10-Q 1 k76803e10vq.htm QUARTERLY REPORT FOR PERIOD ENDED 03/31/03 e10vq
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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 Quarterly Period ended March 31, 2003

Commission file number 1-7310

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


MICHIGAN CONSOLIDATED GAS COMPANY

(Exact name of registrant as specified in its charter)
     
Michigan
(State or other jurisdiction of
incorporation or organization)
  38-0478040
(I.R.S. Employer
Identification No.)
     
2000 2nd Avenue, Detroit, Michigan
(Address of principal executive offices)
  48226-1279
(Zip Code)

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

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

Yes x No o

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

Yes x No o



 


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

TABLE OF CONTENTS

           
      PAGE
      NUMBER
     
DEFINITIONS
    1  
PART I — FINANCIAL INFORMATION
       
Item 1. Financial Statements
       
 
Consolidated Statement of Operations
    8  
 
Consolidated Statement of Financial Position
    9  
 
Consolidated Statement of Cash Flows
    10  
 
Consolidated Statement of Retained Earnings
    11  
 
Notes to Consolidated Financial Statements
    12  
 
Independent Accountants’ Report
    14  
Item 2. Management’s Narrative Analysis of the Results of Operations
    4  
Item 4. Controls and Procedures
    7  
PART II — OTHER INFORMATION
       
Item 6. Exhibits and Reports on Form 8-K
    15  
SIGNATURE
    16  
CERTIFICATIONS
    17  

 


DEFINITIONS
Item 2. Management’s Narrative Analysis of the Results of Operations
Item 4. Controls and Procedures
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Operations
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of Retained Earnings
Notes to Consolidated Financial Statements
Independent Accountants’ Report
PART II — OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
CERTIFICATIONS
Fourth Supplemental Indenture dated 02/15/03
Thirty-seventh Supplemental Indenture, 02/15/2003
Awareness Letter of Deloitte & Touche LLP
Chief Executive Officer Certification
Chief Financial Officer Certification


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DEFINITIONS

     
Customer Choice   The choice program is a statewide initiative giving customers in Michigan the option to choose alternative suppliers for gas.
     
DTE Energy   DTE Energy Company and subsidiary companies.
     
End User Transportation   A gas delivery service historically provided to large-volume commercial and industrial customers who purchase natural gas directly from producers or brokerage companies. Under MichCon’s Customer Choice Program that began in 1999, this service is also provided to residential customers and small-volume commercial and industrial customers.
     
Enterprises   DTE Enterprises Inc. (formerly MCN Energy).
     
FERC   Federal Energy Regulatory Commission, a federal agency that determines the rates and regulations of interstate pipelines.
     
Gas Sales Program   A three-year program that ended in December 2001 under which MichCon’s gas sales rate included a gas commodity component that was fixed at $2.95 per Mcf.
     
Gas Storage   For MichCon, the process of injecting, storing and withdrawing natural gas from a depleted underground natural gas field.
     
GCR   A gas cost recovery mechanism authorized by the MPSC that was reinstated by MichCon in January 2002 permitting MichCon to pass on the cost of natural gas to its customers.
     
Intermediate Transportation   A gas delivery service provided to producers, brokers and other gas companies that own the natural gas, but are not the ultimate consumers.
     
MCN Energy   MCN Energy Group Inc. and subsidiary companies.
     
MichCon   Michigan Consolidated Gas Company, an indirect, wholly-owned natural gas distribution and intrastate transmission subsidiary of Enterprises.

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MPSC   Michigan Public Service Commission.
     
Normal Weather   The average daily temperature within MichCon’s service area during a recent 30-year period.
     
SFAS   Statement of Financial Accounting Standards.
     
Units of Measurement:    
     
Bcf   Billion cubic feet of gas.
     
Mcf   Thousand cubic feet of gas.
     
MMcf   Million cubic feet of gas.
     
/d   Added to various units of measure to denote units per day.

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FORWARD-LOOKING STATEMENTS

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

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

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

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MANAGEMENT’S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS

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

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

         
Increase (Decrease) in Income Compared to Prior Year        
(in Millions)        
Operating revenues
  $ 61.6  
Cost of gas
    (36.6 )
 
   
 
Gross margin
    25.0  
Operation and maintenance
    (11.9 )
Depreciation, depletion and amortization
    1.3  
Other (income) and deductions
    1.2  
Income tax provision
    5.0  
 
   
 
Net income
  $ 20.6  
 
   
 

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

                 
    Quarter
   
Gas Markets (in Millions)   2003   2002
   
 
Gas Sales
  $ 561.1     $ 526.3  
End User Transportation
    57.2       31.6  
 
   
     
 
 
  $ 618.3     $ 557.9  
 
   
     
 
Intermediate Transportation
    13.4       12.1  
Other
    20.0       20.1  
 
   
     
 
 
  $ 651.7     $ 590.1  
 
   
     
 
Gas Markets (in Bcf)
               
Gas Sales
    80.0       76.3  
End User Transportation
    60.8       48.1  
 
   
     
 
 
    140.8       124.4  
Intermediate Transportation
    174.5       137.3  
 
   
     
 
 
    315.3       261.7  
 
   
     
 

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

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

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

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

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

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

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CAPITAL RESOURCES AND LIQUIDITY

                   
      Three Months
      March 31
      2003   2002
     
 
Cash and Cash Equivalents
               
(in Millions)
               
Cash Flow From (Used For)
               
 
Operating activities
  $ 216     $ 73  
 
Investing activities
    (287 )     (19 )
 
Financing activities
    66       (58 )
 
 
   
     
 
Net Decrease in Cash and Cash Equivalents
  $ (5 )   $ (4 )
 
   
     
 

Operating Activities

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

Investing Activities

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

Financing Activities

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

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CONTROLS AND PROCEDURES

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

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MICHIGAN CONSOLIDATED GAS COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

                   
      Three Months
      March 31
(in Thousands)   2003   2002
   
 
Operating Revenues
  $ 651,666     $ 590,062  
 
   
     
 
Operating Expenses
               
 
Cost of gas
    420,722       384,092  
 
Operation and maintenance
    78,080       66,229  
 
Depreciation, depletion and amortization
    25,211       26,521  
 
Taxes other than income
    16,536       16,570  
 
   
     
 
 
    540,549       493,412  
 
   
     
 
Operating Income
    111,117       96,650  
 
   
     
 
Other (Income) and Deductions
               
 
Interest on long-term debt
    13,994       13,632  
 
Other interest expense
    452       1,951  
 
Interest income
    (2,579 )     (3,443 )
 
Equity in earnings of joint ventures
    (572 )     (611 )
 
Other
    (323 )     596  
 
   
     
 
 
    10,972       12,125  
 
   
     
 
Income Before Income Taxes
    100,145       84,525  
Income Tax Provision
    25,438       30,396  
 
   
     
 
Net Income
  $ 74,707     $ 54,129  
 
   
     
 

See Notes to Consolidated Financial Statements

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MICHIGAN CONSOLIDATED GAS COMPANY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION

                         
            March 31        
            2003   December 31
(in Thousands)   (Unaudited)   2002
   
 
ASSETS
               
 
Current Assets
               
     
Cash and cash equivalents
  $ 1,642     $ 7,025  
     
Accounts receivable
               
       
Customer (less allowance for doubtful accounts of $30,348 and $26,894, respectively)
    288,348       156,476  
       
Accrued unbilled revenues
    72,673       116,061  
       
Other
    73,030       73,233  
   
Accrued gas cost recovery revenue
    70,370       21,706  
   
Notes receivable from affiliate
    268,832        
   
Inventories
               
       
Gas
    8,388       54,623  
       
Material and supplies
    15,405       14,460  
   
Other
      32,398       53,193  
 
   
     
 
 
    831,086       496,777  
 
   
     
 
 
Property, Plant and Equipment
    3,120,907       3,108,176  
     
Less accumulated depreciation, depletion and amortization
    1,744,054       1,722,746  
 
   
     
 
 
    1,376,853       1,385,430  
 
   
     
 
 
Other Assets
               
     
Other investments
    80,889       79,355  
     
Notes receivable
    83,967       84,220  
     
Regulatory assets
    43,163       42,459  
     
Prepaid benefit costs and due from affiliate
    301,959       291,834  
     
Other
    34,473       31,194  
 
   
     
 
 
    544,451       529,062  
 
   
     
 
 
  $ 2,752,390     $ 2,411,269  
 
   
     
 
LIABILITIES AND SHAREHOLDER’S EQUITY
               
 
Current Liabilities
               
     
Accounts payable
  $ 144,272     $ 104,457  
     
Short-term borrowings
    32,280       122,918  
     
Current portion of long-term debt, including capital leases
    166,943       98,588  
     
Federal income, property and other taxes payable
    48,064       32,391  
     
Regulatory liabilities
    26,529       29,696  
     
Gas inventory equalization
    150,241        
     
Other
    60,718       83,015  
 
   
     
 
 
    629,047       471,065  
 
   
     
 
 
Other Liabilities
               
     
Deferred income taxes
    133,609       129,912  
     
Regulatory liabilities
    147,010       142,198  
     
Unamortized investment tax credit
    21,638       22,100  
     
Accrued postretirement benefit costs
    78,714       76,765  
     
Accrued environmental costs
    17,292       17,535  
     
Other
    44,928       34,165  
 
   
     
 
 
    443,191       422,675  
 
   
     
 
 
Long-term debt, including capital lease obligations
    778,804       678,101  
 
   
     
 
 
Commitments and Contingencies (Note 5)
               
 
Shareholder’s Equity
               
     
Common stock, $1 par value, 15,100,000 shares authorized, 10,300,000 shares issued and outstanding
    10,300       10,300  
     
Additional paid in capital
    430,356       430,643  
     
Retained earnings
    460,692       398,485  
 
   
     
 
 
    901,348       839,428  
 
   
     
 
 
  $ 2,752,390     $ 2,411,269  
 
   
     
 

See Notes to the Consolidated Financial Statements

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

                         
            Three Months Ended
            March 31
           
            2003   2002
           
 
(in Thousands)
               
Operating Activities
               
 
Net income
  $ 74,707     $ 54,129  
 
Adjustments to reconcile net income to net cash from operating activities
               
   
Depreciation, depletion and amortization
    25,211       26,521  
   
Deferred income taxes and investment tax credit, net
    (2,558 )     15,502  
   
Changes in assets and liabilities:
               
     
Accounts receivable, net
    (131,669 )     (35,862 )
     
Accrued unbilled revenues
    43,388       5,458  
     
Inventories
    45,289       4,161  
     
Property taxes assessed applicable to future periods
    (7,641 )     8,617  
     
Prepaid benefit costs and due from affiliate
    (7,633 )     (15,422 )
     
Accrued gas cost recovery
    (48,664 )     (55,157 )
     
Accounts payable
    39,815       28,585  
     
Gas inventory equalization
    150,241       67,364  
     
Federal income, property and other taxes payable
    13,802       7,186  
     
Other
    21,136       (37,801 )
 
   
     
 
       
Net cash from operating activities
    215,424       73,281  
 
   
     
 
Investing Activities
               
 
Capital expenditures
    (14,916 )     (19,241 )
 
Notes receivable from affiliate
    (268,832 )      
 
Other
    (3,219 )     48  
 
   
     
 
       
Net cash used for investing activities
    (286,967 )     (19,193 )
 
   
     
 
Financing Activities
               
 
Issuance of long-term debt
    199,274        
 
Redemption of long-term debt
    (29,975 )     (969 )
 
Short-term borrowings, net
    (90,639 )     (57,009 )
 
Dividends paid
    (12,500 )      
 
   
     
 
       
Net cash from (used for) financing activities
    66,160       (57,978 )
 
   
     
 
Net Decrease in Cash and Cash Equivalents
    (5,383 )     (3,890 )
Cash and Cash Equivalents at Beginning of Period
    7,025       3,929  
 
   
     
 
Cash and Cash Equivalents at End of Period
  $ 1,642     $ 39  
 
   
     
 
Supplementary Cash Flow Information
               
 
Interest paid (excluding interest capitalized)
  $ 14,051     $ 14,210  
 
   
     
 
 
Income taxes paid
  $ 14,000     $  
 
   
     
 

See Notes to Consolidated Financial Statements

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MICHIGAN CONSOLIDATED GAS COMPANY
CONSOLIDATED STATEMENT OF RETAINED EARNINGS (Unaudited)

                 
    March 31
   
    2003   2002
   
 
(in Thousands)
               
Balance — beginning of period
  $ 398,485     $ 378,156  
Net income
    74,707       54,129  
Common stock dividends declared
    (12,500 )      
 
   
     
 
Balance — end of period
  $ 460,692     $ 432,285  
 
   
     
 

See Notes to Consolidated Financial Statements

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MICHIGAN CONSOLIDATED GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — GENERAL

These consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements included in our 2002 Annual Report to the Securities and Exchange Commission on Form 10-K.

The accompanying consolidated financial statements are prepared using accounting principles generally accepted in the United States of America. These accounting principles require us to use estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

The consolidated financial statements are unaudited, but in our opinion, include all adjustments necessary for a fair statement of the results for the interim periods. Financial results for this interim period are not necessarily indicative of the results that may be expected for any other interim period or for the fiscal year.

We reclassified some prior year balances to match the current year’s presentation.

NOTE 2 — NEW ACCOUNTING PRONOUNCEMENTS

Asset Retirement Obligations

On January 1, 2003, we adopted SFAS No. 143, “Accounting for Asset Retirement Obligations,” which requires the fair value of an asset retirement obligation be recognized in the period in which it is incurred. It applies to legal obligations associated with the retirement of long-lived assets resulting from the acquisition, construction, development and (or) the normal operation of a long-lived asset. When a new liability is recorded, an entity capitalizes the costs of the liability by increasing the carrying amount of the related long-lived asset. The liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity settles the obligation for its recorded amount or incurs a gain or loss upon settlement. The adoption of SFAS No. 143 had an immaterial impact on the consolidated financial statements.

SFAS No. 143 also requires the quantification of the estimated cost of removal obligations, arising from other than legal obligations, which have been accrued through depreciation charges. At January 1, 2003 we estimated that we had approximately $400 million of previously accrued asset removal costs related to our regulated operations, for other than legal obligations, included in accumulated depreciation.

NOTE 3 — REGULATORY MATTERS

Gas Industry Restructuring

Through December 2001, MichCon was operating under an MPSC-approved Regulatory

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Reform Plan, which included a comprehensive experimental three-year gas Customer Choice program, a Gas Sales Program and an income sharing mechanism. MichCon returned to a GCR mechanism in January 2002 when the Gas Sales Program expired. Under the GCR mechanism, the gas commodity component of MichCon’s gas sales rates is designed to recover the actual costs of gas purchases. In December 2001, the MPSC issued an order that permitted MichCon to implement GCR factors up to $3.62 per Mcf for January 2002 billings and up to $4.38 per Mcf for the remainder of 2002. The order also allowed MichCon to recognize a regulatory asset of approximately $14 million representing the difference between the $4.38 factor and the $3.62 factor for volumes that were unbilled at December 31, 2001. The regulatory asset will be subject to the 2002 GCR reconciliation process. As of December 31, 2002, MichCon has accrued a $22 million regulatory asset representing the under-recovery of actual gas costs incurred. In July 2002, in response to a petition for rehearing filed by the Michigan Attorney General, the MPSC directed the parties to address MichCon’s implementation of the December 2001 order and the impact of that implementation on rates charged to MichCon’s customers. On March 12, 2003, the MPSC issued an order in MichCon’s 2002 GCR plan case. The MPSC ordered MichCon to reduce its gas cost recovery expenses by $26.5 million for purposes of calculating the 2002 GCR factor due to MichCon’s decision to utilize storage gas during 2001 that resulted in a gas inventory decrement for the 2001 calendar year. Although MichCon recorded a $26.5 million reserve in 2002 to reflect the impact of this order, a final determination of actual 2002 revenue and expenses including any disallowances or adjustment will be decided in MichCon’s 2002 GCR reconciliation case. In addition, we filed an appeal of the March 12, 2003 MPSC order with the Michigan Court of Appeals.

In December 2001, the MPSC also approved MichCon’s application for a voluntary, expanded permanent gas Customer Choice program, which replaced the experimental program that expired in March 2002. Effective April 2002, up to 40% of MichCon’s customers could elect to purchase gas from suppliers other than MichCon. Effective April 2003, up to 60% of customers are eligible and by April 2004, all of MichCon’s 1.2 million customers can participate in the program. The MPSC also approved the use of deferred accounting for the recovery of implementation costs of the gas Customer Choice program. As of March 2003, approximately 160,000 customers are participating in the gas Customer Choice program.

NOTE 4 — LONG TERM DEBT

In February 2003, MichCon issued $200 million of 5.7% senior notes due in March 2033. The proceeds were used for debt redemption and general corporate purposes.

NOTE 5 — CONTINGENCIES

We are involved in certain legal (including commercial matters), administrative and environmental proceedings before various courts, arbitration panels and governmental agencies concerning claims arising in the ordinary course of business. These proceedings include certain contract disputes, environmental reviews and investigations, 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 financial statements in the period they are resolved.

See Note 3 for a discussion of contingencies related to Regulatory Matters.

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INDEPENDENT ACCOUNTANTS’ REPORT

To the Board of Directors and Shareholder of
Michigan Consolidated Gas Company

We have reviewed the accompanying condensed consolidated statement of financial position of Michigan Consolidated Gas Company and subsidiaries as of March 31, 2003, and the related condensed consolidated statements of operations, cash flows, and retained earnings for the three-month periods ended March 31, 2003 and 2002. These financial statements are the responsibility of Michigan Consolidated Gas Company’s management.

We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to such condensed consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated statement of financial position of Michigan Consolidated Gas Company and subsidiaries as of December 31, 2002, and the related consolidated statements of operations, cash flows and retained earnings for the year then ended (not presented herein); and in our report dated February 11, 2003 (March 12, 2003 as to Note 17), we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated statement of financial position as of December 31, 2002 is fairly stated, in all material respects, in relation to the consolidated statement of financial position from which it has been derived.

/s/ DELOITTE & TOUCHE LLP

Detroit, Michigan
May 2, 2003

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PART II — OTHER INFORMATION

EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits

     
Exhibit    
Number   Description

 
4-3   Fourth Supplemental Indenture, dated as of February 15, 2003, establishing the 5.70% Senior Notes, Series A due 2033
4-4   Thirty-seventh Supplemental Indenture, dated as of February 15, 2003, establishing the 5.70% collateral bonds due 2033
15-6   Awareness Letter of Deloitte & Touche LLP
99-9   Chief Executive Officer Certification of Periodic Report
99-10   Chief Financial Officer Certification of Periodic Report

(b)   Reports on Form 8-K
 
    We filed a report on Form 8-K during the first quarter ended March 31, 2003 dated February 11, 2003.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

         
        MICHIGAN CONSOLIDATED
GAS COMPANY
         
         
Date: May 14, 2003   By:   /s/ DANIEL G. BRUDZYNSKI
       
        Daniel G. Brudzynski
        Chief Accounting Officer,
        Vice President and Controller

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FORM 10-Q CERTIFICATION

I, Anthony F. Earley, Jr., Chairman, President, Chief Executive and Chief Operating Officer of Michigan Consolidated Gas Company, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Michigan Consolidated Gas Company;
 
2.   Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
 
3.   Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
 
4.   The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

  (a)   designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
 
  (b)   evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
 
  (c)   presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.   The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

  (a)   all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
 
  (b)   any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.   The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

     
/s/ ANTHONY F. EARLEY, JR   Date: May 14, 2003

   
Anthony F. Earley, Jr.
Chairman, President, Chief Executive and
Chief Operating Officer of
Michigan Consolidated Gas Company
   

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FORM 10-Q CERTIFICATION

I, David E. Meador, Senior Vice President and Chief Financial Officer of Michigan Consolidated Gas Company, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Michigan Consolidated Gas Company;
 
2.   Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
 
3.   Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
 
4.   The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

  (a)   designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
 
  (b)   evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
 
  (c)   presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.   The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

  (a)   all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
 
  (b)   any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.   The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

     
/s/ DAVID E. MEADOR   Date: May 14, 2003

   
David E. Meador
Senior Vice President and
Chief Financial Officer of
Michigan Consolidated Gas Company
   

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Michigan Consolidated Gas Company
Quarterly Report on Form 10-Q for Quarter Ended March 31, 2003
File No. 1-7310

Exhibit Index

     
Exhibit    
Number   Description

 
4-3   Fourth Supplemental Indenture, dated as of February 15, 2003, establishing the 5.70% Senior Notes, Series A due 2033
4-4   Thirty-seventh Supplemental Indenture, dated as of February 15, 2003, establishing the 5.70% collateral bonds due 2033
15-6   Awareness Letter of Deloitte & Touche LLP
99-9   Chief Executive Officer Certification of Periodic Report
99-10   Chief Financial Officer Certification of Periodic Report