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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended June 30, 2002

Commission file number 1-2198

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

THE DETROIT EDISON COMPANY
(Exact name of registrant as specified in its charter)

313-235-8000
(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 o

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The Detroit Edison Company

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

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Definitions

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The Detroit Edison Company

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, access to the capital markets, the level of borrowings, weather, actual sales, changes in the cost of fuel and purchased power due to the suspension of the PSCR mechanism, the effects of competition and the implementation of electric Customer Choice programs, the implementation of electric utility restructuring in Michigan, environmental and nuclear requirements, the impact of FERC and MPSC proceedings and regulations and the timing of the accretive effects of DTE Energy’s merger with MCN Energy.

Management’s Narrative Analysis of the Results of Operations

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

Detroit Edison reported earnings of $74 million for the 2002 three-month period, compared to a net loss of $77 million for the same period in 2001. For the six-month period, net income was $167 million compared to $36 million for the same period in 2001. Earnings comparability are affected by $173 million ($113 million net of taxes) of merger and restructuring charges that were recorded in the second quarter of 2001.

New reporting alignment - Beginning in 2002, Detroit Edison’s parent company, DTE Energy, realigned its internal and external financial reporting structure into three strategic business units (Energy Resources, Energy Distribution and Energy Gas) that have both regulated and non-regulated operations. This structure is how management sets strategic goals, allocates resources and evaluates performance. The realignment resulted in the following two reportable segments for Detroit Edison:

Energy Resources includes the power generation services of Detroit Edison. Electricity is generated from Detroit Edison’s numerous fossil plants or its nuclear plant and sold to residential, commercial, industrial and wholesale customers.

Energy Distribution includes the electric distribution services of Detroit Edison. Energy Distribution distributes electricity generated by Energy Resources and alternative electric suppliers to Detroit Edison’s 2.1 million residential, commercial and industrial customers.

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Management’s Narrative Analysis and Results of Operations

Energy Resources

Earnings increased $45 million and $40 million during the 2002 three- and six-month periods reflecting higher gross margins due to lower fuel and purchased power costs, partially offset by a decrease in operating revenue. Fuel and purchased power costs reflect favorable energy market prices and an increase in unrealized mark to market gains. The operating revenues decrease was attributable 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 margins were partially offset by increased operations and maintenance expenses for health care and pension costs. Depreciation and amortization expense decreased reflecting the extension of the amortization period from seven years to 15 years for certain regulatory assets that were securitized in 2001.

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Management’s Narrative Analysis and Results of Operations

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

	(1)		Represents fuel costs associated with power plants.
	(2)		The average purchased power amounts include hedging activities.

Outlook – Regulatory changes have resulted and will continue to result in increased competition in the electric generation business. Effective January 1, 2002, the electric Customer Choice program was expanded whereby all electric customers can choose to purchase their electricity from suppliers other than their local utility. Detroit Edison expects to lose 5% to 8% of its retail sales as a result of customers choosing to participate in the electric Customer Choice program during 2002. To the extent Detroit Edison experiences net stranded costs as a result of customers switching to an alternative electric supplier, Michigan legislation provides for the recovery of such stranded costs. Detroit Edison disagrees with the MPSC’s methodology for determining and recovering net stranded costs and has asked for rehearing, clarification and substantial changes on certain aspects of the applicable order. In May 2002, the MPSC denied Detroit Edison’s request for rehearing and clarification on certain aspects of the order. In June 2002, Detroit Edison filed an appeal of the MPSC order at the Michigan Court of Appeals. See Note 3.

Energy Distribution

Earnings declined $7 million and $23 million during the 2002 three- and six-month periods due primarily to increased operation and maintenance expenses. The increased operation and maintenance expenses are attributable to higher health care and pension costs, heat-related maintenance costs on the distribution system and costs associated with restoring power to customers who lost service during two storms in the 2002 six-month period. Operating revenues increased due primarily to higher residential sales due to warm June weather.

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Management’s Narrative Analysis and Results of Operations

Outlook – Regulated electric system deliveries are expected to increase in 2002 due to the economic recovery and continue to grow beginning in 2003. Operating results will vary as a result of various external factors such as weather, changes in economic conditions and the severity and frequency of storms.

CAPITAL RESOURCES AND LIQUIDITY

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Management’s Narrative Analysis and Results of Operations

Operating Activities

Net cash from operating activities decreased $393 million in the 2002 six-month period due to higher working capital levels, incremental storm restoration costs and the impact of the 5% rate reduction as part of securitization.

Higher working capital levels reflect increased customer receivables of $117 million, largely the result of the impact of the economy on collections. Management expects lower receivables outstanding by year end. Increased sales due to warm June weather also contributed to the higher receivable balance. In addition, lower accounts payable levels represents the internal focus on managing external payments and taking greater advantage of purchase discounts.

Investing Activities

Net cash used for investing activities decreased $126 million in the 2002 six-month period due to lower investments in regulatory assets associated with securitizing the company’s Fermi 2 power generation facility in March 2001. Partially offsetting this decrease are higher plant and equipment expenditures associated with new air quality regulations which require the reduction in nitrogen oxide levels. Additional cash that was restricted for debt redemptions also affected the comparison.

Financing Activities

Net cash used for financing activities decreased $74 million during the 2002 six-month period. This change is due primarily to the issuance of $1.75 billion of securitization bonds in 2001 and changes in short-term borrowings, redemptions of long-term debt and repurchases of common stock.

ENVIRONMENTAL MATTERS

EPA ozone transport regulations and final new air quality standards relating to ozone and particulate air pollution will impact the Company. Detroit Edison has spent approximately $348 million through June 2002 and estimates that it will incur an additional $400 to $500 million of future capital expenditures over the next three years to comply.

NEW ACCOUNTING PRONOUNCEMENTS

During 2001, the Financial Accounting Standards Board (FASB) issued new accounting pronouncements concerning business combinations, goodwill and other intangible assets, asset retirement obligations and impairment or disposal of long-lived assets. See Note 6 for a discussion of Detroit Edison’s evaluation of the adoption of these new accounting pronouncements.

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The Detroit Edison Company
Consolidated Statement of Operations (Unaudited)

See Notes to Consolidated Financial Statements (Unaudited)

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The Detroit Edison Company
Consolidated Statement of Financial Position

See Notes to Consolidated Financial Statements (Unaudited)

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The Detroit Edison Company
Consolidated Statement of Financial Position

See Notes to Consolidated Financial Statements (Unaudited)

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The Detroit Edison Company
Consolidated Statement of Cash Flows (Unaudited)

See Notes to Consolidated Financial Statements (Unaudited)

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The Detroit Edison Company
Consolidated Statement of Changes in Shareholder’s Equity (Unaudited)