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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 Quarter Ended September 30, 2002

Commission file number 1-11607

DTE ENERGY 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 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      

At September 30, 2002, 167,461,430 shares of DTE Energy’s Common Stock, substantially all held by non-affiliates, were outstanding.

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DTE Energy Company

Quarterly Report on Form 10-Q
Quarter Ended September 30, 2002

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DEFINITIONS

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DTE Energy Company
Management’s Discussion and Analysis
of Financial Condition and Results of Operations

Forward-Looking Statements

Certain information presented herein includes forward-looking statements. 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. Factors that may impact forward-looking statements include, but are not limited to, interest rates, the use of derivative instruments and their related accounting treatment, access to the capital markets and capital market conditions, the level of borrowings, the effects of weather and other natural phenomena on operations, actual sales, the capital intensive nature of our business, economic climate and growth in the geographic areas in which the Company does business, the timing and extent of changes in commodity prices for electricity and gas, unscheduled generation outages, maintenance or repairs, conditions of capital markets including the effect on our pension plan investments, nuclear power plant performance, the nature, availability and projected profitability of potential projects and other investments available to us, changes in the cost of fuel and purchased power due to the suspension of the power supply cost recovery mechanism, the effects of increased competition from other energy suppliers and the implementation of electric and gas Customer Choice programs, as well as alternative forms of energy, the implementation of electric utility restructuring in Michigan (which involves pending regulatory and related judicial proceedings and actual and possible reductions in authorized rates and earnings), the effects of changes in governmental policies including income taxes, environmental compliance and nuclear requirements and the ability to recover these costs through rate increases, the impact of FERC and MPSC proceedings and existing and proposed regulations, the contributions to earnings by our non-regulated businesses, changes in the cost of natural gas, the effects of new accounting pronouncements and the timing of the accretive effects of DTE Energy’s merger with MCN Energy.

RESULTS OF OPERATIONS

DTE Energy reported earnings of $161 million or $.96 per diluted share for the 2002 third quarter, compared to earnings of $63 million or $.38 per diluted share for the 2001 third quarter. For the 2002 nine-month period, net income was $429 million or $2.62 per diluted share, compared to $114 million or $.76 per diluted share for the same period in 2001. The comparability of earnings was affected by merger and restructuring charges and goodwill amortization associated with the MCN Energy merger that reduced after-tax earnings for the 2001 third quarter by $21 million or $.13 per diluted share and the 2001 nine-month period by $190 million or $1.26 per diluted share. Excluding merger and restructuring charges and goodwill amortization, earnings increased $77 million and $125 million in the 2002 third quarter and nine-month period, respectively, compared to the corresponding 2001 periods. The significant improvements reflect increased contributions from both the regulated and non-regulated businesses and a favorable adjustment in the effective income tax rate. The issuance of 29 million shares of DTE Energy common stock in conjunction with the May 2001 MCN Energy merger, net of 10.5 million shares repurchased in 2001, and the issuance of 6.325 million shares in June 2002 also impacted the earnings per share comparison.

New reporting alignment — Beginning in 2002, DTE Energy realigned its internal and external financial reporting structure into three strategic business units (Energy Resources, Energy Distribution and Energy Gas). Each business unit has regulated and non-regulated operations. Based on this structure, management sets strategic goals, allocates resources and evaluates performance. The realignment resulted in the following nine reportable segments:

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Management’s Discussion and Analysis

Energy Resources

•		Regulated operations include the power generation services of Detroit Edison, the Company’s electric utility. Electricity is generated from Detroit Edison’s numerous fossil plants or its nuclear plant and sold throughout Southeastern Michigan to residential, commercial, industrial and wholesale customers.
•		Non-regulated

	•		Energy Services is comprised of various businesses that develop and manage energy-related assets and services. Such projects include coke production, synfuels production, independent power plants, on-site energy projects and cogeneration facilities. The economic viability of synfuels projects is tied to their generation of alternate fuels tax credits.
	•		Wholesale Marketing & Trading consists of the electric and gas marketing and trading operations of DTE Energy Trading Company and the natural gas marketing and trading operations of DTE Enterprises, which was acquired as part of the MCN Energy merger. Wholesale Marketing & Trading enters into forwards, futures, swaps and option contracts as part of its trading strategy. Wholesale Marketing & Trading focuses on physical power marketing and structured transactions, as well as the enhancement of returns from its power plant, pipeline and storage assets.
	•		Other non-regulated operations consist of businesses involved in coal services and landfill gas recovery along with an independent generating unit.

Energy Distribution

•		Regulated operations include the electric distribution services of Detroit Edison, and the electric transmission services of the International Transmission Company (ITC). Energy Distribution distributes electricity generated by Energy Resources and alternative electric suppliers to Detroit Edison’s 2.1 million residential, commercial and industrial customers. The transmission assets of ITC are operated by the Midwest Independent System Operator, a regional transmission operator.
•		Non-regulated operations primarily consist of DTE Energy Technologies, businesses that market and distribute a broad portfolio of distributed generation products, provide application engineering, and monitor and manage system operations.

Energy Gas

•		Regulated operations include gas distribution services primarily provided by MichCon, the Company’s gas utility that purchases, stores and distributes natural gas throughout Michigan to 1.2 million residential, commercial and industrial customers.
•		Non-regulated operations include the exploration and production of gas and the gathering, processing and storing of gas. Certain pipeline and storage assets are used to support the Wholesale Marketing & Trading segment.

Corporate & Other includes administrative and general expenses, and interest costs of DTE Energy corporate that have not been allocated to the regulated and non-regulated businesses. Corporate & Other also includes various other non-regulated operations, including investments in new emerging energy technologies.

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Management’s Discussion and Analysis

The following tables and related discussion depict the operations of each of these segments.

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Management’s Discussion and Analysis

Energy Resources

Regulated earnings increased $8 million and $30 million during the 2002 third quarter and nine-month period, respectively, reflecting higher gross margins due to lower purchased power costs. The lower purchased power costs reflect favorable energy market prices in 2002. Mark to market accounting for forward and option contracts in 2001 impacted revenues and purchased power, resulting in a favorable impact on margins of $36 million in the 2001 third quarter, and an unfavorable impact on margins of $9 million in the 2001 nine-month period. Margins were also impacted by higher revenues due to greater cooling demand in the 2002 third quarter and the loss of revenues resulting from customers switching to alternative electric suppliers under the electric Customer Choice program. Revenues for the 2002 nine-month period also were reduced due to the impact of a 5% legislatively mandated, securitization based, rate reduction for commercial and industrial customers that began in April 2001. The higher gross

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Management’s Discussion and Analysis

margins were partially offset by increased employee benefit costs and higher operations and maintenance expenses due to planned and unplanned reliability and maintenance work done to improve the production and availability of the generation fleet. Depreciation and amortization expense decreased in the nine-month period reflecting the extension of the amortization period from seven years to 15 years for certain regulatory assets that were securitized in 2001.

System output and average fuel and purchased power costs were as follows: