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 September 30, 2006

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	38-0478040
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2000 2nd Avenue, Detroit, Michigan	48226-1279
(Address of principal executive offices)	(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 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 whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o      Accelerated filer o     Non-accelerated filer þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o      No þ

Michigan Consolidated Gas Company

Quarterly Report on Form 10-Q
Quarter Ended September 30, 2006

Table of Contents

	Page
	Number
DEFINITIONS		1
FORWARD-LOOKING STATEMENTS		2
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Operations		7
Consolidated Statement of Financial Position		8
Consolidated Statement of Cash Flows		10
Consolidated Statement of Changes in Shareholder’s Equity and Comprehensive Income		11
Notes to Consolidated Financial Statements		12
Item 2. Management’s Narrative Analysis of Results of Operations		3
Item 4. Controls and Procedures		6
PART II — OTHER INFORMATION
Item 1. Legal Proceedings		20
Item 6. Exhibits		20
SIGNATURE		21
Chief Executive Officer Section 302
Chief Financial Officer Section 302
Chief Executive Officer Section 906
Chief Financial Officer Section 906

Definitions

Company or MichCon	Michigan Consolidated Gas Company, an indirect, wholly-owned natural gas distribution and intrastate transmission subsidiary of Enterprises.
Customer Choice	Statewide initiatives giving customers in Michigan the option to choose alternative suppliers for gas.
DTE Energy	DTE Energy Company, directly or indirectly, the parent of The Detroit Edison Company, MichCon and numerous non-utility subsidiaries.
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., a wholly owned subsidiary of DTE Energy and indirectly the parent of MichCon.
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, permitting MichCon to pass 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.
MPSC	Michigan Public Service Commission
SFAS	Statement of Financial Accounting Standards
Units of Measurement:
Bcf	Billion cubic feet of gas
Mcf	Thousand cubic feet of gas

1

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 presently contemplated, projected, estimated or budgeted. Many factors 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 population growth or decline in the geographic areas where we do business;

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

• implementation of the gas Customer Choice program;

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

• employee relations and the impact of collective bargaining agreements;

• 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 natural gas;

• effects of competition;

• impact of regulation by the MPSC and other applicable governmental proceedings and regulations;

• changes in and application of 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 and application of 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;

• uncollectible accounts receivable;

• litigation and related appeals; and

• changes in the economic and financial viability of our suppliers and customers, 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.

2

Management’s Narrative Analysis of Results of Operations

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

Certain items reflected in the accompanying consolidated financial statements have been eliminated at DTE Energy as a result of purchase accounting adjustments.

Factors impacting income: MichCon’s net loss increased $178 million for the 2006 third quarter and net income decreased $78 million in the 2006 nine-month period. The variances were primarily attributable to effective tax rate adjustments in 2005, increased rates and the impacts in 2005 of the MPSC’s April 2005 gas cost recovery and final gas rate orders, and the effects of milder weather in 2006.

The MPSC final gas rate order disallowed recovery of 90% of the costs of a computer billing system that was in place prior to DTE Energy’s acquisition of MCN Energy in 2001. MichCon impaired this asset by approximately $42 million in the first quarter of 2005.

Increase (Decrease) in Income Statement Components	Three Months			Nine Months
Compared to Prior Year	Ended			Ended
(in Millions)	September 30			September 30
Operating revenues	$	(39	)	$	(42	)
Cost of gas		(44	)		(90	)
Gross margin		5			48
Operation and maintenance		(2	)		12
Depreciation and amortization		1			(2	)
Taxes other than income		4			6
Asset (gains) and losses, net		(3	)		(48	)
Other (income) and deductions		2			4
Income tax provision (benefit)		181			154
Net income (loss)	$	(178	)	$	(78	)

Gross margins increased $5 million during the 2006 third quarter and $48 million in the 2006 nine-month period. Compared to the third quarter of 2005, gross margins were favorably impacted by $3 million due to the effects of weather and an increase of $4 million in midstream services, including storage and transportation.

The year-to-date gross margins were favorably affected by $15 million in higher base rate revenue and an increase of $22 million in revenue associated with the uncollectible expense tracking mechanism authorized by the MPSC in the April 2005 final gas rate order, a $17 million favorable impact in lost gas and gas in kind recovery and an increase of $16 million in midstream services including storage and transportation. Partially offsetting these increases were a $24 million decline due to warmer than normal weather and an estimated $13 million decline as a result of customer conservation efforts. Additionally, the comparability of the nine month periods is affected by an adjustment we recorded in the first quarter of 2005 related to an April 2005 MPSC order in our 2002 GCR reconciliation case that disallowed $26 million representing unbilled revenues at December 2001.

3

	Three Months Ended				Nine Months Ended
	September 30				September 30
	2006		2005		2006		2005
Gas Markets (in Millions)
Gas sales	$	103	$	147	$	1,047	$	1,105
End user transportation		24		24		96		97
		127		171		1,143		1,202
Intermediate transportation		15		14		44		40
Other		25		21		72		59
	$	167	$	206	$	1,259	$	1,301
Gas Markets (in Bcf)
Gas sales		11		10		93		114
End user transportation		27		34		98		116
		38		44		191		230
Intermediate transportation		77		95		284		313
		115		139		475		543

Operation and maintenance expense decreased $2 million in the 2006 third quarter and increased $12 million for the nine-month period. Compared to the third quarter of 2005, the decrease is due to a $7 million decline in uncollectible accounts receivable expense and $7 million lower corporate support allocations, partially offset by $12 million in costs associated with our Performance Excellence Process.

The year-to-date period increases are due to an $11 million increase in uncollectible accounts receivable expense, reflecting higher past due amounts attributable to an increase in gas prices, continued weak economic conditions, and inadequate government-sponsored assistance for low-income customers. We also recorded $18 million in implementation costs associated with our Performance Excellence Process. Increases were offset by the DTE Energy parent company no longer allocating $9 million of merger-related interest to MichCon effective in April 2005. Additionally, the comparability of the nine month periods is affected by an adjustment we recorded in second quarter of 2005 for the disallowance of $11 million in environmental costs due to the April 2005 final gas rate order and the requirement to defer negative pension expense as a regulatory liability.

Asset (gains) and losses, net increased $3 million in the 2006 third quarter and decreased $48 million for the nine-month period. The third quarter increase is due to the sale of certain investment rights related to storage field construction. The change in nine-month period of $48 million is due to the 2005 disallowances of approximately $42 million of costs related to a computer billing system and $6 million of certain computer equipment and related depreciation resulting from the April 2005 final gas rate order. The third quarter 2006 gain is offset by a second quarter 2006 loss of $3 million as a result of a reduction to MichCon’s 2004 GCR underrecovery related to the accounting treatment of the injected base gas remaining in the New Haven storage field when it was sold in early 2004.

Income tax benefit decreased $181 million and income tax expense increased $154 million for the third quarter and nine-month period of 2006, respectively, primarily due to a lower effective tax rate in 2006.

Outlook – Operating results are expected to vary due to regulatory proceedings, weather, changes in economic conditions, customer conservation and process improvements. Higher gas prices and economic conditions have resulted in continued pressure on receivables and working capital requirements that are partially mitigated by the GCR mechanism. In the April 2005 final gas rate order, the MPSC adopted MichCon’s proposed tracking mechanism for uncollectible accounts receivable. Each year, MichCon will file an application comparing its actual uncollectible expense for the prior calendar year to its designated revenue recovery of approximately $37 million. Ninety percent of the difference will be refunded or surcharged after an annual reconciliation proceeding before the MPSC.

4

We will utilize the DTE Energy Operating System and the Performance Excellence Process to seek opportunities to improve productivity, remove waste and decrease our costs while improving customer satisfaction.

5

CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures

Management of the Company carried out an evaluation, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2006, which is the end of the period covered by this report. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that such controls and procedures are effective in ensuring that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Due to the inherent limitations in the effectiveness of any disclosure controls and procedures, management cannot provide absolute assurance that the objectives of its disclosure controls and procedures will be attained.

(b) Changes in internal control over financial reporting

There has been no change in the Company’s internal control over financial reporting during the quarter ended September 30, 2006 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

6

MICHIGAN CONSOLIDATED GAS COMPANY

CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)

	Three Months Ended						Nine Months Ended
	September 30						September 30
(in Millions)	2006			2005			2006			2005
Operating Revenues	$	167		$	206		$	1,259		$	1,301
Operating Expenses
Cost of gas		56			100			768			858
Operation and maintenance		91			93			320			308
Depreciation and amortization		24			23			71			73
Taxes other than income		13			9			41			35
Asset (gains) and losses, net		(3	)		—			—			48
		181			225			1,200			1,322
Operating Income (Loss)		(14	)		(19	)		59			(21	)
Other (Income) and Deductions
Interest expense		17			14			49			42
Interest income		(2	)		(3	)		(6	)		(8	)
Other income		(2	)		(1	)		(6	)		(3	)
Other expenses		—			1			1			3
		13			11			38			34
Income (Loss) Before Income Taxes		(27	)		(30	)		21			(55	)
Income Tax Provision (Benefit)		(8	)		(189	)		3			(151	)
Net Income (Loss)	$	(19	)	$	159		$	18		$	96

See Notes to Consolidated Financial Statements (Unaudited)

7

MICHIGAN CONSOLIDATED GAS COMPANY

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	(Unaudited)
	September 30			December 31
(in Millions)	2006			2005
ASSETS
Current Assets
Cash and cash equivalents	$	1		$	7
Accounts receivable
Customer (less allowance for doubtful accounts of $93 and $78, respectively)		185			552
Other		84			79
Accrued gas cost recovery revenue		—			42
Inventories
Gas		197			119
Material and supplies		16			16
Gas customer choice deferred asset		96			65
Other		35			30
		614			910
Investments		92			90
Property
Property, plant and equipment		3,318			3,252
Less accumulated depreciation		(1,521	)		(1,468	)
		1,797			1,784
Other Assets
Regulatory assets		100			65
Intangible assets		1			1
Notes receivable		79			80
Prepaid benefit costs and due from affiliate		415			399
Other		10			14
		605			559
Total Assets	$	3,108		$	3,343

See Notes to Consolidated Financial Statements (Unaudited)

8

MICHIGAN CONSOLIDATED GAS COMPANY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	(Unaudited)
	September 30			December 31
(in Millions, Except Shares)	2006			2005
LIABILITIES AND SHAREHOLDER’S EQUITY
Current Liabilities
Accounts payable	$	128		$	246
Dividends payable		13			13
Short-term borrowings		258			439
Current portion of long-term debt, including capital leases		30			40
Federal income, property and other taxes payable		38			24
Regulatory liabilities		110			—
Other		65			70
		642			832
Other Liabilities
Deferred income taxes		186			191
Regulatory liabilities		504			490
Accrued postretirement benefit costs		141			144
Other		186			187
		1,017			1,012
Long-Term debt, (net of current portion)		715			745
Contingencies (Notes 4 and 6)
Shareholder’s Equity
Common stock, $1 par value, 15,100,000 shares authorized, 10,300,000 shares issued and outstanding		10			10
Additional paid in capital		432			432
Retained earnings		293			313
Accumulated other comprehensive loss		(1	)		(1	)
		734			754
Total Liabilities and Shareholder’s Equity	$	3,108		$	3,343

See Notes to Consolidated Financial Statements (Unaudited)

9

MICHIGAN CONSOLIDATED GAS COMPANY

CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

	Nine Months Ended
	September 30
(in Millions)	2006			2005
Operating Activities
Net income	$	18		$	96
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		71			73
Deferred income taxes and investment tax credit, net		(24	)		(140	)
Asset (gains) and losses, net		—			48
Changes in assets and liabilities:
Accounts receivable, net		362			211
Inventories		(78	)		(128	)
Postretirement obligation		(3	)		13
Property taxes assessed applicable to future periods		(11	)		(11	)
Prepaid benefit costs and due from affiliate		(16	)		(24	)
Accrued gas cost recovery		149			6
Accounts payable		(108	)		44
Federal income, property and other taxes payable		14			(18	)
Other assets		(40	)		18
Other liabilities		10			5
Net cash from operating activities		344			193
Investing Activities
Plant and equipment expenditures		(95	)		(84	)
Acquisitions		(1	)		—
Proceeds from sale of other assets		3			—
Notes receivable from affiliate		1			—
Other		—			1
Net cash used for investing activities		(92	)		(83	)
Financing Activities
Redemption of long-term debt		(40	)		—
Short-term borrowings, net		(180	)		(71	)
Dividends on common stock		(38	)		(38	)
Net cash used for financing activities		(258	)		(109	)
Net Increase (Decrease) in Cash and Cash Equivalents		(6	)		1
Cash and Cash Equivalents at Beginning of Period		7			—
Cash and Cash Equivalents at End of Period	$	1		$	1
Supplementary Cash Flow Information
Interest paid (excluding interest capitalized)	$	53		$	45
Income taxes paid		—			—

See Notes to Consolidated Financial Statements (Unaudited)

10

MICHIGAN CONSOLIDATED GAS COMPANY

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER’S EQUITY

AND COMPREHENSIVE INCOME (UNAUDITED)

										Accumulated
					Additional					Other
(Dollars in Millions,	Common Stock				Paid in		Retained			Comprehensive
Shares in Thousands)	Shares		Amount		Capital		Earnings			Income			Total
Balance, December 31, 2005		10,300	$	10	$	432	$	313		$	(1	)	$	754
Net income		—		—		—		18			—			18
Dividends declared on common stock		—		—		—		(38	)		—			(38	)
Balance, September 30, 2006		10,300	$	10	$	432	$	293		$	(1	)	$	734

The following table displays other comprehensive income for the nine-month periods ended September 30:

(in Millions)	2006		2005
Net income	$	18	$	96
Comprehensive income	$	18	$	96

See Notes to Consolidated Financial Statements (Unaudited)

11

Michigan Consolidated Gas Company

Notes to Consolidated Financial Statements (Unaudited)

NOTE 1 — GENERAL

These consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements included in our 2005 Annual Report 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 may 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 certain prior year balances to match the current year’s financial statement presentation.

Asset Retirement Obligations

We have recorded asset retirement obligations in accordance with SFAS No. 143, Accounting for Asset Retirement Obligations and FASB Interpretation FIN No. 47, Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143. We identified conditional retirement obligations for gas pipeline retirement costs. To a lesser extent, we have conditional retirement obligations at certain service centers, compressor and gate stations.

As to regulated operations, we believe that adoptions of SFAS No. 143 and FIN 47 result primarily in timing differences in the recognition of legal asset retirement costs that we are currently recovering in rates. We will be deferring such differences under SFAS No. 71, Accounting for the Effects of Certain Types of Regulation.

A reconciliation of the asset retirement obligation for the 2006 nine-month period follows:

(in Millions)
Asset retirement obligations at January 1, 2006	$	97
Accretion		5
Asset retirement obligations at September 30, 2006	$	102

Retirement Benefits and Trusteed Assets

MichCon sponsors a defined benefit retirement plan for eligible MichCon represented employees. MichCon also participates in a defined benefit retirement plan sponsored by Detroit Edison for its nonrepresented employees, which is treated as a plan covering employees of various affiliates of DTE Energy from the affiliates’ perspective. We are allocated income or an expense each year as a result of our participation in the DTE Energy Company Retirement Plan. Income was approximately $4 million and $6 million for the three months ended September 30, 2006 and 2005, respectively, and was approximately $16 million and $19 million for the nine months ended September 30, 2006 and 2005, respectively, and is not reflected in the following table. We recorded pension expense of $3 million for the three months ended September 30, 2006 and $4 million for the nine months ended September 30, 2006 associated with our Performance Excellence Process and is not reflected in the following table.

12

In its April 2005 final rate order, the MPSC approved the deferral of the non-capitalized portion of our negative pension expense. As of September 30, 2006, we recorded a $33 million regulatory liability.

The components of net periodic benefit costs (credit) for pension benefits and other postretirement benefits follow:

							Other Postretirement
(in Millions)	Pension Benefits						Benefits
Three Months Ended September 30	2006			2005			2006			2005
Service Cost	$	2		$	1		$	3		$	3
Interest Cost		4			4			7			6
Expected Return on Plan Assets		(7	)		(7	)		(4	)		(3	)
Amortization of
Net loss		1			1			2			2
Prior service cost		—			—			—			1
Net transition liability		—			—			2			1
Special Termination Benefits		2			—			1			—
Net Periodic Benefit Cost (Credit)	$	2		$	(1	)	$	11		$	10

							Other Postretirement
(in Millions)	Pension Benefits						Benefits
Nine Months Ended September 30	2006			2005			2006			2005
Service Cost	$	5		$	4		$	10		$	9
Interest Cost		12			11			20			18
Expected Return on Plan Assets		(22	)		(21	)		(9	)		(9	)
Amortization of
Net loss		1			1			7			5
Prior service cost		1			1			1			2
Net transition liability		—			—			4			4
Special Termination Benefits		2			—			1			—
Net Periodic Benefit Cost (Credit)	$	(1	)	$	(4	)	$	34		$	29

During the 2006 third quarter we recorded a $2 million pension cost and a $1 million postretirement benefit cost associated with our Performance Excellence Process. In 2006, we made cash contributions of $20 million to our postretirement benefit plans.

13

NOTE 2 – NEW ACCOUNTING PRONOUNCEMENTS

Stock-Based Compensation

Effective January 1, 2006, our parent company, DTE Energy, adopted SFAS No. 123(R), Share-Based Payment, using the modified prospective transition method. We receive an allocation of costs associated with stock compensation and the related impact of cumulative accounting adjustments. Our allocation for the first nine months of 2006 for stock-based compensation expense was approximately $2 million. The cumulative effect of the adoption of SFAS 123(R) had an immaterial impact on our operation and maintenance expense. We have not restated any prior periods as a result of the adoption of SFAS 123(R).

Accounting for Uncertainty in Income Taxes

In July 2006, the FASB issued Financial Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109 – Accounting for Income Taxes. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109. Additionally, it prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in the tax return. FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition and is effective for fiscal years beginning after December 15, 2006. We plan to adopt FIN 48 on January 1, 2007. We are currently assessing the effects of this interpretation, and have not yet determined the impact on the consolidated financial statements.

Fair Value Measurements

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. It emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Fair value measurement should be determined based on the assumptions that market participants would use in pricing an asset or liability. SFAS 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We plan to adopt SFAS 157 on January 1, 2008. We are currently assessing the effects of this statement, and have not yet determined the impact on the consolidated financial statements.

Accounting for Defined Benefit Pension and Other Postretirement Plans

In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an Amendment of FASB Statements No. 87, 88, 106, and 132(R). SFAS 158 requires companies to (1) recognize the overfunded or underfunded status of defined benefit pension and defined benefit other postretirement plans in its financial statements, (2) recognize as a component of other comprehensive income, net of tax, the actuarial gains or losses and the prior service costs or credits that arise during the period but are not immediately recognized as components of net periodic benefit cost, (3) recognize adjustments to other comprehensive income when the actuarial gains or losses, prior service costs or credits, and transition assets or obligations are recognized as components of net periodic benefit cost, (4) measure postretirement benefit plan assets and plan obligations as of the date of the employer’s statement of financial position, and (5) disclose additional information in the notes to financial statements about certain effects on net periodic benefit cost in the upcoming fiscal year that arise from delayed recognition of the actuarial gains and losses and the prior service cost and credits.

The requirement to recognize the funded status of a postretirement benefit plan and the related disclosure requirements is effective for fiscal years ending after December 15, 2006. We plan to adopt this requirement as of December 31, 2006. The requirement to measure plan assets and benefit obligations as of the date of

14

the employer’s fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. We plan to adopt this requirement as of December 31, 2008. We are currently assessing the impact of this statement, and have not yet determined the impact on the consolidated financial statements.

Quantifying Misstatements

In September 2006, the SEC staff issued Staff Accounting Bulletin (SAB) Topic 1N, Financial Statements — Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements (SAB 108). SAB 108 addresses how a registrant should quantify the effect of an error on the financial statements. The SEC staff concludes in SAB 108 that a dual approach should be used to compute the amount of a misstatement. Specifically, the amount should be computed using both the “rollover” (current year income statement perspective) and “iron curtain” (year-end balance sheet perspective) methods. SAB 108 is effective for years ending after November 15, 2006. We plan to adopt SAB 108 as of December 31, 2006. We are currently assessing what, if any, impact SAB 108 will have on the consolidated financial statements.

NOTE 3 — RESTRUCTURING

Restructuring – Performance Excellence Process

In mid-2005, we initiated a company-wide review of our operations called the Performance Excellence Process. We have identified the Performance Excellence Process as critical to our long-term growth strategy. The overarching goal has been to become more competitive by reducing costs, eliminating waste and optimizing business processes while improving customer service. Additionally, we will need significant resources in the future to invest in maintaining the capital infrastructure and meeting compliance mandates. We began a series of focused improvement initiatives and expect that this process will be carried out over a two- to three-year period beginning in 2006.

We have incurred costs to achieve (CTA) for employee severance and other costs, consisting primarily of project management and consultant support. Our CTA is estimated to total between $55 million and $60 million. We cannot defer CTA costs at this time because a recovery mechanism has not been established.

Amounts expensed are recorded in within the operations and maintenance line in the consolidated statement of operations.

Expenses incurred in 2006 are as follows:

Employee Severance Costs (1)

Other Costs (1)

Total Cost

Three

Nine

Three

Nine

Three

Nine

Months

Months

Months

Months

Months

Months

Ended

Ended

Ended

Ended

Ended

Ended

September

September

September

September

September

September

(in Millions)

30

30

30

30

30

30

Costs incurred:

$

8

$

10

$

4

$

8

$

12

$

18

(1) Includes corporate allocations.

A liability for future CTA associated with the Performance Excellence Process has not been recognized because we have not met the recognition criteria pursuant to SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities.

15

NOTE 4 — REGULATORY MATTERS

Regulatory Accounting Treatment for Performance Excellence Process

In May 2006, we filed an application with the MPSC to allow deferral of costs associated with the implementation of the Performance Excellence Process, a company-wide cost-savings and performance improvement program. Implementation costs include project management, consultant support and employee severance expenses. We sought MPSC authorization to defer and amortize Performance Excellence Process implementation costs for accounting purposes to match the expected savings from the Performance Excellence Process program with the related costs to achieve (CTA). We anticipate that the Performance Excellence Process will be carried out over a two-to three-year period beginning in 2006. MichCon’s implementation costs are estimated to total between $55 million and $60 million. In September 2006, the MPSC issued an order approving a settlement agreement that allows MichCon, commencing in 2006, to defer the incremental CTA. Further, the order provides for MichCon to amortize the CTA deferrals over a ten-year period beginning with the year subsequent to the year the CTA was deferred. We cannot defer CTA costs at this time because a recovery mechanism has not been established.

Uncollectible Expense Tracker Mechanism and Report of Safety and Training-Related Expenditures

In March 2006, MichCon filed an application with the MPSC for approval of its uncollectible expense tracking mechanism for 2005 and review of 2005 annual safety and training-related expenditures. This is the first filing MichCon has made under the uncollectible tracking mechanism, which was approved by the MPSC in April 2005 as part of MichCon’s last general rate case. MichCon’s 2005 base rates included $37 million for anticipated uncollectible expenses. Actual 2005 uncollectible expenses totaled $60 million. The tracker mechanism allows MichCon to recover 90 percent of uncollectibles that exceeded that $37 million base. Under the formula prescribed by the MPSC, MichCon recorded an underrecovery of approximately $11 million for uncollectible expenses from May 2005 (when the mechanism took effect) through the end of 2005. It is expected that the underrecovery will be recovered from customers through a monthly surcharge. MichCon reported that actual safety and training-related expenditures for the initial period exceeded the pro-rated expenditures in base rates and recommended no refund at this time.

Gas Cost Recovery Proceedings

2004 Plan Year — In September 2003, MichCon filed its 2004 GCR plan case proposing a maximum GCR factor of $5.36 per Mcf. MichCon agreed to switch from a calendar year to an operational year as a condition of its settlement in the 2003 GCR plan case. The operational GCR year runs from April to March of the following year. To accomplish the switch, the 2004 GCR plan reflected a 15-month transitional period, January 2004 through March 2005. Under this transition proposal, MichCon filed two reconciliations pertaining to the transition period; one in June 2004 addressing January through March 2004, one filed in June 2005 addressing the remaining April 2004 through March 2005 period and consolidating the two for purposes of the case. The June 2005 filing supported the $46 million under-recovery with interest MichCon had accrued for the period ending March 31, 2005. In March 2006, MPSC Staff filed testimony recommending an adjustment to the accounting treatment of the injected base gas remaining in the New Haven storage field when it was sold in early 2004 that would result in a $3 million reduction to MichCon’s accrued underrecovery. In June 2006, an MPSC ALJ issued a PFD recommending an approximately $43 million underrecovery. MichCon recorded the $3 million reduction to the 2004 underrecovery in the second quarter of 2006. The MPSC issued an order in August 2006 authorizing MichCon to roll a $42 million net underrecovery, including interest, into its 2005 – 2006 GCR reconciliation. This order disallowed $0.3 million related to the sale of storage services and concurrent reduction in gas purchases in February and March of 2005. The MPSC also found that the Staff’s proposed accounting for the sale of the New Haven injected base gas was appropriate.

16

2005-2006 Plan Year — In December 2004, MichCon filed its 2005-2006 GCR plan case proposing a maximum GCR factor of $7.99 per Mcf. The plan includes quarterly contingent GCR factors. These contingent factors allow MichCon to increase the maximum GCR factor to compensate for increases in gas market prices, thereby reducing the possibility of a GCR under-recovery. In April 2005, the MPSC issued an order recognizing that Michigan law allows MichCon to self-implement its quarterly contingent factors. MichCon self-implemented quarterly contingent GCR factors of $8.54 per Mcf in July 2005 and $10.09 per Mcf in October 2005. In response to market price increases in the fall of 2005, MichCon filed a petition to reopen the record in the case during September 2005. MichCon proposed a revised maximum GCR factor of $13.10 per Mcf and a revised contingent factor matrix. In October 2005, the MPSC approved an increase in the GCR factor to a cap of $11.3851 per Mcf for the period November 2005 through March 2006. In June 2006, MichCon filed its GCR reconciliation for the 2005-2006 GCR year. The filing supported a total over-recovery, including interest through March 2006, of $13 million. An MPSC order is expected in 2007.

2006-2007 Plan Year – In December 2005, MichCon filed its 2006-2007 GCR plan case proposing a maximum GCR factor of $12.15 per Mcf. In July 2006, MichCon and the parties to the case reached a settlement agreement that provides for a maximum GCR factor of $8.95 per Mcf, plus quarterly contingent GCR factors. These contingent factors will allow MichCon to increase the maximum GCR factor to compensate for increases in gas market prices, thereby reducing the possibility of a GCR under-recovery. The MPSC issued an order approving the settlement in August 2006.

Other

We are unable to predict the outcome of the regulatory matters discussed herein. Resolution of these matters is dependent upon future MPSC orders and appeals, which may materially impact the financial position, results of operations and cash flows of the Company.

NOTE 5 – LONG -TERM DEBT

Debt Retirements and Redemptions

The following debt was retired, through optional redemption or payment at maturity, during 2006.

	Month					(in Millions)
Company	Retired	Type	Interest Rate		Maturity	Amount
MichCon	May	First Mortgage Bonds		7.15%	May 2006	$	40
			Total Retirements			$	40

NOTE 6 – CONTINGENCIES

Environmental Matters

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. We own, or previously owned, 14 such former manufactured gas plant (MGP) sites. Investigations have revealed contamination related to the by-products of gas manufacturing at each site. In addition to the MGP sites, we are also in the process of cleaning up other contaminated sites. Cleanup activities associated with these sites will be conducted over the next several years.

17

In 1993, a cost deferral and rate recovery mechanism was approved by the MPSC for investigation and remediation costs incurred at former MGP sites in excess of this reserve. We employed outside consultants to evaluate remediation alternatives for these sites, to assist in estimating its potential liabilities and to review its archived insurance policies. As a result of these studies, we accrued an additional liability and a corresponding regulatory asset of $32 million during 1995. During 2005, we spent approximately $4 million investigating and remediating these former MGP sites. In December 2005, we retained multiple environmental consultants to estimate the projected cost to remediate each MGP site. We accrued an additional $9 million in remediation liabilities associated with two of our MGP sites, to increase the reserve balance to $33 million at December 31, 2005.

Any significant change in assumptions, such as remediation techniques, nature and extent of contamination and regulatory requirements, could impact the estimate of remedial action costs for the sites and affect the Company’s financial position and cash flows. However, we anticipate the cost deferral and rate recovery mechanism approved by the MPSC will prevent environmental costs from having a material adverse impact on our results of operations.

Personal Property Taxes

MichCon and other Michigan utilities have asserted that Michigan’s valuation tables result in the substantial overvaluation of utility personal property. Valuation tables established by the Michigan State Tax Commission (STC) are used to determine the taxable value of personal property based on the property’s age. In November 1999, the STC approved new valuation tables that more accurately recognize the value of a utility’s personal property. The new tables became effective in 2000 and are currently used to calculate property tax expense. However, several local taxing jurisdictions took legal action attempting to prevent the STC from implementing the new valuation tables and continued to prepare assessments based on the superseded tables. The legal actions regarding the appropriateness of the new tables were before the Michigan Tax Tribunal (MTT) which, in April 2002, issued its decision essentially affirming the validity of the STC’s new tables. In June 2002, petitioners in the case filed an appeal of the MTT’s decision with the Michigan Court of Appeals. In January 2004, the Michigan Court of Appeals upheld the validity of the new tables. With no further appeal by the petitioners available, the MTT began to schedule utility personal property valuation cases for Prehearing General Calls. After a period of abeyance the MTT issued a scheduling order in a significant number of MichCon appeals that set litigation calendars for these cases extending into mid-2006. After an extended period of settlement discussions, a Memorandum of Understanding was reached with six principals in the litigation and the Michigan Department of Treasury that is expected to lead to settlement of all outstanding property tax disputes on a global basis.

On December 8, 2005, executed Stipulations for Consent Judgment, Consent Judgments, and Schedules to Consent Judgment were filed with the MTT on behalf of MichCon and a significant number of the largest jurisdictions, in terms of tax dollars, involved in the litigation. The filing of these documents fulfilled the requirements of the global settlement agreement and resolves a number of claims by the litigants against each other including both property and non-property issues. The global settlement agreement resulted in an economic benefit to MichCon in 2005 that included the release of a litigation reserve.

Income Taxes

The Internal Revenue Service is currently conducting audits of MichCon as a component of the DTE Energy federal income tax returns for the years 2002 and 2003. The Company accrues tax and interest related to tax uncertainties that arise due to actual or potential disagreements with governmental agencies about the tax treatment of specific items. We believe that our accrued tax liabilities are adequate for all years.

18

Other Commitments

As of December 31, 2005, we were party to numerous long-term purchase commitments relating to a variety of goods and services required for our business. These agreements primarily consist of long-term gas purchase and transportation agreements. We estimate that these commitments will be approximately $1.7 billion through 2051. We also estimate that 2006 base level capital expenditures will be approximately $162 million. We have made certain commitments in connection with expected capital expenditures.

Bankruptcies

We sell gas and/or gas transportation and storage services to numerous companies operating in the steel, automotive, energy, retail and other industries. Certain of our customers have filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code. We regularly review contingent matters relating to these customers and our sale contracts and we record provisions for amounts considered at risk of probable loss. We believe our previously accrued amounts are adequate for probable losses. The final resolution of these matters is not expected to have a material effect on our financial statements.

Other

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.

See Note 4 for a discussion of contingencies related to regulatory matters.

19

OTHER INFORMATION

LEGAL PROCEEDINGS

We are involved in certain legal, regulatory, 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, 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 financial statements in the period they are resolved. See Note 4 for a discussion of contingencies related to Regulatory Matters and Note 6 for a discussion of specific non-regulatory matters.

EXHIBITS

Exhibit
Number	Description
Filed:
31-27	Chief Executive Officer Section 302 Form 10-Q Certification
31-28	Chief Financial Officer Section 302 Form 10-Q Certification
Furnished:
32-27	Chief Executive Officer Section 906 Form 10-Q Certification
32-28	Chief Financial Officer Section 906 Form 10-Q Certification

20

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: November 14, 2006	/s/ PETER B. OLEKSIAK Peter B. Oleksiak
	Controller

21

EXHIBIT INDEX

Exhibit
Number	Description
Filed:
31-27	Chief Executive Officer Section 302 Form 10-Q Certification
31-28	Chief Financial Officer Section 302 Form 10-Q Certification
Furnished:
32-27	Chief Executive Officer Section 906 Form 10-Q Certification
32-28	Chief Financial Officer Section 906 Form 10-Q Certification