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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

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

For the fiscal year ended December 31, 2003

Commission file number 1-11607

DTE ENERGY COMPANY

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

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

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

None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X]       No [  ]

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [X]    No [  ]

Based on the closing price on June 30, 2003, our most recently completed second quarter, the aggregate market value of our Common Stock held by non-affiliates was $6.2 billion.

At January 31, 2004, 168,849,506 shares of DTE Energy’s Common Stock, substantially all held by non-affiliates, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information in DTE Energy Company’s definitive Proxy Statement for its 2004 Annual Meeting of Common Shareholders to be held April 29, 2004, which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the end of the Registrant’s fiscal year covered by this report on Form 10-K, is incorporated herein by reference to Part III (Items 10, 11, 12, 13 and 14) of this Form 10-K.

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DTE Energy Company

Annual Report on Form 10-K
Year Ended December 31, 2003

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Definitions

Company		DTE Energy Company and subsidiary companies
Coke and Coke Battery		Raw coal is heated to high temperatures in ovens to drive off impurities, leaving a carbon residue called coke. Coke is combined with iron ore to create a high metallic iron that is used to produce steel. A series of coke ovens configured in a module is referred to as a battery.
Customer Choice		Choice programs are statewide initiatives giving customers in Michigan the option to choose alternative suppliers for electricity and gas.
Detroit Edison		The Detroit Edison Company (a wholly owned subsidiary of DTE Energy Company) and subsidiary companies
Distributed Generation		Electric energy produced at or close to the point of use, in contrast to central station generation that generally produces electricity at large power plants and transmits and distributes power over long distances. Distributed generation includes fuel cells, small gas turbine engines called micro- and mini-turbines, and other devices capable of producing up to two megawatts of power.
DTE Energy		DTE Energy Company, the parent of Detroit Edison and Enterprises
Enterprises		DTE Enterprises Inc. (successor to MCN Energy) and subsidiary companies
EPA		United States Environmental Protection Agency
FERC		Federal Energy Regulatory Commission
GCR		A gas cost recovery mechanism authorized by the MPSC that was reinstated by MichCon in January 2002, permitting MichCon to pass the cost of natural gas to its customers.
ITC		International Transmission Company (until February 28, 2003, a wholly owned subsidiary of DTE Energy Company)
MCN Energy		MCN Energy Group Inc. and subsidiary companies that were merged into Enterprises
MichCon		Michigan Consolidated Gas Company and subsidiary companies
MPSC		Michigan Public Service Commission
Non-regulated Subsidiary		A subsidiary whose conditions of service, prices of goods and services and other operating related matters are not regulated by the MPSC or the FERC
NRC		Nuclear Regulatory Commission
PSCR		A power supply cost recovery mechanism authorized by the MPSC that allowed Detroit Edison to recover through rates its fuel, fuel-related and purchased power expenses. The clause was suspended under Michigan’s restructuring legislation signed into law June 5, 2000, which lowered and froze electric customer rates. The clause was reinstated by the MPSC effective January 1, 2004.
Section 29 tax credits		Tax credits as authorized under Section 29 of the Internal Revenue Code that are designed to stimulate investment in and development of alternate fuel sources.

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Forward-Looking Statements

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

•		the effects of weather and other natural phenomena on operations and sales to customers;
•		economic climate and growth in the geographic areas where we do business;
•		environmental issues, including changes in the climate, and regulations;
•		nuclear regulations and risks associated with nuclear operations;
•		ability to utilize Section 29 tax credits or sell interests in facilities producing such credits;
•		implementation of electric and gas Customer Choice programs;
•		implementation of electric and gas utility restructuring in Michigan;
•		employee relations;
•		unplanned outages;
•		access to capital markets and capital market conditions and other financing efforts which can be affected by credit agency ratings;
•		the timing and extent of changes in interest rates;
•		the level of borrowings;
•		changes in the cost of fuel, purchased power and natural gas;
•		effects of competition;
•		impact of FERC and MPSC proceedings and regulations;
•		contributions to earnings by non-regulated businesses;
•		changes in federal or state tax laws and their interpretations, including the code, regulations, rulings, court proceedings and audits;
•		ability to recover costs through rate increases;
•		insurance;
•		the cost of protecting assets against or damage due to terrorism; and
•		changes in accounting standards and financial reporting regulations.

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

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Part I

Items 1. & 2. Business & Properties

GENERAL

In 1995, DTE Energy incorporated in the state of Michigan. Our regulated operations consist primarily of Detroit Edison and MichCon. We also have numerous non-regulated subsidiaries engaged in energy marketing and trading, energy services, and various other electricity, coal and gas related businesses. DTE Energy is an exempt holding company under the Public Utility Holding Company Act (PUHCA) of 1935, except Section 9 (a) (2) that relates to the acquisition of securities of public utility companies and Section 33 that relates to the acquisition of foreign (non-U.S.) utility companies.

Detroit Edison is a Michigan corporation organized in 1903. Detroit Edison is a public utility subject to regulation by the MPSC and FERC and is engaged in the generation, purchase, distribution and sale of electric energy to 2.1 million customers in a 7,600 square mile area in southeastern Michigan.

MichCon is a Michigan corporation organized in 1898. MichCon became an indirect wholly owned subsidiary of DTE Energy in conjunction with the acquisition of MCN Energy (which was subsequently merged into Enterprises), which was completed on May 31, 2001. See Note 3 for a further discussion of the MCN Energy acquisition. MichCon is a public utility subject to regulation by the MPSC. MichCon is engaged in the purchase, storage, transmission, distribution and sale of natural gas to 1.2 million customers in a 14,700 square mile area throughout Michigan.

In February 2003, we sold the International Transmission Company (ITC), a FERC regulated transmission company. See Note 3 for a further discussion of the ITC sale and its presentation as a discontinued operation.

Our website is www.dteenergy.com. Available free of charge on our website is information such as previously filed reports with the SEC, press releases and other informational resources regarding DTE Energy and our subsidiaries. The information on our website is updated as soon as reasonably practicable. The information on our website is not, and shall not be deemed to be, a part of this Form 10-K or any other filing we make with the SEC. Additionally, our previously filed reports and statements are also available at the SEC’s website: www.sec.gov.

References in this report to “we,” “us”, “our” or “Company” are to DTE Energy and its subsidiaries, collectively.

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We operate our businesses through three strategic business units (Energy Resources, Energy Distribution and Energy Gas). The balance of our business consists of Corporate & Other. Based on this structure, we set strategic goals, allocate resources and evaluate performance. Each business unit has regulated and non-regulated operations, and contributed to DTE Energy’s 2003 diluted earnings per share of $3.09. See Note 16 - Segment and Related Information, for financial information by segment for the last three years. A discussion of each business follows.

ENERGY RESOURCES

Power Generation

Description

Power Generation comprises our regulated power generation business and plants within Detroit Edison. These plants are regulated by numerous federal and state governmental agencies, including the MPSC, the NRC and the EPA. Electricity is generated from Detroit Edison’s numerous fossil plants, its hydroelectric pumped storage plant and its nuclear plant, and purchased from electricity generators, suppliers and wholesalers. The electricity we produce and purchase is sold to four major classes of customers: residential, commercial, industrial and wholesale, principally throughout Michigan, the Midwest and Ontario, Canada.

Weather, economic factors and electricity prices affect sales levels to customers. Our peak load and highest total system sales generally occur during the third quarter of the year driven by air conditioning and other cooling-related demands. Power generation sales are made to a diverse base of customers in both type and number; sales levels are not dependent on any small market segment. However, due to residential rate subsidization, less than 1% of the customers constitute approximately 80% of the power

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generation margin. Additionally, business customers who have elected to participate in the electric Customer Choice program are having a significant unfavorable effect on our financial performance.

Our power is generated from a variety of fuels and is supplemented with market purchases. The table below details our energy supply mix and average cost per unit:

We expect an adequate supply of fuel and purchased power to meet our obligation to serve customers. The effect of lost sales due the electric Customer Choice program has reduced our need for purchased power and increased our ability to sell power in the wholesale market. We have short and long-term supply contracts for expected fuel and purchased power requirements as detailed in the following table:

Power Generation’s generating capability is heavily dependent upon coal. The coal is purchased from various sources in different geographic areas under agreements that vary in both pricing and terms. Detroit Edison expects to obtain the majority of its coal requirements through long-term contracts with the balance to be obtained through short-term agreements and spot purchases. Detroit Edison has contracts with three coal suppliers for a total purchase of up to 28 million tons of low-sulfur western coal to be delivered from 2004 through 2008. Detroit Edison also has a contract with a supplier for the purchase of approximately 4 million tons of Appalachian coal to be delivered from 2004 through 2006. These existing long-term coal contracts include provisions for price escalation as well as de-escalation. Given the geographic diversity of supply, Detroit Edison believes it can meet the expected generation requirements. We own and lease a fleet of rail cars and have long-term transportation contracts with companies to provide rail and vessel services for delivery of purchased coal to our generating facilities.

We purchase power from other electricity generators, suppliers and wholesalers. These purchases supplement our generation capability to meet customer demand during peak cycles. For example, when high temperatures occur during the summer we require additional electricity to meet demand. This access to additional power is an efficient and economical way to meet our obligation to customers without increasing capital expenditures to build additional base-load power facilities.

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Regulation

Detroit Edison’s Power Generation business is subject to the regulatory jurisdiction of various agencies, including the MPSC, FERC and NRC. The MPSC issues orders pertaining to rates, recovery of certain costs, including the costs of generating facilities and regulatory assets, conditions of service, accounting and operating-related matters. Detroit Edison’s MPSC-approved rates charged to customers have historically been designed to allow for the recovery of costs, plus an authorized rate of return on our investments. The FERC regulates Detroit Edison with respect to financing authorization and wholesale electric activities. The NRC has regulatory jurisdiction over all phases of the operation, construction, licensing and decommissioning of Detroit Edison’s Fermi 2 nuclear plant.

Since 1996 there have been several important acts, orders, court rulings and legislative actions in the state of Michigan that affect our Power Generation operations. In 1996, the MPSC began an initiative designed to give all of Michigan’s electric customers access to electricity supplied by other generators and marketers. In 1998, the MPSC authorized the electric Customer Choice program that allowed for a limited number of customers to purchase electricity from suppliers other than their local utility. The local utility would continue to transport the electric supply to the customers’ facilities, thereby retaining distribution margins. The electric Customer Choice program was phased in over a three-year period, with all customers having the option to choose their electric supplier by January 2002.

In 2000, the Michigan Legislature enacted legislation that reduced electric rates by 5% and reaffirmed January 2002 as the date for full implementation of the electric Customer Choice program. This legislation also contained provisions freezing rates through 2003 and preventing rate increases for residential customers through 2005 and for small business customers through 2004. The legislation and an MPSC order issued in 2001 established a methodology to enable Detroit Edison to recover stranded costs related to its generation operations that may not otherwise be recoverable due to electric Customer Choice related lost sales and margins. The legislation also provides for the recovery of the costs associated with the implementation of electric Customer Choice program. The MPSC has determined that these costs be treated as regulatory assets. Additionally, the legislation provides for recovery of costs incurred as a result of changes in taxes, laws and other governmental actions including the Clean Air Act.

Due to MPSC orders issued in 1997 and 1998 that altered the regulatory process in Michigan and provided a plan for transition to electric Customer Choice for the generation business of Detroit Edison, effective December 1998, Detroit Edison’s generation business no longer met the criteria of SFAS No. 71, “Accounting for the Effects of Certain Types of Regulation.” Since the June 2000 legislation was enacted into law and with the issuance of subsequent clarifying MPSC orders in 2001 and 2002, rates for retail customers and transition charges for electric Customer Choice customers will be set to recover Detroit Edison’s generation costs. Such costs will be billed and recovered from both retail and choice customers and thus satisfy the criteria of SFAS No. 71. In addition, we have the legislative authority to defer regulatory costs in 2002 and 2003 and to begin recovery of such costs starting in 2004 after the mandated rate freeze expires. The recovery of these costs is dependent on authorization from the MPSC. As a result, we resumed application of SFAS No. 71 for our generation business in the fourth quarter of 2002.

In June 2003, Detroit Edison filed an application with the MPSC for a change in retail electric rates, resumption of the Power Supply Cost Recovery (PSCR) mechanism, and recovery of net stranded costs. Detroit Edison is specifically requesting authority to increase rates by $427 million annually with a three-year phase in as customers’ rate caps expire. In February 2004, the MPSC authorized an interim base rate increase of $248 million annually.

For additional information regarding our regulatory environment, see Note 4 - Regulatory Matters.

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Properties

Detroit Edison owns generating properties and facilities that are all located in the state of Michigan. Substantially all the net utility properties of Detroit Edison are subject to the lien of its mortgage. Power Generation plants owned and in service as of December 31, 2003 are as follows:

Strategy and Competition

We continue to strive to be the preferred electricity supplier in southeast Michigan. We believe that we can accomplish our goal by working with our customers, communities and regulatory agencies to be a reliable low cost supplier of electricity. To control expenses, we optimize our fuel blends thereby taking maximum advantage of low cost, environmentally friendly low-sulfur western coals. To ensure generation reliability we will continue to make investments in our generating plants that will improve plant availability and improve operating efficiencies. Revenues from year to year will vary due to weather conditions, economic factors, regulatory events and other risk factors as discussed in the “Risk Factors” section that follows.

Effective January 1, 2002, the electric Customer Choice program expanded in Michigan whereby all of the Company’s electric customers can choose to purchase their electricity from alternative suppliers of generation services. Detroit Edison lost 16% of retail sales in 2003 and 6% of such sales in 2002 as a result of customers choosing to purchase power from alternative suppliers under the electric Customer Choice program. If regulatory or legislative changes are not made, we expect to lose between 17% to 20% of retail sales in 2004 as a result of customers choosing to participate in the program. Customers participating in the electric Customer Choice program consist primarily of industrial and large

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commercial customers. There is a significant price difference in the wholesale and retail markets, which only allows for partial offset of the lost revenue from customer choice migration. We will continue to aggressively utilize the wholesale market to sell the generation made available by the electric Customer Choice program.

Energy Services

Description

Non-regulated Energy Services has three business lines: Coal-Based Fuels, On-Site Energy Projects and Merchant Generation.

Coal-Based Fuels

Coal-Based Fuels operations include producing synthetic fuel from nine synfuel plants and producing coke from three coke battery plants. Both processes generate tax credits under Section 29 of the Internal Revenue Code. Section 29 is designed to stimulate investment in and development of alternate fuel sources. We have private letter rulings from the IRS for all of our synfuel plants. Synfuel-related Section 29 tax credits expire in 2007. Section 29 tax credits for two of our three coke batteries expired at the end of 2002 with the third expiring in 2007.

The synthetic fuel process involves chemically modifying and binding particles of coal to produce a fuel that is used for power generation and coke production. The modification involves a three-step process that produces a solid synthetic fuel product. During 2002, we sold a 95% interest in two of our synfuel plants, and in 2003, we sold a 99% interest in one of our synfuel plants and a 59% interest in two other plants. In January 2004, we sold an additional 40% interest in two of the previously sold plants, reducing our interest to 1%. We continue to consolidate these projects due to our controlling influence.

The coke battery facilities produce coke that is used in blast furnaces within the steel industry. DTE Energy is one of the largest producers in the U.S. of coke for the steel industry. During 2001, we sold a 49% interest in two of our coke battery projects, and in 2002, consistent with the original purchase and sale agreement, our third coke battery project interest was reduced from 95% to 5%.

(1)

DTE Energy’s portion of total tax credits generated

On-Site Energy Projects

Energy Services owns and/or operates on-site facilities, including pulverized coal injection, power generation, steam production, chilled water, wastewater treatment and compressed air. Many of these facilities deliver utility services to industrial, commercial and institutional customers.

Merchant Generation

Energy Services develops and operates peaking and gas-fired electric generating plants. We have four electric generating plants in operation, all located in the Great Lakes region. We have contracts for

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approximately 33% of the 2004 and 2005 output of these plants and lesser amounts contracted through 2008.

Properties

As of December 31, 2003, Coal-Based Fuels owns interests in and operates nine synfuel plants at eight production sites. Additionally, we have interests in three coke battery facilities in the United States, two of which we operate.

Coal-Based Fuels

(1)

An additional 40% interest was sold in January 2004.

The following are significant properties owned by On-Site Energy Projects:

On-Site Energy Projects

The Merchant Generation fleet consists of four natural gas-fired electric generating plants that are all located in the Great Lakes region.

Merchant Generation

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Strategy and Competition

Our strategy for Energy Services is to continue leveraging our extensive energy-related operating experience and project management capability to develop and grow the on-site energy business. We continue to evaluate opportunities to sell interests in all of our synfuel plants in 2004. We also continue to pursue opportunities to provide asset management and operations services to third parties.

We anticipate building around our core strengths in the markets where we operate. In determining the markets in which to compete, we examine closely the regulatory environment, the number of competitors and our ability to achieve sustainable margins. We plan to maximize the effectiveness of our inter-related businesses as we expand from our current regional focus. As we pursue growth opportunities, our first priority will be to achieve value-added returns, and then trend towards increased operational scale.

We plan to focus on the following areas for growth:

	•		Optimization of our synfuel portfolio;
	•		Providing operating services to owners of power plants;
	•		Expansion of on-site energy projects; and
	•		Development of new tax advantaged opportunities.

Energy Marketing & Trading

Description

Energy Marketing & Trading consists of the wholesale electric and gas marketing and trading operations of DTE Energy Trading Company and CoEnergy. We acquired CoEnergy as part of the MCN Energy acquisition in May 2001. Energy Marketing & Trading focuses on physical power marketing and structured transactions for large customers, as well as the enhancement of returns from DTE Energy’s power plants, pipeline and storage assets. In pursuing these goals, Energy Marketing & Trading may enter into forwards, futures, swaps and option contracts.

Strategy and Competition

Our strategy for Energy Marketing & Trading is to execute on our vision of the role energy trading plays in delivering value-added services to our customers. Many of the former major market players have either ceased as going concerns or are no longer engaged in the energy trading business. We seek to manage this business in a manner consistent with and complementary to the growth of our other business segments. We plan to focus on physical marketing and the optimization of our portfolio of energy assets. We have risk management and credit policies to monitor and minimize risk.

Coal Services

Description

Coal Services provides fuel, transportation and equipment management services tailored to the individual requirements of each customer. We specialize in minimizing energy production costs and maximizing reliability of supply for energy-intensive customers. Our external customers include electric utilities, merchant power producers, integrated steel mills and large industrial companies with significant energy requirements. We also operate a number of railcar maintenance and repair facilities serving coal transporters, as well as other industries and rail car types. We participate in the trading of coal and emissions credits as well as coal-to-power tolling transactions. During 2003, we entered into the waste coal recovery business by purchasing a patented technology and constructing our first commercial facility.

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Properties

We lease approximately 2,600 rail cars. We own fixed and mobile railcar maintenance and repair facilities in Nebraska and Indiana. We completed construction of a waste coal recovery facility on the site of a former operating coal mine in Ohio.

Strategy and Competition

We continue to leverage our position as one of the top North American coal marketers and our reputation as an efficient manager of transportation assets. Trends such as railroad and mining consolidation and the financial uncertainty of many mining firms could have an impact on how we compete in the future. We will continue to work with suppliers and the railroads to promote secure and competitive access to the energy requirements of our customers.

We acquired the rights to a proprietary technology that produces high quality coal products from fine coal slurries that are typically discarded from coal mining operations. The technology has the additional benefit of improving the environment by allowing us to restore the land in accordance with reclamation requirements of each state. The technology produces a fine-coal fuel by removing mineral matter, clay-sized impurities and oxides from waste material. The fine-coal fuel can be used in power plants, as a feedstock for synthetic fuel production and for other industrial applications. Our first facility in Ohio became operational in late-2003 and has the capacity to produce more than 500,000 tons of fine coal per year. We are negotiating an agreement for a second facility and plan to site three to five additional facilities in 2004. We believe that the waste coal recovery business will contribute significantly to future earnings and provide significant environmental benefits.

Biomass

Description

Biomass develops, owns and operates landfill gas recovery systems in the U.S. Landfill gas, a by product of solid waste decomposition, is composed of approximately equal portions of methane and carbon dioxide. Converting the methane into a renewable energy resource conserves fossil fuels. Biomass operations generate Section 29 tax credits through 2007.

Biomass helps limit potential greenhouse gas emissions by developing and implementing landfill gas recovery systems that capture the gas and use it productively. Such a recovery system eliminates detrimental air emissions by preventing methane from escaping into the atmosphere or migrating off-site and becoming a safety hazard. Landfill gas recovery systems also provide local utilities, industry and consumers with an opportunity to use a competitive, renewable source of energy. Applications for this form of energy include steam and electricity generation, fueling of asphalt plants and brick kilns and for processing into pipeline quality gas.

(1)

DTE Energy’s portion of total tax credits generated

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Properties

Biomass has 31 operating sites located in 14 states and other projects are under development.

Strategy and Competition

Biomass’ strategy capitalizes upon our industry experience of over 20 years. We are evaluating business growth through both development and acquisitions. We compete primarily with fossil fuels such as natural gas and coal. However, we believe the environmental benefits of biomass along with reasonable and economic access to landfill sites provide a platform for future growth.

ENERGY DISTRIBUTION

Power Distribution

Description

The electric distribution services of Detroit Edison comprise our regulated Power Distribution business. This business distributes electricity generated by Energy Resources’ Power Generation business and alternative electric suppliers to Detroit Edison’s 2.1 million customers in southeastern Michigan. This business also shares, with the Gas Distribution segment, the customer service function for our utilities. Accordingly, costs associated with this function, including collections, our call center and uncollectable accounts receivable is shared between Power Distribution and Gas Distribution.

In January 2003, we sold the steam heating business of Detroit Edison to Thermal Ventures II, LP. In February 2003 we sold ITC to an affiliate of Kohlberg, Kravis, Roberts & Co. and Trimaran Capital Partners, LLC. ITC will continue to provide transmission services to the Energy Distribution business at rates that will be recovered from Detroit Edison’s utility customers.

Weather and economic factors affect our sales and revenues. Similar to the Power Generation business, our peak load and highest total system sales generally occur during the third quarter of the year driven by air conditioning and cooling-related demands. Power Distribution’s sales are not dependent upon a limited number of customers. Additionally, customers participating in the electric Customer Choice program do not impact Power Distribution’s operating revenues or the number of customers served. The loss of any one or a few customers is not reasonably likely to have a material adverse effect on Power Distribution.

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Regulation

Detroit Edison’s Power Distribution is subject to the jurisdiction of the MPSC and the FERC, which have regulatory authority over rates, conditions of service and other operating-related matters. As previously discussed, Michigan legislation prevents Detroit Edison from increasing rates to residential customers through 2005 and for small business customers through 2004. By order of the FERC, rates charged by ITC will remain at current levels through December 2004.

In June 2003, Detroit Edison filed an application with the MPSC for a change in retail electric rates, resumption of the PSCR mechanism, and recovery of net stranded costs. In February 2004, the MPSC authorized an interim base rate increase of $248 million annually. See Note 4 for further discussion of the Electric Transitional Rate Plan filing.

In January 2004, the MPSC issued an order adopting rules governing service quality and reliability standards for electric distribution systems. The reliability standards establish performance levels for service restoration, wire-down relief requests, customer call answer time, customer complaint response, meter reading and new service installations. The order also establishes penalties for delays in service restoration during normal conditions, catastrophic storms and repetitive outages. Detroit Edison is required to file an annual report providing information regarding performance against the measures provided and any penalties incurred.

For additional information regarding our regulatory environment, see Note 4 – Regulatory Matters.

Energy Assistance Programs

Energy assistance programs funded by the federal government and the State of Michigan, remain critical to Detroit Edison’s ability to control its uncollectable accounts receivable and collections expenses.

Detroit Edison’s uncollectable accounts receivable expense is directly affected by the level of government funded assistance its qualifying customers receive. We are working with the State of Michigan and others to increase the share of funding allocated to our customers to be representative of the number of low-income individuals in our service territory.

Properties

Detroit Edison owns and operates 663 distribution substations with a capacity of approximately 31,079,000 kilovolt-amperes (kVA) and approximately 407,000 line transformers with a capacity of approximately 24,542,000 kVA. Substantially all of the net utility properties of Detroit Edison are subject to the lien of its mortgage. Circuit miles of distribution lines owned and in service as of December 31, 2003 are as follows:

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Electric Distribution

There are numerous interconnections that allow the interchange of electricity between Detroit Edison and electricity providers external to its service area. These interconnections are owned and operated by ITC and connect to neighboring energy companies.

Strategy and Competition

Our strategy focuses on improving the quality of customer service and lowering operating costs by improving operating efficiencies as well as targeting capital investments in areas that have the greatest impact on reliability improvements with the goal of managing distribution rates charged to utility customers.

The decision to sell ITC is consistent with our strategic view that maximization of shareholder value and high levels of customer service are best achieved with assets that we own, operate and over which we exercise significant control. As Detroit Edison’s rates are designed to recover transmission costs, billings to Detroit Edison from ITC will be recovered from Detroit Edison’s utility customers. Rates charged by ITC to Detroit Edison will, by FERC order, remain at current levels through December 2004. Thereafter, rates would be subject to normal FERC regulation and market forces.

Competition in the regulated electrical distribution business is provided primarily by on-site generation by industrial customers and distributed generation applications by industrial and commercial customers. We do not expect significant competition for distribution to any group of customers in the near term.

Distributed Generation

Description

Distributed Generation, primarily consisting of DTE Energy Technologies (Dtech), has investments in emerging technologies that complement our existing businesses. We currently develop, market and distribute a portfolio of distributed generation products, provide application engineering, and monitor and manage system operations. Distributed generation units seek to generate safe, clean, reliable power at or near the point of use, rather than at large central power stations, which can also provide very high efficiencies due to effective use of waste heat. Distributed generation products can use a range of technologies, including internal combustion engines, external combustion engines, mini-turbines and fuel cells.

The number of megawatts (MW) of distributed generation delivered has increased since 2001, while the average unit size has also increased. Dtech has begun to shift more of its focus on larger industrial and commercial markets and, in particular, on continuous rather than standby generation, and away from the relatively higher volume, smaller margin, residential and small commercial markets. The following table details the distributed generation capacity delivered for the past three years.

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Strategy and Competition

Our goal is to become a profitable participant in the emerging distributed generation market, providing one-stop shopping that meets customers’ total energy needs. Key milestones toward this success include full commercialization of our internal combustion engine-driven products as well as our monitoring and system operations management. Our sales structure is in place and we are continuing to expand our project support capabilities, both directly and with partners.

Our strategy is to increase our focus on our proprietary pre-engineered and packaged continuous generation products. Provisions in current as well as proposed federal and state laws are expected to provide us additional opportunities via tax credits, energy efficiency and renewable portfolio standards.

Competition in the distributed generation business comes from distributors and manufacturers of stand-by and continuous duty generators. The success of this business depends on the continued development of new products and the expansion of customer acceptance.

ENERGY GAS

Gas Distribution

Description

Gas Distribution operations primarily consist of MichCon, our regulated gas utility. Gas Distribution provides gas sales and transportation delivery services to 1.2 million residential, commercial and industrial customers located throughout Michigan. As previously discussed, this business also shares with the Power Distribution segment, the customer service function for our utilities.

The following table details sales and deliveries to these customers.

Gas Distribution makes gas sales primarily to residential and small-volume commercial and industrial customers. It provides end user transportation to large-volume commercial and industrial customers and gas Customer Choice customers who purchase natural gas directly from other suppliers and utilize MichCon’s pipeline network to transport the gas to the customers’ facilities. Gas Distribution provides

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intermediate transportation to producers, brokers and other gas companies that own the natural gas transported, but are not the ultimate consumers. MichCon’s revenues and net income are impacted by weather and are concentrated in the first and fourth quarters of the year due to heating-related demand. MichCon’s operations are not dependent upon a limited number of customers, and the loss of any one or a few customers is not reasonably likely to have a material adverse effect on MichCon.

We obtain our natural gas supply from various sources in different geographic areas under agreements that vary in both pricing and terms.

Supply under contract represents approximately 75% of the expected 180 Bcf of supply requirements in 2004. We expect to meet the balance of gas supply requirements through open market purchases. As a result of varying demand primarily due to weather, MichCon may use existing gas in inventory to meet unanticipated customer obligations. Given the geographic diversity of supply, coupled with its 124 Bcf of storage capacity, MichCon believes it can meet the supply requirements for customers. MichCon has long-term firm transportation agreements expiring on various dates through 2011 for delivery of purchased natural gas to our distribution system.

Regulation

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

In the late 1990s, the MPSC began an initiative designed to give all of Michigan’s natural gas customers added choices and the opportunity to benefit from lower gas costs resulting from competition. In 1999, the MPSC approved a comprehensive experimental three-year gas Customer Choice program that allowed an increasing number of customers to purchase natural gas from suppliers other than their local utility. The local utility would continue to transport the natural gas supply to the customers’ facilities, thereby retaining distribution margins. In December 2001, the MPSC issued an order that continues the gas Customer Choice program on a permanent and expanding basis beginning with the conclusion of the three-year temporary program on March 31, 2002. Under the expanded program, beginning April 1, 2002, up to approximately 40% of customers could elect to purchase gas from suppliers other than MichCon. Beginning in April 2003, up to approximately 60% of customers could participate, and beginning April 2004, all 1.2 million of MichCon’s gas customers could choose to participate. Since MichCon continues to transport and deliver the gas to the participating customer premises at prices comparable to margins earned on gas sales, customers switching to other suppliers have little impact on MichCon’s earnings.

Under the December 2001 MPSC order, MichCon returned to a gas cost recovery (GCR) mechanism, effective January 2002. Under this mechanism, MichCon’s gas sales rates include a gas commodity component designed to recover its actual gas costs and therefore does not have a commodity price risk for prudently incurred gas costs. During 2001, MichCon was under a Gas Sales Program and incurred commodity price risk associated with its ability to secure gas supplies at prices less than $2.95 per Mcf.

In September 2003, MichCon filed an application with the MPSC for an increase in service and distribution charges (base rates) for its gas sales and transportation customers. The filing requests an

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overall increase in base rates of $194 million per year (approximately 7% increase, inclusive of gas costs), beginning January 1, 2005. MichCon has requested that the MPSC increase base rates by $154 million per year on an interim basis by April 1, 2004. The interim request is based on a projected revenue deficiency for the test year 2004.

For additional information regarding our regulatory environment, see Note 4 - Regulatory Matters.

Energy Assistance Programs

Energy assistance programs funded by the federal government and the State of Michigan, remain critical to MichCon’s ability to control its uncollectable accounts receivable expenses.

As previously discussed, we are working with the State of Michigan and others to increase the share of funding allocated to our customers to be representative of the number of low-income individuals in our service territory.

Properties

MichCon owns distribution, transmission and storage properties and facilities that are all located in the state of Michigan. At December 31, 2003, MichCon’s distribution system included approximately 18,000 miles of distribution mains, approximately 1,148,000 service lines and approximately 1,279,000 active meters. MichCon owns approximately 2,600 miles of transmission lines that deliver natural gas to the distribution districts and interconnect its storage fields with the sources of supply and the market areas. MichCon owns properties relating to four underground natural gas storage fields with an aggregate working gas storage capacity of approximately 124 Bcf. Substantially all of the net utility properties of MichCon are subject to the lien of its mortgage.

Strategy and competition

The strategy of the Gas Distribution business is to expand our role as the preferred provider of natural gas in Michigan. As a result of more efficient furnaces and appliances, we expect future revenues to remain at current levels or slightly decline. To partially offset these factors, we plan initiatives to expand our gas markets, as well as by continuing to provide energy-related services that capitalize on our expertise, capabilities and efficient systems. We also anticipate increased revenues through increased rates as a result of our rate case, which was filed on September 30, 2003 (see Note 4).

Competition in the gas business primarily involves alternate fuels and energy sources. Natural gas continues to be the preferred space and water-heating fuel. Developers select natural gas in new construction because of the convenience, cleanliness and relative price advantage compared to propane, fuel oil and other alternative fuels.

Gas Production

Description

The Gas Production business owns one of the industry’s largest Antrim gas reserve bases predominantly located in the northern portion of the lower peninsula of Michigan. Our emphasis is on developing and producing the 351.9 Bcfe of proved reserves we owned as of December 31, 2003. We drilled 80 wells (68 net of interest of others) in 2003 with a success rate in excess of 90%. Wells drilled in the Antrim shale formation have high success rates and low drilling costs, and are therefore considered low risk.

Gas Production is also involved in the coal bed methane business which is a joint undertaking between Energy Gas and Energy Resources that leverages our gas capabilities with the skills and experience of other non-regulated businesses.

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Properties

The Michigan properties had 23.2 Bcfe of production in 2003. Gas Production does not anticipate adding a significant amount of new reserves to its 351.9 Bcfe of proven reserves at December 31, 2003.

Strategy

The Gas Production business is aggressively managing its Michigan gas producing assets to maximize returns on investment. We have operator responsibilities for our Michigan properties with the goal of optimizing the costs of producing reserves. Gas Production has rights to 94,866 acres (81,133 net of interest of others) of undeveloped leases. During 2004, Gas Production plans to continue developing this acreage.

In order to leverage our gas production capabilities and the skills and experience of other non-regulated businesses, we will continue to invest in opportunities in the coal bed methane business. As of December 31, 2003, the coal bed methane business has rights to 4,034 acres (3,156 net of interest of others) of undeveloped leases in Oklahoma. During 2004, the coal bed methane business plans to drill its first operated wells in Oklahoma.

Gas Storage, Pipelines & Processing

Description

The Gas Storage, Pipelines & Processing business has partnership interests in an interstate transmission pipeline, Vector Pipeline (Vector), seven carbon dioxide processing facilities and a 9.7 Bcf natural gas storage field. Additionally, we lease a 42.5 Bcf natural gas storage field located in Michigan.

Properties

Strategy and Competition

Gas Storage, Pipelines & Processing focuses on opportunities in the Midwest-to-Northeast region that supply natural gas to meet growing demand. We expect much of the growth in the demand for natural gas in the United States to occur within the Mid-Atlantic and New England regions. These regions currently lack the pipeline capacity and low-cost storage necessary to deliver gas volumes to meet growing demand. Vector is an interstate pipeline that is intended to fill a large portion of that need, and is complemented by Energy Gas’ significant storage capacity. Gas Storage, Pipelines & Processing has interests in seven processing plants that extract carbon dioxide from Antrim gas production making it suitable for transportation to nearby markets. Additionally, we have contract rights in natural gas storage fields, capable of storing up to 52.2 Bcf. We plan to continue identifying asset opportunities related to natural gas, storage and transmission and working with other DTE Energy affiliates to secure the market required to support asset investment.

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CORPORATE & OTHER

Description

Corporate & Other includes the administrative and general expenses of various corporate support functions such as accounting, legal and information technology. These functions essentially support the entire company and the related costs are allocated to the various segments based on services utilized. Additionally, Corporate & Other holds certain non-regulated debt and investments, including assets held for sale and in emerging energy technologies.

Strategy and Competition

Our energy technology strategy is to invest in a profitable portfolio of energy technology companies that facilitate the creation of new businesses, and expand growth opportunities for existing DTE Energy businesses. We seek to gain early experience in emerging energy sectors where energy trends and technologies may create potentially profitable opportunities. The investment portfolio consists of direct investments in energy technology companies and venture funds.

ENVIRONMENTAL MATTERS

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

Detroit Edison

Detroit Edison is subject to applicable permit requirements, and to potentially increasing stringent federal, state and local standards covering among other things, particulate and gaseous stack emission limitations, the discharge of waste into lakes and streams and the handling and disposal of waste material.

The U.S. Environmental Protection Agency (EPA) issued ozone transport regulations and, in December, 2003, proposed additional emission regulations relating to ozone, fine particulate and mercury air pollution. The new rules have led to additional controls on fossil-fueled power plants to reduce nitrogen oxides, sulfur dioxide, carbon dioxide and particulate emissions. To comply with these new controls, Detroit Edison has spent approximately $560 million through December 2003 and estimates that it will spend approximately $40 million in 2004 and incur up to an additional $1.2 billion of future capital expenditures over the next five to eight years to satisfy both the existing and proposed new control requirements. The EPA initiated enforcement actions against several major electric utilities citing violations of new source provisions of the Clean Air Act. Detroit Edison received and responded to information requests from the EPA on this subject. In October 2003, the EPA promulgated revised regulations to clarify new source review provisions going forward. Several states and environmental organizations have challenged these regulations and in December 2003 the Court stayed the implementation of the regulations until the U.S. Court of Appeals D.C. Circuit renders an opinion in the case. We cannot predict the future impact of this issue upon Detroit Edison.

Detroit Edison is required to demonstrate that the cooling water intake structures at all of its facilities minimize adverse environmental impact. Detroit Edison filed such demonstrations and in the event of a final adverse decision, may be required to install additional control technologies to further minimize the impact.

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Various state and federal laws regulate Detroit Edison’s handling, storage and disposal of its waste materials. The EPA and the Michigan Department of Environmental Quality (MDEQ) have aggressive programs to manage the clean up of contaminated property. Detroit Edison has extensive land holdings and, from time to time, must investigate claims of improperly disposed contaminants. Detroit Edison anticipates it will be periodically included in these types of environmental proceedings.

MichCon and Citizens

Prior to the construction of major natural gas pipelines, gas for heating and other uses was manufactured from processes involving coal, coke or oil. Enterprises (MichCon and Citizens, a wholly owned gas utility located in Adrian, Michigan) owns, or previously owned, 18 such former manufactured gas plant (MGP) sites. Investigations have revealed contamination related to the by-products of gas manufacturing at each site. Enterprises is remediating seven of the former MGP sites and conducting more extensive investigations at six other former MGP sites. Enterprises received MDEQ closure of one site and a determination that it is not a responsible party for three other sites. Enterprises received closure from the EPA in 2002 for one site. While we cannot make any assurances, we believe that a cost deferral and rate recovery mechanism approved by the MPSC will prevent these costs from having a material adverse impact on our results of operations.

Other

Our non-regulated affiliates are subject to a number of environmental laws and regulations dealing with the protection of the environment from various pollutants. We believe these non-regulated affiliates are in substantial compliance with all environmental requirements.

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RISK FACTORS

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

Electric Customer Choice – Without regulatory and legislative changes, the negative impact of the electric Customer Choice program will continue to impact our financial performance.

Weather – Weather significantly affects our operations. Deviations from normal hot and cold weather conditions affect our earnings and cash flow. Mild temperatures can result in decreased utilization of our assets, lowering income and cash flow. Damage due to ice storms, tornadoes, or high winds can damage our infrastructure and require us to perform emergency repairs and incur material unplanned expenses.

Competition – Deregulation and restructuring in the electric and gas industry, could result in increased competition and unrecovered costs that could affect the financial condition, results of operations or cash flows of our regulated businesses.

Rate regulation – We operate in a regulated industry. Our electric and gas rates are set by the MPSC and the FERC and cannot be increased without their authorization. We may be impacted by new regulations or interpretations by the MPSC, FERC or other regulatory bodies. New legislation, regulations or interpretations could change how our business operates, impact our ability to recover costs through rate increases or require us to incur additional expenses. There is no assurance that our currently pending electric and gas rate increases will be granted.

Section 29 tax credits – We have generated Section 29 tax credits from our synfuel, coke battery, biomass and gas production operations. Generating Section 29 tax credits is important to minimizing our income tax expense. Although, we have received favorable private letter rulings on all of our synfuel plants, the generation of tax credits is subject to audit and review by the Internal Revenue Service. If we do not prevail through the administrative and legal processes, there could be additional tax liabilities owed for previously recognized Section 29 tax credits that could impact our earnings and cash flows. Four of our synfuel facilities are under audit by the IRS for 2001. The value of future credits generated may be affected by new tax legislation. The combination of overall industry audits of Section 29 credits, supply and demand for investment in credit producing activities and new tax legislation could hinder our plan to sell interests in tax credit properties that could have an impact on our earnings and cash flows. We have also provided certain guarantees and indemnities in conjunction with the sales of interests in our synfuel facilities.

Credit ratings – Increased scrutiny of the energy industry and regulatory changes, as well as changes in our economic performance could result in credit agencies reexamining our credit rating. Several of the credit agencies have placed a “negative outlook” on our ratings due primarily to the uncertainty regarding our electric and gas rate cases. A downgrade in our rating could restrict or discontinue our ability to access capital markets at attractive rates and increase our borrowing costs.

Regional and national economic conditions – Our businesses follow the economic cycles of the customers we serve. Should national or regional economic conditions decline, reduced volumes of electricity and gas we supply will result in decreased earnings and cash flow. Economic conditions in our service territory also impact our collections of accounts receivable.

Environmental laws and liability – We are subject to numerous environmental regulations. These regulations govern air emissions, water quality, wastewater discharge, and disposal of solid and hazardous waste. Compliance with these regulations can significantly increase capital spending, operating expenses and plant down times. These laws and regulations require us to seek a variety of environmental licenses, permits, inspections, and other regulatory approvals. We may also incur liabilities because of our emission of gases that may cause changes in the climate. The regulatory environment is subject to significant change and, therefore, we cannot predict future issues.

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

Operation of nuclear facilities – Ownership of an operating nuclear generating plant subjects Detroit Edison to significant additional risks. These risks among others, include plant security, environmental regulation and remediation, and operational factors than can significantly impact the performance and cost of operating a nuclear facility.

Supply and price of raw materials – We are dependent on coal for much of our electrical generating capacity. Price fluctuation and supply disruptions could have a negative impact on our ability to profitably generate electricity. Our access to natural gas supplies is critical to ensure reliability of service for our regulated gas customers. We have hedging policies in place to mitigate negative fluctuations in commodity supply prices.

Labor relations – Unions represent a majority of our employees. A union choosing to strike as a negotiating tactic would have an impact on our business. We have begun negotiations with unions for contracts expiring in 2004 and cannot predict the outcome. An unfavorable outcome, such as a strike, could adversely impact the business.

Unplanned outages – Unforeseen maintenance may be required to safely produce electricity or comply with environmental regulations. This occurrence could result in spot market purchases of electricity in excess of our costs of generation.

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

Cash flows from subsidiaries - Cash flows from subsidiaries are required to pay interest expenses and dividends on DTE Energy debt and securities. Should a major subsidiary not be able to pay dividends or transfer cash flows to DTE Energy, our ability to pay dividends and interest would be restricted.

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

Insurance – While we have a comprehensive insurance program in place to provide coverage for various types of risks, catastrophic damage as a result of acts of God, terrorism, war or a combination of significant unforeseen events could impact our operations and economic losses might not be covered in full by insurance.

Terrorism – Damage to downstream infrastructure or our own assets by terrorist groups would impact our operations.

Energy trading markets – Events in the energy trading industry have increased the level of scrutiny on the energy trading business and the energy industry as a whole. A decline in the confidence in the energy trading market along with stricter credit requirements has led to a decrease in the number of trading entities resulting in decreased liquidity in the energy trading market.

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EMPLOYEES

The table below shows our employees as of December 31, 2003:

There are several bargaining units for our represented employees. Of the 5,674 represented employees, 4,695 are under contracts that expire in June through October 2004. The contracts of the remaining represented employees expire in 2005 through 2007. We have begun negotiations on the labor contract that expires in June of 2004 and cannot predict the outcome.

EXECUTIVE OFFICERS OF DTE ENERGY

Under our By-Laws, the officers of DTE Energy are elected annually by the Board of Directors at a meeting held for such purpose, each to serve until the next annual meeting of directors or until their respective successors are chosen and qualified. With the exception of Messrs. Ewing and Peterson, all of the above officers have been employed by DTE Energy in one or more management capacities during the past five years.

Stephen E. Ewing was elected group president for DTE Energy Gas on May 31, 2001. He joined DTE Energy having previously served as president and chief operating officer of MCN Energy and president and chief executive officer of MichCon during the previous five years.

Bruce D. Peterson was elected Senior Vice President and General Counsel on June 25, 2002. Mr. Peterson was a partner with Hunton & Williams in Washington, D.C. prior to joining DTE Energy.

Pursuant to Article VI of our Articles of Incorporation, directors of DTE Energy will not be personally liable to the company or its shareholders in the performance of their duties to the full extent permitted by law.

Article VII of our Articles of Incorporation provides that each current or former director or officer of DTE Energy, or each current and former employee or agent of the company or a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including the heirs, executors, administrators or estate of such person), shall be indemnified by the company to the full extent permitted by the Michigan Business Corporation Act or any other applicable laws as presently or hereafter in effect. In addition, we have entered into indemnification agreements with all of our officers and directors, these agreements set forth procedures for claims for indemnification as well as contractually obligating us to provide indemnification to the maximum extent permissible by law.

We and our directors and officers in their capacities as such are insured against liability for alleged wrongful acts (to the extent defined) under six insurance policies providing aggregate coverage in the amount of $150 million.

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Item 3. Legal Proceedings

We are 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. We cannot predict the final disposition of such proceedings. We regularly review legal matters and record provisions for claims that are considered probable of loss. The resolution of pending proceedings is not expected to have a material effect on our operations or financial statements in the period they are resolved.

For additional discussion on legal matters, see the following Notes to the Consolidated Financial Statements:

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

We did not submit any matters to a vote of security holders in the fourth quarter of 2003.

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