UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the Quarterly Period ended ~~September 30, 2009~~March 31, 2010

Commission file number 1-2198

The Detroit Edison Company meets the conditions set forth in General Instruction H (1) (a) and (b) of Form 10-Q and is, therefore, filing this Form with the reduced disclosure format.

THE DETROIT EDISON COMPANY

(Exact name of registrant as specified in its charter)


~~Michigan~~		~~38-0478650~~
Michigan (State or other jurisdiction of		~~(I.R.S. Employer~~
incorporation or organization)		38-0478650 (I.R.S. Employer Identification No.)

One Energy Plaza, Detroit, Michigan		~~48226-1279~~
(Address of principal executive offices)		48226-1279 (Zip Code)

313-235-4000
(Registrant’s telephone number, including area code)

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.

Yesþ Noo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yesoþ Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange ~~Act (Check one):~~Act.


Large accelerated filero	Accelerated filero	Non-accelerated filerþ		Smaller reporting companyo
		(Do not check if a smaller reporting company)	~~Smaller reporting company~~ o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yeso Noþ

All of the registrant’s 138,632,324 outstanding shares of common stock are owned by DTE Energy Company.

Definitions


ASC		Accounting Standards Codification

ASU		Accounting Standards Update

Customer Choice		Statewide initiatives giving customers in Michigan the option to choose alternative suppliers for ~~electricity.~~electricity and gas.

Detroit Edison		The Detroit Edison Company (a direct wholly owned subsidiary of DTE ~~Energy Company)~~Energy) and subsidiary companies

DTE Energy		DTE Energy Company, directly or indirectly the parent of Detroit Edison, MichCon and ~~directly or indirectly the parent company of~~ numerous non-utility subsidiaries

EPA		United States Environmental Protection Agency

FASB		Financial Accounting Standards Board

FERC		Federal Energy Regulatory Commission

~~FSP~~		~~FASB Staff Position~~

FTRs		Financial ~~Transmission Rights~~transmission rights

MDEQ		Michigan Department of Environmental Quality

MISO		Midwest Independent System Operator ais an Independent System Operator and the Regional Transmission Organization serving the Midwest United States and Manitoba, Canada.

MPSC		Michigan Public Service Commission

NRC		Nuclear Regulatory Commission

PSCR		A power supply cost recovery mechanism authorized by the MPSC that allows Detroit Edison to recover through rates its fuel, fuel-related and purchased power ~~expenses.~~costs.

Securitization		Detroit Edison financed specific stranded costs at lower interest rates through the sale of rate reduction bonds by a ~~wholly owned~~wholly-owned special purpose entity, ~~the~~The Detroit Edison Securitization Funding LLC.

~~SFAS~~		~~Statement of Financial Accounting Standards~~

Units of Measurement

GWh		Gigawatthour of electricity
kWh		Kilowatthour of electricity

MW		Megawatt of electricity

MWh		Megawatthour of electricity

Forward-Looking Statements

Certain information presented herein includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations and business of Detroit Edison. Forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause actual future results to be materially different from those contemplated, projected, estimated or budgeted. Many factors may impact forward-looking statements including, but not limited to, the following:

	•		~~the length and severity of ongoing~~ economic ~~decline~~conditions resulting in lower demand, customer conservation and increased thefts of ~~electricity;~~electricity and gas;

	•		changes in the economic and financial viability of our customers, suppliers, and trading counterparties, and the continued ability of such parties to perform their obligations to the Company;

	•		economic climate and population growth or decline in the geographic areas where we do business;

	•		high levels of uncollectible accounts receivable;

	•		access to capital markets and capital market conditions and the results of other financing efforts which can be affected by credit agency ratings;

	•		instability in capital markets which could impact availability of short and long-term financing;

	•		~~potential for continued loss on investments, including nuclear decommissioning and benefit plan assets and the related increases in future expense and contributions;~~

	•		the timing and extent of changes in interest rates;

	•		the level of borrowings;

	•		the ~~availability, cost, coverage~~potential for losses on investments, including nuclear decommissioning and ~~terms~~benefit plan assets and the related increases in future expense and contributions;

	•		the potential for increased costs or delays in completion of ~~insurance and stability of insurance providers;~~significant construction projects;

	•		the effects of weather and other natural phenomena on operations and sales to customers, and purchases from suppliers;

	•		~~economic climate and population growth or decline in the geographic areas where we do business;~~

	•		environmental issues, laws, regulations, and the increasing costs of remediation and compliance, including actual and potential new federal and state requirements that include or could include carbon and more stringent mercury emission controls, a renewable portfolio standard, energy efficiency mandates, ~~and~~ a carbon tax or cap and trade ~~structure;~~structure and ash landfill regulations;

	•		nuclear regulations and operations associated with nuclear facilities;

	•		impact of electric and gas utility restructuring in Michigan, including legislative amendments and Customer Choice programs;

	•		employee relations and the impact of collective bargaining agreements;

	•		unplanned outages;

	•		changes in the cost and availability of coal and other raw materials, purchased power and ~~purchased power;~~natural gas;

	•		volatility in the short-term natural gas storage markets impacting third-party storage revenues;

	•		cost reduction efforts and the maximization of plant and distribution system performance;

	•		the effects of competition;

Part I — –Item 1.

The Detroit Edison Company

Consolidated Statements of Financial Position (Unaudited)


	September 30			December 31			March 31			December 31
(in Millions)	2009			2008			2010			2009
ASSETS
Current Assets
Cash and cash equivalents	$	69		$	30		$	161		$	34
Restricted cash		24			84			28			79
Accounts receivable (less allowance for doubtful accounts of $125 and $121, respectively)
Accounts receivable (less allowance for doubtful accounts of $114 and $118, respectively)
Customer		709			709			633			696
Affiliates		1			5			2			3
Other		10			34			16			108
Inventories
Fuel		174			170			137			135
Materials and supplies		175			169			176			173
Notes receivable
Notes Receivable
Affiliates		169			41			8			65
Other		4			3			1			3
Prepaid property taxes		92			43			71			44
Other		46			52			31			35

		1,473			1,340			1,264			1,375


Investments
Nuclear decommissioning trust funds		791			685			859			817
Other		94			99			104			104

		885			784			963			921


Property
Property, plant and equipment		15,335			14,977			15,523			15,451
Accumulated depreciation		(6,058	)		(5,828	)
Less accumulated depreciation and amortization								(6,174	)		(6,133	)

		9,277			9,149			9,349			9,318


Other Assets
Regulatory assets		3,255			3,456			3,313			3,333
Securitized regulatory assets		905			1,001			835			870
Intangible assets		9			19			10			9
Notes receivable
Affiliates		20			—
Other		—			3
Notes receivable — affiliates								15			17
Other		112			90			121			118

		4,301			4,569			4,294			4,347


Total Assets	$	15,936		$	15,842		$	15,870		$	15,961

The Detroit Edison Company
Consolidated Statements of Financial Position (Unaudited)


	September 30			December 31			March 31			December 31
(in Millions, Except Shares)	2009			2008			2010			2009
LIABILITIES AND SHAREHOLDER’S EQUITY
Current Liabilities
Accounts payable — affiliates	$	55		$	103
Accounts payable — other		241			346
Accounts payable
Affiliates							$	168		$	74
Other								265			251
Accrued interest		88			80			89			83
Accrued vacation		48			58
Accrued power supply cost recovery revenue		63			27
Income taxes payable		83			39
Short-term borrowings — other		—			75
Accrued vacations								46			48
Current portion of long-term debt, including capital leases		160			153			665			660
Other		173			197			199			213

		911			1,078			1,432			1,329


Long-Term Debt (net of current portion)
Mortgage bonds, notes and other		4,079			4,091			3,566			3,579
Securitization bonds		793			932			717			793
Capital lease obligations		28			33			23			25

		4,900			5,056			4,306			4,397


Other Liabilities
Deferred income taxes		1,867			1,894			1,901			1,871
Regulatory liabilities		630			593			720			711
Asset retirement obligations		1,269			1,205			1,316			1,285
Unamortized investment tax credit		78			85			73			75
Nuclear decommissioning		131			114			142			136
Accrued pension liability — affiliates		912			978			793			987
Accrued postretirement liability — affiliates		1,101			1,075			1,064			1,058
Other		247			208			234			239

		6,235			6,152			6,243			6,362


Commitments and Contingencies (Notes 4 and 8)
Commitments and Contingencies (Notes 7 and 10)

Shareholder’s Equity
Common stock, $10 par value, 400,000,000 shares authorized, and 138,632,324 shares issued and outstanding		3,196			2,946			3,196			3,196
Retained earnings		706			622			708			693
Accumulated other comprehensive income		(12	)		(12	)
Accumulated other comprehensive income (loss)								(15	)		(16	)

		3,890			3,556			3,889			3,873


Total Liabilities and Shareholder’s Equity	$	15,936		$	15,842		$	15,870		$	15,961

The Detroit Edison Company

Consolidated Statements of Cash Flows (Unaudited)


	Nine Months Ended						Three Months Ended
	September 30						March 31
(in Millions)	2009			2008			2010			2009
Operating Activities
Net income	$	313		$	251		$	91		$	78
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		607			563			204			188
Deferred income taxes		(2	)		70			5			(4	)
Asset (gains) and reserves, net		—			(1	)
Asset gains, net								1			—
Changes in assets and liabilities, exclusive of changes shown separately		105			(33	)		76			154

Net cash from operating activities		1,023			850			375			416


Investing Activities
Plant and equipment expenditures		(640	)		(651	)		(177	)		(263	)
Restricted cash for debt redemptions		60			101			51			64
Proceeds from sale of nuclear decommissioning trust fund assets		237			180			59			113
Investment in nuclear decommissioning trust funds		(251	)		(202	)		(68	)		(113	)
Other investments		(176	)		(33	)
Other								50			(286	)

Net cash used for investing activities		(770	)		(605	)		(85	)		(485	)


Financing Activities
Issuance of long-term debt		65			566
Redemption of long-term debt		(213	)		(166	)		(85	)		(81	)
Repurchase of long-term debt		—			(238	)
Short-term borrowings, net		(82	)		(301	)
Capital contribution by parent company		250			175			—			250
Dividends on common stock		(228	)		(228	)		(76	)		(76	)
Other		(6	)		(7	)		(2	)		(3	)

Net cash used for financing activities		(214	)		(199	)
Net cash from (used for) financing activities								(163	)		90


Net Increase (Decrease) in Cash and Cash Equivalents		39			46
Cash and Cash Equivalents at Beginning of Period		30			47
Net Increase in Cash and Cash Equivalents								127			21
Cash and Cash Equivalents at Beginning of the Period								34			30

Cash and Cash Equivalents at End of Period	$	69		$	93
Cash and Cash Equivalents at End of the Period							$	161		$	51

The Detroit Edison Company

Consolidated Statements of Changes in Shareholder’s Equity andComprehensive Income (Unaudited)
(~~Unaudited~~)

Accumulated
Additional Other
Common Stock Paid In Retained Comprehensive
(Dollars in Millions, shares in thousands) Shares Amount Capital Earnings Income Total

Balance, December 31, 2008 138,632 $ 1,386 $ 1,560 $ 622 $ (12 ) $ 3,556

Net income — — — 313 — 313
Capital contribution by parent company — — 250 — — 250
Dividends declared on common stock — — — (228 ) — (228 )
Net change in unrealized gains on investments, net of tax — — — — (2 ) (2 )
Benefits, net of tax — — — — 2 2
Other — — — (1 ) — (1 )

Balance, September 30, 2009
138,632 $ 1,386 $ 1,810 $ 706 $ (12 ) $ 3,890


										Accumulated
					Additional					Other
	Common Stock				Paid In		Retained			Comprehensive
(Dollars in Millions, shares in thousands)	Shares		Amount		Capital		Earnings			Loss			Total

Balance, December 31, 2009		138,632	$	1,386	$	1,810	$	693		$	(16	)	$	3,873

Net income		—		—		—		91			—			91
Dividends declared on common stock		—		—		—		(76	)		—			(76	)
Benefit obligations, net of tax		—		—		—		—			1			1

Balance, March 31, 2010		138,632	$	1,386	$	1,810	$	708		$	(15	)	$	3,889

The following table displays other comprehensive income for the ~~nine-month~~three-month periods ended ~~September 30:~~March 31:


(in Millions)	2009			2008			2010		2009
Net income	$	313		$	251		$	91	$	78
Other comprehensive income, net of tax:
Benefit obligations, net of taxes								1		—
Net unrealized gains on investments:
Amounts reclassified to income, net of taxes		(2	)		(1	)		—		1
Benefits, net of taxes		2			—

Comprehensive income	$	313		$	250		$	92	$	79

The Detroit Edison Company

Notes to Consolidated Financial Statements (Unaudited)

NOTE 1 — ~~GENERAL~~BASIS OF PRESENTATION

Corporate Structure

Detroit Edison is a Michigan public utility engaged in the generation, purchase, distribution and sale of electric energy to approximately 2.1 million customers in southeastern Michigan. Detroit Edison is regulated by the MPSC and FERC. In addition, we are regulated by other federal and state regulatory agencies including the NRC, the EPA and MDEQ.

References in this report to “we,” “us,’ “our’” or “Company” are to Detroit Edison and its subsidiaries, collectively.

Basis of Presentation

These Consolidated Financial Statements should be read in conjunction with the Notes to Consolidated Financial Statements included in the ~~2008~~2009 Annual Report on Form 10-K.

The accompanying Consolidated Financial Statements are prepared using accounting principles generally accepted in the United States of America. These accounting principles require management to use estimates and assumptions that impact reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results may differ from the Company’s estimates.

The Consolidated Financial Statements are unaudited, but in our opinion include all adjustments necessary for a fair presentation of such financial statements. All adjustments are of a normal recurring nature, except as otherwise disclosed in these Consolidated Financial Statements and Notes to Consolidated Financial Statements. Financial results for this interim period are not necessarily indicative of results that may be expected for any other interim period or for the fiscal year ending December 31, ~~2009.~~2010.

Certain prior year ~~amounts have been~~balances were reclassified to ~~reflect~~match the current ~~year classifications.~~year’s financial statement presentation.

~~Asset Retirement Obligations~~Principles of Consolidation — Variable Interest Entity (VIE)

As discussed in Note 3, effective January 1, 2010, we adopted the provisions of ASU 2009-17,Amendments to FASB Interpretation 46(R). ASU 2009-17 changed the methodology for determining the primary beneficiary of a VIE from a quantitative risk and rewards-based model to a qualitative determination. There is no grandfathering of previous consolidation conclusions. As a result, the Company re-evaluated all prior VIE and primary beneficiary determinations. The requirements of ASU 2009-17 were adopted on a prospective basis.

The Company ~~has~~evaluates whether an entity is a ~~legal retirement~~VIE whenever reconsideration events occur. We consolidate VIEs for which we are the primary beneficiary. If the Company is not the primary beneficiary and an ownership interest is held, the VIE is accounted for under the equity method of accounting. When assessing the determination of the primary beneficiary, we consider all relevant facts and circumstances, including: the power, through voting or similar rights, to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation ~~for~~to absorb the ~~decommissioning costs for its Fermi 1 and Fermi 2 nuclear plants.~~expected losses and/or the right to receive the expected returns of the VIE. The Company performs ongoing reassessments of all VIEs to determine if the primary beneficiary status has ~~conditional retirement obligations~~changed.

Detroit Edison financed specific stranded costs at lower interest rates through the sale of rate reduction bonds by a wholly-owned special purpose entity, Securitization. Detroit Edison performs servicing activities including billing and collecting surcharge revenue for ~~disposal of asbestos at certain of its power plants. To~~Securitization. This entity is a ~~lesser extent,~~consolidated VIE for which the Company ~~has conditional retirement obligations~~is the primary beneficiary. The maximum risk exposure related to Securitization is reflected on our Consolidated Statements of Financial Position

The following table summarizes the amounts at ~~certain service centers, and disposal costs~~March 31, 2010 for PCB contained within transformers and circuit breakers. The Company recognizes such obligations as liabilities at fair market value when they are incurred, which generally is at the time the associated assets are placed in service. Fair value is measured using expected future cash outflows discounted at our credit-adjusted risk-free rate. The Company defers timing differences that arise in the expense recognition of legal asset retirement costsSecuritization that are ~~currently recovered in rates.~~

~~A reconciliation~~either (1) assets that can be used only to settle their obligations or (2) liabilities for which creditors do not have recourse to the general credit of the ~~asset retirement obligations for the nine months ended September 30, 2009 follows:~~

(in Millions)
Asset retirement obligations at January 1, 2009 $ 1,226
Accretion 60
Liabilities settled (6 )
Revision in estimated cash flows 5

Asset retirement obligations at September 30, 2009 1,285
Less amount included in current liabilities (16 )

$ 1,269

Approximately $1.2 billion of the asset retirement obligations represent nuclear decommissioning liabilities that are funded through a surcharge to electric customers over the life of the Fermi 2 nuclear power plant.primary beneficiary.


	March 31,
(in Millions)	2010
ASSETS
Restricted cash	$	$27
Accounts receivable		40
Securitized regulatory assets		835
Other assets		18

	$	920


LIABILITIES
Accounts payable and accrued current liabilities	$	5
Current portion long-term debt, including capital leases		144
Other current liabilities		36
Securitization bonds		717
Other long term liabilities		6

	$	908

~~Retirement Benefits and Trusteed Assets~~NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES

~~The following details the components of net periodic benefit costs for pension benefits and other postretirement benefits:~~

(in Millions) Pension Benefits Other Postretirement Benefits
Three Months Ended September 30 2009 2008 2009 2008
Service cost $ 11 $ 11 $ 11 $ 12
Interest cost 39 38 26 23
Expected return on plan assets (41 ) (41 ) (10 ) (14 )
Amortization of:
Net actuarial loss 9 6 13 7
Prior service cost 2 2 — 1
Net transition liability — — 1 —

Net periodic benefit cost $ 20 $ 16 $ 41 $ 29

(in Millions) Pension Benefits Other Postretirement Benefits
Nine Months Ended September 30 2009 2008 2009 2008
Service cost $ 32 $ 34 $ 34 $ 36
Interest cost 119 112 77 70
Expected return on plan assets (124 ) (123 ) (31 ) (43 )
Amortization of:
Net actuarial loss 29 19 39 21
Prior service cost 5 5 1 1
Net transition liability — — 2 2

Net periodic benefit cost $ 61 $ 47 $ 122 $ 87

The Company expects to contribute up to $250 million to its pension plans during 2009. A $20 million contribution was made to the plans in the third quarter of 2009 and approximately $90 million of contributions were made to the plans in the nine-month period ended September 30, 2009.

The Company expects to contribute up to $90 million to its postretirement medical and life insurance benefit plans during 2009. No contributions were made to the plans in the first nine months of 2009.

Income Taxes

~~Unrecognized~~The Company had $5 million of unrecognized tax benefits at ~~September 30, 2009~~March 31, 2010 and at December 31, ~~2008,~~2009 that, if recognized, would ~~not materially~~favorably impact ~~our~~its effective tax rate. ~~We do~~The Company does not anticipate any significant changes in the unrecognized tax benefits during the next twelve months.

Stock-Based Compensation

The Company received an allocation of costs from DTE Energy associated with stock-based ~~compensation. The~~compensation of $6 million in the first quarter of 2010, as compared to no allocation of stock-based compensation expense for the 2009 and 2008 third quarters was approximately $6 million and $3 million, respectively, while such allocation was $11 million and $13 million for the nine months ended September 30, 2009 and 2008, respectively.

~~Consolidated Statements of Cash Flows~~

~~The following provides detail of the changes in assets and liabilities that are reported~~costs in the ~~Consolidated Statements~~first quarter of ~~Cash Flows, and supplementary cash information:~~

Nine Months Ended
September 30
(in Millions) 2009 2008
Changes in Assets and Liabilities, Exclusive of Changes Shown Separately

Accounts receivable, net $ 22 $ (48 )
Inventories (11 ) (31 )
Accrued pension liability — affiliates (65 ) 59
Accounts payable (52 ) (46 )
Accrued PSCR refund 55 22
Income taxes payable 50 (10 )
General taxes — (11 )
Postretirement obligation — affiliates 25 12
Other assets 42 (14 )
Other liabilities 39 34

$ 105 $ (33 )

~~Subsequent Events~~

~~The Company has evaluated subsequent events through October 30, 2009, the date that these financial statements were issued.~~2009.

NOTE 23 — NEW ACCOUNTING PRONOUNCEMENTS

~~FASB Accounting Standards Codification™ (Codification)~~

In June 2009, the FASB voted to approve that on July 1, 2009, the Codification will become the single source of authoritative nongovernmental U.S. GAAP. The Codification is a reorganization of current GAAP into a topical format that eliminates the current GAAP hierarchy and establishes two levels of guidance — authoritative and non-authoritative. According to the FASB, all “non-grandfathered, non-SEC accounting literature” that is not included in the Codification would be considered non-authoritative. The FASB has indicated that the Codification does not change current GAAP. Instead, the proposed changes aim to (1) reduce the time and effort it takes for users to research accounting questions and (2) improve the usability of current accounting standards. The Codification is effective for interim and annual periods ending after September 15, 2009.

~~Fair Value Accounting~~

~~In September 2006, the FASB issued ASC 820 (SFAS No. 157,~~~~Fair Value Measurements)~~. The standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. It emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Fair value measurement should be determined based on the assumptions that market participants would use in pricing an asset or liability. Effective January 1, 2008, the Company adopted ASC 820 (SFAS No. 157). As permitted by ASC 820-10 (FSP No. 157-2), the Company elected to defer the effective date of the standard as it pertains to measurement and disclosures about the fair value of non-financial assets and liabilities made on a nonrecurring basis. The Company has adopted the recognition provisions for non-financial assets and liabilities as of January 1, 2009. See Note 3.

In April 2009, the FASB issued three FSPs intended to provide additional application guidance and enhance disclosures regarding fair value measurements and impairments of securities. The FSPs are effective for interim and annual periods ending after June 15, 2009.

	•		~~ASC 825-10 (FSP No. 107-1 and APB No. 28-1),~~~~Interim Disclosures about Fair Value of Financial Instruments,~~~~expands the fair value disclosures required for all financial instruments within the scope of SFAS No. 107 to interim periods.~~

	•		~~ASC 820-10 (FSP No. 157-4),~~~~Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,~~~~which applies to all assets and liabilities, i.e., financial and nonfinancial, reemphasizes that the objective of fair value remains~~

			unchanged (i.e., an exit price notion). The FSP provides application guidance on measuring fair value when the volume and level of activity has significantly decreased and identifying transactions that are not orderly. The FSP also emphasizes that an entity cannot presume that an observable transaction price is not orderly even when there has been a significant decline in the volume and level of activity.

	•		~~ASC 320-10 (FSP No. 115-2 and SFAS No. 124-2),~~~~Recognition and Presentation of Other-Than-Temporary Impairments,~~is intended to bring greater consistency to the timing of impairment recognition, and provide greater clarity to investors about the credit and noncredit components of impaired debt securities that are not expected to be sold.

~~The Company adopted these FSPs in the second quarter of 2009. The adoption of these FSPs did not have a significant impact on Detroit Edison’s consolidated financial statements.~~

~~Noncontrolling Interests in Consolidated Financial Statements~~

~~In December 2007, the FASB issued ASC 810-10 (SFAS No. 160,~~~~Noncontrolling Interests in Consolidated Financial Statements — an Amendment of ARB No. 51).~~This standard establishes accounting and reporting standards for the noncontrolling interests in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. The standard is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2008. This standard shall be applied prospectively as of the beginning of the fiscal year in which this standard is initially applied, except for the presentation and disclosure requirements which shall be applied retrospectively for all periods presented. The Company adopted the standard as of January 1, 2009. Adoption of ASC 810-10 (SFAS No. 160) did not have a material effect on the Company’s consolidated financial statements.

~~Disclosures about Derivative Instruments and Guarantees~~

~~In March 2008, the FASB issued ASC 815-10 (SFAS No. 161,~~~~Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133)~~. This standard requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under ASC 815 (SFAS No. 133) and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows.

The standard is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. Comparative disclosures for earlier periods at initial adoption are encouraged but not required. The Company adopted the standard effective January 1, 2009. See Note 3.

~~Subsequent Events~~

~~In May 2009, the FASB issued ASC 855 (SFAS No. 165,~~~~Subsequent Events)~~. This standard provides guidance on management’s assessment of subsequent events. The new standard clarifies that management must evaluate, as of each reporting period, events or transactions that occur after the balance sheet date “through the date that the financial statements are issued or are available to be issued.” Management must perform its assessment for both interim and annual financial reporting periods. The standard does not significantly change the Company’s practice for evaluating such events. ASC 855 (SFAS No. 165) is effective prospectively for interim and annual periods ending after June 15, 2009 and requires disclosure of the date subsequent events are evaluated through. The Company adopted the standard during the quarter ended June 30, 2009. See Note 1.

~~Transfers of Financial Assets~~Variable Interest Entity

In June 2009, the FASB issued ~~SFAS No. 166,~~~~Accounting for Transfers of Financial Assets — an amendment of FASB No. 140 (not yet effective nor codified).~~This standard amends ASC 860, (SFAS No. 140), eliminates the concept of a “qualifying special-purpose entity” (QSPE) and associated guidance and creates more stringent conditions for reporting a transfer of a portion of a financial asset as a sale. SFAS No. 166 is intended to enhance

reporting in the wake of the subprime mortgage crisis and the deterioration in the global credit markets. The standard is effective for financial asset transfers occurring after the beginning of an entity’s first fiscal year that begins after November 15, 2009. Early adoption is prohibited. SFAS No. 166 must be applied prospectively to transfers of financial assets occurring on or after its effective date. The adoption of SFAS No. 166 will not have a material impact on Detroit Edison’s consolidated financial statements.

~~Variable Interest Entities (VIE)~~

~~In June 2009, the FASB issued SFAS No. 167,~~ASU 2009-17,Amendments to FASB Interpretation 46(R) ~~(not yet effective nor codified)~~.This standard amends the consolidation guidance that applies to VIEs and affects the overall consolidation analysis under ASC ~~810 -10(Interpretation 46(R))~~810-10,Consolidation. The amendments to the consolidation guidance affect all entities and enterprises currently within the scope of ASC 810-10, as well as qualifying special purpose entities that are currently outside the scope of ASC 810-10. Accordingly, the Company ~~will need to reconsider~~reconsidered its previous ASC 810-10 conclusions, including (1) whether an entity is a VIE, (2) whether the enterprise is the VIE’s primary beneficiary, and (3) what type of financial statement disclosures are required. ~~SFAS No. 167~~ASU 2009-17 is effective as of the beginning of the first fiscal year that begins after November 15, 2009. ~~Early adoption is prohibited.~~ The Company ~~is currently assessing~~adopted the ~~impact~~standard as of ~~SFAS No. 167 on Detroit Edison’s consolidated financial statements.~~January 1, 2010.

Fair Value Measurements and Disclosures

In ~~September and August 2009, respectively,~~January 2010, the FASB issued ~~Accounting Standards Update (ASU) 2009-12,~~ASU 2010-06,Improving Disclosures about Fair Value Measurements. ASU 2010-06 requires details of transfers in and ~~Disclosure,~~out of Level 1 and ~~ASU 2009-05,~~~~Measuring Liabilities at Fair Value.~~~~ASU 2009-12 provides guidance for~~2 fair value measurements and the gross presentation of activity within the Level 3 fair value measurement roll forward. The new disclosures are required of ~~investments in certain~~all entities that ~~calculate the net asset value per share (or its equivalent) determined as of the reporting entity’s measurement date. Certain attributes of the investment (such as restrictions on redemption)~~are required to provide disclosures about recurring and ~~transaction prices from principal-to-principal or brokered transactions will not be considered in measuring the~~nonrecurring fair value ~~of the investment.~~measurements. The ~~amendments in this standard are effective for interim and annual periods ending after December 15, 2009.~~

ASU 2009-05 provides guidance on measuring the fair value of liabilities under ASC 820. This standard clarifies that in the absence of a quoted price in an active market for an identical liability at the measurement date, companies may apply approaches that use the quoted price of an investment in the identical liability or similar liabilities traded as assets or other valuation techniques consistent with the fair-value measurement principles in ASC 820. The standard permits fair value measurements of liabilities that are based on the price that a company would pay to transfer the liability to a new obligor. It also permits a company to measure the fair value of liabilities using an estimate of the price it would receive to enter into the liability at that date. The new standard is effective for interim and annual periods beginning after August 27, 2009 and applies to all fair-value measurements of liabilities required by GAAP. The Company ~~is currently assessing the impact of ASU 2009-12 and ASU 2009-05 on Detroit Edison’s consolidated financial statements.~~

~~Revenue Arrangements~~

~~In September 2009, the FASB ratified Issue No. 08-1,~~~~Revenue Arrangements with Multiple Deliverables (not yet codified).~~Issue 08-1 provides principles and application guidance on whether multiple deliverables exist, how the arrangement should be separated, and the consideration allocated. This standard shall be applied prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with earlier application permitted. Alternatively, an entity may elect to adopt this standard on a retrospective basis. The Company is currently assessing the impact of Issue No. 08-1 on Detroit Edison’s consolidated financial statements.

~~NOTE 3 — FINANCIAL AND OTHER DERIVATIVE INSTRUMENTS AND FAIR VALUE~~

~~Financial and Other Derivative Instruments~~

The Company recognizes all derivatives on the Consolidated Statement of Financial Position at their fair value unless they qualify for certain scope exceptions, including normal purchases and normal sales exception. Further, derivatives that qualify and are designated for hedge accounting are classified as either hedges of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge), or as hedges of the fair value of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge). For cash flow hedges, the portion of the derivative gain or loss that is effective in offsetting the change in the value of the underlying exposure is deferred in Accumulated other comprehensive income and later

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~~reclassified into earnings when~~adopted ASU 2010-06 effective January 1, 2010, except for the ~~underlying transaction occurs. For~~gross presentation of the Level 3 fair value ~~hedges, changes in fair values~~measurement roll forward which is effective for ~~both the derivative~~annual reporting periods beginning after December 15, 2010 and ~~the underlying hedged exposure are recognized in earnings each period. Gains and losses from the ineffective portion of any hedge are recognized in earnings immediately.~~for interim reporting periods within those years.

The Company’s primary market risk exposure is associated with commodity prices, credit and interest rates. The Company has risk management policies to monitor and manage market risks. The Company uses derivative instruments to manage some of the exposure. Contracts the Company typically classifies as derivative instruments include power, certain coal forwards, futures, options and swaps.

Detroit Edison generates, purchases, distributes and sells electricity. Detroit Edison uses forward energy and capacity contracts to manage changes in the price of electricity and fuel. Substantially all of these contracts meet the normal purchases and sales exemption and are therefore accounted for under the accrual method. Other derivative contracts are recoverable through the PSCR mechanism when realized. This results in the deferral of unrealized gains and losses as Regulatory assets or liabilities, until realized.

~~The following represents the fair value of derivative instruments as of September 30, 2009:~~

Balance Sheet Fair
Location Value
FTRs Other current assets $ 1
Emissions Other current liabilities (2 )
Emissions Other non-current liabilities (7 )

Total derivatives not designated as hedging instrument
$ (8 )

Total derivatives:

Current $ (1 )
Noncurrent (7 )

Total derivatives as reported
$ (8 )

The effect of derivative instruments recoverable through the PSCR mechanism when realized on the Consolidated Statement of Financial Position for the three and nine months ended September 30, 2009 is as follows:

Three Months
Ended Nine Months Ended
Location of Gain Gain (Loss) Gain (Loss)
(Loss) Recognized Recognized in Recognized in
in Regulatory Regulatory Assets Regulatory Assets
Assets / Liabilities / Liabilities on / Liabilities on
On Derivative Derivative Derivative
FTRs and Emissions Regulatory Asset $ (1 ) $ (13 )
FTRs and Emissions Regulatory Liability — (3 )

Total
$ (1 ) $ (16 )

~~The following represents the cumulative gross volume of derivative contracts outstanding as of September 30, 2009:~~


~~Commodity~~	~~Number of Units~~
~~Emissions (Tons)~~		~~5,236~~
~~FTRs (MW)~~		~~100,338~~

~~Fair Value~~NOTE 4 — FAIR VALUE

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in a principal or most advantageous market. Fair value is a market-based measurement that is determined based on inputs, which refer broadly to assumptions that market ~~participants’~~participants use in pricing assets or liabilities. These inputs can be readily observable, market corroborated or generally unobservable inputs. The Company makes certain assumptions it believes that market participants would use in pricing assets or liabilities, including assumptions about risk, and the risks inherent in the inputs to valuation techniques. Credit risk of the Company and its counterparties is incorporated in the valuation of assets and liabilities through the use of credit reserves, the impact of which is immaterial for the three ~~and nine~~ months ended

~~September 30,~~ March 31, 2010 and the year ended December 31, 2009. The Company believes it uses valuation techniques that maximize the use of observable market-based inputs and minimize the use of unobservable inputs.

A fair value hierarchy has been established, which prioritizes the inputs to valuation techniques used to measure fair value in three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). In some cases, the inputs used to measure fair value might fall in different levels of the fair value hierarchy. All assets and liabilities are required to be classified in their entirety based on the lowest level of input that is significant to the fair value measurement in its entirety. Assessing the significance of a particular input may require judgment considering factors specific to the asset or liability, and may affect the valuation of the asset or liability and its placement within the fair value hierarchy. The Company classifies fair value balances based on the fair value hierarchy defined as follows:

	•		•Level 1 — Consists of unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access as of the reporting date.

	•		Level 2 — Consists of inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.

	•		Level 3 — Consists of unobservable inputs for assets or liabilities whose fair value is estimated based on internally developed models or methodologies using inputs that are generally less readily observable and supported by little, if any, market activity at the measurement date. Unobservable inputs are developed based on the best available information and subject to cost-benefit constraints.

•Level 2 — Consists of inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.

•Level 3 — Consists of unobservable inputs for assets or liabilities whose fair value is estimated based on internally developed models or methodologies using inputs that are generally less readily observable and supported by little, if any, market activity at the measurement date. Unobservable inputs are developed based on the best available information and subject to cost-benefit constraints.

The following table presents assets and liabilities measured and recorded at fair value on a recurring basis as of ~~September 30, 2009:~~March 31, 2010:


								Net Balance at										Net Balance at
(in Millions)	Level 1		Level 2			Level 3		September 30, 2009			Level 1		Level 2			Level 3		March 31, 2010
Assets:
Cash equivalents	$	50	$	—		$	—	$	50		$	137	$	—		$	—	$	137
Nuclear decommissioning trusts and other investments		558		320			—		878
Derivative assets		—		—			1		1
Nuclear decommissioning trusts												577		282			—		859
Other investments												43		54			—		97
Derivative assets — FTRs												—		—			1		1

Total	$	608	$	320		$	1	$	929		$	757	$	336		$	1	$	1,094

Liabilities:
Derivative liabilities		—		(9	)		—		(9	)
Derivative liabilities — Emissions												—		(8	)		—		(8	)

Total	$	—	$	(9	)	$	—	$	(9	)	$	—	$	(8	)	$	—	$	(8	)


Net Assets at September 30, 2009	$	608	$	311		$	1	$	920
Net Assets at March 31, 2010											$	757	$	328		$	1	$	1,086


Assets:
Current(1)											$	137	$	—		$	1	$	138
Noncurrent(2)												620		336			—		956

Total Assets											$	757	$	336		$	1	$	1,094

Liabilities:
Current											$	—	$	(5	)	$	—	$	(5	)
Noncurrent												—		(3	)		—		(3	)

Total Liabilities											$	—	$	(8	)	$	—	$	(8	)


Net Assets at March 31, 2010											$	757	$	328		$	1	$	1,086


(1)		Includes $137 million of cash equivalents that are included in the Consolidated Statements of Financial Position in Cash and Cash Equivalents.

(2)		Includes $97 million of other investments that are included in the Consolidated Statements of Financial Position in Other Investments.

The following table presents the fair value reconciliation of Level 3 ~~derivative~~ assets and liabilities measured at fair value on a recurring basis for the three ~~and nine~~ months ended ~~September 30, 2009~~March 31, 2010 and ~~2008:~~2009:

Three Months Ended Nine Months Ended
September 30 September 30
(in Millions) 2009 2008 2009 2008
Asset balance as of beginning of period $ 2 $ 4 $ 4 4
Changes in fair value recorded in income — (1 ) — 2
Changes in fair value recorded in regulatory assets/liabilities (1 ) — (2 ) —
Purchases, issuances and settlements — — 1 (3 )
Transfers in/out of Level 3 — — (2 ) —

Asset balance as of September 30 $ 1 $ 3 $ 1 $ 3

The amount of total gains (losses) included in regulatory assets and liabilities attributed to the change in unrealized gains (losses) related to assets and liabilities held at September 30, 2009 and 2008 $ (1 ) $ — $ 2 $ 3


	Three Months Ended
	March 31
(in Millions)	2010			2009
Asset balance as of January 1	$	2			4
Changes in fair value recorded in regulatory assets/liabilities		(1	)		(2	)
Transfers in/out of Level 3		—			(2	)

Asset balance as of March 31	$	1		$	—

The amount of total gains (losses) included in regulatory assets and liabilities attributed to the change in unrealized gains (losses) related to regulatory assets and liabilities held at March 31, 2010 and 2009	$	—		$	1

Transfers in/out of Level 3 represent existing assets or liabilities that were either previously categorized as a higher level and for which the inputs to the model became unobservable or assets and liabilities that were previously classified as Level 3 for which the lowest significant input became observable during the period. Transfers in/out of Level 3 are reflected as if they had occurred at the beginning of the period. No significant transfers between Levels 1, 2 or 3 occurred in the three months ended March 31, 2010. Transfers out of Level 3 in 2009 reflect increased reliance on broker quotes for certain transactions.

Cash Equivalents

Cash equivalents include investments with maturities of three months or less when purchased. The cash equivalents shown in the fair value table are comprised of investments in money market funds. The fair values of the shares of these funds are based on observable market prices and, therefore, have been categorized as Level 1 in the fair value hierarchy.

Nuclear Decommissioning Trusts and Other Investments

The nuclear decommissioning ~~trust fund investments have been established to satisfy Detroit Edison’s nuclear decommissioning obligations. The nuclear decommissioning~~ trusts and other ~~fund~~ investments hold debt and equity securities directly and indirectly through commingled funds and institutional mutual funds. Exchange-traded debt and equity securities held directly are valued using quoted market prices onin actively traded markets. The commingled funds and institutional mutual funds which hold exchange-traded equity or debt securities are valued based on the underlying securities, using quoted prices in actively traded markets. Non-exchange-traded fixed income securities are valued based upon quotations available from brokers or pricing services. For non-exchange traded fixed income securities, the trustees receive prices from pricing services. A primary price source is identified by asset type, class or issue for each security. The trustees monitor prices supplied by pricing services and may use a supplemental price source or change the primary price source of a given security if the trustees challenge an assigned price and determine that another price source is considered to be preferable. Detroit Edison has obtained an understanding of how these prices are derived, including the nature and observability of the inputs used in deriving

such prices. Additionally, Detroit Edison selectively corroborates the fair values of securities by comparison of market-based price sources.

Derivative Assets and Liabilities

Derivative assets and liabilities are comprised of physical and financial derivative contracts, including futures, forwards, options and swaps that are both exchange-traded and over-the-counter traded contracts. Various inputs are used to value derivatives depending on the type of contract and availability of market data. Exchange-traded derivative contracts are valued using quoted prices in active markets. The Company considers the following criteria in determining whether a market is considered active: frequency in which pricing information is updated, variability in pricing between sources or over time and the availability of public information. Other derivative contracts are valued based upon a variety of inputs including commodity market prices, broker quotes, interest rates, credit ratings, default rates, market-based seasonality and basis differential factors. The Company monitors the prices that are supplied by brokers and pricing services and may use a supplemental price source or change the primary price source of an index if prices become unavailable or another price source is determined to be more representative of fair value. The Company has obtained an understanding of how these prices are derived. Additionally, the Company selectively corroborates the fair value of its transactions by comparison of market-based price sources. Mathematical valuation models are used for derivatives for which external market data is not readily ~~observable.~~observable, such as contracts which extend beyond the actively traded reporting period.

Fair Value of Financial Instruments

The fair value of long-term debt is determined by using quoted market prices when available and a discounted cash flow analysis based upon estimated current borrowing rates when quoted market prices are not available. The table below shows the fair value relative to the carrying value for long-term debt securities. Certain other financial instruments, such as notes payable, customer deposits and notes receivable are not shown as carrying value approximates fair value. See Note 5 for further information on financial and derivative instruments.

~~September 30, 2009~~March 31, 2010

December 31, ~~2008~~2009

Fair Value

Carrying Value

Fair Value

Carrying Value

Long-Term Debt

$~~5.3~~5.1 billion

$4.9 billion

$5.2 billion

$5.0 billion

~~$5.0 billion~~

~~$5.2 billion~~

~~Investments in Debt and Equity Securities~~Nuclear Decommissioning Trust Funds

Detroit Edison has a legal obligation to decommission its nuclear power plants following the expiration of their operating licenses. This obligation is reflected as an asset retirement obligation on the Consolidated Statements of Financial Position. See Note 6 for additional information.

The ~~Company generally classifies investments in debt~~NRC has jurisdiction over the decommissioning of nuclear power plants and ~~equity securities as either trading or available-for-sale~~requires decommissioning funding based upon a formula. The MPSC and ~~has recorded such investments at market value with unrealized gains or losses included in earnings or in other comprehensive income or loss, respectively. Changes in~~FERC regulate the ~~fair value~~recovery of costs of decommissioning nuclear power plants and both require the use of external trust funds to finance the decommissioning of Fermi 2. Rates approved by the MPSC provide for the recovery of decommissioning costs of Fermi 2 ~~nuclear~~and the disposal of low-level radioactive waste. Detroit Edison is continuing to fund FERC jurisdictional amounts for decommissioning ~~investments~~even though explicit provisions are ~~recorded as adjustments~~not included in FERC rates. The Company believes the MPSC and FERC collections will be adequate to ~~regulatory~~fund the estimated cost of decommissioning using the NRC formula. The decommissioning assets, oranticipated earnings thereon and future revenues from decommissioning collections will be used to decommission Fermi 2. The Company expects the liabilities ~~due~~ to ~~a recovery mechanism from~~be reduced to zero at the conclusion of the decommissioning activities. If amounts remain in the trust funds for Fermi 2 following the completion of the decommissioning activities, those amounts will be disbursed based on rulings by the MPSC and FERC.

The decommissioning of Fermi 1 is funded by Detroit Edison. Contributions to the Fermi 1 trust are discretionary.

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customers. The Company’s investments are reviewed for impairment each reporting period. If the assessment indicates that the impairment is other than temporary, a loss is recognized resulting in the investment being written down to its estimated fair value.

~~Decommissioning~~

The following table summarizes the fair value of the nuclear decommissioning trust fund ~~assets.~~assets:

September 30 December 31
(in Millions) 2009 2008
Fermi 2 $ 762 $ 649
Fermi 1 3 3
Low level radioactive waste 26 33

Total $ 791 $ 685

At September 30, 2009, investments in the nuclear decommissioning trust funds consisted of approximately 51% in publicly traded equity securities, 48% in fixed debt instruments and 1% in cash equivalents. At December 31, 2008, investments in the nuclear decommissioning trust funds consisted of approximately 42% in publicly traded equity securities, 57% in fixed income and 1% in cash equivalents. The debt securities at both September 30, 2009 and December 31, 2008 had an average maturity of approximately 5 years.


	March 31,		December 31,
(in Millions)	2010		2009
Fermi 2	$	831	$	790
Fermi 1		2		3
Low level radioactive waste		26		24

Total	$	859	$	817

The costs of securities sold are determined on the basis of specific identification. The following table sets forth the gains and losses and proceeds from the sale of securities by the nuclear decommissioning trust funds:


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30						September 30						March 31
(in Millions)	2009			2008			2009			2008			2010			2009
Realized gains	$	9		$	7		$	28		$	18		$	9		$	17
Realized losses	$	(12	)	$	(15	)	$	(45	)	$	(31	)	$	(8	)	$	(26	)
Proceeds from sales of securities	$	55		$	68		$	237		$	180		$	59		$	113

~~2009 Electric Rate Case Filing~~The Company recognizes all derivatives on the Consolidated Statements of Financial Position at their fair value unless they qualify for certain scope exceptions, including the normal purchases and normal sales exception. Further, derivatives that qualify and are designated for hedge accounting are classified as either hedges of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge), or as hedges of the fair value of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge). For cash flow hedges, the portion of the derivative gain or loss that is effective in offsetting the change in the value of the underlying exposure is deferred in Accumulated other comprehensive income and later reclassified into earnings when the underlying transaction occurs. For fair value hedges, changes in fair values for the derivative are recognized in earnings each period. Gains and losses from the ineffective portion of any hedge are recognized in earnings immediately. For derivatives that do not qualify or are not designated for hedge accounting, changes in fair value are recognized in earnings each period.

~~2009.~~ The ~~proposed revenue increase~~effect of derivative instruments recoverable through the PSCR mechanism when realized on the Consolidated Statements of Financial Position is ~~necessary~~a $1 million loss related to FTRs recognized in ~~order to properly implement Detroit Edison’s 20-year renewable energy plan to address~~Regulatory liabilities for the ~~provisions~~three months ended March 31, 2010.

The following represents the cumulative gross volume of ~~2008 PA 295, to deliver new, cleaner, renewable electric generation to its customers, to further diversify Detroit Edison’s and the State~~derivative contracts outstanding as of Michigan’s sources of electric supply, and to address the state and national goals of increasing energy independence. An MPSC order was issued June 2, 2009 approving the renewable energy plan and customer surcharges. The Renewable Energy Plan surcharges became effective in September 2009.March 31, 2010:


Commodity	Number of Units
Emissions (Tons)		4,486
FTRs (MW)		6,142

NOTE 6 — ASSET RETIREMENT OBLIGATIONS

A reconciliation of the asset retirement obligations for the three months ended March 31, 2010 follows:


(in Millions)
Asset retirement obligations at January 1, 2010	$	1,300
Accretion		21
Liabilities incurred		9
Liabilities settled		(1	)

Asset retirement obligations at March 31, 2010		1,329
Less amount included in current liabilities		(13	)

	$	1,316

Substantially all of the asset retirement obligations represent nuclear decommissioning liabilities that are funded through a surcharge to electric customers over the life of the Fermi 2 nuclear plant.

NOTE 7 — REGULATORY MATTERS

Energy Optimization Plans

In March 2009, Detroit Edison filed an Energy Optimization Plan with the MPSC as required under 2008 PA 295. The Energy Optimization Plan ~~applications are~~application is designed to help each customer class reduce their electric usage by: (1) building customer awareness of energy efficiency options and (2) offering a diverse set of programs and participation options that result in energy savings for each customer class. In March 2010, Detroit Edison filed an amended Energy Optimization Plan with the MPSC. Detroit Edison’s amended Energy Optimization Plan application proposed the recovery of energy optimization expenditures for the period ~~2009-2011~~2010-2015 of ~~$134~~$406 million and further requests approval of surcharges that are designed to recover these costs. ~~An MPSC order was issued June 2,~~In April 2010, Detroit Edison filed its 2009 ~~approving the~~ Energy Optimization ~~Plans~~reconciliation. This filing reconciles 2009 actual Energy Optimization billed revenues with 2009 actual Energy Optimization costs by rate class. Any 2009 over/under recovery of ~~$117 million~~costs have been carried forward and reflected as part of the utility’s March 2010 amended Energy Optimization filing. Also addressed in this filing is the effectiveness of the 2009 Energy Optimization programs relative to legislative targets for ~~Detroit Edison. The surcharges to recover these costs were implemented effective June 3, 2009. A new financial~~energy savings and the calculation of the 2009 performance incentive ~~proposal was filed on July 2, 2009. An MPSC order was issued September 29, 2009 approving incentive mechanisms~~ for ~~Detroit Edison. The mechanism allows a maximum payout of 15% of program expenditures when~~ the utility ~~meets~~based on meeting or ~~exceeds~~exceeding legislative targets.

Detroit Edison Uncollectible Expense True-Up Mechanism (UETM)

In March 2010, Detroit Edison filed an application with the ~~savings target by 15%.~~MPSC for approval of its UETM for 2009 requesting recovery of approximately $4.5 million consisting of costs related to 2009 uncollectible expense and associated carrying charges.

Power Supply Cost Recovery Proceedings

~~2008 Plan Year —~~~~In September 2007, Detroit Edison filed its 2008~~The PSCR ~~plan case seeking approval~~process is designed to allow us to recover all of a levelized PSCR factor of 9.23 mills/kWh above the amount included in base rates for all PSCR customers. Also included in the filing was a request for approval of the Company’s emission compliance strategy which included pre-purchases of emission allowances as well as a request for pre-approval of a contract for capacity and energy associated with a renewable (wind) energy project. On January 31, 2008, Detroit Edison filed a revised PSCR plan case seeking approval of a levelized PSCR factor of 11.22 mills/kWh above the amount included in base rates for all PSCR customers. The revised filing supports a 2008our power supply ~~expense forecast of $1.4 billion~~costs if incurred under reasonable and includes $43 million for the recovery of a projected 2007 PSCR under-collection. On July 29, 2008, the MPSC issued a temporary order approving Detroit Edison’s request to increase the PSCR factor to 11.22 mills/kWh. In January 2009, the MPSC approved the Company’s 2008 PSCR planprudent policies and authorized the Company to charge a maximum PSCR factor of 11.22 mills/kWh for 2008. The Company filed its 2008 PSCR reconciliation case in March 2009. The filing requests recovery of a $19 million PSCR under-collection. In addition, the filing requests authorization to refund its total 2005 PSCR under-collection surcharge at year-end 2008 of $10 million, including interest, to all commercial and industrial customers. Included in the 2008 PSCR reconciliation filing was the Company’s 2008 pension expense mechanism reconciliation that reflects a $50 million over-collection. The Company expects an order in this proceeding in the second quarter of 2010.

~~2009 Plan Year~~— In September 2008, Detroit Edison filed its 2009 PSCR plan case seeking approval of a levelized PSCR factor of 17.67 mills/kWh above the amount included in base rates for residential customers and a levelized PSCR factor of 17.29 mills/kWh above the amount included in base rates for commercial and industrial customers. The Company is supporting a totalpractices. Our power supply expense forecast of $1.73 billion. The plan also includes approximately $69 million for the recovery of its projected 2008 PSCR under-collection from all customers and approximately $12 million for the refund of its 2005 PSCR reconciliation surcharge over-collection to commercial and industrial customers only. Also included in the filing is a request for approval of the Company’s expense associated with the use of urea in the selective catalytic reduction units at Monroe power plant as well as a request for approval of a contract for capacity and energy associated with a renewable (wind) energy project. The Company’s PSCR Plan will allow the Company to recover its reasonably and prudently incurred power supply expense including,costs include fuel costs, purchased and net interchange power costs, nitrogen oxide and sulfur dioxide emission ~~allowance~~allowances costs, transmission costs and MISO costs. The ~~Company self-implemented a~~MPSC reviews these costs, policies and practices for prudence in annual plan and reconciliation filings.

The following table summarizes Detroit Edison’s PSCR factor of 11.64 mills/kWh above the amount included in base rates for residential customers and a PSCR factor of 11.22 mills/kWh above the amount included in base rates for commercial and industrial customers on bills rendered in January 2009. Subsequently, as a result of the December 23, 2008 MPSC order in the 2007 Detroit Edison rate case, the Company implemented a PSCR factor of 3.18 mills/kWh below the amount included in base rates for residential customers and a PSCR factor of 3.60 mills/kWh below the amount included in base rates for commercial and

industrial customers for service rendered effective January 14, 2009. The Company self-implemented a PSCR factor of 10.18 mills/kWh below the amount included in base rates for residential customers and a PSCR factor of 10.46 mills/kWh below the amount included in base rates for commercial and industrial customers for bills rendered effective August 1, 2009. On June 29, 2009, the parties to this proceeding executed a Settlement Agreement in this matter agreeing to maximum PSCR factors of 1.67 mills/kWh for residential customers and 1.35 mills/kWh for commercial and industrial customers and otherwise resolving this 2009 PSCR Plan case. The Company awaits an MPSC order approving the settlement.

~~2010 Plan Year~~~~— In September 2009, Detroit Edison filed its 2010 PSCR plan case seeking approval of a levelized PSCR factor of 5.64 mills/kWh below the amount included in base rates for all PSCR customers. The~~reconciliation filing ~~supports a 2010 power supply expense forecast of $1.2 billion. Also included in the filing is a request for approval of the Company’s expense associated~~currently pending with the use of urea in the selective catalytic reduction units at Monroe power plant as well as a request for approval of a contract for capacity and energy associated with a wind energy project. The Company’s PSCR Plan will allow the Company to recover its reasonably and prudently incurred power supply expense including, fuel costs, purchased and net interchange power costs, nitrogen oxide and sulfur dioxide emission allowance costs, transmission costs and MISO costs. The Company has also requested authority to recover transfer prices for renewable energy, coke oven gas expense, and other potential expenses.MPSC:

~~Merger Control Premium Costs~~

In July 2007, the State of Michigan Court of Appeals published its decision with respect to an appeal by Detroit Edison and others of certain provisions of a November 2004 MPSC order, including reversing the MPSC’s denial of recovery of merger control premium costs. In its published decision, the Court of Appeals held that Detroit Edison is entitled to recover its allocated share of the merger control premium and remanded this matter to the MPSC for further proceedings to establish the precise amount and timing of this recovery. Other parties filed requests for leave to appeal to the Michigan Supreme Court from the Court of Appeals decision and in September 2008, the Michigan Supreme Court granted the requests to address the merger control premium as well as the recovery of transmission costs through the PSCR. On May 1, 2009, the Michigan Supreme Court issued an order reversing the Court of Appeals decision with respect to recovery of the merger control premium, and reinstated the MPSC’s decision excluding the control premium costs from Detroit Edison’s general rates. The Court affirmed the lower court’s decision upholding the right of Detroit Edison to recover electric transmission costs through the Company’s PSCR clause. The Company requested rehearing of the Supreme Court order on the merger premium and the Michigan Attorney General requested rehearing of the transmission portion of the order. On June 26, 2009, the Michigan Supreme Court denied request for a rehearing.


			PSCR Cost of	Description of Net
PSCR Year	Date Filed	Net Over-recovery	Power Sold	Over-recovery
2009	March 2010	$15.6 million	$1.1 billion	The total amount reflects an over-recovery of $10.9 million, plus $4.7 million in accrued interest due to customers

Other

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

NOTE ~~5 — SHAREHOLDER’S EQUITY~~

~~In March 2009, DTE Energy made a capital contribution of $250 million to the Company.~~

~~NOTE 6~~8 — LONG-TERM DEBT

~~Debt Issuances~~

In ~~2009, the Company has issued or remarketed the following long-term debt:~~

(March 2010, Detroit Edison agreed to issue and sell $300 million of 4.89%, 10-year Senior Notes to a group of institutional investors in ~~Millions)~~

Month Issued Type Interest Rate Maturity Amount
April Tax-Exempt Revenue Bonds (1)(2) 6.00 % 2036 $ 69
June Tax-Exempt Revenue Bonds (1)(3) 5.625 % 2020 32
June Tax-Exempt Revenue Bonds (1)(4) 5.25 % 2029 60
June Tax-Exempt Revenue Bonds (1)(5) 5.50 % 2029 59

$ 220


~~(1)~~		~~Detroit Edison Tax-Exempt Revenue Bonds are issued by a public body that loans the proceeds to Detroit Edison on terms substantially mirroring the Revenue Bonds.~~

~~(2)~~		~~Proceeds were used to refund existing Tax-Exempt Revenue Bonds.~~

~~(3)~~		~~These Tax-Exempt Revenue Bonds were converted from a variable rate mode and remarketed in a fixed rate mode to maturity.~~

~~(4)~~		~~These Tax-Exempt Revenue Bonds were converted from a variable rate mode and remarketed in a fixed rate mode to maturity with a five-year mandatory put.~~

~~(5)~~		~~These Tax-Exempt Revenue Bonds were converted from a variable rate mode and remarketed in a fixed rate mode to maturity with a seven-year mandatory put.~~

~~Debt Retirements~~a private placement transaction. The notes are expected to close and ~~Redemptions~~

~~In 2009, the following debt has been retired through optional redemption:~~

(fund in ~~Millions)~~September 2010 with proceeds used to repay a portion of Detroit Edison’s 6.125% Senior Notes due October 2010.

Month Retired Type Interest Rate Maturity Amount
April Tax-Exempt Revenue Bonds (1) Variable 2036 $ 69

$ 69


~~(1)~~		~~These Tax-Exempt Revenue Bonds were redeemed with the proceeds from the issuance of new Detroit Edison Tax-Exempt Revenue Bonds.~~

NOTE 79 — SHORT-TERM CREDIT ARRANGEMENTS AND BORROWINGS

Detroit Edison has a $69 million, five-year unsecured revolving credit agreement expiring in October 2010 and a $212 million, two-year unsecured revolving credit agreement expiring in April 2011. The five-year and two-year ~~revolving~~ credit facilities are with a syndicate of 22 banks and may be ~~utilized~~used for general corporate borrowings, but are intended to provide liquidity support for our commercial paper program. No one bank provides more than 8.5% of the ~~combined credit facilities.~~commitment in any facility. Borrowings under the facilities are available at prevailing short-term interest rates. The above agreements require usthe Company to maintain a total funded debt to capitalization ratio, as defined in the agreements, of no more than 0.65 to 1. At March 31, 2010, the debt to total capitalization ratio ~~of no more than 0.65~~for Detroit Edison is 0.51 to 1. Should we have delinquent obligations of at least $50 million to any ~~creditor,~~creditor; such delinquency will be considered a default under our credit agreements. ~~Detroit Edison is currently in compliance with its covenants.~~

NOTE 8 10—COMMITMENTS AND CONTINGENCIES

Environmental

~~Electric Utility~~

Air— Detroit Edison is subject to EPA ozone transport and acid rain regulations that limit power plant emissions of sulfur dioxide and nitrogen oxides. Since 2005, EPA and the State of Michigan have issued additional emission reduction regulations ~~and continue to develop additional rules and emission standards~~ relating to ozone, fine particulate, regional haze and mercury air pollution. The new rules will lead to additional controls on fossil-fueled power plants to reduce nitrogen oxide, sulfur dioxide and mercury emissions. To comply with these requirements, Detroit Edison has spent approximately ~~$1.4~~$1.5 billion through ~~2008.~~2009. The Company estimates Detroit ~~Edison’s~~Edison will make future undiscounted capital expenditures atof up to ~~approximately $100~~$73 million in ~~2009~~2010 and up to ~~approximately $2.3~~$2.2 billion of additional capital expenditures through 2019 based on current regulations. Further, additional rulemakings are expected over the next few years which could require additional controls for sulfur dioxide, nitrogen oxides and hazardous air pollutants. It is not possible to quantify the impact of those expected rulemakings at this time.

believe that the plants identified by the EPA have complied with applicable regulations. Depending upon the outcome of our discussions with the EPA regarding the NOV/FOV, the EPA could bring legal action against Detroit Edison. We could also be required to install additional pollution control equipment at some or all of the power plants in question, engage in Supplemental Environmental Programs, and/or pay fines. We cannot predict the financial impact or outcome of this matter, or the timing of its resolution.

Water— In response to an EPA regulation, Detroit Edison is required to examine alternatives for reducing the environmental impacts of the cooling water intake structures at several of its facilities. Based on the results of ~~the~~completed studies ~~to be conducted over the next several years,~~and expected future studies, Detroit Edison may be required to install additional control technologies to reduce the impacts of the water intakes. Initially, it was estimated that Detroit Edison could incur up to approximately $55 million over the four to six years subsequent to 2008 in additional capital expenditures to comply with these requirements. However, a January 2007 circuit court decision remanded back to the EPA several provisions of the federal regulation that ~~may result~~has resulted in a delay in compliance dates. The decision also raised the possibility that Detroit Edison may have to install cooling towers at some facilities at a cost substantially greater than was initially estimated for other mitigative technologies. In 2008, the Supreme Court agreed to review the remanded cost-benefit analysis provision of the ~~rule. In~~rule and in April 2009 ~~the Supreme Court ruled that a cost-benefit analysis is a permissible~~upheld EPA’s use of this provision ~~of the rule.~~in determining best technology available for reducing environmental impacts. Concurrently, the EPA continues to develop a revised rule, a draft of which is expected to be published ~~later in 2009.~~by summer 2010. The EPA has also proposed an information collection request to begin a review of steam electric effluent guidelines. It is not possible at this time to quantify the impacts of these developing requirements.

~~Landfill~~— Detroit Edison owns and operates a permitted slurry landfill at the Monroe Power Plant to dispose of fly ash from the coal fired power plant. Detroit Edison performed an engineering analysis in 2009 and identified the need for embankment side slope repairs and reconstruction. The results of the engineering study show that the estimated cost to perform the embankment repairs are $20 million which we expect to incur over the next five years.

Contaminated Sites— Detroit Edison conducted remedial investigations at contaminated sites, including three former manufactured gas plant (MGP) sites. The investigations have revealed contamination related to the by-products of gas manufacturing at each site. In addition to the MGP sites, the Company is also in the process of cleaning up other contaminated sites, including the area surrounding an ash landfill, electrical distribution substations, and ~~several~~ underground and aboveground storage tank locations. The findings of these investigations indicated that the estimated cost to remediate these sites is expected to be incurred over the next several years. At ~~September 30, 2009~~March 31, 2010 and December 31, ~~2008,~~2009, the Company had ~~$10~~$9 million ~~and $12 million, respectively,~~ accrued for remediation.

Landfill— Detroit Edison owns and operates a permitted engineered ash storage facility at the Monroe Power Plant to dispose of fly ash from the coal fired power plant. Detroit Edison performed an engineering analysis in 2009 and identified the need for embankment side slope repairs and reconstruction.

Nuclear Operations

Property Insurance

Detroit Edison maintains several different types of property insurance policies specifically for the Fermi 2 plant. These policies cover such items as replacement power and property damage. The Nuclear Electric Insurance Limited (NEIL) is the primary supplier of the insurance policies.

Detroit Edison maintains a policy for extra expenses, including replacement power costs necessitated by Fermi 2’s unavailability due to an insured event. This policy has a 12-week waiting period and provides an aggregate $490 million of coverage over a three-year period.

Detroit Edison has $500 million in primary coverage and $2.25 billion of excess coverage for stabilization, decontamination, debris removal, repair and/or replacement of property and decommissioning. The combined coverage limit for total property damage is $2.75 billion.

In 2007, the Terrorism Risk Insurance Extension Act of 2005 (TRIA) was extended through December 31, 2014. A major change in the extension is the inclusion of “domestic” acts of terrorism in the definition of covered or “certified” acts. For multiple terrorism losses caused by acts of terrorism not covered under the TRIA occurring within one year after the first loss from terrorism, the NEIL policies would make available to all insured entities up to $3.2 billion, plus any amounts recovered from reinsurance, government indemnity, or other sources to cover losses.

Under the NEIL policies, Detroit Edison could be liable for maximum assessments of up to approximately $28 million per event if the loss associated with any one event at any nuclear plant in the United States should exceed the accumulated funds available to NEIL.

Public Liability Insurance

As of January 1, 2010, as required by federal law, Detroit Edison maintains $375 million of public liability insurance for a nuclear incident. For liabilities arising from a terrorist act outside the scope of TRIA, the policy is subject to one industry aggregate limit of $300 million. Further, under the Price-Anderson Amendments Act of 2005, deferred premium charges up to $117.5 million could be levied against each licensed nuclear facility, but not more than $17.5 million per year per facility. Thus, deferred premium charges could be levied against all owners of licensed nuclear facilities in the event of a nuclear incident at any of these facilities.

Nuclear Fuel Disposal Costs

In accordance with the Federal Nuclear Waste Policy Act of 1982, Detroit Edison has a contract with the U.S. Department of Energy (DOE) for the future storage and disposal of spent nuclear fuel from Fermi 2. Detroit Edison is obligated to pay the DOE a fee of 1 mill per kWh of Fermi 2 electricity generated and sold. The fee is a component of nuclear fuel expense. Delays have occurred in the DOE’s program for the acceptance and disposal of spent nuclear fuel at a permanent repository and the proposed fiscal year 2011 federal budget recommends termination of funding for completion of the government’s long-term storage facility. Detroit Edison is a party in the litigation against the DOE for both past and future costs associated with the DOE’s failure to accept spent nuclear fuel under the timetable set forth in the Federal Nuclear Waste Policy Act of 1982. Detroit Edison currently employs a spent nuclear fuel storage strategy utilizing a fuel pool. We have begun work on an on-site dry cask storage facility which is expected to provide sufficient storage capability for the life of the plant as defined by the original operating license. Issues relating to long- term waste disposal policy and to the disposition of funds contributed by Detroit Edison ratepayers to the federal waste fund await future governmental action.

Guarantees

In ~~January 2003,~~certain limited circumstances, the Company ~~sold~~enters into contractual guarantees. The Company may guarantee another entity’s obligation in the ~~steam heating business~~event it fails to perform. The Company may provide guarantees in certain indemnification agreements. Finally, the Company may provide indirect guarantees for the indebtedness of others.

Detroit Edison ~~to Thermal Ventures II, LP. Under the terms of sale, Detroit Edison~~has guaranteed a bank term loan of ~~$12~~$11 million ~~that was used for capital improvements~~related to the sale of its steam heating ~~system.~~business to Thermal Ventures II, L.P. At ~~September 30, 2009,~~March 31, 2010, the Company has reserves for the entire amount of the bank loan guarantee.

Labor Contracts

There are several bargaining units for the Company’s union employees. The majority of our union employees are under contracts that expire in June 2010 and August 2012.

Purchase Commitments

Detroit Edison has an Energy Purchase Agreement to purchase electricity from the Greater Detroit Resource Recovery Authority (GDRRA). The term of the Energy Purchase Agreement for the purchase of electricity runs through June 2024. The Company estimates electric purchase commitments from 2009 through 2024 will not exceed $300 million in the aggregate.

As of ~~September 30, 2009,~~March 31, 2010, the Company was party to numerous long-term purchase commitments relating to a variety of goods and services required for the Company’s business. These agreements primarily consist of fuel supply commitments and energy trading contracts. The Company estimates that these commitments will be approximately ~~$1.2~~$1.5 billion from ~~2009~~2010 through ~~2024.~~2025. The Company also estimates that ~~2009~~2010 capital expenditures will be approximately ~~$790~~$960 million. The Company has made certain commitments in connection with expected capital expenditures.

Bankruptcies

The Company purchases and sells electricity from and to numerous companies operating in the steel, automotive, energy, retail, financial and other industries. Certain of its customers have filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code. The Company regularly reviews contingent matters relating to these

customers and its purchase and sale contracts and records provisions for amounts considered at risk of probable loss. The Company believes its accrued amounts are adequate for probable loss. The final resolution of these matters may have a material effect on its consolidated financial statements.

The Company provides services to the domestic automotive industry, including General Motors Corporation (GM), Ford Motor Company (Ford) and Chrysler LLC (Chrysler) and many of their vendors and suppliers. Chrysler filed for bankruptcy protection on April 30, 2009. We have reserved approximately $7 million of pre-petition accounts receivable related to Chrysler as of September 30, 2009. GM filed for bankruptcy protection on June 1, 2009. We have no reserves related to GM as of September 30, 2009.

Other Contingencies

The Company is involved in certain other legal, regulatory, 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, additional environmental reviews and investigations, audits, inquiries from various regulators, and pending judicial matters. The Company cannot predict the final disposition of such proceedings. The Company regularly reviews legal matters and records provisions for claims that it can estimate and are considered probable of loss. The resolution of these pending proceedings is not expected to have a material effect on the Company’s operations or financial statements in the periods they are resolved.

See Notes 35 and 47 for a discussion of contingencies related to derivatives and regulatory matters.

NOTE 11 — RETIREMENT BENEFITS AND TRUSTEED ASSETS

The following details the components of net periodic benefit costs for pension benefits and other postretirement benefits:


							Other Postretirement
(in Millions)	Pension Benefits						Benefits
Three Months Ended March 31	2010			2009			2010			2009
Service cost	$	13		$	11		$	13		$	12
Interest cost		38			39			24			26
Expected return on plan assets		(43	)		(41	)		(13	)		(10	)
Amortization of:
Net actuarial loss		18			9			9			12
Prior service cost		1			2			—			—
Net transition liability		—			—			1			1

Net periodic benefit cost	$	27		$	20		$	34		$	41

Pension and other Postretirement Contributions

The Company contributed $200 million to its pension plans during the first quarter of 2010, including a contribution of DTE Energy stock of $100 million (consisting of approximately 2.2 million shares valued at an average price of $44.97 per share).

The Company expects to contribute $90 million to its postretirement medical and life insurance benefit plans during 2010. No contributions were made to the plans in the first quarter of 2010.

Healthcare Legislation

Detroit Edison’s retiree healthcare plan includes the provision of postretirement prescription drug coverage (“coverage”) which is included in the calculation of the recorded other postemployment benefit (OPEB) obligation. Because the Company’s coverage meets certain criteria, Detroit Edison is eligible to receive the Medicare Part D subsidy. With the enactment of the Act, the subsidy will continue to not be subject to tax, but an equal amount of prescription drug coverage expenditures will not be deductible. Income tax accounting rules require the impact of a

2320

change in tax law be recognized in continuing operations in the Consolidated Statements of Operations in the period that the tax law change is enacted.

This change in tax law required a remeasurement of the Deferred Tax Asset related to the OPEB obligation and the Deferred Tax Liability related to the OPEB Regulatory Asset. The net impact of the remeasurement is $18 million and has been deferred as a Regulatory Asset as the traditional rate setting process allows for the recovery of income tax costs.

NOTE 12 — SUPPLEMENTAL CASH FLOW INFORMATION

The following provides detail of the changes in assets and liabilities that are reported in the Consolidated Statements of Cash Flows:


	Three Months Ended
	March 31
(in Millions)	2010			2009
Changes in Assets and Liabilities, Exclusive of Changes Shown Separately
Accounts receivable, net	$	75		$	35
Inventories		—			13
Accrued pension liability— affiliates		(93	)		(42	)
Accounts payable		21			(11	)
Accrued PSCR refund		(3	)		75
Income taxes payable		77			56
Postretirement obligation— affiliates		6			10
Other assets		(9	)		60
Other liabilities		2			(42	)

	$	76		$	154

Part I —Item 2.

The Detroit Edison Company

Management’s Narrative Analysis of Results of Operations

The Management’s Narrative Analysis of Results of Operations discussion for Detroit Edison is presented in accordance with General Instruction H(2) (a) of Form 10-Q.

Detroit Edison’s results for the three ~~and nine~~ months ended ~~September 30, 2009~~March 31, 2010 as compared to the comparable ~~periods in 2008~~2009 period are discussed below:


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30						September 30						March 31
(in Millions)	2009			2008			2009			2008			2010			2009
Operating Revenues	$	1,300		$	1,440		$	3,526		$	3,766		$	1,146		$	1,118
Fuel and Purchased Power		400			586			1,112			1,403			343			340

Gross Margin		900			854			2,414			2,363			803			778
Operation and Maintenance		306			292			928			1,019			309			316
Depreciation and Amortization		222			193			607			563			204			188
Taxes Other Than Income		43			54			147			176			65			60
Asset (Gains) and Reserves, Net		—			(1	)		—			(1	)
Asset Gains, Net														(1	)		—

Operating Income		329			316			732			606			226			214
Other (Income) and Deductions		75			67			220			212			79			84
Income Tax Provision		98			90			199			143			56			52

Net Income Attributable to DTE Energy Company	$	156		$	159		$	313		$	251
Net Income													$	91		$	78


Operating Income as a Percentage of Operating Revenues		25	%		22	%		21	%		16	%		20	%		19	%

opportunities to improve cash flow through working capital initiatives and maintaining flexibility in ~~the domestic automotive industry and~~ the timing and ~~level~~extent of ~~recovery in the national and regional economies. Direct and indirect effects of further automotive and other industrial plant closures could~~our long-term capital projects.

We have a ~~significant impact on~~$69 million, five-year unsecured revolving credit agreement expiring in October 2010. We expect to pursue the ~~results~~renewal of ~~Detroit Edison. We continue to monitor developments in this sector. Due to the economy and credit market~~that facility before its expiration. Given current conditions in the ~~near term,~~credit markets, we anticipate that the new facility will be similar to our April 2009 facility with respect to such items as bank participation, allocation levels and covenants. See Note 9 of the Notes to Consolidated Financial Statements.

We have approximately $660 million in long-term debt maturing in the next twelve months. In March 2010, Detroit Edison agreed to issue and sell $300 million of 4.89%, 10-year Senior Notes to a group of institutional investors in a private placement transaction. The notes are ~~reviewing~~expected to close and fund in September 2010 with proceeds used to repay a portion of Detroit Edison’s $500 million 6.125% Senior Notes due October 2010. The additional $200 million maturing in October 2010 is expected to be funded through a planned debt issuance later in 2010. Substantially all of the remaining debt maturities relate to Securitization. The principal amount of the Securitization debt is funded through a surcharge payable by Detroit Edison’s electric customers.

In March 2010, the Patient Protection and Affordable Care Act (PPACA) and the Health Care and Education Reconciliation Act (HCERA) were enacted into law (collectively, the “Act”). The Act is a comprehensive health care reform bill. A provision of the PPACA repeals the current rule permitting deduction of the portion of the drug coverage expense that is offset by the Medicare Part D subsidy, effective for taxable years beginning after December 31, 2012. The Company is currently assessing other impacts the legislation may have on its healthcare costs. The Company contributed $200 million to its pension plans during the first quarter of 2010, including a contribution of DTE Energy stock of $100 million made on behalf of the Company. The Company has accrued a liability to repay to DTE Energy the value of the stock contribution in cash in April 2010. The Company expects to contribute $90 million to its postretirement medical and life insurance benefit plans during 2010. No contributions were made to the plans in the first quarter of 2010. See Note 11 of the Notes to Consolidated Financial Statements.

We believe we have sufficient operating flexibility, cash resources and funding sources to maintain adequate amounts of liquidity and to meet our future operating cash and capital expenditure ~~commitments for potential adjustments as appropriate.~~needs. However, our business is capital intensive, and requires access to capital, and the inability to access adequate capital could adversely impact earnings and cash flows.

2524

Part I —Item 4.

CONTROLS AND PROCEDURES

(a)~~(a)~~ Evaluation of disclosure controls and procedures

Management of the Company carried out an evaluation, under the supervision and with the participation of Detroit Edison’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in ~~the~~ Exchange Act Rules 13a-15(e) and 15d-15(e)) as of ~~September 30, 2009,~~March 31, 2010, which is the end of the period covered by this report. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that such controls and procedures are effective in providing reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Due to the inherent limitations in the effectiveness of any disclosure controls and procedures, management cannot provide absolute assurance that the objectives of its disclosure controls and procedures will be attained.

(b) Changes in internal control over financial reporting

There have been no changes in the Company’s internal control over financial reporting during the quarter ended ~~September 30, 2009~~March 31, 2010 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

2625

Part II — Other Information

Item 1. — Legal Proceedings

In July 2009, DTE Energy received a Notice of Violation/Finding of Violation (NOV/FOV) from the EPA alleging, among other things, that five Detroit Edison power plants violated New Source Performance standards, Prevention of Significant Deterioration requirements, and Title V operating permit requirements under the Clean Air Act. We believe that the plants identified by the EPA have complied with applicable regulations. Depending upon the outcome of our discussions with the EPA regarding the NOV/FOV, the EPA could bring legal action against Detroit Edison. We could also be required to install additional pollution control equipment at some or all of the power plants in question, engage in Supplemental Environmental Programs, and/or pay fines. We cannot predict the financial impact or outcome of this matter, or the timing of its resolution.

The Company is involved in certain ~~other~~ legal, regulatory, 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, additional environmental reviews and investigations, audits, inquiries from various regulators, and pending judicial matters. The Company cannot predict the final disposition of such proceedings. The Company regularly reviews legal matters and records provisions for claims it can estimate and are considered probable of loss. The resolution of these pending proceedings is not expected to have a material effect on the Company’s operations or financial statements in the periods they are resolved.

~~Item 1A. — Risk Factors~~

In addition to the other information set forth in this report, the risk factors discussed in Part 1, Item 1A. Risk Factors in the Company’s 2008 Form 10-K, which could materially affect the Company’s businesses, financial condition, future operating results and/ or cash flows should be carefully considered. Additional risks and uncertainties not currently known to the Company, or that are currently deemed to be immaterial, also may materially adversely affect the Company’s business, financial condition, and/ or future operating results.

~~We may be required to refund amounts we collect under self-implemented rates.~~Recent Michigan legislation allows us to self-implement rate changes six months after a rate filing, subject to certain limitations. However, if the final rate case order provides for lower rates than we have self-implemented, we must refund the difference, with interest. Our financial performance may be negatively affected if the MPSC sets lower rates than those we have self-implemented, thereby forcing us to issue refunds. We cannot predict what rates the MPSC order will adopt.

~~Adverse changes in our credit ratings may negatively affect us.~~Regional and national economic conditions, increased scrutiny of the energy industry and regulatory changes, as well as changes in our economic performance, could result in credit agencies reexamining our credit rating. While credit ratings reflect the opinions of the credit agencies issuing such ratings and may not necessarily reflect actual performance, a downgrade in our credit rating could restrict or discontinue our ability to access capital markets, including commercial paper markets, and could result in an increase in our borrowing costs, a reduced level of capital expenditures and could impact future earnings and cash flows. In addition, a reduction in credit rating may require us to post collateral related to various physical or financially settled contracts for the purchase of energy-related commodities, products and services, which would impact our liquidity.

2726


	Page

Definitions	1
1

Forward-Looking Statements	2
2

Part I —– Financial Information


Item 1. Financial Statements


Consolidated Statements of Financial Position (Unaudited)	4
4

Consolidated Statements of Operations (Unaudited)	6
6

Consolidated Statements of Cash Flows (Unaudited)	7
7

Consolidated Statements of Changes in Shareholders’ Equity and Comprehensive Income (Unaudited)	8
8

Notes to Consolidated Financial Statements (Unaudited)	9
9

Item 2. Management’s Narrative Analysis of Results of Operations	22
24

Item 4. Controls and Procedures	25
26

Part II —– Other Information


Item 1. Legal Proceedings		27	26

~~Item 1A. Risk Factors~~		27

Item 6. Exhibits	27
28

Signature		29	28
~~EX-12.35~~EX-31.55
~~EX-31.51~~EX-31.56
~~EX-31.52~~EX-32.55
~~EX-32.51~~
~~EX-32.52~~EX-32.56


	Three Months Ended
	March 31
(in Thousands of MWh)	2010		2009
Electric Sales
Residential		3,665		3,738
Commercial		3,942		4,423
Industrial		2,475		2,637
Other		802		817

		10,884		11,615
Interconnections sales (1)		1,310		1,035

Total Electric Sales		12,194		12,650

Electric Deliveries
Retail and Wholesale		10,884		11,615
Electric Customer Choice, including self generators (2)		1,103		317

Total Electric Sales and Deliveries		11,987		11,932


	Three Months Ended				Nine Months Ended
	September 30				September 30
(in Thousands of MWh)	2009		2008		2009		2008
Residential		4,107		4,595		10,992		11,955
Commercial		4,806		5,072		13,764		14,347
Industrial		2,562		3,327		7,584		10,074
Wholesale		720		700		2,119		2,123
Other		79		89		280		285

		12,274		13,783		34,739		38,784
Interconnections sales (1)		1,644		618		3,868		2,627

Total Electric Sales		13,918		14,401		38,607		41,411


Electric Deliveries
Retail and Wholesale		12,274		13,783		34,739		38,784
Electric Customer Choice (2)		337		329		998		1,081

Total Electric Sales and Deliveries		12,611		14,112		35,737		39,865


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30						September 30
Power Generated and Purchased													March 31
(in Thousands of MWh)	2009			2008			2009			2008			2010			2009
Power Plant Generation
Fossil		10,729			10,566			30,424			31,153			9,520			9,842
Nuclear		2,367			2,405			6,106			7,156			2,200			2,254

		13,096			12,971			36,530			38,309			11,720			12,096
Purchased Power		1,753			2,486			4,569			5,725			1,322			1,352

System Output		14,849			15,457			41,099			44,034			13,042			13,448
Less Line Loss and Internal Use		(931	)		(1,056	)		(2,492	)		(2,623	)		(848	)		(798	)

Net System Output		13,918			14,401			38,607			41,411			12,194			12,650


Average Unit Cost ($/MWh)
Generation (1)	$	18.01		$	19.32		$	18.07		$	17.98		$	18.78		$	17.30

Purchased Power	$	35.50		$	88.43		$	37.07		$	73.23		$	32.30		$	33.94

Overall Average Unit Cost	$	20.08		$	30.43		$	20.18		$	25.16		$	20.15		$	18.97


Exhibit
Number		Description

Exhibits filed herewith:

~~12-35~~		~~Computation of Ratio of Earnings to Fixed Charges~~

~~31-51~~31-55		Chief Executive Officer Section 302 Form 10-Q Certification

~~31-52~~31-56		Chief Financial Officer Section 302 Form 10-Q Certification

Exhibits furnished herewith:

~~32-51~~32-55		Chief Executive Officer Section 906 Form 10-Q Certification

~~32-52~~32-56		Chief Financial Officer Section 906 Form 10-Q Certification

	•		the uncertainties of successful exploration of gas shale resources and challenges in estimating gas reserves with certainty;

	•		impact of regulation by the FERC, MPSC, NRC and other applicable governmental proceedings and regulations, including any associated impact on rate structures;

	•		changes in and application of federal, state and local tax laws and their interpretations, including the Internal Revenue Code, regulations, rulings, court proceedings and audits;

	•		the amount and timing of cost recovery allowed as a result of regulatory proceedings, related appeals or new legislation;


	•		the cost of protecting assets against, or damage due to, ~~terrorism;~~terrorism or cyber attacks;

	•		the availability, cost, coverage and terms of insurance and stability of insurance providers;

	•		changes in and application of accounting standards and financial reporting regulations;

	•		changes in federal or state laws and their interpretation with respect to regulation, energy policy and other business issues; and

	•		binding arbitration, litigation and related appeals.


(in Millions)
Asset retirement obligations at January 1, 2009	$	1,226
Accretion		60
Liabilities settled		(6	)
Revision in estimated cash flows		5

Asset retirement obligations at September 30, 2009		1,285
Less amount included in current liabilities		(16	)

	$	1,269


(in Millions)	Pension Benefits						Other Postretirement Benefits
Three Months Ended September 30	2009			2008			2009			2008
Service cost	$	11		$	11		$	11		$	12
Interest cost		39			38			26			23
Expected return on plan assets		(41	)		(41	)		(10	)		(14	)
Amortization of:
Net actuarial loss		9			6			13			7
Prior service cost		2			2			—			1
Net transition liability		—			—			1			—

Net periodic benefit cost	$	20		$	16		$	41		$	29


	Balance Sheet	Fair
	Location	Value
FTRs	Other current assets	$	1
Emissions	Other current liabilities		(2	)
Emissions	Other non-current liabilities		(7	)

Total derivatives not designated as hedging instrument		$	(8	)


Total derivatives:
Current		$	(1	)
Noncurrent			(7	)

Total derivatives as reported		$	(8	)


	Fair		Unrealized		Fair		Unrealized
(in Millions)	Value		Gains		Value		Gains
As of September 30, 2009
As of March 31, 2010
Equity securities	$	400	$	118	$	445	$	152
Debt securities		381		19		401		19
Cash and cash equivalents		10		—		13		—

	$	791	$	137	$	859	$	171


As of December 31, 2008
As of December 31, 2009
Equity securities	$	288	$	65	$	420	$	135
Debt securities		388		17		388		17
Cash and cash equivalents		9		—		9		—

	$	685	$	82	$	817	$	152


	September 30, 2009				December 31, 2008				March 31, 2010				December 31, 2009
(in Millions)	Fair Value		Carrying value		Fair Value		Carrying Value		Fair Value		Carrying value		Fair Value		Carrying Value
Cash equivalents	$	47	$	47	$	98	$	98	$	53	$	53	$	105	$	105
Equity securities	$	3	$	3	$	20	$	20	$	4	$	4	$	4	$	4


Month Issued	Type	Interest Rate			Maturity		Amount
April	Tax-Exempt Revenue Bonds (1)(2)		6.00	%		2036	$	69
June	Tax-Exempt Revenue Bonds (1)(3)		5.625	%		2020		32
June	Tax-Exempt Revenue Bonds (1)(4)		5.25	%		2029		60
June	Tax-Exempt Revenue Bonds (1)(5)		5.50	%		2029		59

							$	220


(in Millions)	Three Months			Nine Months
December 2008 rate order	$	33		$	94
Securitization bond and tax surcharge rate increase		20			45
July 2009 rate self-implementation		40			40
Energy Optimization and Renewable Energy surcharge		17			19
Weather		(41	)		(57	)
Reduction in customer demand and other		(23	)		(90	)

Increase in gross margin	$	46		$	51


(in Millions)	Three Months
January 2010 rate order	$	53
Securitization bond and tax surcharge rate increase		13
Restoration tracker		(10	)
Regulatory Asset Revenue surcharge		(13	)
Other		(18	)

Increase in gross margin	$	25


(1)		Represents power that is not distributed by Detroit Edison.

(2)		Includes deliveries for self generators who have purchased power from alternative energy suppliers to supplement their power requirements.


	THE DETROIT EDISON COMPANY (Registrant)
Date: ~~October 30, 2009~~April 28, 2010	/s/ PETER B. OLEKSIAK
	Peter B. Oleksiak
	Vice President, Controller and ~~Controller~~Investor Relations and Chief Accounting Officer