  | $ | 144,172 |        
|                                |                                                | ****  |             |             |  |   |         |        
|                               

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

As discussed in Note 17, on March 12, 2003, the MPSC ordered MichCon to reduce revenues by $26.5 million for purposes of calculating the
2002 GCR expense in the 2002 GCR reconciliation proceeding.  Although
we have reflected a $26.5 million reduction in revenues for 2002 and a regulatory
liability at December 31, 2002, a final determination of actual 2002
GCR revenue and expenses
including any disallowances or adjustments will be decided in MichCon's 2002 GCR reconciliation case.

Gas Industry Restructuring

Through December 2001, we were operating under an MPSC-approved Regulatory
Reform Plan, which included a comprehensive experimental three-year Customer
Choice program, a Gas Sales Program and an income sharing mechanism. We
returned to a GCR mechanism in January 2002 when the Gas Sales Program expired.
Under the GCR mechanism, the gas commodity component of our gas sales rates is
designed to recover the actual costs of gas purchases. In December 2001, the
MPSC issued an order that permitted us to implement GCR factors up to $3.62 per
Mcf for January 2002 billings and up to $4.38 per Mcf for the remainder of
2002. The order also allowed us to recognize a regulatory asset of
approximately $14 million representing the difference between the $4.38 factor
and the $3.62 factor for

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volumes that were unbilled at December 31, 2001. The regulatory asset will be
subject to the 2002 GCR reconciliation process. As of December 31, 2002, we
have accrued a $21.7 million regulatory asset representing the under-recovery
of actual gas costs incurred. In July 2002, in response to a petition for
rehearing filed by the Michigan Attorney General, the MPSC directed the parties
to address our implementation of the December 2001 order and the impact of that
implementation on rates charged to our customers. Also, in July 2002, an MPSC
Administrative Law Judge (ALJ) issued a Proposal for Decision on our 2002 GCR
plan case. In that decision the ALJ recommended adoption of the MPSC Staffs
proposed $26.5 million reduction in gas cost due to our decision to utilize
storage gas during 2001 that resulted in a gas inventory decrement for the 2001
calendar year. See Note 17 for information concerning a March 2003 MPSC order
in this matter.

In September 2002, we filed for approval of our 2003 GCR Plan with a GCR factor
of $4.14 per Mcf to be effective in monthly bills beginning with the January
2003 billing month. In January 2003, we filed and received a temporary order
(effective for February 2003 through December 2003 billing months) raising the
GCR factor to $4.575 due to the increase in the price of gas.

In December 2001, the MPSC also approved our application for a voluntary,
expanded permanent gas Customer Choice program, which would replace the
experimental program that expired in March 2002. Effective April 2002, up to
40% of our customers could elect to purchase gas from other suppliers.
Effective April 2003, up to 60% of customers would be eligible and by April
2004, all of our 1.2 million customers can participate in the program. The MPSC
also approved the use of deferred accounting for the recovery of implementation
costs of the gas Customer Choice program. As of December 2002, approximately
190,000 customers are participating in the gas Customer Choice program.

As previously mentioned, we were operating under a Regulatory Reform Plan
through December 2001, which included an income sharing mechanism. The income
sharing mechanism allowed customers to share in profits when actual returns on
equity from utility operations exceed predetermined thresholds. Based on the
MPSC approved formula, we believe that no income sharing is required in 2001.
In July 2002, the MPSC ordered a hearing be held to determine the appropriate
treatment of $766,000 of pipeline refunds we received during 2001. We do not
agree with the MPSC Staffs position that this amount should be refunded to
customers.

In November 2002, the MPSC requested Michigan gas and electric utilities to
justify why their retail rates should not be lowered due to potential personal
property tax reductions. We have responded and await further MPSC action.

We are unable to predict the outcome of the regulatory matters discussed
herein. Resolution of these matters is dependent upon future MPSC orders,
which may materially impact our financial position, results of operations and
cash flows.

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NOTE 6  INCOME TAXES

We are part of the consolidated federal income tax return of DTE Energy. Our
federal income tax expense is determined on an individual company basis with no
allocation of tax benefits or expenses from other affiliates of DTE Energy.

Total income tax expense varied from the statutory federal income tax rate for
the following reasons:

|                                                 |  |       |            |       |  |      |         |   |  |   |        |  
|------------------------------------------------ |  | ----- | ---------- | ----- |  | ---- | ------- | - |  | - | ------ | -
|                                                
|(in Thousands, except effective
      tax rate)  |  | 2002  |            | 2001  |  | 2000
|                                                 |  |       |            |       |  |     
|Effective
        federal income tax rate        |  | ****  | **37.2**   | **%** |  |      | 38.9    | % |  |   | 33.2   | %
|                                                 |  | ****  |            | ****  |  |      |         |   |  |   |        |  
|Income
        tax expense at 35% statutory rate |  | **$** | **11,321** | ****  |  | $    | (23,589 | ) |  | $ | 57,570 |  
|Investment
        tax credit                    |  | ****  | **(2,029** | **)** |  |      | (1,738  | ) |  |   | (1,911 | )
|Depreciation                                     |  | ****  | **(1,283** | **)** |  |      | 3,131   |   |  |   | 3,150  |  
|Other-net                                        |  | ****  | **4,009**  | ****  |  |      | (4,004  | ) |  |   | (3,856 | )
|                                                 |  | ****  |            | ****  |  |      |         |   |  |   |        |  
|Total                                            |  | **$** | **12,018** | ****  |  | $    | (26,200 | ) |  | $ | 54,953 |  
|                                                 |  | ****  |            | ****  |  |      |         |   |  |   |        |  
|                                                

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

|                                                                 |  |       |            |      |  |      |         |   |  |   |        | 
|---------------------------------------------------------------- |  | ----- | ---------- | ---- |  | ---- | ------- | - |  | - | ------ | 
|                                                                
|(in Thousands)                                                   |  | 2002  |            | 2001 |  | 2000
|                                                                 |  |       |            |      |  |     
|Current
          federal and other income tax expense (benefit) |  | **$** | **8,637**  |      |  | $    | (6,297  | ) |  | $ | 23,575 | 
|Deferred
          federal income tax expense (benefit)          |  | ****  | **3,381**  |      |  |      | (19,903 | ) |  |   | 31,378 | 
|                                                                 |  | ****  |            |      |  |      |         |   |  |   |        | 
|Total                                                            |  | **$** | **12,018** |      |  | $    | (26,200 | ) |  | $ | 54,953 | 
|                                                                 |  | ****  |            |      |  |      |         |   |  |   |        | 
|                                                                

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

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

|                                          |  |       |              |       |  |   |          |  
|----------------------------------------- |  | ----- | ------------ | ----- |  | - | -------- | -
|                                         
|(in Thousands)                            |  | 2002  |              | 2001 
|                                          |  |       |              |      
|Property                                  |  | **$** | **(54,336**  | **)** |  | $ | (52,324  | )
|Property
          taxes                  |  | ****  | **(7,119**   | **)** |  |   | (7,231   | )
|Pension
          and employee benefits   |  | ****  | **(45,719**  | **)** |  |   | (43,963  | )
|Other                                     |  | ****  | **(23,066**  | **)** |  |   | (19,728  | )
|                                          |  | ****  |              | ****  |  |   |          |  
|                                          |  | **$** | **(130,240** | **)** |  | $ | (123,246 | )
|                                          |  | ****  |              | ****  |  |   |          |  
|Deferred
          income tax liabilities |  | **$** | **(383,183** | **)** |  | $ | (171,145 | )
|Deferred
          income tax assets      |  | ****  | **252,943**  | ****  |  |   | 47,899   |  
|                                          |  | ****  |              | ****  |  |   |          |  
|                                          |  | **$** | **(130,240** | **)** |  | $ | (123,246 | )
|                                          |  | ****  |              | ****  |  |   |          |  
|                                         

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NOTE 7  PREFERRED AND PREFERENCE SECURITIES

At December 31, 2002, MichCon had 7 million shares of preferred stock with a
par value of $1 per share and 4 million shares of preference stock with a par
value of $1 per share authorized, with no shares issued.

NOTE 8  LONG-TERM DEBT

Our long-term debt outstanding and weighted average interest rates of debt
outstanding at December 31 was:

|                                                                    |       |                                |           |             |             |      |       |         |         | 
|------------------------------------------------------------------- | ----- | ------------------------------ | --------- | ----------- | ----------- | ---- | ----- | ------- | ------- | 
|                                                                   
|                                                                    |       |                                |           |            
|(in Thousands)                                                      |       | 2002                           |           | 2001       
|                                                                    |       |                                |           |            
|**First
        Mortgage Bonds, interest payable semi-annually**    |       |                                |           |             |             |      |       |        
|                                                                    |       | 6.72%
        series due 2003  |           | **$**       | ****       | **** |       | $       | 4,150   | 
|                                                                    |       | 6.8% series
        due 2003   |           | ****        | ****       | **** |       |         | 15,850  | 
|                                                                    |       | 7.15%
        series due 2006  |           | ****        | **40,000**  | **** |       |         | 40,000  | 
|                                                                    |       | 7.21%
        series due 2007  |           | ****        | **30,000**  | **** |       |         | 30,000  | 
|                                                                    |       | 7.06%
        series due 2012  |           | ****        | **40,000**  | **** |       |         | 40,000  | 
|                                                                    |       | 8.25%
        series due 2014  |           | ****        | **80,000**  | **** |       |         | 80,000  | 
|                                                                    |       | 7.6% series
        due 2017   |           | ****        | **14,604**  | **** |       |         | 14,645  | 
|                                                                    |       | 7.5% series
        due 2020   |           | ****        | **28,411**  | **** |       |         | 28,513  | 
|                                                                    |       | 6.75%
        series due 2023  |           | ****        | **14,176**  | **** |       |         | 14,802  | 
|                                                                    |       | 7% series
        due 2025     |           | ****        | **40,000**  | **** |       |         | 40,000  | 
|**Remarketable
        securities, interest payable semi-annually** |       | ****                           | ****      | ****        |             |      |       |        
|                                                                    |       | 6.2% series
        due 2038   |           | ****        | ****       | **** |       |         | 75,000  | 
|                                                                    |       | 6.45%
        series due 2038  |           | ****        | **75,000**  | **** |       |         | 75,000  | 
|**Senior
        notes, interest payable semi-annually**            |       | ****                           |           | ****        |             |      |       |        
|                                                                    |       | 6.125%
        series due 2008 |           | ****        | **200,000** | **** |       |         | 200,000 | 
|**Senior
        notes, interest payable quarterly**                |       | ****                           |           | ****        |             |      |       |        
|                                                                    |       | 6.85%
        series due 2038  |           | ****        | **52,354**  | **** |       |         | 52,640  | 
|                                                                    |       | 6.85%
        series due 2039  |           | ****        | **55,000**  | **** |       |         | 55,000  | 
|**Other
        long-term debt**                                    |       | ****                           | **5,155** | ****        |             |      | 8,896 |        
|**Net
        unamortized premium**                                 |       | ****                           | **1,890** | ****        |             |      | 1,998 |        
|**Long-term
        capital lease obligations**                     |       | ****                           | **1,511** | ****        |             |      | 2,083 |        
|                                                                    |       | ****                           |           | ****        |             |      |       |        
|                                                                    | Total |                                | **$**     | **678,101** | ****        |      | $     | 778,577 |        
|                                                                    |       | ****                           |           | ****        |             |      |       |        
|                                                                   

In 2002, we repaid $17.3 million of first mortgage bonds that matured in May
2002.

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

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

In 1998, we issued a total of $150 million of remarketable debt securities with
various interest rates.

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

Our non-utility subsidiaries have amounts outstanding under a nonrecourse
credit agreement. Under the terms of the agreement, certain alternative
variable interest rates are available at the borrowers option during the life
of the agreement. Quarterly principal payments are made, with a final
installment due November 2005. The loan is secured by a pledge of stock of the
borrowers and a security interest in certain of their assets. We may be
required to support the credit agreement through limited capital contributions
to the subsidiaries if certain cash flow and operating targets are not met. At
December 31, 2002 and 2001, $7.4 million and $10.8 million were outstanding at
weighted average interest rates of 2.1% and 2.5%, respectively.

We have a variable interest rate swap agreement with notional principal amounts
aggregating $40 million in connection with its first mortgage bonds. Swap
agreements of $40 million through May 2005 have reduced the average cost of the
related debt from 7.1% to 2.3% for the year ended December 31, 2002.

Substantially all of the net utility property of MichCon is subject to the lien
of a Mortgage and Deed of Trust (Mortgage). Should we fail to timely pay our
indebtedness under the Mortgage, such failure will create cross defaults in
substantially all of our indebtedness.

Maturities and sinking fund requirements during the next five years for
long-term debt outstanding at December 31, 2002 are $98 million in 2003, $3
million in 2004, $2 million in 2005, $40 million in 2006 and $30 million in
2007.

NOTE 9  SHORT-TERM CREDIT ARRANGEMENTS AND BORROWINGS

In October 2002, we entered into a $200 million 364-day revolving facility and
a $100 million three-year revolving facility. These credit facilities can be
used for general corporate purposes, but are primarily intended to provide
liquidity for our commercial paper program. Important aspects of these
agreements require us to maintain a debt to total capitalization ratio of no
more than .65 to 1, and an earnings before interest, taxes, depreciation and
amortization to interest ratio of no less than 2 to 1.

Commercial paper and borrowings outstanding at December 31, 2002 and 2001
totaled $120.1 million and $254.8 million at weighted average interest rates of
1.5% and 2.1%, respectively.

NOTE 10  CAPITAL AND OPERATING LEASES

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

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Operating lease payments for the years ended December 31, 2002, 2001 and 2000
were $2.1 million, $2.3 million and $2.2 million, respectively.

Lessor We lease a portion of our pipeline system to the Vector Pipeline
Partnership through a capital lease contract that expires in 2020, with renewal
options extending for five years. The components of the net investment in the
capital lease at December 31, 2002 were as follows:

|                                         |  |   |          |  
|---------------------------------------- |  | - | -------- | -
|                                        
|(in Thousands)                           |  |   |          |  
|2003                                     |  | $ | 9,000    |  
|2004                                     |  |   | 9,000    |  
|2005                                     |  |   | 9,000    |  
|2006                                     |  |   | 9,000    |  
|2007                                     |  |   | 9,000    |  
|Thereafter                               |  |   | 116,250  |  
|                                         |  |   |          |  
|Total minimum future lease receipts      |  |   | 161,250  |  
|Residual value of leased pipeline        |  |   | 39,742   |  
|Less  unearned income                   |  |   | (117,252 | )
|                                         |  |   |          |  
|Net investment in direct financing lease |  |   | 83,740   |  
|Less   current portion                  |  |   | (956     | )
|                                         |  |   |          |  
|                                         |  | $ | 82,784   |  
|                                         |  |   |          |  

NOTE 11  FINANCIAL AND OTHER DERIVATIVE INSTRUMENTS

In 1998, FASB issued SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities.SFAS No. 133, establishes accounting and reporting
standards for derivative instruments and hedging activities. Listed below are
important SFAS No. 133 requirements:



| |  | All derivative instruments must be recognized as assets or liabilities
and measured at fair value, unless they meet the normal purchases and
sales exemption.                                                                                                                                                                                                                                                                                                                       
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | The accounting for changes in fair value depends upon the purpose of
the derivative instrument and whether it is designated as a hedge and
qualifies for hedge accounting.                                                                                                                                                                                                                                                                                                            
| 
| |  | Special accounting is allowed for a derivative instrument qualifying
as a hedge and designated as a hedge for the variability of cash flow
associated with a forecasted transaction. Gain or loss associated with
the effective portion of the hedge is recorded in other comprehensive
income. The ineffective portion is recorded to earnings. Amounts
reported in other comprehensive income will be reclassified into net
income when the forecasted transaction affects earnings.
| 
| |  | If a cash flow hedge is discontinued because it is unlikely the
forecasted transaction will not occur, net gains or losses are
immediately recorded into earnings.                                                                                                                                                                                                                                                                                                                    
| 
| |  | Special accounting is allowed for a derivative instrument qualifying
as a hedge and designated as a hedge of the changes in fair value of
an existing asset, liability or firm commitment. Gain or loss on the
hedging instrument is recorded into earnings. The gain or loss on the
underlying asset, liability or firm commitment is also recorded into
earnings.                                                                                                                   

SFAS No. 133 requires that as of the date of initial adoption, the difference
between the fair value of derivative instruments and the previous carrying
amount of those derivatives to be reported in net income or other comprehensive
income as the cumulative effect of a change in accounting principle. The
cumulative effect of adopting SFAS No. 133 was not material.

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Our primary market risk exposure is associated with commodity prices and
interest rates. We have risk management policies to monitor and decrease
market risks. We use derivative instruments to manage some of the exposure.

RISK MANAGEMENT ACTIVITIES

Credit Risk

We are exposed to credit risk if customers or counterparties do not comply with
their contractual obligations. We maintain credit policies that significantly
minimize overall credit risk. These policies include an evaluation of
potential customers and counterparties financial condition, credit rating,
collateral requirements or other credit enhancements such as letters of credit
or guarantees. We use standardized agreements that allow the netting of
positive and negative transactions associated with a single counterparty.

Interest Rate Risk

In order to manage interest costs, we have interest rate swap agreements to
exchange fixed- and variable-rate interest payment obligations over the life of
the agreements without the exchange of the underlying principal amounts. While
the swaps are effective in managing our interest costs, they do not qualify for
hedge accounting under SFAS No. 133. Accordingly, the interest rate swaps are
recorded at fair value and shown within Other Deferred Assets or Liabilities
in the consolidated statement of financial position. Unrealized gains or losses
resulting from marking to market these swaps are recognized as an adjustment to
interest expense in the consolidated statement of operations. Furthermore,
SFAS No. 133 required adjusting the carrying value of the related debt that
substantially offsets the transition adjustment from marking to market the
interest rate swaps. The adjustment to debt will be accreted to interest
expense over the life of the related swaps.

At December 31, 2002 and 2001, we had interest rate swap agreements with
notional principal amounts totaling $40 million and $80 million and a weighted
average remaining life of 2.4 and 1.9 years, respectively. The notional
principal amounts are used solely to calculate amounts to be paid or received
under the interest rate swap agreements and approximate the principal amount of
the underlying debt being hedged.

Commodity Price Risk

We have firm-priced contracts for a substantial portion of our expected gas
supply requirements though 2003. These contracts qualify for the normal
purchases exception under SFAS No.133. Accordingly, we do not account for
such contracts as derivatives.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of financial instruments is determined by using various market
data and other valuation techniques. The estimated fair value of total
long-term debt at December 31, 2002 and 2001 was $858.3 million and $799.6
million, respectively, compared to the carrying amount of $774.6 million and
$793.7 million, respectively.

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NOTE 12  COMMITMENTS AND CONTINGENCIES

Personal Property Taxes

MichCon and other Michigan utilities have asserted that Michigans valuation
tables result in the substantial overvaluation of utility personal property.
Valuation tables established by the Michigan State Tax Commission (STC) are
used to determine the taxable value of personal property based on the
propertys age. In November 1999, the STC approved new valuation tables that
more accurately recognize the value of a utilitys personal property. The new
tables became effective in 2000 and are currently used to calculate property
tax expense. However, several local taxing jurisdictions have taken legal
action attempting to prevent the STC from implementing the new valuation tables
and have continued to prepare assessments based on the superseded tables. The
legal actions regarding the appropriateness of the new tables were before the
Michigan Tax Tribunal (MTT) which, in April 2002 issued its decision
essentially affirming the validity of the STCs new tables. In June 2002,
petitioners in the case filed an appeal of the MTTs decision with the Michigan
Court of Appeals. The Michigan Court of Appeals has not yet issued a decision
on this appeal.

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

Environmental Matters

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

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

We completed the administrative proceeding before the EPA regarding one of the
former MGP sites. The site received closure from the EPA in 2002. We are
remediating seven of the former MGP sites and conducting more extensive
investigations at five other former MGP sites. In 1998, we received state
closure of one of the former MGP sites. Additionally, the MDEQ has determined
with respect to two other former MGP sites that we are not a responsible party
for the purpose of assessing remediation expenditures. In September 2001, we
were advised of one additional MGP site for which we have some responsibility.
After review of the extent of the necessary environmental clean-up required,
remediation costs for this site are not expected to exceed $500,000.

In 1984, we established an $11.7 million reserve for environmental
investigation and remediation. During 1993, we 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.

We employed outside consultants to evaluate remediation alternatives for these
sites, to assist in estimating its potential liabilities and to review its
archived insurance policies. The findings of these investigations indicate
that the estimated total expenditures for investigation and remediation
activities for these sites could range from $30 million to $170 million based
on undiscounted 1995 costs. As a

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result of these studies, we recorded an additional liability and a
corresponding regulatory asset of $32 million during 1995.

During 2002, 2001 and 2000, we spent $3.2 million, $4.8 million and $1.3
million, respectively, investigating and remediating these former MGP sites.
At December 31, 2002, the reserve balance was $22.2 million, of which $4.7
million was classified as current. Any significant change in assumptions, such
as remediation techniques, nature and extent of contamination and regulatory
requirements, could impact the estimate of remedial action costs for the sites
and, therefore, have an effect on our financial position and cash flows.
However, we believe the cost deferral and rate recovery mechanism approved by
the MPSC will prevent environmental costs from having a material adverse impact
on our results of operations.

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

Commitments

To ensure a reliable supply of natural gas at competitive prices, we have
entered into long-term purchase and transportation contracts with various
suppliers and producers. In general, purchases are under fixed price and volume
contracts or formulas based on market prices. We have firm purchase commitments
through 2007 for approximately 182 Bcf of gas. We expect that sales, based on
warmer-than-normal weather, will exceed our minimum purchase commitments. We
have long-term transportation contracts with various pipeline companies
expiring on various dates through the year 2011. We are committed to pay demand
charges of approximately $36 million during 2003 related to firm transportation
agreements.

We expect that our 2003 capital investments will approximate $110 million.
Certain commitments have been made in connection with such capital
expenditures.

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

Other Contingencies

We sell gas to numerous companies operating in the steel, automotive, energy
and retail industries. During 2002 and 2001, a number of customers have filed
for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code,
including certain Enron Corporation affiliates. We regularly review contingent
matters relating to purchase and sale contracts and record provisions for
amounts considered probable of loss. We believe our previously accrued amounts
are adequate for probable losses. The final resolution of these matters is not
expected to have a material effect on our financial statements in the period
they are resolved.

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

NOTE 13  RETIREMENT BENEFITS AND TRUSTEED ASSETS

Pension Plan Benefits

We sponsor a defined benefit retirement plan for MichCon union employees and
participate in a defined benefit retirement plan for other DTE Energy union and
nonunion employees. The plans are noncontributory, cover substantially all
employees and provide retirement benefits to MichCon employees based on the
employees years of benefit service, average final compensation and age at
retirement. Currently these plans meet the full funding requirements of the
Internal Revenue Code. Accordingly, no contributions for the 2002, 2001 or
2000 plan years were made.

Effective December 31, 2001, the MCN Energy Group Retirement Plan, that covered
nonunion employees, merged into the DTE Energy Company Retirement Plan.
Detroit Edison operates as the sponsor of the merged plan, which is treated as
a multiemployer plan from the affiliates perspective. Accordingly, the liabilities and assets
associated with this Plan are no longer reflected in the tables below, and the
associated prepaid pension asset of $188 million is now reflected as an amount
due from affiliate at December 31, 2002. We are allocated income or an expense
each year as a result of our participation in the DTE Energy Retirement Plan.
The annual income for 2002 was $43.5 million. The annual cost for 2001 was
$4.4 million, which included a $52.5 million charge for special termination
benefits and a $6.2 million curtailment gain associated with the early
retirement window offered during the year.

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

|                                              |                                |         |             |            |       |         |         |        |   |   |         |         |  
|--------------------------------------------- | ------------------------------ | ------- | ----------- | ---------- | ----- | ------- | ------- | ------ | - | - | ------- | ------- | -
|                                             
|(in Thousands)                                |                                | 2002(1) |             | 2001(1)    |       | 2000(2)
|                                              |                                |         |             |            |       |        
|Service
          Cost                        |                                | **$**   | **3,539**   | ****       |       | $       | 3,398   |        |   | $ | 9,500   |        
|Interest
          Cost                       |                                | ****    | **13,745**  | ****       |       |         | 13,784  |        |   |   | 35,896  |        
|Expected
          Return on Plan Assets      |                                | ****    | **(32,598** | **)**      |       |         | (32,772 | )      |   |   | (86,724 | )      
|Amortization
          of                     |                                | ****    |             |            |       |         |         |        |   |   |         |        
|                                              | Net
          gain             |         | ****        | **(3,730** | **)** |         |         | (4,440 | ) |   |         | (11,200 | )
|                                              | Prior
          service cost   |         | ****        | **1,580**  | ****  |         |         | 1,580  |   |   |         | 1,711   |  
|                                              | Net
          transition asset |         | ****        | **(1,373** | **)** |         |         | (1,373 | ) |   |         | (4,821  | )
|Curtailments/Settlement
          Recognition |                                | ****    | ****       | ****       |       |         |        |        |   |   | (2,140  | )      
|                                              |                                | ****    |             | ****       |       |         |         |        |   |   |         |        
|Net
          Pension Credit                  |                                | **$**   | **(18,837** | **)**      |       | $       | (19,823 | )      |   | $ | (57,778 | )      
|                                              |                                | ****    |             | ****       |       |         |         |        |   |   |         |        
|                                             

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

|                                                                      |                                |         |             |            |       |   |          |         |  
|--------------------------------------------------------------------- | ------------------------------ | ------- | ----------- | ---------- | ----- | - | -------- | ------- | -
|                                                                     
|(in Thousands)                                                        |                                | 2002(1) |             | 2001(1)   
|                                                                      |                                |         |             |           
|Accumulated
          Benefit Obligation at the End of the Period     |                                | **$**   | **194,795** | ****       |       | $ | 166,068  |        
|                                                                      |                                | ****    |             | ****       |       |   |          |        
|Projected
          Benefit Obligation at the Beginning of the Period |                                | **$**   | **182,493** | ****       |       | $ | 485,433  |        
|Service
          Cost                                                |                                | ****    | **3,539**   | ****       |       |   | 3,398    |        
|Interest
          Cost                                               |                                | ****    | **13,745**  | ****       |       |   | 13,784   |        
|Plan
          Amendments                                             |                                | ****    | ****       | ****       |       |   | 5,000    |        
|Actuarial
          (Gain) Loss                                       |                                | ****    | **25,791**  | ****       |       |   | (11,457  | )      
|Benefits
          Paid                                               |                                | ****    | **(13,568** | **)**      |       |   | (16,335  | )      
|Nonunion
          liabilities allocated to multiemployer plan        |                                | ****    | ****       | ****       |       |   | (297,330 | )      
|                                                                      |                                | ****    |             | ****       |       |   |          |        
|Projected
          Benefit Obligation at the End of the Period       |                                | **$**   | **212,000** | ****       |       | $ | 182,493  |        
|                                                                      |                                | ****    |             | ****       |       |   |          |        
|Plan
          Assets at Fair Value at the Beginning of the Period    |                                | **$**   | **318,756** | ****       |       | $ | 989,967  |        
|Actual
          Return on Plan Assets                                |                                | ****    | **(31,573** | **)**      |       |   | (11,842  | )      
|Benefits
          Paid                                               |                                | ****    | **(13,568** | **)**      |       |   | (16,335  | )      
|Nonunion
          liabilities allocated to multiemployer plan        |                                | ****    | ****       | ****       |       |   | (643,034 | )      
|                                                                      |                                | ****    |             | ****       |       |   |          |        
|Plan
          Assets at Fair Value at the End of the Period          |                                | **$**   | **273,615** | ****       |       | $ | 318,756  |        
|                                                                      |                                | ****    |             | ****       |       |   |          |        
|Funded
          Status of the Plans                                  |                                | **$**   | **61,615**  | ****       |       | $ | 136,263  |        
|Unrecognized                                                          |                                | ****    |             | ****       |       |   |          |        
|                                                                      | Net
          (gain) loss      |         | ****        | **29,136** | ****  |   |          | (64,556 | )
|                                                                      | Prior
          service cost   |         | ****        | **13,828** | ****  |   |          | 15,408  |  
|                                                                      | Net
          transition asset |         | ****        | **(739**   | **)** |   |          | (2,112  | )
|                                                                      |                                | ****    |             | ****       |       |   |          |        
|Prepaid
          Pension Cost                                        |                                | **$**   | **103,840** | ****       |       | $ | 85,003   |        
|                                                                      |                                | ****    |             | ****       |       |   |          |        
|(1)
          MichCon union plan only                                 |                                | ****    | ****        | ****       |       |   |          |        
|(2)
          MichCon union and nonunion plans                        |                                | ****    | ****        | ****       |       |   |          |        
|                                                                     

In determining the actuarial present value of the projected benefit obligation,
the discount rate was 6.75% for 2002, 7.25% for 2001 and 7.5% for 2000. The
rate of increase in future compensation levels used was 4% for 2002 and 2001
and 5% for 2000. The expected long-term rate of return on plan assets was 9.0%
for 2002 and 9.5% for 2001 and 2000.

We also sponsor a defined contribution retirement savings plan for union
employees, the MichCon Investment and Stock Ownership Plan, and participate in
a defined contribution plan for nonunion employees. Effective December 31,
2001, the MCN Energy Group Savings and Stock Ownership Plan, that covered
nonunion employees of MichCon, MCN Energy and MCN Energy Enterprises, merged
into the DTE Energy Company Savings and Stock Ownership Plan. Participation in
one of these plans is available to substantially all union and nonunion
employees. We match employee contributions up to certain predefined limits
based upon the definition of eligible compensation, employee contributions and
years of credited service. The cost of these plans was $4.4 million in 2002,
$4.7 million in 2001, and $4.8 million in 2000.

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Other Postretirement Benefits

We provide certain postretirement health care and life insurance benefits for
retired employees who may become eligible for these benefits while working for
us. Our policy is to fund certain trusts to meet our postretirement benefit
obligations. Separate qualified Voluntary Employees Beneficiary Association
(VEBA) trusts exist for union and nonunion employees. No contributions were
made to the VEBA trusts in 2002, 2001 or 2000.

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

|                                                |                                     |       |             |            |       |      |         |        |   |   |         |        |  
|----------------------------------------------- | ----------------------------------- | ----- | ----------- | ---------- | ----- | ---- | ------- | ------ | - | - | ------- | ------ | -
|                                               
|(in Thousands)                                  |                                     | 2002  |             | 2001       |       | 2000
|                                                |                                     |       |             |            |       |     
|Service
          Cost                          |                                     | **$** | **4,485**   | ****       |       | $    | 3,016   |        |   | $ | 3,950   |       
|Interest
          Cost                         |                                     | ****  | **18,117**  | ****       |       |      | 18,270  |        |   |   | 18,779  |       
|Expected
          Return on Plan Assets        |                                     | ****  | **(16,821** | **)**      |       |      | (18,489 | )      |   |   | (16,319 | )     
|Amortization
          of                       |                                     | ****  |             |            |       |      |         |        |   |   |         |       
|                                                | Net
          gain                  |       | ****        | **(5,511** | **)** |      |         | (6,268 | ) |   |         | (5,364 | )
|                                                | Prior
          service cost        |       | ****        | **770**    | ****  |      |         |       |   |   |         |       |  
|                                                | Net
          transition obligation |       | ****        | **10,337** | ****  |      |         | 12,224 |   |   |         | 12,702 |  
|Special
          Termination Benefits (Note 3) |                                     | ****  | ****       | ****       |       |      | 22,790  |        |   |   |        |       
|Curtailment/Settlement
          Recognition    |                                     | ****  | ****       | ****       |       |      | 5,285   |        |   |   |        |       
|                                                |                                     | ****  |             | ****       |       |      |         |        |   |   |         |       
|Net
          Postretirement Cost               |                                     | **$** | **11,377**  | ****       |       | $    | 36,828  |        |   | $ | 13,748  |       
|                                                |                                     | ****  |             | ****       |       |      |         |        |   |   |         |       
|                                               

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The following table reconciles the obligations, assets and funded status of the
plans as well as the amounts recorded as accrued postretirement cost in the
consolidated statement of financial position at December 31:

|                                                                                       |                                     |       |              |             |      |   |          |          |  
|-------------------------------------------------------------------------------------- | ----------------------------------- | ----- | ------------ | ----------- | ---- | - | -------- | -------- | -
|                                                                                      
|(in Thousands)                                                                         |                                     | 2002  |              | 2001       
|                                                                                       |                                     |       |              |            
|Accumulated
          Postretirement Benefit Obligation at the Beginning of the Period |                                     | **$** | **254,864**  | ****        |      | $ | 239,351  |         
|Service
          Cost                                                                 |                                     | ****  | **4,485**    | ****        |      |   | 3,016    |         
|Interest
          Cost                                                                |                                     | ****  | **18,117**   | ****        |      |   | 18,270   |         
|Actuarial
          Gain (Loss)                                                        |                                     | ****  | **92,619**   | ****        |      |   | (5,809   | )       
|Plan
          Amendments                                                              |                                     | ****  | ****        | ****        |      |   | (542     | )       
|Special
          Termination Benefits (Note 3)                                        |                                     | ****  | ****        | ****        |      |   | 17,971   |         
|Benefits
          Paid                                                                |                                     | ****  | **(18,345**  | **)**       |      |   | (17,393  | )       
|                                                                                       |                                     | ****  |              | ****        |      |   |          |         
|Accumulated
          Postretirement Benefit Obligation at the End of the Period       |                                     | **$** | **351,740**  | ****        |      | $ | 254,864  |         
|                                                                                       |                                     | ****  |              | ****        |      |   |          |         
|Plan
          Assets at Fair Value at the Beginning of the Period                     |                                     | **$** | **148,780**  | ****        |      | $ | 192,749  |         
|Actual
          Return on Plan Assets                                                 |                                     | ****  | **(21,676**  | **)**       |      |   | (23,042  | )       
|Benefits
          Paid                                                                |                                     | ****  | **(16,456**  | **)**       |      |   | (20,927  | )       
|                                                                                       |                                     | ****  |              | ****        |      |   |          |         
|Plan
          Assets at Fair Value at the End of the Period                           |                                     | **$** | **110,648**  | ****        |      | $ | 148,780  |         
|                                                                                       |                                     | ****  |              | ****        |      |   |          |         
|Funded
          Status of the Plans                                                   |                                     | **$** | **(241,092** | **)**       |      | $ | (106,084 | )       
|Unrecognized                                                                           |                                     | ****  | ****         | ****        |      |   |          |         
|                                                                                       | Net
          (gain) loss           |       | ****         | **44,444**  | **** |   |          | (100,946 | )
|                                                                                       | Prior
          service cost        |       | ****         | **8,474**   | **** |   |          | (542     | )
|                                                                                       | Net
          transition obligation |       | ****         | **111,409** | **** |   |          | 140,294  |  
|Regular
          Benefits Made After Measurement Date                                 |                                     | ****  | ****        | ****        |      |   | (2,703   | )       
|                                                                                       |                                     | ****  |              | ****        |      |   |          |         
|Accrued
          Postretirement Liability                                             |                                     | **$** | **(76,765**  | **)**       |      | $ | (69,981  | )       
|                                                                                       |                                     | ****  |              | ****        |      |   |          |         
|                                                                                      

The discount rate used in determining the accumulated postretirement benefit
obligation was 6.75% for 2002, 7.25% for 2001 and 7.5% for 2000. The expected
long-term rate of return on plan assets was 9.2% for 2002 and 9.8% for 2001 and
2000.

Benefit costs were calculated assuming health care cost trend rates beginning
at 10% for 2003 and decreasing to 5% in 2009 and thereafter for persons under
age 65 and decreasing from 9% to 5% for persons age 65 and over. A one
percentage point increase in the health care cost trend rates would have
increased the aggregate of the service cost and interest cost components of
benefit costs by $2.9 million. The accumulated benefit obligation would have
increased by $29 million at December 31, 2002. A one percentage point decrease
in the health care cost trend rates would have decreased the total of the
service cost and interest cost components of benefit costs by $2.6 million and
would have decreased the accumulated benefit obligation by $25.8 million at
December 31, 2002.

In 2003, we amended our postretirement health care and life insurance plans to
reduce benefits, modify eligibility criteria and increase retiree co-pays. The
changes reduced the postretirement benefit obligation by $17 million and the
expected 2003 postretirement costs by $4 million. The reduction in
postretirement benefit obligation and costs is not reflected in the previous
tables.

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Grantor Trust

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

NOTE 14  RELATED PARTY TRANSACTIONS

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

|               |                                                               |      |       |            |      |      |   |        |  |  |   |        | 
|-------------- | ------------------------------------------------------------- | ---- | ----- | ---------- | ---- | ---- | - | ------ |  |  | - | ------ | 
|              
|(in Thousands) |                                                               | 2002 |       | 2001       |      | 2000
|               |                                                               |      |       |            |      |     
|Revenues       |                                                               |      |       |            |      |      |   |        |  |  |   |       
|               | Transportation
          and storage services                 |      | **$** | **7,221**  | **** |      | $ | 4,055  |  |  | $ | 13,293 | 
|               | Other
          services                                      |      | ****  | **1,884**  | **** |      |   | 3,041  |  |  |   | 4,558  | 
|               | Interest                                                      |      | ****  | **7**      | **** |      |   | 6      |  |  |   | 587    | 
|Costs          |                                                               | **** | ****  | ****       |      |      |   |        |  |  |   |       
|               | Gas
          purchases                                       |      | ****  | ****      | **** |      |   | 69,204 |  |  |   | 77,542 | 
|               | Corporate
          expenses, merger costs and other services |      | ****  | **68,301** | **** |      |   | 72,956 |  |  |   | 19,017 | 
|              

Our accounts receivable from affiliated companies totaled $52.9 million and
$12.9 million, and accounts payable to affiliated companies totaled $18.6
million and $36.2 million at December 31, 2002 and 2001,
respectively.  The 2001 increase in corporate expenses, merger costs
and other services is due to costs allocated from DTE Energy
corporate since the May 31, 2001 acquisition of MCN Energy.

In December 2002, we received a $200 million capital contribution from our
parent company.

NOTE 15  UNUSUAL CHARGES

Loss on Investment in Joint Ventures

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

Property Write-down

In June 2002, we recorded a $33.2 million pre-tax ($21.6 million net of taxes)
loss from the planned sale of our former headquarters. The carrying value of
the property was reduced to fair value based on the estimated selling price
less cost to sell.

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##### Table of Contents



Contract Loss

In June 2002, we recorded a $14.6 million pre-tax ($9.5 million net of taxes)
charge related to the termination of a contract for computer services with an
unrelated third party.

NOTE 16  SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

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

|                                  |  |         |             |         |      |         |             |         |      |       |             |       |      |       |             |      |      |       |               |     
|--------------------------------- |  | ------- | ----------- | ------- | ---- | ------- | ----------- | ------- | ---- | ----- | ----------- | ----- | ---- | ----- | ----------- | ---- | ---- | ----- | ------------- | ----
|                                 
|                                  |  | First   |             | Second  |      | Third   |             | Fourth  |      |       |             |      
|(in Thousands)                    |  | Quarter |             | Quarter |      | Quarter |             | Quarter |      | Year 
|                                  |  |         |             |         |      |         |             |         |      |      
|2002                              |  |         |             |         |      |         |             |         |      |       |             |       |      |       |             |      |      |       |               |     
|Operating
          Revenues      |  | **$**   | **590,062** | ****    | **** | **$**   | **234,916** | ****    | **** | **$** | **117,440** | ****  | **** | **$** | **370,053** | **** | **** | **$** | **1,312,471** | ****
|Operating
          Income (Loss) |  | **$**   | **96,650**  | ****    | **** | **$**   | **(39,977** | **)**   | **** | **$** | **(23,823** | **)** | **** | **$** | **42,248**  | **** | **** | **$** | **75,098**    | ****
|Net
          Income (Loss)       |  | **$**   | **54,129**  | ****    | **** | **$**   | **(33,593** | **)**   | **** | **$** | **(19,898** | **)** | **** | **$** | **19,691**  | **** | **** | **$** | **20,329**    | ****
|2001                              |  |         |             |         |      |         |             |         |      |       |             |       |      |       |             |      |      |       |               |     
|Operating
          Revenues      |  | $       | 476,459     |         |      | $       | 181,931     |         |      | $     | 121,876     |       |      | $     | 437,346     |      |      | $     | 1,217,612     |     
|Operating
          Income (Loss) |  | $       | 160,104     |         |      | $       | (166,847    | )       |      | $     | (54,366     | )     |      | $     | 45,892      |      |      | $     | (15,217       | )   
|Net
          Income (Loss)       |  | $       | 97,350      |         |      | $       | (120,144    | )       |      | $     | (43,255     | )     |      | $     | 24,925      |      |      | $     | (41,124       | )   
|                                 

NOTE 17  SUBSEQUENT EVENT  REGULATORY MATTERS  GAS INDUSTRY RESTRUCTURING

As discussed in Note 5  Regulatory Matters  Gas Industry Restructuring, in
July 2002, an MPSC Administrative Law Judge (ALJ) issued a Proposal for
Decision on MichCons 2002 GCR plan case. In that decision the ALJ recommended
adoption of the MPSC Staffs proposed $26.5 million reduction in gas cost due
to MichCons decision to utilize storage gas during 2001 that resulted in a gas
inventory decrement for the calendar year 2001. On March 12, 2003, the MPSC
issued an order in MichCons 2002 GCR plan case. The MPSC ordered MichCon to
reduce revenues by $26.5 million for purposes of calculating the 2002 GCR
expense in the 2002 GCR reconciliation proceeding. Although we have
reflected
a $26.5 million reduction in revenues for 2002, a final determination of actual
2002 GCR revenue and expenses including any disallowances or adjustments will
be decided in MichCons 2002 GCR reconciliation case.

43



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##### Table of Contents









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

None.







Part III







Item 10. Directors and Executive Officers of the Registrant







Item 11. Executive Compensation







Item 12. Security Ownership of Certain Beneficial Owners and Management







Item 13. Certain Relationships and Related Transactions

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

44



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##### Table of Contents









Part IV







Item 14. Controls and Procedures



|(a) |  | Evaluation of disclosure controls and procedures                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | MichCons Chief Executive Officer and Chief Financial Officer have evaluated
the effectiveness of MichCons disclosure controls and procedures (as defined
in Exchange Act Rules 13a  14(c) and 15d  14(d)) as of a date within 90
days before the filing of this annual report, and have concluded that, as of
the evaluation date, such controls and procedures were effective at ensuring
that required information will be disclosed on a timely basis in reports
filed under the Exchange Act.
|   
|(b) |  | Changes in internal controls                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|    |  | There have been no significant changes (including corrective actions with
regard to significant deficiencies or material weaknesses) in MichCons
internal controls or in other factors that could significantly affect these
controls subsequent to the evaluation date referenced in paragraph (a) above.                                                                                                                                                                                          







Item 15. Exhibits, Financial Statement Schedule, and Reports On Form 8-K



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



| | (1) | Consolidated financial statements. See Item 8  Financial Statements and Supplementary Data.
| | --- | ----------------------------------------------------------------------------------------------
|
| | (2) | Financial statement schedule. See Item 8  Financial Statements and Supplementary Data.     
|
| | (3) | Exhibits.                                                                                     







|            |  |                                                          
|----------- |  | ---------------------------------------------------------
|Exhibit No. |  | Description                                              
|            |  |                                                          
|(i)         |  | Exhibits filed herewith                                  
|            |  |                                                          
|12-3        |  | Computation of Ratio of Earnings to Fixed Charges.       
|            |  |                                                          
|23-3        |  | Consent of Deloitte & Touche LLP.                        
|            |  |                                                          
|99-7        |  | Chief Executive Officer Certification of Periodic Report.
|            |  |                                                          
|99-8        |  | Chief Financial Officer Certification of Periodic Report.

45



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|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(ii) |  | Exhibits incorporated herein by reference                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|3-1  |  | Restated Articles of Incorporation (Exhibit 3-1 to Form 10-Q
for quarter ended March 31, 1993, file number 1-7310).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|3-2  |  | By-Laws (Exhibit 3-2 to Form 10-Q for quarter ended March 31,
1993, file number 1-7310).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|4-1  |  | Indenture between MichCon and Citibank, N.A. related to Senior
Debt Securities dated as of June 1, 1998 (Exhibit 4-1 to
Registration Statement No. 333-63370); First Supplemental
Indenture dated as of June 18, 1998 (Exhibit 4-1 to June 18,
1998 Form 8-K); Second Supplemental Indenture dated as of June
9, 1999 (Exhibit 4-1 to June 4, 1999 Form 8-K); and Third
Supplemental Indenture dated as of August 15, 2001 (Exhibit
4-2 to Form 10-Q for quarter ended September 30, 2001).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|4-2  |  | Indentures defining the rights of the holders of MichCons
First Mortgage Bonds: MichCons Indenture of Mortgage and Deed
of Trust dated as of March 1, 1944 (Exhibit 7-D to
Registration Statement No. 2-5252); Twenty-ninth Supplemental
Indenture, dated as of July 15, 1989, providing for the
modification and restatement of the Indenture of Mortgage and
Deed of Trust dated as of March 1, 1944; Thirtieth
Supplemental Indenture, dated as of September 1, 1991 (Exhibit
4-1 to September 27, 1991 Form 8-K); Thirty-first Supplemental
Indenture dates as of December 15, 1991 (Exhibit 4-1 to
February 28, 1992 Form 8-K); Thirty-second Supplemental
Indenture, dated as of January 5, 1993 (Exhibit 4-1 to 1992
Form 10-K); Thirty-third Supplemental Indenture, dated as of
May 1, 1995 (Exhibit 4-2 to Registration Statement No.
33-59093); Thirty-fourth Supplemental Indenture dated as of
November 1, 1996 (Exhibit 4-2 to Registration Statement No.
333-16285); Thirty-fifth Supplemental Indenture, dated as of
June 18, 1998 (Exhibit 4-2 to June 18, 1998 Form 8-K); and
Mortgage Supplemental Indenture dated as of August 15, 2001
(Exhibit 4-3 to Form 10-Q for quarter ended September 30,
2001).
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10-1 |  | MichCon Investment and Stock Ownership Plan, as amended
(Exhibit 10-12 to 1998 Form 10-K).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|99-1 |  | 364-Day Credit Agreement dated as of October 25, 2002 ($200
million) (Exhibit 99-3 to Form 10-Q for quarter ended
September 30, 2002).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|99-2 |  | Three-Year Credit Agreement dated as of October 25, 2002 ($100
million) (Exhibit 99-4 to Form 10-Q for quarter ended
September 30, 2001).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

(b)  Reports on Form 8-K.
        None.

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MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS

|                                                                                                                                    |                                 |            |   |        |  |                       |   |                |   |               |   |         |  |  |   |        |  |  |   |        | 
|----------------------------------------------------------------------------------------------------------------------------------- | ------------------------------- | ---------- | - | ------ |  | --------------------- | - | -------------- | - | ------------- | - | ------- |  |  | - | ------ |  |  | - | ------ | 
|                                                                                                                                   
|(in Thousands)                                                                                                                      |                                 |            |   |        |  | Additions             |   |                |   |               |   |        
|                                                                                                                                    |                                 |            |   |        |  |                       |   |                |   |               |   |        
|                                                                                                                                    |                                 |            |   |        |  | Provisions charged to |   | Deductions     |   |               |   |        
|                                                                                                                                    |                                 |            |   |        |  |                       |   | for Purposes   |   |               |   |        
|                                                                                                                                    |                                 | Balance at |   |        |  |                       |   | Utility Plant/ |   | for Which the |   | Balance
|                                                                                                                                    |                                 | Beginning  |   |        |  |                       |   | Regulatory     |   | Reserves Were |   | at End 
|Description                                                                                                                         |                                 | of Period  |   | Income |  | Asset                 |   | Provided       |   | of Period    
|                                                                                                                                    |                                 |            |   |        |  |                       |   |                |   |              
|Year Ended December 31, 2002                                                                                                        |                                 |            |   |        |  |                       |   |                |   |               |   |         |  |  |   |        |  |  |   |       
|Reserve deducted from Assets in
Consolidated Statement of Financial Position:                                                       |                                 |            |   |        |  |                       |   |                |   |               |   |         |  |  |   |        |  |  |   |       
|                                                                                                                                    | Allowance for doubtful accounts |            | $ | 21,428 |  |                       | $ | 21,058         |   |               | $ |        |  |  | $ | 15,592 |  |  | $ | 26,894 | 
|                                                                                                                                    |                                 |            |   |        |  |                       |   |                |   |               |   |         |  |  |   |        |  |  |   |       
|Reserve included in Current Liabilities  Other
and in Accrued Environmental Costs
in Consolidated Statement of Financial Position: |                                 |            |   |        |  |                       |   |                |   |               |   |         |  |  |   |        |  |  |   |       
|                                                                                                                                    | Environmental                   |            | $ | 25,244 |  |                       | $ |               |   |               | $ |        |  |  | $ | 3,209  |  |  | $ | 22,035 | 
|                                                                                                                                    |                                 |            |   |        |  |                       |   |                |   |               |   |         |  |  |   |        |  |  |   |       
|Reserve included in Other Liabilities  Other
in Consolidated Statement of Financial Position:                                      |                                 |            |   |        |  |                       |   |                |   |               |   |         |  |  |   |        |  |  |   |       
|                                                                                                                                    | Injuries and damages            |            | $ | 14,193 |  |                       | $ | (3,511         | ) |               | $ | 310     |  |  | $ | 2,543  |  |  | $ | 8,449  | 
|                                                                                                                                    |                                 |            |   |        |  |                       |   |                |   |               |   |         |  |  |   |        |  |  |   |       
|Year Ended December 31, 2001                                                                                                        |                                 |            |   |        |  |                       |   |                |   |               |   |         |  |  |   |        |  |  |   |       
|Reserve deducted from Assets in
Consolidated Statement of Financial Position:                                                       |                                 |            |   |        |  |                       |   |                |   |               |   |         |  |  |   |        |  |  |   |       
|                                                                                                                                    | Allowance for doubtful accounts |            | $ | 18,912 |  |                       | $ | 16,347         |   |               | $ |        |  |  | $ | 13,831 |  |  | $ | 21,428 | 
|                                                                                                                                    |                                 |            |   |        |  |                       |   |                |   |               |   |         |  |  |   |        |  |  |   |       
|Reserve included in Current Liabilities  Other
and in Accrued Environmental Costs
in Consolidated Statement of Financial Position: |                                 |            |   |        |  |                       |   |                |   |               |   |         |  |  |   |        |  |  |   |       
|                                                                                                                                    | Environmental                   |            | $ | 30,458 |  |                       | $ |               |   |               | $ |        |  |  | $ | 5,214  |  |  | $ | 25,244 | 
|                                                                                                                                    |                                 |            |   |        |  |                       |   |                |   |               |   |         |  |  |   |        |  |  |   |       
|Reserve included in Other Liabilities  Other
in Consolidated Statement of Financial Position:                                      |                                 |            |   |        |  |                       |   |                |   |               |   |         |  |  |   |        |  |  |   |       
|                                                                                                                                    | Injuries and damages            |            | $ | 2,610  |  |                       | $ | 14,901         |   |               | $ | 331     |  |  | $ | 3,649  |  |  | $ | 14,193 | 
|                                                                                                                                    |                                 |            |   |        |  |                       |   |                |   |               |   |         |  |  |   |        |  |  |   |       
|Year Ended December 31, 2000                                                                                                        |                                 |            |   |        |  |                       |   |                |   |               |   |         |  |  |   |        |  |  |   |       
|Reserve deducted from Assets in
Consolidated Statement of Financial Position:                                                       |                                 |            |   |        |  |                       |   |                |   |               |   |         |  |  |   |        |  |  |   |       
|                                                                                                                                    | Allowance for doubtful accounts |            | $ | 17,777 |  |                       | $ | 14,148         |   |               | $ |        |  |  | $ | 13,013 |  |  | $ | 18,912 | 
|                                                                                                                                    |                                 |            |   |        |  |                       |   |                |   |               |   |         |  |  |   |        |  |  |   |       
|Reserve included in Current Liabilities  Other
and in Accrued Environmental Costs
in Consolidated Statement of Financial Position: |                                 |            |   |        |  |                       |   |                |   |               |   |         |  |  |   |        |  |  |   |       
|                                                                                                                                    | Environmental                   |            | $ | 31,368 |  |                       | $ |               |   |               | $ | 350     |  |  | $ | 1,260  |  |  | $ | 30,458 | 
|                                                                                                                                    |                                 |            |   |        |  |                       |   |                |   |               |   |         |  |  |   |        |  |  |   |       
|Reserve included in Other Liabilities  Other
in Consolidated Statement of Financial Position:                                      |                                 |            |   |        |  |                       |   |                |   |               |   |         |  |  |   |        |  |  |   |       
|                                                                                                                                    | Injuries and damages            |            | $ | 2,726  |  |                       | $ | 2,341          |   |               | $ | 627     |  |  | $ | 3,084  |  |  | $ | 2,610  | 
|                                                                                                                                    |                                 |            |   |        |  |                       |   |                |   |               |   |         |  |  |   |        |  |  |   |       
|                                                                                                                                   

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##### Table of Contents









SIGNATURES

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

|                     |  |                                   |                          |                              
|-------------------- |  | --------------------------------- | ------------------------ | -----------------------------
|                     |  | MICHIGAN CONSOLIDATED GAS COMPANY
|                     |  |                                   |                          | (Registrant)                 
|                     |  |                                   |                          |                              
|Date: March 20, 2003 |  | By:                               | /s/ DANIEL G. BRUDZYNSKI
|                     |  |                                   |                         
|                     |  |                                   |                          | Daniel G. Brudzynski         
|                     |  |                                   |                          | Chief Accounting Officer,    
|                     |  |                                   |                          | Vice President and Controller

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.

By
    
    /s/ ANTHONY F. EARLEY, JR.Anthony F. Earley, Jr.
Chairman of the Board,
Chief Executive Officer, President and
Chief Operating OfficerBy
    
    /s/ SUSAN M. BEALESusan M. Beale
Director, Vice President and Corporate
SecretaryBy
    
    /s/ DAVID E. MEADORDavid E. Meador
Director


Date                      March 20, 2003

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FORM 10-K CERTIFICATION

I, Anthony F. Earley, Jr., Chairman, President, Chief Executive and Chief
Operating Officer of Michigan Consolidated Gas Company, certify that:



|1. |  | I have reviewed this annual report on Form 10-K of Michigan Consolidated Gas Company;                                                                                                                                                                                                                                   
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                               

|    |  |                                                                                                                                                                                                                                                                                             
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual
report is being prepared;
|    |  |                                                                                                                                                                                                                                                                                             
|(b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the Evaluation Date); and                                                                                                  
|    |  |                                                                                                                                                                                                                                                                                             
|(c) |  | presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|    |  |                                                                                                                                                                                                                                                                                               
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and
|    |  |                                                                                                                                                                                                                                                                                               
|(b) |  | any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                                                                       |  |                     
|------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------------
|/s/ ANTHONY F. EARLEY, JR.Anthony F. Earley, Jr.
Chairman, President, Chief Executive and
Chief Operating Officer of
Michigan Consolidated Gas Company |  | Date: March 20, 2003

49



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##### Table of Contents



FORM 10-K CERTIFICATION

I, David E. Meador, Senior Vice President and Chief Financial Officer of
Michigan Consolidated Gas Company, certify that:



|1. |  | I have reviewed this annual report on Form 10-K of Michigan Consolidated Gas Company;                                                                                                                                                                                                                                   
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                               

|    |  |                                                                                                                                                                                                                                                                                             
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual
report is being prepared;
|    |  |                                                                                                                                                                                                                                                                                             
|(b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the Evaluation Date); and                                                                                                  
|    |  |                                                                                                                                                                                                                                                                                             
|(c) |  | presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|    |  |                                                                                                                                                                                                                                                                                               
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and
|    |  |                                                                                                                                                                                                                                                                                               
|(b) |  | any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                                           |  |                     
|-------------------------------------------------------------------------------------------------------------------------- |  | --------------------
|/s/ DAVID E. MEADOR
David E. Meador
Senior Vice President and
Chief Financial Officer of
Michigan Consolidated Gas Company |  | Date: March 20, 2003

50



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##### Table of Contents



Exhibit Index

|            |  |                                                           |  |  |  | 
|----------- |  | --------------------------------------------------------- |  |  |  | 
|Exhibit No. |  | Description                                               |  |  |  | 
|            |  |                                                           |  |  |  | 
|(i)         |  | Exhibits filed herewith                                  
|            |  |                                                          
|12-3        |  | Computation of Ratio of Earnings to Fixed Charges.       
|            |  |                                                          
|23-3        |  | Consent of Deloitte & Touche LLP.                        
|            |  |                                                          
|99-7        |  | Chief Executive Officer Certification of Periodic Report.
|            |  |                                                          
|99-8        |  | Chief Financial Officer Certification of Periodic Report.
|            |  |