Table of Contents

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 March 31,June 30, 2011

Commission file number 1-2198

The Detroit Edison Company meets the conditions set forth in GeneralInstruction H (1) (a) and (b) of Form 10-Q and is, therefore, filing this Formwith the reduced disclosure format.
THE DETROIT EDISON COMPANY
(Exact name of registrant as specified in its charter)

Michigan38-0478650
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification No.)
  
One Energy Plaza, Detroit, Michigan48226-1279
(Address of principal executive offices)(Zip Code)

313-235-4000
(Registrant’sRegistrant'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).

Yesþ No o       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.
Large accelerated filer
Accelerated filer
Non-acceleratedfiler þ
Smaller reportingcompany o
Accelerated fileroNon-accelerated filerþSmaller reporting companyo
 (Do not check if a smaller reporting company)

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

YesoNoþ

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


The Detroit Edison Company
Quarterly Report on Form 10-Q
Quarter Ended March 31, 2011
Table Of Contents
 


THE DETROIT EDISON COMPANY
QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED JUNE 30, 2011

TABLE OF CONTENTS

 Page
 
3
Part IFinancial Information
Item 1. Financial Statements
5
 
6
8
9
10
28
 
30
31
EX-12.40
EX-31.63
EX-31.64
EX-32.63
EX-32.64


Table of Contents

DefinitionsDEFINITIONS

ASCAccounting Standards Codification
ASUAccounting Standards Update
CIMA Choice Incentive Mechanism authorized by the MPSC that allows Detroit Edison to recover or refund non-fuel revenues lost or gained as a result of fluctuations in electric Customer Choice sales.
Customer ChoiceMichigan legislation giving customers the option to choose alternative suppliers for electricity.
Detroit EdisonThe Detroit Edison Company (a direct wholly owned subsidiary of DTE Energy) and subsidiary companies
DTE EnergyDTE Energy Company, directly or indirectly the parent of Detroit Edison, Michigan Consolidated Gas Company and numerous non-utility subsidiaries
EPAUnited States Environmental Protection Agency
FASBFinancial Accounting Standards Board
FERCFederal Energy Regulatory Commission
FTRsFinancial transmission rights are financial instruments that entitle the holder to receive payments related to costs incurred for congestion on the transmission grid.
MCITMichigan Corporate Income Tax
MDEQMichigan Department of Environmental Quality
MISOMidwest Independent System Operator is an Independent System Operator and the Regional Transmission Organization serving the Midwest United States and Manitoba, Canada.
MPSCMichigan Public Service Commission
NRCUnited States Nuclear Regulatory Commission
PSCRA Power Supply Cost Recovery mechanism authorized by the MPSC that allows Detroit Edison to recover through rates its fuel, fuel-related and purchased power costs.
RDMA Revenue Decoupling Mechanism authorized by the MPSC that is designed to minimize the impact on revenues of changes in average customer usage of electricity
SecuritizationDetroit Edison financed specific stranded costs at lower interest rates through the sale of rate reduction bonds by a wholly-owned special purpose entity, The Detroit Edison Securitization Funding LLC.
VIEVariable Interest Entity

1



Units of Measurement

Units of Measurement
kWhKilowatthour of electricity
MWMegawatt of electricity
MWhMegawatthour of electricity

2



1

Table of Contents

Forward-Looking StatementsFORWARD-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. Words such as "anticipate," "believe," "expect," "projected" and "goals" signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions, but rather 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:

economic conditions and population changes in our geographic area resulting in changes in demand, customer conservation, increased thefts of electricity and high levels of uncollectible accounts receivable;

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

access to capital markets 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;

the timing and extent of changes in interest rates;

the level of borrowings;

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

the potential for increased costs or delays in completion of significant construction projects;

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

environmental issues, laws, regulations, and the increasing costs of remediation and compliance, including actual and potential new federal and state requirements;

health, safety, financial, environmental and regulatory risks associated with ownership and operation of nuclear facilities;

impact of electric 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 and purchased power;

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

the effects of competition;

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 or cyber attacks;

2



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

3


binding arbitration, litigation and related appeals.appeals; and

the risks discussed in our public filings with the Securities and Exchange Commission.

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

4



The Detroit Edison Company3


Part I — Item 1.


Consolidated Statements of Operations (Unaudited)
THE DETROIT EDISON COMPANY
         
  Three Months Ended 
  March 31 
(in Millions) 2011  2010 
Operating Revenues
 $1,192  $1,146 
       
         
Operating Expenses
        
Fuel and purchased power  378   343 
Operation and maintenance  329   309 
Depreciation and amortization  202   204 
Taxes other than income  59   65 
Asset (gains) and losses, net  19   (1)
       
   987   920 
       
         
Operating Income
  205   226 
       
         
Other (Income) and Deductions
        
Interest expense  71   81 
Other income  (10)  (8)
Other expenses  6   6 
       
   67   79 
       
         
Income Before Income Taxes
  138   147 
         
Income Tax Provision
  53   56 
       
         
Net Income
 $85  $91 
       
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

(in Millions)June 30,
2011
 December 31,
2010
ASSETS   
Current Assets   
Cash and cash equivalents$19
 $30
Restricted cash106
 104
Accounts receivable (less allowance for doubtful accounts of $83 and $93, respectively)   
Customer696
 690
Affiliates11
 8
Other73
 204
Inventories   
Fuel239
 224
Materials and supplies176
 170
Notes receivable   
Affiliates
 97
Other2
 
Regulatory assets85
 52
Other61
 57
 1,468
 1,636
    
Investments   
Nuclear decommissioning trust funds975
 939
Other118
 118
 1,093
 1,057
    
Property   
Property, plant and equipment16,527
 16,068
Less accumulated depreciation and amortization(6,617) (6,418)
 9,910
 9,650
    
Other Assets   
Regulatory assets3,186
 3,277
Securitized regulatory assets656
 729
Intangible assets31
 25
Notes receivable   
Affiliates


 6
Other

6
 
Other138
 142
 4,017
 4,179
    
Total Assets$16,488
 $16,522

See Notes to Consolidated Financial Statements (Unaudited)

5



The Detroit Edison Company4


THE DETROIT EDISON COMPANY
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
Consolidated Statements of Financial Position (Unaudited)
         
  March 31,  December 31, 
(in Millions) 2011  2010 
ASSETS
        
Current Assets
        
Cash and cash equivalents $15  $30 
Restricted cash  55   104 
Accounts receivable (less allowance for doubtful accounts of $83 and $93, respectively)        
Customer  627   690 
Affiliates  18   8 
Other  78   204 
Inventories        
Fuel  201   224 
Materials and supplies  174   170 
Notes receivable        
Affiliates     97 
Other  2    
Prepaid property taxes  71   44 
Other  79   65 
       
   1,320   1,636 
       
         
Investments
        
Nuclear decommissioning trust funds  961   939 
Other  115   118 
       
   1,076   1,057 
       
         
Property
        
Property, plant and equipment  16,178   16,068 
Less accumulated depreciation and amortization  (6,484)  (6,418)
       
   9,694   9,650 
       
         
Other Assets
        
Regulatory assets  3,243   3,277 
Securitized regulatory assets  692   729 
Intangible assets  28   25 
Notes receivable        
Affiliates     6 
Other  6    
Other  144   142 
       
   4,113   4,179 
       
         
Total Assets
 $16,203  $16,522 
       
(in Millions, Except Shares)June 30,
2011
 December 31,
2010
LIABILITIES AND SHAREHOLDER'S EQUITY   
Current Liabilities   
Accounts payable   
Affiliates$50
 $50
Other323
 349
Accrued interest72
 81
Current portion long-term debt, including capital leases257
 308
Regulatory liabilities29
 60
Short-term borrowing - affiliates21
 
Short-term borrowing - other107
 
Other257
 279
 1,116
 1,127
    
Long-Term Debt (net of current portion)   
Mortgage bonds, notes and other4,313
 4,046
Securitization bonds559
 643
Capital lease obligations16
 20
 4,888
 4,709
    
Other Liabilities   
Deferred income taxes2,509
 2,235
Regulatory liabilities397
 714
Asset retirement obligations1,390
 1,354
Unamortized investment tax credit62
 67
Nuclear decommissioning152
 149
Accrued pension liability - affiliates782
 960
Accrued postretirement liability - affiliates1,029
 1,060
Other117
 138
 6,438
 6,677
    
Commitments and Contingencies (Notes 6 and 9)

 

    
Shareholder's Equity   
Common stock, $10 par value, 400,000,000 shares authorized, and 138,632,324 shares issued and outstanding3,196
 3,196
Retained earnings865
 829
Accumulated other comprehensive income (loss)(15) (16)
 4,046
 4,009
    
Total Liabilities and Shareholder's Equity$16,488
 $16,522

See Notes to Consolidated Financial Statements (Unaudited)

6



The Detroit Edison Company
Consolidated Statements5


THE DETROIT EDISON COMPANY
         
  March 31,  December 31, 
(in Millions, Except Shares) 2011  2010 
LIABILITIES AND SHAREHOLDER’S EQUITY
        
Current Liabilities
        
Accounts payable        
Affiliates $55  $50 
Other  296   349 
Accrued interest  74   81 
Current portion long-term debt, including capital leases  285   308 
Regulatory liabilities     60 
Short-term borrowing — affiliates  131    
Other  259   279 
       
   1,100   1,127 
       
         
Long-Term Debt (net of current portion)
        
Mortgage bonds, notes and other  4,064   4,046 
Securitization bonds  559   643 
Capital lease obligations  17   20 
       
   4,640   4,709 
       
         
Other Liabilities
        
Deferred income taxes  2,175   2,235 
Regulatory liabilities  749   714 
Asset retirement obligations  1,389   1,354 
Unamortized investment tax credit  64   67 
Nuclear decommissioning  151   149 
Accrued pension liabilityaffiliates
  770   960 
Accrued postretirement liabilityaffiliates
  1,028   1,060 
Other  118   138 
       
   6,444   6,677 
       
         
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   3,196 
Retained earnings  838   829 
Accumulated other comprehensive income (loss)  (15)  (16)
       
   4,019   4,009 
       
         
Total Liabilities and Shareholder’s Equity
 $16,203  $16,522 
       
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 Three Months Ended Six Months Ended
 June 30 June 30
(in Millions)2011 2010 2011 2010
Operating Revenues$1,240
 $1,208
 $2,432
 $2,354
        
Operating Expenses       
Fuel and purchased power417
 390
 795
 733
Operation and maintenance331
 326
 660
 635
Depreciation and amortization202
 210
 404
 414
Taxes other than income60
 61
 119
 126
Asset (gains) and losses, net(5) 
 14
 (1)
 1,005
 987
 1,992
 1,907
        
Operating Income235
 221
 440
 447
        
Other (Income) and Deductions       
Interest expense73
 77
 144
 158
Other income(11) (9) (21) (17)
Other expenses6
 11
 12
 17
 68
 79
 135
 158
        
Income Before Income Taxes167
 142
 305
 289
        
Income Tax Provision63
 55
 116
 111
        
Net Income$104
 $87
 $189
 $178

See Notes to Consolidated Financial Statements (Unaudited)

7




The Detroit Edison Company6


THE DETROIT EDISON COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Consolidated Statements of Cash Flows (Unaudited)
         
  Three Months Ended 
  March 31 
(in Millions) 2011  2010 
Operating Activities
        
Net income $85  $91 
Adjustments to reconcile net income to net cash from operating activities:        
Depreciation and amortization  202   204 
Deferred income taxes  19   5 
Asset gains (losses), net  19   (1)
Changes in assets and liabilities, exclusive of changes shown separately (Note 12)  (225)  76 
       
Net cash from operating activities  100   375 
       
         
Investing Activities
        
Plant and equipment expenditures  (219)  (177)
Restricted cash for debt redemptions  49   51 
Proceeds from sale of nuclear decommissioning trust fund assets  20   59 
Investment in nuclear decommissioning trust funds  (28)  (68)
Note receivable — affiliates  103   59 
Other investments  (4)  (9)
       
Net cash used for investing activities  (79)  (85)
       
         
Financing Activities
        
Short-term borrowings  131    
Redemption of long-term debt  (89)  (85)
Dividends on common stock  (76)  (76)
Other  (2)  (2)
       
Net cash used for financing activities  (36)  (163)
       
         
Net Increase in Cash and Cash Equivalents
  (15)  127 
Cash and Cash Equivalents at Beginning of the Period
  30   34 
       
Cash and Cash Equivalents at End of the Period
 $15  $161 
       
 Six Months Ended
 June 30
(in Millions)2011 2010
Operating Activities   
Net income$189
 $178
Adjustments to reconcile net income to net cash from operating activities:   
Depreciation and amortization404
 414
Deferred income taxes35
 (1)
Asset (gains) and losses, net14
 (1)
Changes in assets and liabilities, exclusive of changes shown separately (Note 11)(220) (67)
Net cash from operating activities422
 523
    
Investing Activities   
Plant and equipment expenditures(606) (401)
Restricted cash for debt redemptions(2) 2
Proceeds from sale of nuclear decommissioning trust fund assets59
 128
Investment in nuclear decommissioning trust funds(76) (145)
Notes receivable - affiliates103
 70
Other investments(13) (13)
Net cash used for investing activities(535) (359)
    
Financing Activities   
Short-term borrowings - affiliates21
 66
Short-term borrowings - other107
 
Issuance of long-term debt248
 
Redemption of long-term debt(115) (85)
Dividends on common stock(152) (152)
Other(7) (7)
Net cash from (used for) financing activities102
 (178)
    
Net Decrease in Cash and Cash Equivalents(11) (14)
Cash and Cash Equivalents at Beginning of the Period30
 34
Cash and Cash Equivalents at End of the Period$19
 $20

See Notes to Consolidated Financial Statements (Unaudited)

8



The Detroit Edison Company7


THE DETROIT EDISON COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY AND COMPREHENSIVE INCOME (UNAUDITED)
Consolidated Statements of Changes in Shareholder’s Equity and Comprehensive Income
(Unaudited)
                        
 Accumulated  
 Additional Other  
 Common Stock Paid In Retained Comprehensive  Common Stock 
Additional
Paid In Capital
 Retained Earnings 
Accumulated
Other
Comprehensive
Loss
 Total
(Dollars in Millions, shares in thousands) Shares Amount Capital Earnings Loss TotalShares Amount 
Balance, December 31, 2010 138,632 $1,386 $1,810 $829 $(16) $4,009 138,632
 $1,386
 $1,810
 $829
 $(16) $4,009
  
Net income    85  85 
 
 
 189
 
 189
Dividends declared on common stock     (76)   (76)
 
 
 (153) 
 (153)
Benefit obligations, net of tax     1 1 
 
 
 
 1
 1
  
Balance, March 31, 2011 138,632 $1,386 $1,810 $838 $(15) $4,019 
  
Balance, June 30, 2011138,632
 $1,386
 $1,810
 $865
 $(15) $4,046

The following table displays other comprehensive income for the three-monthsix-month periods ended March 31:June 30:
         
(in Millions) 2011  2010 
Net income $85  $91 
Other comprehensive income, net of tax:        
Benefit obligations, net of taxes  1   1 
       
Comprehensive income $86  $92 
       

(in Millions)2011 2010
Net income189
 $178
Other comprehensive income, net of tax:   
Benefit obligations, net of taxes1
 1
Comprehensive income$190
 $179

See Notes to Consolidated Financial Statements (Unaudited)

9




The Detroit Edison Company8


THE DETROIT EDISON COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Notes to Consolidated Financial Statements (Unaudited)
NOTE 1BASIS OF PRESENTATION

Corporate Structure

Detroit Edison is an electric utility engaged in the generation, purchase, distribution and sale of electricity to approximately 2.1 million customers in southeastern Michigan. Detroit Edison is regulated by the MPSC and the FERC. In addition, the Company is regulated by other federal and state regulatory agencies including the NRC, the EPA and the 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 2010 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’sCompany's estimates.

The Consolidated Financial Statements are unaudited, but in the Company’sCompany's opinion include all adjustments necessary forto a fair presentationstatement of such financial statements.the results for the interim periods. 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, 2011.

Certain prior year balances were reclassified to match the current year’syear's financial statement presentation.

Principles of Consolidation

The Company consolidates all majority owned subsidiaries and investments in entities in which it has controlling influence. Non-majority owned investments are accounted for using the equity method when the Company is able to influence the operating policies of the investee. Non-majority owned investments include investments in limited liability companies, partnerships or joint ventures. When the Company does not influence the operating policies of an investee, the cost method is used. These consolidated financial statements also reflect the Company’sCompany's proportionate interests in certain jointly owned utility plant. The Company eliminates all intercompany balances and transactions.

The Company evaluates whether an entity is a VIE whenever reconsideration events occur. The Company consolidates VIEs for which it is 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, the Company considers 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’sVIE's economic performance and the obligation to absorb the 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 changed.

The Company has variable interests in VIEs through certain of its long-term purchase contracts. As of March 31,June 30, 2011, the carrying amount of assets and liabilities in the Consolidated Statement of Financial Position that relate to its variable interests under long-term purchase contracts are predominately related to working capital accounts and generally represent the amounts owed by the Company for the deliveries associated with the current billing cycle under the contracts. The Company has not provided any form of financial support associated with these long-term contracts. There is no significant potential exposure to loss as a result of its variable interests through these long-term purchase contracts.

10



In 2001, Detroit Edison financed a regulatory asset related to Fermi 2 and certain other regulatory assets 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 Securitization. This entity is a VIE, and is consolidated as the Company is the primary beneficiary. The maximum risk exposure related to Securitization is reflected on the Company’sCompany's Consolidated

9


Statements of Financial Position.

The following tables summarize the major balance sheet items at March 31,June 30, 2011 and December 31, 2010 restricted for Securitization that are either (1) assets that can be used only to settle its obligations or (2) liabilities for which creditors do not have recourse to the general credit of the primary beneficiary.
         
  March 31,  December 31, 
(in Millions) 2011  2010 
ASSETS
        
Restricted cash $55  $104 
Accounts receivable  39   42 
Securitized regulatory assets  692   729 
Other assets  12   13 
       
  $798  $888 
       
LIABILITIES
        
Accounts payable and accrued current liabilities $4  $17 
Current portion long-term debt, including capital leases  158   150 
Other current liabilities  62   62 
Securitization bonds  559   643 
Other long term liabilities  6   6 
       
  $789  $878 
       

(in Millions)
June 30,
2011
 
December 31,
2010
ASSETS   
Restricted cash$106
 $104
Accounts receivable34
 42
Securitized regulatory assets656
 729
Other assets12
 13
 $808
 $888
LIABILITIES   
Accounts payable and accrued current liabilities$16
 $17
Current portion long-term debt, including capital leases158
 150
Other current liabilities59
 62
Securitization bonds559
 643
Other long term liabilities6
 6
 $798
 $878

As of March 31,June 30, 2011 and December 31, 2010, Detroit Edison had $5 million and $6 million in Notes receivable, respectively, related to non-consolidated VIEs.

NOTE 2SIGNIFICANT ACCOUNTING POLICIES

Income Taxes

The Company had $3 million of unrecognized tax benefits at March 31,June 30, 2011 and December 31, 2010, that, if recognized, would favorably impact its effective tax rate. The Company has increased its unrecognized tax benefit by $70 million in the six months ended June 30, 2011, as a result of a change in a tax position taken during thea prior period. During the next twelve months, it is reasonably possible that DTE Energy and its subsidiaries will settle certain federal tax audits. As a result, the Company believes that it is possible that there will be a decrease in unrecognized tax benefits of up to $85$84 million within the next twelve months.

Michigan Corporate Income Tax (MCIT)

On May 25, 2011, the Michigan Business Tax (MBT) was repealed and the MCIT was enacted and will become effective January 1, 2012. The Company hadMCIT subjects corporations with business activity in Michigan to a 6 percent tax rate on an apportioned income tax receivablebase and eliminates the modified gross receipts tax and nearly all credits available under the MBT. The MCIT also eliminated the future deductions allowed under MBT that enabled companies to establish a one-time deferred tax asset upon enactment of $43the MBT to offset deferred tax liabilities that resulted from enactment of the MBT.

Effective with the enactment of the MCIT in the second quarter of 2011, the net state deferred tax liability was remeasured to reflect the impact of the MCIT tax rate on cumulative temporary differences expected to reverse after the effective date. The net impact of this remeasurement was a decrease in deferred income tax liabilities of $35 million at March 31, 2011 and $152that was offset against the regulatory asset established upon the enactment of the MBT.

Due to the elimination of the future tax deductions allowed under the MBT, the one-time MBT deferred tax asset that was established upon the enactment of the MBT has been remeasured to zero. The net impact of this remeasurement is a reduction of net deferred tax assets of $342 million at December 31, 2010 due from DTE Energy.which was offset against the regulatory liability established upon enactment of the MBT.

Consistent with the original establishment of this deferred tax liability, no recognition of this non-cash transaction has been reflected in the Consolidated Statements of Cash Flows.

10



Stock-Based Compensation

The Company received an allocation of costs from DTE Energy associated with stock-based compensation of $9$5 million and $6 million for the three months ended March 31,June 30, 2011 and March 31,June 30, 2010, respectively, while such allocation was $14 million and $12 million for the six months ended June 30, 2011 and 2010, respectively.

NOTE 3NEW ACCOUNTING PRONOUNCEMENTS
Fair Value Measurements and Disclosures
In January 2010, the FASB issued ASU 2010-06,Improving Disclosures about Fair Value Measurements. ASU 2010-06 requires details of transfers in and out of Level 1 and 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 all entities that are required to provide disclosures about recurring and nonrecurring fair value measurements. The Company adopted ASU 2010-06 effective January 1, 2010, except for the gross presentation of the Level 3 fair value measurement roll forward provision which was adopted in the first quarter of 2011, as permitted.

11


NOTE 4FAIR 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 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 was immaterial at March 31,June 30, 2011 and December 31, 2010. 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, whichthat 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.

The following table presents assets and liabilities measured and recorded at fair value on a recurring basis as of March 31,June 30, 2011:
                 
              Net Balance at 
(in Millions) Level 1  Level 2  Level 3  March 31, 2011 
Assets:
                
Nuclear decommissioning trusts $624  $337  $  $961 
Other investments  52   53      105 
Derivative assets — FTRs        1   1 
             
Total $676  $390  $1  $1,067 
             
Liabilities:
                
Derivative liabilities — Emissions     (3)     (3)
             
Total $  $(3) $  $(3)
             
                 
Net Assets at March 31, 2011 $676  $387  $1  $1,064 
             

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              Net Balance at 
(in Millions) Level 1  Level 2  Level 3  March 31, 2011 
Assets:
                
Current $  $  $1  $1 
Noncurrent  676   390      1,066 
             
Total Assets $676  $390  $1  $1,067 
             
Liabilities:
                
Current $  $(3) $  $(3)
Noncurrent            
             
Total Liabilities $  $(3) $  $(3)
             
                 
Net Assets at March 31, 2011 $676  $387  $1  $1,064 
             
(in Millions)Level 1 Level 2 Level 3 
Net Balance at
June 30, 2011
Assets:       
Nuclear decommissioning trusts$626
 $349
 $
 $975
Other investments53
 53
 
 106
Derivative assets - FTRs
 
 3
 3
Total$679
 $402
 $3
 $1,084
Liabilities:       
Derivative liabilities - Emissions
 (1) 
 (1)
Total$
 (1) $
 $(1)
        
Net Assets at June 30, 2011$679
 401
 $3
 $1,083


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(in Millions)Level 1 Level 2 Level 3 
 
Net Balance at
June 30, 2011
Assets:       
Current$
 $
 $3
 $3
Noncurrent679
 402
 
 1,081
Total Assets$679
 $402
 $3
 $1,084
Liabilities:       
Current$
 $(1) $
 $(1)
Noncurrent
 
 
 
Total Liabilities$
 $(1) $
 $(1)
        
Net Assets at June 30, 2011$679
 $401
 $3
 $1,083

The following table presents assets and liabilities measured and recorded at fair value on a recurring basis as of December 31, 2010:
                 
              Net Balance at 
(in Millions) Level 1  Level 2  Level 3  December 31, 2010 
Assets:
                
Nuclear decommissioning trusts $599  $340  $  $939 
Other investments  52   55      107 
Derivative assets — FTRs        2   2 
             
Total $651  $395  $2  $1,048 
             
Liabilities:
                
Derivative liabilities — Emissions     (3)     (3)
             
Total $  $(3) $  $(3)
             
                 
Net Assets at December 31, 2010 $651  $392  $2  $1,045 
             

                 
              Net Balance at 
(in Millions) Level 1  Level 2  Level 3  December 31, 2010 
Assets:
                
Current $  $  $2  $2 
Noncurrent  651   395      1,046 
             
Total Assets $651  $395  $2  $1,048 
             
Liabilities:
                
Current $  $(3) $  $(3)
Noncurrent            
             
Total Liabilities $  $(3) $  $(3)
             
                 
Net Assets at December 31, 2010 $651  $392  $2  $1,045 
             
(in Millions)Level 1 Level 2 Level 3 
Net Balance at
December 31, 2010
Assets:       
Nuclear decommissioning trusts$599
 $340
 
 $939
Other investments52
 55
 
 107
Derivative assets - FTRs
 
 2
 2
Total$651
 $395
 $2
 $1,048
Liabilities:       
Derivative liabilities - Emissions
 (3) 
 (3)
Total
 $(3) 
 $(3)
        
Net Assets at December 31, 2010$651
 $392
 $2
 $1,045

(in Millions)Level 1 Level 2 Level 3 
Net Balance at
December 31, 2010
Assets:       
Current
 
 $2
 $2
Noncurrent651
 395
 
 1,046
Total Assets$651
 $395
 $2
 $1,048
Liabilities:       
Current
 $(3) 
 $(3)
Noncurrent
 
 
 
Total Liabilities
 $(3) 
 $(3)
        
Net Assets at December 31, 2010$651
 $392
 $2
 $1,045

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The following table presents the fair value reconciliation of Level 3 assets and liabilities measured at fair value on a recurring basis for the three and six months ended March 31,June 30, 2011 and 2010:
         
  Three Months Ended 
  March 31 
(in Millions) 2011  2010 
Asset balance as of beginning of the period $2  $2 
Changes in fair value recorded in regulatory assets/liabilities  (1)  (1)
       
Asset balance as of March 31 $1  $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, 2011 and 2010 $  $ 
       

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 Three Months Ended Six Months Ended
 June 30 June 30
(in Millions)2011 2010 2011 2010
Asset balance as of beginning of the period$1
 $1
 $2
 $2
Changes in fair value recorded in regulatory assets/liabilities4
 4
 3
 3
Purchases, issuances and settlements:       
Settlements(2) (2) (2) (2)
Asset balance as of June 30$3
 $3
 $3
 $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 June 30, 2011 and 2010$3
 $3
 $3
 $3

Transfers in and transfers 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 and transfers 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 and six months ended March 31,June 30, 2011 and March 31,June 30, 2010.

Nuclear Decommissioning Trusts and Other Investments

The nuclear decommissioning trusts and other 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 in 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. 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 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, 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

13


fair value and 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 fair value information on financial and derivative instruments.

 March 31,June 30, 2011 December 31, 2010
 Fair Value Carrying Value Fair Value Carrying Value
Long-Term Debt$5.25.5 billion $4.95.1 billion $5.3 billion $5.0 billion

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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 6.5.

The NRC has jurisdiction over the decommissioning of nuclear power plants and requires decommissioning funding based upon a formula. The MPSC and FERC regulate the 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 and the disposal of low-level radioactive waste. Detroit Edison is continuing to fund FERC jurisdictional amounts for decommissioning even though explicit provisions are not included in FERC rates. The Company believes the MPSC and FERC collections will be adequate to fund the estimated cost of decommissioning using the NRC formula. The decommissioning assets, anticipated earnings thereon and future revenues from decommissioning collections will be used to decommission Fermi 2. The Company expects the liabilities to 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. See Note 7.

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

The following table summarizes the fair value of the nuclear decommissioning trust fund assets:
         
  March 31  December 31 
(in Millions) 2011  2010 
Fermi 2 $930  $910 
Fermi 1  3   3 
Low level radioactive waste  28   26 
       
Total $961  $939 
       

(in Millions)
June 30
2011
 
December 31
2010
Fermi 2$942
 $910
Fermi 13
 3
Low level radioactive waste30
 26
Total$975
 $939

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
  March 31
(in Millions) 2011 2010
Realized gains $14  $9 
Realized losses  (8)  (8)
Proceeds from sales of securities  20   59 

 Three Months Ended Six Months Ended
 June 30 June 30
(in Millions)2011 2010 2011 2010
Realized gains$12
 $12
 $26
 $21
Realized losses(9) (11) (17) (19)
Proceeds from sales of securities39
 69
 59
 128

Realized gains and losses from the sale of securities for the Fermi 2 and the low level radioactive waste funds are recorded to the Regulatory asset and Nuclear decommissioning liability. The following table sets forth the fair value and unrealized gains for the nuclear decommissioning trust funds:
         
  Fair  Unrealized 
(in Millions) Value  Gains 
As of March 31, 2011        
Equity securities $590  $100 
Debt securities  359   10 
Cash and cash equivalents  12    
       
  $961  $110 
       


14


        
 Fair Unrealized 
(in Millions) Value Gains 
Fair
Value
 
Unrealized
Gains
As of December 31, 2010 
As of June 30, 2011   
Equity securities $572 $77 $589
 $100
Debt securities 361 11 381
 14
Cash and cash equivalents 6  5
 
     975
 114
 $939 $88 
     

15



(in Millions)
Fair
Value
 
Unrealized
Gains
As of December 31, 2010$572
 $77
Equity securities   
Debt securities361
 11
Cash and cash equivalents6
 
 $939
 $88

The debt securities at March 31,June 30, 2011 and December 31, 2010 had an average maturity of approximately 78 and 6 years, respectively. Securities held in the nuclear decommissioning trust funds are classified as available-for-sale. As Detroit Edison does not have the ability to hold impaired investments for a period of time sufficient to allow for the anticipated recovery of market value, all unrealized losses are considered to be other than temporary impairments.

Unrealized losses incurred by the Fermi 2 trust are recognized as a Regulatory asset. Detroit Edison recognized $27$32 million and $26 million of unrealized losses as Regulatory assets at March 31,June 30, 2011 and December 31, 2010, respectively. Since the decommissioning of Fermi 1 is funded by Detroit Edison rather than through a regulatory recovery mechanism, there is no corresponding regulatory asset treatment. Therefore, unrealized losses incurred by the Fermi 1 trust are recognized in earnings immediately. There were no unrealized losses recognized for the three and six months ended March 31,June 30, 2011 and March 31,June 30, 2010 for Fermi 1 trust assets.

Other Available-For-Sale Securities

The following table summarizes the fair value of the Company’sCompany's investment in available-for-sale debt and equity securities, excluding nuclear decommissioning trust fund assets:
                 
  March 31, 2011 December 31, 2010
(in Millions) Fair Value Carrying value Fair Value Carrying Value
Cash equivalents $71  $71  $125  $125 
Equity securities  5   5   4   4 

 June 30, 2011 December 31, 2010
(in Millions)Fair Value Carrying Value Fair Value Carrying Value
Cash equivalents$122
 $122
 $125
 $125
Equity securities5
 5
 4
 4

As of March 31,June 30, 2011, these securities arewere comprised primarily of money-market funds and equity securities. Gains (losses) related to trading securities held at March 31,June 30, 2011 and March 31,June 30, 2010 were $3$4 million and $2$(2) million, respectively.

NOTE 54 FINANCIAL AND OTHER DERIVATIVE INSTRUMENTS

The Company recognizes all derivatives at their fair value on the Consolidated Statements of Financial Position 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 the fair value are recognized in earnings each period.


15


Detroit Edison’sEdison'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. 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 settled. 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 March 31,June 30, 2011 and December 31, 2010:
         
  March 31  December 31 
(in Millions) 2011  2010 
FTRs — Other current assets $1  $2 
Emissions — Other current liabilities  (3)  (3)
       
Total derivatives not designated as hedging instrument $(2) $(1)
       

16


(in Millions)
June 30
2011
 
December 31
2010
FTRs - Other current assets$3
 $2
Emissions - Other current liabilities(1) (3)
Total derivatives not designated as hedging instruments$2
 $(1)

The effects of derivative instruments recoverable through the PSCR mechanism when realized on the Consolidated Statements of Financial Position were immaterial$4 million and $3 million in gains related to both Regulatory assets andFTRs recognized in Regulatory liabilities for the three and six months ended March 31, 2011.June 30, 2011, respectively.

The following represents the cumulative gross volume of derivative contracts outstanding as of March 31,June 30, 2011:

Commodity Number of Units
Emissions (Tons) 1,7002,250
FTRs (MW) 76,22821,562

NOTE 65 ASSET RETIREMENT OBLIGATIONS

A reconciliation of the asset retirement obligations for the threesix months ended March 31,June 30, 2011 follows:
     
(in Millions)    
Asset retirement obligations at December 31, 2010 $1,366 
Accretion  21 
Revision in estimated cash flows  19 
Liabilities settled  (2)
    
Asset retirement obligations at March 31, 2011  1,404 
Less amount included in current liabilities  (15)
    
  $1,389 
    

(in Millions) 
Asset retirement obligations at December 31, 2010$1,366
Accretion42
Revision in estimated cash flows(1)
Liabilities incurred1
Liabilities settled(7)
Asset retirement obligations at June 30, 20111,401
Less amount included in current liabilities(11)
 $1,390

In 2001, Detroit Edison began the final decommissioning of Fermi 1, with the goal of removing the remaining radioactive material and terminating the Fermi 1 license. In the first quarter of 2011, based on management decisions revising the timing and estimate of cash flows, Detroit Edison accrued an additional $19 million with respect to the decommissioning of Fermi 1. Subject to NRC notification, management intends to suspend decommissioning activities and place the facility in safe storage status. The expense amount has been recorded in Asset (gains) and losses, reservesnet on the Consolidated Statements of Operations. In the second quarter of 2011, based on updated studies revising the timing and impairments,estimate of cash flows, a reduction of approximately $20 million was made to the Detroit Edison asset retirement obligation for asbestos removal with approximately $5.7 million of the decrease associated with Fermi 1 recorded in Asset (gains) and losses, net on the Consolidated Statements of Operations.


16


NOTE 76 — REGULATORY MATTERS

2010 Electric Rate Case Filing

Detroit Edison filed a rate case on October 29, 2010 based on a projected twelve-month12-month period ending March 31, 2012. The filing with the MPSC requested a $443 million increase in base rates that is required to recover higher costs associated with environmental compliance, operation and maintenance of the Company’sCompany's electric distribution system and generation plants, inflation, the capital costs of plant additions, the reduction in territory sales, the impact from the expiration of certain wholesale for resale contracts and the increased migration of customers to the electric Customer Choice program. Detroit Edison also proposed certain adjustments which could reduce the net impact on the required increase in rates by approximately $190 million. These adjustments relate to electric Customer Choice migration, pension and other postretirement benefits expenses and the Nuclear Decommissioning surcharge. On April 28, 2011, Detroit Edison self-implemented a rate increase of $107 million. This increase, which is collected subject to refund, will remain in place until a final order is issued.

Detroit Edison Restoration Expense Tracker Mechanism (RETM) and Line ClearanceTracker (LCT) Reconciliation

In March 2011,2010, Detroit Edison filed an application with the MPSC for approval of the reconciliation of its 20102009 RETM and LCT. The Company’s 2010Company's 2009 restoration and line clearance expenses were higherless than the amount provided in rates. Accordingly, Detroit Edison has requested recoveryproposed a refund of approximately $19.5 million.
$16 million, including interest. On May 10, 2011 the MPSC issued an order approving the proposed refund and Detroit Edison Uncollectible Expense True-Up Mechanism (UETM)began applying credits to customer bills in July 2011.

Detroit Edison Choice Implementation Surcharge (CIS)

In MarchJune 2011, Detroit Edison filed an application with the MPSC for approval of its UETMCIS reconciliation and proposed refund of $2.4 million.

2009 Detroit Edison Depreciation Filing
In compliance with an MPSC order, Detroit Edison filed a depreciation case in November 2009. On June 16, 2011, the MPSC issued an order reducing Detroit Edison's composite depreciation rates from 3.33% to 3.06%, effective for accounting purposes, the day after the issuance of the MPSC order in the 2010 rate case expected in October 2011.

Renewable Energy Plan
In June 2011, Detroit Edison filed an amended Renewable Energy Plan with the MPSC requesting authority to refundcontinue to recover approximately $7.2$100 million consisting of costs relatedsurcharge revenues. The proposed revenues are necessary in order to 2010 uncollectible expense.continue to properly implement Detroit Edison's 20-year renewable energy plan, to deliver cleaner, renewable electric generation to its customers, to further diversify Detroit Edison's and the State of Michigan's sources of electric supply, and to address the state and national goals of increasing energy independence.

17



Detroit Edison Choice IncentiveRevenue Decoupling Mechanism (CIM)(RDM)

In MarchMay 2011, Detroit Edison filed an application with the MPSC for approval of its CIMRDM reconciliation for the period February 2010 through January 2011 requesting recovery ofauthority to refund approximately $105.2 million.$55.8 million, plus interest.
Energy Optimization (EO) Plans
In April 2011, Detroit Edison filed an application for approval of its reconciliation of its 2010 EO plan expenses. Detroit Edison’s EO reconciliation includes a cumulative $21 million net over-recovery at year end 2010 for the 2010 EO plan.
Power Supply Cost Recovery (PSCR) Proceedings

The PSCR process is designed to allow Detroit Edison to recover all of its power supply costs if incurred under reasonable and prudent policies and practices. Detroit Edison’sEdison's power supply costs include fuel costs, purchased and net interchange power costs, nitrogen oxide and sulfur dioxide emission allowances costs, urea costs, transmission costs and MISO costs. The MPSC reviews these costs, policies and practices for prudence in annual plan and reconciliation filings.
The following table summarizes Detroit Edison’sEdison's PSCR reconciliation filing currently pending with the MPSC:

Net Over/(Under)-Recovery,PSCR Cost of
PSCR Year Date Filed 
Net Over/(Under)-Recovery,
Including Interest
 
PSCR Cost of
Power Sold
2009 March 2010 $15.6 million $1.2 billion
2010 March 2011 $(52.6) million $1.2 billion

17



2010 PSCR Year- The 2010 PSCR reconciliation includes $15.6 million net over-recovery for the 2009 PSCR year. In addition to the net under-recovery of $52.6 million, the 2010 PSCR reconciliation includes an under-recovery of $7.1 million for the reconciliation of the 2007-2008 Pension Equalization Mechanism and an over-refund of $3.8 million for the 2011 refund of the self-implemented rate increase related to the 2009 electric rate case filing.

2011 Plan Year- In September 2010, Detroit Edison filed its 2011 PSCR plan case seeking approval of a levelized PSCR factor of 2.98 mills/kWh below the amount included in base rates for all PSCR customers. The filing supports a total power supply expense forecast of $1.2 billion. The plan also includes approximately $36 million for the recovery of its projected 2010 PSCR under-recovery.

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 87 — LONG-TERM DEBT

Debt Issuances

In April 2011, Detroit Edisonthe Company has remarketed $31 million of Tax-Exempt Revenue Bondsor issued the following long-term debt:

(in Millions)

Month IssuedTypeInterest RateMaturityAmount
AprilTax-Exempt Revenue Bonds(1)(2)2.35%2024$31
MayMortgage Bonds(3)3.90%2021250
    $281

(1)    These bonds were remarketed in a long-term rate mode at 2.35% forwith a three-year term.term ending April 1, 2014. The final maturity of the issue is October 1, 2024.

(2)    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.

(3) Proceeds were used for general corporate purposes.


In June 2011, Detroit Edison agreed to issue and sell $225 million of general and refunding mortgage bonds, with an average rate of 4.6% and an average maturity of 17 years, to a group of institutional investors in a private placement transaction. The bonds are expected to close and fund on September 1, 2011.

Debt Retirements and Redemptions

In 2011, the following debt was retired:

(in Millions)

Month RetiredTypeInterest RateMaturityAmount
MayTax-Exempt Revenue Bonds6.95%2011$26

NOTE 98 SHORT-TERM CREDIT ARRANGEMENTS AND BORROWINGS

In August 2010, Detroit Edison entered into an amended and restated $212 million two-year unsecured revolving credit agreement and a new $63 million three-year unsecured revolving credit agreement with a syndicate of 23 banks that may be used for general corporate borrowings, but are intended to provide liquidity support for the Company’sCompany's commercial paper

18


program. No one bank provides more than 8.25% of the commitment in any facility. Borrowings under the facilities are available at prevailing short-term interest rates.

The above agreements require the Company to maintain a total funded debt to capitalization ratio of no more than 0.65 to 1. In the agreements, “total funded debt” means all indebtedness of the Company and its consolidated

18


subsidiaries, including capital lease obligations, hedge agreements and guarantees of third parties’parties' debt, but excluding contingent obligations and nonrecourse and junior subordinated debt. “Capitalization” means the sum of (a) total funded debt plus (b) “consolidated net worth,” which is equal to consolidated total stockholders’stockholders' equity of the Company and its consolidated subsidiaries (excluding pension effects under certain FASB statements), as determined in accordance with accounting principles generally accepted in the United States of America. At March 31,June 30, 2011, the total funded debt to total capitalization ratio for Detroit Edison was 0.510.53 to 1. Should Detroit Edison have delinquent obligations of at least $50 million to any creditor, such delinquency will be considered a default under its credit agreements. Detroit Edison had no$107 million in outstanding short-term borrowings at March 31,June 30, 2011.

NOTE 109 COMMITMENTS AND CONTINGENCIES
Environmental
Environmental

Air- Detroit Edison is subject to the EPA ozone transport and acid rain regulations that limit power plant emissions of sulfur dioxide and nitrogen oxides. Since 2005, the EPA and the State of Michigan have issued additional emission reduction regulations 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 $1.5 billion through 2010. The Company estimates Detroit Edison will make capital expenditures of over $230$205 million in 2011 and up to $2.1$2.0 billion of additional capital expenditures through 2020 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. The EPA’sEPA's proposed National Emission Standards for Hazardous Air Pollutants from Coal and Oil-Fired Electric Utility Steam Generating Units rule (covering mercury and other air pollutants) was issued on March 16, 2011 for review and comment. DTE Energy is reviewing potential impacts of the proposed rule. The EPA will be accepting input on the proposal and may modify it prior to finalization, scheduled for November 2011. ItAlso, on July 6, 2011, the EPA finalized the Cross-State Air Pollution Rule (CSAPR) which replaces the Clean Air Interstate Rule (CAIR), requiring further reductions of sulfur dioxides and nitrogen oxides. Detroit Edison is reviewing potential impacts of the proposed and recently finalized rules, but is not possibleable to quantify the financial impact of thisthese and other expected rulemakings at this time.


In July 2009, DTE Energy received a Notice of Violation/Finding of Violation (NOV/FOV) from the EPA alleging, among other things, that five of Detroit Edison’sEdison power plants violated New Source Performance standards, Prevention of Significant Deterioration requirements, and operating permit requirements under the Clean Air Act. InAn additional NOV/FOV was received in June 2010 the EPA issued a NOV/FOV making similar allegations related to a recent project and outage at Unit 2 of the Monroe Power Plant.

On August 5, 2010, the United States Department of Justice, at the request of the EPA, brought a civil suit in the U.S. District Court for the Eastern District of Michigan against DTE Energy and Detroit Edison, related to the June 2010 NOV/FOV and the outage work performed at Unit 2 of the Monroe Power Plant, but not relating to the July 2009 NOV/FOV. Among other relief, the EPA is requestingrequested the court to require Detroit Edison to install and operate the best available control technology at Unit 2 of the Monroe Power Plant. Further, the EPA is requestingrequested the court to issue a preliminary injunction to require Detroit Edison to (i) begin the process of obtaining the necessary permits for the Monroe Unit 2 modification and (ii) offset the pollution from Monroe Unit 2 through emissions reductions from Detroit Edison’sEdison's fleet of coal-fired power plants until the new control equipment is operating. In January 2011, the EPA’sEPA's motion for preliminary injunction was denied and the liability phase of the civil suit has been scheduled for trial in September 2011.

DTE Energy and Detroit Edison believe that the plants identified by the EPA, including Unit 2 of the Monroe Power Plant, have complied with all applicable federal environmental regulations. Depending upon the outcome of discussions with the EPA regarding the NOV/FOV and the result of the civil action, Detroit Edison could also be required to install additional pollution control equipment at some or all of the power plants in question, implement early retirement of facilities where control equipment is not economical, engage in supplemental environmental programs, and/or pay fines. DTE Energy and Detroit Edison 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 completed studies 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

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to approximately $55$80 million in additional capital

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expenditures over the four to six years subsequent to 2008 to comply with these requirements. However, a January 2007 circuit court decision remanded back to the EPA several provisions of the federal regulation that 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 and in April 2009 upheld the EPA’sEPA's use of this provision in determining best technology available for reducing environmental impacts. On March 28, 2011, the EPA issued a revised rule, which is currently under review.proposed rule. A final rule is scheduled to be issued in mid-2012. The EPA has also issued an information collection request to begin a review of steam electric effluent guidelines. It is not possible at this time to quantify the financial impacts of these developing requirements.

Contaminated Sites- Prior to the construction of major interstate natural gas pipelines, gas for heating and other uses was manufactured locally from processes involving coal, coke or oil. The facilities, which produced gas, have been designated as manufactured gas plant (MGP) sites. Detroit Edison conducted remedial investigations at contaminated sites, including three former 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 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 March 31,June 30, 2011 and December 31, 2010, the Company had $9 million accrued for remediation. Any significant change in assumptions, such as remediation techniques, nature and extent of contamination and regulatory requirements, could impact the estimate of remedial action costs for the sites and affect the Company’sCompany's financial position and cash flows.

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.

The EPA has published proposed rules to regulate coal ash under the authority of the Resources Conservation and Recovery Act (RCRA). The proposed rule published on June 21, 2010 contains two primary regulatory options to regulate coal ash residue. The EPA is currently considering either designating coal ash as a “Hazardous Waste” as defined by RCRA or regulating coal ash as non-hazardous waste under RCRA. Agencies and legislatures have urged the EPA to regulate coal ash as a non-hazardous waste. If the EPA designates coal ash as a hazardous waste, the agency could apply some, or all, of the disposal and reuse standards that have been applied to other existing hazardous wastes to disposal and reuse of coal ash. Some of the regulatory actions currently being contemplated could have a significant impact on our operations and financial position and the rates we charge our customers. It is not possible to quantify the financial impact of those expected rulemakingsproposed rules at this time.

Other

In 2011, the EPA finalized a new set of regulations regarding the identification of non-hazardous secondary materials that are considered solid waste, industrial boiler and process heater maximum achievable control technologies (MACT) for major and area sources, and commercial/industrial solid waste incinerator new source performance standard and emission guidelines. This new set of regulations may impact our existing operations and may require us, in certain instances, to install new air pollution control devices. The new MACT regulations for industrial boilers provide three years for compliance with the major and area source standards. The Company is currently assessing the impact on current operations to determine the financial impact, if any, to comply with the new standards.

Nuclear Operations

Property Insurance

Detroit Edison maintains 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.

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Detroit Edison maintains a policy for extra expenses, including replacement power costs necessitated by Fermi 2’s2'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.


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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$29 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, 2011, 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 accounted for as a component of nuclear fuel expense. Delays have occurred in the DOE’sDOE'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’sgovernment'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’sDOE'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. In 2011, the Company expects to begin loading spent nuclear fuel into 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 certain limited circumstances, the Company enters into contractual guarantees. The Company may guarantee another entity’sentity's obligation in the 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.

Labor Contracts

There are several bargaining units for the Company’sCompany's approximately 2,700 represented employees. In the 2010 third quarter, a new three-year agreement was ratified covering approximately 2,400 represented employees. The remaining represented employees are under a contract that expires in August 2012.

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Purchase Commitments

As of March 31,June 30, 2011, the Company was party to numerous long-term purchase commitments relating to a variety of goods and services required for the Company’sCompany's business. These agreements primarily consist of fuel supply commitments. The Company estimates that these commitments will be approximately $2.6$1.4 billion from 2011 through 2026. Certain of these commitments are with variable interest entities where the Company determined it was not the primary beneficiary as it does not have significant exposure to losses.

The Company also estimates that 2011 capital expenditures will be approximately $1.3 billion. The Company has made certain commitments in connection with expected capital expenditures.

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Bankruptcies

The Company purchases and sells electricity from and to numerous companies operating in the steel, automotive, energy, retail 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.

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’sCompany's operations or financial statements in the periods they are resolved.

See Notes 54 and 76 for a discussion of contingencies related to derivatives and regulatory matters.

NOTE 1110 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 2011  2010  2011  2010 
Service cost $15  $13  $13  $13 
Interest cost  39   38   23   24 
Expected return on plan assets  (42)  (43)  (16)  (13)
Amortization of:                
Net actuarial loss  23   18   11   9 
Prior service cost  1   1   (4)   
Net transition liability        1   1 
             
Net periodic benefit cost $36  $27  $28  $34 
             

 Pension Benefits 
Other Postretirement
Benefits
(in Millions)2011 2010 2011 2010
Three Months Ended June 30       
Service cost$15
 $13
 $13
 $11
Interest cost38
 38
 24
 24
Expected return on plan assets(42) (43) (15) (13)
Amortization of:       
Net actuarial loss24
 18
 10
 9
Prior service cost1
 1
 (4) 
Net transition liability
 
 
 1
Special termination benefits2
 
 
 
Net periodic benefit cost$38
 $27
 $28
 $32

 Pension Benefits 
Other Postretirement
Benefits
(in Millions)2011 2010 2011 2010
Six Months Ended June 30       
Service cost$30
 $26
 $26
 $23
Interest cost77
 76
 47
 48
Expected return on plan assets(84) (86) (31) (26)
Amortization of:       
Net actuarial loss47
 35
 21
 19
Prior service cost2
 3
 (8) 1
Net transition liability
 
 1
 1
Special termination benefits2
 
 
 
Net periodic benefit cost$74
 $54
 $56
 $66

Pension and Other Postretirement Contributions

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In January 2011, the Company contributed $200 million to its pension plans.

In January 2011, the Company contributed $36 million to its other postretirement benefit plans. At the discretion of management, the Company may make up to an additional $90 million contribution to its other postretirement benefit plans by the end of 2011.2011.

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NOTE 1211 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) 2011  2010 
Changes in Assets and Liabilities, Exclusive of Changes Shown Separately
        
Accounts receivable, net $55  $75 
Inventories  18    
Accrued pension liability affiliates
  (190)  (93)
Accounts payable  (15)  21 
Accrued PSCR refund  (4)  (3)
Income taxes receivable/payable  26   77 
Postretirement obligation affiliates
  (32)  6 
Other assets  (18)  (9)
Other liabilities  (65)  2 
       
  $(225) $76 
       

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 Six Months Ended
 June 30
(in Millions)2011 2010
Changes in Assets and Liabilities, Exclusive of Changes Shown Separately   
Accounts receivable, net$(35) $(37)
Inventories(21) (53)
Accrued pension liability - affiliates
(178) (186)
Accounts payable(1) 59
Accrued PSCR refund(33) (23)
Income taxes receivable/payable66
 100
Postretirement obligation - affiliates
(31) 10
Other assets85
 47
Other liabilities(72) 16
 $(220) $(67)


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Part I1  Item 2.

The Detroit Edison Company
Management’sManagement's Narrative Analysis of Results of Operations

The Management’sManagement'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’sEdison's results for the three and six months ended March 31,June 30, 2011 as compared to the comparable 2010 period are discussed below:
         
  Three Months Ended 
  March 31 
(in Millions) 2011  2010 
Operating Revenues $1,192  $1,146 
Fuel and Purchased Power  378   343 
       
Gross Margin  814   803 
Operation and Maintenance  329   309 
Depreciation and Amortization  202   204 
Taxes Other Than Income  59   65 
Asset (Gains) and Losses, Net  19   (1)
       
Operating Income  205   226 
Other (Income) and Deductions  67   79 
Income Tax Provision  53   56 
       
Net Income $85  $91 
       
         
Operating Income as a Percentage of Operating Revenues  17%  20%

 Three Months Ended Six Months Ended
 June 30 June 30
(in Millions)2011 2010 2011 2010
Operating Revenues$1,240
 $1,208
 $2,432
 $2,354
Fuel and Purchased Power417
 390
 795
 733
Gross Margin823
 818
 1,637
 1,621
Operation and Maintenance331
 326
 660
 635
Depreciation and Amortization202
 210
 404
 414
Taxes Other Than Income60
 61
 119
 126
Asset (Gains) and Losses, Net(5) 
 14
 (1)
Operating Income235
 221
 440
 447
Other (Income) and Deductions68
 79
 135
 158
Income Tax Provision63
 55
 116
 111
Net Income$104
 $87
 $189
 $178
Operating Income as a Percentage of Operating Revenues19% 18% 18% 19%

Gross marginincreased $11$5 million in the firstsecond quarter of 2011 and $16 million in the six-month period ended June 30, 2011. Revenues associated with certain tracking mechanisms and surcharges are offset by related expenses elsewhere in the Statement of Operations. The following table details changes in various gross margin components relative to the comparable prior period:
     
(in Millions) Three Months 
Base sales, net of RDM and CIM $7 
Energy optimization incentive  9 
Restoration tracker  5 
Electric Choice implementation surcharge elimination  (6)
Securitization bond and tax surcharge  (3)
Other  (1)
    
Increase in gross margin $11 
    

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  Three Months Ended
  March 31
(in Thousands of MWh) 2011 2010
Electric Sales
        
Residential  3,889   3,665 
Commercial  3,993   3,942 
Industrial  2,341   2,475 
Other  798   802 
         
   11,021   10,884 
Interconnection sales (1)  306   1,310 
         
Total Electric Sales  11,327   12,194 
         
         
Electric Deliveries
        
Retail and Wholesale  11,021   10,884 
Electric Customer Choice, including self generators(2)  1,302   1,103 
         
Total Electric Sales and Deliveries  12,323   11,987 
         

(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.
         
  Three Months Ended 
Power Generated and Purchased March 31 
(in Thousands of MWh) 2011  2010 
Power Plant Generation        
Fossil  8,058   9,520 
Nuclear  1,706   2,200 
       
   9,764   11,720 
Purchased Power  2,477   1,322 
       
System Output  12,241   13,042 
Less Line Loss and Internal Use  (914)  (848)
       
Net System Output  11,327   12,194 
       
         
Average Unit Cost ($/MWh)
        
Generation (1) $20.80  $18.78 
       
Purchased Power $40.79  $32.30 
       
Overall Average Unit Cost $24.84  $20.15 
       
(in Millions)Three Months Six Months
Base sales, net of RDM and CIM$20
 $30
Securitization bond and tax surcharge(13) (15)
Electric Choice implementation surcharge elimnation(6) (11)
Energy optimization incentive
 9
Restoration tracker1
 6
Other3
 (3)
Increase in gross margin$5
 $16


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 Three Months Ended Six Months Ended
 June 30 June 30
(in Thousands of MWh)2011 2010 2011 2010
Electric Sales       
Residential3,607
 3,602
 7,495
 7,267
Commercial3,998
 3,988
 7,991
 7,930
Industrial2,405
 2,605
 4,747
 5,081
Other763
 799
 1,560
 1,600
 10,773
 10,994
 21,793
 21,878
Interconnection sales (1)1,156
 1,450
 1,461
 2,760
Total Electric Sales11,929
 12,444
 23,254
 24,638
        
Electric Deliveries       
Retail and Wholesale10,773
 10,994
 21,793
 21,878
Electric Customer Choice, including self generators (2)1,409
 1,283
 2,711
 2,386
Total Electric Sales and Deliveries12,182
 12,277
 24,504
 24,264
____________

(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.

Power Generated and Purchased

(1)Represents fuel costs associated with power plants.
 Three Months Ended Six Months Ended
 June 30 June 30
(in Thousands of MWh)2011 2010 2011 2010
Power Plant Generation       
Fossil8,807
 9,595
 16,864
 19,115
Nuclear2,408
 2,087
 4,114
 4,287
 11,215
 11,682
 20,978
 23,402
Purchased Power1,573
 1,474
 4,050
 2,796
System Output12,788
 13,156
 25,028
 26,198
Less Line Loss and Internal Use(859) (712) (1,774) (1,560)
Net System Output11,929
 12,444
 23,254
 24,638
        
Average Unit Cost ($/MWh)       
Generation (1)$21.85
 $18.96
 $21.36
 $18.87
Purchased Power$44.65
 $45.60
 $42.29
 $39.31
Overall Average Unit Cost$24.66
 $21.95
 $24.75
 $21.05
____________

(1)    Represents fuel costs associated with power plants.

Operation and maintenanceexpense increased $20$5 million and $25 million in the firstthree and six months ended June 30, 2011, respectively. The increase for the 2011 second quarter is primarily due to higher energy optimization and renewable energy expenses of $5 million, partially offset by lower restoration and line clearance expenses of $2 million. The increase for the 2011 due primarilysix-month period is attributable to increased power plant generation outagesexpenses of $15 million, higher energy optimization and renewable energy expenses of $9 million and higher employee benefit related expenses of $8 million, higher storm and line clearance expenses of $6 million and higher energy optimization and renewable energy expenses of $4 million, partially offset by

25


reduced uncollectible expenses of $6$5 million.

Asset (gains) and losses, netincreased $5 million and decreased $20$15 million duein the three and six months ended June 30, 2011, respectively. The changes in the six month periods are primarily attributable to an accrual of $19 million in the first quarter of 2011 resulting from management’smanagement's revisions of the timing and estimate of cash flows for the decommissioning of Fermi 1.1, partially offset by second quarter 2011 revisions in the timing and estimate of cash flows for the Fermi 1 asbestos removal obligation. See Note 65 of the Notes to the Consolidated Financial Statements.

Outlook- We continue to move forward in our efforts to improve the operating performance and cash flow of Detroit Edison. The 2010 MPSC order provided for an uncollectible expense tracking mechanism which financially assists in mitigating the impacts of economic conditions in our service territory and a revenue decoupling mechanism that addresses changes in average customer usage due to general economic conditions, weather and conservation. These and other tracking mechanisms and surcharges are expected to result in lower earnings volatility.

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We expect that our planned significant environmental and renewableenergy investments will result in earnings growth. Looking forward, additionalfactors may impact earnings such as volatility in prices for coalthe outcome of the 2010 electric rate case and other commodities, increased transportation costs,regulatory proceedings, investment returns and changes indiscount rate assumptions in benefit plans and health care costs, lower levelsof wholesale sales due to contract expirations, and uncertainty of legislativeor regulatory actions regarding climate change. We expect to continue ourefforts to improve productivity and decrease our costs while improving customersatisfaction with consideration of customer rate affordability.

In July 2011, Detroit Edison filed a rate case on October 29, 2010 based on a projected twelve-month period ending March 31, 2012.notified the NRC that it intends to apply for renewal of the operating license for the Fermi 2 nuclear power plant. The filingcurrent license expires in 2025 and NRC approval of the application would permit the plant to operate an additional 20 years. The application is expected to be filed with the MPSC requested a $443 million increaseNRC in base rates. Detroit Edison also proposed certain adjustments which could reduce the net impact on the required increase in rates by approximately $190 million. Detroit Edison plans to self-implement $107 million of its requested annual increase on April 28, 2011. This increase will remain in place until a final order is issued by the MPSC, which is expected by October 2011. If the final rate case order does not support the self-implemented rate increase, Detroit Edison must refund the difference with interest.2014.

Environmental Matters

Global Climate Change

The EPA has promulgated the Greenhouse Gas Tailoring rule that regulates greenhouse gases as pollutants under the EPA’sEPA's new source permitting and major source operating permit programs, and that requires a Best Available Control Technology (BACT) determination for new and modified major sources of GHG.greenhouse gas (GHG). In addition, the EPA will be issuing proposed GHG performance standards for new and modified electric generating units in Julylate 2011. Comprehensive climate change and energy legislation was passed out of the U.S. House in 2009, but the Senate was unable to agree on passage of a climate bill. In the current U.S. Congress, efforts are focused on delaying the EPA’sEPA's regulation of GHGs with no expectation of enacting a comprehensive national climate program. Pending or future regulatory or legislative actions could have a material impact on our operations and financial position and the rates we charge our customers. Impacts include expenditures for environmental equipment beyond what is currently planned, financing costs related to additional capital expenditures, the purchase of emission offsets from market sources and the retirement of facilities where control equipment is not economical. We would seek to recover these incremental costs through increased rates charged to our utility customers. Increased costs for energy produced from traditional sources could also increase the economic viability of energy produced from renewable and/or nuclear sources and energy efficiency initiatives and the development of market-based trading of carbon offsets providing business opportunities for our utility and non-utility segments. It is not possible to quantify these impacts on Detroit Edison or its customers at this time.

See Note 109 of the Notes to Consolidated Financial Statements for additional information regarding environmental matters.

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Part IItem 4.

CONTROLS AND PROCEDURES

(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’sEdison's Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of the Company’sCompany's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of March 31,June 30, 2011, which is the end of the period covered by this report. Based on this evaluation, the CEO and CFO have concluded that such disclosure 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 (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’sSEC's rules and forms and (ii) is accumulated and communicated to the Company’sCompany's management, including its CEO and CFO, 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’sCompany's internal control over financial reporting during the quarter ended March 31,June 30, 2011 that have materially affected, or are reasonably likely to materially affect, the Company’sCompany's internal control over financial reporting.



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Part II Other Information


Item 1.Legal Proceedings

The Company is involved in certain legal, regulatory, administrative and environmental proceedings before various courts, arbitration panels and governmental agencies concerning matters arising in the ordinary course of business. These proceedings include certain contract disputes, 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 are considered probable of loss. The resolution of pending proceedings is not expected to have a material effect on its operations or financial statements in the periods they are resolved.Item 1A.  —Risk Factors
In July 2009, DTE Energy received a Notice of Violation/Finding of Violation (NOV/FOV) from the EPA alleging, among other things, that five of Detroit Edison’s power plants violated New Source Performance standards, Prevention of Significant Deterioration requirements, and operating permit requirements under the Clean Air Act. In June 2010, the EPA issued a NOV/FOV making similar allegations related to a recent project and outage at Unit 2 of the Monroe Power Plant.
On August 5, 2010, the United States Department of Justice, at the request of the EPA, brought a civil suit in the U.S. District Court for the Eastern District of Michigan against DTE Energy and Detroit Edison, related to the June 2010 NOV/FOV and the outage work performed at Unit 2 of the Monroe Power Plant, but not relating to the July 2009 NOV/FOV. Among other relief, the EPA requested the court to require Detroit Edison to install and operate the best available control technology at Unit 2 of the Monroe Power Plant. Further, the EPA requested the court to issue a preliminary injunction to require Detroit Edison to (i) begin the process of obtaining the necessary permits for the Monroe Unit 2 modification and (ii) offset the pollution from Monroe Unit 2 through emissions reductions from Detroit Edison’s fleet of coal-fired power plants until the new control equipment is operating. In January 2011, the EPA’s motion for preliminary injunction was denied and the liability phase of the civil suit has been scheduled for trial in September 2011.
DTE Energy and Detroit Edison believe that the plants identified by the EPA, including Unit 2 of the Monroe Power Plant, have complied with all applicable federal environmental regulations. Depending upon the outcome of discussions with the EPA regarding the NOV/FOV and the result of the civil action, Detroit Edison could also be required to install additional pollution control equipment at some or all of the power plants in question, implement early retirement of facilities where control equipment is not economical, engage in supplemental environmental programs, and/or pay fines. DTE Energy and Detroit Edison cannot predict the financial impact or outcome of this matter, or the timing of its resolution.
For additional discussion on legal matters, see Note 10 of the Notes to Consolidated Financial Statements
Item 1A.Risk Factors

There are various risks associated with the operations of Detroit Edison. To provide a framework to understand the operating environment of Detroit Edison, we have provided a brief explanation of the more significant risks associated with our businesses in Part 1, Item 1A. Risk Factors in the Company’sCompany's 2010 Form 10-K. Although we have tried to identify and discuss key risk factors, others could emerge in the future. In addition to the risk factors set forth in our 10-K, the following updated risks could affect our performance.

Operation of a nuclear facility subjects us to risk.Ownership of an operating nuclear generating plant subjects us to significant additional risks. These risks include, among others, plant security, environmental regulation and remediation, changes in federal nuclear regulation and operational factors that can significantly impact the performance and cost of operating a nuclear facility. While we maintain insurance for various nuclear-related risks, there can be no assurances that such insurance will be sufficient to cover our costs in the event of an accident or business interruption at our nuclear generating plant, which may affect our financial performance.

Construction and capital improvements to our power facilities subject us torisk.We are managing ongoing and planning future significant construction and capital improvement projects at multiple power generation and

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distribution facilities. Many factors that could cause delay or increased prices for these complex projects are beyond our control, including the cost of materials and labor, subcontractor performance, timing and issuance of necessary permits, construction disputes and weather conditions. Failure to complete these projects on schedule and on budget for any reason could adversely affect our financial performance and operations at the affected facilities.

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Item 6. — Exhibits

Item 6.— Exhibits
 Exhibit
Exhibit
Number Description
Exhibits filed herewith:
   
4-2744-275 
Supplemental Indenture, dated as of March 1,May15, 2011, to theMortgage and Deed of Trust, dated as of October 1, 1924, by andbetween The Detroit Edison Company and The Bank of New YorkMellon Trust Company, N.A. as successor trustee (2011 Series AT)B)
   
12-4012-41 Computation of Ratio of Earnings to Fixed Charges
   
31-6331-65 Chief Executive Officer Section 302 Form 10-Q Certification
   
31-6431-66 Chief Financial Officer Section 302 Form 10-Q Certification
   
Exhibits furnished herewith:
   
32-6332-65 Chief Executive Officer Section 906 Form 10-Q Certification
   
32-6432-66 Chief Financial Officer Section 906 Form 10-Q Certification
101.INSXBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema
101.CALXBRL Taxonomy Extension Calculation Linkbase
101.DEFXBRL Taxonomy Extension Definition Database
101.LABXBRL Taxonomy Extension Label Linkbase
101.PREXBRL Taxonomy Extension Presentation Linkbase

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

  THE DETROIT EDISON COMPANY
  (Registrant)
   
Date: April 27,July 28, 2011/S/ PETER B. OLEKSIAK
  
Peter B. Oleksiak
  Vice President and Controller and
  Chief Accounting Officer

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