Fitch Ratings Comments on Detroit Edison Rate Order.

CHICAGO -- The final order issued by Michigan Public Service Commission (MPSC) in the Detroit Edison Co. (Detroit Ed; senior unsecured rated 'BBB+', Stable Rating Outlook by Fitch Ratings) rate case is consistent with Fitch's expectations and is generally supportive of Detroit Ed's credit quality. The order calls for a final rate increase of $335.8 million and an allowed rate of return of 11% on a 46% equity ratio. Additionally, the order provided for a pension expense tracker, as well as the recovery of $43.6 million of stranded costs through February 2004. The authorized recovery of stranded costs will be achieved through a three mills per kWh charge for secondary choice customers and a one mill per kWh charge for primary choice customers, until all stranded costs have been recovered. Stranded costs for the remainder of 2004 will be determined in a future rate case.

Positively, the return of service provisions outlined in the order address concerns regarding the utility's margin losses as a result of the customer choice initiative. The order allows retail open access customers to return to bundled sales service after two years, provided they give notice to Detroit Ed by Dec. 1 of each year. Returning customers are obliged to remain on bundled service for one year. Failure to comply with these rules will result in payment by the customer for the higher of the tariff energy prices plus 10%, or market-priced power charges plus 10%, for any power taken from Detroit Ed. This limitation on the ability of choice customers to switch suppliers will provide Detroit Ed with greater certainty as to total load, as well as reduce opportunities for gaming by customers, both of which are supportive to credit. However, Fitch notes that the order did not resolve all outstanding issues relating to customer choice. Additionally, the final order did not consider altering tariff design (deskewing) to further mitigate the margin loss when customers choose alternate suppliers. The MPSC has directed the utility to address this issue in a new rate case to be filed on or before March 2005 for implementation when current rate caps expire in January 2006.

Detroit Ed, a wholly owned subsidiary of DTE, is a vertically integrated, regulated electric utility that serves approximately 2.1 million customers in southeastern Michigan.