Company Quick10K Filing
Quick10K
CMS Energy
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$54.05 284 $15,340
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-02-20 Other Events, Exhibits
8-K 2019-01-31 Earnings, Regulation FD, Exhibits
8-K 2019-01-31 Regulation FD, Exhibits
8-K 2019-01-17 Officers, Exhibits
8-K 2018-12-28 Enter Agreement, Exhibits
8-K 2018-11-19 Enter Agreement, Leave Agreement, Exhibits
8-K 2018-10-25 Regulation FD, Exhibits
8-K 2018-10-25 Earnings, Regulation FD, Exhibits
8-K 2018-10-02 Other Events, Exhibits
8-K 2018-10-01 Off-BS Arrangement, Exhibits
8-K 2018-09-26 Other Events, Exhibits
8-K 2018-08-01 Other Events, Exhibits
8-K 2018-07-26 Regulation FD, Exhibits
8-K 2018-07-26 Earnings, Regulation FD, Exhibits
8-K 2018-06-05 Enter Agreement, Leave Agreement, Exhibits
8-K 2018-05-04 Shareholder Vote
8-K 2018-03-12 Other Events, Exhibits
8-K 2018-03-08 Other Events, Exhibits
MMM 3M 124,910
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WIX Wix.com 6,210
SYNH Syneos Health 5,030
NITE Nightstar Therapeutics 853
STML Stemline Therapeutics 610
EBTC Enterprise Bancorp 346
TA TravelCenters of America 168
IBKR Interactive Brokers Group 0
ECCO Ecco Auto World 0
CMS 2018-12-31
Part 201 of Michigan's Natural Resources and Environmental Protection Act of 1994, As Amended
Part I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
Part IV
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary
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EX-10.14 ex101412312018.htm
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CMS Energy Earnings 2018-12-31

CMS 10K Annual Report

Balance SheetIncome StatementCash Flow

10-K 1 consumersenergy10k12312018.htm 10-K Document

 
 
 
 
 
 
 
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, 2018
OR
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____to_____
 
 
 
 
 
 
 
Commission
 
Registrant; State of Incorporation;
 
IRS Employer
File Number
 
Address; and Telephone Number
 
Identification No.
1-9513
 
CMS ENERGY CORPORATION
 
38-2726431
 
 
(A Michigan Corporation)
 
 
 
 
One Energy Plaza, Jackson, Michigan 49201
 
 
 
 
(517) 788-0550
 
 
 
 
 
 
 
 
 
1-5611
 
CONSUMERS ENERGY COMPANY
 
38-0442310
 
 
(A Michigan Corporation)
 
 
 
 
One Energy Plaza, Jackson, Michigan 49201
 
 
 
 
(517) 788-0550
 
 
 
 
 
 
 
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
 
 
 
Name of Each Exchange
Registrant
 
Title of Class
 
 
on Which Registered
CMS Energy Corporation
Common Stock, $0.01 par value
 
 
New York Stock Exchange
Consumers Energy Company
Cumulative Preferred Stock, $100 par value: $4.50 Series
 
New York Stock Exchange
 
 
 
 
 
 
 
Securities registered pursuant to Section 12(g) of the Act: None
 
 
 
 
 
 
 
 
 
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 x  No o
 
Consumers Energy Company: Yes x  No o
 
 
 
 
 
 
 
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 o  No x
 
Consumers Energy Company: Yes o  No x
 
 
 
 
 
 
 
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: Yes x  No o
 
Consumers Energy Company: Yes x  No o
 
 
 
 
 
 
 
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: Yes x  No o
 
Consumers Energy Company: Yes x  No o
 
 
 
 
 
 
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
 
 
 
 
 
 
 
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 x
Large accelerated filer o
Non‑Accelerated filer o
Non‑Accelerated filer x
Accelerated filer o
Accelerated filer o
Smaller reporting company o
Smaller reporting company o
Emerging growth company o
Emerging growth company o
 
 
 
 
 
 
 
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: o
 
Consumers Energy Company: o
 
 
 
 
 
 
 
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 o  No x
 
Consumers Energy Company: Yes o  No x
 
 
 
 
 
 
 
The aggregate market value of CMS Energy voting and non‑voting common equity held by non‑affiliates was $13.332 billion for the 281,980,308 CMS Energy Common Stock shares outstanding on June 30, 2018 based on the closing sale price of $47.28 for CMS Energy 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, 2018.
There were 283,400,105 shares of CMS Energy Common Stock outstanding on January 14, 2019, including 20,316 shares owned by Consumers. On January 14, 2019, 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 2019 Annual Meetings of Shareholders to be held May 3, 2019.







CMS Energy Corporation
Consumers Energy Company
Annual Reports on Form 10-K to the Securities and Exchange Commission for the Year Ended December 31, 2018
Table of Contents


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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, which became effective in April 2017
ABATE
The 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
ASC 740
Financial Accounting Standards Board Accounting Standards Codification Topic 740, Income Taxes
ASU
Financial Accounting Standards Board Accounting Standards Update
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
Cantera Gas Company
Cantera Gas Company LLC, a non‑affiliated company, formerly known as CMS Field Services
Cantera Natural Gas, Inc.
Cantera Natural Gas, Inc., a non‑affiliated company that purchased CMS Field Services
CAO
Chief Accounting Officer
CCR
Coal combustion residual
CEO
Chief Executive Officer


3


CERCLA
The 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 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 and CMS Enterprises
CMS Enterprises
CMS Enterprises Company, a wholly owned subsidiary of CMS Energy
CMS ERM
CMS Energy Resource Management Company, formerly known as CMS MST, a wholly owned subsidiary of CMS Enterprises
CMS Field Services
CMS Field Services, Inc., a former wholly owned subsidiary of CMS Gas Transmission
CMS Gas Transmission
CMS Gas Transmission Company, a wholly owned subsidiary of CMS Enterprises
CMS Land
CMS Land Company, a wholly owned subsidiary of CMS Capital
CMS MST
CMS Marketing, Services and Trading Company, a wholly owned subsidiary of CMS Enterprises, whose name was changed to CMS ERM in 2004
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


4


Craven
Craven County Wood Energy Limited Partnership, a variable interest entity in which HYDRA-CO Enterprises, Inc., a wholly owned subsidiary of CMS Enterprises, has a 50-percent interest
CSAPR
The 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
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 CMS Energy
Dodd-Frank Act
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
DTE Electric
DTE Electric Company, a non‑affiliated company
EBITDA
Earnings before interest, taxes, depreciation, and amortization
EnerBank
EnerBank USA, a wholly owned subsidiary of CMS Capital
energy waste reduction
The reduction of energy consumption through energy efficiency and demand-side energy conservation, as established under the 2016 Energy Law
Entergy
Entergy Corporation, a non‑affiliated company


5


EPA
U.S. Environmental Protection Agency
EPS
Earnings per share
Exchange Act
Securities Exchange Act of 1934
FDIC
Federal Deposit Insurance Corporation
FERC
The Federal Energy Regulatory Commission
First Mortgage Bond Indenture
The indenture dated as of September 1, 1945 between Consumers and The Bank of New York Mellon, as Trustee, as amended and supplemented
FLI Liquidating Trust
Trust formed in Missouri bankruptcy court to accomplish the liquidation of Farmland Industries, Inc., a non‑affiliated entity
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 variable interest entity in which HYDRA-CO Enterprises, Inc., a wholly owned subsidiary of CMS Enterprises, has a 50-percent interest
Grayling
Grayling Generating Station Limited Partnership, a variable interest entity in which HYDRA-CO Enterprises, Inc., a wholly owned subsidiary of CMS Enterprises, has a 50-percent interest
GWh
Gigawatt-hour, a unit of energy equal to one billion watt-hours
Internal Revenue Code
Internal Revenue Code of 1986, as amended
IRP
Integrated resource plan


6


IRS
Internal Revenue Service
kV
Thousand volts, a unit used to measure the difference in electrical pressure along a current
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
The 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
mcf
Thousand cubic feet
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
MCV PPA
PPA between Consumers and the MCV Partnership
MDEQ
Michigan Department of Environmental Quality
METC
Michigan Electric Transmission Company, LLC, a non‑affiliated company
MGP
Manufactured gas plant
Michigan Mercury Rule
Michigan Air Pollution Control Rules of 2009, as amended: Part 15, Emission Limitations and Prohibitions — Mercury
MISO
Midcontinent Independent System Operator, Inc.


7


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
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
The 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
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
NSR
New Source Review, a construction-permitting program under the Clean Air Act
OPEB
Other Post-Employment Benefits
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
Palisades
Palisades nuclear power plant, sold by Consumers to Entergy in 2007
PBO
Projected benefit obligation


8


PCB
Polychlorinated biphenyl
PHMSA
The U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration
PISP
Performance Incentive Stock Plan
PPA
Power purchase agreement
PSCR
Power supply cost recovery
PURPA
The Public Utility Regulatory Policies Act of 1978
RCRA
The Federal Resource Conservation and Recovery Act of 1976
REC
Renewable energy credit
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
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
Smart Energy
Consumers’ Smart Energy grid modernization project, which includes the installation of smart meters that transmit and receive data, a two-way communications network, and modifications to Consumers’ existing information technology system to manage the data and enable changes to key business processes
TCJA
Tax Cuts and Jobs Act of 2017
T.E.S. Filer City
T.E.S. Filer City Station Limited Partnership, a variable interest entity in which HYDRA-CO Enterprises, Inc., a wholly owned subsidiary of CMS Enterprises, has a 50-percent interest


9


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


10


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. None of CMS Energy, CMS Enterprises, nor any of CMS Energy’s other subsidiaries (other than Consumers) has any obligation in respect of Consumers’ debt securities and holders of such debt securities should not consider the financial resources or results of operations of CMS Energy, CMS Enterprises, 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. Similarly, neither Consumers nor any other subsidiary of CMS Energy has any obligation in respect of debt 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 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, effects of a failure to receive timely regulatory orders affecting Consumers that are or could come before the MPSC, FERC, or other governmental authorities, effects of a government shutdown, or effects of a lack of a quorum of a regulatory body
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
the adoption of federal or state laws or regulations 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 and ROA, infrastructure integrity or security, 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, potential effects of 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


11


factors affecting operations, such as costs and availability of personnel, equipment, and materials; weather conditions; natural disasters; catastrophic weather-related damage; scheduled or unscheduled equipment outages; maintenance or repairs; environmental incidents; failures of equipment or materials; electric transmission and distribution or gas pipeline system constraints; and changes in trade policies or regulations
increases in demand for renewable energy by customers seeking to meet sustainability goals
the ability of Consumers to execute its 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 the MDEQ, EPA, and/or U.S. Army Corps of Engineers, and potential environmental remediation costs associated with these interpretations or decisions, including those that may affect Bay Harbor or Consumers’ routine maintenance, repair, and replacement classification under NSR regulations
changes in energy markets, including availability and price 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, 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 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
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 distributed generation, or energy waste reduction
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 and transmission of electricity, including periodic re‑examination by federal regulators of CMS Energy’s and Consumers’ market-based sales authorizations


12


the impact of credit markets, economic conditions, increased competition, and any new banking and consumer protection regulations on EnerBank
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 and gas and electric transmission and 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, 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, cyber incidents, 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
potential costs, lost revenues, or other consequences resulting from misappropriation of assets or sensitive information, corruption of data, or operational disruption in connection with a cyber attack 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


13


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
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 3, Regulatory Matters and Note 4, Contingencies and Commitments.


14


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 CMS Enterprises, 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. CMS Enterprises, 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 enterprises, 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 $6.9 billion in 2018, $6.6 billion in 2017, and $6.4 billion in 2016.
For further information about operating revenue, income, and assets and liabilities attributable to all of CMS Energy’s business segments and operations, see Item 6. Selected Financial Data and 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, transmission, 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 $6.5 billion in 2018, $6.2 billion in 2017, and $6.1 billion in 2016. For further information about operating revenue, income, and assets and liabilities attributable to Consumers’ electric and gas utility operations, see Item 6. Selected Financial Data and 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 and gas mains are located below or adjacent to public roads or on land owned by others and are accessed by Consumers through easements 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 SegmentsConsumers Electric Utility—Electric Utility Properties and Business Segments—Consumers Gas Utility—Gas Utility Properties.


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In 2018, Consumers served 1.8 million electric customers and 1.8 million gas customers in Michigan’s Lower Peninsula. Presented in the following map are Consumers’ service territories:
cms1a03.jpg
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Electric Service Territory
 
 
 
 
 
Gas Service Territory
 
 
 
 
 
Combination Electric and
Gas Service Territory
 
 
 
 
 
 
Electric Generation Facilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CMS Energy and ConsumersThe 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, transmission, distribution, and sale of electricity, generated operating revenue of $4.6 billion in 2018, $4.4 billion in 2017, and $4.4 billion in 2016. 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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Presented in the following illustration is Consumers’ 2018 electric utility operating revenue of $4.6 billion by customer class:
chart-81dd95ee9e4533cf3cea04.jpg
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 2018, Consumers’ electric deliveries were 38 billion kWh, which included ROA deliveries of four billion kWh, resulting in net bundled sales of 34 billion kWh. In 2017, Consumers’ electric deliveries were 37 billion kWh, which included ROA deliveries of three billion kWh, resulting in net bundled sales of 34 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.


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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 2018 and 2017:
chart-03817bce5d81d74586ca04.jpg
Consumers’ 2018 summer peak demand was 8,084 MW, which included ROA demand of 516 MW. For the 2017-2018 winter season, Consumers’ peak demand was 5,863 MW, which included ROA demand of 463 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 2019.
Electric Utility Properties: Consumers owns and operates electric generation, transmission, 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’ transmission and distribution systems consist of:
214 miles of transmission overhead lines operating at 138 kV
195 miles of high-voltage distribution overhead lines operating at 138 kV
4 miles of high-voltage distribution underground lines operating at 138 kV
4,435 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
56,152 miles of electric distribution overhead lines
10,817 miles of underground distribution lines
substations with an aggregate transformer capacity of 26 million kVA
a battery facility with storage capacity of 1 MW
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.


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Electric Utility Generation and Supply Mix: Presented in the following table are details about Consumers’ 2018 electric generation and supply mix:
 
 
2018

 
2018

 
 
Number of Units and Year Entered Service
Generation
Capacity

1 
Electric
Supply

 
Name and Location (Michigan)
(MW)

 
(GWh)

 
Coal steam generation
 
 
 
 
 
J.H. Campbell 1 & 2 – West Olive
2 Units, 1962-1967
608

 
2,535

 
J.H. Campbell 3 – West Olive2
1 Unit, 1980
782

 
4,911

 
D.E. Karn 1 & 2 – Essexville
2 Units, 1959-1961
515

 
2,358

 
 
 
1,905

 
9,804

 
Oil/Gas steam generation
 
 
 
 
 
D.E. Karn 3 & 4 – Essexville
2 Units, 1975-1977
1,203

 
43

 
Hydroelectric
 
 
 
 
 
Ludington – Ludington
6 Units, 1973
1,097

3 
(325
)
4 
Conventional hydro generation – various locations
35 Units, 1906-1949
77

 
445

 
 
 
1,174

 
120

 
Gas combined cycle
 
 
 
 
 
Jackson – Jackson
1 Unit, 2002
543

 
2,075

 
Zeeland – Zeeland
3 Units, 2002
526

 
2,797

 
 
 
1,069

 
4,872

 
Gas/Oil combustion turbine
 
 
 
 
 
Zeeland (simple cycle) – Zeeland
2 Units, 2001
315

 
360

 
Various plants – various locations5
8 Units, 1966-1971

 
2

 
 
 
315

 
362

 
Wind generation
 
 
 
 
 
Cross Winds® Energy Park – Tuscola County
81 Turbines,
2014 and 2018
22

 
493

 
Lake Winds® Energy Park – Mason County
56 Turbines, 2012
14

 
243

 
 
 
36

 
736

 
Solar generation
 
 
 
 
 
Solar Gardens – Allendale and Kalamazoo
15,100 Panels, 2016
2

 
6

 
Total owned generation
 
5,704

 
15,943

 
Purchased power6
 
 
 
 
 
Coal generation – primarily T.E.S. Filer City
 
60

 
511

 
Gas generation – MCV Facility7
 
1,240

 
5,530

 
Other gas generation – various locations
 
173

 
1,182

 
Nuclear generation – Palisades7
 
791

 
6,749

 
Wind generation – various locations
 
62

 
1,056

 
Other renewable generation – various locations
 
231

 
1,323

 
 
 
2,557

 
16,351

 
Net interchange power8
 

 
4,953

 
Total purchased and interchange power
 
2,557

 
21,304

 
Total supply
 
8,261

 
37,247

 
Less generation and transmission use/loss
 
 
 
2,794

 
Total net bundled sales
 
 
 
34,453

 
1 
Represents generation capacity during the summer months. For wind and solar generation, the amount represents the effective load-carrying capability.


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2 
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.
3 
Represents Consumers’ 51-percent share of the capacity of Ludington. DTE Electric holds the remaining 49-percent ownership interest.
4 
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.
5 
Consumers retired these gas/oil combustion turbine generating units in 2018.
6 
Represents purchases under long-term PPAs.  
7 
For information about Consumers’ long-term PPAs related to the MCV Facility and Palisades, see Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 4, Contingencies and Commitments—Contractual Commitments.
8 
Represents purchases from the MISO energy market.  
Consumers’ generation capacity is a measure of the maximum electric output that Consumers has available to meet peak load requirements. As shown in the following illustration, Consumers’ 2018 generation capacity of 8,261 MW, including purchased capacity of 2,557 MW, relied on a variety of fuel sources:
chart-49673d2bb04f97ed90fa04.jpg


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Presented in the following table are the sources of Consumers’ electric supply for the last three years:
GWh
 
Years Ended December 31
2018

2017

2016

Owned generation
 
 
 
Coal
9,804

10,098

9,739

Gas
5,272

5,190

6,194

Renewable energy
1,187

1,078

1,083

Oil
5

12

8

Net pumped storage1
(325
)
(290
)
(316
)
Total owned generation
15,943

16,088

16,708

Purchased power2
 
 
 
Gas generation
6,712

5,521

6,139

Nuclear generation
6,749

6,780

6,927

Renewable energy generation
2,379

2,288

2,229

Coal generation
511

491

512

Net interchange power3
4,953

4,384

3,688

Total purchased and interchange power
21,304

19,464

19,495

Total supply
37,247

35,552

36,203

1 
Represents Consumers’ share of net pumped-storage generation. During 2018, the pumped-storage facility consumed 1,132 GWh of electricity to pump water during off-peak hours for storage in order to generate 807 GWh of electricity later during peak-demand hours.
2 
Represents purchases under long-term PPAs.
3 
Represents purchases from the MISO energy market.
During 2018, Consumers acquired 57 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 to meet its customers’ needs during peak demand periods.
At December 31, 2018, Consumers had unrecognized future commitments (amounts for which, in accordance with GAAP, liabilities have not been recorded on its balance sheet) 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 2019 through 2036 are estimated to total $10.0 billion and, for each of the next five years, range from $0.6 billion to $1.1 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—Contractual Obligations and Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 4, Contingencies and Commitments—Contractual Commitments.
During 2018, 26 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 9,804 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, 2018, Consumers had unrecognized future commitments to purchase coal through December 2021; payment obligations under these contracts totaled $121 million. Most of Consumers’ rail-supplied coal contracts have fixed prices, although some contain market-based pricing. Consumers’ vessel-supplied coal contracts have fixed base prices that are adjusted monthly to reflect changes to the fuel cost of vessel transportation. At December 31, 2018, Consumers had 92 percent of its 2019 expected coal requirements under contract, as well as a 36-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 and vessel services for delivery of purchased coal to Consumers’ generating facilities. Consumers’ coal transportation contracts are unrecognized future commitments and expire on various dates through December 2024; payment obligations under these contracts totaled $523 million at December 31, 2018.
During 2018, 14 percent of the energy Consumers provided to customers was generated by its natural gas‑fueled generating units, which burned 39 bcf of natural gas and produced a combined total of 5,272 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 units 3 and 4 of D.E. Karn and 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.
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, with certain exceptions, of Consumers’ weather-normalized retail sales of the preceding calendar year. At December 31, 2018, electric deliveries under the ROA program were at the ten-percent limit. Of Consumers’ 1.8 million electric customers, 287 customers, 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
providing competitive rate-design options, particularly for large energy-intensive customers
offering tariff-based incentives that support economic development
providing non‑energy services and value to customers
monitoring activity in adjacent geographical areas


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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 $1.9 billion in 2018, $1.8 billion in 2017, and $1.7 billion in 2016. 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’ 2018 gas utility operating revenue of $1.9 billion by customer class:
chart-9bff18784f10a36c059a04.jpg
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 2018, deliveries of natural gas through Consumers’ pipeline and distribution network, including off-system transportation deliveries, totaled 386 bcf, which included GCC deliveries of 44 bcf. In 2017, deliveries of natural gas through Consumers’ pipeline and distribution network, including off-system transportation deliveries, totaled 352 bcf, which included GCC deliveries of 42 bcf. Consumers’ gas utility operations are seasonal. The consumption of natural gas typically 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 2018, 41 percent of the natural gas supplied to all customers during the winter months was supplied from storage.


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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 2018 and 2017:
chart-7c727f1daed4dc8c3a9a04.jpg
Gas Utility Properties: Consumers’ gas transmission, storage, and distribution system consists of:
1,666 miles of transmission lines
15 gas storage fields with a total storage capacity of 309 bcf and a working gas volume of 151 bcf
28,404 miles of distribution mains
eight compressor stations with a total of 171,129 installed and available horsepower


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Gas Utility Supply: In 2018, Consumers purchased 82 percent of the gas it delivered from U.S. producers. The remaining 18 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 2018:
chart-6a0a17008981acd886ea04.jpg
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 2023 and provide for the delivery of 39 percent of Consumers’ total gas supply requirements in 2019. 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 from alternative fuels and energy sources, such as propane, oil, and electricity.
Enterprises Segment—Non-Utility Operations and Investments
CMS Energy’s enterprises segment, 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. The enterprises segment’s operating revenue was $252 million in 2018, $229 million in 2017, and $215 million in 2016.


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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, 2018:
 
Ownership Interest
 
Gross Capacity1 

2018 Net Generation

Location
(%)
Primary Fuel Type
(MW)

(GWh)

Dearborn, Michigan
100
Natural gas
770

4,855

Gaylord, Michigan
100
Natural gas
156

4

Paulding County, Ohio2
100
Wind
105

94

Comstock, Michigan
100
Natural gas
76

10

Delta Township, Michigan3
100
Solar
24

14

Phillips, Wisconsin
100
Solar
3

4

Filer City, Michigan
50
Coal
73

506

New Bern, North Carolina
50
Wood waste
50

301

Flint, Michigan
50
Wood waste
40

78

Grayling, Michigan
50
Wood waste
38

176

Total
 
 
1,335

6,042

1 
Represents the intended full-load sustained output of each plant. The amount of capacity relating to CMS Energy’s ownership interest was 1,234 MW at December 31, 2018.
2 
Began operation in September 2018.
3 
Represents two solar generation projects that began operation in June 2018 and August 2018.
The operating revenue from independent power production was $19 million in 2018, $16 million in 2017, and $16 million in 2016.
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 2018, CMS ERM marketed five bcf of natural gas and 5,896 GWh of electricity. Electricity marketed by CMS ERM was generated by independent power production of the enterprises segment and by unrelated third parties. CMS ERM’s operating revenue was $233 million in 2018, $213 million in 2017, and $199 million in 2016.
Enterprises Segment Competition: The enterprises segment competes with other independent power producers. The needs of this market are driven by electric demand and the generation available.
Other Businesses
EnerBank: EnerBank is a Utah state-chartered, FDIC-insured industrial bank providing primarily unsecured consumer installment loans for financing home improvements. EnerBank’s operating revenue was $157 million in 2018, $132 million in 2017, and $120 million in 2016.


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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.
FERC and NERC
FERC has exercised limited jurisdiction over several independent power plants and exempt wholesale generators in which CMS Enterprises 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, 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 3, Regulatory Matters.
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.
EnerBank is regulated by the Utah Department of Financial Institutions and the FDIC.


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Energy Legislation
Consumers is subject to various rulemaking matters, including the 2016 Energy Law. Among other things, the 2016 Energy Law:
raised the renewable energy standard from the present ten-percent requirement to 12.5 percent in 2019 and 15 percent in 2021
established a goal of 35 percent combined renewable energy and energy waste reduction by 2025
authorized incentives for demand response programs and expanded existing incentives for energy efficiency programs, referring to the combined initiatives as energy waste reduction programs
authorized incentives for new PPAs with non‑affiliates
established an integrated planning process for new generation resources
shortened from 12 months to ten months the time by which the MPSC must issue a final order in general rate cases, but prohibited electric and gas utilities from filing general rate cases for increases in rates more often than once every 12 months
eliminated utilities’ self-implementation of rates in general rate cases filed after the effective date of the 2016 Energy Law
required the MPSC to implement equitable cost-of-service rates for customers participating in a net metering program
The 2016 Energy Law also 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. 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, with certain exceptions, of Consumers’ weather-normalized retail sales of the preceding calendar year. 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.
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. CMS Energy and Consumers continue to focus on opportunities to reduce their carbon footprint in electric generation. In 2016, Consumers retired 33 percent of its owned coal-fueled generating capacity; this has resulted in a 38‑percent decrease in Consumers’ self-generated electric supply from coal-fueled facilities since 2015.
During 2018, Consumers provided 10 percent of its electricity (self-generated and purchased) from renewable sources. Consumers owns and operates two wind farms: Lake Winds® Energy Park and Cross Winds® Energy Park. Presently, Consumers is expanding its Cross Winds® Energy Park; an additional phase began operations in January 2018 and a third phase is under construction, with operations expected to begin in 2020. Consumers expects to begin construction, subject to MPSC approval, of another wind project in Gratiot County, Michigan in 2019, with operations expected to begin in 2020.
Additionally, CMS Energy, through its enterprises businesses, completed the development and construction of two solar generation projects in Michigan and purchased a wind generation project in northwest Ohio; all of these projects became operational during 2018. For additional information on stewardship goals, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Executive Overview.


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CMS Energy, Consumers, and their subsidiaries are subject to various federal, state, and local environmental regulations for air and water quality, solid waste management, 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 FactorsItem 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 4, Contingencies and Commitments.
CMS Energy has recorded a $46 million liability for its subsidiaries’ obligations associated with Bay Harbor and Consumers has recorded a $73 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 4, Contingencies and Commitments.
Solid Waste Disposal: Costs related to the construction, operation, and closure of solid waste disposal facilities for coal ash are significant. Consumers’ solid waste disposal areas are regulated under Michigan’s solid waste rules and by the EPA’s rules regulating CCRs, such as coal ash. In order 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 MDEQ inspections. Consumers’ estimate of capital and cost of removal expenditures to comply with regulations relating to ash disposal is $188 million from 2019 through 2023.
Water: Consumers uses substantial amounts of water to operate and cool its electric generating plants. Water discharge quality is regulated and administered by the MDEQ under the federal NPDES program. To comply with such regulation, Consumers’ facilities have discharge monitoring programs. The EPA issued final regulations for wastewater discharges from electric generating plants in 2015 and amended them in September 2017. Consumers’ estimate of capital expenditures to comply with these regulations as presently promulgated is $56 million from 2019 through 2023.
In 2014, the EPA finalized its cooling water intake rule, which requires Consumers to evaluate the biological impact of its cooling water intake systems and ensure that it is using the best technology available to minimize adverse environmental impacts. Consumers’ preliminary estimate of capital expenditures to comply with these regulations is $42 million from 2019 through 2023.
Air: Consumers is subject to federal and state environmental regulations that require extensive reductions in nitrogen oxides, sulfur dioxides, particulate matter, and mercury emissions. To comply with these regulations, Consumers has invested in emissions control equipment at its electric generating plants. Consumers’ estimate of additional capital expenditures to comply with these regulations is $3 million from 2019 through 2023.
Consumers’ future costs to comply with solid waste disposal, water, and air environmental regulations may vary depending on future legislation, litigation, or rulemaking.
For further information concerning estimated capital expenditures related to solid waste disposal, water, and air, 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.


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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.
Employees
Presented in the following table are the number of employees of CMS Energy and Consumers:
December 31
2018

2017

2016

CMS Energy, including Consumers1
 
 
 
Full-time employees
7,957

7,822

7,699

Seasonal employees2
603

74

52

Part-time employees
65

56

49

Total employees
8,625

7,952

7,800

Consumers1
 
 
 
Full-time employees
7,504

7,408

7,301

Seasonal employees2
603

74

52

Part-time employees
14

14

13

Total employees
8,121

7,496

7,366

1 
For information about CMS Energy’s and Consumers’ collective bargaining agreements, see Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 12, Retirement Benefits.
2 
Consumers’ seasonal workforce peaked at 614 employees during 2018, 598 employees during 2017, and 522 employees during 2016. Seasonal employees work primarily during the construction season and are subject to yearly layoffs. Typically, yearly layoffs occur in December; that did not happen in 2018.


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CMS Energy 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 1, 2019:
Name, Age, Position(s)
Period
Patricia K. Poppe (age 50)
 
CMS Energy
 
President and CEO
7/2016 – Present
Director
5/2016 – Present
Senior Vice President
3/2015 – 7/2016
Consumers
 
President and CEO
7/2016 – Present
Director
5/2016 – Present
Senior Vice President
3/2015 – 7/2016
Vice President
1/2011 – 3/2015
CMS Enterprises
 
Chairman of the Board, CEO, and Director
7/2016 – Present
President
7/2016 – 9/2017
Rejji P. Hayes (age 44)1
 
CMS Energy
 
Executive Vice President and CFO
5/2017 – Present
Consumers
 
Executive Vice President and CFO
5/2017 – Present
CMS Enterprises
 
Executive Vice President, CFO, and Director
5/2017 – Present
Jean-Francois Brossoit (age 51)2
 
CMS Energy
 
Senior Vice President
4/2017 – Present
Vice President
11/2016 – 4/2017
Consumers
 
Senior Vice President
4/2017 – Present
Vice President
11/2016 – 4/2017
Catherine A. Hendrian (age 50)
 
CMS Energy
 
Senior Vice President
4/2017 – Present
Vice President
3/2015 – 4/2017
Director of Human Resources
10/2012 – 3/2015
Consumers
 
Senior Vice President
4/2017 – Present
Vice President
3/2015 – 4/2017
Director of Human Resources
10/2012 – 3/2015


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Name, Age, Position(s)
Period
Brandon J. Hofmeister (age 42)
 
CMS Energy
 
Senior Vice President
7/2017 – Present
Consumers
 
Senior Vice President
7/2017 – Present
Vice President
7/2016 – 7/2017
Executive Director, Policy Research, Analysis, and Public Affairs
6/2015 – 7/2016
Executive Director, Policy Research and Analysis
9/2013 – 6/2015
CMS Enterprises
 
Senior Vice President
9/2017 – Present
Venkat Dhenuvakonda Rao (age 48)
 
CMS Energy
 
Senior Vice President
9/2016 – Present
Vice President
7/2012 – 9/2016
Consumers
 
Senior Vice President
9/2016 – Present
Vice President
7/2012 – 9/2016
CMS Enterprises
 
Director
11/2017 – Present
Senior Vice President
9/2016 – Present
Vice President
7/2012 – 9/2016
Catherine M. Reynolds (age 61)
 
CMS Energy
 
Senior Vice President and General Counsel
10/2013 – Present
Consumers
 
Senior Vice President and General Counsel
10/2013 – Present
CMS Enterprises
 
Director
1/2014 – Present
Senior Vice President and General Counsel
1/2014 - 10/2018
Vice President and Secretary
9/2006 – 1/2014
Brian F. Rich (age 44)3
 
CMS Energy
 
Senior Vice President and Chief Information Officer
7/2016 – Present
Vice President and Chief Information Officer
7/2014 – 7/2016
Consumers
 
Senior Vice President and Chief Information Officer
7/2016 – Present
Vice President and Chief Information Officer
7/2014 – 7/2016
Garrick J. Rochow (age 44)
 
CMS Energy
 
Senior Vice President
7/2016 – Present
Vice President
3/2015 – 7/2016
Consumers
 
Senior Vice President
7/2016 – Present
Vice President
10/2010 – 7/2016


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Name, Age, Position(s)
Period
Glenn P. Barba (age 53)
 
CMS Energy
 
Vice President, Controller, and CAO
2/2003 – Present
Consumers
 
Vice President, Controller, and CAO
1/2003 – Present
CMS Enterprises
 
Vice President, Controller, and CAO
11/2007 – Present
1 
Prior to joining CMS Energy and Consumers, Mr. Hayes was executive vice president and CFO for ITC Holdings Corp., a non‑affiliated company, from May 2014 through November 2016. Mr. Hayes started with ITC Holdings Corp. in 2012 as vice president of finance and treasurer.
2 
Prior to joining CMS Energy and Consumers, Mr. Brossoit was vice president of manufacturing operations for United Technologies Corp., a non‑affiliated company. Mr. Brossoit started with United Technologies Corp. in 2006.
3 
Prior to joining CMS Energy and Consumers, Mr. Rich was vice president of business technology for Pacific Gas and Electric Company, a non‑affiliated company. Mr. Rich started with Pacific Gas and Electric Company in 2010.
There are no family relationships among executive officers and directors of CMS Energy or Consumers. The list of directors and their biographies are included in CMS Energy’s and Consumers’ definitive proxy statement for their 2019 Annual Meetings of Shareholders to be held May 3, 2019. The term of office of each of the executive officers extends to the first meeting of the Board of Directors of CMS Energy and Consumers after the next annual election of Directors of CMS Energy and Consumers (to be held on May 3, 2019).
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. 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, Boards of Directors, EnerBank, 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
Actual results in future periods for CMS Energy and Consumers could differ materially from historical results and the forward-looking statements contained in this report. Factors that might cause or contribute to these differences include those discussed in the following sections. CMS Energy’s and Consumers’ businesses are influenced by many factors that are difficult to predict, that involve uncertainties that may materially affect results, and that are often beyond their control. 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. All of these risk factors are potentially significant.
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, which could have a material adverse effect on CMS Energy’s liquidity and financial condition.
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. If CMS Energy were unable to generate sufficient cash flows from operations, it could be required 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 may be subject to liquidity demands under commercial commitments, guarantees, indemnities, letters of credit, and other contingent liabilities. Consumers’ capital requirements are expected to be substantial over the next several years as it decommissions older facilities and invests in electric grid modernization technology, construction or acquisition of power generation, environmental controls, conversions and expansions, and other electric and gas infrastructure to upgrade delivery systems. Those requirements may increase if additional laws or regulations are adopted or implemented.
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 if sufficient internal funds are not available from Consumers’ operations and, in the case of CMS Energy, from dividends paid by Consumers and its other subsidiaries. CMS Energy and Consumers also use letters of credit issued under certain of their revolving credit facilities to support certain operations and investments.
Disruptions in the capital and credit markets as a result of uncertainty, changing or increased regulation, or failures of significant financial institutions could adversely affect CMS Energy’s and Consumers’ access to liquidity needed for their businesses. Consumers’ inability to obtain prior FERC authorization for any securities issuances, including publicly offered debt, as is required under the Federal Power Act, could adversely affect Consumers’ access to liquidity. Any liquidity disruption could require CMS Energy and Consumers to take measures to conserve cash. These measures could include, but are not limited to, deferring capital expenditures, changing CMS Energy’s and Consumers’ commodity purchasing strategy to avoid collateral-posting requirements, and reducing or eliminating future share repurchases, dividend payments, or other discretionary uses of cash.
CMS Energy continues to explore financing opportunities to supplement its financial strategy. These potential opportunities include refinancing and/or issuing new debt, preferred stock and/or common equity, commercial paper, and bank financing. Similarly, Consumers may seek funds through the capital markets, commercial lenders, and leasing arrangements. 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 cannot guarantee the capital markets’ acceptance of their securities or predict the impact of factors beyond their control, such as actions of rating agencies.
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 its cost of borrowing, and could cause CMS Energy or Consumers to reduce capital expenditures. If it 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. CMS Energy and Consumers cannot guarantee that any of their present ratings will remain in effect for any given period of time or that a rating will not be lowered or withdrawn entirely by a rating agency.
If CMS Energy or Consumers were unable to obtain bank financing or access the capital markets to incur or refinance indebtedness, or were unable to obtain commercially reasonable terms for any financing, this could have a material adverse effect on its liquidity, financial condition, and results of operations.


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There are risks associated with Consumers’ substantial capital investment program planned for the next five years.
Consumers’ planned investments include the construction or acquisition of power generation, electric and gas infrastructure, conversions and expansions, environmental controls, electric grid modernization 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
changes in commodity and other prices
governmental approvals and permitting
operational performance
changes in environmental, legislative, and regulatory requirements
regulatory cost recovery
It is possible that adverse events associated with these factors could have a material adverse effect on Consumers’ liquidity, financial condition, and results of operations.
Changes to ROA could have a material adverse effect on CMS Energy’s and Consumers’ businesses.
The 2016 Energy 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, with certain exceptions, of Consumers’ weather-normalized retail sales of the preceding calendar year. Lower natural gas prices due to a large supply of natural gas on the market and continued growth of renewable energy resources, coupled with low capacity prices in the electric supply market, are placing increasing competitive pressure on the cost of Consumers’ electric supply. Presently, Consumers’ electric rates are above the Midwest average, while the ROA level on Consumers’ system is at the ten-percent limit and the proportion of Consumers’ electric deliveries under the ROA program and on the ROA waiting list is 26 percent. If the ROA limit were increased or if electric generation service in Michigan were deregulated, it could have a material adverse effect on Consumers’ financial results and operations.
CMS Energy and Consumers are subject to rate regulation, which could have an 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. Regulators seeking to avoid or minimize rate increases could resist raising customer rates sufficiently to permit Consumers to recover the full cost of these investments. In addition, because there are statutory requirements mandating that regulators allow Consumers to recover from customers certain costs, such as resource additions to meet Michigan’s renewable resource standard, energy waste reduction, and environmental compliance, regulators could be more inclined to oppose rate increases for other requested items and investments. Rate regulators could also face pressure to avoid or limit rate increases for a number of reasons, including an economic downturn in the state or diminishment of Consumers’ customer base. Additionally, future orders of the MPSC related to Consumers’ remeasurement of its deferred income taxes as a result of the TCJA could require accelerated customer refunds. In addition to its potential effects on Consumers’ investment program, any limitation of cost


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recovery through rates or any acceleration of customer refunds could have a material adverse effect on Consumers’ liquidity, financial condition, and results of operations.
Orders of the MPSC could limit recovery of costs of providing service including, but not limited to, environmental and safety related expenditures for coal-fueled plants and other utility properties, regulatory assets, power supply and natural gas supply costs, operating and maintenance expenses, additional utility-based investments, sunk investment in mothballed or retired generating plants, costs associated with the proposed retirement and decommissioning of facilities, depreciation expense, MISO energy and transmission costs, costs associated with energy waste reduction investments and state or federally mandated renewable resource standards, or expenditures subject to tracking mechanisms. 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, could prevent or curtail the implementation of a gas revenue mechanism, or could require Consumers to refund previously self-implemented rates.
FERC authorizes certain subsidiaries of CMS Energy to sell 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 are also set by FERC. FERC orders related to transmission costs could have a material adverse effect on Consumers’ liquidity, financial condition, and results of operations.
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’s and Consumers’ liquidity, financial condition, investment plans, and results of operations.
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. CMS Energy and Consumers believe that they comply with applicable laws and regulations. If it were determined that they failed to comply, CMS Energy or Consumers 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. Adoption of new laws, rules, regulations, principles, or practices by federal or state agencies, or challenges or changes to present laws, rules, regulations, principles, or practices and the interpretation of any adoption or change, could have a material adverse effect on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. Furthermore, any state or federal legislation concerning CMS Energy’s or Consumers’ operations could have a similar effect.
Utility regulation could be impacted by various matters, such as electric industry restructuring, hydro relicensing, asset reclassification, gas pipeline capacity and gas storage, new generation facilities or investments, transmission charges, environmental controls, climate change, air emissions, renewable energy, energy policy and ROA, regulation or deregulation, energy capacity standards or markets, reliability, and safety. CMS Energy and Consumers cannot predict the impact of these matters on their liquidity, financial condition, and results of operations.
FERC, through NERC, oversees reliability of certain portions of the electric grid. FERC orders regarding electric system reliability could have a material adverse effect on CMS Energy’s or Consumers’ liquidity, financial condition, and results of operations.


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Government-mandated power purchases from renewable energy projects may have an adverse effect on CMS Energy’s and Consumers’ businesses.
PURPA requires Consumers to purchase power from qualifying cogeneration and small power production facilities at a price approved by the MPSC that is meant to represent Consumers’ “avoided cost” of generating power or purchasing power from another source. In November 2017, the MPSC issued an order establishing a new avoided-cost methodology for determining the price that Consumers must pay to purchase power under PURPA. Among other things, the MPSC’s order changes the basis of Consumers’ avoided cost from the cost of coal-fueled generating units to that of natural gas-fueled generating units. The MPSC order also assigns more capacity value to qualifying facilities that are consistently able to generate electricity during peak times. The MPSC is considering Consumers’ IRP, which presents Consumers’ current outlook and plans for its electric generation supply portfolio out to 2040. Consumers’ potential need for additional electric generation, and the corresponding cost to build or purchase that generation, can be used by the MPSC to determine Consumers’ avoided costs pursuant to PURPA. The MPSC orders in these proceedings could result in mandated purchases of generation, potentially at above-market prices, and reduce Consumers’ need for new owned generation. This in turn could have a material adverse effect on Consumers’ capital investment plan, the affordability of future customer rates, and CMS Energy’s and Consumers’ liquidity, financial condition, investment plans, and results of operations.
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 emissions control equipment, CCR disposal and storage, cooling water intake equipment, effluent treatment, and PCB remediation. Present and reasonably anticipated state and federal environmental statutes and regulations, including but not limited to the Clean Air Act, the Clean Water Act, RCRA, CERCLA, and NREPA, will continue to have a material effect on CMS Energy and Consumers.
CMS Energy and Consumers have interests in fossil-fuel-fired power plants and other types of power plants that produce greenhouse gases. Federal and state environmental laws and rules, as well as international accords and treaties, could require CMS Energy and Consumers to install additional equipment for emission controls, 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.
In August 2018, the EPA proposed the “Affordable Clean Energy” rule as a replacement for the EPA’s 2015 Clean Power Plan, which the U.S. Supreme Court stayed in 2016. This proposed rule requires individual states to evaluate fossil-fuel-fired power plants for heat-rate improvements that could be undertaken to increase overall plant efficiency. There is also a proposal to modify the Clean Air Act permitting requirements to promote these efficiency projects. Consumers does not expect that the Affordable Clean Energy rule will have an adverse impact on its environmental strategy.


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The following risks related to climate change, emissions, and environmental regulations could also have a material adverse impact on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations:
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, that may affect customer demand, company operations, or assets
Consumers retired seven smaller coal-fueled electric generating units in 2016. Consumers may encounter previously unknown environmental conditions that will need to be addressed in a timely fashion with state and federal environmental regulators as facilities and equipment on these sites are taken out of service.
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, it could negatively affect CMS Energy’s and/or Consumers’ liquidity, results of operations, and financial condition and CMS Energy and/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—Consumers Electric Utility Outlook and Uncertainties.
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 control equipment could:
prevent the construction of new facilities
prevent the continued operation 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 that could have a material adverse effect on their liquidity, financial condition, and results of operations
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. Based upon prior MPSC orders, Consumers expects to be able to recover the costs of these cleanup activities through its gas rates, but cannot guarantee that outcome.
Consumers also expects to incur remediation and other response activity costs at a number of other sites under NREPA and CERCLA. Consumers believes these costs should be recoverable in rates, but cannot guarantee that outcome.


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In addition, certain CMS Energy subsidiaries retained environmental remediation obligations for the collection, treatment, and discharge of leachate at Bay Harbor after selling their 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. Certain CMS Energy subsidiaries have signed agreements with the EPA and the MDEQ relating to Bay Harbor. If these CMS Energy subsidiaries were unable to meet their commitments under these agreements, or if unanticipated events occurred, these CMS Energy subsidiaries could incur additional material costs relating to their Bay Harbor remediation obligations.
CMS Energy and Consumers could be affected adversely by legacy litigation and retained liabilities.
CMS Energy, CMS MST, CMS Field Services, Cantera Natural Gas, Inc., and Cantera Gas Company were named as defendants in various lawsuits arising as a result of alleged inaccurate natural gas price reporting. Remaining allegations include price-fixing conspiracies, restraint of trade, and artificial inflation of natural gas retail prices in Kansas and Wisconsin. CMS Energy cannot predict the outcome of these lawsuits or the amount of damages for which CMS Energy may be liable. It is possible that the outcome of the lawsuits could have a material adverse effect on CMS Energy’s liquidity, financial condition, and results of operations.
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.
In 2002, CMS Energy sold its oil, gas, and methanol investments in Equatorial Guinea. The government of Equatorial Guinea claims that, in connection with the sale, CMS Energy owes $152 million in taxes, plus substantial penalties and interest that could be up to the amount of the taxes claimed. In 2015, the matter was proceeding to formal arbitration; however, since then, the government of Equatorial Guinea has stopped communicating. CMS Energy has concluded that the government’s tax claim is without merit and will continue to contest the claim, but cannot predict the financial impact or outcome of the matter. An unfavorable outcome could have a material adverse effect on CMS Energy’s liquidity, financial condition, and results of operations.
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. 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. Accordingly, CMS Energy’s and Consumers’ overall results may fluctuate substantially on a seasonal


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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 on CMS Energy’s and 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, which in turn impact its liquidity, financial condition, and results of operations.
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 security and customer information. CMS Energy and Consumers are subject to laws and rules issued by various agencies concerning safeguarding and maintaining the confidentiality of this information. A security breach of CMS Energy’s and Consumers’ information or control systems could involve theft or the inappropriate release of certain types of information, such as confidential customer information or, separately, system operating information. These events could disrupt operations, subject CMS Energy and Consumers to possible financial liability, damage their reputation and diminish the confidence of customers, and have a material adverse effect on CMS Energy’s and Consumers’ liquidity, financial conditions, and results of operations.
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, has increased in frequency, scope, and potential impact in recent years. While CMS Energy and Consumers have not been subject to cyber crime 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, which could have a material adverse effect on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. 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’s or Consumers’ businesses, financial condition, and results of operations.
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 and materially adversely affect their liquidity, financial condition, and results of operations. A breach or failure of technology, including disaster recovery or backup systems, could also have a negative impact on CMS Energy’s banking subsidiary, EnerBank.


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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, 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’s and Consumers’ revenues and results of operations are subject to risks that are beyond their control, including but not limited to natural disasters, terrorist attacks and related acts of war, cyber incidents, vandalism, and other catastrophic events.
The impact of natural disasters, severe weather, wars, terrorist acts, vandalism, cyber incidents, pandemics, and other catastrophic events on the facilities and operations of CMS Energy and Consumers could have a material adverse effect on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. These 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 and limits), 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.
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 on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. It could also result in negative customer perception and increased regulatory oversight.
Consumers is exposed to changes in customer usage that could impact financial results.
Distributed electricity generation: Technology advances, government incentives and subsidies, and recent regulatory decisions could increase the cost effectiveness of customer-owned methods of producing electricity, such as fuel cells, microturbines, wind turbines, and solar photovoltaics, resulting in reduced load, cross subsidization, and increased costs. This could have a material adverse effect on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations.
Energy waste reduction: Customers could reduce their consumption through demand-side energy conservation and energy waste reduction programs. These reductions could have a material adverse effect on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations.
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.
Consumers is exposed to changes in market prices for natural gas, coal, electric capacity, electric energy, emission allowances, gasoline, diesel fuel, and RECs. Prices for these commodities may fluctuate substantially over relatively short periods of time and expose Consumers to price risk. A substantial portion of Consumers’ operating expenses for its electric generating plants and vehicle fleet consists of


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the costs of obtaining these commodities. The contracts associated with Consumers’ fuel and purchased power costs are executed in conjunction with the PSCR mechanism, which is designed to allow Consumers to recover prudently incurred costs associated with those positions. If the MPSC determined that any of these contracts or related contracting policies were imprudent, recovery of these costs could be disallowed. Consumers manages commodity price risk using established policies and procedures, and it 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 Consumers’ pricing risk or that they will not result in net liabilities to Consumers as a result of future volatility in these markets.
Natural gas prices in particular have been historically volatile. Consumers routinely enters into contracts to mitigate exposure to the risks of demand, market effects of weather, and changes in commodity prices associated with its 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 those positions. If the MPSC determined that any of these contracts or related contracting policies were imprudent, recovery of these costs could be disallowed. Consumers does not always hedge the entire exposure of its 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, Consumers might not be able to execute its 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’s and Consumers’ liquidity, financial condition, and results of operations. Changes in laws that limit Consumers’ ability to hedge could also have a negative effect on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations.
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 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 fashion. Any delay or default in payment or performance of contractual obligations could have a material adverse effect on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations.
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. Adverse economic conditions could also have a negative impact on the loan portfolio of CMS Energy’s banking subsidiary, EnerBank.
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.


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If, for its electric generating capacity, Consumers were unable to obtain its natural gas or coal requirements under existing or future natural gas and coal supply and transportation contracts, or to obtain resources under existing or future PPAs, it could be required to purchase natural gas or coal at higher prices or forced to purchase electricity from higher-cost generating resources in the MISO energy market. If, for natural gas delivery to its customers, Consumers were unable to obtain its natural gas supply requirements under existing or future natural gas supply and transportation contracts, it could be required to purchase natural gas at higher prices from other sources or implement its natural gas curtailment program filed with the MPSC. These alternatives could increase Consumers’ working capital requirements and could decrease its revenues.
Market performance and other changes could decrease the value of employee benefit plan assets, which then could require substantial funding.
The performance of the capital 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. If CMS Energy and Consumers were unable to manage their pension and postretirement plan assets successfully, it could have a material adverse effect on their liquidity, financial condition, and results of operations.
A work interruption or other union actions could adversely affect Consumers.
Unions represent 37 percent of Consumers’ employees. Consumers’ union agreements expire in 2020. 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.
The workforce of CMS Energy and Consumers is aging and a number of employees will become eligible to retire within the next few years. 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. If CMS Energy and Consumers were unable to attract and retain an appropriately qualified workforce, their financial condition and results of operations could be affected negatively.
Unplanned power plant outages could be costly for Consumers.
Unforeseen maintenance of Consumers’ power plants may be required for many reasons, including catastrophic events such as fires, explosions, extreme weather, floods or other acts of God, failures of equipment or materials, operator error, or the need to comply with environmental or safety regulations. When unplanned maintenance work is required on power plants or other equipment, Consumers will not


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only incur unexpected maintenance expenses, but it may also have to make spot market purchases of replacement electricity that exceed Consumers’ costs of generation or be forced to retire a given unit if the cost or timing of the maintenance is not reasonable and prudent. Additionally, unplanned maintenance work could reduce the capacity credit Consumers receives from MISO and could cause Consumers to incur additional capacity costs in future years. If Consumers were unable to recover any of these increased costs in rates, it could have a material adverse effect on Consumers’ liquidity, financial condition, and results of operations.
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 on their liquidity, financial condition, and results of operations.
CMS Energy and Consumers are subject to changing tax laws. Changes in federal, state, or local tax rates or other changes in tax laws could have adverse impacts on their liquidity, financial condition, and results of operations.
In December 2017, President Trump signed the TCJA, which changed existing federal tax law and included numerous provisions that affect businesses. CMS Energy and Consumers made reasonable estimates in measuring and accounting for the effects of the TCJA and did not recognize any material changes to their estimates during the year ended December 31, 2018. Given expected changes to U.S. Treasury regulations and interpretations of the TCJA by the U.S. Treasury, the final transition impacts of the TCJA may differ from the estimates provided elsewhere in this report.
CMS Energy and its subsidiaries, including Consumers and EnerBank, must comply with the Dodd-Frank Act and its related regulations, which are subject to change and could involve material costs or affect operations.
Regulations that are intended to implement the Dodd-Frank Act have been and are still being adopted by the appropriate agencies. The Dodd-Frank Act added a new Section 13 to the Bank Holding Company Act. Known, together with its implementing regulations, as the Volcker Rule, it generally restricts certain banking entities (such as EnerBank) and their subsidiaries or affiliates from engaging in proprietary trading activities and from owning equity in or sponsoring any private equity or hedge fund. The activities of CMS Energy and its subsidiaries (including EnerBank) are not expected to be materially affected by the Volcker Rule; however, they will be restricted from engaging in proprietary trading, investing in third‑party hedge or private equity funds, and sponsoring these funds in the future unless CMS Energy qualifies for an exemption from the rule. CMS Energy and its subsidiaries are also subject to certain ongoing compliance requirements pursuant to the regulations. In May 2018, the federal agencies that are responsible for the Volcker Rule approved a notice of proposed rulemaking that proposes significant revisions to the Volcker Rule implementing regulations. The revisions would leave intact the core restrictions on proprietary trading and private equity and hedge fund activities; however, the revisions would make certain significant changes to the proprietary trading restrictions and compliance program requirements. CMS Energy cannot predict the full impact of the Volcker Rule, including any impact resulting from changes to implementing regulations, on CMS Energy’s or EnerBank’s operations or financial condition.


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All companies that directly or indirectly control an FDIC-insured bank are required to serve as a source of financial strength for that institution. As a result, CMS Energy could be called upon by the FDIC to infuse additional capital into EnerBank to the extent that EnerBank fails to satisfy its capital requirements. In addition, CMS Energy is contractually required (i) to make cash capital contributions to EnerBank in the event that EnerBank does not maintain required minimum capital ratios and (ii) to provide EnerBank financial support, in an amount and duration as may be necessary for EnerBank to meet the cash needs of its depositors and other operations. EnerBank has exceeded these requirements historically and exceeded them as of January 31, 2019.
In addition, the Dodd-Frank Act provides for regulation by the Commodity Futures Trading Commission of certain commodity-related contracts. Although CMS Energy, Consumers, EnerBank, and certain subsidiaries of CMS Enterprises 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.
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—Enterprises Segment—Non-Utility Operations and Investments—Independent Power Production
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 3, Regulatory Matters and Note 4, 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.


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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. Market prices for CMS Energy’s common stock and related security holder matters are contained in Item 6. Selected Financial Data, which is incorporated by reference herein. At January 14, 2019, the number of registered holders of CMS Energy’s common stock totaled 29,620, 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 13, 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 5, Financings and Capitalization.


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Comparison of Five-Year Cumulative Total Return
chart-d3e289c55f3f85747f6a04.jpg
 
Five-Year Cumulative Total Return
Company/Index
2013
 
2014
 
2015
 
2016
 
2017
 
2018
 
CMS Energy
 
$
100

 
$
135

 
$
144

 
$
172

 
$
201

 
$
217

S&P 500 Index
 
100

 
114

 
115

 
129

 
157

 
150

Dow Jones Utility Index
 
100

 
131

 
127

 
150

 
170

 
173

S&P 400 Utilities Index
 
100

 
119

 
112

 
142

 
158

 
169

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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Issuer Repurchases of Equity Securities
Presented in the following table are CMS Energy’s repurchases of equity securities for the three months ended December 31, 2018:
 
Period
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
 
 
 
 
October 1, 2018 to
 
 
 
 
 
 
 
 
 
October 31, 2018
 
816

 
$
49.21

 

 

 
November 1, 2018 to
 
 
 
 
 
 
 
 
 
November 30, 2018
 
62

 
52.09

 

 

 
December 1, 2018 to
 
 
 
 
 
 
 
 
 
December 31, 2018
 
87

 
51.17

 

 

 
Total
 
965

 
$
49.57

 

 

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 PISP. The value of shares repurchased is based on the market price on the vesting date.
Unregistered Sales of Equity Securities
None.


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Item 6.    Selected Financial Data
CMS Energy Corporation
 
 
 
2018

2017

2016

2015

2014

 
 
 
 
 
 
 
 
Operating revenue (in millions)
 
($)
6,873

6,583

6,399

6,456

7,179

Income from equity method investees (in millions)
 
($)
9

15

13

14

15

Net income (in millions)1
 
($)
659

462

553

525

479

Net income available to common stockholders (in millions)
 
($)
657

460

551

523

477

Average common shares outstanding (in thousands)
 
 
282,171

280,025

277,851

275,600

270,580

Earnings per average common share
 
 
 
 
 
 
 
CMS Energy
Basic
 
($)
2.33

1.64

1.99

1.90

1.76

 
Diluted
 
($)
2.32

1.64

1.98

1.89

1.74

Cash provided by operations (in millions)
 
($)
1,703

1,705

1,629

1,640

1,481

Capital expenditures, excluding assets placed under capital lease (in millions)
 
($)
2,074

1,665

1,672

1,564

1,577

Total assets (in millions)
 
($)
24,529

23,050

21,622

20,299

19,143

Long-term debt, excluding current portion (in millions)
 
($)
10,615

9,123

8,640

8,400

7,974

Non-current portion of capital leases and financing obligation (in millions)
 
($)
69

91

110

118

123

Cash dividends declared per common share
 
($)
1.43

1.33

1.24

1.16

1.08

Market price of common stock at year-end
 
($)
49.65

47.30

41.62

36.08

34.75

Book value per common share at year-end
 
($)
16.78

15.77

15.23

14.21

13.33

Total employees at year-end
 
 
8,625

7,952

7,800

7,804

7,747

Electric Utility Statistics
 
 
 
 
 
 
 
Sales (billions of kWh)
 
 
38

37

38

37

38

Customers (in thousands)
 
 
1,831

1,826

1,805

1,803

1,793

Average sales rate per kWh
 
(¢)
11.78

11.98

11.63

11.39

12.04

Gas Utility Statistics
 
 
 
 
 
 
 
Sales and transportation deliveries (bcf)
 
 
386

352

358

356

373

Customers (in thousands)2
 
 
1,784

1,776

1,772

1,741

1,733

Average sales rate per mcf
 
($)
7.44

7.51

7.31

7.89

8.83

1 
Includes income attributable to noncontrolling interests of $2 million in each period.
2 
Excludes off-system transportation customers.


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Consumers Energy Company
 
 
 
2018

2017

2016

2015

2014

 
 
 
 
 
 
 
 
Operating revenue (in millions)
 
($)
6,464

6,222

6,064

6,165

6,800

Net income (in millions)
 
($)
705

632

616

594

567

Net income available to common stockholder (in millions)
 
($)
703

630

614

592

565

Cash provided by operations (in millions)
 
($)
1,449

1,715

1,681

1,794

1,354

Capital expenditures, excluding assets placed under capital lease (in millions)
 
($)
1,822

1,632

1,656

1,537

1,573

Total assets (in millions)
 
($)
22,025

21,099

19,946

18,635

17,824

Long-term debt, excluding current portion (in millions)
 
($)
6,779

5,561

5,253

5,183

5,131

Non-current portion of capital leases and financing obligation (in millions)
 
($)
69

91

110

118

123

Total preferred stock (in millions)
 
($)
37

37

37

37

37

Number of preferred stockholders at year-end
 
 
1,017

1,056

1,095

1,156

1,191

Total employees at year-end
 
 
8,121

7,496

7,366

7,394

7,388

Electric Utility Statistics
 
 
 
 
 
 
 
Sales (billions of kWh)
 
 
38

37

38

37

38

Customers (in thousands)
 
 
1,831

1,826

1,805

1,803

1,793

Average sales rate per kWh
 
(¢)
11.78

11.98

11.63

11.39

12.04

Gas Utility Statistics
 
 
 
 
 
 
 
Sales and transportation deliveries (bcf)
 
 
386

352

358

356

373

Customers (in thousands)1
 
 
1,784

1,776

1,772

1,741

1,733

Average sales rate per mcf
 
($)
7.44

7.51

7.31

7.89

8.83

1 
Excludes off-system transportation customers.


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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 CMS Enterprises, primarily a domestic independent power producer and marketer. Consumers’ electric utility operations include the generation, purchase, transmission, 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 residential, commercial, and diversified industrial customers. CMS Enterprises, 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 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 enterprises, 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:
regulation and regulatory matters
state and federal legislation
economic conditions
weather
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, the companies employ the “Consumers Energy 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 the companies create for customers and investors, but also their responsibility to social and environmental goals. The triple bottom line balances the interests of the companies’ employees, customers, suppliers, regulators, creditors, Michigan’s residents, the investment community, and other stakeholders, and it reflects the broader societal impacts of the companies’ activities.
cms11.jpg


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Consumers’ Sustainability Report, which is available to the public, describes the company’s 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 the companies 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. Presented in the following illustration are Consumers’ OSHA recordable incident rates over the last ten years:
chart-3c659442179a0ba8590a04.jpg
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 with cleaner and more efficient natural gas-fueled generation, renewable energy, and energy waste reduction and demand response programs
targeted infrastructure investment, including the installation of smart meters
information and control system efficiencies
employee and retiree health care cost sharing
workforce productivity enhancements


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In addition, Consumers’ gas commodity costs declined by 60 percent from 2008 through 2018, due not only to a decrease in market prices but also to Consumers’ improvements to its gas infrastructure and optimization of its gas purchasing and storage strategy. These gas commodity savings are passed on 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 complying with the various state and federal environmental and health and safety laws and regulations to which CMS Energy and Consumers are subject. Management considers climate change risk and other environmental risks in the companies’ strategy development, business planning, and enterprise risk management processes. In November 2018, CMS Energy published a climate assessment report of the long-term impacts on the company’s portfolio, of public policies and technological advances that are consistent with limiting global warming to no more than two degrees Celsius over pre-industrial levels.
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 by CMS Energy and Consumers, including the retirement of seven of Consumers’ coal-fueled electric generating units in 2016, the companies have decreased their combined percentage of electric supply (self-generated and purchased) from coal by 18 percentage points since 2015. Presented in the following illustration are CMS Energy’s, including Consumers’, sources of electric supply in 2018:
chart-587860755b851cf3feca04.jpg


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The companies have also:
reduced carbon dioxide emissions by over 35 percent since 2005
reduced the amount of water used to generate electricity by over 35 percent since 2012
reduced landfill waste disposal by over one million cubic yards since 1992
Additionally, over the last 20 years, Consumers has reduced its sulfur dioxide, nitrogen oxide, particulate matter, and mercury emissions by 90 percent.
The 2016 Energy Law:
raised the renewable energy standard from the present ten-percent requirement to 12.5 percent in 2019 and 15 percent in 2021
established a goal of 35 percent combined renewable energy and energy waste reduction by 2025
authorized incentives for demand response programs and expanded existing incentives for energy efficiency programs, referring to the combined initiatives as energy waste reduction programs
established an integrated planning process for new generation resources
Consumers filed an IRP with the MPSC in June 2018, detailing its long-term strategy for delivering reliable and affordable energy to its customers through the increased use of energy efficiency and customer demand management programs and additional renewable energy.
In its IRP, Consumers details how it 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. Further, Consumers details its plans to replace all of its coal-fueled generation with investment in renewable energy, proposing renewable energy levels of 25 percent by 2025, over 35 percent by 2030, and over 40 percent by 2040. The attainment of these renewable energy levels will enable Consumers to meet and exceed the 2016 Energy Law renewable energy requirements and fulfill increasing customer demand for renewable energy. The IRP supports the following clean energy goals, which Consumers announced during 2018:
a breakthrough goal to reduce carbon emissions by 80 percent and to eliminate the use of coal to generate electricity by 2040
a target of at least 50 percent combined renewable energy and energy waste reduction by 2030
Additionally, in an effort to advance its environmental stewardship in Michigan and to minimize the impact of future regulations, Consumers announced these five-year targets during 2018:
to reduce its water use by one billion gallons; in 2018, Consumers reduced its water usage by 180 million gallons
to reduce the amount of waste taken to landfills by 35 percent; in 2018, Consumers reduced its waste to landfills by 12 percent
to enhance, restore, or protect 5,000 acres of land; in 2018, Consumers enhanced, restored, or protected nearly 800 acres of land
CMS Energy, through its non‑utility businesses, continues to pursue further opportunities for the development of renewable generation projects. In 2018, CMS Enterprises completed the development and construction of two solar generation projects totaling 24 MW in Michigan; energy produced by these projects is sold under 25‑year PPAs to the Lansing Board of Water and Light, a non‑affiliated utility. CMS Enterprises also purchased a 105-MW wind generation project in northwest Ohio, and the project became operational in September 2018. Renewable energy produced by the wind generation project has been committed to General Motors LLC, a non‑affiliated company, under a 15-year PPA.


55


CMS Energy and Consumers are monitoring numerous legislative, policy, and regulatory initiatives, including those to regulate greenhouse gases, and related litigation. While CMS Energy and Consumers cannot predict the outcome of these matters, which could have a material effect on the companies, 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 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 2018, CMS Energy’s net income available to common stockholders was $657 million, and diluted EPS were $2.32. This compares with net income available to common stockholders of $460 million and diluted EPS of $1.64 in 2017. In 2018, rate increases, higher sales, and the absence of the impacts of the TCJA were offset partially by higher depreciation and maintenance and other operating expenses. 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.
Consumers projects that its electric weather-normalized deliveries will remain stable and gas weather-normalized deliveries will increase slightly through 2023. This outlook reflects growth in electric demand offset by the effects of energy waste reduction programs, and growth in gas demand offset partially by energy efficiency and conservation
Performance: Impacting the Triple Bottom Line 
CMS Energy and Consumers remain committed to achieving world class performance while delivering hometown service. Leveraging the Consumers Energy Way, CMS Energy and Consumers accomplished the following during 2018:
achieved record-breaking performance in the area of on-time delivery commitments
attracted 101 MW of new or expanding load in Consumers’ service territory
announced clean energy goals and filed an IRP in support of those goals
expanded CMS Enterprises’ renewable portfolio
enhanced or restored nearly 800 acres of land in Michigan
finished first overall across the electric utility sector in cyber security testing
CMS Energy and Consumers will continue to utilize the Consumers Energy 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: Consumers expects to make significant expenditures on infrastructure upgrades and replacements and electric supply projects from 2019 through 2028. 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 six to eight percent. This rate-base growth, together with cost-control initiatives, should allow Consumers to maintain affordable customer prices.


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Presented in the following illustration are planned capital expenditures of $11.2 billion that Consumers expects to make from 2019 through 2023:
chart-199139c906cb35b4175a04.jpg
Consumers plans to spend $9.3 billion over the next five years to maintain and upgrade its gas infrastructure and electric distribution systems in order to enhance safety and reliability, improve customer satisfaction, and reduce energy waste on those systems. The gas infrastructure projects comprise $5.1 billion to sustain deliverability and enhance pipeline integrity and safety. These projects, which involve replacement of mains and services and enhancement of transmission and storage systems, should reduce the minor quantity of methane emissions released as gas is transported. The electric distribution projects comprise $4.2 billion to strengthen circuits and substations and replace poles. Consumers also expects to spend $1.9 billion on electric supply projects, representing new generation, including renewable generation, and environmental investments needed to comply with state and federal laws and regulations.


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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.
2017 Electric Rate Case: In March 2017, Consumers filed an application with the MPSC seeking an annual rate increase of $173 million, based on a 10.5 percent authorized return on equity. The filing requested authority to recover new investment in system reliability, environmental compliance, and technology enhancements. In September 2017, Consumers reduced its requested annual rate increase to $148 million. The MPSC issued an order in March 2018, authorizing an annual rate increase of $66 million, based on a 10.0 percent authorized return on equity. In June 2018, as a result of a petition for rehearing filed by Consumers, the MPSC issued an order adjusting the authorized annual rate increase to $72 million by allowing recovery of additional retirement benefit plan costs.
2018 Electric Rate Case: In May 2018, Consumers filed an application with the MPSC seeking an annual rate increase of $58 million, based on a 10.75 percent authorized return on equity. In October 2018, Consumers reduced its requested annual rate increase to $44 million. The filing requested authority to recover new investment in system reliability, environmental compliance, and technology enhancements. In January 2019, the MPSC approved a settlement agreement authorizing an annual rate decrease of $24 million, based on a 10.0 percent authorized return of equity. With the elimination of the $113 million TCJA credit to customer bills, the approved settlement agreement results in an $89 million increase in annual rates. In lieu of the investment recovery mechanism requested by Consumers, the settlement agreement provides for deferred accounting treatment for distribution-related capital investments exceeding certain amounts. Consumers also agreed to not file a new electric rate case prior to January 2020.
2017 Gas Rate Case: In October 2017, Consumers filed an application with the MPSC seeking an annual rate increase of $178 million, based on a 10.5 percent authorized return on equity. In March 2018, Consumers reduced its requested revenue requirement to $145 million, before taking into consideration any impact of the TCJA. Consumers further reduced its requested revenue requirement to $83 million to reflect the impact of the TCJA, offset partially by an increase in the authorized return of equity to 10.75 percent to compensate for the anticipated negative effects of tax reform on Consumers’ cash flows from operating activities. In August 2018, the MPSC approved a settlement agreement authorizing an annual rate increase of $11 million, based on a 10.0 percent authorized return on equity. With the elimination of the $49 million TCJA credit to customer bills, the approved settlement agreement results in a $60 million increase in annual rates.
The MPSC also approved two rate adjustment mechanisms: a revenue decoupling mechanism and an investment recovery mechanism. The revenue decoupling mechanism will annually reconcile Consumers’ actual weather-normalized non‑fuel revenues with the revenues approved by the MPSC. The investment recovery mechanism will provide for an additional annual rate increase of $9 million beginning in July 2019 and another $10 million beginning in July 2020 for incremental investments that Consumers plans to make in those years, subject to reconciliation. The investment recovery surcharge will remain in effect until rates are reset in a subsequent general rate case.
2018 Gas Rate Case: In November 2018, Consumers filed an application with the MPSC seeking an annual rate increase of $229 million, based on a 10.75 percent authorized return on equity. The filing also seeks approval of two rate adjustment mechanisms: a revenue decoupling mechanism and an investment recovery mechanism. The revenue decoupling mechanism would


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annually reconcile Consumers’ actual weather-normalized non-fuel revenues with the revenues approved by the MPSC. The investment recovery mechanism would provide for additional annual rate increases of $11 million beginning in October 2020 and another $11 million beginning in October 2021 for incremental investments that Consumers plans to make in those years, subject to reconciliation. These future investments are intended to help ensure adequate system capacity and deliverability. The MPSC previously approved an investment recovery mechanism in August 2018; that mechanism will remain in effect until rates are changed in this proceeding.
Tax Cuts and Jobs Act: The TCJA, which changed existing federal tax law and included numerous provisions that affect businesses, was signed into law in December 2017. In early 2018, the MPSC ordered Consumers to file various proceedings to determine the reduction in its electric and gas revenue requirements as a result of the reduction in the corporate income tax rate, and to implement bill credits to reflect that reduction until customer rates could be adjusted through Consumers’ general rate cases. Consumers filed, and the MPSC approved, such proceedings throughout 2018, resulting in credits to customer bills during 2018 to reflect reductions in Consumers’ electric and gas revenue requirements. Additionally, Consumers filed an application to address the December 31, 2017 remeasurement of its deferred income taxes and other base rate impacts of the TCJA on customers. For details on these proceedings, see Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 3, Regulatory Matters.
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 initiatives that will allow it to maintain sustainable customer base rates. The Consumers Energy 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
In Millions, Except Per Share Amounts 
 
Years Ended December 31
2018
 
2017
 
2016
 
Net Income Available to Common Stockholders
 
$
657

 
$
460

 
$
551

Basic Earnings Per Average Common Share
 
$
2.33

 
$
1.64

 
$
1.99

Diluted Earnings Per Average Common Share
 
$
2.32

 
$
1.64

 
$
1.98

In Millions
 
Years Ended December 31
2018
 
2017
 
Change
 
2017
 
2016
 
Change
 
Electric utility
 
$
535

 
$
455

 
$
80

 
$
455

 
$
458

 
$
(3
)
Gas utility
 
169

 
173

 
(4
)
 
173

 
155

 
18

Enterprises
 
34

 
(27
)
 
61

 
(27
)
 
17

 
(44
)
Corporate interest and other
 
(81
)
 
(141
)
 
60

 
(141
)
 
(79
)
 
(62
)
Net Income Available to Common Stockholders
 
$
657

 
$
460

 
$
197

 
$
460

 
$
551

 
$
(91
)


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Presented in the following table are specific after-tax changes to net income available to common stockholders for 2018 versus 2017:
In Millions
 
Year Ended December 31, 2017
 
 
 
$
460

Reasons for the change
 
 
 
 
Consumers electric utility and gas utility
 
 
 
 
Electric sales
 
$
43

 
 
Gas sales
 
20

 
 
Electric rate increase
 
42

 
 
Gas rate increase
 
36

 
 
OPEB Plan changes
 
41

 
 
Deferred income tax adjustments due to the TCJA, primarily the absence of the 2017 adjustment1
 
32

 
 
Depreciation and amortization
 
(32
)
 
 
Increased distribution, transmission, and customer operations expenses
 
(30
)
 
 
Absence of state income tax benefit in 2017
 
(16
)
 
 
Other, including absence of 2017 intercompany gain of $9 million
 
(60
)
 
$
76

Enterprises
 
 
 
 
Deferred income tax adjustments due to the TCJA, primarily the absence of the 2017 adjustment1
 
62

 
 
Reduction of corporate income tax rate due to the impacts of the TCJA
 
6

 
 
Higher expenses from legacy obligations, net
 
(4
)
 
 
Lower earnings from operations and equity method investees
 
(3
)
 
61

Corporate interest and other
 
 
 
 
Deferred income tax adjustments due to the TCJA, primarily the absence of the 2017 adjustment1
 
58

 
 
2017 Elimination of an intercompany gain on the donation of CMS Energy stock2
 
9

 
 
Lower fixed charges and administrative and other expenses
 
2

 
 
Lower tax benefit due to the impacts of the TCJA
 
(9
)
 
60

Year Ended December 31, 2018
 
 
 
$
657

1 
See Note 14, Income Taxes.
2 
Gain at segment is eliminated on CMS Energy’s consolidated statements of income.


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Presented in the following table are specific after-tax changes to net income available to common stockholders for 2016 versus 2017:
In Millions
 
Year Ended December 31, 2016
 
 
 
$
551

Reasons for the change
 
 
 
 
Consumers electric utility and gas utility
 
 
 
 
Electric sales
 
$
(15
)
 
 
Gas sales
 
14

 
 
Electric rate increase
 
50

 
 
Gas rate increase
 
16

 
 
State income tax benefit in 2017
 
15

 
 
Retirement of coal-fueled power plants in 2016
 
12

 
 
Voluntary separation program costs in 2016
 
7

 
 
Employee benefit costs
 
1

 
 
Depreciation and amortization
 
(42
)
 
 
Deferred income tax adjustment due to the TCJA1
 
(34
)
 
 
Donations
 
(8
)
 
 
Other
 
(1
)
 
$
15

Enterprises
 
 
 
 
Deferred income tax adjustment due to the TCJA1
 
(57
)
 
 
Higher prices for capacity and demand revenue from DIG
 
13

 
(44
)
Corporate interest and other
 
 
 
 
Deferred income tax adjustment due to the TCJA1
 
(57
)
 
 
Elimination of an intercompany gain on the donation of CMS Energy stock2
 
(9
)
 
 
2016 Settlement with Michigan Department of Treasury
 
(5
)
 
 
Higher earnings at EnerBank
 
3

 
 
Lower fixed charges and administrative and other expenses
 
6

 
(62
)
Year Ended December 31, 2017
 
 
 
$
460

1 
See Note 14, Income Taxes.
2 
Gain at segment is eliminated on CMS Energy’s consolidated statements of income.


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Consumers Electric Utility Results of Operations
For the year ended December 31, 2018, Consumers electric utility’s net income available to common stockholders was $535 million. This compares with net income available to common stockholders of $455 million for the year ended December 31, 2017. In 2018, higher net income was due primarily to a rate increase and higher sales as a result of favorable weather. These increases were offset partially by higher maintenance and other operating expenses and higher depreciation on increased plant in service. Consumers incurred higher maintenance and other operating expenses due to the execution of additional work in 2018. Lower tax expense in 2018 resulting from the TCJA was offset fully by a reduction in revenue to reflect the pass-through of TCJA-related benefits to customers. Presented in the following table are the detailed changes to the electric utility’s net income available to common stockholders for 2018 versus 2017:


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In Millions
 
Year Ended December 31, 2017
 
 
 
$
455

Reasons for the change
 
 
 
 
Electric deliveries1 and rate increases
 
 
 
 
Rate increase, including the impacts of the March 2018 order
 
$
63

 
 
Higher sales due primarily to favorable weather in 2018
 
59

 
 
Higher energy waste reduction program revenues
 
33

 
 
Increase in other revenues
 
4

 
$
159

Revenue reserve and lower rates related to the TCJA2
 
 
 
(143
)
Maintenance and other operating expenses
 
 
 
 
Higher energy waste reduction program costs
 
(33
)
 
 
Increased distribution, transmission, and customer operations expenses
 
(22
)
 
 
Increase in generation operating expenses
 
(17
)
 
 
Higher service restoration costs
 
(4
)
 
 
Higher other maintenance and operating expenses
 
(4
)
 
(80