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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

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, 2003

Commission file number 1-7310

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

MICHIGAN CONSOLIDATED GAS COMPANY

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (Exchange Act) 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 o

Indicate by check mark whether the registrant is an accelerated filer as defined in Rule 12b-2 of the Exchange Act.

Yes x No o

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MICHIGAN CONSOLIDATED GAS COMPANY
QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED MARCH 31, 2003

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DEFINITIONS

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FORWARD-LOOKING STATEMENTS

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

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

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

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MANAGEMENT’S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS

The Results of Operations discussion for MichCon is presented in accordance with General Instruction H(2)(a) of Form 10-Q.

MichCon reported net income of $74.7 million for the first quarter of 2003 compared to net income of $54.1 million in the 2002 first quarter. The increase was primarily due to higher weather related demand and a lower effective tax rate partially, offset by increased operation and maintenance cost.

Operating revenues increased $61.6 million in the first quarter of 2003, reflecting increased contributions from weather related sales and higher Gas Cost Recovery (GCR) revenues.

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Gas sales and end user transportation revenues in total increased $60.4 million in the 2003 first quarter due primarily to $27.7 million in weather related demand and an associated increase of $31.5 million in Gas Cost Recovery (GCR) revenues. Upon returning to the GCR mechanism in January 2002, MichCon has no commodity price risk associated with its prudently incurred gas costs. End user transportation volumes and revenues also reflect deliveries associated with a varying number of customers participating in the Customer Choice program. Customers participating in this program purchase gas from suppliers other than MichCon, while MichCon continues to deliver the gas to their premises. Accordingly, margins earned from selling gas and margins generated from providing end user transportation services to Customer Choice customers are the same.

Intermediate transportation revenues increased $1.3 million in the 2003 first quarter and intermediate transportation deliveries increased 37.2 billion cubic feet (Bcf) for the same period. A significant portion of the volume increase was due to increased weather demand and storage requirements combined with a volume increase attributable to customers who pay a fixed fee for intermediate transportation capacity regardless of actual usage. Although volumes associated with these fixed-fee customers may vary, the related revenues are not affected.

Cost of gas is affected by variations in sales volumes, cost of purchased gas and related transportation costs, and the effects of any permanent liquidation of inventory gas. Cost of gas sold increased by $36.6 million in the first quarter of 2003. The increase was due primarily to increased volumes due to colder weather in 2003. The average cost of gas sold increased $.19 per Mcf (3.9%) from the comparable 2002 period.

Operation and maintenance expenses increased $11.9 million for the 2003 first quarter compared to the same period in 2002 due to higher employee pension and health care benefit costs and increased costs associated with customer service process improvements. As a result of the continued increase in operating costs, MichCon expects to file a rate case in the latter half of 2003.

Other income and deductions decreased $1.2 million in the 2003 first quarter primarily due to lower interest expense associated with long term debt.

Income taxes decreased $5.0 million for the 2003 first quarter compared to the same period in 2002. The income tax provision was favorably affected by an increase in the amortization of tax benefits previously deferred in accordance with MPSC regulations.

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CAPITAL RESOURCES AND LIQUIDITY

Operating Activities

Net cash from operating activities increased $143 million due to increases in net income, utilization of gas in inventory and gas inventory equalization and a decrease in unbilled revenues, offset by increases in accounts receivable due to higher volumes.

Investing Activities

Net cash used for investing activities increased $268 million reflecting an increase in intercompany loans to DTE Energy, resulting from temporary excess cash.

Financing Activities

Net cash related to financing activities increased $124 million reflecting the issuance of $200 million in debt, partially offset by a reduction in short term borrowings, retirement of long-term debt and the payment of a dividend in the first quarter of 2003.

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CONTROLS AND PROCEDURES

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

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MICHIGAN CONSOLIDATED GAS COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

See Notes to Consolidated Financial Statements

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MICHIGAN CONSOLIDATED GAS COMPANY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION

See Notes to the Consolidated Financial Statements

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MICHIGAN CONSOLIDATED GAS COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)