Fitch Rates Detroit Edison's $300MM Senior Notes 'A-'; Outlook Stable

CHICAGO--(Business Wire)--
Fitch Ratings has assigned a 'A-' rating to Detroit Edison Co.'s
(DECo) $300 million issuance of 5.60% senior notes, series G, due June
15, 2018. Proceeds from the sale will be used to repay short-term
indebtedness and for general corporate purposes. DECo's Rating Outlook
is Stable.

The senior notes will be issued under a supplemental indenture,
and will be secured by the pledge of a like amount of DECo's first
mortgage bonds (FMBs; rated 'A-' by Fitch). The indenture provides for
the release of the collateral when there is less than 5% of DECo's net
tangible assets or 5% of net capitalization in FMBs outstanding other
than those securing senior notes.

Currently, DECo has $885 million of outstanding FMBs not subject
to release provisions. Of this amount, $549 million of outstanding
FMBs will not mature or be subject to redemption prior to 2011.
Therefore the release date is not expected to occur prior to 2011,
however, the outstanding FMBs could be redeemed before the first call
date by a tender offer. After the release of property, notes issued
under this indenture will instead be secured by substitute mortgage
bonds.

DECo's ratings take into account the company's solid credit
protection measures, stable operating performance and historically
constructive regulatory environment in Michigan. Rating concerns
facing the utility primarily relate to DECo's exposure to a weak local
economy, in particular the automotive sector; and a large capital
expenditure program through 2012, which may be extended should the
utility follow through on its plan to build a nuclear power plant. A
large portion of DECo's capital investments will be for environmental
compliance costs, which DECo will be able to recover through future
rate cases, but there will be regulatory lag.

The Stable Outlook takes into consideration Fitch's expectation
that DECo will continue to maintain a solid financial and operating
profile, receive a reasonable outcome in its pending electric rate
case and not embark on a large baseload capital spending program
without first attaining regulatory approvals for timely recovery of
these costs. While the parent company, DTE Energy (DTE; IDR rated
'BBB' with a Negative Outlook), has sold assets, parent debt has not
yet been meaningfully reduced.

In April 2008, the Michigan House of Representatives passed House
Bill (HB) 5524, which would provide for significant changes to
Michigan's electricity regulatory framework if enacted into law.
Overall, Fitch considers the legislation, as proposed, supportive of
the credit of investor-owned electric utilities operating within the
state because it would increase certainty of cost recovery and reduce
regulatory lag. However, the bill now moves onto the Senate, where
considerable modifications could occur. Senate action is expected by
mid-summer.

In April 2007, DECo filed a general rate case with the Michigan
Public Service Commission (MPSC) for a $123 million rate increase;
which was later increased to $199 million. The majority of the initial
rate increase is comprised of environmental compliance costs and
inflationary increases. A return on equity of 11.25% was requested,
based on a 50/50 debt/equity capital structure. A final decision from
the MPSC is expected sometime in 2008. While personnel turnover at the
MPSC has resulted in some regulatory uncertainty, Fitch expects a
reasonable outcome from the new commission.

DECo, a wholly-owned subsidiary of DTE, is a regulated electric
utility that serves approximately 2.2 million customers in Michigan.

Fitch's rating definitions and the terms of use of such ratings
are available on the agency's public site, www.fitchratings.com.
Published ratings, criteria and methodologies are available from this
site, at all times. Fitch's code of conduct, confidentiality,
conflicts of interest, affiliate firewall, compliance and other
relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings
Karen Anderson, 312-368-3165 (Chicago)
Sharon Bonelli, 212-908-0581 (New York)
Brian Bertsch, 212-908-0549 (Media Relations, New York)

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