UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Form 10-K

FOR ANNUAL REPORT AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE OF 1934

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

For the fiscal year ended December 31, 2004

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:

*	Issued by DTE Energy Trust I. DTE Energy fully and unconditionally guarantees the payments of all amounts due on these securities to the extent DTE Energy Trust I has funds available for payment of such distributions.
**	Issued by DTE Energy Trust II. DTE Energy fully and unconditionally guarantees the payments of all amounts due on these securities to the extent DTE Energy Trust II has funds available for payment of such distributions.

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 þ No o

     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 the 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. Yes þ No o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes þ No o

     On June 30, 2004, the aggregate market value of the Registrant’s voting and non-voting common equity held by non-affiliates was approximately $7.0 billion (based on the New York Stock Exchange closing price on such date). There were 174,209,034 shares of common stock outstanding at January 31, 2005.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information in DTE Energy Company’s definitive Proxy Statement for its 2005 Annual Meeting of Common Shareholders to be held April 28, 2005, 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.

DTE Energy Company
Annual Report on Form 10-K
Year Ended December 31, 2004

TABLE OF CONTENTS

1

Definitions

2

Units of Measurement

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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, and purchases from suppliers;

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

•	environmental issues, laws and regulations, and the cost of remediation and compliance associated therewith;

•	nuclear regulations and operations associated with nuclear facilities;

•	the higher price of oil and its impact on the value of Section 29 tax credits, and the ability to utilize and/or sell interests in facilities producing such credits;

•	implementation of electric and gas Customer Choice programs;

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

•	employee relations and the impact of collective bargaining agreements;

•	unplanned outages;

•	access to capital markets and capital market conditions and the results of 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 and availability of coal and other raw materials, purchased power and natural gas;

•	effects of competition;

•	impact of regulation by FERC, MPSC, NRC and other applicable governmental proceedings and regulations;

•	contributions to earnings by non-utility businesses;

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

•	the ability to recover costs through rate increases;

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

•	the cost of protecting assets against or damage due to terrorism;

•	changes in 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

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

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 speak 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 and Properties

General

In 1995, DTE Energy incorporated in the State of Michigan. Our utility operations consist primarily of Detroit Edison and MichCon. We also have numerous non-utility 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 and is a public utility subject to regulation by the Michigan Public Service Commission (MPSC) and the Federal Energy Regulatory Commission (FERC). Detroit Edison is engaged in the generation, purchase, distribution and sale of electricity to 2.1 million customers in southeastern Michigan.

MichCon is a Michigan corporation organized in 1898 and 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 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 annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to such reports are available free of charge through the investor relations page of our website: www.dteenergy.com, as soon as reasonably practicable after they are filed with or furnished to the Securities and Exchange Commission (SEC). 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. Our previously filed reports and statements are also available at the SEC’s website: www.sec.gov.

We have a code of ethics that applies to our chief executive officer and all senior financial officers, including our chief financial officer, controller, assistant controllers, treasurer and assistant treasurers. Our code of ethics is available in the corporate governance section of the investor relations webpage of our website located at www.dteenergy.com. Should we make changes in, or provide waivers from, the provisions of the code of ethics that the SEC requires us to disclose, we intend to disclose these events in the governance section of our investor relations website.

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

Corporate Structure

Through 2004, we operated our businesses through three strategic business units (Energy Resources, Energy Distribution and Energy Gas). Each business unit had utility and non-utility operations. The balance of our business consisted of Corporate & Other. See Note 16 — Segment and Related Information, for financial information by segment for the last three years. In 2005, we expect to realign our business

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units to strengthen the Company’s focus on customer relationships and growth within our non-utility businesses. Based on this structure, we will set strategic goals, allocate resources and evaluate performance. Beginning with the first quarter of 2005, we expect to report our segment information based on a new structure as described in Note 1. A discussion of each business unit based on the structure in effect over the past three years follows.

ENERGY RESOURCES

Utility – Power Generation

Description

Power Generation comprises our utility power generation business and plants within Detroit Edison. These plants are regulated by numerous federal and state governmental agencies, including the MPSC, the FERC, the NRC, the EPA and the MDEQ. Electricity is generated from Detroit Edison’s numerous fossil plants, its hydroelectric pumped storage plant and its nuclear plant, and is 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. Customers who elect to purchase their electricity from alternative energy suppliers by participating in the electric Customer Choice program have an unfavorable effect on our financial performance.

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

(2) Includes amounts associated with hedging activities.

We expect an adequate supply of fuel and purchased power to meet our obligation to serve customers. The effect of lost sales due to 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 the availability of coal. 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 five coal suppliers and several over-the-counter brokers for a total purchase of up to 35 million tons of low-sulfur western coal to be delivered through 2008. Detroit Edison also has contracts with four suppliers for the purchase of approximately 6 million tons of Appalachian coal to be delivered through 2006. These existing long-term coal contracts either have fixed prices or 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 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, the FERC and the 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 small business customers through 2004 and for residential customers through 2005. 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 the electric Customer Choice program. The MPSC has determined that these costs will 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.

In 2004, the MPSC issued interim and final rate orders that authorized electric rate increases totaling $374 million, and eliminated transition credits and implemented transition charges for electric Customer Choice customers. The increases were applicable to all customers not subject to a rate cap. The interim order affirmed the resumption of the Power Supply Cost Recovery (PSCR) mechanism for both capped and uncapped customers, which reduced PSCR revenues. The MPSC also authorized the recovery of approximately $385 million in regulatory assets, including stranded costs. The final order addressed numerous issues relating to regulatory assets, including the actual amounts recoverable and the recovery mechanism.

See Note 4 – Regulatory Matters for additional information regarding the 2004 rate orders and our regulatory environment.

Properties

Detroit Edison owns generating properties and facilities that are primarily 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, 2004 are as follows:

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Strategy and Competition

We 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 both plant availability and 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 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 18% of retail sales in 2004, 12% in 2003 and 5% of such sales in 2002 as a result of customers choosing to purchase power from alternative suppliers. Customers participating in the electric Customer Choice program consist primarily of industrial and commercial customers whose MPSC-authorized full service rates exceed the cost of service. We will continue to utilize the wholesale market to sell the generation made available by the electric Customer Choice program, in order to lower costs for full service customers.

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Energy Services

Description

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

Coal-Based Fuels

Energy Services’ Coal-Based Fuels operations include producing synthetic fuel from nine synfuel plants and producing coke from three coke battery plants. The production of synfuel from all of the synfuel plants and the production of coke from one of the coke battery plants 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. Since 2002, we have sold majority interests in eight of our nine synfuel plants, representing approximately 92 percent of our total production capacity. We anticipate selling a majority interest in our remaining 100% owned synfuel plant in 2005. 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 independent producers in the U.S. of coke for the steel industry.

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-type services to industrial, commercial and institutional customers. In 2004, we formed a utility services company that acquired utility-related assets from a large automotive company and entered into long-term agreements to provide utility and energy conservation services to the company. We then sold a 50% interest in the project to an unaffiliated partner. Also in 2004, we

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purchased a 50% interest in a company that owns and operates a cogeneration facility serving a tissue mill located in Mobile, Alabama.

Power Generation – Non-Utility

Energy Services operates peaking and gas-fired electric generating plants. We have four electric generating plants in operation, all located in the Great Lakes region. In 2004, we sold two of the three units at our Georgetown plant. We have contracts for the sale of approximately 42% of the 2005 and 2006 output of the remaining units.

Properties

As of December 31, 2004, 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

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

On-Site Energy Projects

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

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Power Generation

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 will continue to evaluate opportunities to sell a majority interest in our remaining synfuel plant in 2005. We also will 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.

We plan to focus on the following areas for growth:

	•	Optimizing of our synfuel portfolio;
	•	Providing operating services to owners of power plants;
	•	Acquiring and developing solid fuel fired power plants;
	•	Expanding on-site energy projects; and
	•	Developing 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, Inc. and DTE-CoEnergy L.L.C. (CoEnergy). 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 deliver value-added services to our customers. 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 compete with electric and gas marketers, traders, utilities and other energy providers. We have risk management and credit processes to monitor and minimize risk.

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Coal Services

Description

Coal Services provides fuel, transportation and equipment management services tailored to the individual requirements of each customer. We specialize in minimizing fuel 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. In 2003, we entered into the waste coal recovery business by purchasing a patented technology and constructing our first commercial facility.

Properties

We lease approximately 2,600 rail cars. We own fixed and mobile rail car 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 coal to meet 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 (waste coal recovery). 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-like 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. We have experienced certain complications with our feedstock excavating process. We are working to resolve these complications and increase our production capacity to more than 500,000 tons of fine coal per year. We believe that the waste coal recovery business has the potential to 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 byproduct 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. Some Biomass operations generate Section 29 tax credits that will expire in 2007.

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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. In 2004, Biomass entered into a joint venture with Coal Services to acquire facilities that produce coal mine methane gas.

Properties

Biomass operates 29 sites located in 12 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

Utility – Power Distribution

Description

The electric distribution services of Detroit Edison comprise our utility Power Distribution business. This business distributes electricity generated by Energy Resources’ Power Generation business and alternative energy suppliers to Detroit Edison’s 2.1 million customers in southeastern Michigan. This business also shares, with the Gas Distribution segment, the customer service and regulated marketing functions for our utilities. Accordingly, costs associated with these functions, including collections and customer service activities, are 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 other cooling-related demands. Power Distribution’s sales are not dependent upon a limited number of customers. Although customers participating in the electric Customer Choice program do not impact the total number of Power Distribution customers, they do impact operating revenues. Electric Choice customers currently pay a lower distribution rate than full service customers. Accordingly, customers participating in the electric Customer Choice program unfavorably affect revenues. Detroit Edison filed a

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rate restructuring proposal in February 2005 to eliminate this intra class rate subsidy (Note 4). The loss of any one or a few customers is not reasonably likely to have a material adverse effect on Power Distribution.

Regulation

Detroit Edison’s Power Distribution is subject to the jurisdiction of the MPSC, which has 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 prevented rate increases for small business customers through 2004.

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.

In 2004, the MPSC issued interim and final rate orders that authorized electric rate increases totaling $374 million, and eliminated transition credits and implemented transition charges for electric Customer Choice customers. The increases were applicable to all customers not subject to a rate cap. The MPSC also authorized the recovery of approximately $385 million in regulatory assets, including stranded costs. The final order addressed numerous issues relating to regulatory assets, including the actual amounts recoverable and the recovery mechanism.

See Note 4 – Regulatory Matters for additional information regarding the 2004 rate orders and our regulatory environment.

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 uncollectible accounts receivable and collections expenses.

Detroit Edison’s uncollectible 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.

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Properties

Detroit Edison owns and operates 667 distribution substations with a capacity of approximately 31,381,500 kilovolt-amperes (kVA) and approximately 415,000 line transformers with a capacity of approximately 24,792,000 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, 2004 are as follows:

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

Strategy and Competition

Our strategy focuses on improving reliability, restoration time and the quality of customer service and lowering operating costs by improving operating efficiencies. We also are 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 was 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. By FERC order, rates charged by ITC to Detroit Edison were frozen through December 2004. Thereafter, rates became subject to normal FERC regulation. With the MPSC’s November 2004 final rate order, transmission costs are recoverable through Detroit Edison’s PSCR mechanism.

Competition in the regulated electric distribution business is primarily from the on-site generation of industrial customers and from 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), invests in emerging technologies that complement our existing businesses. We currently have businesses that develop, assemble, market, distribute and service distributed generation products, provide application engineering, and monitor and manage system operations.

In 2004, Dtech revised its strategy to reduce the losses that occurred in the development phase of the business over the past four years. As a result, we closed most of our sales offices and created two regional selling offices, located in Southern California and in Michigan. These offices will concentrate on higher-margin sales. Additionally, Dtech’s organization was reduced and realigned to be more efficient.

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Also in 2004, Dtech purchased the assets of the developer and assembler of its continuous duty products ranging from 75kW to 150kW.

The above changes, along with reduction of Dtech’s operating expenses, are expected to improve the financial performance of this business.

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. Our strategy is to increase focus on our proprietary pre-engineered and packaged continuous duty generation products.

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, refinement of existing products, the expansion of customer acceptance of continuous duty distributed generation, and our ability to execute our plans.

ENERGY GAS

Utility – Gas Distribution

Description

Gas Distribution operations primarily consist of MichCon, our gas utility. Gas Distribution provides gas sales and transportation delivery services to 1.2 million residential, commercial and industrial customers located throughout Michigan.

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 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.

The following table details sales and deliveries to these customers.

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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 58% of the expected 188 Bcf of supply requirements in 2005. We expect to meet the balance of gas supply requirements through open market purchases. We expect that 20% of our 2005 purchases will be under fixed-price contracts, with the remaining 80% acquired at prevailing market prices. 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. In December 2001, the MPSC issued an order that continued the gas Customer Choice program on a permanent and expanding basis. The permanent gas Customer Choice program was phased in over a three-year period, with all customers having the option to choose their gas supplier by April 2004. 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.

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 overall increase in base rates of $194 million per year (approximately 7% increase, inclusive of gas costs), beginning January 1, 2005. In September 2004, the MPSC issued an order granting interim rate relief of $35 million annually to MichCon. A final order is expected in the first quarter of 2005.

See Note 4 - Regulatory Matters, for additional information regarding the September 2004 interim rate order and our regulatory environment.

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 uncollectible 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.

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Properties

MichCon owns distribution, transmission and storage properties and facilities that are all located in the State of Michigan. At December 31, 2004, MichCon’s distribution system included approximately 18,000 miles of distribution mains, approximately 1,164,000 service lines and approximately 1,275,000 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 sales volumes to remain at current levels or slightly decline. To offset these factors, we plan to expand our gas markets and to continue providing energy-related services that capitalize on our expertise, capabilities and efficient systems.

Competition in the gas business primarily involves other natural gas providers, 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 is engaged in natural gas exploration, development and production. Gas Production 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 335.4 Bcfe of proven reserves we owned as of December 31, 2004. We drilled 79 wells (67.3 net of interest of others) in 2004 with a success rate of 99%. Wells drilled in the Antrim shale have high success rates and low drilling costs, and are therefore considered low risk.

Gas Production is also involved in unconventional drilling opportunities outside of the State of Michigan that leverage our gas production capabilities and the skills and the experience of our other non-utility businesses. During 2004, Gas Production acquired 55,792 leasehold acres (48,857 net of interest of others) in the southern region of the Barnett shale in Texas, an area of increasing production. We currently have 7.9 Bcfe of proven reserves in the Barnett shale as of December 31, 2004. We began drilling 3 new wells (1.7 net of interest of others) in December 2004 and anticipate drilling additional wells, including test wells, in the first half of 2005. Initial results from the test wells are expected in mid-2005. If the results are successful, we could commit from $250 million to $500 million of capital over the next several years to develop these properties.

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Properties

Gas Production owns interests in the following producing wells and acreage as of December 31.

The Antrim shale properties had 22.5 Bcfe of production in 2004. Gas Production expects to maintain its 335.4 Bcfe of proven reserves at December 31, 2004 by developing its acreage, thereby adding new reserves in low risk areas.

If Barnett shale test wells prove successful, Gas Production expects to substantially increase its proven reserves by investing a significant level of capital through 2008 to develop these properties.

Strategy

The Gas Production business is aggressively managing its Michigan gas producing assets to maximize returns on investment and increase earnings. We have operator responsibilities for our Michigan properties with the goal of optimizing the cost of producing reserves and adding additional reserves. During 2005, Gas Production plans to further develop and produce its Antrim shale acreage and wells.

In order to leverage our gas production capabilities and the skills and experience of other non-utility businesses, we plan to continue investing in unconventional drilling opportunities outside of Michigan such as the Barnett shale.

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 through 2029 a 60.5 Bcf natural gas storage field located in Michigan.

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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 U.S. to occur within the Mid-Atlantic and New England regions. These regions currently lack the pipeline capacity and gas storage necessary to deliver gas volumes to meet growing demand. Vector is an interstate pipeline that is filling 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 70.2 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. One of those opportunities is Millennium Pipeline, which we have a 10.5% interest in. Upon securing market support, the Millennium Pipeline could be in-service in the 2006-2007 timeframe and would be able to transport up to 500 MMcf per day of gas originating from our Michigan storage facilities to the higher value markets in New York.

CORPORATE & OTHER

Description

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

Strategy and Competition

Our energy technology venture fund 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

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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 increased stringent federal, state and local standards covering, among other things, particulate and gaseous stack emission limitations, the discharge of wastewater into lakes and streams and the handling and disposal of waste material.

Air - The U.S. Environmental Protection Agency (EPA) has ozone transport and acid rain regulations and, in December 2003, proposed additional emission regulations relating to ozone, fine particulate and mercury air pollution. The new rules would lead to additional controls on fossil-fueled power plants to reduce nitrogen oxides, sulfur dioxide and mercury emissions. To comply with existing requirements, Detroit Edison has spent approximately $580 million through December 2004 and estimates that it will spend up to $100 million in 2005. Detroit Edison will incur from $700 million to $1.3 billion of additional 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. The EPA has not initiated proceedings against Detroit Edison. 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.

Water - 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 studies to be conducted over the next several years, Detroit Edison may be required to install additional control technologies to reduce the environmental impact of the intakes. Detroit Edison estimates that it will incur up to $50 million over the next five to seven years in additional capital expenditures to comply with these requirements.

Contaminated Sites - Detroit Edison conducted remedial investigations at contaminated sites, including two former manufactured gas plant (MGP) sites, the area surrounding an ash landfill and several underground and aboveground storage tank locations. The findings of these investigations indicated that the estimated cost to remediate these sites is approximately $8 million, which is expected to be incurred over the next several years. As a result of the investigation, Detroit Edison accrued an $8 million liability during 2004.

MichCon and Citizens

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. DTE Enterprises (MichCon and Citizens, a wholly owned gas utility located in Adrian, Michigan) owns, or previously owned, 18 such former MGP sites. Investigations have revealed contamination related to the by-products of gas manufacturing at each site. Enterprises is remediating eight of the former MGP sites and conducting more extensive investigations at five other former MGP sites. Enterprises received Michigan Department of Environmental Quality (MDEQ) closure of one site and a determination that it is not a

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responsible party for three other sites. Enterprises also received a 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-utility affiliates are subject to a number of environmental laws and regulations dealing with the protection of the environment from various pollutants. Our non-utility affiliates are substantially in compliance with all environmental requirements.

Various state and federal laws regulate our handling, storage and disposal of waste materials. The EPA and the MDEQ have aggressive programs to manage the clean up of contaminated property. We have extensive land holdings and, from time to time, must investigate claims of improperly disposed contaminants. We anticipate our utility and non-utility companies may periodically be included in various types of environmental proceedings.

RISK FACTORS

There are various risks associated with the operations of DTE Energy’s utility and non-utility 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.

Michigan’s electric Customer Choice program is negatively impacting our financial performance. Even with the Customer Choice-related rate relief received in Detroit Edison’s 2004 rate orders, there continues to be considerable financial risk associated with the Customer Choice program. Choice migration is sensitive to market price, transition charges and electric bundled price increases.

Weather significantly affects our utility 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. The expenses of storm restoration efforts may not be recoverable through the regulatory process.

Our electric utility continues to be negatively affected by competition. Deregulation and restructuring in the electric industry has resulted in increased competition and unrecovered costs that have affected and may continue to affect our financial condition, results of operations or cash flows. We are a regulated public utility, and this regulation has hindered our ability to retain customers in a competitive marketplace.

We are subject to 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 regulatory authorization. We may be impacted by new regulations or interpretations by the MPSC, the 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.

Our ability to utilize Section 29 tax credits may be limited. We have generated Section 29 tax credits from our synfuel, coke battery, biomass and gas production operations. We have received favorable private letter rulings on all of our synfuel facilities. All Section 29 tax credits taken after 1997 are subject to audit by the Internal Revenue Service (IRS). If our Section 29 tax credits were disallowed in whole or in part as a result of an IRS audit, there could be additional tax liabilities owed for previously recognized tax credits that could significantly impact our earnings and cash flows. The value of future credits

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generated may be affected by new tax legislation. Moreover, Section 29 tax credits related to generation of synfuels expire at the end of 2007. The combination of overall industry audits of Section 29 tax credits, supply and demand for investment in credit producing activities and new tax legislation 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.

In addition, the value of a Section 29 tax credit in a given year is reduced if the “Reference Price” of oil within the year exceeds a threshold price and is eliminated entirely if the Reference Price exceeds a phase-out price. The Reference Price of a barrel of oil is an estimate of the annual average wellhead price per barrel for domestic crude oil, which in recent years has been $3 - - $4 lower than the New York Mercantile Exchange (NYMEX) price for light, sweet crude oil.

Adverse changes in our credit ratings may negatively affect us. 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. A credit agency currently has a “negative outlook” on our ratings. While credit ratings reflect the opinions of the credit agencies issuing such ratings and may not necessarily reflect actual performance, a downgrade in our credit rating could restrict or discontinue our ability to access capital markets at attractive rates and increase our borrowing costs. In addition, a reduction in credit rating may require us to post collateral related to various trading contracts, which would impact our liquidity.

Regional and national economic conditions may unfavorably impact us. 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 and financial results.

Environmental laws and liability may be costly. 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.

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.

Since there can be no assurances that environmental costs may be recovered through the regulatory process, our financial performance may be negatively impacted as a result of environmental matters.

Operation of a nuclear facility subjects us to risk. 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 that can significantly impact the performance and cost of operating a nuclear facility. While Detroit Edison maintains 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.

The supply and price of fuel and other commodities may impact our financial results. We are dependent on coal for much of our electrical generating capacity. Price fluctuation and coal and other fuel supply disruptions could have a negative impact on our ability to profitably generate electricity. Our

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access to natural gas supplies is critical to ensure reliability of service for our utility gas customers. We have hedging strategies in place to mitigate negative fluctuations in commodity supply prices but there can be no assurances that our financial performance will not be negatively impacted by price fluctuations. The price of natural gas also impacts the market for distributed generation products and other non-utility businesses that compete with utilities and alternative energy suppliers.

A work interruption may adversely affect us. Unions represent a majority of our employees. A union choosing to strike as a negotiating tactic would have an impact on our business.

Unplanned power plant outages may be costly. Unforeseen maintenance may be required to safely produce electricity or comply with environmental regulations. Our financial performance may be negatively affected if we are unable to recover such increased costs.

Our ability to access capital markets at attractive interest rates is important. 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 and negatively impact our financial performance.

We rely on 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 may be costly. 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.

We may not be fully covered by 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 could affect our business. Damage to downstream infrastructure or our own assets by terrorist groups would impact our operations. We have increased security as a result of recent events and further security increases are expected.

Failure to successfully implement new information systems could interrupt our operations. Our businesses depend on numerous information systems for operations and financial information and billings. We are in the process of launching the first phase of our DTE2 project, a multiyear Company-wide initiative to improve existing processes and implement new core information systems. Failure to successfully implement DTE2 and other new systems could interrupt our operations.

Our participation in energy trading markets subjects us to additional risk. 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. Also, in certain situations we may be required to post collateral to support trading operations.

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EMPLOYEES

The table below shows our employees as of December 31, 2004:

There are several bargaining units for our represented employees. Approximately 4,500, or approximately 79% of our represented employees are under three year contracts that were ratified in 2004. The contracts of the remaining represented employees expire in 2005.

EXECUTIVE OFFICERS OF DTE ENERGY

Under our Bylaws, 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

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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 permitted 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 seven insurance policies providing aggregate coverage in the amount of $165 million.

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 2004.

Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is listed on the New York Stock Exchange, which is the principal market for such stock, and the Chicago Stock Exchange. The following table indicates the reported high and low sales prices of our common stock on the Composite Tape of the New York Stock Exchange and dividends paid per share for each quarterly period during the past two years:

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At December 31, 2004, there were 174,209,034 shares of our common stock outstanding. These shares were held by a total of 99,832 shareholders of record.

Our Bylaws nullify Chapter 7B of the Michigan Business Corporation Act (Act). This Act regulates shareholder rights when an individual’s stock ownership reaches 20% of a Michigan corporation’s outstanding shares. A shareholder seeking control of the Company cannot require our Board of Directors to call a meeting to vote on issues related to corporate control within 10 days, as stipulated by the Act. See Note 8 — Common Stock and Earnings Per Share for information concerning the Shareholders’ Rights Agreement.

The amount of future dividends will depend on our earnings, cash flows, financial condition and other factors that are periodically reviewed by our Board of Directors. Although there can be no assurances, we anticipate paying dividends at the current rate of $0.515 per quarter for the foreseeable future. See Note 9 – Long-Term Debt and Preferred Securities for possible restrictions on the payment of dividends.

All of our equity compensation plans that provide for the annual awarding of stock-based compensation have been approved by shareholders. See Note 15 – Stock Based Compensation for additional detail. See below for information as of December 31, 2004.

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Item 6. Selected Financial Data

The following selected financial data should be read with the accompanying Management’s Discussion and Analysis and Notes.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

DTE Energy is a diversified energy company with approximately $7 billion in revenues in 2004 and approximately $21 billion in assets at December 31, 2004. We are the parent company of Detroit Edison and MichCon, regulated electric and gas utilities engaged primarily in the business of providing electricity and natural gas sales and distribution services throughout southeastern Michigan. Additionally, we have numerous non-utility subsidiaries involved in energy-related businesses predominantly in the Midwest and eastern U.S.

A significant portion of our earnings is derived from our utility operations, synthetic fuel business, and energy marketing and trading operations. Earnings in 2004 were $431 million, or $2.49 per diluted share, down from 2003 earnings of $521 million, or $3.09 per diluted share. As discussed in the “RESULTS OF OPERATIONS” section that follows, the comparability of earnings was impacted by discontinued businesses and the adoption of new accounting rules. Excluding discontinued operations and the cumulative effect of accounting changes, earnings from continuing operations in 2004 were $443 million, or $2.55 per diluted share, compared to earnings of $480 million, or $2.85 per diluted share for the same 2003 period. Income reflects reduced contributions from our utility operations, partially offset by increased contributions from our non-utility businesses and Corporate & Other. Significant items that influenced our 2004 financial performance and/or may affect future results are:

•	Electric Customer Choice penetration;

•	Electric and gas rate orders;

•	Higher operating costs;

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Weather;

•	Synfuel-related earnings and the risk of higher oil prices; and

•	Growth of non-utility businesses.

Electric Customer Choice Program - Since 2002, Michigan residents and businesses have had the option of participating in the electric Customer Choice program. This program is designed to give all customers added choices and the opportunity to benefit from lower power costs resulting from competition. However, Detroit Edison’s rates are regulated by the Michigan Public Service Commission (MPSC), while alternative suppliers can charge market-based rates. This regulation has hindered Detroit Edison’s ability to retain customers. In addition, the MPSC has maintained regulated rates for certain groups of customers that exceed the cost of service to those customers. This has resulted in high levels of participation in the electric Customer Choice program by those customers that have the highest rates relative to their cost of service, primarily commercial and industrial businesses. As a result, our margins continue to be affected. To address this issue, we filed a revenue neutral rate restructuring proposal in February 2005 designed to adjust rates for each customer class to be reflective of the full costs incurred to service such customers. Under the proposal, Detroit Edison’s commercial and industrial rates would be lowered in 2006, but residential rates would increase over a five-year period beginning in 2007. The number and mix of customers participating in the electric Customer Choice program could be impacted under the rate restructuring.

Lost margins and electricity volumes associated with electric Customer Choice were approximately $237 million and 9,245 gigawatthours (gWh) in 2004. This compares with lost electric Customer Choice margins and volumes of approximately $120 million and 6,193 gWh in 2003. The financial impact of electric Customer Choice was affected by the issuance of electric interim and final rate orders that increased base rates, authorized transition charges and reaffirmed the resumption of the Power Supply Cost Recovery (PSCR) mechanism, as subsequently discussed. Partially offsetting the impact of lost margins on income, we recorded regulatory assets representing stranded costs that we believe are

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recoverable under existing Michigan legislation and MPSC orders. There are a number of variables and estimates that impact the level of recoverable stranded costs, including weather, sales mix and transition charges. As a result, our estimate of stranded costs could increase or decrease. As subsequently discussed, the MPSC authorized the recovery of $44 million in stranded costs for the period of January 2002 through February 2004.

Detroit Edison rate orders, along with the rate restructuring proposal, address certain issues with the electric Customer Choice program. However, current regulation continues to hinder our ability to retain certain customers. Accordingly, we will continue working with the MPSC and Michigan legislature to address other issues associated with the electric Customer Choice program.

Electric Rate Orders - In 2000, Public Act (PA) 141 froze electric rates for all residential, commercial and industrial customers through 2003. The legislation also prevented rate increases (or capped rates) for small commercial and industrial customers through 2004 and for residential customers through 2005. The rate freeze and caps apply to base rates as well as rates designed to recover fuel and purchased power costs which has traditionally been a cost pass-through under the power supply cost recovery (PSCR) mechanism.

In 2004, the MPSC issued interim and final rate orders that authorized electric rate increases totaling $374 million, and eliminated transition credits and implemented transition charges for electric Customer Choice customers. The increases were applicable to all customers not subject to a rate cap. The interim order affirmed the resumption of the PSCR mechanism for both capped and uncapped customers, which reduced PSCR revenues by $115 million in 2004. However, the order allowed Detroit Edison to increase base rates for customers still subject to a cap in an equal and offsetting amount to the change in the PSCR factor to maintain the total capped rate levels in effect for these customers. The MPSC also authorized the recovery of approximately $385 million in regulatory assets, including stranded costs.

As a result of rate caps, regulatory asset adjustments and other factors, the rate orders decreased 2004 earnings by $15 million. The impact of the rate orders is expected to increase earnings in 2005 and 2006 as rate caps expire.

See Note 4 for a further discussion of the MPSC’s interim and final rate orders.

Gas Interim Rate Order - 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 requested an overall increase in base rates of $194 million annually (approximately 7% increase, inclusive of gas costs), beginning January 1, 2005. In September 2004, MichCon received an interim order in this rate case authorizing an increase in base rates of $35 million annually, effective September 22, 2004. The interim rate order increased earnings by approximately $6 million in 2004. MichCon expects a final order from the MPSC in the first quarter of 2005.

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Operating Costs - During 2004, we experienced increases in operation and maintenance costs, primarily within our electric and gas utilities. The increases were driven by higher costs associated with pension and postretirement benefits and uncollectible accounts receivable.

Pension and postretirement benefits expense totaled $212 million in 2004, compared to $172 million in 2003. The increase is due to financial market performance, lower discount rates and increased health care trend rates. We have made modifications to the pension and postretirement benefit plans to mitigate the earnings impact of higher costs. Additionally, the recoverability of pension and health care benefits costs were part of our electric and gas rate filings. The MPSC approved a pension tracking mechanism in Detroit Edison’s final rate order that provides for the recovery or refunding of pension costs above or below the amount reflected in base rates. The MPSC also required Detroit Edison to propose a similar tracking mechanism for retiree health care costs. Detroit Edison filed a request with the MPSC in February 2005 seeking authority to implement a tracking mechanism for retiree health care costs.

Both utilities continue to experience high levels of past due receivables, especially within our Energy Gas operations. The increase is attributable to economic conditions, high natural gas prices and the lack of adequate levels of assistance for low-income customers. As a result of these factors, our allowance for doubtful accounts expense for the two utilities increased to $105 million in 2004 compared to $76 million for the corresponding 2003 period. We are taking aggressive actions to reduce the level of past due receivables, including customer disconnections, contracting with collection agencies and working with the State of Michigan and others to increase the share of low-income funding allocated to our customers.

In MichCon’s current gas rate filing, we addressed numerous operating cost issues, including uncollectible accounts receivable expense. The MPSC Staff supports a provision proposed by MichCon that would allow MichCon to recover or refund 90% of uncollectible accounts receivable expense above or below the amount that is reflected in base rates. We support the MPSC Staff’s recommendation and believe the provision would significantly reduce our risk of high uncollectible gas accounts receivable.

To partially address this issue of rising costs, we continue to employ the DTE Energy Operating System, which is the application of tools and practices to obtain operating efficiencies and enhance operating performance. We are targeting over $100 million in savings during 2005 through the application of Operating System principles.

Weather - Earnings in our electric and gas utilities are seasonal and sensitive to weather. Electric utility earnings are dependent on hot summer weather, while the gas utility’s results are driven by cold winter weather. We experienced both milder summer and winter weather during 2004, which negatively impacted sales demand. The lower demand reduced current year earnings by $27 million compared to 2003.

Additionally, we occasionally experience various types of storms that damage our electric distribution infrastructure resulting in power outages. The impact of storms on our current year earnings was significantly lower than in 2003, which was affected by several catastrophic wind and ice storms, as well as by the August 2003 blackout. Restoration and other costs associated with storm-related power outages lowered 2004 pretax earnings by $48 million compared to $72 million in 2003.

Synthetic Fuel Operations - We operate nine synthetic fuel production plants at eight locations. Since 2002, we have sold majority interests in eight of the nine plants, representing approximately 92% of our total production capacity. Synfuel facilities chemically change coal, including waste and marginal coal, into a synthetic fuel as determined under applicable Internal Revenue Service (IRS) rules. Section 29 of the Internal Revenue Code provides tax credits for the production and sale of solid synthetic fuel produced from coal. Synfuel-related tax credits expire in December 2007.

Operating expenses associated with synfuel projects exceed operating revenues and therefore generate operating losses, which have been more than offset by the resulting Section 29 tax credits. In order to

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recognize Section 29 tax credits, a taxpayer must have sufficient taxable income in the year the tax credit is generated. Once earned, the tax credits are utilized subject to certain limitations but can be carried forward indefinitely. We have not had sufficient taxable income to fully utilize tax credits earned in prior periods. As of December 2004, we had $483 million in tax credit carry-forwards. In order to optimize income and cash flow from our synfuel operations, we have sold majority interests in eight of our nine facilities and intend to sell a majority interest in the remaining plant during 2005, representing 99% of our production capacity. When we sell an interest in a synfuel project, we recognize the gain from such sale as the facility produces and sells synfuel and when there is persuasive evidence that the sales proceeds have become fixed or determinable and collectability is reasonably assured. Gain recognition is dependent on the synfuel production qualifying for Section 29 tax credits and the value of such credits as subsequently discussed. In substance, we are receiving synfuel gains and reduced operating losses in exchange for tax credits associated with the projects sold. Sales of interests in synfuel projects allow us to accelerate cash flow while maintaining a stable income base.

The value of a Section 29 tax credit can vary each year and is adjusted annually by an inflation factor as published by the IRS in April of the following year. Additionally, the value of the tax credit in a given year is reduced if the “Reference Price” of oil within the year exceeds a threshold price and is eliminated entirely if the Reference Price exceeds a phase-out price. The Reference Price of a barrel of oil is an estimate of the annual average wellhead price per barrel for domestic crude oil, which in recent years has been $3 — $4 lower than the New York Mercantile Exchange (NYMEX) price for light, sweet crude oil. The actual or estimated Reference Price and beginning and ending phase-out prices per barrel of oil for 2003, 2004 and 2005 are as follows:

Numerous recent events have significantly increased domestic crude oil prices, including terrorism, storm-related supply disruptions and strong worldwide demand. As of February 1, 2005, the NYMEX closing price of a barrel of oil to be delivered in March 2005 was $47.12, which is comparable to a $43.47 Reference Price (assuming that such price was to continue for an entire year). For 2005 and later years, if the Reference Price falls within or exceeds the phase-out range, the availability of tax credits in that year would be reduced or eliminated, respectively.

As previously discussed, until the gain recognition criteria is met, gains from selling interests in synfuel facilities will be deferred. It is possible that gains will be deferred in the first, second and/or third quarters of each year until there is persuasive evidence that no tax credit phase out will occur for the applicable calendar year. This could result in shifting earnings from earlier quarters to later quarters of a calendar year.

As discussed in Notes 12 and 13, we have entered into derivative and other contracts to economically hedge approximately 65% of our 2005 synfuel cash flow exposure related to the risk of an increase in oil prices. We are continuing to evaluate the current volatility in oil prices and alternatives available to mitigate our unhedged exposure to oil prices as part of our synfuel-related risk management strategy.

Assuming no synfuel tax credit phase out in future years, we expect cash flow from our synfuel business to total approximately $1.6 billion between 2005 and 2008. The source of synfuel cash flow includes cash from operations, asset sales, and the utilization of Section 29 tax credits carried forward from synfuel production prior to 2004.

Non-utility Growth - During 2004, we continued to experience growth in our non-utility businesses with income reaching $283 million compared to $256 million in 2003. The improvement primarily reflects increased contributions in our Energy Marketing & Trading segment, primarily due to a one-time contract gain. Additionally, non-utility growth in 2004 is attributable to increased earnings from our synfuels, coke

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batteries and on-site energy projects. Also affecting the year over year comparison are asset gains, losses and impairments during 2004 and 2003 as subsequently discussed.

Outlook - We made significant progress during the past year on our 2004 corporate priorities, which included:

•	Successful rate case outcomes;

•	Addressing structural issues with the electric Customer Choice program;

•	Continuing sell-down of synfuel portfolio;

•	Continuing non-utility growth momentum; and

•	Maintaining cash and balance sheet strength.

Our long-term strategy has not changed and in 2005 we will focus on maintaining a strong utility base, pursuing a unique growth strategy focused on value creation in targeted markets, maintaining a strong balance sheet and paying an attractive dividend. The impact of the rate orders is expected to increase utility earnings in 2005 and 2006 as rate caps expire.

Our financial performance will be dependent on successfully redeploying an expected $1.65 billion of cash flow through 2008, primarily associated with proceeds from the sale of interests in synfuel facilities. Our objective for cash redeployment is to strengthen the balance sheet and coverage ratios, as well as replace the value of synfuels that is currently inherent in our share price. We will first use our cash to reduce parent company debt. Secondly, we will continue to pursue growth investments that meet our strict risk-return and value creation criteria. Lastly, share repurchases will be used to build share value if adequate investment opportunities are not available.

RESULTS OF OPERATIONS

We had earnings of $431 million in 2004, or $2.49 per diluted share, compared to earnings of $521 million, or $3.09 per diluted share in 2003 and earnings of $632 million, or $3.83 per diluted share in 2002. As subsequently discussed, the comparability of earnings was impacted by our two discontinued businesses, International Transmission Company and Southern Missouri Gas Company, and the adoption of two new accounting rules in 2003. Excluding discontinued operations and the cumulative effect of accounting changes, our earnings from continuing operations in 2004 were $443 million, or $2.55 per diluted share, compared to earnings of $480 million, or $2.85 per diluted share in 2003 and earnings of $586 million, or $3.55 per diluted share in 2002. The following sections provide a detailed discussion of our segments, operating performance and future outlook.

Segment Performance & Outlook – Through 2004, we operated our businesses through three strategic business units (Energy Resources, Energy Distribution and Energy Gas). Each business unit had utility and non-utility operations. The balance of our business consisted of Corporate & Other. This resulted in the following reportable segments. In 2005, we expect to realign our business units as discussed in Note 1.

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