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C MS EN E R GY & C O N S U M E R S EN E R GY
ANNUAL
REPORT
2022
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Shareowners:
Thank you for your investment in CMS Energy. Our story and purpose remain grounded
in our commitment to our customers, communities, co-workers and investors – World
Class Performance Delivering Hometown Service.
As we continued to lead the clean energy transformation this year, our vision for
Michigan’s future was supported by successful settlements of our Clean Energy Plan
(IRP) and gas and electric rate cases. These settlements provide certainty for our
investments in clean energy and highlight the supportive regulatory construct in
Michigan. Our IRP will deliver roughly $600 million in savings over our prior plan and
reduces our carbon footprint by over 60% as we exit coal in 2025. In addition to these
operational advancements, I’m happy to report that we delivered another year of
strong financial performance in 2022, marking 20 years of meeting our adjusted
earnings guidance.
Outlined below are accomplishments delivered by the CMS Energy team exemplifying
our impact on the triple bottom line – People, Planet and Profit.
PEOPLE
• Awarded #1 Utility for America’s Best Employers for Women
• Awarded #2 Utility for Best Employers for Workplace Diversity by Forbes
• Recognized within Military Times list of “Best for Vets: Employers”
• Achieved our 5-year goal to double spending with diverse suppliers, one year
ahead of plan
• Placed in the top quartile across all industries for customer experience measured
•
by CXi Forrester Index
Secured more than $100 million of customer assistance in partnership with state
and federal agencies to help keep customer bills affordable
• Attracted approximately 230 megawatts of new or expanding load – estimated
to create about 6,300 jobs and bring more than $8 billion of investment to
Michigan
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PLANET
•
Landmark 2021 Clean Energy Plan approved, providing for the exit of coal
generation and a 60% reduction in carbon emissions by 2025, while ensuring
continued reliability through the acquisition of New Covert, a 1.2-gigawatt
natural gas-fueled plant, the addition of 8 gigawatts of solar generation and
550 megawatts of battery storage through 2040
• Achieved subscription to build 1st tranche of Voluntary Green Pricing program –
this generation project is expected to exceed 300 megawatts and result in more
than $450 million in additional renewable capital investment
• Announced goal to power more than 1 million electric vehicles by 2030
• Committed to achieving net-zero greenhouse gas emissions by 2050 for our
entire business, incorporating emissions from our natural gas system and including
customers and suppliers
Launched the MI Clean Air program to help customers offset their greenhouse
gas emissions from natural gas use
•
PROFIT
• Delivered adjusted earnings per share of $2.89 – at the high end of the guidance
range
Increased annual dividend to $1.95 for 2023 – 17th increase in as many years
Settled gas rate case with $170 million of rate relief
Settled electric rate case with $161 million of rate relief
•
•
•
• Achieved $58 million in operations and maintenance savings and $117 million in
capital cost savings by leveraging the CE Way
This completes another outstanding year for operational and financial performance,
and the successes achieved over the past year point to a strong outlook in 2023. Thank
you for your continued support.
Sincerely,
Garrick Rochow
President and CEO
This letter includes non-GAAP measures. Reconciliations to the most directly comparable GAAP measures
are found immediately following this letter and on our website at cmsenergy.com.
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CMS ENERGY CORPORATION
Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income
(Unaudited)
Net Income Available to Common Stockholders
Reconciling items:
Disposal of discontinued operations gain
Tax impact
Discontinued operations income
Tax impact
Other exclusions from adjusted earnings**
Tax impact
Loss on fleet impairment
Tax impact
Voluntary separation program
Tax impact
Adjusted net income – non-GAAP
Average Common Shares Outstanding - Diluted
Diluted Earnings Per Average Common Share
Reported net income per share
Reconciling items:
Disposal of discontinued operations gain
Tax impact
Discontinued operations income
Tax impact
Other exclusions from adjusted earnings**
Tax impact
Loss on fleet impairment
Tax impact
Voluntary separation program
Tax impact
In Millions, Except Per Share Amounts
Twelve Months Ended
12/31/22
12/31/21
$
827
$
1,348
$
$
(5)
1
-
-
8
(2)
-
-
12
(3)
838
290.0
2.85
(0.01)
*
-
-
0.03
(0.01)
-
-
0.04
(0.01)
$
$
(657)
143
(115)
27
(1)
*
29
(7)
-
-
767
289.5
4.66
(2.27)
0.49
(0.39)
0.09
(*)
*
0.10
(0.03)
-
-
2.65
Adjusted net income per share – non-GAAP
$
2.89
$
* Less than $0.5 million or $0.01 per share.
** Includes restructuring costs, business optimization initiative, and unrealized gains or losses from mark-to-market adjustments, recognized in net income related to NorthStar
Clean Energy's interest expense.
Management views adjusted (non-Generally Accepted Accounting Principles) earnings as a key measure of the company's present operating financial performance and uses
adjusted earnings for external communications with analysts and investors. Internally, the company uses adjusted earnings to measure and assess performance. Adjustments
could include items such as discontinued operations, asset sales, impairments, restructuring costs, business optimization initiative, changes in accounting principles, changes in
federal tax policy, regulatory items from prior years, unrealized gains or losses from mark-to-market adjustments, recognized in net income related to NorthStar Clean Energy’s
interest expense, or other items. The adjusted earnings should be considered supplemental information to assist in understanding our business results, rather than as a substitute
for the reported earnings.
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____to_____
Registrant; State of Incorporation; Address; and Telephone Number
Commission File Number
IRS Employer Identification No.
1-9513
1-5611
CMS ENERGY CORPORATION
(A Michigan Corporation)
One Energy Plaza, Jackson, Michigan 49201
(517) 788-0550
CONSUMERS ENERGY COMPANY
(A Michigan Corporation)
One Energy Plaza, Jackson, Michigan 49201
(517) 788-0550
38-2726431
38-0442310
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
CMS Energy Corporation Common Stock, $0.01 par value
CMS Energy Corporation 5.625% Junior Subordinated Notes due 2078
CMS Energy Corporation 5.875% Junior Subordinated Notes due 2078
CMS Energy Corporation 5.875% Junior Subordinated Notes due 2079
CMS Energy Corporation Depositary Shares, each representing a 1/1,000th interest in a share
of 4.200% Cumulative Redeemable Perpetual Preferred Stock, Series C
Consumers Energy Company Cumulative Preferred Stock, $100 par value: $4.50 Series
Securities registered pursuant to Section 12(g) of the Act:
None
Trading Symbol(s)
Name of each exchange on which registered
CMS
CMSA
CMSC
CMSD
CMS PRC
CMS-PB
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
CMS Energy Corporation:
Yes ☒
No ☐
Consumers Energy Company:
Yes ☒
No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
CMS Energy Corporation:
Yes ☐
No ☒
Consumers Energy Company:
Yes ☐
No ☒
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.
CMS Energy Corporation:
Consumers Energy Company:
Yes ☒
Yes ☒
No ☐
No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
CMS Energy Corporation:
Consumers Energy Company:
Yes ☒
Yes ☒
No ☐
No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See
the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
CMS Energy Corporation:
Consumers Energy Company:
Large accelerated filer
Non-accelerated filer
Accelerated filer
Smaller reporting company
Emerging growth company
☒
☐
☐
☐
☐
Large accelerated filer
Non-accelerated filer
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☒
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
CMS Energy Corporation:
Consumers Energy Company:
☐
☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under
Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
☒
CMS Energy Corporation:
Consumers Energy Company:
☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an
error to previously issued financial statements.
CMS Energy Corporation:
Consumers Energy Company:
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s
executive officers during the relevant recovery period pursuant to §240.10D-1(b).
CMS Energy Corporation:
Consumers Energy Company:
☐
☐
☐
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
CMS Energy Corporation:
Yes ☐
No ☒
Consumers Energy Company:
Yes ☐
No ☒
The aggregate market value of CMS Energy voting and non-voting common equity held by non-affiliates was $19.588 billion for the 290,193,601 CMS Energy Corporation Common Stock
shares outstanding on June 30, 2022 based on the closing sale price of $67.50 for CMS Energy Corporation Common Stock, as reported by the New York Stock Exchange on such date.
There were no shares of Consumers common equity held by non-affiliates as of June 30, 2022.
There were 291,264,195 shares of CMS Energy Corporation Common Stock outstanding on January 13, 2023. On January 13, 2023, CMS Energy held all 84,108,789 outstanding shares of
common stock of Consumers.
Documents incorporated by reference in Part III: CMS Energy’s and Consumers’ proxy statement relating to their 2023 Annual Meetings of Shareholders to be held May 5, 2023.
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CMS Energy Corporation
Consumers Energy Company
Annual Reports on Form 10-K to the Securities and Exchange
Commission for the Year Ended December 31, 2022
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Glossary ...............................................................................................................................................
Filing Format .......................................................................................................................................
Forward-Looking Statements and Information ...................................................................................
Part I ....................................................................................................................................................
Item 1.
Business .........................................................................................................................
Item 1A. Risk Factors ...................................................................................................................
Item 1B. Unresolved Staff Comments ..........................................................................................
Properties .......................................................................................................................
Item 2.
Legal Proceedings ..........................................................................................................
Item 3.
Mine Safety Disclosures ................................................................................................
Item 4.
Part II ...................................................................................................................................................
Item 5.
Item 6.
Item 7.
Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities .......................................................................................
Reserved ........................................................................................................................
Management’s Discussion and Analysis of Financial Condition and Results of
Operations ......................................................................................................................
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.......................................
Financial Statements and Supplementary Data .............................................................
Item 8.
Changes in and Disagreements with Accountants on Accounting and Financial
Item 9.
Disclosure ......................................................................................................................
Item 9A. Controls and Procedures ................................................................................................
Item 9B. Other Information ..........................................................................................................
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections...........................
Part III .................................................................................................................................................
Item 10. Directors, Executive Officers and Corporate Governance ............................................
Executive Compensation ...............................................................................................
Item 11.
Security Ownership of Certain Beneficial Owners and Management and Related
Item 12.
Stockholder Matters .......................................................................................................
Item 13. Certain Relationships and Related Transactions, and Director Independence ..............
Principal Accountant Fees and Services ........................................................................
Item 14.
Part IV .................................................................................................................................................
Exhibits and Financial Statement Schedules .................................................................
Form 10-K Summary .....................................................................................................
Signatures ............................................................................................................................................
Item 15.
Item 16.
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12
16
16
37
47
47
48
48
48
48
50
50
86
87
183
183
185
185
185
185
186
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Glossary
Certain terms used in the text and financial statements are defined below.
2016 Energy Law
Michigan’s Public Acts 341 and 342 of 2016
ABATE
Association of Businesses Advocating Tariff Equity
ABO
Accumulated benefit obligation; the liabilities of a pension plan based on service and pay to date, which
differs from the PBO in that it does not reflect expected future salary increases
AFUDC
Allowance for borrowed and equity funds used during construction
AOCI
Accumulated other comprehensive income (loss)
ARO
Asset retirement obligation
ASC 715
Financial Accounting Standards Board Accounting Standards Codification Topic 715, Retirement
Benefits
Aviator Wind
Aviator Wind Holdings, LLC, a VIE in which Aviator Wind Equity Holdings holds a Class B
membership interest
Aviator Wind Equity Holdings
Aviator Wind Equity Holdings, LLC, a VIE in which Grand River Wind has a 51-percent interest
Bay Harbor
A residential/commercial real estate area located near Petoskey, Michigan, in which CMS Energy sold
its interest in 2002
bcf
Billion cubic feet
CAO
Chief Accounting Officer
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CCR
Coal combustion residual
CEO
Chief Executive Officer
CERCLA
Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended
CFO
Chief Financial Officer
city-gate contract
An arrangement made for the point at which a local distribution company physically receives gas from a
supplier or pipeline
Clean Air Act
Federal Clean Air Act of 1963, as amended
Clean Energy Plan
Consumers’ long-term strategy for delivering clean, reliable, resilient, and affordable energy to its
customers through the increased use of energy efficiency and customer demand management programs,
additional renewable energy generation, and conservation voltage reduction
Clean Water Act
Federal Water Pollution Control Act of 1972, as amended
CMS Capital
CMS Capital, L.L.C., a wholly owned subsidiary of CMS Energy
CMS Energy
CMS Energy Corporation and its consolidated subsidiaries, unless otherwise noted; the parent of
Consumers, NorthStar Clean Energy, and, until October 1, 2021, EnerBank
CMS ERM
CMS Energy Resource Management Company, a wholly owned subsidiary of NorthStar Clean Energy
CMS Gas Transmission
CMS Gas Transmission Company, a wholly owned subsidiary of NorthStar Clean Energy
CMS Generation Michigan Power
CMS Generation Michigan Power L.L.C., a wholly owned subsidiary of HYDRA-CO
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CMS Land
CMS Land Company, a wholly owned subsidiary of CMS Capital, L.L.C., a wholly owned subsidiary of
CMS Energy
Consumers
Consumers Energy Company and its consolidated subsidiaries, unless otherwise noted; a wholly owned
subsidiary of CMS Energy
Consumers 2014 Securitization Funding
Consumers 2014 Securitization Funding LLC, a wholly owned consolidated bankruptcy-remote
subsidiary of Consumers and special-purpose entity organized for the sole purpose of purchasing and
owning securitization property, issuing securitization bonds, and pledging its interest in securitization
property to a trustee to collateralize the securitization bonds
COVID-19
Coronavirus disease 2019, a respiratory illness that was declared a pandemic in March 2020 and to
which public and private agencies initially responded by instituting social-distancing and other measures
designed to slow the spread of the disease
Craven
Craven County Wood Energy Limited Partnership, a VIE in which HYDRA-CO has a 50-percent
interest
CSAPR
Cross-State Air Pollution Rule of 2011, as amended
DB Pension Plan A
Defined benefit pension plan of CMS Energy and Consumers, including certain present and former
affiliates and subsidiaries, created as of December 31, 2017 for active employees who were covered
under the defined benefit pension plan that closed in 2005
DB Pension Plan B
Defined benefit pension plan of CMS Energy and Consumers, including certain present and former
affiliates and subsidiaries, amended as of December 31, 2017 to include only retired and former
employees who were covered under the defined benefit pension plan that closed in 2005
DB Pension Plans
Defined benefit pension plans of CMS Energy and Consumers, comprising DB Pension Plan A and
DB Pension Plan B
DB SERP
Defined Benefit Supplemental Executive Retirement Plan
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DCCP
Defined Company Contribution Plan
DC SERP
Defined Contribution Supplemental Executive Retirement Plan
DIG
Dearborn Industrial Generation, L.L.C., a wholly owned subsidiary of Dearborn Industrial
Energy, L.L.C., a wholly owned subsidiary of NorthStar Clean Energy
Dodd-Frank Act
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
DTE Electric
DTE Electric Company, a non-affiliated company
EGLE
Michigan Department of Environment, Great Lakes, and Energy
EnerBank
EnerBank USA, until October 1, 2021, a wholly owned subsidiary of CMS Capital; on October 1, 2021,
EnerBank was acquired by Regions Bank
energy waste reduction
The reduction of energy consumption through energy efficiency and demand-side energy conservation,
as established under the 2016 Energy Law
EPA
U.S. Environmental Protection Agency
EPS
Earnings per share
ERCOT
Electric Reliability Council of Texas
Exchange Act
Securities Exchange Act of 1934
FERC
Federal Energy Regulatory Commission
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First Mortgage Bond Indenture
Indenture dated as of September 1, 1945 between Consumers and The Bank of New York Mellon, as
Trustee, as amended and supplemented
FTR
Financial transmission right
GAAP
U.S. Generally Accepted Accounting Principles
GCC
Gas Customer Choice, which allows gas customers to purchase gas from alternative suppliers
GCR
Gas cost recovery
Genesee
Genesee Power Station Limited Partnership, a VIE in which HYDRA-CO has a 50-percent interest
Grand River Wind
Grand River Wind, LLC, a wholly owned subsidiary of NorthStar Clean Energy
Grayling
Grayling Generating Station Limited Partnership, a VIE in which HYDRA-CO has a 50-percent interest
GWh
Gigawatt-hour, a unit of energy equal to one billion watt-hours
HYDRA-CO
HYDRA-CO Enterprises, Inc., a wholly owned subsidiary of NorthStar Clean Energy
Internal Revenue Code
Internal Revenue Code of 1986, as amended
IRP
Integrated resource plan
IRS
Internal Revenue Service
kV
Thousand volts, a unit used to measure the difference in electrical pressure along a current
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kVA
Thousand volt-amperes, a unit used to reflect the electrical power capacity rating of equipment or a
system
kWh
Kilowatt-hour, a unit of energy equal to one thousand watt-hours
LIBOR
London Interbank Offered Rate
Ludington
Ludington pumped-storage plant, jointly owned by Consumers and DTE Electric
MATS
Mercury and Air Toxics Standards, which limit mercury, acid gases, and other toxic pollution from
coal-fueled and oil-fueled power plants
MCV Facility
A 1,647-MW natural gas-fueled, combined-cycle cogeneration facility operated by the MCV Partnership
MCV Partnership
Midland Cogeneration Venture Limited Partnership, a non-affiliated company
MCV PPA
PPA between Consumers and the MCV Partnership
METC
Michigan Electric Transmission Company, LLC, a non-affiliated company
MGP
Manufactured gas plant
MISO
Midcontinent Independent System Operator, Inc.
mothball
To place a generating unit into a state of extended reserve shutdown in which the unit is inactive and
unavailable for service for a specified period, during which the unit can be brought back into service
after receiving appropriate notification and completing any necessary maintenance or other work;
generation owners in MISO must request approval to mothball a unit, and MISO then evaluates the
request for reliability impacts
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MPSC
Michigan Public Service Commission
MRV
Market-related value of plan assets
MW
Megawatt, a unit of power equal to one million watts
MWh
Megawatt-hour, a unit of energy equal to one million watt-hours
NAAQS
National Ambient Air Quality Standards
NERC
North American Electric Reliability Corporation, a non-affiliated company responsible for developing
and enforcing reliability standards, monitoring the bulk power system, and educating and certifying
industry personnel
New Covert Generating Facility
A 1,176-MW natural gas-fueled generating unit that is expected to be acquired by Consumers in
May 2023 and is presently operated by New Covert Generating Company, LLC, a non-affiliated
NorthStar Clean Energy
NorthStar Clean Energy Company, a wholly owned subsidiary of CMS Energy, formerly known as
CMS Enterprises Company
NPDES
National Pollutant Discharge Elimination System, a permit system for regulating point sources of
pollution under the Clean Water Act
NREPA
Part 201 of Michigan’s Natural Resources and Environmental Protection Act of 1994, as amended
NWO Holdco
NWO Holdco, L.L.C., a VIE in which NWO Holdco I, LLC, a wholly owned subsidiary of Grand River
Wind, holds a Class B membership interest
OPEB
Other Post-Employment Benefits
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OPEB Plan
Postretirement health care and life insurance plans of CMS Energy and Consumers, including certain
present and former affiliates and subsidiaries
OSHA
Occupational Safety and Health Administration
PBO
Projected benefit obligation
PCB
Polychlorinated biphenyl
PFAS
Per- and polyfluoroalkyl substances
PISP
Performance Incentive Stock Plan
PJM
PJM Interconnection Inc.
PPA
Power purchase agreement
PSCR
Power supply cost recovery
PURPA
Public Utility Regulatory Policies Act of 1978
RCRA
Federal Resource Conservation and Recovery Act of 1976
REC
Renewable energy credit
Regions Bank
A subsidiary of Regions Financial Corporation, a non-affiliated company
ROA
Retail Open Access, which allows electric generation customers to choose alternative electric suppliers
pursuant to Michigan’s Public Acts 141 and 142 of 2000, as amended
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S&P
Standard & Poor’s Financial Services LLC
SEC
U.S. Securities and Exchange Commission
securitization
A financing method authorized by statute and approved by the MPSC which allows a utility to sell its
right to receive a portion of the rate payments received from its customers for the repayment of
securitization bonds issued by a special-purpose entity affiliated with such utility
Series C preferred stock
CMS Energy 4.200 percent cumulative redeemable perpetual preferred stock, Series C, with a
liquidation value of $25,000 per share
SOFR
Secured overnight financing rate calculated and published by the Federal Reserve Bank of New York
and selected as the recommended alternative to replace LIBOR for dollar-denominated financial
contracts by the Alternative Reference Rates Committee
TAES
Toshiba America Energy Systems Corporation, a non-affiliated company
TCJA
Tax Cuts and Jobs Act of 2017
Term SOFR
The rate per annum that is a forward-looking term rate based on SOFR
T.E.S. Filer City
T.E.S. Filer City Station Limited Partnership, a VIE in which HYDRA-CO has a 50-percent interest
USW
United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers
International Union, AFL-CIO-CLC
UWUA
Utility Workers Union of America, AFL-CIO
VEBA trust
Voluntary employees’ beneficiary association trusts accounts established specifically to set aside
employer-contributed assets to pay for future expenses of the OPEB Plan
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VIE
Variable interest entity
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Filing Format
This combined Form 10-K is separately filed by CMS Energy and Consumers. Information in this
combined Form 10-K relating to each individual registrant is filed by such registrant on its own behalf.
Consumers makes no representation regarding information relating to any other companies affiliated with
CMS Energy other than its own subsidiaries.
CMS Energy is the parent holding company of several subsidiaries, including Consumers and NorthStar
Clean Energy (formerly known as CMS Enterprises Company). None of CMS Energy, NorthStar Clean
Energy, nor any of CMS Energy’s other subsidiaries (other than Consumers) has any obligation in respect
of Consumers’ debt securities or preferred stock and holders of such securities should not consider the
financial resources or results of operations of CMS Energy, NorthStar Clean Energy, nor any of
CMS Energy’s other subsidiaries (other than Consumers and its own subsidiaries (in relevant
circumstances)) in making a decision with respect to Consumers’ debt securities or preferred stock.
Similarly, neither Consumers nor any other subsidiary of CMS Energy has any obligation in respect of
securities of CMS Energy.
Forward-Looking Statements and Information
This Form 10-K and other CMS Energy and Consumers disclosures may contain forward-looking
statements as defined by the Private Securities Litigation Reform Act of 1995. The use of “might,”
“may,” “could,” “should,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,”
“projects,” “forecasts,” “predicts,” “assumes,” and other similar words is intended to identify forward-
looking statements that involve risk and uncertainty. This discussion of potential risks and uncertainties is
designed to highlight important factors that may impact CMS Energy’s and Consumers’ businesses and
financial outlook. CMS Energy and Consumers have no obligation to update or revise forward-looking
statements regardless of whether new information, future events, or any other factors affect the
information contained in the statements. These forward-looking statements are subject to various factors
that could cause CMS Energy’s and Consumers’ actual results to differ materially from the results
anticipated in these statements. These factors include, but are not limited to, the following, all of which
are potentially significant:
•
•
•
•
the impact and effect of recent events, such as the war in Ukraine, the COVID-19 pandemic, and
the responses to these events, and related economic disruptions including, but not limited to, labor
shortages, inflation, and supply chain disruptions, all of which could impact CMS Energy’s and
Consumers’ workforce, operations, revenues, expenses, uncollectible accounts, energy efficiency
programs, postretirement benefits funding, PSCR and GCR costs, capital investment programs,
cash flows, liquidity, maintenance of existing assets, and other operating expenses
the impact of new regulation by the MPSC, FERC, and other applicable governmental
proceedings and regulations, including any associated impact on electric or gas rates or rate
structures
potentially adverse regulatory treatment or failure to receive timely regulatory orders affecting
Consumers that are or could come before the MPSC, FERC, or other governmental authorities
changes in the performance of or regulations applicable to MISO, METC, pipelines, railroads,
vessels, or other service providers that CMS Energy, Consumers, or any of their affiliates rely on
to serve their customers
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•
•
•
•
•
•
•
•
•
•
the adoption of or challenges to federal or state laws or regulations or changes in applicable laws,
rules, regulations, principles, or practices, or in their interpretation, such as those related to
energy policy, ROA, PURPA, infrastructure integrity or security, cybersecurity, gas pipeline
safety, gas pipeline capacity, energy waste reduction, the environment, regulation or deregulation,
reliability, health care reforms (including comprehensive health care reform enacted in 2010),
taxes, accounting matters, climate change, air emissions, renewable energy, the Dodd-Frank Act,
and other business issues that could have an impact on CMS Energy’s, Consumers’, or any of
their affiliates’ businesses or financial results
factors affecting operations, such as costs and availability of personnel, equipment, and materials;
weather and climate conditions; natural disasters; catastrophic weather-related damage; scheduled
or unscheduled equipment outages; maintenance or repairs; contractor performance;
environmental incidents; failures of equipment or materials; electric transmission and distribution
or gas pipeline system constraints; interconnection requirements; political and social unrest;
general strikes; the government and/or paramilitary response to political or social events; and
changes in trade policies or regulations
increased frequency or intensity of storms and other adverse weather events due to climate
change that could negatively impact infrastructure owned by CMS Energy or Consumers
the ability of CMS Energy and Consumers to execute cost-reduction strategies
potentially adverse regulatory or legal interpretations or decisions regarding environmental
matters, or delayed regulatory treatment or permitting decisions that are or could come before
agencies such as EGLE, the EPA, FERC, and/or the U.S. Army Corps of Engineers, and potential
environmental remediation costs associated with these interpretations or decisions, including
those that may affect Consumers’ coal ash management or routine maintenance, repair, and
replacement classification under New Source Review, a construction-permitting program under
the Clean Air Act
changes in energy markets, including availability, price, and seasonality of electric capacity and
the timing and extent of changes in commodity prices and availability and deliverability of coal,
natural gas, natural gas liquids, electricity, oil, gasoline, diesel fuel, and certain related products
the price of CMS Energy common stock, the credit ratings of CMS Energy and Consumers,
capital and financial market conditions, and the effect of these market conditions on
CMS Energy’s and Consumers’ interest costs and access to the capital markets, including
availability of financing to CMS Energy, Consumers, or any of their affiliates
the potential effects on the credit and capital markets of the transition from LIBOR to an
alternative reference interest rate, including SOFR, which may perform differently than LIBOR
and could result in increased interest rate expense
the investment performance of the assets of CMS Energy’s and Consumers’ pension and benefit
plans, the discount rates, mortality assumptions, and future medical costs used in calculating the
plans’ obligations, and the resulting impact on future funding requirements
the impact of the economy, particularly in Michigan, and potential future volatility in the
financial and credit markets on CMS Energy’s, Consumers’, or any of their affiliates’ revenues,
ability to collect accounts receivable from customers, or cost and availability of capital
13
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•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
changes in the economic and financial viability of CMS Energy’s and Consumers’ suppliers,
customers, and other counterparties and the continued ability of these third parties, including
those in bankruptcy, to meet their obligations to CMS Energy and Consumers
population changes in the geographic areas where CMS Energy and Consumers conduct business
national, regional, and local economic, competitive, and regulatory policies, conditions, and
developments
loss of customer demand for electric generation supply to alternative electric suppliers, increased
use of self-generation including distributed generation, energy waste reduction, or energy storage
loss of customer demand for natural gas due to alternative technologies or fuels
restricted ability to construct natural gas infrastructure due to environmental regulations or other
governmental action
ability of Consumers to meet increased renewable energy demand due to customers seeking to
meet their own sustainability goals in a timely and cost-efficient manner
the reputational or other impact on CMS Energy and Consumers of the failure to achieve
greenhouse gas reduction goals related to reducing their impact on climate change
adverse consequences of employee, director, or third-party fraud or non-compliance with codes
of conduct or with laws or regulations
federal regulation of electric sales, including periodic re-examination by federal regulators of
CMS Energy’s and Consumers’ market-based sales authorizations
any event, change, development, occurrence, or circumstance that could impact the
implementation of the 2021 IRP, including any action by a regulatory authority or other third
party to prohibit, delay, or impair the implementation of the 2021 IRP
the availability, cost, coverage, and terms of insurance, the stability of insurance providers, and
the ability of Consumers to recover the costs of any insurance from customers
the effectiveness of CMS Energy’s and Consumers’ risk management policies, procedures, and
strategies, including strategies to hedge risk related to interest rates and future prices of
electricity, natural gas, and other energy-related commodities
factors affecting development of electric generation projects, gas transmission, and gas and
electric distribution infrastructure replacement, conversion, and expansion projects, including
factors related to project site identification, construction material pricing, schedule delays,
availability of qualified construction personnel, permitting, acquisition of property rights,
community opposition, and government approvals
potential disruption to, interruption of, or other impacts on facilities, utility infrastructure,
operations, or backup systems due to accidents, explosions, physical disasters, global pandemics,
cyber incidents, civil unrest, vandalism, war, or terrorism, and the ability to obtain or maintain
insurance coverage for these events
changes or disruption in fuel supply, including but not limited to supplier bankruptcy and delivery
disruptions
14
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•
•
•
•
•
•
•
•
•
•
•
•
potential costs, lost revenues, reputational harm, or other consequences resulting from
misappropriation of assets or sensitive information, corruption of data, or operational disruption
in connection with a cyberattack or other cyber incident
potential disruption to, interruption or failure of, or other impacts on information technology
backup or disaster recovery systems
technological developments in energy production, storage, delivery, usage, and metering
the ability to implement technology successfully
the impact of CMS Energy’s and Consumers’ integrated business software system and its effects
on their operations, including utility customer billing and collections
adverse consequences resulting from any past, present, or future assertion of indemnity or
warranty claims associated with assets and businesses previously owned by CMS Energy or
Consumers, including claims resulting from attempts by foreign or domestic governments to
assess taxes on or to impose environmental liability associated with past operations or
transactions
the outcome, cost, and other effects of any legal or administrative claims, proceedings,
investigations, or settlements
the reputational impact on CMS Energy and Consumers of operational incidents, violations of
corporate policies, regulatory violations, inappropriate use of social media, and other events
restrictions imposed by various financing arrangements and regulatory requirements on the ability
of Consumers and other subsidiaries of CMS Energy to transfer funds to CMS Energy in the form
of cash dividends, loans, or advances
earnings volatility resulting from the application of fair value accounting to certain energy
commodity contracts or interest rate contracts
changes in financial or regulatory accounting principles or policies (e.g., the adoption of the
hypothetical liquidation at book value method of accounting for certain non-regulated renewable
energy projects)
other matters that may be disclosed from time to time in CMS Energy’s and Consumers’ SEC
filings, or in other public documents
All forward-looking statements should be considered in the context of the risk and other factors described
above and as detailed from time to time in CMS Energy’s and Consumers’ SEC filings. For additional
details regarding these and other uncertainties, see Item 1A. Risk Factors; Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations—Outlook; and Item 8.
Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 2,
Regulatory Matters and Note 3, Contingencies and Commitments.
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Table of Contents
Part I
Item 1. Business
General
CMS Energy
CMS Energy was formed as a corporation in Michigan in 1987 and is an energy company operating
primarily in Michigan. It is the parent holding company of several subsidiaries, including Consumers, an
electric and gas utility, and NorthStar Clean Energy (formerly known as CMS Enterprises Company),
primarily a domestic independent power producer and marketer. Consumers serves individuals and
businesses operating in the alternative energy, automotive, chemical, food, and metal products industries,
as well as a diversified group of other industries. NorthStar Clean Energy, through its subsidiaries and
equity investments, is engaged in domestic independent power production, including the development and
operation of renewable generation, and the marketing of independent power production.
CMS Energy manages its businesses by the nature of services each provides, and operates principally in
three business segments: electric utility; gas utility; and NorthStar Clean Energy, its non-utility operations
and investments. Consumers’ consolidated operations account for the substantial majority of
CMS Energy’s total assets, income, and operating revenue. CMS Energy’s consolidated operating
revenue was $8.6 billion in 2022, $7.3 billion in 2021, and $6.4 billion in 2020.
For further information about operating revenue, income, and assets and liabilities attributable to all of
CMS Energy’s business segments and operations, see Item 8. Financial Statements and Supplementary
Data—CMS Energy Consolidated Financial Statements and Notes to the Consolidated Financial
Statements.
Consumers
Consumers has served Michigan customers since 1886. Consumers was incorporated in Maine in 1910
and became a Michigan corporation in 1968. Consumers owns and operates electric generation and
distribution facilities and gas transmission, storage, and distribution facilities. It provides electricity and/
or natural gas to 6.7 million of Michigan’s 10 million residents. Consumers’ rates and certain other
aspects of its business are subject to the jurisdiction of the MPSC and FERC, as well as to NERC
reliability standards, as described in Item 1. Business—CMS Energy and Consumers Regulation.
Consumers’ consolidated operating revenue was $8.2 billion in 2022, $7.0 billion in 2021, and
$6.2 billion in 2020. For further information about operating revenue, income, and assets and liabilities
attributable to Consumers’ electric and gas utility operations, see Item 8. Financial Statements and
Supplementary Data—Consumers Consolidated Financial Statements and Notes to the Consolidated
Financial Statements.
Consumers owns its principal properties in fee, except that most electric lines, gas mains, and renewable
generation projects are located below or adjacent to public roads or on land owned by others and are
accessed by Consumers through easements, leases, and other rights. Almost all of Consumers’ properties
are subject to the lien of its First Mortgage Bond Indenture. For additional information on Consumers’
properties, see Item 1. Business—Business Segments—Consumers Electric Utility—Electric Utility
Properties and Business Segments—Consumers Gas Utility—Gas Utility Properties.
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Table of Contents
In 2022, Consumers served 1.9 million electric customers and 1.8 million gas customers in Michigan’s
Lower Peninsula. Presented in the following map are Consumers’ service territories:
Electric service territory
Gas service territory
Combination electric and
gas service territory
• Electric generation and battery
storage facilities
CMS Energy and Consumers—The Triple Bottom Line
For information regarding CMS Energy’s and Consumers’ purpose and impact on the “triple bottom line”
of people, planet, and profit, see Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations—Executive Overview.
Business Segments
Consumers Electric Utility
Electric Utility Operations: Consumers’ electric utility operations, which include the generation,
purchase, distribution, and sale of electricity, generated operating revenue of $5.4 billion in 2022,
$5.0 billion in 2021, and $4.4 billion in 2020. Consumers’ electric utility customer base consists of a mix
of primarily residential, commercial, and diversified industrial customers in Michigan’s Lower Peninsula.
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Table of Contents
Presented in the following illustration is Consumers’ 2022 electric utility operating revenue of
$5.4 billion by customer class:
Consumers’ electric utility operations are not dependent on a single customer, or even a few customers,
and the loss of any one or even a few of Consumers’ largest customers is not reasonably likely to have a
material adverse effect on Consumers’ financial condition.
In 2022, Consumers’ electric deliveries were 37 billion kWh, which included ROA deliveries of
three billion kWh, resulting in net bundled sales of 34 billion kWh. In 2021, Consumers’ electric
deliveries were 36 billion kWh, which included ROA deliveries of three billion kWh, resulting in net
bundled sales of 33 billion kWh.
Consumers’ electric utility operations are seasonal. The consumption of electric energy typically
increases in the summer months, due primarily to the use of air conditioners and other cooling equipment.
18
Residential: 46%Commercial: 32%Industrial: 15%Other: 7% Table of Contents
Presented in the following illustration are Consumers’ monthly weather-normalized electric deliveries
(deliveries adjusted to reflect normal weather conditions) to its customers, including ROA deliveries,
during 2022 and 2021:
Consumers’ 2022 summer peak demand was 8,061 MW, which included ROA demand of 532 MW. For
the 2021-2022 winter season, Consumers’ peak demand was 5,559 MW, which included ROA demand of
447 MW. As required by MISO reserve margin requirements, Consumers owns or controls, through long-
term PPAs and short-term capacity purchases, all of the capacity required to supply its projected firm
peak load and necessary reserve margin for summer 2023.
Electric Utility Properties: Consumers owns and operates electric generation and distribution facilities.
For details about Consumers’ electric generation facilities, see the Electric Utility Generation and Supply
Mix section that follows this Electric Utility Properties section. Consumers’ distribution system consists
of:
•
•
•
•
•
•
•
•
212 miles of high-voltage distribution overhead lines operating at 138 kV
four miles of high-voltage distribution underground lines operating at 138 kV
4,430 miles of high-voltage distribution overhead lines operating at 46 kV and 69 kV
19 miles of high-voltage distribution underground lines operating at 46 kV
82,326 miles of electric distribution overhead lines
9,501 miles of underground distribution lines
1,093 substations with an aggregate transformer capacity of 27 million kVA
three battery facilities with storage capacity of 2 MWh
Consumers is interconnected to the interstate high-voltage electric transmission system owned by METC
and operated by MISO. Consumers is also interconnected to neighboring utilities and to other
transmission systems.
19
Total GWh per Month20212022JanuaryFebruaryMarchAprilMayJuneJulyAugustSeptemberOctoberNovemberDecember05001,0001,5002,0002,5003,0003,5004,000 Table of Contents
Electric Utility Generation and Supply Mix: Consumers’ Clean Energy Plan details its strategy to meet
customers’ long-term energy needs and provides the foundation for its goal to achieve net-zero carbon
emissions from its electric business by 2040. This goal includes not only emissions from owned
generation, but also emissions from the generation of power purchased through long-term PPAs and from
the MISO energy market.
In June 2022, Consumers received approval of its 2021 IRP, which updated its Clean Energy Plan. With
these updates, Consumers expects to meet 90 percent of its customers’ needs with clean energy sources
by 2040 through execution of its plan, which calls for replacing its coal-fueled generation predominantly
with investment in renewable energy. New technologies and carbon offset measures including, but not
limited to, carbon sequestration, methane emission capture, forest preservation, and reforestation may be
used to close the gap to achieving net-zero carbon emissions. Specifically, the Clean Energy Plan
provides for the retirement of the D.E. Karn coal-fueled generating units in 2023 and the J.H. Campbell
coal-fueled generating units in 2025. For further information on Consumers’ progress towards its net-zero
carbon emissions goal, see Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations—Executive Overview.
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Presented in the following table are details about Consumers’ 2022 electric generation and supply mix:
Name and Location (Michigan)
Coal steam generation
J.H. Campbell 1 & 2 – West Olive2
J.H. Campbell 3 – West Olive2,3
D.E. Karn 1 & 2 – Essexville4
Oil/Gas steam generation
D.E. Karn 3 & 4 – Essexville
Hydroelectric
Ludington – Ludington
Conventional hydro generation
Gas combined cycle
Jackson – Jackson
Zeeland – Zeeland
Gas combustion turbines
Zeeland (simple cycle) – Zeeland
Wind generation
Number of Units and
Year Entered Service
2 Units, 1962-1967
1 Unit, 1980
2 Units, 1959-1961
2022
Generation
Capacity
(MW)
1
610
785
489
1,884
2022
Electric
Supply
(GWh)
2,869
4,449
2,899
10,217
2 Units, 1975-1977
1,213
167
6 Units, 1973
35 Units, 1906-1949
1 Unit, 2002
3 Units, 2002
1,109 5
78
1,187
535
533
1,068
(370) 6
381
11
2,205
3,456
5,661
2 Units, 2001
317
860
Cross Winds® Energy Park – Tuscola County
Lake Winds® Energy Park – Mason County
Gratiot Farms Wind Project – Gratiot County
Crescent Wind Farm – Hillsdale County
Solar generation
Solar Gardens – Allendale, Cadillac, and Kalamazoo
Total owned generation
Purchased power7
114 Turbines,
2014, 2018, and 2019
56 Turbines, 2012
60 Turbines, 2020
60 Turbines, 2021
16,852 Panels,
2016-2021
Coal generation – T.E.S. Filer City
Gas generation – MCV Facility8
Other gas generation
Nuclear generation9
Wind generation
Solar generation
Other renewable generation
Net interchange power10
Total purchased and interchange power
Total supply
Less distribution and transmission loss
Total net bundled sales
21
33
13
10
8
64
3
5,736
60
1,240
155
—
60
71
204
1,790
—
1,790
7,526
747
269
421
392
1,829
7
18,752
500
5,857
1,325
2,692
1,017
227
1,197
12,815
3,943
16,758
35,510
1,940
33,570
Table of Contents
1
2
3
4
5
6
7
8
9
Represents generation capacity during the summer months (planning year 2022 capacity as reported to
MISO and limited by interconnection service limits). For wind and solar generation, the amount represents
the effective load-carrying capability.
Consumers plans to retire these generating units in 2025.
Represents Consumers’ share of the capacity of the J.H. Campbell 3 unit, net of the 6.69-percent ownership
interest of the Michigan Public Power Agency and Wolverine Power Supply Cooperative, Inc, each a non-
affiliated company.
Consumers plans to retire these generating units in 2023.
Represents Consumers’ 51-percent share of the capacity of Ludington. DTE Electric holds the remaining
49-percent ownership interest.
Represents Consumers’ share of net pumped-storage generation. The pumped-storage facility consumes
electricity to pump water during off-peak hours for storage in order to generate electricity later during
peak-demand hours.
Represents purchases under long-term PPAs.
For information about Consumers’ long-term PPA related to the MCV Facility, see Item 8. Financial
Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 3,
Contingencies and Commitments—Contractual Commitments.
Represents purchases from a nuclear generating facility that closed in May 2022.
10 Represents purchases from the MISO energy market.
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Presented in the following table are the sources of Consumers’ electric supply for the last three years:
Years Ended December 31
Owned generation
Coal
Gas
Renewable energy
Oil
Net pumped storage1
Total owned generation
Purchased power2
Gas generation
Nuclear generation
Renewable energy generation
Coal generation
Net interchange power3
Total purchased and interchange power
Total supply
2022
2021
10,217
10,861
6,684
2,217
4
5,555
1,974
7
GWh
2020
7,960
5,883
1,505
6
(370)
(321)
(371)
18,752
18,076
14,983
7,182
2,692
2,441
500
3,943
5,862
6,901
2,408
494
645
7,346
6,898
2,225
513
2,655
16,758
16,310
19,637
35,510
34,386
34,620
1
2
3
Represents Consumers’ share of net pumped-storage generation. During 2022, the pumped-storage facility
consumed 1,339 GWh of electricity to pump water during off-peak hours for storage in order to generate
969 GWh of electricity later during peak-demand hours.
Represents purchases under long-term PPAs.
Represents purchases from the MISO energy market.
During 2022, Consumers acquired 47 percent of the electricity it provided to customers through long-term
PPAs and the MISO energy market. Consumers offers its generation into the MISO energy market on a
day-ahead and real-time basis and bids for power in the market to serve the demand of its customers.
Consumers is a net purchaser of power and supplements its generation capability with purchases from the
MISO energy market.
At December 31, 2022, Consumers had future commitments to purchase capacity and energy under long-
term PPAs with various generating plants. These contracts require monthly capacity payments based on
the plants’ availability or deliverability. The payments for 2023 through 2050 are estimated to total
$8.5 billion and, for each of the next five years, range from $0.7 billion to $0.8 billion annually. These
amounts may vary depending on plant availability and fuel costs. For further information about
Consumers’ future capacity and energy purchase obligations, see Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations—Capital Resources and Liquidity—Other
Material Cash Requirements and Item 8. Financial Statements and Supplementary Data—Notes to the
Consolidated Financial Statements—Note 3, Contingencies and Commitments—Contractual
Commitments.
During 2022, 29 percent of the energy Consumers provided to customers was generated by its coal-fueled
generating units, which burned six million tons of coal and produced a combined total of 10,217 GWh of
electricity. In order to obtain the coal it needs, Consumers enters into physical coal supply contracts.
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At December 31, 2022, Consumers had future commitments to purchase coal through 2024; payment
obligations under these contracts totaled $104 million. Most of Consumers’ rail-supplied coal contracts
have fixed prices, although some contain market-based pricing. At December 31, 2022, Consumers had
85 percent of its 2023 expected coal requirements under contract, as well as a 34-day supply of coal on
hand.
In conjunction with its coal supply contracts, Consumers leases a fleet of railcars and has transportation
contracts with various companies to provide rail services for delivery of purchased coal to Consumers’
generating facilities. Consumers’ coal transportation contracts are future commitments and expire on
various dates through 2025; payment obligations under these contracts totaled $428 million at
December 31, 2022.
During 2022, 19 percent of the energy Consumers provided to customers was generated by its natural
gas-fueled generating units, which burned 49 bcf of natural gas and produced a combined total of
6,684 GWh of electricity.
In order to obtain the gas it needs for electric generation fuel, Consumers’ electric utility purchases gas
from the market near the time of consumption, at prices that allow it to compete in the electric wholesale
market. For the Jackson and Zeeland plants, Consumers utilizes an agent that owns firm transportation
rights to each plant to purchase gas from the market and transport the gas to the facilities. For units 3 & 4
of D.E. Karn, Consumers holds gas transportation contracts to transport to the plant gas that Consumers
or an agent purchase from the market.
Electric Utility Competition: Consumers’ electric utility business is subject to actual and potential
competition from many sources, in both the wholesale and retail markets, as well as in electric generation,
electric delivery, and retail services.
Michigan law allows electric customers in Consumers’ service territory to buy electric generation service
from alternative electric suppliers in an aggregate amount capped at ten percent of Consumers’ sales, with
certain exceptions. At December 31, 2022, electric deliveries under the ROA program were at the
ten-percent limit. Of Consumers’ 1.9 million electric customers, fewer than 300, or 0.02 percent,
purchased electric generation service under the ROA program. For additional information, see Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook—
Consumers Electric Utility Outlook and Uncertainties.
Consumers also faces competition or potential competition associated with industrial customers relocating
all or a portion of their production capacity outside of Consumers’ service territory for economic reasons;
municipalities owning or operating competing electric delivery systems; and customer self-generation.
Consumers addresses this competition in various ways, including:
•
aggressively controlling operating, maintenance, and fuel costs and passing savings on to
customers
providing renewable energy options and energy waste reduction programs
providing competitive rate-design options, particularly for large energy-intensive customers
offering tariff-based incentives that support economic development
•
•
•
• monitoring activity in adjacent geographical areas
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Table of Contents
Consumers Gas Utility
Gas Utility Operations: Consumers’ gas utility operations, which include the purchase, transmission,
storage, distribution, and sale of natural gas, generated operating revenue of $2.7 billion in 2022,
$2.1 billion in 2021, and $1.8 billion in 2020. Consumers’ gas utility customer base consists of a mix of
primarily residential, commercial, and diversified industrial customers in Michigan’s Lower Peninsula.
Presented in the following illustration is Consumers’ 2022 gas utility operating revenue of $2.7 billion by
customer class:
Consumers’ gas utility operations are not dependent on a single customer, or even a few customers, and
the loss of any one or even a few of Consumers’ largest customers is not reasonably likely to have a
material adverse effect on Consumers’ financial condition.
In 2022, deliveries of natural gas through Consumers’ pipeline and distribution network, including off-
system transportation deliveries, totaled 391 bcf, which included GCC deliveries of 34 bcf. In 2021,
deliveries of natural gas through Consumers’ pipeline and distribution network, including off-system
transportation deliveries, totaled 347 bcf, which included GCC deliveries of 33 bcf. Consumers’ gas
utility operations are seasonal. The consumption of natural gas increases in the winter, due primarily to
colder temperatures and the resulting use of natural gas as heating fuel. Consumers injects natural gas into
storage during the summer months for use during the winter months. During 2022, 48 percent of the
natural gas supplied to all customers during the winter months was supplied from storage.
25
Residential 62%GCC: 14%Commercial: 16%Industrial: 4%Other: 4% Table of Contents
Presented in the following illustration are Consumers’ monthly weather-normalized natural gas deliveries
(deliveries adjusted to reflect normal weather conditions) to its customers, including GCC deliveries,
during 2022 and 2021:
Gas Utility Properties: Consumers’ gas transmission, storage, and distribution system consists of:
•
•
•
•
2,380 miles of transmission lines
15 gas storage fields with a total storage capacity of 309 bcf and a working gas volume of 151 bcf
28,170 miles of distribution mains
eight compressor stations with a total of 157,893 installed and available horsepower
Under its Methane Reduction Plan, Consumers has set a goal of net-zero methane emissions from its
natural gas delivery system by 2030. Consumers plans to reduce methane emissions from its system by
about 80 percent by accelerating the replacement of aging pipe, rehabilitating or retiring outdated
infrastructure, and adopting new technologies and practices. The remaining emissions will likely be offset
by purchasing and/or producing renewable natural gas. For further information on Consumers’ progress
towards its net-zero methane emissions goal, see Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations—Executive Overview.
26
Total bcf per Month20212022JanuaryFebruaryMarchAprilMayJuneJulyAugustSeptemberOctoberNovemberDecember0102030405060 Table of Contents
Gas Utility Supply: In 2022, Consumers purchased 86 percent of the gas it delivered from U.S. suppliers.
The remaining 14 percent was purchased from authorized GCC suppliers and delivered by Consumers to
customers in the GCC program. Presented in the following illustration are the supply arrangements for the
gas Consumers delivered to GCC and GCR customers during 2022:
Firm gas transportation or firm city-gate contracts are those that define a fixed amount, price, and delivery
time frame. Consumers’ firm gas transportation contracts are with Panhandle Eastern Pipe Line Company
and Trunkline Gas Company, LLC, each a non-affiliated company. Under these contracts, Consumers
purchases and transports gas to Michigan for ultimate delivery to its customers. Consumers’ firm gas
transportation contracts expire on various dates through 2024 with planned contract volumes providing
38 percent of Consumers’ total forecasted gas supply requirements for 2023. Consumers purchases the
balance of its required gas supply under firm city-gate contracts and through authorized suppliers under
the GCC program.
Gas Utility Competition: Competition exists in various aspects of Consumers’ gas utility business.
Competition comes from GCC and transportation programs; system bypass opportunities for new and
existing customers; and from alternative fuels and energy sources, such as propane, oil, and electricity.
27
GCR firm city-gate contracts:52%GCR firm gas transportation contracts: 34%GCC suppliers: 14% Table of Contents
NorthStar Clean Energy—Non-Utility Operations and Investments
NorthStar Clean Energy, through various subsidiaries and certain equity investments, is engaged in
domestic independent power production, including the development and operation of renewable
generation, and the marketing of independent power production. NorthStar Clean Energy’s operating
revenue was $445 million in 2022, $308 million in 2021, and $229 million in 2020.
Independent Power Production: Presented in the following table is information about the independent
power plants in which CMS Energy had an ownership interest at December 31, 2022:
Location
Dearborn, Michigan
Gaylord, Michigan
Paulding County, Ohio
Comstock, Michigan
Delta Township, Michigan
Phillips, Wisconsin
Paulding County, Ohio
Coke County, Texas
Filer City, Michigan
New Bern, North Carolina
Flint, Michigan
Grayling, Michigan
Total
1
Ownership
Interest
(%)
Primary Fuel Type
Gross Capacity
(MW)
1
100
100
100
100
100
100
100
51
50
50
50
50
Natural gas
Natural gas
Wind
Natural gas
Solar
Solar
Solar and storage
Wind
Coal
Wood waste
Wood waste
Wood waste
770
134
100
76
24
3
3
525
73
50
40
38
1,836
2022 Net
Generation
(GWh)
4,786
14
317
111
40
5
2
1,894
498
291
163
219
8,340
Represents the intended full-load sustained output of each plant. The amount of capacity relating to
CMS Energy’s ownership interest was 1,478 MW and net generation relating to CMS Energy’s ownership
interest was 6,826 GWh at December 31, 2022.
The operating revenue from independent power production was $58 million in 2022, $48 million in 2021,
and $32 million in 2020.
Energy Resource Management: CMS ERM purchases and sells energy commodities in support of
CMS Energy’s generating facilities with a focus on optimizing CMS Energy’s independent power
production portfolio. In 2022, CMS ERM marketed two bcf of natural gas and 6,494 GWh of electricity.
Electricity marketed by CMS ERM was generated by independent power production of NorthStar Clean
Energy and by unrelated third parties. CMS ERM’s operating revenue was $387 million in 2022,
$260 million in 2021, and $197 million in 2020.
NorthStar Clean Energy Competition: NorthStar Clean Energy competes with other independent
power producers. The needs of this market are driven by electric demand and the generation available.
28
Table of Contents
CMS Energy and Consumers Regulation
CMS Energy, Consumers, and their subsidiaries are subject to regulation by various federal, state, and
local governmental agencies, including those described in the following sections. If CMS Energy or
Consumers failed to comply with applicable laws and regulations, they could become subject to fines,
penalties, or disallowed costs, or be required to implement additional compliance, cleanup, or remediation
programs, the cost of which could be material. For more information on the potential impacts of
government regulation affecting CMS Energy and Consumers, see Item 1A. Risk Factors, Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook, and
Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—
Note 2, Regulatory Matters.
FERC and NERC
FERC has exercised limited jurisdiction over several independent power plants and exempt wholesale
generators in which NorthStar Clean Energy has ownership interests, as well as over CMS ERM,
CMS Gas Transmission, and DIG. FERC’s jurisdiction includes, among other things, acquisitions,
operations, disposals of certain assets and facilities, services provided and rates charged, and conduct
among affiliates. FERC also has limited jurisdiction over holding company matters with respect to
CMS Energy. FERC, in connection with NERC and with regional reliability organizations, also regulates
generation and transmission owners and operators, load serving entities, purchase and sale entities, and
others with regard to reliability of the bulk power system.
FERC regulates limited aspects of Consumers’ gas business, principally compliance with FERC capacity
release rules, shipping rules, the prohibition against certain buy/sell transactions, and the price-reporting
rule.
FERC also regulates certain aspects of Consumers’ electric operations, including compliance with FERC
accounting rules, wholesale and transmission rates, operation of licensed hydroelectric generating plants,
transfers of certain facilities, corporate mergers, and issuances of securities.
MPSC
Consumers is subject to the jurisdiction of the MPSC, which regulates public utilities in Michigan with
respect to retail utility rates, accounting, utility services, certain facilities, certain asset transfers, corporate
mergers, and other matters.
The Michigan Attorney General, ABATE, the MPSC Staff, residential customer advocacy groups,
environmental organizations, and certain other parties typically participate in MPSC proceedings
concerning Consumers. These parties often challenge various aspects of those proceedings, including the
prudence of Consumers’ policies and practices, and seek cost disallowances and other relief. The parties
also have appealed significant MPSC orders.
Rate Proceedings: For information regarding open rate proceedings, see Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations—Outlook and Item 8.
Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 2,
Regulatory Matters.
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Other Regulation
The U.S. Secretary of Energy regulates imports and exports of natural gas and has delegated various
aspects of this jurisdiction to FERC and the U.S. Department of Energy’s Office of Fossil Fuels.
The U.S. Department of Transportation’s Office of Pipeline Safety regulates the safety and security of gas
pipelines through the Natural Gas Pipeline Safety Act of 1968 and subsequent laws.
The Transportation Security Administration, an agency of the U.S. Department of Homeland Security,
regulates certain activities related to the safety and security of natural gas pipelines.
CMS Energy and Consumers Environmental Strategy and
Compliance
CMS Energy and Consumers are committed to protecting the environment; this commitment extends
beyond compliance with applicable laws and regulations. Consumers’ Clean Energy Plan details its
strategy to meet customers’ long-term energy needs and provides the foundation for its goal to achieve
net-zero carbon emissions from its electric business by 2040. This goal includes not only emissions from
owned generation, but also emissions from the generation of power purchased through long-term PPAs
and from the MISO energy market.
Consumers expects to meet 90 percent of its customers’ needs with clean energy sources by 2040 through
execution of its Clean Energy Plan, which calls for replacing its coal-fueled generation predominantly
with investment in renewable energy. New technologies and carbon offset measures including, but not
limited to, carbon sequestration, methane emission capture, forest preservation, and reforestation may be
used to close the gap to achieving net-zero carbon emissions.
In June 2022, Consumers received approval of its 2021 IRP, which updated its Clean Energy Plan. With
these updates, Consumers will eliminate the use of coal-fueled generation in 2025 and forecasts
renewable energy capacity levels of over 60 percent in 2040. For additional information on Consumers’
Clean Energy Plan, see Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations—Outlook—Consumers Electric Utility Outlook and Uncertainties.
In addition to Consumers’ efforts to reduce the electric utility’s carbon footprint, it is also making efforts
to reduce the gas utility’s methane footprint. Under its Methane Reduction Plan, Consumers has set a goal
of net-zero methane emissions from its natural gas delivery system by 2030. Consumers plans to reduce
methane emissions from its system by about 80 percent by accelerating the replacement of aging pipe,
rehabilitating or retiring outdated infrastructure, and adopting new technologies and practices. The
remaining emissions will likely be offset by purchasing and/or producing renewable natural gas. For
additional information on Consumers’ Methane Reduction Plan, see Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of Operations—Outlook—Consumers Gas Utility
Outlook and Uncertainties—Gas Environmental Outlook.
CMS Energy, Consumers, and their subsidiaries are subject to various federal, state, and local
environmental regulations for solid waste management, air and water quality, and other matters.
Consumers expects to recover costs to comply with environmental regulations in customer rates but
cannot guarantee this result. For additional information concerning environmental matters, see Item 1A.
Risk Factors, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Outlook, and Item 8. Financial Statements and Supplementary Data—Notes to the
Consolidated Financial Statements—Note 3, Contingencies and Commitments.
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CMS Energy has recorded a $45 million liability for its subsidiaries’ obligations associated with
Bay Harbor and Consumers has recorded a $62 million liability for its obligations at a number of former
MGP sites. For additional information, see Item 1A. Risk Factors and Item 8. Financial Statements and
Supplementary Data—Notes to the Consolidated Financial Statements—Note 3, Contingencies and
Commitments.
Costs related to the construction, operation, corrective action, and closure of solid waste disposal facilities
for coal ash are significant. Consumers’ coal ash disposal areas are regulated under Michigan’s solid
waste rules and by the EPA’s rules regulating CCRs. To address some of the requirements of these rules,
Consumers has converted all of its fly ash handling systems to dry systems. In addition, Consumers’ ash
facilities have programs designed to protect the environment and are subject to quarterly EGLE
inspections. Consumers’ estimate of capital and cost of removal expenditures to comply with regulations
relating to ash disposal is $205 million from 2023 through 2027. Consumers’ future costs to comply with
solid waste disposal regulations may vary depending on future legislation, litigation, executive orders,
treaties, or rulemaking.
For further information concerning estimated capital expenditures related to environmental matters, see
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—
Outlook—Consumers Electric Utility Outlook and Uncertainties—Electric Environmental Outlook.
Insurance
CMS Energy and its subsidiaries, including Consumers, maintain insurance coverage generally similar to
comparable companies in the same lines of business. The insurance policies are subject to terms,
conditions, limitations, and exclusions that might not fully compensate CMS Energy or Consumers for all
losses. A portion of each loss is generally assumed by CMS Energy or Consumers in the form of
deductibles and self-insured retentions that, in some cases, are substantial. As CMS Energy or Consumers
renews its policies, it is possible that some of the present insurance coverage may not be renewed or
obtainable on commercially reasonable terms due to restrictive insurance markets.
Human Capital
CMS Energy and Consumers employ a highly trained and skilled workforce comprised of union,
non-union, and seasonal employees. Presented in the following table are the number of employees of
CMS Energy and Consumers:
December 31
CMS Energy, including Consumers
Full-time and part-time employees
Seasonal employees1
Total employees
Consumers
Full-time and part-time employees
Seasonal employees1
Total employees
2022
2021
2020
8,560
8,509
8,234
513
613
603
9,073
9,122
8,837
8,366
8,314
7,627
513
613
603
8,879
8,927
8,230
1
Consumers’ seasonal workforce peaked at 587 employees during 2022, 622 employees during 2021, and
603 employees during 2020. Seasonal employees work primarily during the construction season.
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At December 31, 2022, unions represented 41 percent of CMS Energy’s employees and 42 percent of
Consumers’ employees. The UWUA represents Consumers’ operating, maintenance, construction, and
customer contact center employees. The USW represents Zeeland plant employees. The UWUA and
USW agreements expire in 2025.
The safety of employees, customers, and the general public is a priority of CMS Energy and Consumers.
Accordingly, CMS Energy and Consumers have worked to integrate a set of safety principles into their
business operations and culture. These principles include complying with applicable safety, health, and
security regulations and implementing programs and processes aimed at continually improving safety and
security conditions. On an annual basis, CMS Energy and Consumers set various safety goals, with their
primary measure being the OSHA recordable incident rate. The recordable incident rate was 1.17 in 2022
and 1.54 in 2021. The target recordable incident rate for 2023 is 1.07. Over the last ten years, Consumers’
OSHA recordable incident rate has decreased by 34 percent.
Within the utility industry, there is strong competition for rare, high-demand talent, including those
related to renewable energy generation, technology, and data analytics. In order to address this
competition and to be able to meet their human capital needs, CMS Energy and Consumers provide
compensation and benefits that are competitive with industry peers. Furthermore, CMS Energy and
Consumers have developed a comprehensive talent strategy, the People Strategy, to attract, develop, and
retain highly skilled employees. The strategy focuses on three areas, which are summarized below.
• Cultivating a Purpose-Driven Culture: This goal is aimed at ensuring all co-workers
understand how their work drives CMS Energy’s and Consumers’ key strategic goals.
CMS Energy’s and Consumers’ progress toward a purpose-driven culture is measured through an
engagement index and an empowerment index developed from data obtained through an annual
employee engagement survey of union and non-union co-workers administered by a third party.
For the year ended December 31, 2022, the employee engagement index score, which measures
the percentage of employees that feel satisfied with the company, was 71 percent and ranked in
the second quartile of general industry companies. The employee empowerment index score,
which measures the percentage of employees that feel the workplace promotes empowerment,
was 54 percent and ranked in the third quartile of general industry companies. The general
industry benchmark was created by the third party who administered the survey through a
targeted sampling of working adults within the U.S. who work for firms with widely respected
reputations. CMS Energy and Consumers have a goal to achieve a first-quartile empowerment
index score by 2030.
• Creating a Breakthrough Employee Experience: A breakthrough employee experience is one
that instills pride and ownership in one’s work. To measure progress toward a breakthrough
employee experience, CMS Energy and Consumers measure employees’ satisfaction with people
processes, such as performance management and hiring and onboarding new employees. For the
year ended December 31, 2022, the employee experience index was 54 percent; CMS Energy and
Consumers have a goal to achieve a score of 80 percent by 2030.
• Building Skill Sets at Scale: With an overarching goal of ensuring employees have the right
skills to succeed, CMS Energy and Consumers measure progress in this area through achievement
of workforce planning and hiring milestones and through a first-time skill attainment index to
evaluate the effectiveness of training. CMS Energy and Consumers develop skill sets in co-
workers through a variety of means, including union apprenticeship programs and yearly
trainings for newly required skills. In 2021, CMS Energy and Consumers launched a full-scale
development program for leaders to enable robust succession planning and improve employee
engagement and empowerment.
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This talent strategy allows CMS Energy and Consumers to shape employees’ experience and enable
leaders to coach and develop co-workers, source talent, and anticipate and adjust to changing skill sets in
the business environment.
Diversity, Equity, and Inclusion
As a part of their People Strategy, CMS Energy and Consumers also employ a comprehensive diversity,
equity, and inclusion strategy designed to embed diversity, equity, and inclusion into all aspects of their
business. This is done through embedding standards for diversity, equity, and inclusion into all company
processes and ensuring these standards are incorporated into all employee experiences. To measure their
success, CMS Energy and Consumers utilize select questions in the annual engagement survey to create a
diversity, equity, and inclusion index. For the year ended December 31, 2022, the diversity, equity, and
inclusion index score was 72 percent.
CMS Energy and Consumers are committed to building an inclusive workplace that embraces the diverse
makeup of the communities that they serve. The following table presents the composition of
CMS Energy’s and Consumers’ workforce:
December 31, 2022
Percent female employees
Percent racially or ethnically diverse employees
Percent employees with disabilities
Percent veteran employees
CMS Energy,
including
Consumers
Consumers
27 %
28 %
12
5
11
12
5
11
Co-workers are also empowered to engage in employee resource groups and events that encourage candid
conversations around diversity, equity, and inclusion. There are eight employee resource groups available
to all co-workers; these groups are, by date of origin:
•
•
•
•
the Women’s Advisory Panel, contributing to the achievement of the corporate strategy by
supporting the retention, development, and success of women
the Minority Advisory Panel, promoting a culture of diversity and inclusion among all racial and
ethnic minorities through education, leadership, development, and networking
the Women’s Engineering Network, connecting and empowering women in the science,
technology, engineering, and mathematics fields, while building capabilities to support company
objectives
the Veteran’s Advisory Panel, supporting former and active military personnel and assisting in
recruiting and retaining veterans through career development
• GEN-ERGY, a multigenerational group designed to bridge the gap of learning, networking, and
•
•
•
mentoring across the generations of the workforce
the Pride Alliance of Consumers Energy, promoting an inclusive environment that is safe,
supportive, and respectful for lesbian, gay, bi-sexual, and transgender persons and allies
capABLE, aimed at removing barriers and creating pathways to meaningful work for employees
of all abilities
Interfaith, a space for co-workers of all backgrounds to gather and celebrate their unique beliefs,
creating an environment of understanding and respect for all faiths, religions, and spiritual beliefs,
including those with no faith affiliation
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Information About CMS Energy’s and Consumers’
Executive Officers
Presented in the following table are the company positions held during the last five years for each of
CMS Energy’s and Consumers’ executive officers as of February 3, 2023:
Name, Age, Position(s)
Garrick J. Rochow (age 48)
CMS Energy
President, CEO, and Director
Executive Vice President
Senior Vice President
Consumers
President, CEO, and Director
Executive Vice President
Senior Vice President
NorthStar Clean Energy
Chairman of the Board, CEO, and Director
Rejji P. Hayes (age 48)
CMS Energy
Executive Vice President and CFO
Consumers
Executive Vice President and CFO
NorthStar Clean Energy
Executive Vice President, CFO, and Director
EnerBank
Chairman of the Board and Director
Tonya L. Berry (age 50)
CMS Energy
Senior Vice President
Consumers
Senior Vice President
Vice President
Executive Director, Quality
Catherine A. Hendrian (age 54)
CMS Energy
Senior Vice President
Consumers
Senior Vice President
34
Period
12/2020 – Present
1/2020 – 12/2020
7/2016 – 1/2020
12/2020 – Present
1/2020 – 12/2020
7/2016 – 1/2020
12/2020 – Present
5/2017 – Present
5/2017 – Present
5/2017 – Present
10/2018 – 10/2021
2/2022 – Present
2/2022 – Present
11/2018 – 2/2022
7/2017 – 11/2018
4/2017 – Present
4/2017 – Present
Table of Contents
Name, Age, Position(s)
Brandon J. Hofmeister (age 46)
CMS Energy
Senior Vice President
Consumers
Senior Vice President
NorthStar Clean Energy
Senior Vice President
Shaun M. Johnson (age 44)
CMS Energy
Senior Vice President and General Counsel
Vice President and Deputy General Counsel
Consumers
Senior Vice President and General Counsel
Vice President and Deputy General Counsel
NorthStar Clean Energy
Senior Vice President, General Counsel, and Director
Vice President and General Counsel
EnerBank
Senior Vice President and General Counsel
Venkat Dhenuvakonda Rao (age 52)
CMS Energy
Senior Vice President
Consumers
Senior Vice President
NorthStar Clean Energy
Director
Senior Vice President
Brian F. Rich (age 48)
CMS Energy
Senior Vice President and Chief Customer Officer
Senior Vice President and Chief Information Officer
Consumers
Senior Vice President and Chief Customer Officer
Senior Vice President and Chief Information Officer
LeeRoy Wells, Jr. (age 44)
CMS Energy
Senior Vice President
Consumers
Senior Vice President
Vice President
35
Period
7/2017 – Present
7/2017 – Present
9/2017 – Present
5/2019 – Present
4/2016 – 5/2019
5/2019 – Present
4/2016 – 5/2019
4/2019 – Present
10/2018 – 4/2019
8/2018 – 6/2020
9/2016 – Present
9/2016 – Present
11/2017 – Present
9/2016 – Present
8/2019 – Present
7/2016 – 8/2019
8/2019 – Present
7/2016 – 8/2019
12/2020 – Present
12/2020 – Present
8/2017 – 12/2020
Table of Contents
Name, Age, Position(s)
Scott B. McIntosh (age 47)
CMS Energy
Vice President, Controller, and CAO
Vice President and Controller
Vice President
Consumers
Vice President, Controller, and CAO
Vice President and Controller
Vice President
NorthStar Clean Energy
Vice President, Controller, and CAO
Vice President and Controller
Vice President
Period
9/2021 – Present
6/2021 – 9/2021
9/2015 – 6/2021
9/2021 – Present
6/2021 – 9/2021
9/2015 – 6/2021
9/2021 – Present
6/2021 – 9/2021
9/2015 – 6/2021
There are no family relationships among executive officers and directors of CMS Energy or Consumers.
The list of directors and their biographies will be included in CMS Energy’s and Consumers’ definitive
proxy statement for their 2023 Annual Meetings of Shareholders to be held May 5, 2023. The term of
office of each of the executive officers extends to the first meeting of each of the Boards of Directors of
CMS Energy and Consumers after the next annual election of Directors of CMS Energy and Consumers
(to be held on May 5, 2023).
Available Information
CMS Energy’s internet address is www.cmsenergy.com. CMS Energy routinely posts important
information on its website and considers the Investor Relations section, www.cmsenergy.com/investor-
relations, a channel of distribution for material information. Information contained on CMS Energy’s
website is not incorporated herein. CMS Energy’s and Consumers’ annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed
pursuant to Section 13(a) or 15(d) of the Exchange Act are accessible free of charge on CMS Energy’s
website. These reports are available soon after they are electronically filed with the SEC. Also on
CMS Energy’s website are CMS Energy’s and Consumers’:
• Corporate Governance Principles
• Articles of Incorporation
• Bylaws
• Charters and Codes of Conduct (including the Charters of the Audit Committee, Compensation
and Human Resources Committee, Finance Committee, and Governance, Sustainability and
Public Responsibility Committee, as well as the Employee, Board of Directors, and Third Party
Codes of Conduct)
CMS Energy will provide this information in print to any stockholder who requests it.
The SEC maintains an internet site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC. The address is www.sec.gov.
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Item 1A. Risk Factors
CMS Energy and Consumers are exposed to a variety of factors, often beyond their control, that are
difficult to predict and that involve uncertainties that may materially adversely affect CMS Energy’s or
Consumers’ business, liquidity, financial condition, or results of operations. Additional risks and
uncertainties not presently known or that management believes to be immaterial may also adversely affect
CMS Energy or Consumers. The risk factors described in the following sections, as well as the other
information included in this report and in other documents filed with the SEC, should be considered
carefully before making an investment in securities of CMS Energy or Consumers. Risk factors of
Consumers are also risk factors of CMS Energy.
Investment/Financial Risks
CMS Energy depends on dividends from its subsidiaries to meet its debt service obligations.
Due to its holding company structure, CMS Energy depends on dividends from its subsidiaries to meet its
debt service and other payment obligations. If sufficient dividends were not paid to CMS Energy by its
subsidiaries, CMS Energy might not be able to generate the funds necessary to fulfill its payment
obligations.
Consumers’ ability to pay dividends or acquire its own stock from CMS Energy is limited by restrictions
contained in Consumers’ preferred stock provisions and potentially by other legal restrictions, such as
certain terms in its articles of incorporation and FERC requirements.
CMS Energy has indebtedness that could limit its financial flexibility and its ability to meet its debt
service obligations.
The level of CMS Energy’s present and future indebtedness could have several important effects on its
future operations, including, among others, that:
•
•
a significant portion of CMS Energy’s cash flow from operations could be dedicated to the
payment of principal and interest on its indebtedness and would not be available for other
purposes
covenants contained in CMS Energy’s existing debt arrangements, which require it to meet
certain financial tests, could affect its flexibility in planning for, and reacting to, changes in its
business
• CMS Energy’s ability to obtain additional financing for working capital, capital expenditures,
acquisitions, and general corporate and other purposes could become limited
• CMS Energy could be placed at a competitive disadvantage to its competitors that are less
leveraged
• CMS Energy’s vulnerability to adverse economic and industry conditions could increase
• CMS Energy’s future credit ratings could fluctuate
CMS Energy’s ability to meet its debt service obligations and to reduce its total indebtedness will depend
on its future performance, which will be subject to general economic conditions, industry cycles, changes
in laws or regulatory decisions, and financial, business, and other factors affecting its operations, many of
which are beyond its control. CMS Energy cannot make assurances that its businesses will continue to
generate sufficient cash flow from operations to service its indebtedness, which could require
CMS Energy to sell assets or obtain additional financing.
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CMS Energy and Consumers have financing needs and could be unable to obtain bank financing or
access the capital markets.
CMS Energy and Consumers rely on the capital markets, as well as on bank syndications, to meet their
financial commitments and short-term liquidity needs not otherwise funded internally.
Disruptions in the capital and credit markets, or the inability to obtain required FERC authorization for
issuances of securities including debt, could adversely affect CMS Energy’s and Consumers’ access to
liquidity needed for their businesses. Any liquidity disruption could require CMS Energy and Consumers
to take measures to conserve cash including, but not limited to, deferring capital expenditures, changing
commodity purchasing strategies to avoid collateral-posting requirements, and reducing or eliminating
future share repurchases, dividend payments, or other discretionary uses of cash.
Entering into new financings is subject in part to capital market receptivity to utility industry securities in
general and to CMS Energy’s and Consumers’ securities in particular. CMS Energy and Consumers
continue to explore financing opportunities to supplement their respective financial strategies. These
potential opportunities include refinancing and/or issuing new debt, issuing CMS Energy preferred stock
and/or common equity, or entering into commercial paper, bank financing, and leasing arrangements.
CMS Energy and Consumers cannot guarantee the capital markets’ acceptance of their securities.
CMS Energy may also, from time to time, repurchase (either in open market transactions or through
privately negotiated transactions), redeem, or otherwise retire its outstanding debt. Such activities, if any,
will depend on prevailing market conditions, contractual restrictions, and other factors. The amounts
involved may or may not be material.
Certain of CMS Energy’s and Consumers’ securities and those of their affiliates are rated by various
credit rating agencies. A reduction or withdrawal of one or more of its credit ratings could have a material
adverse impact on CMS Energy’s or Consumers’ ability to access capital on acceptable terms and
maintain commodity lines of credit, could increase their cost of borrowing, and could cause CMS Energy
or Consumers to reduce capital expenditures. If either or both were unable to maintain commodity lines of
credit, CMS Energy or Consumers might have to post collateral or make prepayments to certain suppliers
under existing contracts. Further, since Consumers provides dividends to CMS Energy, any adverse
developments affecting Consumers that result in a lowering of its credit ratings could have an adverse
effect on CMS Energy’s credit ratings.
Market performance and other changes could decrease the value of employee benefit plan assets,
which then could require substantial funding.
The performance of various markets affects the value of assets that are held in trust to satisfy future
obligations under CMS Energy’s and Consumers’ pension and postretirement benefit plans. CMS Energy
and Consumers have significant obligations under these plans and hold significant assets in these trusts.
These assets are subject to market fluctuations and will yield uncertain returns, which could fall below
CMS Energy’s and Consumers’ forecasted return rates. A decline in the market value of the assets or a
change in the level of interest rates used to measure the required minimum funding levels could
significantly increase the funding requirements of these obligations. Also, changes in demographics,
including an increased number of retirements or changes in life expectancy assumptions, could
significantly increase the funding requirements of the obligations related to the pension and
postretirement benefit plans.
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Industry/Regulatory Risks
Changes to ROA could have a material adverse effect on CMS Energy’s and Consumers’
businesses.
Michigan law allows electric customers in Consumers’ service territory to buy electric generation service
from alternative electric suppliers in an aggregate amount capped at ten percent of Consumers’ sales, with
certain exceptions. The proportion of Consumers’ electric deliveries under the ROA program and on the
ROA waiting list is over ten percent. Consumers’ rates are regulated by the MPSC, while alternative
electric suppliers charge market-based rates, putting competitive pressure on Consumers’ electric supply.
If the ROA limit were increased or if electric generation service in Michigan were deregulated, it could
have a material adverse effect on CMS Energy and Consumers.
Distributed energy resources could have a material adverse effect on CMS Energy’s and
Consumers’ businesses.
Michigan law allows customers to use distributed energy resources for their electric energy needs. These
distributed energy resources are connected to Consumers’ electric grid. The state distributed generation
program is currently capped by the 2016 Energy Law at one percent of utilities’ peak loads, but in the
settlement of its 2022 electric rate case, Consumers agreed to increase the cap to four percent on its
system. Consumers is required to purchase distributed generation customers’ excess generation at rates
determined by the MPSC. Recent FERC policy will also soon allow many customer-owned behind-the-
meter and grid-connected distributed energy resources to participate in and receive revenue from
wholesale electricity markets. Increased customer use of distributed energy resources could result in a
reduction of Consumers’ electric sales. Third parties’ operations of distributed energy resources could
also potentially have a negative impact on the stability of the grid. An increase in customers’ use of
distributed energy resources, and the rate structure for distributed energy resources customers’ use of
Consumers’ system and Consumers’ purchases of their excess generation, could have a material adverse
effect on CMS Energy and Consumers.
CMS Energy and Consumers are subject to rate regulation, which could have a material adverse
effect on financial results.
CMS Energy and Consumers are subject to rate regulation. Consumers’ electric and gas retail rates are set
by the MPSC and cannot be changed without regulatory authorization. If rate regulators fail to provide
adequate rate relief, it could have a material adverse effect on Consumers or Consumers’ plans for
making significant capital investments. Additionally, increasing rates could result in additional regulatory
scrutiny, regulatory or legislative actions, and increased competitive or political pressures, all of which
could have a material adverse effect on CMS Energy’s and Consumers’ liquidity, financial condition, and
results of operations.
Orders of the MPSC could limit recovery of costs of providing service. These orders could also result in
adverse regulatory treatment of other matters. For example, MPSC orders could prevent or curtail
Consumers from shutting off non-paying customers or could prevent or limit the implementation of a gas
revenue mechanism. Regulators could face competitive or political pressures to avoid or limit rate
increases for a number of reasons, including economic downturn in the state or decreased customer base,
among others.
FERC authorizes certain subsidiaries of CMS Energy to sell wholesale electricity at market-based rates.
Failure of these subsidiaries to maintain this FERC authority could have a material adverse effect on
CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. Transmission
rates paid by Consumers and other CMS Energy subsidiaries are also set by FERC, as are the tariff terms
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governing the participation of Consumers and other CMS Energy subsidiaries in FERC-regulated
wholesale electricity markets operated by regional transmission organizations and independent system
operators such as MISO and PJM. At least one CMS Energy subsidiary participates in the wholesale
electricity markets operated by ERCOT, over which FERC has limited control.
The various risks associated with the MPSC and FERC regulation of CMS Energy’s and Consumers’
businesses, which include the risk of adverse decisions in any number of rate or regulatory proceedings
before either agency, as well as judicial proceedings challenging any agency decisions, could have a
material adverse effect on CMS Energy and Consumers. Changes to the tariffs or business practice
manuals of certain wholesale market operators such as MISO, PJM, or ERCOT could also have a material
adverse effect on CMS Energy and Consumers.
Utility regulation, state or federal legislation, and compliance could have a material adverse effect
on CMS Energy’s and Consumers’ businesses.
CMS Energy and Consumers are subject to, or affected by, extensive utility regulation and state and
federal legislation. If it were determined that CMS Energy or Consumers failed to comply with applicable
laws and regulations, they could become subject to fines, penalties, or disallowed costs, or be required to
implement additional compliance, cleanup, or remediation programs, the cost of which could be material.
CMS Energy and Consumers cannot predict the impact of new laws, rules, regulations, principles, or
practices by federal or state agencies or wholesale electricity market operators, or challenges or changes
to present laws, rules, regulations, principles, or practices and the interpretation of any adoption or
change. Furthermore, any state or federal legislation concerning CMS Energy’s or Consumers’ operations
could also have a material adverse effect.
FERC, through NERC and its delegated regional entities, oversees reliability of certain portions of the
electric grid. CMS Energy and Consumers cannot predict the impact of FERC orders or actions of NERC
and its regional entities on electric system reliability. Additionally, national gas pipeline infrastructure has
recently been under scrutiny following disruptions related to extreme weather and cyber incidents. In
2021, the Transportation Security Administration issued two mandatory security directives related to
natural gas pipelines that apply to Consumers. Additional regulation in this area could adversely affect
Consumers’ gas operations.
CMS Energy and Consumers have announced ambitious plans to reduce their impact on climate
change and increase the reliability of their electric distribution system. Achieving these plans
depends on numerous factors, many of which are outside of their control.
Consumers has announced a long-term strategy for delivering clean, reliable, resilient, and affordable
energy, including a plan to end coal use in 2025 as set forth in the 2021 IRP. The MPSC, FERC, other
regulatory authorities, or other third parties may prohibit, delay, or impair the 2021 IRP and some or all of
the 2021 IRP-associated acquisitions of owned or purchased electric generation capacity. Consumers may
be unable to acquire, site, and/or permit some or all of the generation capacity proposed in the 2021 IRP.
Consumers’ ability to implement the 2021 IRP may be affected by global supply chain disruptions and
changes in the cost, availability, and supply of generation capacity. While CMS Energy and Consumers
continue to advocate for advances in technologies required to reduce or eliminate greenhouse gases on a
cost-effective basis, such advances are largely outside of CMS Energy’s and Consumers’ control.
Advancements in technology related to items such as battery storage and electric vehicles may not
become commercially available or economically feasible as projected in the 2021 IRP. Customer
programs such as energy efficiency and demand response may not realize the projected levels of customer
participation.
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Consumers has also announced its Natural Gas Delivery Plan, a 10-year strategic investment plan to
deliver safe, reliable, clean, and affordable natural gas to customers. This plan includes accelerated
infrastructure replacements, innovative leak detection technology, and process changes to reduce or
eliminate methane emissions. The MPSC, FERC, other regulatory authorities, or other third parties may
prohibit, delay, or impair the Natural Gas Delivery Plan and some or all of the associated capital
investments. Consumers’ ability to implement its plan may be affected by environmental regulations,
global supply chain disruptions, and changes in the cost, availability, and supply of natural gas or the
ability to deliver natural gas to customers. Advancements in technology related to items such as
renewable natural gas may not become commercially available or economically feasible as projected in
Consumers’ plan.
CMS Energy and Consumers could suffer financial loss, reputational damage, litigation, or other negative
repercussions if they are unable to achieve their ambitious plans.
Changes in taxation as well as the inherent difficulty in quantifying potential tax effects of business
decisions could negatively impact CMS Energy and Consumers.
CMS Energy and Consumers are required to make judgments regarding the potential tax effects of
various financial transactions and results of operations in order to estimate their obligations to taxing
authorities. The tax obligations include income taxes, real estate taxes, sales and use taxes, employment-
related taxes, and ongoing issues related to these tax matters. The judgments include determining reserves
for potential adverse outcomes regarding tax positions that have been taken and may be subject to
challenge by the IRS and/or other taxing authorities. Unfavorable settlements of any of the issues related
to these reserves or other tax matters at CMS Energy or Consumers could have a material adverse effect.
Additionally, changes in federal, state, or local tax rates or other changes in tax laws could have adverse
impacts.
CMS Energy and its subsidiaries, including Consumers, must comply with the Dodd-Frank Act and
its related regulations.
The Dodd-Frank Act provides for regulation by the Commodity Futures Trading Commission of certain
commodity-related contracts. Although CMS Energy, Consumers, and certain subsidiaries of NorthStar
Clean Energy qualify for an end-user exception from mandatory clearing of commodity-related swaps,
these regulations could affect the ability of these entities to participate in these markets and could add
additional regulatory oversight over their contracting activities.
CMS Energy and Consumers could incur substantial costs to comply with environmental
requirements.
CMS Energy and Consumers are subject to costly and stringent environmental regulations that will likely
require additional significant capital expenditures for CCR disposal and storage, cooling water intake
equipment, effluent treatment, and PCB remediation. In addition, regulatory action on PFAS at the state
and/or federal level could cause CMS Energy and Consumers to further test and remediate some sites if
PFAS is present at certain levels. Present and reasonably anticipated state and federal environmental
statutes and regulations will continue to have a material effect on CMS Energy and Consumers.
CMS Energy and Consumers have interests in fossil-fuel-fired power plants, other types of power plants,
and natural gas systems that emit greenhouse gases. Federal, state, and local environmental laws and
rules, as well as international accords and treaties, could require CMS Energy and Consumers to install
additional equipment for emission controls, undertake heat-rate improvement projects, purchase carbon
emissions allowances, curtail operations, invest in generating capacity with fewer carbon dioxide
emissions, or take other significant steps to manage or lower the emission of greenhouse gases. Similarly,
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Consumers could be restricted from constructing natural gas infrastructure due to potential environmental
regulations, which could require more costly alternatives.
The following risks related to climate change, emissions, and environmental regulations could also have a
material adverse impact on CMS Energy and Consumers:
•
•
•
a change in regulators’ implementation of policy or litigation originated by third parties against
CMS Energy or Consumers due to CMS Energy’s or Consumers’ greenhouse gas or other
emissions or CCR disposal and storage
impairment of CMS Energy’s or Consumers’ reputation due to their greenhouse gas or other
emissions and public perception of their response to potential environmental regulations, rules,
and legislation
extreme weather conditions, such as severe storms or flooding, that may affect customer demand,
company operations, or company infrastructure
Consumers expects to collect fully from its customers, through the ratemaking process, expenditures
incurred to comply with environmental regulations, but cannot guarantee this outcome. If Consumers
were unable to recover these expenditures from customers in rates, CMS Energy or Consumers could be
required to seek significant additional financing to fund these expenditures.
For additional information regarding compliance with environmental regulations, see Item 1. Business—
CMS Energy and Consumers Environmental Strategy and Compliance and Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations—Outlook.
CMS Energy’s and Consumers’ businesses could be affected adversely by any delay in meeting
environmental requirements.
A delay or failure by CMS Energy or Consumers to obtain or maintain any necessary environmental
permits or approvals to satisfy any applicable environmental regulatory requirements or install emission
or pollution control equipment could:
•
•
•
•
•
prevent the construction of new facilities
prevent the continued operation of and sale of energy from existing facilities
prevent the suspension of operations at existing facilities
prevent the modification of existing facilities
result in significant additional costs
CMS Energy and Consumers expect to incur additional substantial costs related to remediation of
legacy environmental sites.
Consumers expects to incur additional substantial costs related to the remediation of its former MGP sites
and other response activity costs at a number of other sites, including, but not limited to, sites of retired
coal-fueled electric generating units, under NREPA and CERCLA. Consumers believes these costs should
be recoverable in rates, but cannot guarantee that outcome.
Business/Operations Risks
There are risks associated with Consumers’ substantial capital investment program planned for the
next ten years.
Consumers’ planned investments include the construction or acquisition of electric generation, electric
and gas infrastructure, conversions and expansions, environmental controls, electric grid modernization
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technology, and other electric and gas investments to upgrade delivery systems, as well as
decommissioning of older facilities. The success of these capital investments depends on or could be
affected by a variety of factors that include, but are not limited to:
•
•
•
•
•
•
•
•
•
•
•
effective pre-acquisition evaluation of asset values, future operating costs, potential
environmental and other liabilities, and other factors beyond Consumers’ control
effective cost and schedule management of new capital projects
availability of qualified construction personnel, both internal and contracted
changes in commodity and other prices, applicable tariffs, and/or material and equipment
availability
governmental approvals and permitting
operational performance
changes in environmental, legislative, and regulatory requirements
regulatory cost recovery
inflation of labor rates
increases in lead times and disruptions in supply chain distribution
barriers to accessing key materials for renewable projects (solar, battery, and other key
equipment) created by geopolitical relations and U.S. relations with China
It is possible that adverse events associated with these factors could have a material adverse effect on
Consumers.
CMS Energy and Consumers could be affected adversely by legacy litigation and retained
liabilities.
The agreements that CMS Energy and Consumers enter into for the sale of assets customarily include
provisions whereby they are required to:
•
•
retain specified preexisting liabilities, such as for taxes, pensions, or environmental conditions
indemnify the buyers against specified risks, including the inaccuracy of representations and
warranties that CMS Energy and Consumers make
• make payments to the buyers depending on the outcome of post-closing adjustments, litigation,
audits, or other reviews, including claims resulting from attempts by foreign or domestic
governments to assess taxes on past operations or transactions
Many of these contingent liabilities can remain open for extended periods of time after the sales are
closed. Depending on the extent to which the buyers might ultimately seek to enforce their rights under
these contractual provisions, and the resolution of any disputes concerning them, there could be a material
adverse effect on CMS Energy’s or Consumers’ liquidity, financial condition, and results of operations.
Consumers is exposed to risks related to general economic conditions in its service territories.
Consumers’ electric and gas utility businesses are affected by the economic conditions impacting the
customers they serve. If the Michigan economy becomes sluggish or declines, Consumers could
experience reduced demand for electricity or natural gas that could result in decreased earnings and cash
flow. In addition, economic conditions in Consumers’ service territory affect its collections of accounts
receivable and levels of lost or stolen gas.
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Consumers is exposed to changes in customer usage that could impact financial results.
Technology advances, government incentives and subsidies, and recent regulatory decisions could
increase the cost effectiveness of customer-owned methods of producing electricity and managing energy
use resulting in reduced load, cross subsidization, and increased costs.
Customers could also reduce their consumption through demand-side energy conservation and energy
waste reduction programs. Similarly, customers could also reduce their consumption of natural gas
through alternative technologies or fuels.
CMS Energy’s and Consumers’ energy sales and operations are affected by seasonal factors and
varying weather conditions from year to year.
CMS Energy’s and Consumers’ utility operations are seasonal. The consumption of electric energy
typically increases in the summer months, due primarily to the use of air conditioners and other cooling
equipment, while peak demand for natural gas typically occurs in the winter due to colder temperatures
and the resulting use of natural gas as heating fuel. Accordingly, CMS Energy’s and Consumers’ overall
results may fluctuate substantially on a seasonal basis. Mild temperatures during the summer cooling
season and winter heating season as well as the impact of extreme weather events on Consumers’ system
could have a material adverse effect.
CMS Energy and Consumers are subject to information security risks, risks of unauthorized access
to their systems, and technology failures.
In the regular course of business, CMS Energy and Consumers handle a range of sensitive confidential
security and customer information. In addition, CMS Energy and Consumers operate in a highly regulated
industry that requires the continued operation of sophisticated information and control technology
systems and network infrastructure. Despite implementation of security measures, technology systems,
including disaster recovery and backup systems, are vulnerable to failure, cyber crime, unauthorized
access, and being disabled. These events could impact the reliability of electric generation and electric
and gas delivery and also subject CMS Energy and Consumers to financial harm. Cyber crime, which
includes the use of malware, computer viruses, and other means for disruption or unauthorized access
against companies, including CMS Energy and Consumers, is increasing in frequency, scope, and
potential impact. While CMS Energy and Consumers have not been subject to cyber incidents that have
had a material impact on their operations to date, their security measures in place may be insufficient to
prevent a major cyber incident in the future. If technology systems, including disaster recovery and
backup systems, were to fail or be breached, CMS Energy and Consumers might not be able to fulfill
critical business functions, and sensitive confidential and proprietary data could be compromised. In
addition, because CMS Energy’s and Consumers’ generation, transmission, and distribution systems are
part of an interconnected system, a disruption caused by a cyber incident at another utility, electric
generator, system operator, or commodity supplier could also adversely affect CMS Energy or
Consumers.
A variety of technological tools and systems, including both company-owned information technology and
technological services provided by outside parties, support critical functions. The failure of these
technologies, including backup systems, or the inability of CMS Energy and Consumers to have these
technologies supported, updated, expanded, or integrated into other technologies, could hinder their
business operations.
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CMS Energy’s and Consumers’ businesses have liability risks.
Consumers’ electric and gas delivery systems, power plants, gas infrastructure including storage facilities,
wind energy or solar equipment, and energy products, and the independent power plants owned in whole
or in part by CMS Energy could be involved in incidents, failures, or accidents that result in injury, loss of
life, or property loss to customers, employees, or the public. Although CMS Energy and Consumers have
insurance coverage for many potential incidents (subject to deductibles, limitations, and self-insurance
amounts that could be material), depending upon the nature or severity of any incident, failure, or
accident, CMS Energy or Consumers could suffer financial loss, reputational damage, and negative
repercussions from regulatory agencies or other public authorities.
CMS Energy and Consumers are subject to risks that are beyond their control, including but not
limited to natural disasters, civil unrest, terrorist attacks and related acts of war, cyber incidents,
vandalism, and other catastrophic events.
Natural disasters, severe weather, wars, terrorist acts, civil unrest, vandalism, theft, cyber incidents,
pandemics, and other catastrophic events could result in severe damage to CMS Energy’s and
Consumers’ assets beyond what could be recovered through insurance policies (which are subject to
deductibles, limitations, and self-insurance amounts that could be material), could require CMS Energy
and Consumers to incur significant upfront costs, and could severely disrupt operations, resulting in loss
of service to customers. There is also a risk that regulators could, after the fact, conclude that Consumers’
preparedness or response to such an event was inadequate and take adverse actions as a result.
Energy risk management strategies might not be effective in managing fuel and electricity pricing
risks, which could result in unanticipated liabilities to CMS Energy and Consumers or increased
volatility in their earnings.
CMS Energy and Consumers are exposed to changes in market prices for commodities including, but not
limited to, natural gas, coal, electric capacity, electric energy, emission allowances, gasoline, diesel fuel,
and RECs. CMS Energy and Consumers manage commodity price risk using established policies and
procedures, and they may use various contracts to manage this risk, including swaps, options, futures, and
forward contracts. No assurance can be made that these strategies will be successful in managing
CMS Energy’s and Consumers’ risk or that they will not result in net liabilities to CMS Energy or
Consumers as a result of future volatility.
A substantial portion of Consumers’ operating expenses for its electric generating plants and vehicle fleet
consists of the costs of obtaining these commodities. The contracts associated with Consumers’ fuel for
electric generation and purchased power are executed in conjunction with the PSCR mechanism, which is
designed to allow Consumers to recover prudently incurred costs associated with its positions in these
commodities. If the MPSC determined that any of these contracts or related contracting policies were
imprudent, recovery of these costs could be disallowed.
Natural gas prices in particular have been historically volatile. Consumers routinely enters into contracts
for natural gas to mitigate exposure to the risks of demand, market effects of weather, and changes in
commodity prices associated with the gas distribution business. These contracts are executed in
conjunction with the GCR mechanism, which is designed to allow Consumers to recover prudently
incurred costs associated with its natural gas positions. If the MPSC determined that any of these
contracts or related contracting policies were imprudent, recovery of these costs could be disallowed.
CMS Energy and Consumers do not always hedge any or all of the exposure of their operations from
commodity price volatility. Furthermore, the ability to hedge exposure to commodity price volatility
depends on liquid commodity markets. As a result, to the extent the commodity markets are illiquid,
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CMS Energy and Consumers might not be able to execute their risk management strategies, which could
result in larger unhedged positions than preferred at a given time. To the extent that unhedged positions
exist, fluctuating commodity prices could have a negative effect on CMS Energy and Consumers.
Changes in laws that limit CMS Energy’s and Consumers’ ability to hedge could also have a negative
effect on CMS Energy and Consumers.
Consumers might not be able to obtain an adequate supply of natural gas or coal, which could limit
its ability to operate its electric generation facilities or serve its natural gas customers.
Consumers has natural gas and coal supply and transportation contracts in place for the natural gas and
coal it requires for its electric generating capacity. Consumers also has interstate transportation and
supply agreements in place to facilitate delivery of natural gas to its customers. Apart from the contractual
and monetary remedies available to Consumers in the event of a counterparty’s failure to perform under
any of these contracts, there can be no assurances that the counterparties to these contracts will fulfill their
obligations to provide natural gas or coal to Consumers. The counterparties under the agreements could
experience financial or operational problems that inhibit their ability to fulfill their obligations to
Consumers. In addition, counterparties under these contracts might not be required to supply natural gas
or coal to Consumers under certain circumstances, such as in the event of a natural disaster or severe
weather.
If Consumers were unable to obtain its supply requirements, it could be required to purchase natural gas
or coal at higher prices, implement its natural gas curtailment program filed with the MPSC, or purchase
replacement power at higher prices.
Unplanned outages or maintenance could be costly for CMS Energy or Consumers.
Unforeseen outages or maintenance of the electric and gas delivery systems, power plants, gas
infrastructure including storage facilities and compression stations, wind energy or solar equipment, and
energy products owned in whole or in part by CMS Energy or Consumers may be required for many
reasons. When unplanned outages occur, CMS Energy and Consumers will not only incur unexpected
maintenance expenses, but may also have to make spot market purchases of electric and gas commodities
that may exceed CMS Energy’s or Consumers’ expected cost of generation or gas supply, be forced to
curtail services, or retire a given asset if the cost or timing of the maintenance is not reasonable and
prudent. Unplanned generator outages could reduce the capacity credit CMS Energy or Consumers
receives from MISO and could cause CMS Energy or Consumers to incur additional capacity costs in
future years.
General Risk Factors
The COVID-19 pandemic could materially and adversely affect each of CMS Energy’s and
Consumers’ business, results of operations, financial condition, capital investment program,
liquidity, and cash flows.
The COVID-19 pandemic has had widespread impacts on people, businesses, economies, and financial
markets globally, in the U.S., and in markets where CMS Energy and Consumers conduct business. These
impacts include a reduction in economic activity, disruption to supply chains and operations, increased
labor costs, reduced availability of labor, and reduced productivity.
CMS Energy and Consumers are exposed to counterparty risk.
Adverse economic conditions or financial difficulties experienced by counterparties with whom
CMS Energy and Consumers do business could impair the ability of these counterparties to pay for
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CMS Energy’s and Consumers’ services and/or fulfill their contractual obligations, including
performance and payment of damages. CMS Energy and Consumers depend on these counterparties to
remit payments and perform contracted services in a timely and adequate fashion. Any delay or default in
payment or performance, including inadequate performance, of contractual obligations could have a
material adverse effect on CMS Energy and Consumers.
Volatility and disruptions in capital and credit markets could have a negative impact on CMS Energy’s
and Consumers’ lenders, vendors, contractors, suppliers, customers, and other counterparties, causing
them to fail to meet their obligations.
CMS Energy and Consumers are exposed to significant reputational risks.
CMS Energy and Consumers could suffer negative impacts to their reputations as a result of operational
incidents, violations of corporate policies, regulatory violations, inappropriate use of social media, or
other events. Reputational damage could have a material adverse effect and could result in negative
customer perception and increased regulatory oversight.
A work interruption or other union actions could adversely affect Consumers.
At December 31, 2022, unions represent 42 percent of Consumers’ employees. Consumers’ union
agreements expire in 2025. If these employees were to engage in a strike, work stoppage, or other
slowdown, Consumers could experience a significant disruption in its operations and higher ongoing
labor costs.
Failure to attract and retain an appropriately qualified workforce could adversely impact
CMS Energy’s and Consumers’ results of operations.
In some areas, competition for skilled employees is high and if CMS Energy and Consumers were unable
to match skill sets to future needs, they could encounter operating challenges and increased costs. These
challenges could include a lack of resources, loss of knowledge, and delays in skill development.
Additionally, higher costs could result from the use of contractors to replace employees, loss of
productivity, and safety incidents. Failing to train replacement employees adequately and to transfer
internal knowledge and expertise could adversely affect CMS Energy’s and Consumers’ ability to manage
and operate their businesses.
Item 1B. Unresolved Staff Comments
None.
Item 2.
Properties
Descriptions of CMS Energy’s and Consumers’ properties are found in the following sections of Item 1.
Business, all of which are incorporated by reference in this Item 2:
• General—CMS Energy
• General—Consumers
• Business Segments—Consumers Electric Utility—Electric Utility Properties
• Business Segments—Consumers Gas Utility—Gas Utility Properties
• Business Segments—NorthStar Clean Energy—Non-Utility Operations and Investments—
Independent Power Production
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Item 3. Legal Proceedings
For information regarding CMS Energy’s and Consumers’ significant pending administrative and judicial
proceedings involving regulatory, operating, transactional, environmental, and other matters, see Item 8.
Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 2,
Regulatory Matters and Note 3, Contingencies and Commitments.
CMS Energy, Consumers, and certain of their affiliates are also parties to routine lawsuits and
administrative proceedings incidental to their businesses involving, for example, claims for personal
injury and property damage, contractual matters, various taxes, and rates and licensing.
Item 4. Mine Safety Disclosures
Not applicable.
Part II
Item 5. Market For Registrant’s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities
CMS Energy
CMS Energy’s common stock is traded on the New York Stock Exchange under the symbol CMS. At
January 13, 2023, the number of registered holders of CMS Energy’s common stock totaled 26,227, based
on the number of record holders.
For additional information regarding securities authorized for issuance under equity compensation plans,
see Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial
Statements—Note 11, Stock-based Compensation and Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters. For additional information regarding
dividends and dividend restrictions, see Item 8. Financial Statements and Supplementary Data—Notes to
the Consolidated Financial Statements—Note 4, Financings and Capitalization.
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Comparison of Five-year Cumulative Total Return
Company/Index
CMS Energy
S&P 500 Index
S&P 400 Utilities Index
Five-Year Cumulative Total Return
$
2017
100
100
100
2018
$
108
$
96
107
2019
141
126
122
$
2020
140
149
105
$
2021
154
191
126
$
2022
154
157
126
These cumulative total returns assume reinvestments of dividends.
Consumers
Consumers’ common stock is privately held by its parent, CMS Energy, and does not trade in the public
market.
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CMS EnergyS&P 500 IndexS&P 400 Utilities Index201720182019202020212022$100$120$140$160$180$200
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Issuer Repurchases of Equity Securities
Presented in the following table are CMS Energy’s repurchases of common stock for the three months
ended December 31, 2022:
Total Number
of Shares
Purchased1
Average Price
Paid per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
Maximum Number of
Shares That May Yet Be
Purchased Under Publicly
Announced Plans or
Programs
416
$
58.26
—
—
416
—
—
$
58.26
—
—
—
—
—
—
—
—
Period
October 1, 2022 to
October 31, 2022
November 1, 2022 to
November 30, 2022
December 1, 2022 to
December 31, 2022
Total
1
All of the common shares were repurchased to satisfy the minimum statutory income tax withholding
obligation for common shares that have vested under the Performance Incentive Stock Plan. The value of
shares repurchased is based on the market price on the vesting date.
Unregistered Sales of Equity Securities
None.
Item 6. Reserved
Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is a
combined report of CMS Energy and Consumers.
Executive Overview
CMS Energy is an energy company operating primarily in Michigan. It is the parent holding company of
several subsidiaries, including Consumers, an electric and gas utility, and NorthStar Clean Energy
(formerly known as CMS Enterprises Company), primarily a domestic independent power producer and
marketer. Consumers’ electric utility operations include the generation, purchase, distribution, and sale of
electricity, and Consumers’ gas utility operations include the purchase, transmission, storage, distribution,
and sale of natural gas. Consumers’ customer base consists of a mix of primarily residential, commercial,
and diversified industrial customers. NorthStar Clean Energy, through its subsidiaries and equity
investments, is engaged in domestic independent power production, including the development and
operation of renewable generation, and the marketing of independent power production. CMS Energy was
also the parent holding company of EnerBank, an industrial bank located in Utah, until October 1, 2021
when EnerBank was acquired by Regions Bank.
CMS Energy and Consumers manage their businesses by the nature of services each provides.
CMS Energy operates principally in three business segments: electric utility; gas utility; and NorthStar
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Clean Energy, its non-utility operations and investments. Consumers operates principally in two business
segments: electric utility and gas utility. CMS Energy’s and Consumers’ businesses are affected primarily
by:
•
•
•
• weather
•
•
•
regulation and regulatory matters
state and federal legislation
economic conditions
energy commodity prices
interest rates
their securities’ credit ratings
The Triple Bottom Line
CMS Energy’s and Consumers’ purpose is to achieve world class performance while delivering
hometown service. In support of this purpose, CMS Energy and Consumers employ the “CE Way,” a lean
operating model designed to improve safety, quality, cost, delivery, and employee morale.
CMS Energy and Consumers measure their progress toward the purpose by considering their impact on
the “triple bottom line” of people, planet, and profit, which is underpinned by performance; this
consideration takes into account not only the economic value that CMS Energy and Consumers create for
customers and investors, but also their responsibility to social and environmental goals. The triple bottom
line balances the interests of employees, customers, suppliers, regulators, creditors, Michigan’s residents,
the investment community, and other stakeholders, and it reflects the broader societal impacts of
CMS Energy’s and Consumers’ activities.
CMS Energy’s Environmental, Social, Governance and Sustainability Report, which is available to the
public, describes CMS Energy’s and Consumers’ progress toward world class performance measured in
the areas of people, planet, and profit.
People: The people element of the triple bottom line represents CMS Energy’s and Consumers’
commitment to their employees, their customers, the residents of local communities in which they do
business, and other stakeholders.
The safety of employees, customers, and the general public is a priority of CMS Energy and Consumers.
Accordingly, CMS Energy and Consumers have worked to integrate a set of safety principles into their
business operations and culture. These principles include complying with applicable safety, health, and
security regulations and implementing programs and processes aimed at continually improving safety and
security conditions. Over the last ten years, Consumers’ OSHA recordable incident rate has decreased by
34 percent.
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CMS Energy and Consumers also place a high priority on customer value and on providing a hometown
customer experience. Consumers’ customer-driven investment program is aimed at improving safety and
increasing electric and gas reliability, which has resulted in measurable improvements in customer
satisfaction.
Central to Consumers’ commitment to its customers are the initiatives it has undertaken to keep electricity
and natural gas affordable, including:
•
replacement of coal-fueled generation and PPAs with a cost-efficient mix of renewable energy,
less-costly dispatchable generation sources, and energy waste reduction and demand response
programs
targeted infrastructure investment to reduce maintenance costs and improve reliability and safety
supply chain optimization
economic development to increase sales and reduce overall rates
information and control system efficiencies
employee and retiree health care cost sharing
•
•
•
•
•
• workforce productivity enhancements
While CMS Energy and Consumers have experienced some supply chain disruptions and inflationary
pressures, they have taken steps to mitigate the impact on their ability to provide safe and reliable service
to customers.
Planet: The planet element of the triple bottom line represents CMS Energy’s and Consumers’
commitment to protect the environment. This commitment extends beyond compliance with various state
and federal environmental, health, and safety laws and regulations. Management considers climate change
and other environmental risks in strategy development, business planning, and enterprise risk
management processes.
CMS Energy and Consumers continue to focus on opportunities to protect the environment and to reduce
their carbon footprint. As a result of actions already taken through 2022, CMS Energy and Consumers
have:
•
•
•
•
•
decreased their combined percentage of electric supply (self-generated and purchased) from coal
by 17 percentage points since 2015
reduced carbon dioxide emissions by over 30 percent since 2005
reduced the amount of water used to generate electricity by over 35 percent since 2012
reduced landfill waste disposal by over 1.7 million tons since 1992
reduced methane emissions by more than 20 percent since 2012
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Since 2005, Consumers has reduced its sulfur dioxide and particulate matter emissions by over 90 percent
and its nitrogen oxides emissions by over 80 percent. Consumers began tracking mercury emissions in
2007; since that time, it has reduced such emissions by nearly 90 percent. Presented in the following
illustration are Consumers’ reductions in these emissions:
The 2016 Energy Law:
•
•
•
•
raised the renewable energy standard to 15 percent in 2021; Consumers has met the 15-percent
requirement and expects to continue meeting the requirement going forward with a combination
of newly generated RECs and previously generated RECs carried over from prior years
established a goal of 35-percent combined renewable energy and energy waste reduction by 2025;
Consumers achieved 33-percent combined renewable energy and energy waste reduction through
2022
authorized incentives for demand response programs and energy efficiency programs, referring to
the combined initiatives as energy waste reduction programs
established an integrated planning process for new capacity and energy resources
Consumers’ Clean Energy Plan details its strategy to meet customers’ long-term energy needs. The Clean
Energy Plan was originally outlined in Consumers’ 2018 IRP, which was approved by the MPSC in 2019.
Under its Clean Energy Plan, Consumers will meet the requirements of the 2016 Energy Law using its
clean and lean strategy, which focuses on increasing the generation of renewable energy, helping
customers use less energy, and offering demand response programs to reduce demand during critical peak
times.
In June 2021, Consumers filed its 2021 IRP with the MPSC, proposing updates to the Clean Energy Plan.
In April 2022, Consumers and a broad coalition of key stakeholders, including customer groups,
environmental organizations, the MPSC Staff, energy industry representatives, and the Michigan Attorney
53
SO2, NOx, and PM Emissions (Tons)Mercury Emissions (Lbs)Sulfur dioxide (SO2)Nitrogen oxide (NOx)MercuryParticulate matter (PM)200520082011201420172020015,00030,00045,00060,00075,00090,000105,00002004006008001,000 Table of Contents
General, filed a settlement agreement with the MPSC resolving Consumers’ 2021 IRP. The MPSC
approved that settlement agreement in June 2022.
The 2021 IRP outlines Consumers’ long-term strategy for delivering clean, reliable, resilient, and
affordable energy to its customers, including plans to:
•
•
•
•
end the use of coal-fueled generation in 2025, 15 years sooner than initially planned
purchase an existing natural gas-fueled generating unit, providing an additional 1,176 MW of
nameplate capacity and allowing Consumers to continue providing controllable sources of
electricity to customers
solicit approximately 700 MW of capacity through PPAs from sources able to deliver to
Michigan’s Lower Peninsula beginning in 2025
expand its investment in renewable energy, adding nearly 8,000 MW of solar generation by 2040
Under the 2021 IRP, Consumers will continue to earn a return equal to its weighted-average cost of
capital on payments made under new competitively bid PPAs approved by the MPSC.
The 2021 IRP will allow Consumers to exceed its breakthrough goal of at least 50-percent combined
renewable energy and energy waste reduction by 2030.
Presented in the following illustration is Consumers’ 2021 capacity portfolio and its future capacity
portfolio under its 2021 IRP. This illustration includes the effects of purchased capacity and energy waste
reduction and uses the nameplate capacity for all energy sources:
1 Does not include RECs.
2
These amounts and fuel sources will vary and are dependent on a one-time competitive solicitation to
acquire approximately 700 MW of capacity through PPAs from sources able to deliver to Michigan’s
Lower Peninsula beginning in 2025.
54
11%10%9%8%18%26%31%19%21%10%7%6%3%3%11%9%9%11%11%12%13%14%15%15%14%30%43%50%61%Renewable energy¹Energy waste reductionEnergy storageOne-time solicitation²Natural gasCoalNuclearOil/gas20212025203020352040 Table of Contents
In addition to Consumers’ plan to eliminate its use of coal-fueled generation in 2025, CMS Energy and
Consumers have set the net-zero emissions goals discussed below.
Net-zero methane emissions from natural gas delivery system by 2030: Under its Methane Reduction
Plan, Consumers plans to reduce methane emissions from its system by about 80 percent by accelerating
the replacement of aging pipe, rehabilitating or retiring outdated infrastructure, and adopting new
technologies and practices. The remaining emissions will likely be offset by purchasing and/or producing
renewable natural gas.
Net-zero carbon emissions from electric business by 2040: This goal includes not only emissions from
owned generation, but also emissions from the generation of power purchased through long-term PPAs
and from the MISO energy market. Consumers expects to meet 90 percent of its customers’ needs with
clean energy sources by 2040 through execution of its Clean Energy Plan. New technologies and carbon
offset measures including, but not limited to, carbon sequestration, methane emission capture, forest
preservation, and reforestation may be used to close the gap to achieving net-zero carbon emissions.
Net-zero greenhouse gas emissions target for the entire business by 2050: This goal, announced in
March 2022, incorporates greenhouse gas emissions from Consumers’ natural gas delivery system,
including suppliers and customers, and has an interim goal of reducing customer emissions by 20 percent
by 2030. Consumers expects to meet this goal through carbon offset measures, renewable natural gas,
energy efficiency and demand response programs, and the adoption of cost-effective emerging
technologies once proven and commercially available.
Additionally, to advance its environmental stewardship in Michigan and to minimize the impact of future
regulations, Consumers announced the following targets in 2022:
•
•
to enhance, restore, or protect 6,500 acres of land by 2026; in 2022, Consumers enhanced,
restored, or protected over 700 acres of land
to increase the rate of waste diverted from landfills (through waste reduction, recycling, and
reuse) to 90 percent from a baseline of 88 percent; in 2022, Consumers’ rate of waste diverted
from landfills was 92 percent
CMS Energy and Consumers are monitoring numerous legislative, policy, and regulatory initiatives,
including those to regulate and report greenhouse gases, and related litigation. While CMS Energy and
Consumers cannot predict the outcome of these matters, which could affect them materially, they intend
to continue to move forward with their clean and lean strategy.
Profit: The profit element of the triple bottom line represents CMS Energy’s and Consumers’
commitment to meeting their financial objectives and providing economic development opportunities and
benefits in the communities in which they do business. CMS Energy’s and Consumers’ financial strength
allows them to maintain solid investment-grade credit ratings and thereby reduce funding costs for the
benefit of customers and investors, to preserve and create jobs, and to reinvest in the communities they
serve.
In 2022, CMS Energy’s net income available to common stockholders was $827 million, and diluted EPS
were $2.85. This compares with net income available to common stockholders of $1.3 billion and diluted
EPS of $4.66 in 2021. In 2022, higher gas sales due primarily to favorable weather, along with benefits
from gas and electric rate increases, were more than offset by the absence of the 2021 gain on the sale of
EnerBank. A more detailed discussion of the factors affecting CMS Energy’s and Consumers’
performance can be found in the Results of Operations section that follows this Executive Overview.
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Over the next five years, Consumers expects weather-normalized electric and gas deliveries to remain
relatively stable compared to 2022. This outlook reflects the effects of energy waste reduction programs
offset largely by modest growth in electric and gas demand.
Performance: Impacting the Triple Bottom Line
CMS Energy and Consumers remain committed to achieving world class performance while delivering
hometown service and positively impacting the triple bottom line of people, planet, and profit. During
2022, CMS Energy and Consumers:
•
•
•
•
•
•
•
•
settled and received approval of Consumers’ 2021 IRP, gas rate case, and electric rate case,
demonstrating the constructive nature of Michigan’s regulatory environment
partnered with state and federal agencies to secure over $100 million of customer assistance to
help keep customer bills affordable
committed to power over 1,200 Michigan public buildings with 100-percent clean energy
reached an agreement with General Motors Company, a non-affiliated company, to power all of
its auto plants within Consumers’ electric service territory with 100-percent clean energy
announced the “Clean Air” program for residential and business customers who want to offset
carbon emissions from their natural gas use and help protect the planet’s atmosphere
installed five new units at the Freedom Compressor Station, continuing progress toward
achieving Consumers’ Natural Gas Delivery Plan, making its gas system even more safe, reliable,
affordable, and clean
participated in the state’s economic development efforts that resulted in Gotion, Inc., a
non-affiliated global battery components producer, committing to construct a manufacturing
facility in Big Rapids, Michigan
received recognition as #1 utility company in the U.S. for America’s Best Employers for Women
and America’s Best Employers for Diversity by Forbes®
CMS Energy and Consumers will continue to utilize the CE Way to enable them to achieve world class
performance and positively impact the triple bottom line. Consumers’ investment plan and the regulatory
environment in which it operates also drive its ability to impact the triple bottom line.
Investment Plan: Over the next five years, Consumers expects to make significant expenditures on
infrastructure upgrades, replacements, and clean generation. While it has a large number of potential
investment opportunities that would add customer value, Consumers has prioritized its spending based on
the criteria of enhancing public safety, increasing reliability, maintaining affordability for its customers,
and advancing its environmental stewardship. Consumers’ investment program is expected to result in
annual rate-base growth of over seven percent. This rate-base growth, together with cost-control
measures, should allow Consumers to maintain affordable customer prices.
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Presented in the following illustration are planned capital expenditures of $15.5 billion that Consumers
expects to make from 2023 through 2027:
Of this amount, Consumers plans to spend $12.4 billion over the next five years to primarily maintain and
upgrade its gas infrastructure and electric distribution systems in order to enhance safety and reliability,
improve customer satisfaction, reduce energy waste on those systems, and facilitate its clean energy
transformation. The gas infrastructure projects comprise $6.3 billion to sustain deliverability, enhance
pipeline integrity and safety, and reduce methane emissions. Electric distribution and other projects
comprise $6.1 billion to strengthen circuits and substations, replace poles, and interconnect clean energy
resources. Consumers also expects to spend $3.1 billion on clean generation, which includes investments
in wind, solar, and hydro electric generation resources.
Regulation: Regulatory matters are a key aspect of Consumers’ business, particularly rate cases and
regulatory proceedings before the MPSC, which permit recovery of new investments while helping to
ensure that customer rates are fair and affordable. Important regulatory events and developments not
already discussed are summarized below.
2021 Gas Rate Case: In December 2021, Consumers filed an application with the MPSC seeking an
annual rate increase of $278 million, based on a 10.5-percent authorized return on equity for the projected
twelve-month period ending September 30, 2023. In July 2022, the MPSC approved a settlement
agreement authorizing an annual rate increase of $170 million, based on a 9.9-percent authorized return
on equity, effective October 1, 2022. The MPSC also approved the continuation of a revenue decoupling
mechanism, which annually reconciles Consumers’ actual weather-normalized non-fuel revenues with the
revenues approved.
2022 Gas Rate Case: In December 2022, Consumers filed an application with the MPSC seeking an
annual rate increase of $212 million, based on a 10.25-percent authorized return on equity for the
projected twelve-month period ending September 30, 2024. The filing requests authority to recover new
infrastructure investment and related costs that are expected to allow Consumers to improve system safety
and reliability and reduce fugitive methane emissions.
57
Gas infrastructure$6.3 billionElectric distribution and other $6.1 billionClean generation$3.1 billion Table of Contents
2022 Electric Rate Case: In April 2022, Consumers filed an application with the MPSC seeking a rate
increase of $272 million, based on a 10.25-percent authorized return on equity for the projected twelve-
month period ending December 31, 2023. In September 2022, Consumers revised its requested increase to
$292 million. The filing requested authority to recover future investments associated with distribution
system reliability, solar generation, environmental compliance, and enhanced technology.
In January 2023, the MPSC approved a settlement agreement authorizing an annual rate increase of
$155 million, based on a 9.9-percent authorized return on equity. The MPSC also approved a surcharge
for the recovery of $6 million of depreciation, property tax, and interest expense related to distribution
investments made in 2021 that exceeded what was authorized in rates in accordance with the
December 2020 electric rate order.
Looking Forward
CMS Energy and Consumers will continue to consider the impact on the triple bottom line of people,
planet, and profit in their daily operations as well as in their long-term strategic decisions. Consumers will
continue to seek fair and timely regulatory treatment that will support its customer-driven investment
plan, while pursuing cost-control measures that will allow it to maintain sustainable customer base rates.
The CE Way is an important means of realizing CMS Energy’s and Consumers’ purpose of achieving
world class performance while delivering hometown service.
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Results of Operations
CMS Energy Consolidated Results of Operations
Years Ended December 31
Net Income Available to Common Stockholders
Basic Earnings Per Average Common Share
Diluted Earnings Per Average Common Share
Years Ended December 31
Electric utility
Gas utility
NorthStar Clean Energy
Corporate interest and other
Discontinued operations
In Millions, Except Per Share Amounts
$
$
$
$
2022
2021
Change
827
$ 1,348
2.85
2.85
$
$
4.66
4.66
$
$
$
(521)
(1.81)
(1.81)
$
2022
567
378
34
(156)
4
In Millions
2021
Change
$
565
302
23
(144)
602
2
76
11
(12)
(598)
Net Income Available to Common Stockholders
$
827
$ 1,348
$
(521)
For a summary of net income available to common stockholders for 2021 versus 2020, as well as detailed
changes by reportable segment, see Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Results of Operations, in the Form 10-K for the fiscal year ended
December 31, 2021, filed February 10, 2022.
Amounts in the following tables are presented pre-tax, with the exception of income tax changes.
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Table of Contents
Presented in the following table is a summary of changes to net income available to common stockholders
for 2022 versus 2021:
Year Ended December 31, 2021
Reasons for the change
Consumers electric utility and gas utility
Electric sales
Gas sales
Electric rate increase
Gas rate increase
Lower non-operating retirement benefits expenses
Lower income tax expense
Voluntary revenue refunds, including one-time bill credit commitment1
Higher interest charges
Higher property taxes, reflecting higher capital spending
Higher depreciation and amortization
Higher other maintenance and operating expenses
Other
NorthStar Clean Energy
Corporate interest and other
Discontinued operations
Year Ended December 31, 2022
1
See Note 2, Regulatory Matters.
$
(38)
89
35
54
40
16
(37)
(24)
(23)
(11)
(7)
(16)
In Millions
$ 1,348
$
78
11
(12)
(598)
$
827
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Consumers Electric Utility Results of Operations
Presented in the following table are the detailed changes to the electric utility’s net income available to
common stockholders for 2022 versus 2021:
Year Ended December 31, 2021
Reasons for the change
Electric deliveries1 and rate increases
Rate increase, including return on higher renewable capital spending
$
Higher energy waste reduction program revenues
Voluntary revenue refunds, including one-time bill credit commitment2
Lower revenue due primarily to weather and sales mix
Lower other revenues
Maintenance and other operating expenses
Lower service restoration costs
Absence of 2021 fleet write-down and other asset impairments2
Higher energy waste reduction program costs
Higher vegetation management costs
Higher distribution, transmission, and generation expenses
Higher uncollectible accounts expense
Higher demand response costs
Voluntary separation plan expenses
Voluntary assistance to vulnerable customers2
Higher other maintenance and operating expenses
Depreciation and amortization
Lower depreciation rates, offset partially by higher capital spending
General taxes
Higher property taxes, reflecting higher capital spending, and other
Other income, net of expenses
Lower non-operating retirement benefits expenses
Lower other income, net of expenses
Interest charges
Income taxes
Year Ended December 31, 2022
35
27
(29)
(15)
(23)
55
34
(27)
(15)
(13)
(6)
(7)
(7)
(5)
(19)
26
(7)
In Millions
$
565
$
(5)
(10)
15
(13)
19
(12)
8
567
$
1
2
Deliveries to end-use customers were 37.3 billion kWh in 2022 and 36.2 billion kWh in 2021.
See Note 2, Regulatory Matters.
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Consumers Gas Utility Results of Operations
Presented in the following table are the detailed changes to the gas utility’s net income available to
common stockholders for 2022 versus 2021:
$
In Millions
$
302
$
152
(40)
(26)
(14)
8
(12)
8
378
$
92
54
17
(8)
(3)
11
(17)
(12)
(10)
(5)
(4)
(3)
14
(6)
25
(17)
Year Ended December 31, 2021
Reasons for the change
Gas deliveries1 and rate increases
Favorable weather and sales mix
Rate increase
Higher energy waste reduction program revenues
Voluntary revenue refund2
Lower other revenues
Maintenance and other operating expenses
Absence of 2021 fleet write-down and other asset impairments2
Higher energy waste reduction program costs
Higher uncollectible accounts expense
Ray Compressor Station impairment3
Voluntary assistance to vulnerable customers2
Voluntary separation plan expenses
Higher distribution, transmission, and compression expenses, and other
Depreciation and amortization
Increased plant in service, reflecting higher capital spending
General taxes
Higher property taxes, reflecting higher capital spending
Other income, net of expenses
Lower non-operating retirement benefits expenses
Lower other income, net of expenses
Interest charges
Income taxes
Lower income tax expense due primarily to accelerated amortization of excess
deferred income taxes and tax benefits associated with cost of removal4
Higher gas utility pre-tax earnings
Year Ended December 31, 2022
1
2
3
4
Deliveries to end-use customers were 315 bcf in 2022 and 282 bcf in 2021.
See Note 2, Regulatory Matters.
See Note 3, Contingencies and Commitments.
See Note 12, Income Taxes.
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NorthStar Clean Energy Results of Operations
Presented in the following table are the detailed changes to NorthStar Clean Energy’s net income
available to common stockholders for 2022 versus 2021:
Year Ended December 31, 2021
Reason for the change
Higher earnings from renewable wind projects
Higher earnings at DIG, offset partially by lower earnings from equity method
investees
Higher income taxes, due primarily to higher earnings
Year Ended December 31, 2022
Corporate Interest and Other Results of Operations
In Millions
$
$
$
23
10
6
(5)
34
Presented in the following table are the detailed changes to corporate interest and other results for 2022
versus 2021:
Year Ended December 31, 2021
Reasons for the change
Absence of 2021 reduction in state tax liabilities
Higher preferred stock dividends
Lower income tax benefit
Other
Year Ended December 31, 2022
Results of Discontinued Operations
In Millions
$
(144)
$
(7)
(5)
(2)
2
$
(156)
In October 2021, EnerBank was acquired by Regions Bank. As a result, EnerBank’s results of operations
through the date of the sale are presented as income from discontinued operations on CMS Energy’s
consolidated statements of income for the years ended December 31, 2021 and 2020. For additional
details see, Note 19, Exit Activities and Discontinued Operations.
Presented in the following table are the detailed changes to discontinued operations for 2022 versus 2021:
Year Ended December 31, 2021
Reason for the change
Additional EnerBank sale proceeds, net of tax and transaction costs
Absence of 2021 EnerBank sale proceeds, net of tax and transaction costs
Absence of 2021 earnings from discontinued operations, net of tax
Year Ended December 31, 2022
In Millions
$
602
$
4
(514)
(88)
4
$
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Cash Position, Investing, and Financing
At December 31, 2022, CMS Energy had $182 million of consolidated cash and cash equivalents, which
included $18 million of restricted cash and cash equivalents. At December 31, 2022, Consumers had
$60 million of consolidated cash and cash equivalents, which included $17 million of restricted cash and
cash equivalents.
For specific components of net cash provided by operating activities, net cash used in investing activities,
and net cash provided by (used in) financing activities for 2021 versus 2020, see Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations—Cash Position, Investing, and
Financing, in the Form 10-K for the fiscal year ended December 31, 2021, filed February 10, 2022.
Operating Activities
Presented in the following table are specific components of net cash provided by operating activities for
2022 versus 2021:
CMS Energy, including Consumers
Year Ended December 31, 2021
Reasons for the change
Lower net income
Non-cash transactions1
Absence of gain from 2021 sale of EnerBank2
Absence of cash used in discontinued operations in 20212
Unfavorable impact of changes in core working capital,3 due primarily to gas purchased at higher
prices and underrecovery of power supply costs4
Favorable impact of changes in other assets and liabilities
Year Ended December 31, 2022
Consumers
Year Ended December 31, 2021
Reasons for the change
Higher net income
Non-cash transactions1
Unfavorable impact of changes in core working capital,3 due primarily to gas purchased at higher
prices and underrecovery of power supply costs4
Favorable impact of changes in other assets and liabilities
Year Ended December 31, 2022
In Millions
$ 1,819
$
(517)
(143)
652
111
(1,080)
13
$
855
$ 1,982
$
77
(4)
(1,063)
2
$
994
1
2
3
4
Non-cash transactions comprise depreciation and amortization, changes in deferred income taxes and
investment tax credits, bad debt expense, and other non-cash operating activities and reconciling
adjustments.
For information regarding the sale of EnerBank, see Note 19, Exit Activities and Discontinued Operations.
Core working capital comprises accounts receivable, accrued revenue, inventories, accounts payable, and
accrued rate refunds.
For information regarding the underrecovery of power supply costs, see Note 2, Regulatory Matters.
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Investing Activities
Presented in the following table are specific components of net cash used in investing activities for 2022
versus 2021:
CMS Energy, including Consumers
Year Ended December 31, 2021
Reasons for the change
Higher capital expenditures
Absence of net proceeds from sale of EnerBank in 20211
Absence of cash provided by discontinued operations in 20211
Other investing activities, primarily higher proceeds from the sale of assets, offset partially by higher
costs to retire property
Year Ended December 31, 2022
Consumers
Year Ended December 31, 2021
Reasons for the change
Higher capital expenditures
Other investing activities, primarily higher proceeds from the sale of assets, offset partially by higher
costs to retire property
Year Ended December 31, 2022
In Millions
$ (1,233)
$
(298)
(893)
(78)
26
$ (2,476)
$ (2,185)
$
(187)
28
$ (2,344)
1
For information regarding the sale of EnerBank, see Note 19, Exit Activities and Discontinued Operations.
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Financing Activities
Presented in the following table are specific components of net cash provided by (used in) financing
activities for 2022 versus 2021:
CMS Energy, including Consumers
Year Ended December 31, 2021
Reasons for the change
Higher debt issuances
Lower debt retirements
Higher borrowings of notes payable
Higher issuances of common stock
Issuance of preferred stock in 2021
Higher payments of dividends on common and preferred stock
Proceeds from the sale of membership interest in VIE to tax equity investor1
Higher contributions from noncontrolling interest
Absence of cash used in discontinued operations in 20212
Other financing activities, primarily the payment of a long-term contract liability, offset partially by
the collection of customer advances for construction
Year Ended December 31, 2022
Consumers
Year Ended December 31, 2021
Reasons for the change
Higher debt issuances
Higher debt retirements
Higher borrowings of notes payable
Higher repayments of borrowings from CMS Energy
Higher stockholder contribution from CMS Energy
Higher payments of dividends on common stock
Other financing activities, primarily the collection of customer advances for construction
Year Ended December 31, 2022
In Millions
$
(295)
$ 1,564
129
20
43
(224)
(37)
49
1
84
(7)
$ 1,327
$
212
$ 1,464
(1)
20
(402)
110
(47)
10
$ 1,366
1
2
For information regarding the sale of a membership interest to a tax equity investor, see Note 18, Variable
Interest Entities.
For information regarding the sale of EnerBank, see Note 19, Exit Activities and Discontinued Operations.
Capital Resources and Liquidity
CMS Energy and Consumers expect to have sufficient liquidity to fund their present and future
commitments. CMS Energy uses dividends and tax-sharing payments from its subsidiaries and external
financing and capital transactions to invest in its utility and non-utility businesses, retire debt, pay
dividends, and fund its other obligations. The ability of CMS Energy’s subsidiaries, including Consumers,
to pay dividends to CMS Energy depends upon each subsidiary’s revenues, earnings, cash needs, and
other factors. In addition, Consumers’ ability to pay dividends is restricted by certain terms included in its
articles of incorporation and potentially by FERC requirements and provisions under the Federal Power
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Act and the Natural Gas Act. For additional details on Consumers’ dividend restrictions, see Item 8.
Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 4,
Financings and Capitalization—Dividend Restrictions. During the year ended December 31, 2022,
Consumers paid $769 million in dividends on its common stock to CMS Energy.
Consumers uses cash flows generated from operations and external financing transactions, as well as
stockholder contributions from CMS Energy, to fund capital expenditures, retire debt, pay dividends, and
fund its other obligations. Consumers also uses these sources of funding to contribute to its employee
benefit plans.
Financing and Capital Resources: CMS Energy and Consumers rely on the capital markets to fund their
robust capital plan. Barring any sustained market dislocations or disruptions, CMS Energy and
Consumers expect to continue to have ready access to the financial and capital markets and will continue
to explore possibilities to take advantage of market opportunities as they arise with respect to future
funding needs. If access to these markets were to diminish or otherwise become restricted, CMS Energy
and Consumers would implement contingency plans to address debt maturities, which could include
reduced capital spending.
In January 2023, Consumers entered into a bond purchase agreement to issue an aggregate principal
amount of $400 million of first mortgage bonds through a private placement offering. The bonds, which
were priced in November 2022, carry a weighted average interest rate of 5.251 percent and mature at
varying dates between 2026 and 2037. The bonds are expected to be issued in May 2023. The proceeds of
the bonds will be used to finance a portion of the purchase price of the New Covert Generating Facility
and for general corporate purposes. For more information on the purchase of the New Covert Generating
Facility, see Consumers Electric Utility Outlook and Uncertainties — Clean Energy Plan.
Also in January 2023, Consumers issued $425 million of first mortgage bonds that mature in March 2028
and bear interest at a rate of 4.650 percent. The proceeds of the bonds have been used to repay a portion
of the $1.0 billion aggregate principal amount outstanding under Consumers’ term loan credit agreement
and for general corporate purposes. For more information on Consumers’ recent financing activities, see
Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—
Note 4, Financings and Capitalization.
Under an existing equity offering program, CMS Energy may sell shares of its common stock having an
aggregate sales price of up to $500 million in privately negotiated transactions, in “at the market”
offerings, through forward sales transactions, or otherwise.
CMS Energy has entered into forward sales transactions under this program, which allow CMS Energy to
either physically settle the contracts by issuing shares of its common stock at the then-applicable forward
sale price specified by the agreement or net settle the contracts through the delivery or receipt of cash or
shares. CMS Energy may settle the contracts at any time through their maturity dates, and presently
intends to physically settle the contracts by delivering shares of its common stock. As of
December 31, 2022, these contracts have an aggregate sales price of $439 million, maturing through
February 2024. For more information on these forward sale contracts, see Item 8. Financial Statements
and Supplementary Data—Notes to the Consolidated Financial Statements—Note 4, Financings and
Capitalization—Issuance of Common Stock.
At December 31, 2022, CMS Energy had $532 million of its revolving credit facility available and
Consumers had $1.3 billion available under its revolving credit facilities. CMS Energy and Consumers
use these credit facilities for general working capital purposes and to issue letters of credit. An additional
source of liquidity is Consumers’ commercial paper program, which allows Consumers to issue, in one or
more placements, up to $500 million in aggregate principal amount of commercial paper notes with
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maturities of up to 365 days at market interest rates. These issuances are supported by Consumers’
revolving credit facilities. While the amount of outstanding commercial paper does not reduce the
available capacity of the revolving credit facilities, Consumers does not intend to issue commercial paper
in an amount exceeding the available capacity of the facilities. At December 31, 2022, there were
$20 million of commercial paper notes outstanding under this program.
Certain of CMS Energy’s and Consumers’ credit agreements contain covenants that require CMS Energy
and Consumers to maintain certain financial ratios, as defined therein. At December 31, 2022, no default
had occurred with respect to any financial covenants contained in CMS Energy’s and Consumers’ credit
agreements. CMS Energy and Consumers were each in compliance with these covenants as of
December 31, 2022, as presented in the following table:
CMS Energy, parent only
Debt to Capital1
Consumers
Debt to Capital2
Limit
Actual
< 0.70 to 1.0
0.58 to 1.0
< 0.65 to 1.0
0.50 to 1.0
1
2
Applies to CMS Energy’s revolving credit agreement and letter of credit reimbursement agreement, and a
term loan agreement of a subsidiary of NorthStar Clean Energy.
Applies to Consumers’ revolving credit agreements and term loan agreement.
Material Cash Requirements: Based on the present investment plan, during 2023, Consumers projects
capital expenditures of $3.7 billion. Additionally, CMS Energy’s other material cash requirements for
2023 include $3.2 billion of purchase obligations and $1.7 billion of principal and interest payments on
long-term debt. Consumers’ other material cash requirements for 2023 comprise $3.0 billion of purchase
obligations and $1.4 billion of principal and interest payments on long-term debt.
Components of CMS Energy’s and Consumers’ cash management plan include controlling operating
expenses and capital expenditures and evaluating market conditions for financing and refinancing
opportunities. CMS Energy’s and Consumers’ present level of cash and expected cash flows from
operating activities, together with access to sources of liquidity, are anticipated to be sufficient to fund
contractual obligations and other material cash requirements for 2023 and beyond.
Capital Expenditures: Over the next five years, Consumers expects to make substantial capital
investments. Consumers may revise its forecast of capital expenditures periodically due to a number of
factors, including environmental regulations, MPSC approval or disapproval, business opportunities,
market volatility, economic trends, and the ability to access capital. Presented in the following table are
Consumers’ estimated capital expenditures, including lease commitments, for 2023 through 2027:
Consumers
Electric utility operations
Gas utility operations
Total Consumers
2023
2024
2025
2026
2027
Total
In Billions
$
$
2.5
1.2
3.7
$
$
1.6
1.3
2.9
$
$
1.9
1.3
3.2
$
$
1.6
1.3
2.9
$
$
1.6
1.2
2.8
$
$
9.2
6.3
15.5
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Other Material Cash Requirements: Presented in the following table are CMS Energy’s and Consumers’
material cash obligations from known contractual and other legal obligations:
December 31, 2022
CMS Energy, including Consumers
Long-term debt
Interest payments on long-term debt
Purchase obligations
AROs
Total obligations
Consumers
Long-term debt
Interest payments on long-term debt
Purchase obligations
AROs
Total obligations
In Billions
Payments Due
Less Than One Year
Total
$
$
$
$
1.1
0.6
3.2
—
4.9
1.0
0.4
3.0
—
4.4
$
$
14.4
13.2
12.5
2.7
42.8
$
10.3
7.8
11.9
2.6
$
32.6
Purchase obligations arise from long-term contracts for the purchase of commodities and related services,
plant purchase commitments, and construction and service agreements. The commodities and related
services include long-term PPAs, natural gas and associated transportation, and coal and associated
transportation. For more information on CMS Energy’s and Consumers’ purchase obligations, see Item 8.
Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 3,
Contingencies and Commitments—Contractual Commitments.
CMS Energy, Consumers, and certain of their subsidiaries enter into various arrangements in the normal
course of business to facilitate commercial transactions with third parties. These arrangements include
indemnities, surety bonds, letters of credit, and financial and performance guarantees. For additional
details on indemnity and guarantee arrangements, see Item 8. Financial Statements and Supplementary
Data—Notes to the Consolidated Financial Statements—Note 3, Contingencies and Commitments—
Guarantees. For additional details on letters of credit and CMS Energy’s forward sales contracts, see
Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—
Note 4, Financings and Capitalization.
Outlook
Several business trends and uncertainties may affect CMS Energy’s and Consumers’ financial condition
and results of operations. These trends and uncertainties could have a material impact on CMS Energy’s
and Consumers’ consolidated income, cash flows, or financial position. For additional details regarding
these and other uncertainties, see Forward-Looking Statements and Information; Item 1A. Risk Factors;
and Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial
Statements—Note 2, Regulatory Matters and Note 3, Contingencies and Commitments.
Consumers Electric Utility Outlook and Uncertainties
Clean Energy Plan: Consumers’ Clean Energy Plan details its strategy to meet customers’ long-term
energy needs and provides the foundation for its goal to achieve net-zero carbon emissions from its
electric business by 2040. Under this net-zero goal, Consumers plans to eliminate the impact of carbon
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emissions created by the electricity it generates or purchases for customers. Additionally, through its
Clean Energy Plan, Consumers continues to make progress on expanding its customer programs, namely
its demand response, energy efficiency, and conservation voltage reduction programs, as well as
increasing its renewable energy and pumped storage generation.
The Clean Energy Plan was originally outlined in Consumers’ 2018 IRP, which was approved by the
MPSC in 2019. In June 2021, Consumers filed its 2021 IRP with the MPSC, proposing updates to the
Clean Energy Plan. In April 2022, Consumers and a broad coalition of key stakeholders, including
customer groups, environmental organizations, the MPSC Staff, energy industry representatives, and the
Michigan Attorney General, filed a settlement agreement with the MPSC resolving Consumers’
2021 IRP. The MPSC approved that settlement agreement in June 2022.
Under its 2021 IRP, Consumers will eliminate the use of coal-fueled generation in 2025 and expects to
meet 90 percent of its customers’ needs with clean energy sources by 2040. Specifically, the 2021 IRP
provides for:
•
•
•
the retirement of the D.E. Karn coal-fueled generating units, totaling 515 MW of nameplate
capacity, in 2023
the retirement of the J.H. Campbell coal-fueled generating units, totaling 1,407 MW of nameplate
capacity, in 2025
the retirement of the D.E. Karn oil and gas-fueled generating units, totaling 1,219 MW of
nameplate capacity, in 2031, the units’ original retirement date
The MPSC has authorized Consumers to issue securitization bonds to finance the recovery of and return
on the D.E. Karn coal-fueled generating units. Under the 2021 IRP, Consumers will receive regulatory
asset treatment to recover the remaining book value of the J.H. Campbell coal-fueled generating units, as
well as a 9.0-percent return on equity, commencing in 2025.
Under the 2021 IRP, Consumers will bridge the transition away from coal generation with:
•
•
the purchase of the New Covert Generating Facility, a natural gas-fueled generating unit with
1,176 MW of nameplate capacity in Van Buren County, Michigan, for $815 million, subject to
certain adjustments, in 2023; the purchase was approved by FERC in November 2022
a one-time competitive solicitation to acquire approximately 700 MW of capacity through PPAs
from sources able to deliver to Michigan’s Lower Peninsula beginning in 2025; of this amount,
500 MW would be from dispatchable sources
These actions are expected to allow Consumers to continue providing controllable sources of electricity to
customers while expanding its investment in renewable energy. The 2021 IRP forecasts renewable energy
capacity levels of 30 percent in 2025, 43 percent in 2030, and 61 percent in 2040, including the addition
of nearly 8,000 MW of solar generation. Additionally, the 2021 IRP will accelerate Consumers’
deployment of battery storage from 2030 to 2024, with 75 MW of energy storage by 2027 and an
additional 475 MW by 2040.
Under its 2021 IRP, Consumers will continue to bid new capacity competitively and will own and operate
approximately 50 percent of new capacity, with the remainder being built and owned by third parties.
Additionally, Consumers will continue to earn a return equal to its weighted-average cost of capital on
payments made under new competitively bid PPAs approved by the MPSC.
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As a result of requests for proposals, Consumers has entered into PPAs to purchase renewable capacity,
energy, and RECs from solar generating facilities and build transfer agreements to purchase solar
generating facilities. Presented in the following illustration is the aggregate renewable capacity that
Consumers expects to add to its portfolio as a result of these agreements:
In support of its 2021 IRP, Consumers issued a request for proposals in September 2022 to acquire
approximately 700 MW of capacity through PPAs from sources able to deliver to Michigan’s Lower
Peninsula beginning in 2025. Specifically, Consumers solicited offers to acquire 500 MW of capacity
from dispatchable sources and 200 MW of capacity from intermittent resources and dispatchable, non-
intermittent clean capacity resources (including battery storage resources).
In March 2022, the U.S. Department of Commerce announced it is opening inquiries into whether
manufacturers of solar modules that are produced in certain countries using supplies obtained from China
are circumventing antidumping and countervailing duties which apply to Chinese modules. The
U.S. Department of Commerce has made an initial determination that four manufacturers have
circumvented tariffs. The remainder of this inquiry process is expected to continue through at least the
first half of 2023. In June 2022, the Biden Administration paused for two years the imposition of duties
that might result from the U.S. Department of Commerce’s pending inquiries. In addition, the Uyghur
Forced Labor Prevention Act, which was enacted in December 2021 and became effective in June 2022,
along with an earlier withhold release order that U.S. Customs and Border Protection issued in mid-2021,
restrict the importation of goods sourced from the Xinjiang region of China. Solar modules whose raw
materials come from the Xinjiang region are a key focus of these import laws. Consumers continues to
closely monitor these matters and their potential impacts on availability of solar modules and timing
associated with pending and planned solar projects.
Renewable Energy Plan: The 2016 Energy Law raised the renewable energy standard to 15 percent in
2021. Consumers is required to submit RECs, which represent proof that the associated electricity was
generated from a renewable energy resource, in an amount equal to at least 15 percent of Consumers’
electric sales volume each year. Under its renewable energy plan, Consumers has met the 15-percent
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Capacity (MW)PPAOwned2022Actual202320242025025050075010001250 Table of Contents
requirement and expects to continue meeting the requirement going forward with a combination of newly
generated RECs and previously generated RECs carried over from prior years.
Under Consumers’ renewable energy plan, the MPSC has approved the acquisition of up to 525 MW of
new wind generation projects and authorized Consumers to earn a 10.7-percent return on equity on any
projects approved by the MPSC. Specifically, the MPSC has approved the following:
•
•
•
purchase and construction of a 150-MW wind generation project in Gratiot County, Michigan; the
project became operational and Consumers took full ownership in 2020
purchase of a 166-MW wind generation project in Hillsdale, Michigan; the project became
operational and Consumers took full ownership in February 2021
purchase of a wind generation project under development, with capacity of up to 201 MW, in
Gratiot County, Michigan; Consumers expects to take full ownership and begin commercial
operation of the project in 2023
The MPSC also approved the execution of a 20-year PPA under which Consumers will purchase 100 MW
of renewable capacity, energy, and RECs from a 149-MW solar generating facility to be constructed in
Calhoun County, Michigan; the facility is targeted to be operational in 2024.
Voluntary Large Customer Renewable Energy Program: Consumers provides service under a program
that provides large full-service electric customers with the opportunity to advance the development of
renewable energy beyond the requirements of the 2016 Energy Law. In September 2021, the MPSC
approved Consumers’ request to amend its renewable energy plan to remove the annual subscription limit
associated with this program. The MPSC also approved up to 1,000 MW of new wind and solar
generation projects between 2024 and 2027 to meet customer demand for the program. Consumers will
competitively solicit for additional renewable energy assets based on customer applications and will
construct the assets based on customer subscriptions to the program.
Electric Customer Deliveries and Revenue: Consumers’ electric customer deliveries are seasonal and
largely dependent on Michigan’s economy. The consumption of electric energy typically increases in the
summer months, due primarily to the use of air conditioners and other cooling equipment. In addition,
Consumers’ electric rates, which follow a seasonal rate design, are higher in the summer months than in
the remaining months of the year. Each year in June, electric residential customers transition to a summer
peak time-of-use rate that allows them to take advantage of lower-cost energy during off-peak times
during the summer months. Thus, customers can reduce their electric bills by shifting their consumption
from on-peak to off-peak times.
Over the next five years, Consumers expects weather-normalized electric deliveries to remain relatively
stable compared to 2022. This outlook reflects the effects of energy waste reduction programs offset
largely by modest growth in electric demand. Actual delivery levels will depend on:
energy conservation measures and results of energy waste reduction programs
•
• weather fluctuations
• Michigan’s economic conditions, including utilization, expansion, or contraction of
manufacturing facilities, population trends, electric vehicle adoption, and housing activity
Electric ROA: Michigan law allows electric customers in Consumers’ service territory to buy electric
generation service from alternative electric suppliers in an aggregate amount capped at ten percent of
Consumers’ sales, with certain exceptions. At December 31, 2022, electric deliveries under the ROA
program were at the ten-percent limit. Of Consumers’ 1.9 million electric customers, fewer than 300, or
0.02 percent, purchased electric generation service under the ROA program.
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The 2016 Energy Law established a path to ensure that forward capacity is secured for all electric
customers in Michigan, including customers served by alternative electric suppliers under ROA. The law
also authorized the MPSC to ensure that alternative electric suppliers have procured enough capacity to
cover their anticipated capacity requirements for the four-year forward period. In 2017, the MPSC issued
an order establishing a state reliability mechanism for Consumers. Under this mechanism, if an alternative
electric supplier does not demonstrate that it has procured its capacity requirements for the four-year
forward period, its customers will pay a set charge to the utility for capacity that is not provided by the
alternative electric supplier.
During 2017, the MPSC issued orders finding that it has statutory authority to determine and implement a
local clearing requirement, which requires all electric suppliers to demonstrate that a portion of the
capacity procured to serve customers during peak demand times is located in the MISO footprint in
Michigan’s Lower Peninsula. In 2020, the Michigan Supreme Court affirmed the MPSC’s statutory
authority to implement a local clearing requirement on individual electric providers.
In 2020, ABATE and another intervenor filed a complaint against the MPSC in the U.S. District Court for
the Eastern District of Michigan challenging the constitutionality of a local clearing requirement. The
complaint requests the federal court to issue a permanent injunction prohibiting the MPSC from
implementing a local clearing requirement on individual electric providers. Consumers filed a motion to
intervene and defend the local clearing requirement in that federal litigation; this motion was granted in
January 2021 and the complaint is pending decision by the court after a non-jury trial.
Electric Rate Matters: Rate matters are critical to Consumers’ electric utility business. For additional
details on rate matters, see Item 8. Financial Statements and Supplementary Data—Notes to the
Consolidated Financial Statements—Note 2, Regulatory Matters and Note 3, Contingencies and
Commitments.
MPSC Reliability Report and Audit: In October 2022, the MPSC ordered the state’s two largest electric
utilities, including Consumers, to report on their compliance with regulations and past MPSC orders
governing the utilities’ response to outages and downed lines. Also, the MPSC Staff was directed to
engage a third-party auditor to review all equipment and operations of the two utilities’ distribution
systems.
Consumers has responded to the MPSC’s order and awaits further action by the MPSC. Consumers is
committed to working with other state utilities, the third-party auditor, and the MPSC to continue
improving electric reliability and safety in Michigan.
2022 Electric Rate Case: In April 2022, Consumers filed an application with the MPSC seeking a rate
increase of $272 million, based on a 10.25-percent authorized return on equity for the projected twelve-
month period ending December 31, 2023. In September 2022, Consumers revised its requested increase to
$292 million. The filing requested authority to recover future investments associated with distribution
system reliability, solar generation, environmental compliance, and enhanced technology.
In January 2023, the MPSC approved a settlement agreement authorizing an annual rate increase of
$155 million, based on a 9.9-percent authorized return on equity. The MPSC also approved a surcharge
for the recovery of $6 million of depreciation, property tax, and interest expense related to distribution
investments made in 2021 that exceeded what was authorized in rates in accordance with the
December 2020 electric rate order. Additionally, the approved settlement provides for a pension and
OPEB tracker that will allow Consumers to defer the future recovery or refund of pension and OPEB
expenses above or below the amounts used to set existing rates, respectively. For additional details on the
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settlement agreement, see Item 8. Financial Statements and Supplementary Data—Notes to the
Consolidated Financial Statements—Note 2, Regulatory Matters.
PSCR Plan: Consumers submitted its 2023 PSCR plan to the MPSC in September 2022. As a result of
higher-than-normal power supply costs during 2022, Consumers included a projection of its full-year
2022 underrecovery in its 2023 PSCR plan. In accordance with its proposed plan, Consumers self-
implemented the 2023 PSCR charge beginning in January 2023.
In January 2023, Consumers filed a motion for a temporary order in its 2023 PSCR plan, requesting that
the MPSC approve only a third of the 2022 underrecovery amount for recovery in 2023, with the
remaining amount to be recovered equally during 2024 and 2025. Recovering the 2022 underrecovery
over three years will provide immediate relief to electric customers, and the financial impact will be
neutral to Consumers’ earnings. For additional details, see Item 8. Financial Statements and
Supplementary Data—Notes to the Consolidated Financial Statements—Note 2, Regulatory Matters.
Retention Incentive Program: Under its Clean Energy Plan, Consumers will retire the D.E. Karn coal-
fueled electric generating units in 2023. In 2019, Consumers announced a retention incentive program to
ensure necessary staffing at the D.E. Karn generating complex through the anticipated retirement of the
coal-fueled generating units. Based on the number of employees that have chosen to participate, the
aggregate cost of the program through 2023 is estimated to be $35 million. In its order in Consumers’
2020 electric rate case, the MPSC approved deferred accounting treatment for these costs. Consumers
expects to recognize $2 million of retention benefit costs in 2023; this expense will be deferred as a
regulatory asset.
Under the 2021 IRP, Consumers will retire the J.H. Campbell coal-fueled generating units in 2025.
Similar to the D.E. Karn program, Consumers is providing a retention incentive program to ensure
necessary staffing at the J.H. Campbell generating complex through retirement. Based on the number of
employees that have chosen to participate, the aggregate cost of the program through 2025 is estimated to
be $50 million. Consumers expects to recognize $16 million of retention benefit costs in 2023. The
2021 IRP provides deferred accounting treatment for retention costs recognized during 2022; deferral of
costs beyond 2022 was approved as part of the 2022 electric rate case settlement. For additional details on
these programs, see Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated
Financial Statements—Note 19, Exit Activities and Discontinued Operations.
Electric Environmental Outlook: Consumers’ electric operations are subject to various federal, state,
and local environmental laws and regulations. Consumers estimates that it will incur capital expenditures
of $210 million from 2023 through 2027 to continue to comply with RCRA, the Clean Air Act, and
numerous other environmental regulations. Consumers expects to recover these costs in customer rates,
but cannot guarantee this result. Multiple environmental laws and regulations are subject to litigation.
Consumers’ primary environmental compliance focus includes, but is not limited to, the following
matters.
Air Quality: Multiple air quality regulations apply, or may apply, to Consumers’ electric utility.
In 2012, the EPA published emission standards for electric generating units, known as MATS, based on
Section 112 of the Clean Air Act. Consumers has complied, and continues to comply, with the MATS
regulation, and does not expect MATS to materially impact its environmental strategy.
CSAPR requires Michigan and many other states to improve air quality by reducing power plant
emissions that, according to EPA modeling, contribute to ground-level ozone in other downwind states.
Since its 2015 effective date, CSAPR has been revised several times. One such revision made in 2021
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provided updated emission reductions through 2024 from electric generating units in 12 states, including
Michigan. Consumers believes the impact of this rule on its generation operations should be minimal.
In March 2022, the EPA proposed another revision to CSAPR that affects Michigan. If finalized as
proposed, this revision would reduce nitrogen oxides allowance budgets beginning in 2023 and would
change the mechanism for allocating such allowances on a year-over-year basis. While prior CSAPR
regulations have primarily focused on electric generating units, this latest proposal also includes other
sources of nitrogen oxides emissions. If the EPA finalizes the proposed CSAPR revision in its current
form, Consumers may incur significant costs in allowance purchases and/or equipment retrofits.
Consumers will continue to monitor this rulemaking and its impact on Consumers’ electric operations.
In 2015, the EPA lowered the NAAQS for ozone and made it more difficult to construct or modify power
plants and other emission sources in areas of the country that do not meet the ozone standard. In 2018, the
EPA designated certain areas of Michigan as not meeting the ozone standard. None of Consumers’ fossil-
fuel-fired generating units are located in these areas. Additionally, in January 2023, the EPA proposed
lowering the NAAQS for particulate matter. Consumers will continue to monitor NAAQS rulemakings
and evaluate potential impacts to its generating assets.
Consumers’ strategy to comply with air quality statutes and regulations involved the installation and
operation of emission control equipment at some facilities and the suspension of operations at others;
however, Consumers continues to evaluate these rules in conjunction with other EPA and EGLE
rulemakings, litigation, executive orders, treaties, and congressional actions. This evaluation could result
in:
•
•
•
•
•
•
a change in Consumers’ fuel mix
changes in the types of generating units Consumers may purchase or build in the future
changes in how certain units are operated
the retirement, mothballing, or repowering with an alternative fuel of some of Consumers’
generating units
changes in Consumers’ environmental compliance costs
the purchase or sale of allowances
Greenhouse Gases: There have been numerous legislative and regulatory initiatives at the state, regional,
national, and international levels that involve the potential regulation and reporting of greenhouse gases.
Consumers continues to monitor and comment on these initiatives, as appropriate.
In June 2022, the EPA announced its plan to propose a new rule to address greenhouse gas emissions
from existing fossil-fuel-fired electric generating units. Under its 2021 IRP, Consumers will eliminate the
use of coal-fueled generation in 2025. Therefore, it is unlikely that the proposed rule will materially
impact Consumers over the remaining operating lives of these coal-fueled facilities. However, Consumers
cannot predict the form and extent of such potential regulation on its natural gas-fueled generation until
this rule is released.
Under the Paris Agreement, an international agreement addressing greenhouse gas emissions, the U.S. has
committed to reduce greenhouse gas emissions by 50 to 52 percent from 2005 levels by 2030. Under its
2021 IRP, Consumers plans to reduce carbon emissions from its electric business by 60 percent from
2005 levels in 2025. At this time, Consumers does not expect any adverse changes to its environmental
strategy as a result of these events, as its plans exceed the nationally committed reduction. The
commitment made by the U.S. is not binding without new Congressional legislation.
In 2020, Michigan’s Governor signed an executive order creating the Michigan Healthy Climate Plan,
which outlines goals for Michigan to achieve economy-wide net-zero greenhouse gas emissions and to be
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carbon neutral by 2050. The executive order aims for a 28-percent reduction below 2005 levels of
greenhouse gas emissions by 2025. These goals are aspirational in nature and any changes in law or
regulation to achieve these goals would need to be approved by the Michigan Legislature or the relevant
regulatory agency. Additionally, Consumers has already surpassed the 28-percent reduction milestone for
its owned electric generation and previously announced a goal of achieving net-zero carbon emissions
from its electric business by 2040. Consumers does not expect any adverse changes to its environmental
strategy as a result of these events.
Increased frequency or intensity of severe or extreme weather events, including those due to climate
change, could materially impact Consumers’ facilities, energy sales, and results of operations. Consumers
is unable to predict these events or their financial impact; however, Consumers evaluates the potential
physical impacts of climate change on its operations, including increased frequency or intensity of storm
activity; increased precipitation; increased temperature; and changes in lake and river levels. Consumers
released a report addressing the physical risks of climate change on its infrastructure in February 2022.
Consumers is taking steps to mitigate these risks as appropriate.
While Consumers cannot predict the outcome of changes in U.S. policy or of other legislative, executive,
or regulatory initiatives involving the potential regulation or reporting of greenhouse gases, it intends to
move forward with its Clean Energy Plan, its present net-zero goals, and its emphasis on reliable and
resilient supply. Litigation, international treaties, executive orders, federal laws and regulations (including
regulations by the EPA), and state laws and regulations, if enacted or ratified, could ultimately impact
Consumers. Consumers may be required to:
replace equipment
install additional emission control equipment
purchase emission allowances or credits (including potential greenhouse gas offset credits)
curtail operations
arrange for alternative sources of supply
purchase facilities that generate fewer emissions
•
•
•
•
•
•
• mothball or retire facilities that generate certain emissions
•
•
pursue energy efficiency or demand response measures more swiftly
take other steps to manage or lower the emission of greenhouse gases
Although associated capital or operating costs relating to greenhouse gas regulation or legislation could
be material and cost recovery cannot be assured, Consumers expects to recover these costs in rates
consistent with the recovery of other reasonable costs of complying with environmental laws and
regulations.
CCRs: In 2015, the EPA published a rule regulating CCRs under RCRA. This rule adopts minimum
standards for beneficially using and disposing of non-hazardous CCRs and establishes technical
requirements for CCR landfills and surface impoundments. The rule also sets out conditions under which
some CCR units would be forced to cease receiving CCR wastewater and initiate closure. Due to
litigation, many aspects of the rule have been remanded to the EPA, resulting in more proposed and final
rules. Anticipated litigation related to remanded aspects will add uncertainty around requirements for
compliance and state permit programs.
In 2020, the EPA amended the conditions of forced closure and required all unlined surface
impoundments to initiate closure by mid-2021, unless conditions that satisfied an alternate closure
schedule were approved by the EPA. Consumers, with agreement from EGLE, completed the work
necessary to initiate closure by excavating CCRs or placing a final cover over each of its relevant CCR
units prior to the closure initiation deadline.
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Separately, Congress passed legislation in 2016 allowing participating states to develop permitting
programs for CCRs under RCRA Subtitle D. In 2018, the Michigan Legislature adopted standards for a
permitting program, which requires the EPA’s authorization. In 2020, EGLE submitted a regulatory
package for Michigan’s permit program to the EPA for its review, which is still pending. Federal
rulemaking challenges may delay EPA approval of the Michigan permitting program.
Consumers has historically been authorized to recover in electric rates costs related to coal ash disposal
sites.
Water: Multiple water-related regulations apply, or may apply, to Consumers.
The EPA regulates cooling water intake systems of existing electric generating plants under
Section 316(b) of the Clean Water Act. The rules seek to reduce alleged harmful impacts on aquatic
organisms, such as fish. In 2018, Consumers submitted to EGLE for approval all required studies and
recommended plans to comply with Section 316(b), but has not yet received final approval.
The EPA also regulates the discharge of wastewater through its effluent limitation guidelines for steam
electric generating plants. In 2020, the EPA revised previous guidelines related to the discharge of certain
wastewater, but allowed for extension of the compliance deadline from the end of 2023 to the end of
2025, upon approval by EGLE through the NPDES permitting process. Consumers received such an
extension to 2025 for its J.H. Campbell generating facility, which it plans to retire in 2025. Consumers
does not expect any adverse changes to its environmental strategy as a result of these revisions or any
litigation of the guidelines.
In recent years, the EPA and the U.S. Army Corps of Engineers have proposed changes to the scope of
federal jurisdiction over bodies of water and to the frequency of dual jurisdiction in states with authority
to regulate the same waters; Michigan is one such state. Additionally, a final 2022 rulemaking changed
the definition of “Waters of the United States.” Consumers does not expect adverse changes to its
environmental strategy as a result of the current interpretations.
Many of Consumers’ facilities maintain NPDES permits, which are vital to the facilities’ operations.
Consumers applies for renewal of these permits every five years. Failure of EGLE to renew any NPDES
permit, a successful appeal against a permit, a change in the interpretation or scope of NPDES permitting,
or onerous terms contained in a permit could have a significant detrimental effect on the operations of a
facility.
Protected Wildlife: Multiple regulations apply, or may apply, to Consumers relating to protected species
and habitats.
Statutes like the federal Endangered Species Act, the Migratory Bird Treaty Act, and the Bald and Golden
Eagle Protection Act may impact operations at Consumers’ facilities. In 2021, the U.S. Fish and Wildlife
Service announced its intent to regulate incidental take under the Migratory Bird Treaty Act. Any
resulting permitting and monitoring fees and/or restrictions on operations could impact Consumers’
existing and future operations, including wind and solar generation facilities.
Additionally, Consumers is monitoring proposed changes to the listing status of several species within its
operational area due to an increase in wildlife-related regulatory activity at federal and state levels. A
change in species listed under the Endangered Species Act may impact Consumers’ costs to mitigate its
impact on protected species and habitats at certain existing facilities as well as siting choices for new
facilities.
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Other Matters: Other electric environmental matters could have a material impact on Consumers’
outlook. For additional details on other electric environmental matters, see Item 8. Financial Statements
and Supplementary Data—Notes to the Consolidated Financial Statements—Note 3, Contingencies and
Commitments—Consumers Electric Utility Contingencies—Electric Environmental Matters.
Consumers Gas Utility Outlook and Uncertainties
Gas Deliveries: Consumers’ gas customer deliveries are seasonal. The peak demand for natural gas
typically occurs in the winter due to colder temperatures and the resulting use of natural gas as heating
fuel.
Over the next five years, Consumers expects weather-normalized gas deliveries to remain stable relative
to 2022. This outlook reflects the effects of energy waste reduction programs offset largely by modest
growth in gas demand. Actual delivery levels will depend on:
use by power producers
availability and development of renewable energy sources
gas price changes
• weather fluctuations
•
•
•
• Michigan’s economic conditions, including population trends and housing activity
•
•
the price or demand of competing energy sources or fuels
energy efficiency and conservation impacts
Gas Rate Matters: Rate matters are critical to Consumers’ gas utility business. For additional details on
rate matters, see Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated
Financial Statements—Note 2, Regulatory Matters and Note 3, Contingencies and Commitments.
2022 Gas Rate Case: In December 2022, Consumers filed an application with the MPSC seeking an
annual rate increase of $212 million, based on a 10.25-percent authorized return on equity for the
projected twelve-month period ending September 30, 2024. The filing requests authority to recover new
infrastructure investment and related costs that are expected to allow Consumers to improve system safety
and reliability and reduce fugitive methane emissions. Presented in the following table are the
components of the requested increase in revenue:
Projected Twelve-Month Period Ending September 30
Components of the requested rate increase
Investment in rate base
Operating and maintenance costs
Cost of capital
Sales and other revenue
Total
$
2024
80
47
63
22
$
212
The filing also seeks approval of a pension and OPEB tracker that will allow Consumers to defer for
future recovery or refund pension and OPEB expense above the amounts used to set existing rates and an
uncollectible deferral/refund mechanism.
Postretirement Benefits Expense Accounting Application: In January 2023, Consumers filed an
application with the MPSC, requesting authority to defer the future recovery or refund of pension and
OPEB expenses above or below the amounts used to set existing rates, respectively. Consumers requested
this accounting treatment to begin in 2023 and to continue until rates are reset in the 2022 gas rate case.
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Depreciation Rate Case: In December 2021, Consumers filed a depreciation case related to its gas utility
plant property. In this case, Consumers requested a decrease in depreciation expense of $1 million
annually based on December 31, 2020 balances. In September 2022, the MPSC approved a settlement
agreement authorizing a decrease in depreciation expense of $29 million annually. The decrease in
depreciation expense will become effective concurrent with Consumers’ 2022 gas rate case.
GCR Plan: Consumers submitted its 2023-2024 GCR plan to the MPSC in December 2022 and, in
accordance with its proposed plan, expects to self-implement the 2023-2024 GCR charge beginning in
April 2023.
Gas Pipeline and Storage Integrity and Safety: The U.S. Department of Transportation’s Pipeline and
Hazardous Materials Safety Administration has published various rules that expand federal safety
standards for gas transmission pipelines and underground storage facilities. Initial requirements took
effect in 2020, with future regulation phases to be released over numerous years. To comply with these
rules, Consumers will incur increased capital and operating and maintenance costs to install and
remediate pipelines and to expand inspections, maintenance, and monitoring of its existing pipelines and
storage facilities.
Although associated capital or operating and maintenance costs relating to these regulations could be
material and cost recovery cannot be assured, Consumers expects to recover such costs in rates consistent
with the recovery of other reasonable costs of complying with laws and regulations.
Gas Environmental Outlook: Consumers expects to incur response activity costs at a number of sites,
including 23 former MGP sites. For additional details, see Item 8. Financial Statements and
Supplementary Data—Notes to the Consolidated Financial Statements—Note 3, Contingencies and
Commitments—Consumers Gas Utility Contingencies—Gas Environmental Matters.
Consumers’ gas operations are subject to various federal, state, and local environmental laws and
regulations. Multiple environmental laws and regulations are subject to litigation. Consumers’ primary
environmental compliance focus includes, but is not limited to, the following matters.
Air Quality: Multiple air quality regulations apply, or may apply, to Consumers’ gas utility.
In 2015, the EPA lowered the NAAQS for ozone and made it more difficult to construct or modify natural
gas compressor stations and other emission sources in areas of the country that do not meet the ozone
standard. In 2018, the EPA designated certain areas of Michigan as not meeting the ozone standard.
Seven counties in southeastern Michigan were not in attainment with the ozone standard by a
2021 regulatory deadline, and thus may have their ozone nonattainment designations increased from
marginal to moderate. The EPA also recently elevated the nonattainment status of three counties in
western Michigan from marginal to moderate. Some of Consumers’ compressor stations are located in
these areas. Consumers expects to incur costs to retrofit equipment to lower emissions at some of its
compressor stations located in the nonattainment areas.
In March 2022, the EPA proposed a revision to CSAPR that affects Michigan. This proposed rule seeks to
reduce interstate air pollution transport issues that EPA modeling suggests contribute to downwind states
attaining or maintaining compliance with the NAAQS for ozone. While prior CSAPR regulations have
primarily focused on electric generating units, the proposed rule includes other emission sources,
including engines at natural gas compressor stations. If the EPA finalizes the proposed CSAPR revision in
its current form, Consumers may incur costs to retrofit or replace equipment at some compressor stations.
Greenhouse Gases: There is increasing interest at the federal, state, and local levels in potential regulation
of greenhouse gases or their sources. Such regulation, if adopted, may involve requirements to reduce
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methane emissions from Consumers’ gas utility operations and carbon dioxide emissions from customer
use of natural gas. No such measures apply to Consumers at this time.
In 2020, Michigan’s Governor signed an executive order creating the Michigan Healthy Climate Plan,
which outlines goals for Michigan to achieve economy-wide net-zero greenhouse gas emissions and to be
carbon neutral by 2050. The executive order aims for a 28-percent reduction below 2005 levels of
greenhouse gas emissions by 2025. For additional details on the executive order, see Consumers Electric
Utility Outlook and Uncertainties—Electric Environmental Outlook.
Under the Paris Agreement, an international agreement addressing greenhouse gas emissions, the U.S. has
committed to reduce greenhouse gas emissions by 50 to 52 percent from 2005 levels by 2030. The
commitment made by the U.S. is not binding without new Congressional legislation. Consumers
continues to monitor these initiatives and comment as appropriate. Consumers cannot predict the impact
of any potential future legislation or regulation on its gas utility.
Consumers is making voluntary efforts to reduce its gas utility’s methane emissions. Under its Methane
Reduction Plan, Consumers has set a goal of net-zero methane emissions from its natural gas delivery
system by 2030. Consumers plans to reduce methane emissions from its system by about 80 percent by
accelerating the replacement of aging pipe, rehabilitating or retiring outdated infrastructure, and adopting
new technologies and practices. The remaining emissions will likely be offset by purchasing and/or
producing renewable natural gas. To date, Consumers has reduced methane emissions by more than
20 percent from a 2012 baseline.
In March 2022, Consumers also announced a net-zero greenhouse gas emissions target for its entire
natural gas system by 2050. This includes suppliers and customers, and has an interim goal of reducing
customer emissions by 20 percent by 2030. Consumers’ Natural Gas Delivery Plan, a 10-year strategic
investment plan to deliver safe, reliable, clean, and affordable natural gas to customers, outlines ways in
which Consumers can make early progress toward these goals in a cost-effective manner, including
energy waste reduction or energy efficiency, carbon offsets, and renewable natural gas supply.
Consumers has already initiated work in these key areas, continuing to expand its energy waste reduction
targets, launching a program allowing gas customers to purchase carbon offset credits on a voluntary
basis, and announcing plans to begin development of a renewable natural gas facility that will capture
methane from manure generated at a Michigan-based farm and convert it into renewable natural gas.
Consumers is evaluating and monitoring newer technologies to determine their role in achieving
Consumers’ interim and long-term net-zero goals, including hydrogen, biofuels, and synthetic methane;
carbon capture sequestration systems; and other innovative technologies.
Over the long term, Consumers will incorporate technological advances, policy-driven incentives, and
other influencing factors into its compliance, investment planning, and decarbonization strategy in order
to achieve these net-zero methane and greenhouse gas emissions goals.
NorthStar Clean Energy Outlook and Uncertainties
CMS Energy’s primary focus with respect to its NorthStar Clean Energy businesses is to maximize the
value of generating assets, its share of which represents 1,478 MW of capacity, and to pursue
opportunities for the development of renewable generation projects.
NorthStar Clean Energy’s operations may be subject to various federal, state, and local environmental
laws and regulations. Multiple environmental laws and regulations are subject to litigation. NorthStar
Clean Energy’s primary environmental compliance focus includes, but is not limited to, the following
matters.
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In 2015, the EPA lowered the NAAQS for ozone and made it more difficult to construct or modify power
plants and other emission sources in areas of the country that do not meet the ozone standard. In 2018, the
EPA designated certain areas of Michigan as not meeting the ozone standard. Seven counties in
southeastern Michigan were not in attainment with the ozone standard by a 2021 regulatory deadline, and
thus may have their ozone nonattainment designations increased from marginal to moderate. The DIG
plant is within one of these counties and, as a result, may be subject to additional permitting restrictions in
the event of any future increase in the nonattainment designation.
In March 2022, the EPA proposed a revision to CSAPR that affects Michigan. This proposed rule seeks to
reduce interstate air pollution transport issues that EPA modeling suggests contribute to downwind states
attaining or maintaining compliance with the NAAQS for ozone. If the EPA finalizes the proposed
CSAPR revision in its current form, NorthStar Clean Energy may incur significant costs in allowance
purchases and equipment retrofits. NorthStar Clean Energy will continue to monitor this rulemaking and
its impact on its emission sources.
Many of NorthStar Clean Energy’s facilities maintain NPDES permits, which are vital to the facilities’
operations. NorthStar Clean Energy applies for renewal of these permits every five years. Failure of
EGLE to renew any NPDES permit, a successful appeal against a permit, a change in the interpretation or
scope of NPDES permitting, or onerous terms contained in a permit could have a significant detrimental
effect on the operations of a facility.
For additional details regarding the new ozone NAAQS or CSAPR rule, see Consumers Electric Utility
Outlook and Uncertainties—Electric Environmental Outlook.
Trends, uncertainties, and other matters related to NorthStar Clean Energy that could have a material
impact on CMS Energy’s consolidated income, cash flows, or financial position include:
•
•
•
•
•
•
•
•
investment in and financial benefits received from renewable energy and energy storage projects
changes in energy and capacity prices
severe weather events and climate change associated with increasing levels of greenhouse gases
changes in commodity prices on certain derivative contracts that do not qualify for hedge
accounting and must be marked to market through earnings
changes in various environmental laws, regulations, principles, or practices, or in their
interpretation
indemnity obligations assumed in connection with ownership interests in facilities that involve
tax equity financing
representations, warranties, and indemnities provided by CMS Energy in connection with sales of
assets
delays or difficulties in obtaining environmental permits for facilities located in areas associated
with environmental justice concerns
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In March 2022, the U.S. Department of Commerce announced it is opening inquiries into whether
manufacturers of solar modules that are produced in certain countries using supplies obtained from China
are circumventing antidumping and countervailing duties which apply to Chinese modules. The
U.S. Department of Commerce has made an initial determination that four manufacturers have
circumvented tariffs. The remainder of this inquiry process is expected to continue through at least the
first half of 2023. In June 2022, the Biden Administration paused for two years the imposition of duties
that might result from the U.S. Department of Commerce’s pending inquiries. In addition, the Uyghur
Forced Labor Prevention Act, which was enacted in December 2021 and became effective in June 2022,
along with an earlier withhold release order that U.S. Customs and Border Protection issued in mid-2021,
restrict the importation of goods sourced from the Xinjiang region of China. Solar modules whose raw
materials come from the Xinjiang region are a key focus of these import laws. CMS Energy continues to
closely monitor these matters and their potential impacts on availability of solar modules and timing
associated with pending and planned solar projects.
For additional details regarding NorthStar Clean Energy’s uncertainties, see Item 8. Financial Statements
and Supplementary Data—Notes to the Consolidated Financial Statements—Note 3, Contingencies and
Commitments—Guarantees.
Other Outlook and Uncertainties
Litigation: CMS Energy, Consumers, and certain of their subsidiaries are named as parties in various
litigation matters, as well as in administrative proceedings before various courts and governmental
agencies, arising in the ordinary course of business. For additional details regarding these and other legal
matters, see Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial
Statements—Note 2, Regulatory Matters and Note 3, Contingencies and Commitments.
Employee Separation Program: In April 2022, CMS Energy and Consumers announced a voluntary
separation program for salaried non-union employees. For the year ended December 31, 2022,
CMS Energy and Consumers recorded an after-tax charge of $8 million related to the program, under
which more than 170 employees accepted and were approved for early separation. As a result of the
program, CMS Energy and Consumers expect to benefit from future cost savings, as employee staffing
levels will be better matched to workload demand, which reflects the companies’ ongoing workforce
productivity improvements.
Tax Legislation: CMS Energy and Consumers are subject to changing tax laws. In August 2022,
President Biden signed the Inflation Reduction Act. Among other things, this Act expands production tax
credits and investment tax credits, allows for the transferability of such credits, and implements a
15-percent corporate alternative minimum tax on companies with an average adjusted financial statement
income of more than $1.0 billion. While CMS Energy and Consumers are still assessing the overall
impacts of the bill, they have determined they will not be subject to the corporate alternative minimum tax
in 2023, and do not believe the corporate alternative minimum tax will have a material impact on their
business.
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Critical Accounting Policies and Estimates
The following information is important to understand CMS Energy’s and Consumers’ results of
operations and financial condition. For additional accounting policies, see Item 8. Financial Statements
and Supplementary Data—Notes to the Consolidated Financial Statements—Note 1, Significant
Accounting Policies.
In the preparation of CMS Energy’s and Consumers’ consolidated financial statements, estimates and
assumptions are used that may affect reported amounts and disclosures. CMS Energy and Consumers use
accounting estimates for asset valuations, unbilled revenue, depreciation, amortization, financial and
derivative instruments, employee benefits, stock-based compensation, the effects of regulation,
indemnities, contingencies, and AROs. Actual results may differ from estimated results due to changes in
the regulatory environment, regulatory decisions, lawsuits, competition, and other factors. CMS Energy
and Consumers consider all relevant factors in making these assessments.
Accounting for the Effects of Industry Regulation: Because Consumers has regulated operations, it
uses regulatory accounting to recognize the effects of the regulators’ decisions on its financial statements.
Consumers continually assesses whether future recovery of its regulatory assets is probable by
considering communications and experience with its regulators and changes in the regulatory
environment. If Consumers determined that recovery of a regulatory asset were not probable, Consumers
would be required to write off the asset and immediately recognize the expense in earnings.
Contingencies: CMS Energy and Consumers make judgments regarding the future outcome of various
matters that give rise to contingent liabilities. For such matters, they record liabilities when they are
considered probable and reasonably estimable, based on all available information. In particular,
CMS Energy and Consumers are participating in various environmental remediation projects for which
they have recorded liabilities. The recorded amounts represent estimates that may take into account such
considerations as the number of sites, the anticipated scope, cost, and timing of remediation work, the
available technology, applicable regulations, and the requirements of governmental authorities. For
remediation projects in which the timing of estimated expenditures is considered reliably determinable,
CMS Energy and Consumers record the liability at its net present value, using a discount rate equal to the
interest rate on monetary assets that are essentially risk-free and have maturities comparable to that of the
environmental liability. The amount recorded for any contingency may differ from actual costs incurred
when the contingency is resolved. For additional details, see Item 8. Financial Statements and
Supplementary Data—Notes to the Consolidated Financial Statements—Note 3, Contingencies and
Commitments.
Derivative Instruments: CMS Energy and Consumers account for certain contracts as derivative
instruments. If a contract is a derivative and does not qualify for the normal purchases and sales
exception, it is recorded on the consolidated balance sheets at its fair value. At CMS Energy, if the
derivative is accounted for as a cash flow hedge, unrealized gains and losses from changes in the fair
value of the derivative are recognized in AOCI and subsequently recognized in earnings when the hedged
transactions impact earnings. If the derivative is accounted for as a fair value hedge, changes in the fair
value of the derivative and changes in the fair value of the hedged item due to the hedged risk are
recognized in earnings. For the FTRs at Consumers, changes in fair value are deferred as regulatory assets
or liabilities.
The criteria used to determine if an instrument qualifies for derivative accounting or for an exception
from derivative accounting are complex and often require judgment in application. Changes in business
strategies or market conditions, as well as a requirement to apply different interpretations of the derivative
accounting literature, could result in changes in accounting for a single contract or groups of contracts,
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which could have a material impact on CMS Energy’s and Consumers’ financial statements. For
additional details on CMS Energy’s and Consumers’ derivatives and how the fair values of derivatives are
determined, see Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated
Financial Statements—Note 5, Fair Value Measurements.
Income Taxes: The amount of income taxes paid by CMS Energy is subject to ongoing audits by federal,
state, and foreign tax authorities, which can result in proposed assessments. An estimate of the potential
outcome of any uncertain tax issue is highly judgmental. CMS Energy believes adequate reserves have
been provided for these exposures; however, future results may include favorable or unfavorable
adjustments to the estimated tax liabilities in the period the assessments are made or resolved or when
statutes of limitation on potential assessments expire. Additionally, CMS Energy’s judgment as to the
ability to recover its deferred tax assets may change. CMS Energy believes the valuation allowances
related to its deferred tax assets are adequate, but future results may include favorable or unfavorable
adjustments. As a result, CMS Energy’s effective tax rate may fluctuate significantly over time. For
additional details, see Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated
Financial Statements—Note 12, Income Taxes.
Pension and OPEB: CMS Energy and Consumers provide retirement pension benefits to certain
employees under non-contributory DB Pension Plans, and they provide postretirement health and life
benefits to qualifying retired employees under an OPEB Plan.
CMS Energy and Consumers record liabilities for pension and OPEB on their consolidated balance sheets
at the present value of the future obligations, net of any plan assets. The calculation of the liabilities and
associated expenses requires the expertise of actuaries, and requires many assumptions, including:
•
•
•
•
•
life expectancies
discount rates
expected long-term rate of return on plan assets
rate of compensation increases
expected health care costs
A change in these assumptions could change significantly CMS Energy’s and Consumers’ recorded
liabilities and associated expenses.
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Presented in the following table are estimates of credits and cash contributions through 2025 for the
DB Pension Plans and OPEB Plan. Actual future costs, credits, and contributions will depend on future
investment performance, discount rates, and various factors related to the participants of the DB Pension
Plans and OPEB Plan. CMS Energy and Consumers will, at a minimum, contribute to the plans as needed
to comply with federal funding requirements.
CMS Energy, including Consumers
2023
2024
2025
Consumers1
2023
2024
2025
1
DB Pension Plans
OPEB Plan
Credit
Contribution
Credit
Contribution
In Millions
$
$
$
$
(58)
(64)
(63)
(54)
(59)
(59)
—
—
—
—
—
—
$
$
$
$
(76)
(71)
(75)
(70)
(65)
(69)
—
—
—
—
—
—
Consumers’ pension and OPEB costs are recoverable through its general ratemaking process.
Lowering the expected long-term rate of return on the assets of the DB Pension Plans by 25 basis points
would increase estimated pension cost for 2023 by $8 million for both CMS Energy and Consumers.
Lowering the PBO discount rates by 25 basis points would decrease estimated pension cost for 2023 by
$1 million for both CMS Energy and Consumers.
Pension and OPEB plan assets are accounted for and disclosed at fair value. Fair value measurements
incorporate assumptions that market participants would use in pricing an asset or liability, including
assumptions about risk. Development of these assumptions may require judgment.
For additional details on postretirement benefits, including the fair value measurements for the assets of
the DB Pension Plans and OPEB Plan, see Item 8. Financial Statements and Supplementary Data—Notes
to the Consolidated Financial Statements—Note 10, Retirement Benefits.
Unbilled Revenues: Consumers’ customers are billed monthly in cycles having billing dates that do not
generally coincide with the end of a calendar month. This results in customers having received electricity
or natural gas that they have not been billed for as of the month-end. Consumers estimates its unbilled
revenues by applying an average billed rate to total unbilled deliveries for each customer class.
Consumers records unbilled revenues as accounts receivable and accrued revenue on its consolidated
balance sheet. For additional information on unbilled revenues, see Item 8. Financial Statements and
Supplementary Data—Notes to the Consolidated Financial Statements—Note 14, Revenue.
New Accounting Standards
There are no new accounting standards issued but not yet effective that are expected to have a material
impact on CMS Energy’s or Consumers’ consolidated financial statements.
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Item 7A. Quantitative and Qualitative Disclosures About Market
Risk
CMS Energy and Consumers are exposed to market risks including, but not limited to, changes in interest
rates, commodity prices, and investment security prices. They may enter into various risk management
contracts to mitigate exposure to these risks, including swaps, options, futures, and forward contracts.
CMS Energy and Consumers enter into these contracts using established policies and procedures, under
the direction of an executive oversight committee consisting of certain officers and a risk committee
consisting of those and other officers and business managers.
The following risk sensitivities illustrate the potential loss in fair value, cash flows, or future earnings
from financial instruments, assuming a hypothetical adverse change in market rates or prices of
ten percent. Potential losses could exceed the amounts shown in the sensitivity analyses if changes in
market rates or prices were to exceed ten percent.
Long-Term Debt: CMS Energy and Consumers are exposed to interest-rate risk resulting from issuing
fixed-rate and variable-rate debt instruments. CMS Energy and Consumers use a combination of these
instruments, and may also enter into interest-rate swap agreements, in order to manage this risk and to
achieve a reasonable cost of capital.
Presented in the following table is a sensitivity analysis of interest-rate risk on CMS Energy’s and
Consumers’ debt instruments (assuming an adverse change in market interest rates of ten percent):
December 31
Fixed-rate financing—potential loss in fair value
CMS Energy, including Consumers
Consumers
In Millions
2022
2021
$
711
482
$
639
402
The fair value losses in the above table could be realized only if CMS Energy and Consumers transferred
all of their fixed-rate financing to other creditors. The annual earnings exposure related to variable-rate
financing was immaterial for both CMS Energy and Consumers at December 31, 2022 and 2021,
assuming an adverse change in market interest rates of ten percent. For additional details on financial
instruments see Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated
Financial Statements—Note 6, Financial Instruments.
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Item 8.
Financial Statements and Supplementary Data
Index to Financial Statements
CMS Energy Consolidated Financial Statements ............................................................................
Consolidated Statements of Income ..............................................................................................
Consolidated Statements of Comprehensive Income ....................................................................
Consolidated Statements of Cash Flows .......................................................................................
Consolidated Balance Sheets ........................................................................................................
Consolidated Statements of Changes in Equity ............................................................................
Consumers Consolidated Financial Statements ...............................................................................
Consolidated Statements of Income ..............................................................................................
Consolidated Statements of Comprehensive Income ....................................................................
Consolidated Statements of Cash Flows .......................................................................................
Consolidated Balance Sheets ........................................................................................................
Consolidated Statements of Changes in Equity ............................................................................
Notes to the Consolidated Financial Statements ..............................................................................
1: Significant Accounting Policies .........................................................................................
2: Regulatory Matters .............................................................................................................
3: Contingencies and Commitments ......................................................................................
4: Financings and Capitalization ............................................................................................
5: Fair Value Measurements ..................................................................................................
6: Financial Instruments .........................................................................................................
7: Plant, Property, and Equipment .........................................................................................
8: Leases .................................................................................................................................
9: Asset Retirement Obligations ............................................................................................
10: Retirement Benefits ............................................................................................................
11: Stock-based Compensation ................................................................................................
12: Income Taxes .....................................................................................................................
13: Earnings Per Share—CMS Energy ....................................................................................
14: Revenue ..............................................................................................................................
15: Other Income and Other Expense ......................................................................................
16: Reportable Segments ..........................................................................................................
17: Related-Party Transactions—Consumers ..........................................................................
18: Variable Interest Entities ....................................................................................................
19: Exit Activities and Discontinued Operations .....................................................................
Reports of Independent Registered Public Accounting Firm (PCAOB ID 238) .............................
CMS Energy ..................................................................................................................................
Consumers .....................................................................................................................................
88
88
90
92
94
96
98
98
99
100
102
104
105
105
108
115
121
127
130
131
135
139
141
151
155
159
160
164
165
170
171
173
176
176
180
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CMS Energy Corporation
Consolidated Statements of Income
Years Ended December 31
Operating Revenue
Operating Expenses
Fuel for electric generation
Purchased and interchange power
Purchased power – related parties
Cost of gas sold
Maintenance and other operating expenses
Depreciation and amortization
General taxes
Total operating expenses
Operating Income
Other Income (Expense)
Non-operating retirement benefits, net
Other income
Other expense
Total other income
Interest Charges
Interest on long-term debt
Interest expense – related parties
Other interest expense
Allowance for borrowed funds used during construction
Total interest charges
Income Before Income Taxes
Income Tax Expense
Income From Continuing Operations
Income From Discontinued Operations, Net of Tax of $1, $170, and
$18
Net Income
Loss Attributable to Noncontrolling Interests
Net Income Attributable to CMS Energy
Preferred Stock Dividends
In Millions, Except Per Share Amounts
2022
2021
2020
$ 8,596
$ 7,329
$ 6,418
905
1,928
76
1,256
1,669
1,126
412
7,372
593
1,665
77
735
1,610
1,114
389
6,183
375
1,492
64
577
1,280
1,043
357
5,188
1,224
1,146
1,230
205
19
(27)
197
165
30
(18)
177
118
28
(62)
84
509
481
483
12
—
(2)
519
902
93
809
4
813
(24)
837
10
12
10
(3)
500
823
95
728
602
1,330
(23)
1,353
5
12
12
(2)
505
809
115
694
58
752
(3)
755
—
Net Income Available to Common Stockholders
$
827
$ 1,348
$
755
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Years Ended December 31
Basic Earnings Per Average Common Share
In Millions, Except Per Share Amounts
2022
2021
2020
Income from continuing operations per average common share available
to common stockholders
$
2.84
$
2.58
$
2.45
Income from discontinued operations per average common share available
to common stockholders
Basic earnings per average common share
0.01
2.85
$
2.08
4.66
0.20
2.65
$
$
Diluted Earnings Per Average Common Share
Income from continuing operations per average common share available
to common stockholders
$
2.84
$
2.58
$
2.44
Income from discontinued operations per average common share available
to common stockholders
Diluted earnings per average common share
0.01
2.85
$
2.08
4.66
0.20
2.64
$
$
The accompanying notes are an integral part of these statements.
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CMS Energy Corporation
Consolidated Statements of Comprehensive Income
Years Ended December 31
Net Income
Retirement Benefits Liability
Net gain (loss) arising during the period, net of tax of $—, $6, and $(4)
Settlement arising during the period, net of tax of $— for all periods
Prior service credit adjustment, net of tax of $— for all periods
Amortization of net actuarial loss, net of tax of $1, $2, and $1
Amortization of prior service credit, net of tax of $— for all periods
Derivatives
Unrealized gain (loss) on derivative instruments, net of tax of $1, $—,
and $(2)
Reclassification adjustments included in net income, net of tax of $—, $1,
and $—
Other Comprehensive Income (Loss)
Comprehensive Income
Comprehensive Loss Attributable to Noncontrolling Interests
In Millions
2022
2021
2020
$
813
$ 1,330
$
752
1
—
—
4
(1)
2
1
7
19
1
—
5
(1)
2
1
27
820
(24)
1,357
(23)
(15)
1
(1)
5
(1)
(4)
2
(13)
739
(3)
Comprehensive Income Attributable to CMS Energy
$
844
$ 1,380
$
742
The accompanying notes are an integral part of these statements.
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CMS Energy Corporation
Consolidated Statements of Cash Flows
Years Ended December 31
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by operating
activities
Depreciation and amortization
Deferred income taxes and investment tax credits
Bad debt expense
Postretirement benefits contributions
Gain from sale of EnerBank
Other non-cash operating activities and reconciling adjustments
Net cash provided by (used in) discontinued operations
Changes in assets and liabilities
Accounts receivable and accrued revenue
Inventories
Accounts payable and accrued rate refunds
Other current assets and liabilities
Other non-current assets and liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities
In Millions
2022
2021
2020
$
813
$ 1,330
$
752
1,126
1,114
1,043
89
50
(12)
(5)
(93)
—
(677)
(450)
4
14
(4)
249
22
(12)
(657)
(70)
(111)
(103)
(93)
153
13
(16)
170
30
(712)
—
(15)
33
(5)
28
56
(68)
(36)
855
1,819
1,276
Capital expenditures (excludes assets placed under finance lease)
(2,374)
(2,076)
(2,311)
Net proceeds from sale of EnerBank
Proceeds from sale of transmission equipment
Net cash provided by (used in) discontinued operations
Cost to retire property and other investing activities
Net cash used in investing activities
Cash Flows from Financing Activities
Proceeds from issuance of debt
Retirement of debt
Increase (decrease) in notes payable
Issuance of common stock
Issuance of preferred stock, net of issuance costs
Payment of dividends on common and preferred stock
Debt prepayment costs
Proceeds from the sale of membership interest in VIE to tax equity investor
Contribution from noncontrolling interest
Net cash provided by (used in) discontinued operations
Other financing costs
Net cash provided by (used in) financing activities
5
—
—
898
—
78
(107)
(133)
—
58
(485)
(129)
(2,476)
(1,233)
(2,867)
1,899
(106)
20
69
—
(546)
—
49
2
—
(60)
1,327
335
3,179
(235)
(2,010)
—
26
224
(509)
—
—
1
(84)
(53)
(295)
(90)
253
—
(467)
(59)
417
31
416
(51)
1,619
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Years Ended December 31
Net Increase (Decrease) in Cash and Cash Equivalents, Including
Restricted Amounts
Cash and Cash Equivalents, Including Restricted Amounts, Beginning of
Period
In Millions
2022
2021
2020
(294)
476
291
185
28
157
Cash and Cash Equivalents, Including Restricted Amounts, End of
Period
$
182
$
476
$
185
Other Cash Flow Activities and Non-cash Investing and Financing Activities
Cash transactions
Interest paid (net of amounts capitalized)
Income taxes paid (refunds received), net
Non-cash transactions
Capital expenditures not paid
$
490
$
489
$
549
1
16
(58)
$
228
$
196
$
141
The accompanying notes are an integral part of these statements.
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CMS Energy Corporation
Consolidated Balance Sheets
ASSETS
December 31
Current Assets
Cash and cash equivalents
Restricted cash and cash equivalents
Accounts receivable and accrued revenue, less allowance of $27 in 2022 and $20 in
2021
Accounts receivable – related parties
Inventories at average cost
Gas in underground storage
Materials and supplies
Generating plant fuel stock
Deferred property taxes
Regulatory assets
Prepayments and other current assets
Total current assets
Plant, Property, and Equipment
Plant, property, and equipment, gross
Less accumulated depreciation and amortization
Plant, property, and equipment, net
Construction work in progress
Total plant, property, and equipment
Other Non-current Assets
Regulatory assets
Accounts receivable
Investments
Postretirement benefits
Other
Total other non-current assets
Total Assets
94
In Millions
2022
2021
$
164
$
452
18
1,564
16
840
212
65
384
57
113
24
931
12
462
168
37
356
46
139
3,433
2,627
30,491
29,893
8,960
8,502
21,531
21,391
1,182
961
22,713
22,352
3,595
2,259
23
71
1,208
310
5,207
30
71
1,150
264
3,774
$ 31,353
$ 28,753
Table of Contents
LIABILITIES AND EQUITY
December 31
Current Liabilities
In Millions
2022
2021
Current portion of long-term debt and finance leases
$ 1,099
$
382
Notes payable
Accounts payable
Accounts payable – related parties
Accrued rate refunds
Accrued interest
Accrued taxes
Regulatory liabilities
Other current liabilities
Total current liabilities
Non-current Liabilities
Long-term debt
Non-current portion of finance leases
Regulatory liabilities
Postretirement benefits
Asset retirement obligations
Deferred investment tax credit
Deferred income taxes
Other non-current liabilities
Total non-current liabilities
Commitments and Contingencies (Notes 2, 3, and 19)
Equity
Common stockholders’ equity
Common stock, authorized 350.0 shares; outstanding 291.3 shares in 2022 and
289.8 shares in 2021
Other paid-in capital
Accumulated other comprehensive loss
Retained earnings
Total common stockholders’ equity
Cumulative redeemable perpetual preferred stock, Series C, authorized 9.2 depositary
shares; outstanding 9.2 depositary shares in both periods
Total stockholders’ equity
Noncontrolling interests
Total equity
Total Liabilities and Equity
The accompanying notes are an integral part of these statements.
95
20
928
8
—
122
538
104
166
—
875
11
12
107
515
146
156
2,985
2,204
13,122
12,046
68
3,796
108
746
129
2,407
397
46
3,802
142
628
112
2,210
375
20,773
19,361
3
3
5,490
5,406
(52)
(59)
1,350
6,791
224
7,015
580
7,595
1,057
6,407
224
6,631
557
7,188
$ 31,353
$ 28,753
Table of Contents
CMS Energy Corporation
Consolidated Statements of Changes in Equity
In Millions, Except Number of Shares in Thousands and Per Share Amounts
Number of Shares
Years Ended December 31
2022
2021
2020
2022
2021
2020
Total Equity at Beginning of Period
$ 7,188
$ 6,077
$ 5,055
Common Stock
At beginning and end of period
Other Paid-in Capital
At beginning of period
Common stock issued
Common stock repurchased
Common stock reissued
Common stock reacquired
3
3
3
289,758 288,940 283,864
5,406
5,365
5,113
1,704
(151)
—
(43)
997
(157)
—
(22)
5,609
(216)
12
(329)
93
(9)
—
—
50
(9)
—
—
265
(13)
1
(1)
At end of period
291,268 289,758 288,940
5,490
5,406
5,365
Accumulated Other Comprehensive Loss
At beginning of period
Retirement benefits liability
At beginning of period
Net gain (loss) arising during the period
Settlement arising during the period
Prior service credit adjustment
Amortization of net actuarial loss
Amortization of prior service credit
At end of period
Derivative instruments
At beginning of period
Unrealized gain (loss) on derivative instruments
Reclassification adjustments included in net income
At end of period
At end of period
Retained Earnings
At beginning of period
Cumulative effect of change in accounting principle
Net income attributable to CMS Energy
Dividends declared on common stock
Dividends declared on preferred stock
At end of period
96
(59)
(86)
(73)
(56)
(80)
1
—
—
4
(1)
(52)
(3)
2
1
—
19
1
—
5
(1)
(56)
(6)
2
1
(3)
(69)
(15)
1
(1)
5
(1)
(80)
(4)
(4)
2
(6)
(52)
(59)
(86)
1,057
—
837
(534)
(10)
214
—
1,353
(505)
(5)
1,350
1,057
(25)
(51)
755
(465)
—
214
Table of Contents
In Millions, Except Number of Shares in Thousands and Per Share Amounts
Number of Shares
2021
Years Ended December 31
Cumulative Redeemable Perpetual Preferred Stock, Series C
2022
2020
2022
2021
2020
At beginning of period
Preferred stock issued, net of issuance costs
At end of period
Noncontrolling Interests
At beginning of period
Impact of purchase and consolidation of VIE
Sale of membership interest in VIE to tax equity investor
Contribution from noncontrolling interest
Loss attributable to noncontrolling interests
Distributions and other changes in noncontrolling interests
At end of period
Total Equity at End of Period
Dividends declared per common share
224
—
224
557
—
49
2
(24)
(4)
580
—
224
224
581
—
—
1
(23)
(2)
557
—
—
—
37
101
417
31
(3)
(2)
581
$ 7,595
$ 7,188
$ 6,077
$ 1.8400
$ 1.7400
$ 1.6300
Dividends declared per preferred stock Series C depositary share
$ 1.0500
$ 0.5688
$ —
The accompanying notes are an integral part of these statements.
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Table of Contents
Consumers Energy Company
Consolidated Statements of Income
Years Ended December 31
Operating Revenue
Operating Expenses
Fuel for electric generation
Purchased and interchange power
Purchased power – related parties
Cost of gas sold
Maintenance and other operating expenses
Depreciation and amortization
General taxes
Total operating expenses
Operating Income
Other Income (Expense)
Non-operating retirement benefits, net
Other income
Other expense
Total other income
Interest Charges
Interest on long-term debt
Interest expense – related parties
Other interest expense
Allowance for borrowed funds used during construction
Total interest charges
Income Before Income Taxes
Income Tax Expense
Net Income
Preferred Stock Dividends
In Millions
2022
2021
2020
$ 8,151
$ 7,021
$ 6,189
662
1,867
76
1,243
1,582
1,088
400
6,918
463
1,599
77
726
1,531
1,077
373
5,846
286
1,454
64
568
1,224
1,023
349
4,968
1,233
1,175
1,221
195
17
(25)
187
155
23
(18)
160
112
19
(43)
88
325
294
299
12
—
(2)
12
8
(3)
335
311
1,085
1,024
140
945
2
156
868
2
12
11
(2)
320
989
173
816
2
Net Income Available to Common Stockholder
$
943
$
866
$
814
The accompanying notes are an integral part of these statements.
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Consumers Energy Company
Consolidated Statements of Comprehensive Income
Years Ended December 31
Net Income
Retirement Benefits Liability
Net gain (loss) arising during the period, net of tax of $5, $1, and $(3)
Amortization of net actuarial loss, net of tax of $—, $1, and $1
Other Comprehensive Income (Loss)
Comprehensive Income
The accompanying notes are an integral part of these statements.
In Millions
2022
2021
2020
$
945
$
868
$
816
15
2
17
2
2
4
(9)
1
(8)
$
962
$
872
$
808
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Consumers Energy Company
Consolidated Statements of Cash Flows
Years Ended December 31
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by operating
activities
Depreciation and amortization
Deferred income taxes and investment tax credits
Bad debt expense
Postretirement benefits contributions
Other non-cash operating activities and reconciling adjustments
Changes in assets and liabilities
Accounts and notes receivable and accrued revenue
Inventories
Accounts payable and accrued rate refunds
Other current assets and liabilities
Other non-current assets and liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities
In Millions
2022
2021
2020
$
945
$
868
$
816
1,088
134
50
(9)
(87)
(660)
(447)
(9)
18
(29)
994
1,077
154
22
(9)
(64)
(103)
(90)
140
27
(40)
1,023
177
33
(690)
(30)
(46)
26
45
(78)
(58)
1,982
1,218
Capital expenditures (excludes assets placed under finance lease)
(2,239)
(2,052)
(2,170)
DB SERP investment in note receivable – related party
Proceeds from sale of transmission equipment
Cost to retire property and other investing activities
Net cash used in investing activities
Cash Flows from Financing Activities
Proceeds from issuance of debt
Retirement of debt
Increase (decrease) in notes payable
Increase (decrease) in notes payable – related parties
Stockholder contribution
Payment of dividends on common and preferred stock
Debt prepayment costs
Other financing costs
Net cash provided by financing activities
Net Increase in Cash and Cash Equivalents, Including Restricted
Amounts
Cash and Cash Equivalents, Including Restricted Amounts, Beginning of
Period
—
—
—
—
(5)
58
(105)
(133)
(129)
(2,344)
(2,185)
(2,246)
1,799
(28)
20
(317)
685
(771)
—
(22)
1,366
16
44
335
(27)
—
85
575
(724)
—
(32)
212
9
35
1,954
(1,086)
(90)
307
650
(639)
(43)
(18)
1,035
7
28
Cash and Cash Equivalents, Including Restricted Amounts, End of
Period
$
60
$
44
$
35
100
Years Ended December 31
Other Cash Flow Activities and Non-cash Investing and Financing Activities
Cash transactions
Interest paid (net of amounts capitalized)
Income taxes paid (refunds received), net
Non-cash transactions
Capital expenditures not paid
In Millions
2022
2021
2020
$
309
$
298
$
305
(2)
(10)
51
$
210
$
192
$
130
The accompanying notes are an integral part of these statements.
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Consumers Energy Company
Consolidated Balance Sheets
ASSETS
December 31
Current Assets
Cash and cash equivalents
Restricted cash and cash equivalents
Accounts receivable and accrued revenue, less allowance of $27 in 2022 and $20 in
2021
Accounts and notes receivable – related parties
Inventories at average cost
Gas in underground storage
Materials and supplies
Generating plant fuel stock
Deferred property taxes
Regulatory assets
Prepayments and other current assets
Total current assets
Plant, Property, and Equipment
Plant, property, and equipment, gross
Less accumulated depreciation and amortization
Plant, property, and equipment, net
Construction work in progress
Total plant, property, and equipment
Other Non-current Assets
Regulatory assets
Accounts receivable
Accounts and notes receivable – related parties
Postretirement benefits
Other
Total other non-current assets
Total Assets
102
In Millions
2022
2021
$
$
43
17
1,524
10
840
206
59
384
57
96
22
22
905
9
462
163
33
356
46
103
3,236
2,121
29,342
28,771
8,791
8,371
20,551
20,400
994
915
21,545
21,315
3,595
2,259
29
99
1,126
286
5,135
36
102
1,056
251
3,704
$ 29,916
$ 27,140
Table of Contents
LIABILITIES AND EQUITY
December 31
Current Liabilities
In Millions
2022
2021
Current portion of long-term debt and finance leases
$ 1,000
$
374
Notes payable
Notes payable – related parties
Accounts payable
Accounts payable – related parties
Accrued rate refunds
Accrued interest
Accrued taxes
Regulatory liabilities
Other current liabilities
Total current liabilities
Non-current Liabilities
Long-term debt
Non-current portion of finance leases
Regulatory liabilities
Postretirement benefits
Asset retirement obligations
Deferred investment tax credit
Deferred income taxes
Other non-current liabilities
Total non-current liabilities
Commitments and Contingencies (Notes 2 and 3)
Equity
Common stockholder’s equity
Common stock, authorized 125.0 shares; outstanding 84.1 shares in both periods
Other paid-in capital
Accumulated other comprehensive loss
Retained earnings
Total common stockholder’s equity
Cumulative preferred stock, $4.50 series, authorized 7.5 shares; outstanding 0.4 shares
in both periods
Total equity
Total Liabilities and Equity
The accompanying notes are an integral part of these statements.
103
20
75
864
15
—
90
556
104
147
—
392
835
16
12
75
529
146
109
2,871
2,488
9,192
45
3,796
79
722
129
2,585
342
8,050
46
3,802
104
605
112
2,340
314
16,890
15,373
841
7,284
(15)
2,008
10,118
37
10,155
841
6,599
(32)
1,834
9,242
37
9,279
$ 29,916
$ 27,140
Table of Contents
Consumers Energy Company
Consolidated Statements of Changes in Equity
Years Ended December 31
Total Equity at Beginning of Period
Common Stock
At beginning and end of period
Other Paid-in Capital
At beginning of period
Stockholder contribution
At end of period
Accumulated Other Comprehensive Loss
At beginning of period
Retirement benefits liability
At beginning of period
Net gain (loss) arising during the period
Amortization of net actuarial loss
At end of period
At end of period
Retained Earnings
At beginning of period
Net income
Dividends declared on common stock
Dividends declared on preferred stock
At end of period
Cumulative Preferred Stock
At beginning and end of period
Total Equity at End of Period
The accompanying notes are an integral part of these statements.
In Millions
2022
2021
2020
$ 9,279
$ 8,556
$ 7,737
841
841
841
6,599
685
7,284
6,024
575
6,599
5,374
650
6,024
(32)
(36)
(28)
(32)
15
2
(15)
(15)
(36)
2
2
(32)
(32)
(28)
(9)
1
(36)
(36)
1,834
1,690
1,513
945
(769)
(2)
868
(722)
(2)
816
(637)
(2)
2,008
1,834
1,690
37
37
37
$ 10,155
$ 9,279
$ 8,556
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CMS Energy Corporation
Consumers Energy Company
Notes to the Consolidated Financial Statements
1: Significant Accounting Policies
Principles of Consolidation: CMS Energy and Consumers prepare their consolidated financial
statements in conformity with GAAP. CMS Energy’s consolidated financial statements comprise
CMS Energy, Consumers, NorthStar Clean Energy, and all other entities in which CMS Energy has a
controlling financial interest or is the primary beneficiary. Consumers’ consolidated financial statements
comprise Consumers and all other entities in which it has a controlling financial interest. CMS Energy
uses the equity method of accounting for investments in companies and partnerships that are not
consolidated, where they have significant influence over operations and financial policies but are not the
primary beneficiary. CMS Energy and Consumers eliminate intercompany transactions and balances.
Use of Estimates: CMS Energy and Consumers are required to make estimates using assumptions that
may affect reported amounts and disclosures. Actual results could differ from those estimates.
Cash and Cash Equivalents and Restricted Cash and Cash Equivalents: Cash and cash equivalents
include short-term, highly liquid investments with original maturities of three months or less. Restricted
cash and cash equivalents are held primarily for the repayment of securitization bonds and funds held in
escrow. Cash and cash equivalents may also be restricted to pay other contractual obligations such as
leasing of coal railcars. These amounts are classified as current assets since they relate to payments that
could or will occur within one year.
Contingencies: CMS Energy and Consumers record estimated loss contingencies on their consolidated
financial statements when it is probable that a loss has been incurred and when the amount of loss can be
reasonably estimated. For environmental remediation projects in which the timing of estimated
expenditures is considered reliably determinable, CMS Energy and Consumers record the liability at its
net present value, using a discount rate equal to the interest rate on monetary assets that are essentially
risk-free and have maturities comparable to that of the environmental liability. CMS Energy and
Consumers expense legal fees as incurred; fees incurred but not yet billed are accrued based on estimates
of work performed.
Debt Issuance Costs, Discounts, Premiums, and Refinancing Costs: Upon the issuance of long-term
debt, CMS Energy and Consumers defer issuance costs, discounts, and premiums and amortize those
amounts over the terms of the associated debt. Debt issuance costs are presented as a direct deduction
from the carrying amount of long-term debt on the balance sheet. Upon the refinancing of long-term debt,
Consumers, as a regulated entity, defers any remaining unamortized issuance costs, discounts, and
premiums associated with the refinanced debt and amortizes those amounts over the term of the newly
issued debt. For the non-regulated portions of CMS Energy’s business, any remaining unamortized
issuance costs, discounts, and premiums associated with extinguished debt are charged to earnings.
Derivative Instruments: In order to support ongoing operations, CMS Energy and Consumers enter into
contracts for the future purchase and sale of various commodities, such as electricity, natural gas, and
coal. These forward contracts are generally long-term in nature and result in physical delivery of the
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commodity at a contracted price. Most of these contracts are not subject to derivative accounting for one
or more of the following reasons:
•
•
•
they do not have a notional amount (that is, a number of units specified in a derivative instrument,
such as MWh of electricity or bcf of natural gas)
they qualify for the normal purchases and sales exception
they cannot be net settled due in part to the absence of an active market for the commodity
Consumers also uses FTRs to manage price risk related to electricity transmission congestion. An FTR is
a financial instrument that entitles its holder to receive compensation or requires its holder to remit
payment for congestion-related transmission charges. Consumers accounts for FTRs as derivatives.
Additionally, CMS Energy uses interest rate swaps to manage its interest rate risk on certain long-term
debt transactions.
CMS Energy and Consumers record derivative contracts that do not qualify for the normal purchases and
sales exception at fair value on their consolidated balance sheets. At CMS Energy, if the derivative is
accounted for as a cash flow hedge, unrealized gains and losses from changes in the fair value of the
derivative are recognized in AOCI and subsequently recognized in earnings when the hedged transactions
impact earnings. If the derivative is accounted for as a fair value hedge, changes in the fair value of the
derivative and changes in the fair value of the hedged item due to the hedged risk are recognized in
earnings. For the FTRs at Consumers, changes in fair value are deferred as regulatory assets or liabilities.
For details regarding CMS Energy’s and Consumers’ derivative instruments recorded at fair value, see
Note 5, Fair Value Measurements.
EPS: CMS Energy calculates basic and diluted EPS using the weighted-average number of shares of
common stock and dilutive potential common stock outstanding during the period. Potential common
stock, for purposes of determining diluted EPS, includes the effects of nonvested stock awards and
forward equity sales. CMS Energy computes the effect on potential common stock using the treasury
stock method. Diluted EPS excludes the impact of antidilutive securities, which are those securities
resulting in an increase in EPS or a decrease in loss per share. For EPS computations, see Note 13,
Earnings Per Share—CMS Energy.
Impairment of Long-Lived Assets and Equity Method Investments: CMS Energy and Consumers
perform tests of impairment if certain triggering events occur that indicate the carrying amount of an asset
may not be recoverable or that there has been a decline in value that may be other than temporary.
CMS Energy and Consumers evaluate long-lived assets held in use for impairment by calculating the
undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. If
the undiscounted future cash flows are less than the carrying amount, CMS Energy and Consumers
recognize an impairment loss equal to the amount by which the carrying amount exceeds the fair value.
CMS Energy and Consumers estimate the fair value of the asset using quoted market prices, market prices
of similar assets, or discounted future cash flow analyses.
CMS Energy also assesses equity method investments for impairment whenever there has been a decline
in value that is other than temporary. This assessment requires CMS Energy to determine the fair value of
the equity method investment. CMS Energy determines fair value using valuation methodologies,
including discounted cash flows, and assesses the ability of the investee to sustain an earnings capacity
that justifies the carrying amount of the investment. CMS Energy records an impairment if the fair value
is less than the carrying amount and the decline in value is considered to be other than temporary.
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Investment Tax Credits: Consumers amortizes its investment tax credits over the life of the related
property in accordance with regulatory treatment. CMS Energy’s non-regulated businesses use the
deferral method of accounting for investment tax credits. Under the deferral method, the book basis of the
associated assets is reduced by the amount of the credit, resulting in lower depreciation expense over the
life of the assets. Furthermore, the tax basis of the assets is reduced by 50 percent of the related credit,
resulting in a net deferred tax asset. CMS Energy recognizes the tax benefit of this basis difference as a
reduction to income tax expense in the year in which the plant reaches commercial operation.
Inventory: CMS Energy and Consumers use the weighted-average cost method for valuing working gas,
recoverable base gas in underground storage facilities, and materials and supplies inventory. CMS Energy
and Consumers also use this method for valuing coal inventory, and they classify these amounts as
generating plant fuel stock on their consolidated balance sheets.
CMS Energy and Consumers account for RECs and emission allowances as inventory and use the
weighted-average cost method to remove amounts from inventory. RECs and emission allowances are
used to satisfy compliance obligations related to the generation of power. CMS Energy and Consumers
classify these amounts within other assets on their consolidated balance sheets.
CMS Energy and Consumers evaluate inventory for impairment as required to ensure that its carrying
value does not exceed the lower of cost or net realizable value.
MISO Transactions: MISO requires the submission of hourly day-ahead and real-time bids and offers
for energy at locations across the MISO region. CMS Energy and Consumers account for MISO
transactions on a net hourly basis in each of the real-time and day-ahead markets, netted across all MISO
energy market locations. CMS Energy and Consumers record net hourly purchases in purchased and
interchange power and net hourly sales in operating revenue on their consolidated statements of income.
They record net billing adjustments upon receipt of settlement statements, record accruals for future net
purchases and sales adjustments based on historical experience, and reconcile accruals to actual expenses
and sales upon receipt of settlement statements.
Property Taxes: Property taxes are based on the taxable value of CMS Energy’s and Consumers’ real
and personal property assessed by local taxing authorities. CMS Energy and Consumers record property
tax expense over the fiscal year of the taxing authority for which the taxes are levied. The deferred
property tax balance represents the amount of CMS Energy’s and Consumers’ accrued property tax that
will be recognized over future governmental fiscal periods.
Reclassifications: CMS Energy and Consumers have reclassified certain prior period amounts to conform
to the presentation in the present period. The most significant of these reclassifications is related to
CMS Energy’s sale of EnerBank to Regions Bank in October 2021. EnerBank’s results of operations
through the date of the sale are presented as income from discontinued operations on CMS Energy’s
consolidated statements of income for the years ended December 31, 2021 and 2020. For information
regarding the sale of EnerBank, see Note 19, Exit Activities and Discontinued Operations.
CMS Energy and Consumers also reclassified certain prior period amounts relating to postretirement
benefits. The asset balances for postretirement benefits are presented discretely within other non-current
assets on CMS Energy’s and Consumers’ consolidated balance sheets for the years ended
December 31, 2022 and 2021.
Renewable Energy Grant: In 2013, Consumers received a renewable energy cash grant for Lake
Winds® Energy Park under Section 1603 of the American Recovery and Reinvestment Tax Act of 2009.
Upon receipt of the grant, Consumers recorded a regulatory liability, which Consumers is amortizing over
the life of Lake Winds® Energy Park. Consumers presents the amortization as a reduction to maintenance
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and other operating expenses on its consolidated statements of income. Consumers recorded the deferred
income taxes related to the grant as a reduction of the book basis of Lake Winds® Energy Park.
Other: For additional accounting policies, see:
• Note 7, Plant, Property, and Equipment
• Note 8, Leases
• Note 9, Asset Retirement Obligations
• Note 10, Retirement Benefits
• Note 12, Income Taxes
• Note 13, Earnings Per Share—CMS Energy
• Note 14, Revenue
• Note 18, Variable Interest Entities
2: Regulatory Matters
Regulatory matters are critical to Consumers. The Michigan Attorney General, ABATE, the MPSC Staff,
residential customer advocacy groups, environmental organizations, and certain other parties typically
participate in MPSC proceedings concerning Consumers, such as Consumers’ rate cases and PSCR and
GCR processes. These parties often challenge various aspects of those proceedings, including the
prudence of Consumers’ policies and practices, and seek cost disallowances and other relief. The parties
also have appealed significant MPSC orders. Depending upon the specific issues, the outcomes of rate
cases and proceedings, including judicial proceedings challenging MPSC orders or other actions, could
negatively affect CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations.
Consumers cannot predict the outcome of these proceedings.
There are multiple appeals pending that involve various issues concerning cost recovery from customers,
the MPSC’s authority to approve voluntary revenue refunds, and other matters. Consumers is unable to
predict the outcome of these appeals.
Regulatory Assets and Liabilities
Consumers is subject to the actions of the MPSC and FERC and therefore prepares its consolidated
financial statements in accordance with the provisions of regulatory accounting. A utility must apply
regulatory accounting when its rates are designed to recover specific costs of providing regulated
services. Under regulatory accounting, Consumers records regulatory assets or liabilities for certain
transactions that would have been treated as expense or revenue by non-regulated businesses.
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Presented in the following table are the regulatory assets and liabilities on Consumers’ consolidated
balance sheets:
December 31
Regulatory assets
Current
Energy waste reduction plan incentive1
Other
Total current regulatory assets
Non-current
End of Recovery
or Refund Period
In Millions
2022
2021
2023
2023
$
$
47
10
57
$
$
Costs of coal-fueled electric generating units to be retired2
various
$
1,960
$
Postretirement benefits3
ARO4
Securitized costs2
MGP sites4
Unamortized loss on reacquired debt4
Energy waste reduction plan incentive1
Retention incentive program4
Demand response program4
Energy waste reduction plan4
Other
Total non-current regulatory assets
Total regulatory assets
Regulatory liabilities
Current
Income taxes, net
Reserve for customer refunds
Other
Total current regulatory liabilities
Non-current
Cost of removal
Income taxes, net
Renewable energy grant
Renewable energy plan
Demand response program
Energy waste reduction plan
Postretirement benefits
Other
Total non-current regulatory liabilities
Total regulatory liabilities
various
various
2029
various
various
2024
various
various
various
various
2023
2023
2023
various
various
2043
2028
various
various
various
various
42
4
46
678
837
247
193
112
104
46
7
10
13
12
856
281
165
108
100
55
31
12
10
17
$
$
$
$
$
3,595
3,652
$
$
2,259
2,305
48
47
9
$
138
2
6
104
$
146
$
2,426
1,267
2,375
1,297
45
32
12
6
—
8
47
13
7
—
54
9
$
$
3,796
3,900
$
$
3,802
3,948
1
2
These regulatory assets have arisen from an alternative revenue program and are not associated with
incurred costs or capital investments. Therefore, the MPSC has provided for recovery without a return.
The MPSC has provided a specific return on these regulatory assets.
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3
4
This regulatory asset is included in rate base, thereby providing a return.
These regulatory assets represent incurred costs for which the MPSC has provided recovery without a
return on investment.
Regulatory Assets
Energy Waste Reduction Plan Incentive: The energy waste reduction incentive mechanism provides a
financial incentive if the energy savings of Consumers’ customers exceed annual targets established by
the MPSC. Consumers accounts for this program as an alternative-revenue program that meets the criteria
for recognizing revenue related to the incentive as soon as energy savings exceed the annual targets
established by the MPSC.
In October 2022, the MPSC approved a settlement agreement authorizing Consumers to collect
$46 million during 2023 as an incentive for exceeding its statutory savings targets in 2021. Consumers
recognized incentive revenue under this program of $46 million in 2021.
Consumers also exceeded its statutory savings targets in 2022, achieved certain other goals, and will
request the MPSC’s approval to collect $55 million, the maximum performance incentive, in the energy
waste reduction reconciliation to be filed in May 2023. Consumers recognized incentive revenue under
this program of $55 million in 2022.
Costs of Coal-fueled Electric Generating Units to be Retired: In 2019, the MPSC approved the
settlement agreement reached in Consumers’ 2018 IRP, under which Consumers will retire the D.E. Karn
coal-fueled electric generating units in 2023. Under Michigan law, electric utilities have been permitted to
use highly rated, low-cost securitization bonds to finance the recovery of qualified costs. In 2019,
Consumers removed from total plant, property, and equipment an amount representing the projected
remaining book value of the two coal-fueled electric generating units upon their retirement, and recorded
it as a regulatory asset. In 2020, the MPSC issued a securitization financing order authorizing Consumers
to issue securitization bonds in order to finance the recovery of the remaining book value of the two coal-
fueled electric generating units upon their retirement. Until securitization, the book value of the
generating units will remain in rate base and receive full regulatory returns in general rate cases.
In June 2022, the MPSC approved the settlement agreement reached in Consumers’ 2021 IRP, under
which Consumers plans to retire the J.H. Campbell coal-fueled generating units in 2025. Under the
2021 IRP, upon the units’ retirement, Consumers will receive regulatory asset treatment to recover their
remaining book value, as well as a 9.0-percent return on equity, over their original design lives. Until
retirement, the book value of the generating units will remain in rate base and receive full regulatory
returns in general rate cases.
In June 2022, Consumers removed from total plant, property, and equipment an amount of $1.3 billion,
representing the projected remaining book value of the electric generating units upon their retirement, and
recorded it as a non-current regulatory asset on its consolidated balance sheets.
Postretirement Benefits: As part of the ratemaking process, the MPSC allows Consumers to recover the
costs of postretirement benefits. Accordingly, Consumers defers the net impact of actuarial losses and
gains, prior service costs and credits, and settlements associated with postretirement benefits as a
regulatory asset or liability. The asset or liability will decrease as the deferred items are amortized and
recognized as components of net periodic benefit cost. For details about settlements and the amortization
periods, see Note 10, Retirement Benefits.
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ARO: The recovery of the underlying asset investments and related removal and monitoring costs of
recorded AROs is approved by the MPSC in depreciation rate cases. Consumers records a regulatory asset
and a regulatory liability for timing differences between the recognition of AROs for financial reporting
purposes and the recovery of these costs from customers. The recovery period approximates the useful
life of the assets to be removed.
Securitized Costs: In 2013, the MPSC issued a securitization financing order authorizing Consumers to
issue securitization bonds in order to finance the recovery of the remaining book value of seven smaller
coal-fueled electric generating units that Consumers retired in 2016 and three smaller natural gas-fueled
electric generating units that Consumers retired in 2015. Upon receipt of the MPSC’s order, Consumers
removed the book value of the ten units from plant, property, and equipment and recorded this amount as
a regulatory asset. Consumers is amortizing the regulatory asset over the life of the related securitization
bonds, which it issued through a subsidiary in 2014. For additional details regarding the securitization
bonds, see Note 4, Financings and Capitalization.
MGP Sites: Consumers is incurring environmental remediation and other response activity costs at
23 former MGP facilities. The MPSC allows Consumers to recover from its natural gas customers over a
ten-year period the costs incurred to remediate the MGP sites.
Unamortized Loss on Reacquired Debt: Under regulatory accounting, any unamortized discount,
premium, or expense related to debt redeemed with the proceeds of new debt is capitalized and amortized
over the life of the new debt.
Retention Incentive Program: To ensure necessary staffing at the D.E. Karn and J.H. Campbell
generating complexes through the anticipated retirement of the coal-fueled generating units, Consumers
has established retention incentive programs. In 2020, the MPSC approved deferred accounting treatment
for the retention and severance costs incurred under the D.E. Karn program, and Consumers began
deferring these costs as a regulatory asset in 2021. In addition, under the 2021 IRP, the MPSC approved
deferred accounting treatment for the retention and severance costs incurred under the J.H. Campbell
program during 2022; deferral of costs beyond 2022 was approved as part of the 2022 electric rate case
settlement. For additional details regarding the retention incentive program, see Note 19, Exit Activities
and Discontinued Operations.
Demand Response Program: In Consumers’ 2018 IRP and general rate cases, the MPSC has approved
the recovery of demand response costs. Consumers annually files a reconciliation with the MPSC to
review actual demand response costs against amounts approved. The amount of spending incurred in
excess of amounts included in rates for recovery is recorded as a regulatory asset and amortized when it is
collected from customers. The amount included in rates for recovery in excess of spending incurred is
recorded as a regulatory liability to be refunded to customers.
Energy Waste Reduction Plan: The MPSC allows Consumers to collect surcharges from customers to
fund its energy waste reduction plan. The amount of spending incurred in excess of surcharges collected
is recorded as a regulatory asset and amortized as surcharges are collected from customers over the plan
period. The amount of surcharges collected in excess of spending incurred is recorded as a regulatory
liability and amortized as costs are incurred.
Regulatory Liabilities
Income Taxes, Net: Consumers records regulatory assets and liabilities to reflect the difference between
deferred income taxes recognized for financial reporting purposes and amounts previously reflected in
Consumers’ rates. This net balance will decrease over the remaining life of the related temporary
differences and flow through income tax expense. The majority of the net regulatory liability recorded
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related to income taxes is associated with plant assets that are subject to normalization, which is governed
by the Internal Revenue Code, and will be returned to customers over the remaining book life of the
related plant assets. For additional details on deferred income taxes, see Note 12, Income Taxes.
Reserve for Customer Refunds: In December 2022, the MPSC issued an order authorizing Consumers
to refund $22 million voluntarily to utility customers. In January 2023, Consumers submitted a filing
proposing that the refund take the form of incremental funding to cover the cost of, and return on, certain
distribution capital investments above amounts included in rates and contributions to programs that assist
vulnerable customers.
Additionally, in the settlement of its 2022 electric rate case, Consumers agreed to refund voluntarily
$15 million of 2022 revenues to utility customers through a one-time bill credit and to fund $10 million in
contributions to programs that directly assist vulnerable customers with utility bills.
Cost of Removal: The MPSC allows Consumers to collect amounts from customers to fund future asset
removal activities. This regulatory liability is reduced as costs are incurred to remove the assets at the end
of their useful lives.
Renewable Energy Grant: In 2013, Consumers received a $69 million renewable energy grant for Lake
Winds® Energy Park, which began operations in 2012. This grant reduces Consumers’ cost of complying
with Michigan’s renewable portfolio standard and, accordingly, reduces the overall renewable energy
surcharge to be collected from customers. The regulatory liability recorded for the grant will be amortized
over the life of Lake Winds® Energy Park.
Renewable Energy Plan: Consumers has collected surcharges to fund its renewable energy plan.
Amounts not yet spent under the plan are recorded as a regulatory liability, which is amortized as
incremental costs are incurred to operate and depreciate Consumers’ renewable generation facilities and
to purchase RECs under renewable energy purchase agreements. Incremental costs represent costs
incurred in excess of amounts recovered through the PSCR process.
Consumers Electric Utility
2021 Electric Rate Case: In December 2021, the MPSC issued a final order in Consumers’ 2021 electric
rate case, disallowing cost recovery for fleet assets and certain other categories of recently completed
capital expenditures incurred by Consumers. As a result, Consumers impaired certain of these capital
expenditures, a portion of which were held by the gas utility, and recorded impairment charges totaling
$45 million within maintenance and other operating expenses on its consolidated statements of income for
the year ended December 31, 2021.
2022 Electric Rate Case: In April 2022, Consumers filed an application with the MPSC seeking a rate
increase of $272 million, based on a 10.25-percent authorized return on equity for the projected twelve-
month period ending December 31, 2023. In September 2022, Consumers revised its requested increase to
$292 million. The filing requested authority to recover future investments associated with distribution
system reliability, solar generation, environmental compliance, and enhanced technology.
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In January 2023, the MPSC approved a settlement agreement authorizing an annual rate increase of
$155 million, based on a 9.9-percent authorized return on equity. The MPSC also approved a surcharge
for the recovery of $6 million of depreciation, property tax, and interest expense related to distribution
investments made in 2021 that exceeded what was authorized in rates in accordance with the
December 2020 electric rate order. Additionally, the approved settlement provides for the following:
•
•
•
•
•
a pension and OPEB tracker that will allow Consumers to defer the future recovery or refund of
pension and OPEB expenses above or below the amounts used to set existing rates, respectively
a refund of $15 million of 2022 revenues to utility customers through a one-time bill credit
a commitment to fund $10 million in contributions to programs that directly assist vulnerable
customers with utility bills
deferred accounting treatment for depreciation and property tax expense as well as the debt
component of the overall rate of return for distribution-related capital investments exceeding a
certain threshold amount
an increase to the distributed generation cap from two percent to four percent on Consumers’
system
There were no direct disallowances of historical capital expenditures within the approved settlement
agreement. The new rates became effective January 20, 2023.
Voluntary Radio Tower Asset Sale Gain Share: In May 2022, Consumers completed a sale of various
radio tower assets. In June 2022, Consumers filed an application with the MPSC requesting approval to
share voluntarily half of the gain from the sale with its electric and gas utility customers; this application
was approved by the MPSC in October 2022. During 2022, Consumers shared two-thirds with electric
customers through additional spending for tree trimming and one-third with gas customers through a
donation to nonprofit agencies that provide customer energy bill assistance.
Consumers Gas Utility
2021 Gas Rate Case: In December 2021, Consumers filed an application with the MPSC seeking an
annual rate increase of $278 million, based on a 10.5-percent authorized return on equity for the projected
twelve-month period ending September 30, 2023. In April 2022, Consumers reduced its requested annual
rate increase to $233 million, based on a 10.25-percent authorized return on equity. In July 2022, the
MPSC approved a settlement agreement authorizing an annual rate increase of $170 million, based on a
9.9-percent authorized return on equity, effective October 1, 2022. The MPSC also approved the
continuation of a revenue decoupling mechanism, which annually reconciles Consumers’ actual weather-
normalized non-fuel revenues with the revenues approved.
Power Supply Cost Recovery and Gas Cost Recovery
The PSCR and GCR ratemaking processes are designed to allow Consumers to recover all of its power
supply and purchased natural gas costs if incurred under reasonable and prudent policies and practices.
The MPSC reviews these costs, policies, and practices in annual plan and reconciliation proceedings.
Consumers adjusts its PSCR and GCR billing charges monthly, subject to ceiling factor limitations, in
order to minimize the underrecovery or overrecovery amount in the annual reconciliations.
Underrecoveries represent probable future revenues that will be recovered from customers; overrecoveries
represent previously collected revenues that will be refunded to customers.
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Presented in the following table are the assets and liabilities for PSCR and GCR underrecoveries and
overrecoveries reflected on Consumers’ consolidated balance sheets:
December 31
Assets
PSCR underrecoveries
GCR underrecoveries
Accounts receivable and accrued revenue
Liabilities
PSCR overrecoveries
Accrued rate refunds
In Millions
2022
2021
$
$
$
$
401
$
8
409
$
—
—
$
$
—
25
25
12
12
Due to spikes in fuel prices during 2022, the cost of electric generation increased, resulting in higher
market prices for electricity. Accordingly, Consumers’ power supply costs for 2022 were significantly
higher than those projected in its 2022 PSCR plan. Consumers included a projection of its full-year 2022
underrecovery in the 2023 PSCR plan filed with the MPSC in September 2022. In January 2023,
Consumers filed a motion for a temporary order in its 2023 PSCR plan, requesting that the MPSC
approve only a third of the 2022 underrecovery amount for recovery in 2023, with the remaining amount
to be recovered equally during 2024 and 2025. Recovering the 2022 underrecovery over three years will
provide immediate relief to electric customers, and the financial impact will be neutral to Consumers’
earnings.
PSCR Plans and Reconciliations: In August 2022, the MPSC issued an order in Consumers’ 2020
PSCR reconciliation, authorizing recovery of $1.8 billion of power costs and authorizing Consumers to
reflect in its 2021 PSCR reconciliation the underrecovery of $1 million. In its order, the MPSC disallowed
the recovery of $1 million of replacement power costs associated with an extended outage at Ludington.
Consumers filed an appeal of the MPSC’s order with the Michigan Court of Appeals in September 2022.
In March 2022, Consumers filed its 2021 PSCR reconciliation, requesting full recovery of $2.1 billion of
power costs and authorization to reflect in its 2022 PSCR reconciliation the overrecovery of $8 million.
Consumers submitted its 2022 PSCR plan to the MPSC in September 2021 and self-implemented its
proposed 2022 PSCR charge in January 2022.
GCR Plans and Reconciliations: In April 2022, the MPSC approved a settlement agreement in
Consumers’ 2020-2021 GCR reconciliation, authorizing recovery of $0.4 billion of gas costs and
authorizing Consumers to reflect in its 2021-2022 GCR reconciliation the overrecovery of $2 million.
In June 2022, Consumers filed its 2021-2022 GCR reconciliation, requesting full recovery of $0.7 billion
of gas costs and authorization to reflect in its 2022-2023 GCR reconciliation the underrecovery of
$9 million.
Consumers submitted its 2022-2023 GCR plan to the MPSC in December 2021 and self-implemented its
proposed 2022-2023 GCR charge in April 2022. In June 2022, Consumers filed with the MPSC a revised
GCR plan requesting an increase to the GCR factor due to rising natural gas prices. Consumers self-
implemented that increased factor in October 2022.
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3: Contingencies and Commitments
CMS Energy and Consumers are involved in various matters that give rise to contingent liabilities.
Depending on the specific issues, the resolution of these contingencies could negatively affect
CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. In their
disclosures of these matters, CMS Energy and Consumers provide an estimate of the possible loss or
range of loss when such an estimate can be made. Disclosures stating that CMS Energy or Consumers
cannot predict the outcome of a matter indicate that they are unable to estimate a possible loss or range of
loss for the matter.
CMS Energy Contingencies
Bay Harbor: CMS Land retained environmental remediation obligations for the collection and treatment
of leachate at Bay Harbor after selling its interests in the development in 2002. Leachate is produced
when water enters into cement kiln dust piles left over from former cement plant operations at the site. In
2012, CMS Land and EGLE finalized an agreement establishing the final remedies and the future water
quality criteria at the site. CMS Land completed all construction necessary to implement the remedies
required by the agreement and will continue to maintain and operate a system to discharge treated
leachate into Little Traverse Bay under an NPDES permit, which was renewed in January 2022 and is
valid through 2025.
At December 31, 2022, CMS Energy had a recorded liability of $45 million for its remaining obligations
for environmental remediation. CMS Energy calculated this liability based on discounted projected costs,
using a discount rate of 4.34 percent and an inflation rate of one percent on annual operating and
maintenance costs. The undiscounted amount of the remaining obligation is $57 million. CMS Energy
expects to pay the following amounts for long-term leachate disposal and operating and maintenance
costs in each of the next five years:
2023
2024
2025
2026
2027
In Millions
CMS Energy
Long-term leachate disposal and operating and maintenance
costs
$
4
$
4
$
4
$
4
$
4
CMS Energy’s estimate of response activity costs and the timing of expenditures could change if there are
changes in circumstances or assumptions used in calculating the liability. Although a liability for its
present estimate of remaining response activity costs has been recorded, CMS Energy cannot predict the
ultimate financial impact or outcome of this matter.
Consumers Electric Utility Contingencies
Electric Environmental Matters: Consumers’ operations are subject to environmental laws and
regulations. Historically, Consumers has generally been able to recover, in customer rates, the costs to
operate its facilities in compliance with these laws and regulations.
Cleanup and Solid Waste: Consumers expects to incur remediation and other response activity costs at a
number of sites under NREPA. Consumers believes that these costs should be recoverable in rates, but
cannot guarantee that outcome. Consumers estimates its liability for NREPA sites for which it can
estimate a range of loss to be between $2 million and $4 million. At December 31, 2022, Consumers had
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a recorded liability of $2 million, the minimum amount in the range of its estimated probable NREPA
liability, as no amount in the range was considered a better estimate than any other amount.
Consumers is a potentially responsible party at a number of contaminated sites administered under
CERCLA. CERCLA liability is joint and several. In 2010, Consumers received official notification from
the EPA that identified Consumers as a potentially responsible party for cleanup of PCBs at the
Kalamazoo River CERCLA site. The notification claimed that the EPA had reason to believe that
Consumers disposed of PCBs and arranged for the disposal and treatment of PCB-containing materials at
portions of the site. In 2011, Consumers received a follow-up letter from the EPA requesting that
Consumers agree to participate in a removal action plan along with several other companies for an area of
lower Portage Creek, which is connected to the Kalamazoo River. All parties asked to participate in the
removal action plan, including Consumers, declined to accept liability. Until further information is
received from the EPA, Consumers is unable to estimate a range of potential liability for cleanup of the
river.
Based on its experience, Consumers estimates its share of the total liability for known CERCLA sites to
be between $3 million and $8 million. Various factors, including the number and creditworthiness of
potentially responsible parties involved with each site, affect Consumers’ share of the total liability. At
December 31, 2022, Consumers had a recorded liability of $3 million for its share of the total liability at
these sites, the minimum amount in the range of its estimated probable CERCLA liability, as no amount
in the range was considered a better estimate than any other amount.
The timing of payments related to Consumers’ remediation and other response activities at its CERCLA
and NREPA sites is uncertain. Consumers periodically reviews these cost estimates. A change in the
underlying assumptions, such as an increase in the number of sites, different remediation techniques, the
nature and extent of contamination, and legal and regulatory requirements, could affect its estimates of
NREPA and CERCLA liability.
Ludington PCB: In 1998, during routine maintenance activities, Consumers identified PCB as a
component in certain paint, grout, and sealant materials at Ludington. Consumers removed part of the
PCB material and replaced it with non-PCB material. Consumers has had several communications with
the EPA regarding this matter, but cannot predict the financial impact or outcome.
Ludington Plant Overhaul Contract Dispute: Consumers and DTE Electric, co-owners of Ludington,
are parties to a 2010 engineering, procurement, and construction contract with TAES, under which TAES
is charged with performing a major overhaul and upgrade of Ludington. TAES’ performance has been
unsatisfactory and resulted in overhaul project delays. Consumers and DTE Electric have demanded that
TAES provide a comprehensive plan to resolve quality control concerns, including adherence to its
warranty commitments and other contractual obligations. Consumers and DTE Electric have taken
extensive efforts to resolve these issues with TAES, including a formal demand to TAES’ parent, Toshiba
Corporation, a non-affiliated company, under a parent guaranty it provided in the contract. TAES has not
provided a comprehensive plan or otherwise met its performance obligations.
In order to enforce the contract, Consumers and DTE Electric filed a complaint against TAES and
Toshiba Corporation in the U.S. District Court for the Eastern District of Michigan in April 2022. In
June 2022, TAES and Toshiba Corporation filed a motion to dismiss the complaint, along with an answer
and counterclaims seeking approximately $15 million in damages related to payments allegedly owed
under the parties’ contract. As a co-owner of Ludington, Consumers would be liable for 51 percent of any
such damages. In September 2022, the court denied the motion to dismiss filed by TAES and Toshiba
Corporation. Consumers believes the counterclaims are without merit, but cannot predict the financial
impact or outcome of this matter. An unfavorable outcome could have a material adverse effect on
CMS Energy’s and Consumers’ financial condition, results of operations, or liquidity.
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In November 2022, Consumers and DTE Electric jointly filed an application with the MPSC, requesting
authority to defer as a regulatory asset the costs associated with repairing or replacing the defective work
performed by TAES while the litigation with TAES and Toshiba Corporation moves forward; such costs
would be offset by potential future litigation proceeds received from TAES or Toshiba Corporation. If
this application is approved by the MPSC, Consumers and DTE Electric will have the opportunity to seek
appropriate recovery and ratemaking treatment for amounts recorded as a regulatory asset following
resolution of the litigation.
J.H. Campbell 3 Plant Retirement Contract Dispute: In May 2022, Consumers filed a complaint
against Wolverine Power Supply Cooperative, Inc. in the Ottawa County Circuit Court and requested a
ruling that Consumers has sole authority to decide to retire the J.H. Campbell 3 coal-fueled generating
unit under the unit’s Joint Ownership and Operating Agreement. In July 2022, Wolverine Power Supply
Cooperative, Inc. filed an answer, affirmative defenses, and a counterclaim seeking approximately
$37 million in damages allegedly caused by Consumers’ decision to retire the unit before the end of its
useful life. In July 2022, Consumers filed a motion for summary disposition, which was heard in
August 2022. In October 2022, the state circuit court judge found that Consumers may, in its sole
discretion, retire the J.H. Campbell 3 coal-fueled generating unit, provided that Consumers continues to
operate and make necessary improvements to the unit while the litigation concerning Wolverine Power
Supply Cooperative, Inc.’s claim for damages is pending. Consumers believes Wolverine Power Supply
Cooperative, Inc.’s claim has no merit, but cannot predict the final impact or outcome on this matter. An
unfavorable outcome could have a material adverse effect on CMS Energy’s and Consumers’ financial
condition, results of operations, or liquidity.
Consumers Gas Utility Contingencies
Gas Environmental Matters: Consumers expects to incur remediation and other response activity costs
at a number of sites under NREPA. These sites include 23 former MGP facilities. Consumers operated the
facilities on these sites for some part of their operating lives. For some of these sites, Consumers has no
present ownership interest or may own only a portion of the original site.
At December 31, 2022, Consumers had a recorded liability of $62 million for its remaining obligations
for these sites. This amount represents the present value of long-term projected costs, using a discount
rate of 2.57 percent and an inflation rate of 2.5 percent. The undiscounted amount of the remaining
obligation is $67 million. Consumers expects to pay the following amounts for remediation and other
response activity costs in each of the next five years:
Consumers
Remediation and other response activity costs
2023
2024
2025
2026
2027
In Millions
$
5
$ 11
$ 31
$
6
$
1
Consumers periodically reviews these cost estimates. Any significant change in the underlying
assumptions, such as an increase in the number of sites, changes in remediation techniques, or legal and
regulatory requirements, could affect Consumers’ estimates of annual response activity costs and the
MGP liability.
Pursuant to orders issued by the MPSC, Consumers defers its MGP-related remediation costs and
recovers them from its customers over a ten-year period. At December 31, 2022, Consumers had a
regulatory asset of $108 million related to the MGP sites.
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Consumers estimates that its liability to perform remediation and other response activities at NREPA sites
other than the MGP sites could reach $3 million. At December 31, 2022, Consumers had a recorded
liability of less than $1 million, the minimum amount in the range of its estimated probable liability, as no
amount in the range was considered a better estimate than any other amount.
Ray Compressor Station: On January 30, 2019, Consumers experienced a fire at the Ray Compressor
Station, which resulted in the Ray Storage Field being off-line or operating at significantly reduced
capacity, which negatively affected Consumers’ natural gas supply and delivery capacity. This incident,
which occurred during the extreme polar vortex weather condition, required Consumers to request
voluntary reductions in customer load, to implement contingency gas supply purchases, and to implement
a curtailment of natural gas deliveries for industrial and large commercial customers pursuant to
Consumers’ MPSC curtailment tariff. The curtailment and request for voluntary reductions of customer
loads were canceled as of midnight, February 1, 2019. Consumers investigated the cause of the incident,
and filed a report on the incident with the MPSC in April 2019. In response, the MPSC issued an order in
July 2019, directing Consumers to file additional reports regarding the incident and to include detail of
the resulting costs in a future rate proceeding. The compressor station is presently operating at full
capacity.
In September 2020, the MPSC disallowed the recovery of $7 million in incremental gas purchases related
to the fire. In February 2021, after the MPSC denied Consumers’ petition for rehearing challenging this
disallowance, Consumers filed an appeal with the Michigan Court of Appeals. In December 2022, the
Michigan Court of Appeals issued a decision rejecting Consumers’ appeal. Consumers plans to file an
application for leave to appeal with the Michigan Supreme Court in February 2023.
In December 2021, Consumers filed a gas rate case with the MPSC that included a request for recovery of
the capital expenditures incurred to restore and modify the compressor station. Consumers incurred
capital expenditures of $17 million during 2020 and 2021 to restore and modify the compressor station.
During 2022, Consumers received insurance proceeds of $13 million, representing recovery of costs
incurred to restore the compressor station and incremental gas purchases related to the fire. Consumers
had recognized the insurance recovery during 2021.
In June 2022, Consumers, the MPSC Staff, and other intervenors reached a settlement of the gas rate case
and the MPSC approved it in July 2022. As a part of the settlement agreement, Consumers agreed, at this
time, to not seek recovery of the capital expenditures, net of insurance proceeds, related to restoring and
modifying the Ray Compressor Station. As a result, Consumers recorded an impairment charge of
$10 million within maintenance and other operating expenses on its consolidated statements of income in
2022.
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Guarantees
Presented in the following table are CMS Energy’s and Consumers’ guarantees at December 31, 2022:
Guarantee Description
CMS Energy, including Consumers
Indemnity obligations from sale of
membership interests in VIEs1
Indemnity obligations from stock and asset
sale agreements2
Guarantee3
Consumers
Guarantee3
Issue Date Expiration Date
Maximum
Obligation
In Millions
Carrying
Amount
various
indefinite
$
325
$
various
2011
indefinite
indefinite
226
30
2011
indefinite
$
30
$
—
3
—
—
1
2
3
These obligations arose from the sale of membership interests in NWO Holdco and Aviator Wind to tax
equity investors. NorthStar Clean Energy provided certain indemnity obligations that protect the tax equity
investors against losses incurred as a result of breaches of representations and warranties under the
associated limited liability company agreements. These obligations are generally capped at an amount equal
to the tax equity investor’s capital contributions plus a specified return, less any distributions and tax
benefits it receives, in connection with its membership interest. For any indemnity obligations related to
Aviator Wind, NorthStar Clean Energy would recover 49 percent of any amounts paid to the tax equity
investor from the other owner of Aviator Wind Equity Holdings. Additionally, Aviator Wind holds
insurance coverage that would partially protect against losses incurred as a result of certain failures to
qualify for production tax credits. For further details on NorthStar Clean Energy’s ownership interest in
NWO Holdco and Aviator Wind, see Note 18, Variable Interest Entities.
These obligations arose from stock and asset sale agreements under which CMS Energy or a subsidiary of
CMS Energy indemnified the purchaser for losses resulting from various matters, including claims related
to taxes and breaches of representations and warranties. The maximum obligation amount is mostly related
to an Equatorial Guinea tax claim and an indemnity provided in connection with the sale of EnerBank to
Regions Bank. For further details on the sale, see Note 19, Exit Activities and Discontinued Operations.
This obligation comprises a guarantee provided by Consumers to the U.S. Department of Energy in
connection with a settlement agreement regarding damages resulting from the department’s failure to
accept spent nuclear fuel from nuclear power plants formerly owned by Consumers.
Additionally, in the normal course of business, CMS Energy, Consumers, and certain other subsidiaries of
CMS Energy have entered into various agreements containing tax and other indemnity provisions for
which they are unable to estimate the maximum potential obligation. CMS Energy and Consumers
consider the likelihood that they would be required to perform or incur substantial losses related to these
indemnities and those disclosed in the table to be remote.
Other Contingencies
In addition to the matters disclosed in this Note and Note 2, Regulatory Matters, there are certain other
lawsuits and administrative proceedings before various courts and governmental agencies, as well as
unasserted claims that may result in such proceedings, arising in the ordinary course of business to which
CMS Energy, Consumers, and certain other subsidiaries of CMS Energy are parties. These other lawsuits,
proceedings, and unasserted claims may involve personal injury, property damage, contracts,
environmental matters, federal and state taxes, rates, licensing, employment, and other matters. Further,
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CMS Energy and Consumers occasionally self-report certain regulatory non-compliance matters that may
or may not eventually result in administrative proceedings. CMS Energy and Consumers believe that the
outcome of any one of these proceedings and potential claims will not have a material negative effect on
their consolidated results of operations, financial condition, or liquidity.
Contractual Commitments
Purchase Obligations: Purchase obligations arise from long-term contracts for the purchase of
commodities and related services, plant purchase commitments, and construction and service agreements.
The commodities and related services include long-term PPAs, natural gas and associated transportation,
and coal and associated transportation. Related-party PPAs are between Consumers and certain affiliates
of NorthStar Clean Energy. Presented in the following table are CMS Energy’s and Consumers’
contractual purchase obligations at December 31, 2022 for each of the periods shown:
Payments Due
Total
2023
2024
2025
2026
2027
In Millions
Beyond
2027
$ 8,479 $
652 $
792 $
809 $
812 $
847 $ 4,567
4,042
2,513
903
335
41
31
219
$ 12,521 $ 3,165 $ 1,695 $ 1,144 $
853 $
878 $ 4,786
$ 2,317 $
286 $
369 $
357 $
384 $
406 $
515
320
5,842
76
290
76
347
53
399
35
393
38
403
42
4,010
$ 8,479 $
652 $
792 $
809 $
812 $
847 $ 4,567
3,422
2,394
836
177
11
1
3
CMS Energy, including Consumers
Total PPAs
Other
Total purchase obligations
Consumers
PPAs
MCV PPA
Related-party PPAs
Other PPAs
Total PPAs
Other
Total purchase obligations
$ 11,901 $ 3,046 $ 1,628 $
986 $
823 $
848 $ 4,570
MCV PPA: Consumers has a PPA with the MCV Partnership giving Consumers the right to purchase up
to 1,240 MW of capacity and energy produced by the MCV Facility through May 2030. The MCV PPA
provides for:
•
•
•
•
a capacity charge of $10.14 per MWh of available capacity through March 2025 and
$5.00 per MWh of available capacity from March 2025 through the termination date of the PPA
a fixed energy charge of $6.30 per MWh for on-peak hours and $6.00 for off-peak hours
a variable energy charge based on the MCV Partnership’s cost of production for energy delivered
to Consumers
a $5 million annual contribution by the MCV Partnership to a renewable resources program
through March 2025
Capacity and energy charges under the MCV PPA were $519 million in 2022, $348 million in 2021, and
$298 million in 2020.
Other PPAs: Consumers has PPAs expiring through 2050 with various counterparties. The majority of the
PPAs have capacity and energy charges for delivered energy. Capacity and energy charges under these
PPAs were $510 million in 2022, $338 million in 2021, and $327 million in 2020. In addition,
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CMS Energy and Consumers account for several of their PPAs as leases. See Note 8, Leases for more
information about CMS Energy’s and Consumers’ lease obligations.
4: Financings and Capitalization
Presented in the following table is CMS Energy’s long-term debt at December 31:
Interest Rate
(%)
Maturity
2022
2021
In Millions
CMS Energy, including Consumers
CMS Energy, parent only
Senior notes
Junior subordinated notes1
Total CMS Energy, parent only
Consumers
NorthStar Clean Energy, including subsidiaries
Term loan facility
Term loan facility
Total principal amount outstanding
Current amounts
Unamortized discounts
Unamortized issuance costs
Total long-term debt
3.875
3.600
3.000
2.950
3.450
4.700
4.875
4.750 2
3.750 3
5.625
5.875
5.875
2024
2025
2026
2027
2027
2043
2044
2050
2050
2078
2078
2079
$
$
250
250
300
275
350
250
300
250
250
300
275
350
250
300
$
1,975
$
1,975
500
400
200
280
630
$
$
2,010
3,985
10,277
$
$
500
400
200
280
630
2,010
3,985
8,505
78
—
$ 14,362
$ 12,568
(1,090)
(30)
(120)
(373)
(31)
(118)
$ 13,122
$ 12,046
variable
variable 4
2025
2023
—
100
1
2
3
4
These unsecured obligations rank subordinate and junior in right of payment to all of CMS Energy’s
existing and future senior indebtedness.
On June 1, 2030, and every five years thereafter, the notes will reset to an interest rate equal to the five-year
treasury rate plus 4.116 percent.
On December 1, 2030, and every five years thereafter, the notes will reset to an interest rate equal to the
five-year treasury rate plus 2.900 percent
Funds borrowed under this facility have an interest rate of one-month Term SOFR plus a spread of
one percent. At December 31, 2022, the interest rate for the loan issued under this facility was
5.423 percent.
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Presented in the following table is Consumers’ long-term debt at December 31:
Consumers
First mortgage bonds
Interest Rate
(%)
Maturity
2022
2021
In Millions
0.350
3.375
3.125
3.190
3.680
3.390
3.800
3.600
3.180
5.800
3.520
4.010
6.170
4.970
4.310
3.950
4.100
3.250
3.950
4.050
4.350
3.750
3.100
3.500
2.650
4.200
3.860
4.280
2.500
4.350
variable 1
variable 1
variable 1
0.875 2
1.800 3
2023
2023
2024
2024
2027
2027
2028
2032
2032
2035
2037
2038
2040
2040
2042
2043
2045
2046
2047
2048
2049
2050
2050
2051
2052
2052
2052
2057
2060
2064
2069
2070
2070
2035
2049
3.343 4
2025-2029 5
variable 6
2024
$
$
$
300
325
250
52
100
35
300
350
100
175
335
215
50
50
263
425
250
450
350
550
550
300
550
575
300
450
50
185
525
250
76
134
127
8,997
35
75
110
170
1,000
$ 10,277
(991)
(27)
(67)
9,192
$
$
$
$
$
$
300
325
250
52
100
35
300
—
100
175
335
215
50
50
263
425
250
450
350
550
550
300
550
575
300
—
50
185
525
250
76
134
127
8,197
35
75
110
198
—
8,505
(365)
(28)
(62)
8,050
Tax-exempt revenue bonds
Securitization bonds
Term loan facility
Total principal amount outstanding
Current amounts
Unamortized discounts
Unamortized issuance costs
Total long-term debt
1
The variable-rate bonds bear interest quarterly at a rate of three-month LIBOR minus 0.300 percent, subject
to a zero-percent floor. At December 31, 2022, the interest rates were 4.469 percent for bonds due
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September 2069, 4.375 percent for bonds due May 2070, and 3.484 percent for bonds due October 2070.
The interest rate for all variable-rate bonds at December 31, 2021 was zero percent. The holders of these
variable-rate bonds may put them to Consumers for redemption on certain dates prior to their stated
maturity, including dates within one year of December 31, 2022.
2
3
4
5
6
The interest rate on these tax-exempt revenue bonds will reset on October 8, 2026.
The interest rate on these tax-exempt revenue bonds will reset on October 1, 2024.
The weighted-average interest rate for Consumers’ securitization bonds issued through its subsidiary,
Consumers 2014 Securitization Funding, was 3.343 percent at December 31, 2022 and 3.290 percent at
December 31, 2021.
Principal and interest payments are made semiannually.
Loans under this facility have an interest rate of one-month Term SOFR plus 0.650 percent. At
December 31, 2022, the weighted-average interest rate for the loans issued under this facility was
4.975 percent at December 31, 2022.
Financings: Presented in the following table is a summary of major long-term debt issuances during
2022:
Principal
(In Millions)
Interest Rate
Issuance Date Maturity Date
NorthStar Clean Energy, including
subsidiaries
Term loan facility1
Total NorthStar Clean Energy, including
subsidiaries
Consumers
Term loan facility2
First mortgage bonds
First mortgage bonds
Total Consumers
Total CMS Energy
$
$
100
100
$
1,000
350
450
1,800
1,900
$
$
variable December 2022 September 2023
variable
3.600%
4.200%
July 2022
January 2024
August 2022
August 2032
August 2022 September 2052
1
2
In December 2022, a subsidiary of NorthStar Clean Energy entered into a $185 million unsecured term loan
credit agreement. Under this credit agreement, $100 million of loans have been issued as of
December 31, 2022. In January 2023, an additional $30 million was borrowed under the unsecured term
loan credit agreement.
In July 2022, Consumers entered into a delayed-draw $1.0 billion unsecured term loan credit agreement.
Under this credit agreement, Consumers issued loans of $550 million in September 2022 and $450 million
in November 2022. In January 2023, Consumers repaid $500 million of the term loan credit agreement.
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In January 2023, Consumers entered into a bond purchase agreement to issue an aggregate principal
amount of $400 million of first mortgage bonds through a private placement offering. The bonds, which
were priced in November 2022, carry a weighted average interest rate of 5.251 percent and mature at
varying dates between 2026 and 2037. The bonds are expected to be issued in May 2023. The proceeds of
the bonds will be used to finance a portion of the purchase price of the New Covert Generating Facility
and for general corporate purposes.
Also in January 2023, Consumers issued $425 million of first mortgage bonds that mature in March 2028
and bear interest at a rate of 4.650 percent. The proceeds of the bonds have been used to repay a portion
of the $1.0 billion aggregate principal amount outstanding under Consumers’ term loan credit agreement
and for general corporate purposes.
Presented in the following table is a summary of major long-term debt retirements during 2022:
NorthStar Clean Energy, including
subsidiaries
Term loan facility
Principal
(In Millions)
Interest Rate
Retirement Date
Maturity Date
$
76
variable
June 2022
October 2025
In June 2022, NorthStar Clean Energy sold a Class A membership interest in NWO Holdco to a tax equity
investor for $49 million. Proceeds from the sale were used to retire the non-recourse debt held by a
subsidiary of NorthStar Clean Energy. For more information, see Note 18, Variable Interest Entities.
First Mortgage Bonds: Consumers secures its first mortgage bonds by a mortgage and lien on
substantially all of its property. Consumers’ ability to issue first mortgage bonds is restricted by certain
provisions in the First Mortgage Bond Indenture and the need for regulatory approvals under federal law.
Restrictive issuance provisions in the First Mortgage Bond Indenture include achieving a two-times
interest coverage ratio and having sufficient unfunded net property additions.
Regulatory Authorization for Financings: Consumers is required to maintain FERC authorization for
financings. Its current authorization expires on March 31, 2024. Any long-term issuances during the
authorization period are exempt from FERC’s competitive bidding and negotiated placement
requirements. In December 2022, Consumers filed an application for authority to issue securities between
April 1, 2023 and March 31 2025.
Securitization Bonds: Certain regulatory assets held by Consumers’ subsidiary, Consumers
2014 Securitization Funding, collateralize Consumers’ securitization bonds. The bondholders have no
recourse to Consumers’ assets except for those held by the subsidiary that issued the bonds. Consumers
collects securitization surcharges to cover the principal and interest on the bonds as well as certain other
qualified costs. The surcharges collected are remitted to a trustee and are not available to creditors of
Consumers or creditors of Consumers’ affiliates other than the subsidiary that issued the bonds.
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Debt Maturities: At December 31, 2022, the aggregate annual maturities for long-term debt for the next
five years, based on stated maturities or earlier put dates, were:
CMS Energy, including Consumers
Long-term debt
CMS Energy, parent only
Consumers
NorthStar Clean Energy, including subsidiaries
Total CMS Energy1
Consumers
Long-term debt
2023
2024
2025
2026
2027
In Millions
$ —
$
250
$
250
$
300
$
991
100
1,332
—
31
—
32
—
625
168
—
$ 1,091
$ 1,582
$
281
$
332
$
793
$
991
$ 1,332
$
31
$
32
$
168
1
This amount excludes debt issuance costs, related to the term loan agreement of a subsidiary of NorthStar
Clean Energy, of less than $1 million.
Credit Facilities: The following credit facilities with banks were available at December 31, 2022:
Expiration Date
CMS Energy, parent only
December 14, 20271
September 22, 2024
NorthStar Clean Energy, including
subsidiaries
September 25, 20252
Consumers3
December 14, 2027
November 18, 2024
Amount of
Facility
Amount
Borrowed
Letters of Credit
Outstanding
In Millions
Amount
Available
$
550
50
$
37
$
1,100
250
$
$
$
—
—
—
—
—
$
$
$
$
18
50
532
—
37
$
—
29
27
$
1,071
223
1
2
3
There were no borrowings under this facility during the year ended December 31, 2022.
This letter of credit facility is available to Aviator Wind Equity Holdings. For more information regarding
Aviator Wind Equity Holdings, see Note 18, Variable Interest Entities.
Obligations under these facilities are secured by first mortgage bonds of Consumers. There were
no borrowings under these facilities during the year ended December 31, 2022.
Short-term Borrowings: Under Consumers’ commercial paper program, Consumers may issue, in one or
more placements, investment-grade commercial paper notes with maturities of up to 365 days at market
interest rates. These issuances are supported by Consumers’ revolving credit facilities and may have an
aggregate principal amount outstanding of up to $500 million. While the amount of outstanding
commercial paper does not reduce the available capacity of the revolving credit facilities, Consumers
does not intend to issue commercial paper in an amount exceeding the available capacity of the facilities.
At December 31, 2022, there were $20 million of commercial paper notes outstanding under this program
at an annual interest rate of 4.710 percent, recorded as current notes payable on the consolidated balance
sheets of CMS Energy and Consumers.
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In December 2022, Consumers renewed a short-term credit agreement with CMS Energy, permitting
Consumers to borrow up to $500 million. At December 31, 2022, outstanding borrowings under the
agreement were $75 million bearing the maximum interest rate authorized by FERC for this short-term
credit agreement of 3.500 percent.
Dividend Restrictions: At December 31, 2022, payment of dividends by CMS Energy on its common
stock was limited to $6.8 billion under provisions of the Michigan Business Corporation Act of 1972.
Under the provisions of its articles of incorporation, at December 31, 2022, Consumers had $1.9 billion of
unrestricted retained earnings available to pay dividends on its common stock to CMS Energy. Provisions
of the Federal Power Act and the Natural Gas Act appear to restrict dividends payable by Consumers to
the amount of Consumers’ retained earnings. Several decisions from FERC suggest that, under a variety
of circumstances, dividends from Consumers on its common stock would not be limited to amounts in
Consumers’ retained earnings. Any decision by Consumers to pay dividends on its common stock in
excess of retained earnings would be based on specific facts and circumstances and would be subject to a
formal regulatory filing process.
During the year ended December 31, 2022, Consumers paid $769 million in dividends on its common
stock to CMS Energy.
Capitalization: The authorized capital stock of CMS Energy consists of:
•
•
350 million shares of CMS Energy Common Stock, par value $0.01 per share
10 million shares of CMS Energy Preferred Stock, par value $0.01 per share
Issuance of Common Stock: Under an existing equity offering program, CMS Energy may sell shares of
its common stock having an aggregate sales price of up to $500 million in privately negotiated
transactions, in “at the market” offerings, through forward sales transactions, or otherwise. In 2022,
CMS Energy settled forward contracts under this program by issuing 962,354 shares of common stock at
a weighted-average price of $57.36 per share, resulting in net proceeds of $55 million.
Presented in the following table are details of CMS Energy’s forward sales contracts under this program
at December 31, 2022:
Contract Date
August 3, 2022
August 24, 2022
August 29, 2022
Maturity Date
Number of Shares
Initial December 31, 2022
February 1, 2024
February 26, 2024
February 26, 2024
2,944,207
1,677,938
1,783,388
67.59
69.46
68.18
67.83
69.69
68.38
Forward Price Per Share
These contracts allow CMS Energy to either physically settle the contracts by issuing shares of its
common stock at the then-applicable forward sale price specified by the agreement or net settle the
contracts through the delivery or receipt of cash or shares. CMS Energy may settle the contracts at any
time through their maturity dates, and presently intends to physically settle the contracts by delivering
shares of its common stock.
The initial forward price in the forward equity sale contracts includes a deduction for commissions and
will be adjusted on a daily basis over the term based on an interest rate factor and decreased on certain
dates by certain predetermined amounts to reflect expected dividend payments. No amounts are recorded
on CMS Energy’s consolidated balance sheets until settlements of the forward equity sale contracts occur.
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If CMS Energy had elected to net share settle or net cash settle the contracts as of December 31, 2022,
CMS Energy would not have been required to deliver shares or pay cash.
Preferred Stock: CMS Energy’s Series C preferred stock is traded on the New York Stock Exchange
under the symbol CMS PRC. Depositary shares represent a 1/1000th interest in a share of its Series C
preferred stock. The Series C preferred stock has no maturity or mandatory redemption date and is not
redeemable at the option of the holders. CMS Energy may, at its option, redeem the Series C preferred
stock, in whole or in part, at any time on or after July 15, 2026. The Series C preferred stock ranks senior
to CMS Energy’s common stock with respect to dividend rights and distribution rights upon liquidation.
Presented in the following table are details of CMS Energy’s Series C preferred stock at
December 31, 2022 and 2021:
Depositary
Share
Optional
Redemption
Price
Depositary
Share Par
Value
Number of
Depositary
Shares
Authorized
Number of
Depositary
Shares
Outstanding
Cumulative, redeemable perpetual
$
25
$
25
9,200,000
9,200,000
Preferred Stock of Subsidiary: Consumers’ preferred stock is traded on the New York Stock Exchange
under the symbol CMS-PB. Presented in the following table are details of Consumers’ preferred stock at
December 31, 2022 and 2021:
Cumulative, with no mandatory redemption
Optional
Redemption
Price
Number of
Shares
Authorized
Number of
Shares
Outstanding
$
110
7,500,000
373,148
Par Value
$
100
5: Fair Value Measurements
Accounting standards define fair value as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants. When measuring fair value,
CMS Energy and Consumers are required to incorporate all assumptions that market participants would
use in pricing an asset or liability, including assumptions about risk. A fair value hierarchy prioritizes
inputs used to measure fair value according to their observability in the market. The three levels of the
fair value hierarchy are as follows:
•
•
•
Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 inputs are observable, market-based inputs, other than Level 1 prices. Level 2 inputs may
include quoted prices for similar assets or liabilities in active markets, quoted prices in inactive
markets, and inputs derived from or corroborated by observable market data.
Level 3 inputs are unobservable inputs that reflect CMS Energy’s or Consumers’ own
assumptions about how market participants would value their assets and liabilities.
CMS Energy and Consumers classify fair value measurements within the fair value hierarchy based on
the lowest level of input that is significant to the fair value measurement in its entirety.
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Assets and Liabilities Measured at Fair Value on a Recurring Basis
Presented in the following table are CMS Energy’s and Consumers’ assets and liabilities recorded at fair
value on a recurring basis:
December 31
Assets1
Restricted cash equivalents
Nonqualified deferred
compensation plan assets
Derivative instruments
Total assets
Liabilities1
Nonqualified deferred
compensation plan liabilities
Derivative instruments
Total liabilities
CMS Energy, including Consumers
2022
2021
$
$
$
$
18
24
2
44
24
—
24
$
$
$
$
24
27
2
53
27
7
34
In Millions
Consumers
2022
2021
$
$
$
$
17
18
2
37
18
—
18
$
$
$
$
22
21
2
45
21
—
21
1
All assets and liabilities were classified as Level 1 with the exception of derivative contracts, which were
classified as Level 2 or Level 3.
Restricted Cash Equivalents: Restricted cash equivalents consist of money market funds with daily
liquidity. For further details, see Note 1, Significant Accounting Policies.
Nonqualified Deferred Compensation Plan Assets and Liabilities: The nonqualified deferred
compensation plan assets consist of mutual funds, which are valued using the daily quoted net asset
values. CMS Energy and Consumers value their nonqualified deferred compensation plan liabilities based
on the fair values of the plan assets, as they reflect the amount owed to the plan participants in accordance
with their investment elections. CMS Energy and Consumers report the assets in other non-current assets
and the liabilities in other non-current liabilities on their consolidated balance sheets.
Derivative Instruments: CMS Energy and Consumers value their derivative instruments using either a
market approach that incorporates information from market transactions, or an income approach that
discounts future expected cash flows to a present value amount. CMS Energy’s and Consumers’
derivatives are classified as Level 2 or Level 3.
The derivatives classified as Level 2 were interest rate swaps at CMS Energy, which were valued using
market-based inputs. CMS Energy used interest rate swaps to manage its interest rate risk on certain
long-term debt obligations.
A subsidiary of NorthStar Clean Energy used floating-to-fixed interest rate swaps to reduce the impact of
interest rate fluctuations associated with future interest payments on certain long-term variable-rate debt.
The interest rate swaps were accounted for as cash flow hedges of the future variability of interest
payments on the debt. In June 2022, NorthStar Clean Energy repaid the hedged debt and terminated the
related interest rate swaps. As a result, the associated unrecognized losses recorded in other
comprehensive income were recognized in interest on long-term debt on CMS Energy’s consolidated
statements of income; this amount was immaterial. NorthStar Clean Energy also had other interest rate
swaps that economically hedged interest rate risk on debt, but that did not qualify for cash flow hedge
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accounting. These swaps were also terminated in June 2022; the amounts associated with these swaps
were not material for the periods presented.
The majority of derivatives classified as Level 3 are FTRs held by Consumers. Due to the lack of quoted
pricing information, Consumers determines the fair value of its FTRs based on Consumers’ average
historical settlements. There was no material activity within the Level 3 categories of assets and liabilities
during the periods presented.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Presented in the following table are Consumers’ assets, by level within the fair value hierarchy, reported
at fair value on a nonrecurring basis during the year ended December 31, 2021:
Level 1
Level 2
Level 3
In Millions
Gains
(Losses)
Assets held for sale
$ —
$
15
$ —
$
(4)
In 2021, Consumers wrote down fleet assets held for sale from their carrying amount of $19 million to
their fair value, less selling costs, of $15 million, resulting in an impairment charge of $4 million, which
was recorded within maintenance and other operating expenses on its consolidated statements of income
for the year ended December 31, 2021. The fair value was determined based on the market prices of
similar fleet vehicles at the time of measurement. These vehicles were subsequently sold at an amount
exceeding their recorded fair value in 2022. For additional information, see Item 8. Financial Statements
and Supplementary Data—Notes to the Consolidated Financial Statements—Note 2, Regulatory Matters.
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6: Financial Instruments
Presented in the following table are the carrying amounts and fair values, by level within the fair value
hierarchy, of CMS Energy’s and Consumers’ financial instruments that are not recorded at fair value. The
table excludes cash, cash equivalents, short-term financial instruments, and trade accounts receivable and
payable whose carrying amounts approximate their fair values. For information about assets and liabilities
recorded at fair value and for additional details regarding the fair value hierarchy, see Note 5, Fair Value
Measurements.
December 31, 2022
December 31, 2021
In Millions
Fair Value
Level
1
2
Carrying
Amount
3
Fair Value
Level
Total
1
2
3
Total
CMS Energy, including Consumers
Carrying
Amount
Assets
Long-term
receivables1
$
14 $
14 $ — $ — $ 14
$
14 $
14 $ — $ — $ 14
Liabilities
Long-term
debt2
Long-term
payables3
Consumers
Assets
Long-term
14,212
12,384
987
8,741
2,656
12,419
13,800
1,189
10,656
1,955
9
7
—
—
7
31
32
—
—
32
receivables1
$
14 $
14 $ — $ — $ 14
$
14 $
14 $ — $ — $ 14
Notes
receivable –
related
party4
Liabilities
Long-term
debt5
101
101
—
—
101
104
104
—
—
104
10,183
8,728
—
6,172
2,556
8,415
9,410
—
7,455
1,955
1
2
3
4
5
Includes current portion of long-term accounts receivable and notes receivable of $7 million at
December 31, 2022 and $9 million at December 31, 2021.
Includes current portion of long-term debt of $1,090 million at December 31, 2022 and $373 million at
December 31, 2021.
Includes current portion of long-term payables of $2 million at December 31, 2022 and $23 million at
December 31, 2021.
Includes current portion of notes receivable – related party of $7 million at December 31, 2022 and 2021.
Includes current portion of long-term debt of $991 million at December 31, 2022 and $365 million at
December 31, 2021.
The DB SERP note receivable – related party is Consumers’ portion of a demand note payable issued by
CMS Energy to the DB SERP rabbi trust. The demand note bears interest at an annual rate of 4.10 percent
and has a maturity date of 2028.
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7: Plant, Property, and Equipment
Presented in the following table are details of CMS Energy’s and Consumers’ plant, property, and
equipment:
December 31
CMS Energy, including Consumers
Plant, property, and equipment, gross
Consumers
NorthStar Clean Energy
Independent power production1
Assets under finance leases2
Other
Plant, property, and equipment, gross
Construction work in progress
Accumulated depreciation and amortization
Total plant, property, and equipment3
Consumers
Plant, property, and equipment, gross
Electric
Generation
Distribution
Other
Assets under finance leases2
Gas
Distribution
Transmission
Underground storage facilities4
Other
Assets under finance leases2
Other non-utility property
Plant, property, and equipment, gross
Construction work in progress
Accumulated depreciation and amortization
Total plant, property, and equipment2
Estimated
Depreciable
Life in Years
In Millions
2022
2021
3 - 125
$
29,342
$
28,771
3 - 40
1,124
1,121
3 - 5
24
1
—
1
$
30,491
$
29,893
1,182
(8,960)
961
(8,502)
$
22,713
$
22,352
15 - 125
$
5,780
$
15 - 75
5 - 55
20 - 85
17 - 75
27 - 75
5 - 55
3 - 51
10,590
1,374
126
6,951
2,440
1,197
835
20
29
6,704
9,815
1,309
319
6,338
2,319
1,117
814
13
23
$
29,342
$
28,771
994
915
(8,791)
(8,371)
$
21,545
$
21,315
1
2
3
A portion of independent power production assets are leased to others under operating leases. For
information regarding CMS Energy’s operating leases of owned assets, see Note 8, Leases.
For information regarding the amortization terms of CMS Energy’s and Consumers’ assets under finance
leases, see Note 8, Leases.
Consumers’ plant additions were $2.3 billion for the year ended December 31, 2022 and $2.4 billion for the
year ended December 31, 2021. Consumers’ plant retirements, which include the impact of disallowances
and transfers to held for sale, were $290 million for the year ended December 31, 2022 and $361 million
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for the year ended December 31, 2021. Consumers plans to retire the J.H. Campbell 1, 2, & 3 coal-fueled
electric generating units in 2025. Accordingly, in 2022, Consumers removed from total plant, property, and
equipment $1.3 billion, representing the remaining book value of the three units upon their retirement, and
recorded it as a regulatory asset. For additional details, see Note 2, Regulatory Matters.
4
Underground storage includes base natural gas of $26 million at December 31, 2022 and 2021. Base natural
gas is not subject to depreciation.
Intangible Assets: Included in net plant, property, and equipment are intangible assets. Presented in the
following table are details about Consumers’ intangible assets:
Description
Consumers
Software development
Rights of way
Franchises and consents
Leasehold improvements
Other intangibles
Total
December 31, 2022
December 31, 2021
Amortization
Life in Years
Gross Cost1
Accumulated
Amortization
Gross Cost1
Accumulated
Amortization
In Millions
3 - 15
50 - 85
5 - 50
various2
various
$
846
218
16
9
25
$
593
$
61
10
6
16
840
211
16
9
26
$
592
60
10
6
16
$ 1,114
$
686
$ 1,102
$
684
1
2
Consumers’ intangible asset additions were $116 million for the year ended December 31, 2022 and
$88 million for the year ended December 31, 2021. Consumers’ intangible asset retirements were
$104 million for the year ended December 31, 2022 and $91 million for the year ended December 31, 2021.
Leasehold improvements are amortized over the life of the lease, which may change whenever the lease is
renewed or extended.
Capitalization: CMS Energy and Consumers record plant, property, and equipment at original cost when
placed into service. The cost includes labor, material, applicable taxes, overhead such as pension and
other benefits, and AFUDC, if applicable. Consumers’ plant, property, and equipment is generally
recoverable through its general ratemaking process.
With the exception of utility property for which the remaining book value has been securitized,
mothballed utility property stays in rate base and continues to be depreciated at the same rate as before the
mothball period. When utility property is retired or otherwise disposed of in the ordinary course of
business, Consumers records the original cost to accumulated depreciation, along with associated cost of
removal, net of salvage. CMS Energy and Consumers recognize gains or losses on the retirement or
disposal of non-regulated assets in income. Consumers records cost of removal collected from customers,
but not spent, as a regulatory liability.
Software: CMS Energy and Consumers capitalize the costs to purchase and develop internal-use
computer software. These costs are expensed evenly over the estimated useful life of the internal-use
computer software. If computer software is integral to computer hardware, then its cost is capitalized and
depreciated with the hardware.
AFUDC: Consumers capitalizes AFUDC on regulated major construction projects. AFUDC represents
the estimated cost of debt and authorized return-on-equity funds used to finance construction additions.
Consumers records the offsetting credit as a reduction of interest for the amount representing the
borrowed funds component and as other income for the equity funds component on the consolidated
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statements of income. When construction is completed and the property is placed in service, Consumers
depreciates and recovers the capitalized AFUDC from customers over the life of the related asset.
Presented in the following table are Consumers’ average AFUDC capitalization rates:
Years Ended December 31
Electric
Gas
2022
6.2%
5.6
2021
6.2%
5.6
2020
6.9%
5.7
Assets Under Finance Leases: Presented in the following table are further details about changes in
CMS Energy’s and Consumers’ assets under finance leases:
Years Ended December 31
CMS Energy, including Consumers
Balance at beginning of period
Additions
Net retirements and other adjustments
Balance at end of period
Consumers
Balance at beginning of period
Additions
Net retirements and other adjustments
Balance at end of period
In Millions
2022
2021
$
332
$
336
$
$
44
(206)
—
(4)
170
$
332
332
$
336
20
(206)
—
(4)
$
146
$
332
Assets under finance leases are presented as gross amounts. CMS Energy and Consumers’ accumulated
amortization of assets under finance leases was $88 million at December 31, 2022 and $272 million at
December 31, 2021.
Depreciation and Amortization: Presented in the following table are further details about
CMS Energy’s and Consumers’ accumulated depreciation and amortization:
Years Ended December 31
CMS Energy, including Consumers
Utility plant assets
Non-utility plant assets
Consumers
Utility plant assets
Non-utility plant assets
In Millions
2022
2021
$
8,785
$
8,366
175
136
$
8,785
$
8,366
6
5
Consumers depreciates utility property on an asset-group basis, in which it applies a single MPSC-
approved depreciation rate to the gross investment in a particular class of property within the electric and
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gas segments. Consumers performs depreciation studies periodically to determine appropriate group lives.
Presented in the following table are the composite depreciation rates for Consumers’ segment properties:
Years Ended December 31
Electric utility property
Gas utility property
Other property
2022
3.7%
2.9
8.9
2021
3.9%
2.9
9.4
2020
3.9%
2.9
9.8
CMS Energy and Consumers record property repairs and minor property replacement as maintenance
expense. CMS Energy and Consumers record planned major maintenance activities as operating expense
unless the cost represents the acquisition of additional long-lived assets or the replacement of an existing
long-lived asset.
Presented in the following table are the components of CMS Energy’s and Consumers’ depreciation and
amortization expense:
Years Ended December 31
CMS Energy, including Consumers
2022
2021
In Millions
2020
Depreciation expense – plant, property, and equipment
$
990
$
975
$
901
Amortization expense
Software
Other intangible assets
Securitized regulatory assets
Total depreciation and amortization expense
Consumers
Depreciation expense – plant, property, and equipment
$
$
Amortization expense
Software
Other intangible assets
Securitized regulatory assets
103
5
28
108
4
27
112
4
26
1,126
$
1,114
$
1,043
952
$
938
$
881
103
5
28
108
4
27
112
4
26
Total depreciation and amortization expense
$
1,088
$
1,077
$
1,023
Presented in the following table is Consumers’ estimated amortization expense on intangible assets for
each of the next five years:
Consumers
Intangible asset amortization expense
2023
2024
2025
2026
2027
In Millions
$
96
$
82
$
80
$
76
$
64
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Jointly Owned Regulated Utility Facilities
Presented in the following table are Consumers’ investments in jointly owned regulated utility facilities at
December 31, 2022:
Ownership share
Utility plant in service
Accumulated depreciation
Construction work in progress
Net investment
In Millions, Except Ownership Share
J.H. Campbell Unit 3
93.3%
$ 1,767
(816)
10
Ludington
51.0%
$
591
(210)
21
$
961
$
402
Other
various
412
(93)
21
340
$
$
Consumers includes its share of the direct expenses of the jointly owned plants in operating expenses.
Consumers shares operation, maintenance, and other expenses of these jointly owned utility facilities in
proportion to each participant’s undivided ownership interest. Consumers is required to provide only its
share of financing for the jointly owned utility facilities.
8: Leases
Lessee
CMS Energy and Consumers lease various assets from third parties, including coal-carrying railcars, real
estate, service vehicles, and gas pipeline capacity. In addition, CMS Energy and Consumers account for
several of their PPAs as leases.
CMS Energy and Consumers do not record right-of-use assets or lease liabilities on their consolidated
balance sheets for rentals with lease terms of 12 months or less, most of which are for the lease of real
estate and service vehicles. Lease expense for these rentals is recognized on a straight-line basis over the
lease term.
CMS Energy and Consumers include future payments for all renewal options, fair market value
extensions, and buyout provisions reasonably certain of exercise in their measurement of lease right-of-
use assets and lease liabilities. In addition, certain leases for service vehicles contain end-of-lease
adjustment clauses based on proceeds received from the sale or disposition of the vehicles. CMS Energy
and Consumers also include executory costs in the measurement of their right-of-use assets and lease
liabilities, except for maintenance costs related to their coal-carrying railcar leases.
Most of Consumers’ PPAs contain provisions at the end of the initial contract terms to renew the
agreements annually under mutually agreed-upon terms at the time of renewal. Energy and capacity
payments that vary depending on quantities delivered are recognized as variable lease costs when
incurred. Consumers accounts for a PPA with one of CMS Energy’s equity method subsidiaries as a
finance lease.
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Presented in the following table is information about CMS Energy’s and Consumers’ lease right-of-use
assets and lease liabilities:
December 31
Operating leases
Right-of-use assets1
Lease liabilities
Current lease liabilities2
Non-current lease liabilities3
Finance leases
Right-of-use assets
Lease liabilities4
Current lease liabilities
Non-current lease liabilities
Weighted-average remaining lease term (in years)
Operating leases
Finance leases
Weighted-average discount rate
Operating leases
Finance leases5
In Millions, Except as Noted
CMS Energy, including
Consumers
Consumers
2022
2021
2022
2021
$
31
$
26
$
27
$
22
4
27
82
9
68
20
18
3
25
57
6
46
23
12
4
23
58
9
45
18
10
3
19
57
6
46
21
12
4.0%
5.2
4.0%
1.7
3.9%
1.6
3.9%
1.7
1
2
3
4
5
CMS Energy’s and Consumers’ operating right-of-use lease assets are reported as other non-current assets
on their consolidated balance sheets.
The current portion of CMS Energy’s and Consumers’ operating lease liabilities are reported as other
current liabilities on their consolidated balance sheets.
The non-current portion of CMS Energy’s and Consumers’ operating lease liabilities are reported as other
non-current liabilities on their consolidated balance sheets.
Includes related-party lease liabilities of $25 million, of which less than $1 million was current, at
December 31, 2022 and 2021.
This rate excludes the impact of Consumers’ pipeline agreements and long-term PPAs accounted for as
finance leases. The required capacity payments under these agreements, when compared to the underlying
fair value of the leased assets, result in effective interest rates that exceed market rates for leases with
similar terms.
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CMS Energy and Consumers report operating, variable, and short-term lease costs as operating expenses
on their consolidated statements of income, except for certain amounts that may be capitalized to other
assets. Presented in the following table is a summary of CMS Energy’s and Consumers’ total lease costs:
Years Ended December 31
CMS Energy, including Consumers
Operating lease costs
Finance lease costs
Amortization of right-of-use assets
Interest on lease liabilities
Variable lease costs
Short-term lease costs
Total lease costs
Consumers
Operating lease costs
Finance lease costs
Amortization of right-of-use assets
Interest on lease liabilities
Variable lease costs
Short-term lease costs
Total lease costs
In Millions
2022
2021
$
6
$
8
12
14
93
23
7
16
90
22
$
148
$
143
$
6
$
8
12
14
93
22
7
16
90
21
$
147
$
142
Presented in the following table is supplemental cash flow information related to CMS Energy’s and
Consumers’ lease liabilities:
Years Ended December 31
CMS Energy, including Consumers
Cash paid for amounts included in the measurement of lease liabilities
Cash used in operating activities for operating leases
Cash used in operating activities for finance leases
Cash used in financing activities for finance leases
Lease liabilities arising from obtaining right-of-use assets
Operating leases
Finance leases
Consumers
Cash paid for amounts included in the measurement of lease liabilities
Cash used in operating activities for operating leases
Cash used in operating activities for finance leases
Cash used in financing activities for finance leases
Lease liabilities arising from obtaining right-of-use assets
Operating leases
Finance leases
137
In Millions
2022
2021
$
$
$
$
6
14
13
10
36
6
14
12
10
12
8
16
7
2
—
8
16
7
2
—
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Presented in the following table are the minimum rental commitments under CMS Energy’s and
Consumers’ non-cancelable leases:
December 31, 2022
CMS Energy, including Consumers
2023
2024
2025
2026
2027
2028 and thereafter
Total minimum lease payments
Less discount
Present value of minimum lease payments
Consumers
2023
2024
2025
2026
2027
2028 and thereafter
Total minimum lease payments
Less discount
Present value of minimum lease payments
Lessor
In Millions
Finance Leases
Operating
Leases
Pipelines
and PPAs
Other
Total
$
$
$
$
$
$
5
5
3
2
2
31
48
17
31
5
4
3
2
1
26
41
14
27
$
$
15
13
13
13
13
39
$
106
$
$
$
$
$
75
31
15
13
13
13
13
39
$
106
$
75
31
$
$
8
6
3
4
2
67
90
44
46
7
5
2
2
1
8
25
2
23
$
$
$
$
23
19
16
17
15
106
196
119
77
22
18
15
15
14
47
$
131
77
54
$
CMS Energy and Consumers are the lessor under power sales and natural gas delivery agreements that are
accounted for as leases.
CMS Energy has power sales agreements that are accounted for as operating leases. In addition to fixed
payments, these agreements have variable payments based on energy delivered. For the year ended
December 31, 2022, lease revenue from these power sales agreements was $240 million, which included
variable lease payments of $191 million. For the year ended December 31, 2021, lease revenue from these
power sales agreements was $194 million, which included variable lease payments of $138 million.
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Presented in the following table are the minimum rental payments to be received under CMS Energy’s
non-cancelable operating leases:
December 31, 2022
2023
2024
2025
2026
Total minimum lease payments
In Millions
$
43
43
44
18
$
148
Consumers has a natural gas transportation agreement with a subsidiary of CMS Energy that extends
through 2038, related to a pipeline owned by Consumers. This agreement is accounted for as a direct
finance lease and will automatically extend annually unless terminated by either party. The effects of the
lease are eliminated on CMS Energy’s consolidated financial statements.
Minimum rental payments to be received under Consumers’ direct financing leases are less than
$1 million for each of the next five years and $8 million for the years thereafter. The lease receivable was
$6 million as of December 31, 2022, which does not include unearned income of $7 million.
9: Asset Retirement Obligations
CMS Energy and Consumers record the fair value of the cost to remove assets at the end of their useful
lives, if there is a legal obligation to remove them. If a reasonable estimate of fair value cannot be made in
the period in which the ARO is incurred, such as for assets with indeterminate lives, the liability is
recognized when a reasonable estimate of fair value can be made. CMS Energy and Consumers have not
recorded liabilities associated with the closure of certain gas wells that have an indeterminate life.
CMS Energy and Consumers have not recorded liabilities for assets that have immaterial cumulative
disposal costs, such as substation batteries.
CMS Energy and Consumers calculate the fair value of ARO liabilities using an expected present-value
technique that reflects assumptions about costs and inflation, and uses a credit-adjusted risk-free rate to
discount the expected cash flows. CMS Energy’s ARO liabilities are primarily at Consumers.
Presented below are the categories of assets that CMS Energy and Consumers have legal obligations to
remove at the end of their useful lives and for which they have an ARO liability recorded:
ARO Description
In-Service Date
Long-Lived Assets
Closure of coal ash disposal areas
Gas distribution cut, purge, and cap
Asbestos abatement
Closure of renewable generation assets
Gas wells plug and abandon
various
various
1973
various
various
Generating plants coal ash areas
Gas distribution mains and services
Electric and gas utility plant
Wind and solar generation facilities
Gas transmission and storage
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Presented in the following tables are the changes in CMS Energy’s and Consumers’ ARO liabilities:
ARO
Liability
12/31/2021
Incurred
Settled Accretion
Cash Flow
Revisions1
In Millions
ARO
Liability
12/31/2022
$
605
$
23
$
628
$
1
—
1
$
(39) $
—
$
(39) $
27
1
28
7
15
2
2
1
$
128
$
722
—
24
$
128
$
746
$
128
$
—
—
—
—
272
287
39
95
29
Company and ARO Description
CMS Energy, including Consumers
Consumers
Renewable generation assets
Total CMS Energy
Consumers
Asbestos abatement
Renewable generation assets
Gas wells plug and abandon
Total Consumers
157
282
38
93
35
Coal ash disposal areas
$
Gas distribution cut, purge, and cap
$ —
$
(20) $
$
605
$
$
(39) $
27
$
128
$
722
1
Increase was attributable to a proposed change for closure work at the J.H. Campbell 3 ash disposal landfill
and an updated cost estimate for other coal ash disposal areas.
Company and ARO Description
CMS Energy, including Consumers
Consumers
Renewable generation assets
Total CMS Energy
Consumers
Coal ash disposal areas
Gas distribution cut, purge, and cap
Asbestos abatement
Renewable generation assets
Gas wells plug and abandon
Total Consumers
ARO
Liability
12/31/2020
Incurred
Settled Accretion
In Millions
ARO
Liability
12/31/2021
Cash Flow
Revisions
$
530
$
23
$
553
$
71
—
71
$
(53) $
—
$
(53) $
$ —
$
(34) $
$
$
$
24
—
24
5
13
2
3
1
33
—
33
38
—
—
—
(5)
33
$
605
23
$
628
$
157
282
38
93
35
$
605
$
(53) $
24
$
1
—
—
—
1
39
—
16
16
71
(11)
(1)
—
(7)
(10)
—
—
(9)
$
148
240
36
74
32
$
530
$
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10: Retirement Benefits
Benefit Plans: CMS Energy and Consumers provide pension, OPEB, and other retirement benefits to
employees under a number of different plans. These plans include:
•
•
•
•
•
•
non-contributory, qualified DB Pension Plans (closed to new non-union participants as of
July 1, 2003 and closed to new union participants as of September 1, 2005)
a non-contributory, qualified DCCP for employees hired on or after July 1, 2003
benefits to certain management employees under a non-contributory, nonqualified DB SERP
(closed to new participants as of March 31, 2006)
a non-contributory, nonqualified DC SERP for certain management employees hired or promoted
on or after April 1, 2006
a contributory, qualified defined contribution 401(k) plan
health care and life insurance benefits under an OPEB Plan
DB Pension Plans: Participants in the pension plans include present and former employees of
CMS Energy and Consumers, including certain present and former affiliates and subsidiaries. Pension
plan trust assets are not distinguishable by company. Effective December 31, 2017, CMS Energy’s and
Consumers’ then-existing pension plan was amended to include only retired and former employees
already covered; this amended plan is referred to as DB Pension Plan B. Also effective
December 31, 2017, active employees were moved to a newly created pension plan, referred to as
DB Pension Plan A, whose benefits mirror those provided under DB Pension Plan B. Maintaining
separate plans for the two groups allows CMS Energy and Consumers to employ a more targeted
investment strategy and provides additional opportunities to mitigate risk and volatility.
In March 2022, CMS Energy and Consumers determined that 2022 lump-sum payments to retired
employees under DB Pension Plan A would exceed the plan’s service cost and interest cost components
of net periodic cost for the year. These lump-sum payments constitute pension plan liability settlements;
once such settlements meet the service and interest cost threshold, recognition in earnings is required. As
a result, in accordance with GAAP, CMS Energy, including Consumers, performed a remeasurement of
DB Pension Plan A at the end of each quarter in 2022. For the year ended December 31, 2022,
CMS Energy, including Consumers, recognized a settlement loss of $22 million; $21 million of this
amount was deferred as a regulatory asset. Consumers recognized a settlement loss of $21 million, all of
which was deferred as a regulatory asset. CMS Energy and Consumers will amortize the regulatory asset
over eight years.
DCCP: CMS Energy and Consumers provide an employer contribution to the DCCP 401(k) plan for
employees hired on or after July 1, 2003. The contribution ranges from five percent to ten percent of base
pay, depending on years of service and employee class. Employees are not required to contribute in order
to receive the plan’s employer contribution. DCCP expense for CMS Energy, including Consumers, was
$48 million for the year ended December 31, 2022, $41 million for the year ended December 31, 2021,
and $31 million for the year ended December 31, 2020. DCCP expense for Consumers was $48 million
for the year ended December 31, 2022, $41 million for the year ended December 31, 2021, and
$31 million for the year ended December 31, 2020.
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DB SERP: The DB SERP is a nonqualified plan as defined by the Internal Revenue Code. DB SERP
benefits are paid from a rabbi trust established in 1988. The trust assets are not considered plan assets
under ASC 715. DB SERP rabbi trust earnings are taxable. Presented in the following table are the fair
values of trust assets and ABO for CMS Energy’s and Consumers’ DB SERP:
Years Ended December 31
CMS Energy, including Consumers
Trust assets
ABO
Consumers
Trust assets
ABO
In Millions
2022
2021
$
$
137
118
$
101
$
85
142
149
104
108
Neither CMS Energy nor Consumers made any contributions to the DB SERP in 2022 or 2021.
DC SERP: On April 1, 2006, CMS Energy and Consumers implemented a DC SERP and froze further
new participation in the DB SERP. The DC SERP provides participants benefits ranging from
five percent to 15 percent of total compensation. The DC SERP requires a minimum of five years of
participation before vesting. CMS Energy’s and Consumers’ contributions to the plan, if any, are placed
in a grantor trust. For CMS Energy and Consumers, trust assets were $12 million at December 31, 2022
and $13 million at December 31, 2021. DC SERP assets are included in other non-current assets on
CMS Energy’s and Consumers’ consolidated balance sheets. CMS Energy’s and Consumers’ DC SERP
expense was $1 million for the year ended December 31, 2022, and $2 million for the years ended
December 31, 2021 and 2020.
401(k) Plan: The 401(k) plan employer match equals four to six percent of employee eligible
contributions based on an employee’s wages and class. The total 401(k) plan cost for CMS Energy,
including Consumers, was $44 million for the year ended December 31, 2022, $31 million for the year
ended December 31, 2021, and $29 million for the year ended December 31, 2020. The total 401(k) plan
cost for Consumers was $43 million for the year ended December 31, 2022, $31 million for the year
ended December 31, 2021, and $29 million for the year ended December 31, 2020.
OPEB Plan: Participants in the OPEB Plan include all regular full-time employees covered by the
employee health care plan on the day before retirement from either CMS Energy or Consumers at age 55
or older with at least ten full years of applicable continuous service. Regular full-time employees who
qualify for disability retirement under the DB Pension Plans or are disabled and covered by the DCCP
and who have 15 years of applicable continuous service may also participate in the OPEB Plan. Retiree
health care costs were based on the assumption that costs would increase 6.50 percent in 2023 and
6.25 percent in 2022 for those under 65 and would increase 6.75 percent in 2023 and 2022 for those
over 65. The rate of increase was assumed to decline to 4.75 percent by 2032 and thereafter for all
retirees.
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Assumptions: Presented in the following table are the weighted-average assumptions used in
CMS Energy’s and Consumers’ retirement benefit plans to determine benefit obligations and net periodic
benefit cost:
December 31
CMS Energy, including Consumers
Weighted average for benefit obligations1
Discount rate2
DB Pension Plan A
DB Pension Plan B
DB SERP
OPEB Plan
Rate of compensation increase
DB Pension Plan A
DB SERP
Weighted average for net periodic benefit cost1
Service cost discount rate2,3
DB Pension Plan A
DB SERP
OPEB Plan
Interest cost discount rate2,3
DB Pension Plan A
DB Pension Plan B
DB SERP
OPEB Plan
Expected long-term rate of return on plan assets4
DB Pension Plans
OPEB Plan
Rate of compensation increase
DB Pension Plan A
DB SERP
2022
2021
2020
5.24%
3.02%
2.73%
5.14
5.13
5.21
3.60
5.50
2.79
2.78
2.99
3.60
5.50
2.41
2.40
2.69
3.70
5.50
3.09%
2.83%
3.44%
3.09
3.23
2.44
2.21
2.21
2.45
6.50
6.50
3.60
5.50
2.84
3.03
1.97
1.70
1.72
1.99
6.75
6.75
3.70
5.50
3.46
3.57
2.92
2.74
2.74
2.88
6.75
6.75
3.50
5.50
1
2
3
4
The mortality assumption for benefit obligations was based on the Pri-2012 Mortality Table, with
improvement scale MP-2021 for 2022 and 2021 and improvement scale MP-2020 for 2020. The mortality
assumption for net periodic benefit cost was based on the Pri-2012 Mortality Table, with improvement
scales MP-2021 for 2022, MP-2020 for 2021, and MP-2019 for 2020.
The discount rate reflects the rate at which benefits could be effectively settled and is equal to the
equivalent single rate resulting from a yield-curve analysis. This analysis incorporated the projected benefit
payments specific to CMS Energy’s and Consumers’ DB Pension Plans and OPEB Plan and the yields on
high-quality corporate bonds rated Aa or better.
CMS Energy and Consumers have elected to use a full-yield-curve approach in the estimation of service
cost and interest cost; this approach applies individual spot rates along the yield curve to future projected
benefit payments based on the time of payment.
CMS Energy and Consumers determined the long-term rate of return using historical market returns, the
present and expected future economic environment, the capital market principles of risk and return, and the
expert opinions of individuals and firms with financial market knowledge. CMS Energy and Consumers
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considered the asset allocation of the portfolio in forecasting the future expected total return of the
portfolio. The goal was to determine a long-term rate of return that could be incorporated into the planning
of future cash flow requirements in conjunction with the change in the liability. Annually, CMS Energy and
Consumers review for reasonableness and appropriateness the forecasted returns for various classes of
assets used to construct an expected return model. CMS Energy’s and Consumers’ expected long-term rate
of return on the assets of the DB Pension Plans was 6.50 percent in 2022. The actual return (loss) on the
assets of the DB Pension Plans was (15.9) percent in 2022, 12.0 percent in 2021, and 13.6 percent in 2020.
Costs: Presented in the following table are the costs (credits) and other changes in plan assets and benefit
obligations incurred in CMS Energy’s and Consumers’ retirement benefit plans:
DB Pension Plans and DB SERP
OPEB Plan
2022
2021
2020
2022
2021
2020
In Millions
Years Ended December 31
CMS Energy, including Consumers
Net periodic cost (credit)
Service cost
Interest cost
Settlement loss
$
$
41
84
1
$
53
63
1
50
83
1
$
$
17
28
—
$
18
23
—
16
33
—
Expected return on plan assets
(206)
(208)
(191)
(115)
(109)
(100)
40
4
9
100
4
6
95
1
2
1
(51)
—
8
(53)
—
15
(56)
—
$
(27) $
19
$
41
$
(120) $
(113) $
(92)
Amortization of:
Net loss
Prior service cost (credit)
Settlement loss
Net periodic cost (credit)
Consumers
Net periodic cost (credit)
Service cost
Interest cost
15
31
(93)
15
(54)
—
$
$
39
79
$
51
59
49
78
$
$
17
27
$
17
23
Expected return on plan assets
(194)
(197)
(181)
(107)
(102)
Amortization of:
Net loss
Prior service cost (credit)
Settlement loss
37
4
9
96
4
6
90
1
2
—
(50)
—
8
(51)
—
Net periodic cost (credit)
$
(26) $
19
$
39
$
(113) $
(105) $
(86)
CMS Energy and Consumers amortize net gains and losses in excess of ten percent of the greater of the
PBO or the MRV over the average remaining service period for DB Pension Plan A and the OPEB Plan
and over the average remaining life expectancy of participants for DB Pension Plan B. For DB Pension
Plan A, the estimated period of amortization of gains and losses was eight years for the years ended
December 31, 2022, 2021, and 2020. For DB Pension Plan B, the estimated period of amortization of
gains and losses was 18 years for the years ended December 31, 2022 and 2021, and 19 years for the year
ended December 31, 2020. For the OPEB Plan, the estimated amortization period was nine years for the
years ended December 31, 2022, 2021, and 2020.
Prior service cost (credit) amortization is established in the year in which the prior service cost (credit)
first occurred, and is based on the same amortization period for all future years until the prior service cost
(credit) is fully amortized. CMS Energy and Consumers had new prior service costs for DB Pension
Plan A in 2020. The estimated period of amortization of these new prior service costs is eight years.
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CMS Energy and Consumers determine the MRV for the assets of the DB Pension Plans as the fair value
of plan assets on the measurement date, adjusted by the gains or losses that will not be admitted into the
MRV until future years. CMS Energy and Consumers reflect each year’s gain or loss in the MRV in equal
amounts over a five-year period beginning on the date the original amount was determined. CMS Energy
and Consumers determine the MRV for OPEB Plan assets as the fair value of assets on the measurement
date.
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Reconciliations: Presented in the following table are reconciliations of the funded status of
CMS Energy’s and Consumers’ retirement benefit plans with their retirement benefit plans’ liabilities:
DB Pension Plans
DB SERP
OPEB Plan
2022
2021
2022
2021
2022
2021
In Millions
Years Ended December 31
CMS Energy, including Consumers
Benefit obligation at beginning of
period
Service cost
Interest cost
Plan amendments
Actuarial gain
Benefits paid
$ 3,070
$ 3,266
$
149
$
160
$ 1,166
$ 1,205
41
81
—
53
60
—
(811) 1
(212)
(108) 1
(201)
—
3
—
(25)
(10)
—
3
—
(4)
(10)
17
28
—
(274) 1
(48)
18
23
5
(32) 1
(53)
Benefit obligation at end of period
$ 2,169
$ 3,070
$
117
$
149
$
889
$ 1,166
Plan assets at fair value at
beginning of period
Actual return on plan assets
Company contribution
Actual benefits paid
Plan assets at fair value at end of
period
Funded status
Consumers
Benefit obligation at beginning of
period
Service cost
Interest cost
Plan amendments
Actuarial gain
Benefits paid
$ 3,599
$ 3,402
$ —
$ —
$ 1,787
$ 1,645
(567)
—
(212)
398
—
(201)
—
10
(10)
—
10
(10)
(294)
—
(47)
194
—
(52)
$ 2,820
$ 3,599
$ —
$ —
$ 1,446
$ 1,787
$
651 2 $
529 2
$
(117) $
(149)
$
557
$
621
$
109
$
117
$ 1,122
$ 1,158
—
2
—
(19)
(7)
—
2
—
(3)
(7)
17
27
—
(265) 1
(45)
17
23
5
(30) 1
(51)
Benefit obligation at end of period
$
85
$
109
$
856
$ 1,122
Plan assets at fair value at
beginning of period
Actual return on plan assets
Company contribution
Actual benefits paid
Plan assets at fair value at end of
period
Funded status
$ —
$ —
$ 1,668
$ 1,535
—
7
(7)
—
7
(7)
(273)
—
(45)
182
—
(49)
$ —
$ —
$ 1,350
$ 1,668
$
(85) $
(109)
$
494
$
546
1
2
The actuarial gains for 2022 and 2021 for the DB Pension Plans and OPEB Plan were primarily the result
of higher discount rates.
The total funded status of the DB Pension Plans attributable to Consumers, based on an allocation of
expenses, was $632 million at December 31, 2022 and $510 million at December 31, 2021.
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Presented in the following table is the classification of CMS Energy’s and Consumers’ retirement benefit
plans’ assets and liabilities:
December 31
CMS Energy, including Consumers
Non-current assets
DB Pension Plans
OPEB Plan
Current liabilities
DB SERP
Non-current liabilities
DB SERP
Consumers
Non-current assets
DB Pension Plans
OPEB Plan
Current liabilities
DB SERP
Non-current liabilities
DB SERP
In Millions
2022
2021
$
$
651
557
529
621
10
10
107
139
$
$
632
494
510
546
7
78
7
102
The ABO for the DB Pension Plans was $2.0 billion at December 31, 2022 and $2.7 billion at
December 31, 2021. At December 31, 2022 and 2021, the PBO and ABO did not exceed plan assets for
any of the defined benefit pension plans.
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Items Not Yet Recognized as a Component of Net Periodic Benefit Cost: Presented in the following
table are the amounts recognized in regulatory assets, regulatory liabilities, and AOCI that have not been
recognized as components of net periodic benefit cost. For additional details on regulatory assets and
regulatory liabilities, see Note 2, Regulatory Matters.
December 31
CMS Energy, including Consumers
Regulatory assets (liabilities)
Net loss
Prior service cost (credit)
Regulatory assets (liabilities)
AOCI
Net loss (gain)
Prior service cost (credit)
Total amounts recognized in regulatory assets (liabilities) and
AOCI
Consumers
Regulatory assets (liabilities)
Net loss
Prior service cost (credit)
Regulatory assets (liabilities)
AOCI
Net loss
In Millions
DB Pension Plans and
DB SERP
OPEB Plan
2022
2021
2022
2021
$
724
$
812
$
251
$
136
21
25
(140)
(190)
$
745
$
837
$
111
$
(54)
69
1
94
—
2
(3)
(17)
(5)
$
815
$
931
$
110
$
(76)
$
724
$
812
$
251
$
136
21
25
(140)
(190)
$
745
$
837
$
111
$
(54)
20
41
—
—
Total amounts recognized in regulatory assets (liabilities) and
AOCI
$
765
$
878
$
111
$
(54)
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Plan Assets: Presented in the following tables are the fair values of the assets of CMS Energy’s
DB Pension Plans and OPEB Plan, by asset category and by level within the fair value hierarchy. For
additional details regarding the fair value hierarchy, see Note 5, Fair Value Measurements.
DB Pension Plans
In Millions
December 31, 2022
December 31, 2021
Total
Level 1
Total
Level 1
Level 2
CMS Energy, including Consumers
Cash and short-term investments
$
122
$
122
$
30
$
U.S. government and agencies securities
Corporate debt
State and municipal bonds
Foreign corporate bonds
Mutual funds
Pooled funds
Total
—
—
—
—
263
385
—
—
—
—
$
263
385
2,435
$ 2,820
$
209
595
13
66
785
$ 1,698
$
1,901
$ 3,599
30
—
—
—
—
785
815
$ —
209
595
13
66
—
$
883
CMS Energy, including Consumers
Cash and short-term investments
U.S. government and agencies securities
Corporate debt
State and municipal bonds
Foreign corporate bonds
Common stocks
Mutual funds
Pooled funds
Total
OPEB Plan
In Millions
December 31, 2022
December 31, 2021
Total
Level 1
Total
Level 1
Level 2
$
$
28
—
—
—
—
69
754
851
595
$ 1,446
$
28
—
—
—
—
69
754
851
$
$
$
21
25
73
2
8
85
941
21
—
—
—
—
85
941
$ —
25
73
2
8
—
—
$ 1,155
$ 1,047
$
108
632
$ 1,787
Cash and Short-Term Investments: Cash and short-term investments consist of money market funds with
daily liquidity.
U.S. Government and Agencies Securities: U.S. government and agencies securities consist of
U.S. Treasury notes and other debt securities backed by the U.S. government and related agencies. These
securities are valued based on quoted market prices.
Corporate Debt: Corporate debt investments consist of investment grade bonds of U.S. issuers from
diverse industries. These securities are valued based on quoted market prices, when available, or yields
available on comparable securities of issuers with similar credit ratings.
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State and Municipal Bonds: State and municipal bonds are valued using a matrix-pricing model that
incorporates Level 2 market-based information. The fair value of the bonds is derived from various
observable inputs, including benchmark yields, reported securities trades, broker/dealer quotes, bond
ratings, and general information on market movements for investment grade state and municipal securities
normally considered by market participants when pricing such debt securities.
Foreign Corporate Bonds: Foreign corporate debt securities are valued based on quoted market prices,
when available, or on yields available on comparable securities of issuers with similar credit ratings.
Common Stocks: Common stocks in the OPEB Plan consist of equity securities that are actively managed
and tracked to the S&P 500 Index. These securities are valued at their quoted closing prices.
Mutual Funds: Mutual funds represent shares in registered investment companies that are priced based on
the daily quoted net asset values that are publicly available and are the basis for transactions to buy or sell
shares in the funds.
Pooled Funds: Pooled funds include both common and collective trust funds as well as special funds that
contain only employee benefit plan assets from two or more unrelated benefit plans. These funds
primarily consist of U.S. and foreign equity securities, but also include U.S. and foreign fixed-income
securities and multi-asset investments. Since these investments are valued at their net asset value as a
practical expedient, they are not classified in the fair value hierarchy.
Asset Allocations: Presented in the following table are the investment components of the assets of
CMS Energy’s DB Pension Plans and OPEB Plan as of December 31, 2022:
Equity securities
Fixed-income securities
Real asset investments
Cash and cash equivalents
DB Pension Plans
OPEB Plan
38.0%
47.0
11.0
4.0
100.0%
55.0%
38.0
5.0
2.0
100.0%
CMS Energy’s target 2022 asset allocation for the assets of the DB Pension Plans was 50-percent equity,
40-percent fixed income, and ten-percent real assets.
CMS Energy established union and non-union VEBA trusts to fund future retiree health and life insurance
benefits. These trusts are funded through the ratemaking process for Consumers and through direct
contributions from the non-utility subsidiaries. CMS Energy’s target 2022 asset allocation for the health
trusts was 51-percent equity, 39-percent fixed income, and ten-percent real assets. CMS Energy’s target
asset allocation for the life trusts was 53-percent equity, 32-percent fixed income, and 15-percent multi-
asset investments.
The goal of these target allocations was to maximize the long-term return on plan assets, while
maintaining a prudent level of risk. The level of acceptable risk is a function of the liabilities of the plans.
Equity investments are diversified mostly across the S&P 500 Index, with lesser allocations to the
S&P MidCap and SmallCap Indexes and Foreign Equity Funds. Fixed-income investments are diversified
across investment grade instruments of government and corporate issuers, as well as high-yield and global
bond funds. Real asset investments are diversified across real estate investment trusts, public
infrastructure, and public resource equity. Multi-asset investments are global tactical asset allocations.
CMS Energy uses annual liability measurements, quarterly portfolio reviews, and periodic asset/liability
studies to evaluate the need for adjustments to the portfolio allocations.
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Contributions: Contributions comprise required amounts and discretionary contributions. Neither
CMS Energy nor Consumers made any contributions in 2022 or 2021, or plans to contribute to the
DB Pension Plans or OPEB Plan in 2023. Actual future contributions will depend on future investment
performance, discount rates, and various factors related to the participants of the DB Pension Plans and
OPEB Plan. CMS Energy and Consumers will, at a minimum, contribute to the plans as needed to comply
with federal funding requirements.
Benefit Payments: Presented in the following table are the expected benefit payments for each of the
next five years and the five-year period thereafter:
CMS Energy, including Consumers
2023
2024
2025
2026
2027
2028-2032
Consumers
2023
2024
2025
2026
2027
2028-2032
DB Pension
Plans DB SERP
In Millions
OPEB
Plan
$
$
$
$
160
158
161
160
159
790
150
149
151
151
150
745
$
$
10
10
10
10
10
45
7
7
7
7
7
55
57
58
59
60
312
52
54
55
56
58
30
298
Collective Bargaining Agreements: At December 31, 2022, unions represented 41 percent of
CMS Energy’s employees and 42 percent of Consumers’ employees. The UWUA represents Consumers’
operating, maintenance, construction, and customer contact center employees. The USW represents
Zeeland plant employees. The UWUA and USW agreements expire in 2025.
11: Stock-based Compensation
CMS Energy and Consumers provide a PISP to officers, employees, and non-employee directors based on
their contributions to the successful management of the company. The PISP has a ten-year term, expiring
in May 2030.
In 2022, all awards were in the form of restricted stock or restricted stock units. The PISP also allows for
unrestricted common stock, stock options, stock appreciation rights, phantom shares, performance units,
and incentive options, none of which was granted in 2022, 2021, or 2020.
Shares awarded or subject to stock options, phantom shares, or performance units may not exceed
6.5 million shares from June 2020 through May 2030. CMS Energy and Consumers may issue awards of
up to 5,417,727 shares of common stock under the PISP as of December 31, 2022. Shares for which
payment or exercise is in cash, as well as shares that expire, terminate, or are canceled or forfeited, may
be awarded or granted again under the PISP.
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All awards under the PISP vest fully upon death. Upon a change of control of CMS Energy or termination
under an officer separation agreement, the awards will vest in accordance with specific officer
agreements. If stated in the award, for restricted stock recipients who terminate employment due to
retirement or disability, a pro-rata portion of the award will vest upon termination, with any market-based
award also contingent upon the outcome of the market condition and any performance-based award
contingent upon the outcome of the performance condition. The pro-rata portion is equal to the portion of
the service period served between the award grant date and the employee’s termination date. The
remaining portion of the awards will be forfeited. All awards for directors vest fully upon retirement.
Restricted shares may be forfeited if employment terminates for any other reason or if the minimum
service requirements are not met, as described in the award document.
Restricted Stock Awards: Restricted stock awards for employees under the PISP are in the form of
performance-based, market-based, and time-lapse restricted stock. Award recipients receive shares of
CMS Energy common stock that have dividend and voting rights. The dividends on time-lapse restricted
stock are paid in cash or in CMS Energy common stock. The dividends on performance-based and
market-based restricted stock are paid in restricted shares equal to the value of the dividends. These
additional restricted shares are subject to the same vesting conditions as the underlying restricted stock
shares.
Performance-based restricted stock vesting is contingent on meeting at least a 36-month service
requirement and a performance condition. The performance condition is based on an adjusted measure of
CMS Energy’s EPS growth relative to a peer group over a three-year period. The awards granted in 2022,
2021, and 2020 require a 38-month service period. Market-based restricted stock vesting is generally
contingent on meeting a three-year service requirement and a market condition. The market condition is
based on a comparison of CMS Energy’s total shareholder return with the median total shareholder return
of a peer group over the same three-year period. Depending on the outcome of the performance condition
or the market condition, a recipient may earn a total award ranging from zero to 200 percent of the initial
grant. Time-lapse restricted stock generally vests after a service period of three years.
Restricted Stock Units: In 2022, 2021, and 2020, CMS Energy and Consumers granted restricted stock
units to certain non-employee directors who elected to defer their restricted stock awards. The restricted
stock units generally vest after a service period of one year or, if earlier, at the next annual meeting. The
restricted stock units will be distributed to the recipients as shares in accordance with the directors’
deferral agreements. Restricted stock units do not have voting rights, but do have dividend rights. In lieu
of cash dividend payments, the dividends on restricted stock units are paid in additional units equal to the
value of the dividends. These additional restricted stock units are subject to the same vesting and
distribution conditions as the underlying restricted stock units. No restricted stock units were forfeited
during 2022.
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Presented in the following tables is the activity for restricted stock and restricted stock units under the
PISP:
CMS Energy, including Consumers
Consumers
Weighted-Average
Grant Date Fair Value
per Share
Number of
Shares
Weighted-Average
Grant Date Fair Value
per Share
$
56.56
887,085
$
56.56
Year Ended December 31, 2022
Nonvested at beginning of period
Granted
Restricted stock
Restricted stock units
Vested
Restricted stock
Restricted stock units
Forfeited – restricted stock
Number of
Shares
932,573
534,386
14,255
(395,069)
(14,170)
(42,452)
Nonvested at end of period
1,029,523
$
Year Ended December 31, 2022
Granted
Time-lapse awards
Market-based awards
Performance-based awards
Restricted stock units
Dividends on market-based awards
Dividends on performance-based awards
Dividends on restricted stock units
Additional market-based shares based on achievement of
condition
Additional performance-based shares based on
achievement of condition
Total granted
48.69
56.13
36.27
52.95
60.75
60.13
506,911
13,611
(378,759)
(13,377)
(37,325)
978,146
48.57
56.07
36.28
52.79
60.87
60.15
$
CMS Energy, including
Consumers
Consumers
123,067
141,287
141,287
11,810
15,864
16,216
2,445
52,627
44,038
548,641
116,881
133,450
133,450
11,265
15,085
15,423
2,346
50,428
42,194
520,522
CMS Energy and Consumers charge the fair value of the restricted stock awards to expense over the
required service period and charge the fair value of the restricted stock units to expense immediately. For
performance-based awards, CMS Energy and Consumers estimate the number of shares expected to vest
at the end of the performance period based on the probable achievement of the performance objective.
Performance-based and market-based restricted stock awards have graded vesting features for retirement-
eligible employees, and CMS Energy and Consumers recognize expense for those awards on a graded
vesting schedule over the required service period. Expense for performance-based and market-based
restricted stock awards for non-retirement-eligible employees and time-lapse awards is recognized on a
straight-line basis over the required service period.
The fair value of performance-based and time-lapse restricted stock and restricted stock units is based on
the price of CMS Energy’s common stock on the grant date. The fair value of market-based restricted
stock awards is calculated on the grant date using a Monte Carlo simulation. CMS Energy and Consumers
base expected volatilities on the historical volatility of the price of CMS Energy common stock. The risk-
free rate for valuation of the market-based restricted stock awards was based on the three-year
U.S. Treasury yield at the award grant date.
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Presented in the following table are the most significant assumptions used to estimate the fair value of the
market-based restricted stock awards:
Years Ended December 31
Expected volatility
Expected dividend yield
Risk-free rate
2022
2021
2020
27.3%
27.6%
14.2%
2.8
1.4
2.8
0.2
2.4
1.6
Presented in the following table is the weighted-average grant-date fair value of all awards under the
PISP:
Years Ended December 31
CMS Energy, including Consumers
Weighted-average grant-date fair value per share
Restricted stock granted
Restricted stock units granted
Consumers
Weighted-average grant-date fair value per share
Restricted stock granted
Restricted stock units granted
In Millions
2022
2021
2020
$ 48.69
$ 43.52
$ 45.56
56.13
54.11
49.76
$ 48.57
$ 42.85
$ 45.53
56.07
53.93
49.70
Presented in the following table are amounts related to restricted stock awards and restricted stock units:
Years Ended December 31
CMS Energy, including Consumers
Fair value of shares that vested during the year
Compensation expense recognized
Income tax benefit recognized
Consumers
Fair value of shares that vested during the year
Compensation expense recognized
Income tax benefit recognized
In Millions
2022
2021
2020
$
$
$
$
27
26
—
25
25
—
$
$
25
22
1
24
21
1
22
11
3
21
10
3
At December 31, 2022, $28 million of total unrecognized compensation cost was related to restricted
stock for CMS Energy, including Consumers, and $27 million of total unrecognized compensation cost
was related to restricted stock for Consumers. CMS Energy and Consumers expect to recognize this cost
over a weighted-average period of two years.
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12: Income Taxes
CMS Energy and its subsidiaries file a consolidated U.S. federal income tax return as well as a Michigan
Corporate Income Tax return for the unitary business group and various other state unitary group
combined income tax returns. Income taxes are allocated based on each company’s separate taxable
income in accordance with the CMS Energy tax sharing agreement.
Presented in the following table is the difference between actual income tax expense on continuing
operations and income tax expense computed by applying the statutory U.S. federal income tax rate:
Years Ended December 31
CMS Energy, including Consumers
Income from continuing operations before income taxes
Income tax expense at statutory rate
Increase (decrease) in income taxes from:
State and local income taxes, net of federal effect
TCJA excess deferred taxes1
Production tax credits
Accelerated flow-through of regulatory tax benefits2
Research and development tax credits, net3
Refund of alternative minimum tax sequestration4
Other, net
Income tax expense
Effective tax rate
Consumers
Income from continuing operations before income taxes
Income tax expense at statutory rate
Increase (decrease) in income taxes from:
State and local income taxes, net of federal effect
TCJA excess deferred taxes1
Accelerated flow-through of regulatory tax benefits2
Production tax credits
Research and development tax credits, net3
Other, net
Income tax expense
Effective tax rate
In Millions, Except Tax Rate
2022
2021
2020
$ 902
189
$ 823
173
$ 809
170
51
(65)
(45)
(39)
(2)
39
(50)
(40)
(28)
(3)
—
—
4
4
44
(35)
(28)
(13)
(11)
(9)
(3)
$ 93
$ 95
$ 115
10.3%
11.5%
14.2%
$ 1,085
228
$ 1,024
215
$ 989
208
59
(65)
(39)
(40)
(1)
(2)
54
(50)
(28)
(33)
(3)
1
47
(35)
(13)
(19)
(11)
(4)
$ 140
$ 156
$ 173
12.9%
15.2%
17.5%
1
2
In 2020, the MPSC authorized Consumers to accelerate the amortization of a gas regulatory liability
associated with unprotected, non-property-related excess deferred income taxes resulting from the TCJA.
The regulatory liability, which was previously scheduled to be amortized through 2029, has now been fully
amortized.
In 2020, the MPSC authorized Consumers to accelerate the amortization of income tax benefits associated
with the cost to remove gas plant assets. These tax benefits, which were previously scheduled to be
amortized through 2025, have now been fully amortized.
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3
4
In 2022, CMS Energy finalized a study of research and development tax credits for tax years 2019 through
2021. As a result, Consumers recognized a $1 million decrease in the credit, net of reserves for uncertain
tax positions. There was no impact at the consolidated level. In 2020, CMS Energy finalized a study of
research and development tax credits for tax years 2012 through 2018. As a result, in 2020, CMS Energy,
including Consumers, recognized a $9 million increase in the credit, net of reserves for uncertain tax
positions. Of this amount, $8 million was recognized at Consumers.
In 2020, the IRS issued a decision restoring alternative minimum tax credit refunds sequestered in years
prior to 2018. As a result, in 2020, CMS Energy recognized a $9 million income tax benefit for sequestered
amounts related to its 2017 tax return. CMS Energy received the refund in April 2020.
Presented in the following table are the significant components of income tax expense on continuing
operations:
Years Ended December 31
CMS Energy, including Consumers
Current income taxes
Federal
State and local
Deferred income taxes
Federal
State and local
Deferred income tax credit
Tax expense
Consumers
Current income taxes
Federal
State and local
Deferred income taxes
Federal
State and local
Deferred income tax credit
Tax expense
In Millions
2022
2021
2020
$
$
$
$
$
$
6
—
6
4
65
69
18
93
$
(1) $
(35)
1
(2)
$ —
$
(37)
49
49
98
(3)
100
57
$
157
(5)
95
$
115
$
$
(2) $
(13) $
8
6
50
66
15
2
$
$
103
54
3
(7)
(4)
115
67
$
116
$
157
$
182
18
(3)
(5)
$
140
$
156
$
173
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Presented in the following table are the principal components of deferred income tax assets (liabilities)
recognized:
December 31
CMS Energy, including Consumers
Deferred income tax assets
Tax loss and credit carryforwards
Net regulatory tax liability
Reserves and accruals
Total deferred income tax assets
Valuation allowance
Total deferred income tax assets, net of valuation allowance
Deferred income tax liabilities
Plant, property, and equipment
Employee benefits
Gas inventory
Securitized costs
Other
Total deferred income tax liabilities
Total net deferred income tax liabilities
Consumers
Deferred income tax assets
Net regulatory tax liability
Tax loss and credit carryforwards
Reserves and accruals
Total deferred income tax assets
Deferred income tax liabilities
Plant, property, and equipment
Employee benefits
Gas inventory
Securitized costs
Other
Total deferred income tax liabilities
Total net deferred income tax liabilities
In Millions
2022
2021
$
$
385
318
35
332
349
32
$
738
$
713
(2)
(2)
$
736
$
711
$ (2,515) $ (2,395)
(433)
(53)
(39)
(103)
(399)
(22)
(46)
(59)
$ (3,143) $ (2,921)
$ (2,407) $ (2,210)
$
$
318
145
28
349
134
24
$
491
$
507
$ (2,458) $ (2,341)
(423)
(53)
(39)
(103)
(388)
(22)
(46)
(50)
$ (3,076) $ (2,847)
$ (2,585) $ (2,340)
Deferred tax assets and liabilities are recognized for the estimated future tax effect of temporary
differences between the tax basis of assets or liabilities and the reported amounts on CMS Energy’s and
Consumers’ consolidated financial statements.
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Presented in the following table are the tax loss and credit carryforwards at December 31, 2022:
CMS Energy, including Consumers
State net operating loss carryforwards
Local net operating loss carryforwards
General business credits
Federal charitable contribution carryforwards
Total tax attributes
Consumers
State net operating loss carryforwards
General business credits
Total tax attributes
In Millions
Tax Attribute
Expiration
$
60 2030 – 2032
3 2024 – 2040
320 2035 – 2042
2
385
46
2025
2030
99 2035 – 2042
145
$
$
$
CMS Energy has provided a valuation allowance of $2 million for the local tax loss carryforward.
CMS Energy and Consumers expect to utilize fully their tax loss and credit carryforwards for which no
valuation allowance has been provided. It is reasonably possible that further adjustments will be made to
the valuation allowances within one year.
Presented in the following table is a reconciliation of the beginning and ending amount of uncertain tax
benefits:
Years Ended December 31
CMS Energy, including Consumers
Balance at beginning of period
Additions for current-year tax positions
Additions for prior-year tax positions
Reductions for prior-year tax positions
Balance at end of period
Consumers
Balance at beginning of period
Additions for current-year tax positions
Additions for prior-year tax positions
Reductions for prior-year tax positions
Balance at end of period
In Millions
2022
2021
2020
$
27
$
1
1
(1)
$
$
28
$
34
$
3
1
(2)
$
36
$
25
2
—
—
27
31
3
—
—
34
$
23
1
3
(2)
25
34
1
4
(8)
31
$
$
$
If recognized, all of these uncertain tax benefits would affect CMS Energy’s and Consumers’ annual
effective tax rates in future years. One uncertain tax benefit relates to the methodology of state
apportionment for Consumers’ electricity sales to MISO. The Michigan Tax Tribunal heard oral
arguments on this methodology during 2022. A final conclusion is not anticipated in the next 12 months.
CMS Energy and Consumers recognize accrued interest and penalties, where applicable, as part of
income tax expense. CMS Energy, including Consumers, recognized no interest or penalties for each of
the years ended December 31, 2022, 2021, or 2020.
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The amount of income taxes paid is subject to ongoing audits by federal, state, local, and foreign tax
authorities, which can result in proposed assessments. CMS Energy’s federal income tax returns for 2019
and subsequent years remain subject to examination by the IRS. CMS Energy’s Michigan Corporate
Income Tax returns for 2013 and subsequent years remain subject to examination by the State of
Michigan. CMS Energy’s and Consumers’ estimate of the potential outcome for any uncertain tax issue is
highly judgmental. CMS Energy and Consumers believe that their accrued tax liabilities at
December 31, 2022 were adequate for all years.
13: Earnings Per Share—CMS Energy
Presented in the following table are CMS Energy’s basic and diluted EPS computations based on income
from continuing operations:
Years Ended December 31
Income available to common stockholders
Income from continuing operations
Less loss attributable to noncontrolling interests
Less preferred stock dividends
Income from continuing operations available to common stockholders – basic
and diluted
Average common shares outstanding
Weighted-average shares – basic
Add dilutive nonvested stock awards
Add dilutive forward equity sale contracts
Weighted-average shares – diluted
Income from continuing operations per average common share available to
common stockholders
Basic
Diluted
Nonvested Stock Awards
In Millions, Except Per Share Amounts
2022
2021
2020
$
809
$
728
$
694
(24)
10
(23)
5
(3)
—
$
823
$
746
$
697
289.5
289.0
285.0
0.3
0.2
0.5
—
0.7
0.6
290.0
289.5
286.3
$
2.84
2.84
$
2.58
2.58
$
2.45
2.44
CMS Energy’s nonvested stock awards are composed of participating and non-participating securities.
The participating securities accrue cash dividends when common stockholders receive dividends. Since
the recipient is not required to return the dividends to CMS Energy if the recipient forfeits the award, the
nonvested stock awards are considered participating securities. As such, the participating nonvested stock
awards were included in the computation of basic EPS. The non-participating securities accrue stock
dividends that vest concurrently with the stock award. If the recipient forfeits the award, the stock
dividends accrued on the non-participating securities are also forfeited. Accordingly, the non-participating
awards and stock dividends were included in the computation of diluted EPS, but not in the computation
of basic EPS.
Forward Equity Sale Contracts
CMS Energy has entered into forward equity sale contracts. These forward equity sale contracts are
non-participating securities. While the forward sale price in the forward equity sale contract is decreased
on certain dates by certain predetermined amounts to reflect expected dividend payments, these price
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adjustments were set upon inception of the agreement and the forward contract does not give the owner
the right to participate in undistributed earnings. Accordingly, the forward equity sale contracts were
included in the computation of diluted EPS, but not in the computation of basic EPS. For further details
on the forward equity sale contracts, see Note 4, Financings and Capitalization.
14: Revenue
Presented in the following tables are the components of operating revenue:
Revenue recognized from contracts with customers
$
5,395
$
2,720
$
Year Ended December 31, 2022
CMS Energy, including Consumers
Consumers utility revenue
Other
Leasing income
Financing income
Consumers alternative-revenue programs
Consumers revenues to be refunded
Total operating revenue – CMS Energy
Consumers
Consumers utility revenue
Residential
Commercial
Industrial
Other
In Millions
NorthStar
Clean
Gas Utility
Energy1 Consolidated
Electric
Utility
$
5,395
$
2,720
$
—
—
—
10
43
(29)
—
6
14
(8)
—
205
205
240
—
—
—
$
8,115
205
$
8,320
240
16
57
(37)
$
5,419
$
2,732
$
445
$
8,596
$
2,523
1,733
792
347
$
1,879
$
559
75
207
4,402
2,292
867
554
Revenue recognized from contracts with customers
$
5,395
$
2,720
$
8,115
Financing income
Alternative-revenue programs
Revenues to be refunded
10
43
(29)
6
14
(8)
16
57
(37)
Total operating revenue – Consumers
$
5,419
$
2,732
$
8,151
1
Amounts represent NorthStar Clean Energy’s operating revenue from independent power production and its
sales of energy commodities.
160
Revenue recognized from contracts with customers
$
4,915
$
2,046
$
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Year Ended December 31, 2021
CMS Energy, including Consumers
Consumers utility revenue
Other
Leasing income
Financing income
Consumers alternative-revenue programs
Total operating revenue – CMS Energy
Consumers
Consumers utility revenue
Residential
Commercial
Industrial
Other
In Millions
NorthStar
Clean
Gas Utility
Energy1 Consolidated
Electric
Utility
$
4,915
$
2,046
$
—
—
—
10
33
—
5
12
—
114
114
194
—
—
$
6,961
114
$
7,075
194
15
45
$
4,958
$
2,063
$
308
$
7,329
$
2,402
1,573
624
316
$
1,396
$
396
54
200
3,798
1,969
678
516
Revenue recognized from contracts with customers
$
4,915
$
2,046
$
6,961
Financing income
Alternative-revenue programs
10
33
5
12
15
45
Total operating revenue – Consumers
$
4,958
$
2,063
$
7,021
1
Amounts represent NorthStar Clean Energy’s operating revenue from independent power production and its
sales of energy commodities.
161
Revenue recognized from contracts with customers
$ 4,348
$ 1,809
$
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Year Ended December 31, 2020
CMS Energy, including Consumers
Consumers utility revenue
Other
Leasing income
Financing income
Consumers alternative-revenue programs
Consumers revenues to be refunded
Total operating revenue – CMS Energy
Consumers
Consumers utility revenue
Residential
Commercial
Industrial
Other
Electric
Utility
Gas
Utility
In Millions
NorthStar
Clean
Energy1 Consolidated
$ 4,348
$ 1,809
$
—
—
—
11
29
(16)
—
6
14
(12)
—
81
81
148
—
—
—
$
6,157
81
$
6,238
148
17
43
(28)
$ 4,372
$ 1,817
$
229
$
6,418
$ 2,109
$ 1,232
$
3,341
1,444
570
225
337
46
194
1,781
616
419
Revenue recognized from contracts with customers
$ 4,348
$ 1,809
$
6,157
Financing income
Alternative-revenue programs
Revenues to be refunded
11
29
(16)
6
14
(12)
17
43
(28)
Total operating revenue – Consumers
$ 4,372
$ 1,817
$
6,189
1
Amounts represent NorthStar Clean Energy’s operating revenue from independent power production and its
sales of energy commodities.
Electric and Gas Utilities
Consumers Utility Revenue: Consumers recognizes revenue primarily from the sale of electric and gas
utility services at tariff-based rates regulated by the MPSC. Consumers’ customer base consists of a mix
of residential, commercial, and diversified industrial customers. Consumers’ tariff-based sales
performance obligations are described below.
• Consumers has performance obligations for the service of standing ready to deliver electricity or
natural gas to customers, and it satisfies these performance obligations over time. Consumers
recognizes revenue at a fixed rate as it provides these services. These arrangements generally do
not have fixed terms and remain in effect as long as the customer consumes the utility service.
The rates are set by the MPSC through the rate-making process and represent the stand-alone
selling price of Consumers’ service to stand ready to deliver.
• Consumers has performance obligations for the service of delivering the commodity of electricity
or natural gas to customers, and it satisfies these performance obligations upon delivery.
Consumers recognizes revenue at a price per unit of electricity or natural gas delivered, based on
the tariffs established by the MPSC. These arrangements generally do not have fixed terms and
remain in effect as long as the customer consumes the utility service. The rates are set by the
MPSC through the rate-making process and represent the stand-alone selling price of a bundled
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product comprising the commodity, electricity or natural gas, and the service of delivering such
commodity.
In some instances, Consumers has specific fixed-term contracts with large commercial and industrial
customers to provide electricity or gas at certain tariff rates or to provide gas transportation services at
contracted rates. The amount of electricity and gas to be delivered under these contracts and the
associated future revenue to be received are generally dependent on the customers’ needs. Accordingly,
Consumers recognizes revenues at the tariff or contracted rate as electricity or gas is delivered to the
customer. Consumers also has other miscellaneous contracts with customers related to pole and other
property rentals, appliance service plans, and utility contract work. Generally, these contracts are short
term or evergreen in nature.
Accounts Receivable and Unbilled Revenues: Accounts receivable comprise trade receivables and
unbilled receivables. CMS Energy and Consumers record their accounts receivable at cost less an
allowance for uncollectible accounts. The allowance is increased for uncollectible accounts expense and
decreased for account write-offs net of recoveries. CMS Energy and Consumers establish the allowance
based on historical losses, management’s assessment of existing economic conditions, customer payment
trends, and reasonable and supported forecast information. CMS Energy and Consumers assess late
payment fees on trade receivables based on contractual past-due terms established with customers.
Accounts are written off when deemed uncollectible, which is generally when they become six months
past due.
For the year ended December 31, 2022, CMS Energy and Consumers recorded uncollectible accounts
expense of $50 million, which included a commitment to contribute $10 million to directly assist
vulnerable customers with utility bills. CMS Energy and Consumers recorded uncollectible accounts
expense of $22 million for the year ended December 31, 2021 and $33 million for the year ended
December 31, 2020.
Consumers’ customers are billed monthly in cycles having billing dates that do not generally coincide
with the end of a calendar month. This results in customers having received electricity or natural gas that
they have not been billed for as of the month-end. Consumers estimates its unbilled revenues by applying
an average billed rate to total unbilled deliveries for each customer class. Unbilled revenues, which are
recorded as accounts receivable and accrued revenue on CMS Energy’s and Consumers’ consolidated
balance sheets, were $663 million at December 31, 2022 and $486 million at December 31, 2021.
Alternative-Revenue Programs: Consumers accounts for its energy waste reduction incentive
mechanism and financial compensation mechanism as alternative-revenue programs. Consumers
recognizes revenue related to the energy waste reduction incentive as soon as energy savings exceed the
annual targets established by the MPSC and recognizes revenue related to the financial compensation
mechanism as payments are made on MPSC-approved PPAs. For additional information on these
mechanisms, see Note 2, Regulatory Matters.
Under a gas revenue decoupling mechanism authorized by the MPSC, Consumers is allowed to adjust
future gas rates for differences between Consumers’ actual weather-normalized, non-fuel revenues and
the revenues approved by the MPSC. Consumers accounts for this program as an alternative-revenue
program that meets the criteria for recognizing the effects of decoupling adjustments on revenue as gas is
delivered.
Consumers does not reclassify revenue from its alternative-revenue program to revenue from contracts
with customers at the time the amounts are collected from customers.
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Revenues to Be Refunded: In 2020, the MPSC issued an order authorizing Consumers to refund
$28 million voluntarily to utility customers. This amount was refunded to customers during 2021 and
2022 in the form of incremental spending above amounts included in rates on various programs.
In December 2022, the MPSC issued an order authorizing Consumers to refund $22 million voluntarily to
utility customers. Additionally, in the settlement of its 2022 electric rate case, Consumers agreed to
refund voluntarily $15 million of 2022 revenues to utility customers through a one-time bill credit. For
additional information, see Note 2, Regulatory Matters.
15: Other Income and Other Expense
Presented in the following table are the components of other income and other expense at CMS Energy
and Consumers:
Years Ended December 31
CMS Energy, including Consumers
Other income
Interest income
Interest income - related parties
Allowance for equity funds used during construction
Income from equity method investees
All other
Total other income – CMS Energy
Consumers
Other income
Interest income
Interest income - related parties
Allowance for equity funds used during construction
All other
Total other income – Consumers
CMS Energy, including Consumers
Other expense
Donations
Civic and political expenditures
Loss on reacquired and extinguished debt
All other
Total other expense – CMS Energy
Consumers
Other expense
Donations
Civic and political expenditures
All other
Total other expense – Consumers
164
In Millions
2022
2021
2020
$
$
5
—
6
3
5
$
19
$
$
$
2
5
6
4
3
—
8
10
9
30
2
5
8
8
$
4
7
6
5
6
$
28
$
3
5
6
5
$
17
$
23
$
19
$
(9) $
(6) $
(35)
(6)
—
(12)
(5)
—
(7)
(5)
(16)
(6)
$
(27) $
(18) $
(62)
$
(9) $
(6) $
(33)
(6)
(5)
(10)
(25) $
(7)
(18) $
$
(5)
(5)
(43)
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16: Reportable Segments
Reportable segments consist of business units defined by the products and services they offer.
CMS Energy and Consumers evaluate the performance of each segment based on its contribution to net
income available to CMS Energy’s common stockholders.
Accounting policies for CMS Energy’s and Consumers’ segments are as described in Note 1, Significant
Accounting Policies. The consolidated financial statements reflect the assets, liabilities, revenues, and
expenses of the individual segments when appropriate. Accounts are allocated among the segments when
common accounts are attributable to more than one segment. The allocations are based on certain
measures of business activities, such as revenue, labor dollars, customers, other operating and
maintenance expense, construction expense, leased property, taxes, or functional surveys. For example,
customer receivables are allocated based on revenue, and pension provisions are allocated based on labor
dollars.
Inter-segment sales and transfers are accounted for at current market prices and are eliminated in
consolidated net income available to common stockholders by segment. Inter-segment sales and transfers
were immaterial for all periods presented.
CMS Energy
The segments reported for CMS Energy are:
•
•
electric utility, consisting of regulated activities associated with the generation, purchase,
distribution, and sale of electricity in Michigan
gas utility, consisting of regulated activities associated with the purchase, transmission, storage,
distribution, and sale of natural gas in Michigan
• NorthStar Clean Energy (formerly known as the enterprises segment), consisting of various
subsidiaries engaging in domestic independent power production, including the development and
operation of renewable generation, and the marketing of independent power production
In August 2022, CMS Enterprises Company changed its legal name to NorthStar Clean Energy Company.
To align the segment reporting with the legal organizational structure and the internal reporting of
CMS Energy, the enterprises segment will now be referred to as NorthStar Clean Energy. There were no
changes to CMS Energy’s reportable segment composition as a result of this name change.
In October 2021, EnerBank was acquired by Regions Bank. As a result, EnerBank was removed from the
composition of CMS Energy’s reportable segments. EnerBank’s results of operations through the date of
the sale are presented as income from discontinued operations on CMS Energy’s consolidated statements
of income. For information regarding the sale of EnerBank, see Note 19, Exit Activities and Discontinued
Operations.
CMS Energy presents corporate interest and other expenses, discontinued operations, and Consumers’
other consolidated entities within other reconciling items.
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Consumers
The segments reported for Consumers are:
•
•
electric utility, consisting of regulated activities associated with the generation, purchase,
distribution, and sale of electricity in Michigan
gas utility, consisting of regulated activities associated with the purchase, transmission, storage,
distribution, and sale of natural gas in Michigan
Consumers’ other consolidated entities are presented within other reconciling items.
Presented in the following tables is financial information by segment:
In Millions
2022
2021
2020
$ 5,419
$ 4,958
$ 4,372
2,732
445
2,063
308
1,817
229
$ 8,596
$ 7,329
$ 6,418
$ 5,419
$ 4,958
$ 4,372
2,732
2,063
1,817
$ 8,151
$ 7,021
$ 6,189
$
$
$
757
330
38
1
772
304
37
1
739
283
20
1
$ 1,126
$ 1,114
$ 1,043
$
$
$
757
330
1
772
304
1
739
283
1
$ 1,088
$ 1,077
$ 1,023
Years Ended December 31
CMS Energy, including Consumers
Operating revenue
Electric utility
Gas utility
NorthStar Clean Energy
Total operating revenue – CMS Energy
Consumers
Operating revenue
Electric utility
Gas utility
Total operating revenue – Consumers
CMS Energy, including Consumers
Depreciation and amortization
Electric utility
Gas utility
NorthStar Clean Energy
Other reconciling items
Total depreciation and amortization – CMS Energy
Consumers
Depreciation and amortization
Electric utility
Gas utility
Other reconciling items
Total depreciation and amortization – Consumers
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Years Ended December 31
CMS Energy, including Consumers
Income from equity method investees1
NorthStar Clean Energy
Total income from equity method investees – CMS Energy
CMS Energy, including Consumers
Interest charges
Electric utility
Gas utility
NorthStar Clean Energy
Other reconciling items
Total interest charges – CMS Energy
Consumers
Interest charges
Electric utility
Gas utility
Other reconciling items
Total interest charges – Consumers
CMS Energy, including Consumers
Income tax expense (benefit)
Electric utility
Gas utility
NorthStar Clean Energy
Other reconciling items
Total income tax expense – CMS Energy
Consumers
Income tax expense (benefit)
Electric utility
Gas utility
Other reconciling items
Total income tax expense – Consumers
In Millions
2022
2021
2020
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
3
3
218
116
3
182
519
218
116
1
10
10
207
104
6
183
500
207
104
—
5
5
217
102
7
179
505
217
102
1
$
335
$
311
$
320
$
109
$
117
$
115
32
3
(51)
39
(2)
(59)
58
(4)
(54)
$
93
$
95
$
115
$
109
$
117
$
115
32
(1)
39
—
58
—
$
140
$
156
$
173
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Years Ended December 31
CMS Energy, including Consumers
Net income (loss) available to common stockholders
Electric utility
Gas utility
NorthStar Clean Energy
Other reconciling items
Total net income available to common stockholders – CMS Energy
Consumers
Net income (loss) available to common stockholder
Electric utility
Gas utility
Other reconciling items
Total net income available to common stockholder – Consumers
CMS Energy, including Consumers
Plant, property, and equipment, gross
Electric utility2
Gas utility2
NorthStar Clean Energy
Other reconciling items
Total plant, property, and equipment, gross – CMS Energy
Consumers
Plant, property, and equipment, gross
Electric utility2
Gas utility2
Other reconciling items
Total plant, property, and equipment, gross – Consumers
CMS Energy, including Consumers
Investments in equity method investees1
NorthStar Clean Energy
Total investments in equity method investees – CMS Energy
In Millions
2022
2021
2020
$
$
$
567
378
34
(152)
565
302
23
458
554
261
36
(96)
$
827
$ 1,348
$
755
$
$
567
378
(2)
$
565
302
(1)
554
261
(1)
$
943
$
866
$
814
$ 17,870
$ 18,147
$ 17,155
11,443
10,601
1,148
30
1,122
23
9,581
1,113
21
$ 30,491
$ 29,893
$ 27,870
$ 17,870
$ 18,147
$ 17,155
11,443
10,601
29
23
9,581
21
$ 29,342
$ 28,771
$ 26,757
$
$
71
71
$
$
71
71
$
$
70
70
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Years Ended December 31
CMS Energy, including Consumers
Total assets
Electric utility2
Gas utility2
NorthStar Clean Energy
Other reconciling items
Total assets – CMS Energy
Consumers
Total assets
Electric utility2
Gas utility2
Other reconciling items
Total assets – Consumers
CMS Energy, including Consumers
Capital expenditures3
Electric utility4
Gas utility4
NorthStar Clean Energy
Other reconciling items
Total capital expenditures – CMS Energy
Consumers
Capital expenditures3
Electric utility4
Gas utility4
Other reconciling items
Total capital expenditures – Consumers
In Millions
2022
2021
2020
$ 17,907
$ 16,493
$ 15,829
11,873
10,517
1,464
109
1,312
431
9,429
1,276
3,132
$ 31,353
$ 28,753
$ 29,666
$ 17,968
$ 16,555
$ 15,893
11,918
10,564
30
21
9,477
29
$ 29,916
$ 27,140
$ 25,399
$ 1,265
$ 1,153
$ 1,281
1,008
113
7
989
17
2
885
108
1
$ 2,393
$ 2,161
$ 2,275
$ 1,265
$ 1,153
$ 1,281
1,008
7
989
2
885
1
$ 2,280
$ 2,144
$ 2,167
1
2
3
4
Consumers had no equity method investments.
Amounts include a portion of Consumers’ other common assets attributable to both the electric and gas
utility businesses.
Amounts include assets placed under finance lease.
Amounts include a portion of Consumers’ capital expenditures for plant and equipment attributable to both
the electric and gas utility businesses.
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17: Related-Party Transactions—Consumers
Consumers enters into a number of transactions with related parties in the normal course of business.
These transactions include but are not limited to:
•
•
purchases of electricity from affiliates of NorthStar Clean Energy
payments to and from CMS Energy related to parent company overhead costs
Transactions involving power supply purchases from certain affiliates of NorthStar Clean Energy are
based on avoided costs under PURPA, state law, and competitive bidding. The payment of parent
company overhead costs is based on the use of accepted industry allocation methodologies. These
payments are for costs that occur in the normal course of business.
Presented in the following table is Consumers’ expense recorded from related-party transactions for the
years ended December 31:
Description
Related Party
2022
2021
2020
Purchases of capacity and energy
Affiliates of NorthStar Clean Energy
$
76
$
77
$
64
In Millions
Amounts payable to related parties for purchased power and other services were $20 million at
December 31, 2022 and $22 million at December 31, 2021. Accounts receivable from related parties were
$8 million at December 31, 2022 and $7 million at December 31, 2021.
CMS Energy has a demand note payable to the DB SERP rabbi trust. The demand note bears interest at an
annual rate of 4.10 percent and has a maturity date of 2028. The portion of the demand note attributable to
Consumers was recorded as a note receivable – related party on Consumers’ consolidated balance sheets
at December 31, 2022 and 2021.
Consumers has a natural gas transportation agreement with a subsidiary of CMS Energy that extends
through 2038, related to a pipeline owned by Consumers. For additional details about the agreement, see
Note 8, Leases.
In June 2021, Consumers entered into an agreement with DIG, CMS Generation Michigan Power, and
CMS ERM to purchase NorthStar Clean Energy’s three natural gas-fueled generating units for
$515 million, subject to certain adjustments. Consumers had proposed purchasing these generating units
as part of its 2021 IRP. However, in accordance with the terms of the settlement agreement of its
2021 IRP, which was approved by the MPSC in June 2022, Consumers will not purchase these generating
units.
In December 2022, Consumers renewed a short-term credit agreement with CMS Energy, permitting
Consumers to borrow up to $500 million. For additional details about the agreement, see Note 4,
Financings and Capitalization.
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18: Variable Interest Entities
In June 2022, NorthStar Clean Energy sold a Class A membership interest in NWO Holdco to a tax equity
investor for $49 million. NWO Holdco owns 100 percent of Northwest Ohio Wind, LLC, a 100-MW
wind generation project in Paulding County, Ohio. NorthStar Clean Energy retained a Class B
membership interest in NWO Holdco.
NorthStar Clean Energy has a 51-percent ownership interest in Aviator Wind Equity Holdings, which
holds a Class B membership interest in Aviator Wind, the holding company of a 525-MW wind
generation project in Coke County, Texas. The Class A membership interest in Aviator Wind is held by a
tax equity investor.
Earnings, tax attributes, and cash flows generated by NWO Holdco and Aviator Wind are allocated
among and distributed to the membership classes in accordance with the ratios specified in the associated
limited liability company agreements; these ratios change over time and are not representative of the
ownership interest percentages of each membership class. Since NWO Holdco’s and Aviator Wind’s
income and cash flows are not distributed among their investors based on ownership interest percentages,
NorthStar Clean Energy allocates the entities’ income (loss) among the investors by applying the
hypothetical liquidation at book value method. This method calculates each investor’s earnings based on a
hypothetical liquidation of the entities at the net book value of underlying assets as of the balance sheet
date. The liquidation tax gain (loss) is allocated to each investor’s capital account, resulting in income
(loss) equal to the period change in the investor’s capital account balance.
NWO Holdco, Aviator Wind Equity Holdings, and Aviator Wind are VIEs. In accordance with the
associated limited liability company agreements, the tax equity investors are guaranteed preferred returns
from NWO Holdco and Aviator Wind. However, NorthStar Clean Energy manages and controls the
operating activities of NWO Holdco and Aviator Wind Equity Holdings (and, thereby, Aviator Wind). As
a result, NorthStar Clean Energy is the primary beneficiary, as it has the power to direct the activities that
most significantly impact the economic performance of the companies, as well as the obligation to absorb
losses or the right to receive benefits from the companies. NorthStar Clean Energy consolidates
NWO Holdco, Aviator Wind Equity Holdings, and Aviator Wind and presents the Class A membership
interests and 49 percent of the Class B membership interest in Aviator Wind as noncontrolling interests.
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Presented in the following table are the carrying values of the VIEs’ assets and liabilities included on
CMS Energy’s consolidated balance sheets:
December 31
Current
Cash and cash equivalents
Restricted cash and cash equivalents
Accounts receivable
Prepayments and other current assets
Non-current
Plant, property, and equipment, net
Total assets1
Current
Accounts payable
Other current liabilities
Non-current
Asset retirement obligations
Other non-current liabilities
Total liabilities
In Millions
2022
2021
$
$
$
$
28
—
7
3
825
863
15
—
24
—
39
$
21
1
3
2
856
883
17
2
23
4
46
$
$
$
1
Assets may be used only to meet VIEs’ obligations and commitments.
NorthStar Clean Energy is obligated under certain indemnities that protect the tax equity investors against
losses incurred as a result of breaches of representations and warranties under the associated limited
liability company agreements. For additional details on these indemnity obligations, see Note 3,
Contingencies and Commitments—Guarantees.
Other VIEs: CMS Energy has variable interests in T.E.S. Filer City, Grayling, Genesee, and Craven.
While CMS Energy owns 50 percent of each partnership, it is not the primary beneficiary of any of these
partnerships because decision making is shared among unrelated parties, and no one party has the ability
to direct the activities that most significantly impact the entities’ economic performance, such as
operations and maintenance, plant dispatch, and fuel strategy. The partners must agree on all major
decisions for each of the partnerships.
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Presented in the following table is information about these partnerships:
Name
Nature of the Entity
Nature of CMS Energy’s Involvement
T.E.S. Filer City
Coal-fueled power generator
Long-term PPA between partnership and Consumers
Employee assignment agreement
Grayling
Wood waste-fueled power generator
Long-term PPA between partnership and Consumers
Reduced dispatch agreement with Consumers1
Operating and management contract
Genesee
Wood waste-fueled power generator
Long-term PPA between partnership and Consumers
Reduced dispatch agreement with Consumers1
Operating and management contract
Craven
Wood waste-fueled power generator
Operating and management contract
1
Reduced dispatch agreements allow the facilities to be dispatched based on the market price of power
compared with the cost of production of the plants. This results in fuel cost savings that each partnership
shares with Consumers’ customers.
The creditors of these partnerships do not have recourse to the general credit of CMS Energy or
Consumers. CMS Energy’s maximum risk exposure to these partnerships is generally limited to its
investment in the partnerships, which is included in investments on its consolidated balance sheets in the
amount of $71 million at December 31, 2022 and 2021.
19: Exit Activities and Discontinued Operations
Exit Activities: Under its Clean Energy Plan, Consumers will retire the D.E. Karn coal-fueled electric
generating units in 2023. In 2019, Consumers announced a retention incentive program to ensure
necessary staffing at the D.E. Karn generating complex through the anticipated retirement of the coal-
fueled generating units. Based on the number of employees that have chosen to participate, the aggregate
cost of the program through 2023 is estimated to be $35 million. In its order in Consumers’ 2020 electric
rate case, the MPSC approved deferred accounting treatment for these costs; Consumers began deferring
these costs as a regulatory asset in 2021.
Under the 2021 IRP, Consumers will retire the J.H. Campbell coal-fueled generating units in 2025.
Similar to the D.E. Karn program, Consumers is providing a retention incentive program to ensure
necessary staffing at the J.H. Campbell generating complex through retirement. Based on the number of
employees that have chosen to participate, the aggregate cost of the program through 2025 is estimated to
be $50 million. Additionally, Consumers recognized $4 million related to severance benefits during the
year ended December 31, 2022. This amount was recorded in other non-current liabilities on its
consolidated balance sheets at December 31, 2022. The 2021 IRP provides deferred accounting treatment
for the retention and severance costs recognized during 2022; deferral of costs beyond 2022 was approved
as part of the 2022 electric rate case settlement.
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As of December 31, 2022, the cumulative cost incurred and charged to expense related to the D.E. Karn
retention incentive program was $16 million. Additionally, an amount of $4 million has been capitalized
as a cost of plant, property, and equipment and an amount of $11 million has been deferred as a
regulatory asset. The cumulative cost incurred and deferred as a regulatory asset related to the
J.H. Campbell retention incentive program was $20 million.
Presented in the following table is a reconciliation of the retention benefit liability recorded in other
liabilities on Consumers’ consolidated balance sheets:
In Millions
2022
2021
$
11
$
14
24
—
(17)
7
1
(5)
14
Years Ended December 31
Retention benefit liability at beginning of period
Costs deferred as a regulatory asset
Costs incurred and capitalized
Costs paid or settled
Retention benefit liability at the end of the period1
$
21
$
1
Includes current portion of other liabilities of $13 million at December 31, 2022 and $5 million at
December 31, 2021.
Discontinued Operations: In October 2021, EnerBank was acquired by Regions Bank. CMS Energy
received proceeds of over $1.0 billion from the transaction and recognized a pre-tax gain of $657 million
in 2021. In March 2022, CMS Energy received $6 million of additional proceeds as the result of a post-
closing adjustment. Net of related transaction costs, CMS Energy recognized a pre-tax gain of $5 million
during 2022.
In December 2021, CMS Energy submitted a notice of disagreement to Regions Bank relating to a
$36 million negative post-closing purchase price adjustment that it believed was inconsistent with the
merger agreement. In accordance with the merger agreement, the disputed adjustment was submitted to a
mutually agreed upon independent accounting firm for final determination. In June 2022, the accounting
firm rendered a determination on the disputed items entirely in favor of CMS Energy. As a result, no
further adjustment was required in 2022.
EnerBank’s results of operations through the date of the sale are presented as income from discontinued
operations on CMS Energy’s consolidated statements of income for the year ended December 31, 2021.
The table below presents the financial results of EnerBank included in income from discontinued
operations:
Years Ended December 31
Operating revenue
Expenses
Operating expenses
Interest expense
Income before income taxes
Gain on sale
Income from discontinued operations before income taxes
Income tax expense
Income from discontinued operations, net of tax
174
In Millions
2022
2021
2020
$ —
$
209
$
262
—
—
$ —
5
5
1
4
$
$
60
34
115
657
772
170
602
130
56
76
—
76
18
58
$
$
$
$
$
$
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of CMS Energy Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of CMS Energy Corporation and its
subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements
of income, of comprehensive income, of changes in equity and of cash flows for each of the three years in
the period ended December 31, 2022, including the related notes and financial statement schedules listed
in the index appearing under Item 15 (collectively referred to as the “consolidated financial statements”).
We also have audited the Company’s internal control over financial reporting as of December 31, 2022,
based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2022 in
conformity with accounting principles generally accepted in the United States of America. Also in our
opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated
Framework (2013) issued by the COSO.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining
effective internal control over financial reporting, and for its assessment of the effectiveness of internal
control over financial reporting, included in Management’s Annual Report on Internal Control Over
Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s
consolidated financial statements and on the Company’s internal control over financial reporting based on
our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement, whether due to error or fraud, and whether effective internal
control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of
material misstatement of the consolidated financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audits also included performing
such other procedures as we considered necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.
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Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (iii) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could
have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the
consolidated financial statements that was communicated or required to be communicated to the audit
committee and that (i) relates to accounts or disclosures that are material to the consolidated financial
statements and (ii) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it
relates.
Accounting for the Effects of New Regulatory Matters
As described in Note 2 to the consolidated financial statements, the Company is a utility and must apply
regulatory accounting when its rates are designed to recover specific costs of providing regulated
services. Under regulatory accounting, the Company records regulatory assets or liabilities for certain
transactions that would have been treated as expense or revenue by a non-regulated business. As of
December 31, 2022, the Company has recognized a total of $3,652 million of regulatory assets,
$3,900 million of regulatory liabilities, and $409 million of accrued revenue. As described by
management, there are multiple participants to rate case proceedings who often challenge various aspects
of those proceedings, including the prudence of the Company’s policies and practices. These participants
often seek cost disallowances and other relief and have appealed significant decisions reached by the
regulators. The recovery of regulatory assets and the settlement of regulatory liabilities are contingent
upon the outcomes of rate cases and regulatory proceedings.
The principal considerations for our determination that performing procedures relating to management’s
accounting for the effects of new regulatory matters is a critical audit matter are (i) the high degree of
auditor judgment and subjectivity applied to evaluate management’s assessment of the potential outcomes
and related accounting impacts associated with pending rate case proceedings, (ii) in some cases, the
significant audit effort necessary to assess contrary evidence from various parties involved in rate case
proceedings, and (iii) the significant audit effort necessary to evaluate audit evidence related to the
recovery of regulatory assets and the settlement of regulatory liabilities.
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Table of Contents
Addressing the matter involved performing procedures and evaluating audit evidence in connection with
forming our overall opinion on the consolidated financial statements. These procedures included testing
the effectiveness of controls relating to management’s assessment of regulatory proceedings, including
the probability of recovering incurred costs and the related accounting and disclosure impacts. These
procedures also included, among others, obtaining and evaluating the Company’s correspondence with
regulators, evaluating the reasonableness of management’s assessment regarding whether recovery of
regulatory assets and settlement of regulatory liabilities is probable and evaluating the sufficiency of the
disclosures in the consolidated financial statements. Procedures were performed to evaluate the regulatory
assets and liabilities, including those subject to pending rate cases, based on provisions and formulas
outlined in rate orders, other regulatory correspondence, or application of relevant regulatory precedents.
/s/ PricewaterhouseCoopers LLP
Detroit, Michigan
February 9, 2023
We have served as the Company’s auditor since 2007.
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179
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholder of Consumers Energy Company
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Consumers Energy Company and its
subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements
of income, of comprehensive income, of changes in equity and of cash flows for each of the three years in
the period ended December 31, 2022, including the related notes and financial statement schedule listed
in the index appearing under Item 15 (collectively referred to as the “consolidated financial statements”).
We also have audited the Company’s internal control over financial reporting as of December 31, 2022,
based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2022 in
conformity with accounting principles generally accepted in the United States of America. Also in our
opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated
Framework (2013) issued by the COSO.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining
effective internal control over financial reporting, and for its assessment of the effectiveness of internal
control over financial reporting, included in Management’s Annual Report on Internal Control Over
Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s
consolidated financial statements and on the Company’s internal control over financial reporting based on
our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement, whether due to error or fraud, and whether effective internal
control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of
material misstatement of the consolidated financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audits also included performing
such other procedures as we considered necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.
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Table of Contents
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (iii) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could
have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the
consolidated financial statements that was communicated or required to be communicated to the audit
committee and that (i) relates to accounts or disclosures that are material to the consolidated financial
statements and (ii) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it
relates.
Accounting for the Effects of New Regulatory Matters
As described in Note 2 to the consolidated financial statements, the Company is a utility and must apply
regulatory accounting when its rates are designed to recover specific costs of providing regulated
services. Under regulatory accounting, the Company records regulatory assets or liabilities for certain
transactions that would have been treated as expense or revenue by a non-regulated business. As of
December 31, 2022, the Company has recognized a total of $3,652 million of regulatory assets,
$3,900 million of regulatory liabilities, and $409 million of accrued revenue. As described by
management, there are multiple participants to rate case proceedings who often challenge various aspects
of those proceedings, including the prudence of the Company’s policies and practices. These participants
often seek cost disallowances and other relief and have appealed significant decisions reached by the
regulators. The recovery of regulatory assets and the settlement of regulatory liabilities are contingent
upon the outcomes of rate cases and regulatory proceedings.
The principal considerations for our determination that performing procedures relating to management’s
accounting for the effects of new regulatory matters is a critical audit matter are (i) the high degree of
auditor judgment and subjectivity applied to evaluate management’s assessment of the potential outcomes
and related accounting impacts associated with pending rate case proceedings, (ii) in some cases, the
significant audit effort necessary to assess contrary evidence from various parties involved in rate case
proceedings, and (iii) the significant audit effort necessary to evaluate audit evidence related to the
recovery of regulatory assets and the settlement of regulatory liabilities.
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Addressing the matter involved performing procedures and evaluating audit evidence in connection with
forming our overall opinion on the consolidated financial statements. These procedures included testing
the effectiveness of controls relating to management’s assessment of regulatory proceedings, including
the probability of recovering incurred costs and the related accounting and disclosure impacts. These
procedures also included, among others, obtaining and evaluating the Company’s correspondence with
regulators, evaluating the reasonableness of management’s assessment regarding whether recovery of
regulatory assets and settlement of regulatory liabilities is probable and evaluating the sufficiency of the
disclosures in the consolidated financial statements. Procedures were performed to evaluate the regulatory
assets and liabilities, including those subject to pending rate cases, based on provisions and formulas
outlined in rate orders, other regulatory correspondence, or application of relevant regulatory precedents.
/s/ PricewaterhouseCoopers LLP
Detroit, Michigan
February 9, 2023
We have served as the Company’s auditor since 2007.
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Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
CMS Energy
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures: Under the
supervision and with the participation of management, including its CEO and CFO, CMS Energy
conducted an evaluation of its disclosure controls and procedures (as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on such evaluation, CMS Energy’s CEO
and CFO have concluded that its disclosure controls and procedures were effective as of
December 31, 2022.
Management’s Annual Report on Internal Control Over Financial Reporting: CMS Energy’s
management is responsible for establishing and maintaining adequate internal control over financial
reporting, as defined in Exchange Act Rules 13a-15(f) and 15d-15(f). CMS Energy’s internal control over
financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
GAAP and includes policies and procedures that:
•
•
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of CMS Energy
provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with GAAP, and that receipts and expenditures of
CMS Energy are being made only in accordance with authorizations of management and directors
of CMS Energy
provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of CMS Energy’s assets that could have a material effect on its
financial statements
Management, including its CEO and CFO, does not expect that its internal controls will prevent or detect
all errors and all fraud. A control system, no matter how well designed and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of
a control system must reflect the fact that there are resource constraints, and the benefits of controls must
be considered relative to their costs. In addition, any evaluation of the effectiveness of controls is subject
to risks that those internal controls may become inadequate in future periods because of changes in
business conditions, or that the degree of compliance with the policies or procedures deteriorates.
Under the supervision and with the participation of management, including its CEO and CFO,
CMS Energy conducted an evaluation of the effectiveness of its internal control over financial reporting
as of December 31, 2022. In making this evaluation, management used the criteria set forth in the
framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on such evaluation, CMS Energy’s management
concluded that its internal control over financial reporting was effective as of December 31, 2022. The
effectiveness of CMS Energy’s internal control over financial reporting as of December 31, 2022 has
183
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been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as
stated in their report which appears under Item 8. Financial Statements and Supplementary Data.
Changes in Internal Control Over Financial Reporting: There have not been any changes in
CMS Energy’s internal control over financial reporting during the last fiscal quarter that have materially
affected, or are reasonably likely to affect materially, its internal control over financial reporting.
Consumers
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures: Under the
supervision and with the participation of management, including its CEO and CFO, Consumers conducted
an evaluation of its disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act). Based on such evaluation, Consumers’ CEO and CFO have
concluded that its disclosure controls and procedures were effective as of December 31, 2022.
Management’s Annual Report on Internal Control Over Financial Reporting: Consumers’
management is responsible for establishing and maintaining adequate internal control over financial
reporting, as defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Consumers’ internal control over
financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
GAAP and includes policies and procedures that:
•
•
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of Consumers
provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with GAAP, and that receipts and expenditures of Consumers
are being made only in accordance with authorizations of management and directors of
Consumers
provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of Consumers’ assets that could have a material effect on its
financial statements
Management, including its CEO and CFO, does not expect that its internal controls will prevent or detect
all errors and all fraud. A control system, no matter how well designed and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of
a control system must reflect the fact that there are resource constraints, and the benefits of controls must
be considered relative to their costs. In addition, any evaluation of the effectiveness of controls is subject
to risks that those internal controls may become inadequate in future periods because of changes in
business conditions, or that the degree of compliance with the policies or procedures deteriorates.
Under the supervision and with the participation of management, including its CEO and CFO, Consumers
conducted an evaluation of the effectiveness of its internal control over financial reporting as of
December 31, 2022. In making this evaluation, management used the criteria set forth in the framework in
Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission. Based on such evaluation, Consumers’ management concluded that its
internal control over financial reporting was effective as of December 31, 2022. The effectiveness of
Consumers’ internal control over financial reporting as of December 31, 2022 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report
which appears under Item 8. Financial Statements and Supplementary Data.
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Changes in Internal Control Over Financial Reporting: There have not been any changes in
Consumers’ internal control over financial reporting during the last fiscal quarter that have materially
affected, or are reasonably likely to affect materially, its internal control over financial reporting.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent
Inspections
Not applicable.
Part III
Item 10. Directors, Executive Officers and Corporate Governance
CMS Energy
Information that is required in Item 10 of this Form 10-K regarding executive officers is included in the
Item 1. Business—Information About CMS Energy’s and Consumers’ Executive Officers section, which
is incorporated by reference herein.
Information that is required in Item 10 of this Form 10-K regarding directors, executive officers, and
corporate governance is incorporated by reference from CMS Energy’s and Consumers’ definitive proxy
statement for their 2023 Annual Meetings of Shareholders to be held May 5, 2023. The proxy statement
will be filed with the SEC, pursuant to Regulation 14A under the Exchange Act, within 120 days after the
end of the fiscal year covered by this Form 10-K, all of which information is hereby incorporated by
reference in, and made part of, this Form 10-K.
Code of Ethics
CMS Energy has adopted an employee code of ethics, entitled “CMS Energy 2023 Code of Conduct and
Guide to Ethical Business Behavior” (Employee Code) that applies to its CEO, CFO, and CAO, as well as
all other officers and employees of CMS Energy and its affiliates. The Employee Code is administered by
the Chief Compliance Officer of CMS Energy, who reports directly to the Audit Committee of the Board
of Directors of CMS Energy. CMS Energy has also adopted a director code of ethics entitled “2023 Board
of Directors Code of Conduct and Guide to Ethical Business Behavior” (Director Code) that applies to its
directors. The Director Code is administered by the Audit Committee of the Board of Directors of
CMS Energy. Any alleged violation of the Director Code by a director will be investigated by
disinterested members of the Audit Committee of the Board of Directors of CMS Energy, or if none, by
disinterested members of the entire Board of Directors of CMS Energy. The Employee Code and Director
Code and any waivers of, or amendments or exceptions to, a provision of the Employee Code that applies
to CMS Energy’s CEO, CFO, CAO or persons performing similar functions and any waivers of, or
amendments or exceptions to, a provision of CMS Energy’s Director Code will be disclosed on
CMS Energy’s website at www.cmsenergy.com/corporate-governance/compliance-and-ethics.
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Consumers
Information that is required in Item 10 of this Form 10-K regarding executive officers is included in the
Item 1. Business—Information About CMS Energy’s and Consumers’ Executive Officers section, which
is incorporated by reference herein.
Information that is required in Item 10 of this Form 10-K regarding directors, executive officers, and
corporate governance is incorporated by reference from CMS Energy’s and Consumers’ definitive proxy
statement for their 2023 Annual Meetings of Shareholders to be held May 5, 2023. The proxy statement
will be filed with the SEC, pursuant to Regulation 14A under the Exchange Act, within 120 days after the
end of the fiscal year covered by this Form 10-K, all of which information is hereby incorporated by
reference in, and made part of, this Form 10-K.
Code of Ethics
Consumers has adopted an employee code of ethics, entitled “CMS Energy 2023 Code of Conduct and
Guide to Ethical Business Behavior” (Employee Code) that applies to its CEO, CFO, and CAO, as well as
all other officers and employees of Consumers and its affiliates. The Employee Code is administered by
the Chief Compliance Officer of Consumers, who reports directly to the Audit Committee of the Board of
Directors of Consumers. Consumers has also adopted a director code of ethics entitled “2023 Board of
Directors Code of Conduct and Guide to Ethical Business Behavior” (Director Code) that applies to its
directors. The Director Code is administered by the Audit Committee of the Board of Directors of
Consumers. Any alleged violation of the Director Code by a director will be investigated by disinterested
members of the Audit Committee of the Board of Directors of Consumers, or if none, by disinterested
members of the entire Board of Directors of Consumers. The Employee Code and Director Code and any
waivers of, or amendments or exceptions to, a provision of the Employee Code that applies to
Consumers’ CEO, CFO, CAO or persons performing similar functions and any waivers of, or
amendments or exceptions to, a provision of Consumers’ Director Code will be disclosed on Consumers’
website at www.cmsenergy.com/corporate-governance/compliance-and-ethics.
Item 11. Executive Compensation
See the note below.
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Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
Securities Authorized for Issuance Under Equity
Compensation Plans
Presented in the following table is information regarding CMS Energy’s equity compensation plans as of
December 31, 2022:
(a)
(b)
(c)
Number of securities to
be issued upon exercise
of outstanding options,
warrants, and rights
Weighted-average
exercise price of
outstanding options,
warrants, and rights
Number of securities remaining
available for future issuance under
equity compensation plans (excluding
securities reflected in column (a))
—
$ —
5,417,727
Plan Category
Equity compensation plan
approved by
shareholders
Also see the note below.
Item 13. Certain Relationships and Related Transactions, and
Director Independence
See the note below.
Item 14. Principal Accountant Fees and Services
See the note below.
NOTE: Information that is required by Part III—Items 11, 12, 13, and 14 of this Form 10-K is
incorporated by reference from CMS Energy’s and Consumers’ definitive proxy statement for their
2023 Annual Meetings of Shareholders to be held May 5, 2023. The proxy statement will be filed with the
SEC, pursuant to Regulation 14A under the Exchange Act, within 120 days after the end of the fiscal year
covered by this Form 10-K, all of which information is hereby incorporated by reference in, and made
part of, this Form 10-K.
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188
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Part IV
Item 15. Exhibits and Financial Statement Schedules
The following financial statements are filed as part of this report under Item 8. Financial Statements and
Supplementary Data:
• Consolidated Statements of Income of CMS Energy for the years ended December 31, 2022,
2021, and 2020
• Consolidated Statements of Comprehensive Income of CMS Energy for the years ended
December 31, 2022, 2021, and 2020
• Consolidated Statements of Cash Flows of CMS Energy for the years ended December 31, 2022,
2021, and 2020
• Consolidated Balance Sheets of CMS Energy at December 31, 2022 and 2021
• Consolidated Statements of Changes in Equity of CMS Energy for the years ended
December 31, 2022, 2021, and 2020
• Consolidated Statements of Income of Consumers for the years ended December 31, 2022, 2021,
and 2020
• Consolidated Statements of Comprehensive Income of Consumers for the years ended
December 31, 2022, 2021, and 2020
• Consolidated Statements of Cash Flows of Consumers for the years ended December 31, 2022,
2021, and 2020
• Consolidated Balance Sheets of Consumers at December 31, 2022 and 2021
• Consolidated Statements of Changes in Equity of Consumers for the years ended
December 31, 2022, 2021, and 2020
• Notes to the Consolidated Financial Statements
• Report of Independent Registered Public Accounting Firm for CMS Energy
• Report of Independent Registered Public Accounting Firm for Consumers
The following financial statement schedules are included below:
•
•
•
Schedule I — Condensed Financial Information of Registrant, CMS Energy—Parent Company at
December 31, 2022 and 2021 and for the years ended December 31, 2022, 2021, and 2020
Schedule II — Valuation and Qualifying Accounts and Reserves of CMS Energy for the years
ended December 31, 2022, 2021, and 2020
Schedule II — Valuation and Qualifying Accounts and Reserves of Consumers for the years
ended December 31, 2022, 2021, and 2020
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Schedule I — Condensed Financial Information of
Registrant
CMS Energy—Parent Company
Condensed Statements of Income
Years Ended December 31
Operating Expenses
Other operating expenses
Total operating expenses
Operating Loss
Other Income (Expense)
Equity earnings of subsidiaries
Nonoperating retirement benefits, net
Interest income
Interest income - intercompany
Other income
Other expense
Total other income
Interest Charges
Interest on long-term debt
Intercompany interest expense and other
Total interest charges
Income Before Income Taxes
Income Tax Benefit
Income From Continuing Operations
Income From Discontinued Operations, Net of Tax of $—, $(5), and $—
Net Income Attributable to CMS Energy
Preferred Stock Dividends
In Millions
2022
2021
2020
$
(7) $
(7) $
(7)
(7)
980
(1)
2
2
1
(1)
983
181
8
189
787
(50)
837
—
837
10
(7)
(7)
1,482
(1)
—
1
1
—
1,483
183
7
190
1,286
(60)
1,346
7
1,353
5
(6)
(6)
(6)
909
(1)
—
1
1
(19)
891
178
7
185
700
(55)
755
—
755
—
Net Income Available to Common Stockholders
$
827
$ 1,348
$
755
The accompanying notes are an integral part of these statements.
190
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Schedule I — Condensed Financial Information of
Registrant (Continued)
CMS Energy—Parent Company
Condensed Statements of Cash Flows
Years Ended December 31
Cash Flows from Operating Activities
Net cash provided by operating activities
Cash Flows from Investing Activities
Investment in subsidiaries
Decrease (increase) in notes receivable – intercompany
Net cash used in investing activities
Cash Flows from Financing Activities
Proceeds from issuance of debt
Issuance of common stock
Issuance of preferred stock
Retirement of long-term debt
Debt prepayment costs
Payment of dividends on common and preferred stock
Debt issuance costs and financing fees
Change in notes payable – intercompany
Net cash provided by (used in) financing activities
In Millions
2022
2021
2020
$
565
$ 1,549
$
507
(796)
286
(510)
—
69
—
—
—
(544)
(11)
77
(409)
(581)
(83)
(664)
—
26
224
(200)
—
(507)
(10)
(28)
(495)
(657)
(307)
(964)
1,225
253
—
(425)
(16)
(465)
(10)
(105)
457
—
—
Net Increase (Decrease) in Cash and Cash Equivalents, Including
Restricted Amounts
Cash and Cash Equivalents, Including Restricted Amounts, Beginning of
Period
(354)
390
390
—
Cash and Cash Equivalents, Including Restricted Amounts, End of
Period
$
36
$
390
$ —
The accompanying notes are an integral part of these statements.
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Schedule I — Condensed Financial Information of
Registrant (Continued)
CMS Energy—Parent Company
Condensed Balance Sheets
ASSETS
December 31
Current Assets
Cash and cash equivalents
Notes and accrued interest receivable – intercompany
Accounts receivable – intercompany and related parties
Accrued taxes
Prepayments and other current assets
Total current assets
Other Non-current Assets
Deferred income taxes
Investments in subsidiaries
Other investments
Other
Total other non-current assets
Total Assets
In Millions
2022
2021
$
36
$
107
8
45
1
197
105
10,881
6
11
390
463
5
—
1
859
147
9,870
6
8
11,003
10,031
$ 11,200
$ 10,890
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LIABILITIES AND EQUITY
December 31
Current Liabilities
Accounts and notes payable – intercompany
Accrued interest, including intercompany
Accrued taxes
Other current liabilities
Total current liabilities
Non-current Liabilities
Long-term debt
Notes payable – intercompany
Postretirement benefits
Other non-current liabilities
Total non-current liabilities
Equity
Common stockholders’ equity
Preferred stock
Total equity
Total Liabilities and Equity
The accompanying notes are an integral part of these statements.
In Millions
2022
2021
$
$
74
33
—
9
61
33
83
8
116
185
3,930
109
15
15
3,928
112
19
15
4,069
4,074
6,791
224
7,015
6,407
224
6,631
$ 11,200
$ 10,890
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Schedule I — Condensed Financial Information of
Registrant (Continued)
CMS Energy—Parent Company
Notes to the Condensed Financial Statements
1: Basis of Presentation
CMS Energy’s condensed financial statements have been prepared on a parent-only basis. In accordance
with Rule 12-04 of Regulation S-X, these parent-only financial statements do not include all of the
information and notes required by GAAP for annual financial statements, and therefore these parent-only
financial statements and other information included should be read in conjunction with CMS Energy’s
audited consolidated financial statements contained within Item 8. Financial Statements and
Supplementary Data.
2: Guarantees
CMS Energy has issued guarantees with a maximum potential obligation of $1.0 billion on behalf of
some of its wholly owned subsidiaries and related parties. CMS Energy’s maximum potential obligation
consists primarily of potential payments:
•
•
•
•
•
•
to third parties under certain commodity purchase and sales agreements entered into by
CMS ERM and other subsidiaries of NorthStar Clean Energy
to third parties under a credit agreement entered into by a subsidiary of NorthStar Clean Energy
to tax equity investors that hold membership interests in certain VIEs held by NorthStar Clean
Energy
to Regions Bank related to the sale of EnerBank
to EGLE on behalf of CMS Land and CMS Capital, for environmental remediation obligations at
Bay Harbor
to the U.S. Department of Energy on behalf of Consumers, in connection with Consumers’ 2011
settlement agreement with the U.S. Department of Energy regarding damages resulting from the
department’s failure to accept spent nuclear fuel from nuclear power plants formerly owned by
Consumers
The expiry dates of these guarantees vary, depending upon contractual provisions or upon the statute of
limitations under the relevant governing law.
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Schedule II — Valuation and Qualifying Accounts and
Reserves
CMS Energy Corporation
Years Ended December 31, 2022, 2021, and 2020
Description
Allowance for uncollectible accounts1
2022
2021
2020
Deferred tax valuation allowance
Balance at
Beginning of
Period
Charged to
Expense
Charged to
Other
Accounts Deductions
In Millions
Balance at
End of
Period
$ 20
$ 50
29
20
2
1
2
$
22
33
$ —
1
—
$ —
—
—
$ —
—
—
$ 43
$ 27
31
24
$ —
—
1
20
29
2
2
1
$
Deductions represent write-offs of uncollectible accounts, net of recoveries.
Consumers Energy Company
Years Ended December 31, 2022, 2021, and 2020
Description
Allowance for uncollectible accounts1
Balance at
Beginning of
Period
Charged to
Expense
Charged to
Other
Accounts Deductions
In Millions
Balance at
End of
Period
$ 20
$ 50
29
20
22
33
$ —
—
—
$ 43
$ 27
31
24
20
29
2022
2021
2020
1
2022
2021
2020
1
Deductions represent write-offs of uncollectible accounts, net of recoveries.
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196
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Exhibit Index
The agreements included as exhibits to this Form 10-K filing are included solely to provide information
regarding the terms of the agreements and are not intended to provide any other factual or disclosure
information about CMS Energy, Consumers, or other parties to the agreements. The agreements may
contain representations and warranties made by each of the parties to each of the agreements that were
made exclusively for the benefit of the parties involved in each of the agreements and should not be
treated as statements of fact. The representations and warranties were made as a way to allocate risk if one
or more of those statements prove to be incorrect. The statements were qualified by disclosures of the
parties to each of the agreements that may not be reflected in each of the agreements. The agreements
may apply standards of materiality that are different than standards applied to other investors.
Additionally, the statements were made as of the date of the agreements or as specified in the agreements
and have not been updated. The representations and warranties may not describe the actual state of affairs
of the parties to each agreement.
Additional information about CMS Energy and Consumers may be found in this filing, at
www.cmsenergy.com, at www.consumersenergy.com, and through the SEC’s website at www.sec.gov.
Previously Filed
Exhibits
3.11
With File
Number
1-9513
As
Exhibit
Number
Description
3.1 — Restated Articles of Incorporation of CMS Energy, effective
June 1, 2004, as amended May 22, 2009, together with the
Certificate of Designation of 4.200% Cumulative Redeemable
Perpetual Preferred Stock, Series C, effective June 29, 2021
(Form 10-Q for the quarterly period ended June 30, 2021)
3.21
3.3
3.4
4.1
4.1.a
4.1.b
4.1.c
4.1.d
4.1.e
4.1.f
4.1.g
4.1.h
1-9513
3.2 — CMS Energy Bylaws, amended and restated effective
1-5611
February 8, 2016 (Form 8-K filed February 8, 2016)
3(c) — Restated Articles of Incorporation of Consumers effective
June 7, 2000 (Form 10-K for the fiscal year ended
December 31, 2000)
1-5611
3.2 — Consumers Bylaws, amended and restated as of January 24, 2013
(Form 8-K filed January 29, 2013)
2-65973 (b)(1)–4 — Indenture dated as of September 1, 1945 between Consumers and
Chemical Bank (successor to Manufacturers Hanover Trust
Company), as Trustee, including therein indentures supplemental
thereto through the Forty-third Supplemental Indenture dated as
of May 1, 1979 (Form S-16 filed November 13, 1979)
Indentures Supplemental thereto:
1-5611
1-5611
1-5611
1-5611
1-5611
1-5611
1-5611
1-5611
4.2 — 104th dated as of 8/11/05 (Form 8-K filed August 11, 2005)
4.1 — 112th dated as of 9/1/10 (Form 8-K filed September 7, 2010)
4.1 — 113th dated as of 10/15/10 (Form 8-K filed October 20, 2010)
4.1 — 114th dated as of 3/31/11 (Form 8-K filed April 6, 2011)
4.1 — 120th dated as of 12/17/12 (Form 8-K filed December 20, 2012)
4.1 — 121st dated as of 5/17/13 (Form 8-K filed May 17, 2013)
4.1 — 122nd dated as of 8/9/13 (Form 8-K filed August 9, 2013)
4.1 — 123rd dated as of 12/20/13 (Form 8-K filed December 27, 2013)
197
Table of Contents
Previously Filed
Exhibits
4.1.i
4.1.j
4.1.k
With File
Number
1-5611
1-5611
1-5611
4.1.l
4.1.m
4.1.n
4.1.o
4.1.p
4.1.q
4.1.r
4.1.s
4.1.t
4.1.u
4.1.v
4.1.w
4.1.x
4.1.y
4.1.z
4.1.aa
4.1.bb
4.1.cc
4.1.dd
4.1.ee
4.1.ff
4.2
1-5611
1-5611
1-5611
1-5611
1-5611
1-5611
1-5611
1-5611
1-5611
1-5611
1-5611
1-5611
1-5611
1-5611
1-5611
1-5611
1-5611
1-5611
1-5611
1-5611
1-5611
1-5611
4.3
1-5611
As
Exhibit
Number
Description
4.1 — 124th dated as of 8/18/2014 (Form 8-K filed August 18, 2014)
4.1 — 125th dated as of 11/6/2015 (Form 8-K filed November 6, 2015)
4.1 — 126th dated as of 11/23/2015 (Form 8-K filed
November 25, 2015)
4.1 — 127th dated as of 8/10/16 (Form 8-K filed August 10, 2016)
4.1 — 128th dated as of 2/22/17 (Form 8-K filed February 22, 2017)
4.1 — 129th dated as of 9/28/17 (Form 8-K filed September 28, 2017)
4.1 — 130th dated as of 11/15/17 (Form 8-K filed November 15, 2017)
4.1 — 131st dated as of 5/14/18 (Form 8-K filed May 14, 2018)
4.1 — 132nd dated as of 6/5/18 (Form 8-K filed June 5, 2018)
4.1 — 133rd dated as of 10/1/18 (Form 8-K filed October 1, 2018)
4.1 — 134th dated as of 11/13/18 (Form 8-K filed November 13, 2018)
4.1 — 135th dated as of 5/28/19 (Form 8-K filed May 28, 2019)
4.1 — 136th dated as of 9/3/19 (Form 8-K filed September 3, 2019)
4.1 — 137th dated as of 9/19/19 (Form 8-K filed September 19, 2019)
4.3 — 138th dated as of 10/1/19 (Form 10-Q for the quarterly period
ended September 30, 2019)
4.1 — 139th dated as of 3/26/20 (Form 8-K filed March 26, 2020)
4.1 — 140th dated as of 5/13/20 (Form 8-K filed May 13, 2020)
4.1 — 141st dated as of 5/20/20 (Form 8-K filed May 20, 2020)
4.1 — 142nd dated as of 10/7/20 (Form 8-K filed October 7, 2020)
4.1 — 143rd dated as of 12/14/20 (Form 8-K filed December 14, 2020)
4.1 — 144th dated as of 8/12/21 (Form 8-K filed August 12, 2021)
4.1 — 145th dated as of 8/11/22 (Form 8-K filed August 11, 2022)
4.1 — 146th dated as of 12/14/22 (Form 8-K filed December 15, 2022)
4.1 — 147th dated as of 1/10/23 (Form 8-K filed January 10, 2023)
(4)(b) — Indenture dated as of January 1, 1996 between Consumers and
The Bank of New York Mellon, as Trustee (Form 10-K for the
fiscal year ended December 31, 1995)
(4)(c) — Indenture dated as of February 1, 1998 between Consumers and
The Bank of New York Mellon (formerly The Chase Manhattan
Bank), as Trustee (Form 10-K for the fiscal year ended
December 31, 1997)
4.41
4.4.a1
4.4.b1
4.4.c1
4.4.d1
33-47629
(4)(a) — Indenture dated as of September 15, 1992 between CMS Energy
and NBD Bank, as Trustee (Form S-3 filed May 1, 1992)
Indentures Supplemental thereto:
1-9513
1-9513
1-9513
1-9513
4.1 — 29th dated as of 3/22/13 (Form 8-K filed March 22, 2013)
4.1 — 30th dated as of 2/27/14 (Form 8-K filed February 27, 2014)
4.2 — 31st dated as of 2/27/14 (Form 8-K filed February 27, 2014)
4.1 — 32nd dated as of 11/9/15 (Form 8-K filed November 9, 2015)
198
Table of Contents
Previously Filed
Exhibits
4.4.e1
4.4.f1
4.4.g1
4.51
With File
Number
1-9513
1-9513
1-9513
1-9513
As
Exhibit
Number
Description
4.1 — 33rd dated as of 5/5/16 (Form 8-K filed May 5, 2016)
4.1 — 34th dated as of 11/3/16 (Form 8-K filed November 3, 2016)
4.1 — 35th dated as of 2/13/17 (Form 8-K filed February 13, 2017)
(4a) — Indenture dated as of June 1, 1997 between CMS Energy and
The Bank of New York Mellon, as Trustee (Form 8-K filed
July 1, 1997)
Indentures Supplemental thereto:
4.5.a1
4.5.b1
4.5.c1
4.5.d1
4.5.e1
4.5.f1
4.61
4.7
4.81
10.12
10.22
10.32
10.42
10.52
10.62
10.71
1-9513
4.5.a — 5th dated as of 2/13/18 (Form 10-K for the fiscal year ended
December 31, 2017)
1-9513
1-9513
1-9513
1-9513
1-9513
1-9513
4.1 — 6th dated as of 3/8/18 (Form 8-K filed March 8, 2018)
4.1 — 7th dated as of 9/26/18 (Form 8-K filed September 26, 2018)
4.1 — 8th dated as of 2/20/19 (Form 8-K filed February 20, 2019)
4.1 — 9th dated as of 5/28/20 (Form 8-K filed May 28, 2020)
4.1 — 10th dated as of 11/25/20 (Form 8-K filed November 25, 2020)
4.6 — Description of CMS Energy Securities (Form 10-K for the fiscal
year ended December 31, 2021)
1-5611
4.7 — Description of Consumers Securities (Form 10-K for the fiscal
year ended December 31, 2019)
1-9513
4.2 — Deposit Agreement, dated as of July 1, 2021, among
CMS Energy, Equiniti Trust Company, and the holders from time
to time of the depositary receipts described therein, including
Form of Depositary Receipt (Form 8-K filed July 1, 2021)
1-9513
10.1 — CMS Energy 2020 Performance Incentive Stock Plan, effective
June 1, 2020 (Form 8-K filed May 5, 2020)
1-9513
10.3 — CMS Energy’s Deferred Salary Savings Plan, as amended and
restated, effective January 1, 2019 (Form 10-K for the fiscal year
ended December 31, 2018)
1-9513
10.5 — CMS Energy and Consumers Directors’ Deferred Compensation
Plan, effective as of November 30, 2007 (Form 10-K for the
fiscal year ended December 31, 2014)
1-9513
10.6 — Supplemental Executive Retirement Plan for Employees of
CMS Energy/Consumers effective on January 1, 1982 and as
amended effective April 1, 2011 (Form 10-Q for the quarterly
period ended March 31, 2011)
1-9513
1-9513
1-9513
10.7 — Defined Contribution Supplemental Executive Retirement Plan,
as amended and restated, effective May 1, 2019 (Form 10-K for
the fiscal year ended December 31, 2018)
10.6 — Form of Officer Separation Agreement as of January 2020
(Form 10-K for the fiscal year ended December 31, 2019)
(10)(y) — Environmental Agreement dated as of June 1, 1990 made by
CMS Energy to The Connecticut National Bank and Others
(Form 10-K for the fiscal year ended December 31, 1990)
199
Table of Contents
Previously Filed
Exhibits
10.81,2
With File
Number
1-9513
10.92
1-5611
10.102
1-9513
As
Exhibit
Number
Description
(10)(a) — Form of Indemnification Agreement between CMS Energy and
its Directors, effective as of November 1, 2007 (Form 10-Q for
the quarterly period ended September 30, 2007)
(10)(b) — Form of Indemnification Agreement between Consumers and its
Directors, effective as of November 1, 2007 (Form 10-Q for the
quarterly period ended September 30, 2007)
10.10 — CMS Incentive Compensation Plan for CMS Energy and
Consumers Officers as amended, effective as of January 27, 2022
(Form 10-K for the fiscal year ended December 31, 2021)
10.112
10.122
10.131,2
10.141
1-9513
10.1 — 2016 Form of Change in Control Agreement (Form 8-K filed
June 23, 2016)
1-9513
10.12 — Annual Employee Incentive Compensation Plan for Consumers
as amended, effective as of January 27, 2022 (Form 10-K for the
fiscal year ended December 31, 2021)
— Annual NorthStar Clean Energy Employee Incentive
Compensation Plan as amended, effective as of August 22, 2022
1-9513
10.1 — $550 million Fifth Amended and Restated Revolving Credit
Agreement dated as of December 14, 2022 among CMS Energy,
the Banks, as defined therein, and Barclays Bank PLC, as Agent
(Form 8-K filed December 15, 2022)
10.15
1-5611
10.2 — $1.1 billion Sixth Amended and Restated Revolving Credit
10.16
1-5611
Agreement dated as of December 14, 2022 among Consumers,
the Banks, as defined therein, and JPMorgan Chase Bank, N.A.,
as Agent (Form 8-K filed December 15, 2022)
10.1 — $250 million Amended and Restated Revolving Credit
Agreement dated as of November 19, 2018 among Consumers,
the Banks, as defined therein, and The Bank of Nova Scotia, as
Agent (Form 8-K filed November 20, 2018)
10.16.a
10.16.b
1-5611
10.1 — Description of the Extension to the Amended and Restated
$250 million Secured Revolving Credit Agreement (Form 8-K
filed November 19, 2019)
1-5611
10.1 — Description of the Second Extension to the Amended and
Restated $250 million Secured Revolving Credit Agreement
(Form 8-K filed November 19, 2020)
10.16.c
1-5611
10.1 — Description of the Third Extension to the Amended and Restated
$250 million Secured Revolving Credit Agreement (Form 8-K
filed November 22, 2021)
10.16.d
1-5611
10.1 — First Amendment to the Amended and Restated $250 million
10.172
1-9513
10.1 — Consumers and other CMS Energy Companies Retired
Secured Revolving Credit Agreement (Form 8-K filed
November 29, 2022)
Executives Survivor Benefit Plan for Management/Executive
Employees, distributed July 1, 2011 (Form 10-Q for the quarterly
period ended September 30, 2011)
200
Table of Contents
Previously Filed
With File
Number
1-5611
As
Exhibit
Number
Description
10.1 — Form of Commercial Paper Dealer Agreement between
Consumers, as Issuer, and the Dealer party thereto (Form 10-Q
for the quarterly period ended September 30, 2014)
1-9513
10.1 — Agreement and Plan of Merger dated June 7, 2021 by and among
Exhibits
10.18
10.191
10.19.a1
1-9513
10.20
1-5611
CMS Energy, EnerBank, and Regions Bank (Form 8-K filed
June 8, 2021)
10.1 — Amendment No. 1 dated as of August 9, 2021 to the Agreement
and Plan of Merger, dated June 7, 2021, by and among
CMS Energy, EnerBank, and Regions Bank (Form 10-Q for the
quarterly period ended September 30, 2021)
10.1 — Purchase and Sale Agreement dated June 21, 2021 by and among
Consumers and New Covert Generating Company, LLC
(Form 8-K filed June 23, 2021)
10.21
10.22
1-5611
10.2 — Purchase and Sale Agreement dated June 21, 2021 by and among
Consumers and DIG, CMS Generation Michigan Power, and
CMS ERM (Form 8-K filed June 23, 2021)
1-5611
10.1 — $1 billion unsecured Term Loan Credit Agreement dated as of
July 22, 2022 among Consumers, the Banks defined therein, and
U.S. Bank National Association, as Agent (Form 10-Q for the
quarterly period ended June 30, 2022)
10.1 — Bond Purchase Agreement dated as of January 12, 2023 between
Consumers and each of the Purchasers named therein (Form 8-K
filed January 12, 2023)
— Subsidiaries of CMS Energy and Consumers
— Consent of PricewaterhouseCoopers LLP for CMS Energy
— Consent of PricewaterhouseCoopers LLP for Consumers
— CMS Energy’s certification of the CEO pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
— CMS Energy’s certification of the CFO pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
— Consumers’ certification of the CEO pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
— Consumers’ certification of the CFO pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
— CMS Energy’s certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
— Consumers’ certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
10.23
1-5611
21.1
23.1
23.2
31.1
31.2
31.3
31.4
32.1
32.2
99.11
333-249643
99.1 — CMS Energy Stock Purchase Plan, as amended and restated
October 23, 2020 (Form S-3ASR filed October 23, 2020)
101.INS
— Inline XBRL Instance Document
201
Table of Contents
Exhibits
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
Previously Filed
With File
Number
As
Exhibit
Number
Description
— Inline XBRL Taxonomy Extension Schema
— Inline XBRL Taxonomy Extension Calculation Linkbase
— Inline XBRL Taxonomy Extension Definition Linkbase
— Inline XBRL Taxonomy Extension Labels Linkbase
— Inline XBRL Taxonomy Extension Presentation Linkbase
— Cover Page Interactive Data File (the cover page XBRL tags are
embedded in the Inline XBRL document)
1
Obligations of CMS Energy or its subsidiaries, but not of Consumers.
2 Management contract or compensatory plan or arrangement.
Exhibits that have been previously filed with the SEC, designated above, are incorporated herein by
reference and made a part hereof.
Item 16. Form 10-K Summary
None.
202
Table of Contents
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, CMS Energy
Corporation has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto
duly authorized.
/s/ Garrick J. Rochow
Name: Garrick J. Rochow
Title: President and Chief Executive Officer
Date: February 9, 2023
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed
below by the following persons on behalf of CMS Energy Corporation and in the capacities indicated and
on February 9, 2023.
/s/ Garrick J. Rochow
Garrick J. Rochow
President, Chief Executive Officer, and Director
(Principal Executive Officer)
/s/ Rejji P. Hayes
Rejji P. Hayes
Executive Vice President and Chief Financial
Officer
(Principal Financial Officer)
/s/ Scott B. McIntosh
Scott B. McIntosh
Vice President, Controller, and Chief
Accounting Officer
(Controller)
/s/ William D. Harvey
William D. Harvey, Director
/s/ John G. Russell
John G. Russell, Director
/s/ Suzanne F. Shank
Suzanne F. Shank, Director
/s/ Myrna M. Soto
Myrna M. Soto, Director
/s/ John G. Sznewajs
John G. Sznewajs, Director
/s/ Jon E. Barfield
Jon E. Barfield, Director
/s/ Ronald J. Tanski
Ronald J. Tanski, Director
/s/ Deborah H. Butler
Deborah H. Butler, Director
/s/ Laura H. Wright
Laura H. Wright, Director
/s/ Kurt L. Darrow
Kurt L. Darrow, Director
203
Table of Contents
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Consumers
Energy Company has duly caused this Annual Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
/s/ Garrick J. Rochow
Name: Garrick J. Rochow
Title: President and Chief Executive Officer
Date: February 9, 2023
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed
below by the following persons on behalf of Consumers Energy Company and in the capacities indicated
and on February 9, 2023.
/s/ Garrick J. Rochow
Garrick J. Rochow
President, Chief Executive Officer, and Director
(Principal Executive Officer)
/s/ Rejji P. Hayes
Rejji P. Hayes
Executive Vice President and Chief Financial
Officer
(Principal Financial Officer)
/s/ Scott B. McIntosh
Scott B. McIntosh
Vice President, Controller, and Chief
Accounting Officer
(Controller)
/s/ William D. Harvey
William D. Harvey, Director
/s/ John G. Russell
John G. Russell, Director
/s/ Suzanne F. Shank
Suzanne F. Shank, Director
/s/ Myrna M. Soto
Myrna M. Soto, Director
/s/ John G. Sznewajs
John G. Sznewajs, Director
/s/ Jon E. Barfield
Jon E. Barfield, Director
/s/ Ronald J. Tanski
Ronald J. Tanski, Director
/s/ Deborah H. Butler
Deborah H. Butler, Director
/s/ Laura H. Wright
Laura H. Wright, Director
/s/ Kurt L. Darrow
Kurt L. Darrow, Director
204
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CMS Energy Corporation
Consumers Energy Company
One Energy Plaza
Jackson, MI 49201-2357