CONSUMERS ENERGY CO [CMS-PB] Filings

10-Q 1 cms-20230930.htm FORM 10-Q (CMS ENERGY AND CONSUMERS) cms-20230930

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____to_____


Commission File Number	Registrant; State of Incorporation; Address; and Telephone Number	IRS Employer 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:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

CMS Energy Corporation Common Stock, $0.01 par value

CMS

New York Stock Exchange

CMS Energy Corporation 5.625% Junior Subordinated Notes due 2078

CMSA

New York Stock Exchange

CMS Energy Corporation 5.875% Junior Subordinated Notes due 2078

CMSC

New York Stock Exchange

CMS Energy Corporation 5.875% Junior Subordinated Notes due 2079

CMSD

New York Stock Exchange

CMS Energy Corporation Depositary Shares, each representing a 1/1,000th interest in a share of 4.200% Cumulative Redeemable Perpetual Preferred Stock, Series C

CMS PRC

New York Stock Exchange

Consumers Energy Company Cumulative Preferred Stock, $100 par value: $4.50 Series

CMS-PB

New York Stock Exchange

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

☒

☐

Consumers Energy Company:

Yes

☒

☐

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

☒

☐

Consumers Energy Company:

Yes

☒

☐

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

☒

Large accelerated filer

☐

Non‑accelerated filer

☐

Non‑accelerated filer

☒

Accelerated filer

☐

Accelerated filer

☐

Smaller reporting company

☐

Smaller reporting company

☐

Emerging growth company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

CMS Energy Corporation:

☐

Consumers Energy Company:

☐

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

CMS Energy Corporation:

Yes

☐

☒

Consumers Energy Company:

Yes

☐

☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock at October 9, 2023:

CMS Energy Corporation:

CMS Energy Corporation Common Stock, $0.01 par value

291,763,567

Consumers Energy Company:

Consumers Common Stock, $10 par value, privately held by CMS Energy Corporation

84,108,789

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CMS Energy Corporation

Consumers Energy Company

Quarterly Report on Form 10‑Q to the Securities and Exchange Commission for the Period Ended September 30, 2023

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Glossary		2
Filing Format		9
Available Information		9
Forward-looking Statements and Information		9










Part I—Financial Information		13
Item 1.	Financial Statements	13



Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	85
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	86


Item 4.	Controls and Procedures	86


Part II—Other Information		86
Item 1.	Legal Proceedings	86
Item 1A.	Risk Factors	86
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	87
Item 3.	Defaults Upon Senior Securities	87
Item 4.	Mine Safety Disclosures	87
Item 5 .	Other Information	87
Item 6.	Exhibits	89










Signatures		90

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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

2022 Form 10‑K
Each of CMS Energy’s and Consumers’ Annual Report on Form 10‑K for the year ended December 31, 2022

3G
Third generation technology

4G
Fourth generation technology

ABATE
Association of Businesses Advocating Tariff Equity



















Aviator Wind
Aviator Wind Holdings, LLC, a VIE in which Aviator Wind Equity Holdings holds a Class B membership interest

Aviator Wind Equity Holdings
Aviator Wind Equity Holdings, LLC, a VIE in which Grand River Wind, LLC, a wholly owned subsidiary of NorthStar Clean Energy, has a 51‑percent interest

Bay Harbor
A residential/commercial real estate area located near Petoskey, Michigan, in which CMS Energy sold its interest in 2002

bcf
Billion cubic feet













CCR
Coal combustion residual




CEO
Chief Executive Officer

CERCLA
Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended

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CFO
Chief Financial Officer




Clean Air Act
Federal Clean Air Act of 1963, as amended

Clean Energy Plan
Consumers’ long-term strategy for delivering clean, reliable, resilient, and affordable energy to its customers; this plan was originally outlined and approved in Consumers’ 2018 integrated resource plan and subsequently updated and approved through its 2021 integrated resource plan

Clean Water Act
Federal Water Pollution Control Act of 1972, as amended




CMS Energy
CMS Energy Corporation and its consolidated subsidiaries, unless otherwise noted; the parent of Consumers and NorthStar Clean Energy
















CMS Land
CMS Land Company, a wholly owned subsidiary of CMS Capital, L.L.C., a wholly owned subsidiary of CMS Energy




Consumers
Consumers Energy Company and its consolidated subsidiaries, unless otherwise noted; a wholly owned subsidiary of CMS Energy




Covert Generating Facility
A 1,200-MW natural gas-fueled generation facility that was acquired by Consumers in May 2023 from New Covert Generating Company, LLC, a non-affiliated company




Craven
Craven County Wood Energy Limited Partnership, a VIE in which HYDRA‑CO Enterprises, Inc., a wholly owned subsidiary of NorthStar Clean Energy, has a 50-percent interest

CSAPR
Cross-State Air Pollution Rule of 2011, as amended







DB Pension Plans
Defined benefit pension plans of CMS Energy and Consumers, including certain present and former affiliates and subsidiaries

DB SERP
Defined Benefit Supplemental Executive Retirement Plan

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DIG
Dearborn Industrial Generation, L.L.C., a wholly owned subsidiary of Dearborn Industrial Energy, L.L.C., a wholly owned subsidiary of NorthStar Clean Energy




Dodd-Frank Act
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

DTE Electric
DTE Electric Company, a non‑affiliated company




EGLE
Michigan Department of Environment, Great Lakes, and Energy

Endangered Species Act
Endangered Species Act of 1973, as amended




energy waste reduction
The reduction of energy consumption through energy efficiency and demand-side energy conservation, as established under the 2016 Energy Law




EPA
U.S. Environmental Protection Agency

EPS
Earnings per share




Exchange Act
Securities Exchange Act of 1934




Federal Power Act
Federal Power Act of 1920




FERC
Federal Energy Regulatory Commission







FTR
Financial transmission right

GAAP
U.S. Generally Accepted Accounting Principles

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Genesee
Genesee Power Station Limited Partnership, a VIE in which HYDRA‑CO Enterprises, Inc., a wholly owned subsidiary of NorthStar Clean Energy, has a 50-percent interest







Grayling
Grayling Generating Station Limited Partnership, a VIE in which HYDRA‑CO Enterprises, Inc., a wholly owned subsidiary of NorthStar Clean Energy, has a 50-percent interest













IRS
Internal Revenue Service










kWh
Kilowatt-hour, a unit of energy equal to one thousand watt-hours




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













MD&A
Management’s Discussion and Analysis of Financial Condition and Results of Operations




MGP
Manufactured gas plant




Migratory Bird Treaty Act
Migratory Bird Treaty Act of 1918, as amended




MISO
Midcontinent Independent System Operator, Inc.

mothball
To place a generating unit into a state of extended reserve shutdown in which the unit is inactive and unavailable for service for a specified period, during which the unit can be brought back into service after receiving appropriate notification and completing any necessary maintenance or other work; generation owners in MISO must request approval to mothball a unit, and MISO then evaluates the request for reliability impacts

MPSC
Michigan Public Service Commission

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MW
Megawatt, a unit of power equal to one million watts




NAAQS
National Ambient Air Quality Standards

Natural Gas Act
Natural Gas Act of 1938




Newport Solar Holdings
Newport Solar Holdings III, LLC, a wholly owned subsidiary of Grand River Solar, LLC, a wholly owned subsidiary of NorthStar Clean Energy

NorthStar Clean Energy
NorthStar Clean Energy Company, a wholly owned subsidiary of CMS Energy, formerly known as CMS Enterprises Company

NOx
Nitrogen oxides

NPDES
National Pollutant Discharge Elimination System, a permit system for regulating point sources of pollution under the Clean Water Act

NREPA
Part 201 of Michigan’s Natural Resources and Environmental Protection Act of 1994, as amended




NWO Holdco
NWO Holdco, L.L.C., a VIE in which NWO Holdco I, LLC, a wholly owned subsidiary of Grand River Wind, LLC, a wholly owned subsidiary of NorthStar Clean Energy, holds a Class B membership interest

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










PCB
Polychlorinated biphenyl













PPA
Power purchase agreement

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PSCR
Power supply cost recovery




RCRA
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




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







SOFR
Secured overnight financing rate calculated and published by the Federal Reserve Bank of New York and selected as the recommended alternative to replace the London Interbank Offered Rate for dollar-denominated financial contracts by the Alternative Reference Rates Committee

TAES
Toshiba America Energy Systems Corporation, a non-affiliated company

TCJA
Tax Cuts and Jobs Act of 2017

Term SOFR
The rate per annum that is a forward-looking term rate based on SOFR

T.E.S. Filer City
T.E.S. Filer City Station Limited Partnership, a VIE in which HYDRA‑CO Enterprises, Inc., a wholly owned subsidiary of NorthStar Clean Energy, has a 50-percent interest










VIE
Variable interest entity

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Wolverine Power
Wolverine Power Supply Cooperative, Inc., a non-affiliated company

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Filing Format

This combined Form 10‑Q is separately filed by CMS Energy and Consumers. Information in this combined Form 10‑Q relating to each individual registrant is filed by such registrant on its own behalf. Consumers makes no representation regarding information relating to any other companies affiliated with CMS Energy other than its own subsidiaries.

CMS Energy is the parent holding company of several subsidiaries, including Consumers and NorthStar Clean Energy. None of CMS Energy, NorthStar Clean Energy, nor any of CMS Energy’s other subsidiaries (other than Consumers) has any obligation in respect of Consumers’ debt securities or preferred stock and holders of such securities should not consider the financial resources or results of operations of CMS Energy, NorthStar Clean Energy, nor any of CMS Energy’s other subsidiaries (other than Consumers and its own subsidiaries (in relevant circumstances)) in making a decision with respect to Consumers’ debt securities or preferred stock. Similarly, neither Consumers nor any other subsidiary of CMS Energy has any obligation in respect of securities of CMS Energy.

This report should be read in its entirety. No one section of this report deals with all aspects of the subject matter of this report. This report should be read in conjunction with the consolidated financial statements and related notes and with MD&A included in the 2022 Form 10‑K.

Available Information

CMS Energy’s internet address is www.cmsenergy.com. CMS Energy routinely posts important information on its website and considers the Investor Relations section, www.cmsenergy.com/investor-relations, a channel of distribution for material information. Information contained on CMS Energy’s website is not incorporated herein.

Forward-looking Statements and Information

This Form 10‑Q 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 “will,” “might,” “may,” “could,” “should,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “seeks,” “projects,” “forecasts,” “predicts,” “assumes,” “goals,” “targets,” “objectives,” “guidance,” “possible,” “potential,” and other similar words is intended to identify forward-looking statements that involve risk and uncertainty. This discussion of potential risks and uncertainties is designed to highlight important factors that may impact CMS Energy’s and Consumers’ businesses and financial outlook. CMS Energy and Consumers have no obligation to update or revise forward-looking statements regardless of whether new information, future events, or any other factors affect the information contained in the statements. These forward-looking statements are subject to various factors that could cause CMS Energy’s and Consumers’ actual results to differ materially from the results anticipated in these statements. These factors include, but are not limited to, the following, all of which are potentially significant:

•the impact and effect of recent events, such as worsening trade relations, geopolitical tensions, war, acts of terrorism, and the responses to these events, and related economic disruptions including, but not limited to, inflation, energy price volatility, and supply chain disruptions

•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

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•potentially adverse regulatory treatment, effects of a failure to receive timely regulatory orders that are or could come before the MPSC, FERC, or other governmental authorities, or effects of a government shutdown

•changes in the performance of or regulations applicable to MISO, Michigan Electric Transmission Company, LLC (a non‑affiliated company), 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 or challenges to federal or state laws or regulations or changes in applicable laws, rules, regulations, principles, or practices, or in their interpretation, such as those related to energy policy, ROA, the Public Utility Regulatory Policies Act of 1978, infrastructure integrity or security, cybersecurity, gas pipeline safety, gas pipeline capacity, energy waste reduction, the environment, regulation or deregulation, reliability, health care reforms, taxes, accounting matters, climate change, air emissions, renewable energy, the Dodd-Frank Act, and other business issues that could have an impact on CMS Energy’s, Consumers’, or any of their affiliates’ businesses or financial results

•factors affecting, disrupting, interrupting, or otherwise impacting CMS Energy’s or Consumers’ facilities, utility infrastructure, operations, or backup systems, such as costs and availability of personnel, equipment, and materials; weather and climate, including catastrophic weather-related damage and extreme temperatures; natural disasters; fires; smoke; scheduled or unscheduled equipment outages; maintenance or repairs; contractor performance; environmental incidents; failures of equipment or materials; electric transmission and distribution or gas pipeline system constraints; interconnection requirements; political and social unrest; general strikes; the government and/or paramilitary response to political or social events; changes in trade policies or regulations; accidents; explosions; physical disasters; global pandemics; cyber incidents; vandalism; war or terrorism; and the ability to obtain or maintain insurance coverage for these events

•the ability of CMS Energy and Consumers to execute cost-reduction strategies

•potentially adverse regulatory or legal interpretations or decisions regarding environmental matters, or delayed regulatory treatment or permitting decisions that are or could come before agencies such as EGLE, the EPA, FERC, and/or the U.S. Army Corps of Engineers, and potential environmental remediation costs associated with these interpretations or decisions, including those that may affect Consumers’ coal ash management or routine maintenance, repair, and replacement classification under New Source Review, a construction-permitting program under the Clean Air Act

•changes in energy markets, including availability, price, and seasonality of electric capacity and the timing and extent of changes in commodity prices and availability and deliverability of coal, natural gas, natural gas liquids, electricity, oil, gasoline, diesel fuel, and certain related products

•the price of CMS Energy common stock, the credit ratings of CMS Energy and Consumers, capital and financial market conditions, and the effect of these market conditions on CMS Energy’s and Consumers’ interest costs and access to the capital markets, including availability of financing to CMS Energy, Consumers, or any of their affiliates

•the ability of CMS Energy and Consumers to execute their financing strategies

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•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 self-generation including distributed generation, energy waste reduction, or energy storage

•loss of customer demand for natural gas due to alternative technologies or fuels or electrification

•ability of Consumers to meet increased renewable energy demand due to customers seeking to meet their own sustainability goals in a timely and cost-efficient manner

•the reputational or other impact on CMS Energy and Consumers of the failure to achieve or make timely progress on their greenhouse gas reduction goals related to reducing their impact on climate change

•adverse consequences of employee, director, or third‑party fraud or non‑compliance with codes of conduct or with laws or regulations

•federal regulation of electric sales, including periodic re‑examination by federal regulators of CMS Energy’s and Consumers’ market-based sales authorizations

•any event, change, development, occurrence, or circumstance that could impact the implementation of the Clean Energy Plan, including any action by a regulatory authority or other third party to prohibit, delay, or impair the implementation of the Clean Energy Plan

•the availability, cost, coverage, and terms of insurance, the stability of insurance providers, and the ability of Consumers to recover the costs of any insurance from customers

•the effectiveness of CMS Energy’s and Consumers’ risk management policies, procedures, and strategies, including strategies to hedge risk related to interest rates and future prices of electricity, natural gas, and other energy-related commodities

•factors affecting development of electric generation projects, gas transmission, and gas and electric distribution infrastructure replacement, conversion, and expansion projects, including factors related to project site identification, construction material pricing, schedule delays, availability of qualified construction personnel, permitting, acquisition of property rights, community opposition, environmental regulations, and government actions

•changes or disruption in fuel supply, including but not limited to supplier bankruptcy and delivery disruptions

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•potential costs, lost revenues, reputational harm, or other consequences resulting from misappropriation of assets or sensitive information, corruption of data, or operational disruption in connection with a cyberattack or other cyber incident

•potential disruption to, interruption or failure of, or other impacts on information technology backup or disaster recovery systems

•technological developments in energy production, storage, delivery, usage, and metering

•the ability to implement and integrate technology successfully, including artificial intelligence

•the impact of CMS Energy’s and Consumers’ integrated business software system and its effects on their operations, including utility customer billing and collections

•adverse consequences resulting from any past, present, or future assertion of indemnity or warranty claims associated with assets and businesses previously owned by CMS Energy or Consumers, including claims resulting from attempts by foreign or domestic governments to assess taxes on or to impose environmental liability associated with past operations or transactions

•the outcome, cost, and other effects of any legal or administrative claims, proceedings, investigations, or settlements

•the reputational impact on CMS Energy and Consumers of operational incidents, violations of corporate policies, regulatory violations, inappropriate use of social media, and other events

•restrictions imposed by various financing arrangements and regulatory requirements on the ability of Consumers and other subsidiaries of CMS Energy to transfer funds to CMS Energy in the form of cash dividends, loans, or advances

•earnings volatility resulting from the application of fair value accounting to certain energy commodity contracts or interest rate contracts

•changes in financial or regulatory accounting principles or policies (e.g., the adoption of the hypothetical liquidation at book value method of accounting for certain non‑regulated renewable energy projects)

•other matters that may be disclosed from time to time in CMS Energy’s and Consumers’ SEC filings, or in other public documents

All forward-looking statements should be considered in the context of the risk and other factors described above and as detailed from time to time in CMS Energy’s and Consumers’ SEC filings. For additional details regarding these and other uncertainties, see Part I—Item 1. Financial Statements—MD&A—Outlook and Notes to the Unaudited Consolidated Financial Statements—Note 1, Regulatory Matters and Note 2, Contingencies and Commitments; and Part I—Item 1A. Risk Factors in the 2022 Form 10‑K.

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Part I—Financial Information

Item 1. Financial Statements

Index to Financial Statements


Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
CMS Energy Consolidated Financial Statements (Unaudited)		44
Consolidated Statements of Income (Unaudited)		44
Consolidated Statements of Comprehensive Income (Unaudited)		46
Consolidated Statements of Cash Flows (Unaudited)		47
Consolidated Balance Sheets (Unaudited)		48
Consolidated Statements of Changes in Equity (Unaudited)		50
Consumers Consolidated Financial Statements (Unaudited)		52
Consolidated Statements of Income (Unaudited)		52
Consolidated Statements of Comprehensive Income (Unaudited)		53
Consolidated Statements of Cash Flows (Unaudited)		55
Consolidated Balance Sheets (Unaudited)		56
Consolidated Statements of Changes in Equity (Unaudited)		58
Notes to the Unaudited Consolidated Financial Statements		59

1:	Regulatory Matters	59
2:	Contingencies and Commitments	60
3:	Financings and Capitalization	65
4:	Fair Value Measurements	69
5:	Financial Instruments	71

6:	Retirement Benefits	72
7:	Income Taxes	73
8:	Earnings Per Share—CMS Energy	74
9:	Revenue	75
10:	Reportable Segments	80
11:	Variable Interest Entities	82
12:	Transition Activities	84

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CMS Energy Corporation

Consumers Energy Company

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This MD&A is a combined report of CMS Energy and Consumers.

Executive Overview

CMS Energy is an energy company operating primarily in Michigan. It is the parent holding company of several subsidiaries, including Consumers, an electric and gas utility, and NorthStar Clean Energy, primarily a domestic independent power producer and marketer. Consumers’ electric utility operations include the generation, purchase, distribution, and sale of electricity, and Consumers’ gas utility operations include the purchase, transmission, storage, distribution, and sale of natural gas. Consumers’ customer base consists of a mix of primarily residential, commercial, and diversified industrial customers. NorthStar Clean Energy, through its subsidiaries and equity investments, is engaged in domestic independent power production, including the development and operation of renewable generation, and the marketing of independent power production.

CMS Energy and Consumers manage their businesses by the nature of services each provides. CMS Energy operates principally in three business segments: electric utility; gas utility; and NorthStar Clean Energy, its non‑utility operations and investments. Consumers operates principally in two business segments: electric utility and gas utility. CMS Energy’s and Consumers’ businesses are affected primarily by:

•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, CMS Energy and Consumers employ the “CE Way,” a lean operating model designed to improve safety, quality, cost, delivery, and employee morale.

CMS Energy and Consumers measure their progress toward the purpose by considering their impact on the “triple bottom line” of people, planet, and profit, which is underpinned by performance; this consideration takes into account not only the economic value that CMS Energy and Consumers create for customers and investors, but also their responsibility to social and environmental goals. The triple bottom line balances the interests of employees, customers, suppliers, regulators, creditors, Michigan’s residents,

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the investment community, and other stakeholders, and it reflects the broader societal impacts of CMS Energy’s and Consumers’ activities.

CMS Energy’s Environmental, Social, Governance and Sustainability Report, which is available to the public, describes CMS Energy’s and Consumers’ progress toward world class performance measured in the areas of people, planet, and profit.

People: The people element of the triple bottom line represents CMS Energy’s and Consumers’ commitment to their employees, their customers, the residents of local communities in which they do business, and other stakeholders.

The safety of employees, customers, and the general public is a priority of CMS Energy and Consumers. Accordingly, CMS Energy and Consumers have worked to integrate a set of safety principles into their business operations and culture. These principles include complying with applicable safety, health, and security regulations and implementing programs and processes aimed at continually improving safety and security conditions. Over the last ten years, Consumers’ Occupational Safety and Health Administration recordable incident rate has decreased by 34 percent.

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.

In September 2023, Consumers filed its Reliability Roadmap, an update to its previous Electric Distribution Infrastructure Investment Plan filed in 2021, with the MPSC. The Reliability Roadmap outlines a five-year strategy to improve Consumers’ electric distribution system and the reliability of the grid. The plan proposes the following spending for projects designed to reduce the number and duration of power outages to customers through investment in infrastructure upgrades, forestry management, and grid modernization:

•capital expenditures of $7 billion over the next five years; this amount is $3 billion higher than proposed in the previous plan

•maintenance and operating spending of $1.7 billion over the next five years, reflecting an increase of $300 million over the previous plan

Consumers will request rate recovery of these proposed expenditures in future electric rate cases.

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Central to Consumers’ commitment to its customers are the initiatives it has undertaken to keep electricity and natural gas affordable, including:

•replacement of coal-fueled generation and PPAs with a cost-efficient mix of renewable energy, less-costly dispatchable generation sources, and energy waste reduction and demand response programs

•targeted infrastructure investment to reduce maintenance costs and improve reliability and safety

•supply chain optimization

•economic development to increase sales and reduce overall rates

•information and control system efficiencies

•employee and retiree health care cost sharing

•tax planning

•cost-effective financing

•workforce productivity enhancements

While CMS Energy and Consumers have experienced some supply chain disruptions and inflationary pressures, they have taken steps to mitigate the impact on their ability to provide safe and reliable service to customers.

Planet: The planet element of the triple bottom line represents CMS Energy’s and Consumers’ commitment to protect the environment. This commitment extends beyond compliance with various state and federal environmental, health, and safety laws and regulations. Management considers climate change and other environmental risks in strategy development, business planning, and enterprise risk management processes.

CMS Energy and Consumers continue to focus on opportunities to protect the environment and to reduce their carbon footprint. As a result of actions already taken through 2022, CMS Energy and Consumers have:

•decreased their combined percentage of electric supply (self-generated and purchased) from coal by 17 percentage points since 2015

•reduced carbon dioxide emissions by over 30 percent since 2005

•reduced methane emissions by more than 20 percent since 2012

•reduced the amount of water used to generate electricity by over 35 percent since 2012

•reduced landfill waste disposal by over 1.7 million tons since 1992

•enhanced, restored, or protected over 6,500 acres of land since 2017

Since 2005, Consumers has reduced its sulfur dioxide and particulate matter emissions by over 90 percent and its NOx emissions by over 80 percent. Consumers began tracking mercury emissions in 2007; since that time, it has reduced such emissions by nearly 90 percent.

The 2016 Energy Law:

•raised the renewable portfolio standard to 15 percent in 2021; Consumers has met the 15‑percent requirement and expects to continue meeting the requirement going forward with a combination of newly generated RECs and previously generated RECs carried over from prior years

•established a goal of 35‑percent combined renewable energy and energy waste reduction by 2025; Consumers achieved 33‑percent combined renewable energy and energy waste reduction through 2022

•authorized incentives for demand response programs and energy efficiency programs, referring to the combined initiatives as energy waste reduction programs

•established an integrated planning process for new electric capacity and energy resources

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Consumers’ Clean Energy Plan details its strategy to meet customers’ long-term energy needs. The Clean Energy Plan was most recently revised and approved by the MPSC in June 2022. Under its Clean Energy Plan, Consumers will meet the requirements of the 2016 Energy Law using its clean and lean strategy, which focuses on increasing the generation of renewable energy, helping customers use less energy, and offering demand response programs to reduce demand during critical peak times.

The Clean Energy Plan outlines Consumers’ long-term strategy for delivering clean, reliable, resilient, and affordable energy to its customers, including plans to:

•end the use of coal-fueled generation in 2025, 15 years sooner than initially planned

•purchase the Covert Generating Facility, a natural gas-fueled generation facility with 1,200 MW of nameplate capacity, allowing Consumers to continue to provide controllable sources of electricity to customers; this purchase was completed in May 2023

•solicit up to 700 MW of capacity through PPAs from sources able to deliver to Michigan’s Lower Peninsula beginning in 2025

•expand its investment in renewable energy, adding nearly 8,000 MW of solar generation by 2040

Under the Clean Energy Plan, Consumers earns a return equal to its weighted-average cost of capital on payments made under new competitively bid PPAs with non‑affiliated entities approved by the MPSC.

The Clean Energy Plan will allow Consumers to exceed its breakthrough goal of at least 50‑percent combined renewable energy and energy waste reduction by 2030.

Presented in the following illustration is Consumers’ 2021 capacity portfolio and its future capacity portfolio under its Clean Energy Plan. This illustration includes the effects of purchased capacity and energy waste reduction and uses the nameplate capacity for all energy sources:

1 Does not include RECs.

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2 These amounts and fuel sources will vary and are dependent on a one‑time competitive solicitation to acquire up to 700 MW of capacity through PPAs from sources able to deliver to Michigan’s Lower Peninsula beginning in 2025.

In addition to Consumers’ plan to eliminate its use of coal-fueled generation in 2025, CMS Energy and Consumers have set the net‑zero emissions goals discussed below.

Net-zero methane emissions from natural gas delivery system by 2030: Under its Methane Reduction Plan, Consumers plans to reduce methane emissions from its system by about 80 percent, from 2012 baseline levels, by accelerating the replacement of aging pipe, rehabilitating or retiring outdated infrastructure, and adopting new technologies and practices. The remaining emissions will likely be offset by purchasing and/or producing renewable natural gas. To date, Consumers has reduced methane emissions by more than 20 percent.

Net-zero carbon emissions from electric business by 2040: This goal includes not only emissions from owned generation, but also emissions from the generation of power purchased through long-term PPAs and from the MISO energy market. Consumers expects to meet 90 percent of its customers’ needs with clean energy sources by 2040 through execution of its Clean Energy Plan. New technologies and carbon offset measures including, but not limited to, carbon sequestration, methane emission capture, forest preservation, and reforestation may be used to close the gap to achieving net-zero carbon emissions.

Net-zero greenhouse gas emissions target for the entire business by 2050: This goal, announced in March 2022, incorporates greenhouse gas emissions from Consumers’ natural gas delivery system, including suppliers and customers, and has an interim goal of reducing customer emissions by 20 percent by 2030. Consumers expects to meet this goal through carbon offset measures, renewable natural gas, energy efficiency and demand response programs, and the adoption of cost-effective emerging technologies once proven and commercially available.

Additionally, to advance its environmental stewardship in Michigan and to minimize the impact of future regulations, Consumers set the following targets in 2022:

•to enhance, restore, or protect 6,500 acres of land by 2026; in 2022, Consumers enhanced, restored, or protected over 700 acres of land

•to reduce water usage by 1.5 billion gallons by 2026; in 2022, Consumers reduced water usage by more than 750 million gallons

•to increase the rate of waste diverted from landfills (through waste reduction, recycling, and reuse) to 90 percent from a baseline of 88 percent through 2023; in 2022, Consumers’ rate of waste diverted from landfills was 92 percent

CMS Energy and Consumers are monitoring numerous legislative, policy, and regulatory initiatives, including those to regulate and report greenhouse gases, and related litigation. While CMS Energy and Consumers cannot predict the outcome of these matters, which could affect them materially, they intend to continue to move forward with their clean and lean strategy.

Profit: The profit element of the triple bottom line represents CMS Energy’s and Consumers’ commitment to meeting their financial objectives and providing economic development opportunities and benefits in the communities in which they do business. CMS Energy’s and Consumers’ financial strength allows them to maintain solid investment-grade credit ratings and thereby reduce funding costs for the benefit of customers and investors, to attract and retain talent, and to reinvest in the communities they serve.

For the nine months ended September 30, 2023, CMS Energy’s net income available to common stockholders was $571 million, and diluted EPS were $1.96. This compares with net income available to

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common stockholders of $659 million and diluted EPS of $2.27 for the nine months ended September 30, 2022. In 2023, lower gas and electric sales, due primarily to unfavorable weather, and higher service restoration costs attributable to storms were partially offset by gas and electric rate increases and gains on the extinguishment of debt. 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.

Over the next five years, Consumers expects weather-normalized electric and gas deliveries to remain relatively stable compared to 2022. This outlook reflects the effects of energy waste reduction programs offset largely by modest growth in electric and gas demand.

Performance: Impacting the Triple Bottom Line

CMS Energy and Consumers remain committed to achieving world class performance while delivering hometown service and positively impacting the triple bottom line of people, planet, and profit. During 2023, CMS Energy and Consumers:

•were selected to receive a $100 million grant from the U.S. Department of Energy to fund investments in its electric distribution system, improving the reliability of Michigan’s electric grid

•participated in the state’s economic development efforts that have resulted in commitments by large third-party manufacturers to construct facilities for electric vehicle batteries and battery components in Michigan

•met all requirements for inclusion in the MSCI ESG Leaders Indexes; these indexes are designed to represent the performance of companies that have high Environmental, Social, and Governance ratings relative to their sector peers

•announced plans for an 85-MW solar array to be constructed at the former D.E. Karn coal-generating facilities, which were retired earlier in 2023

•opened a state-of-the-art natural gas training facility in Flint, Michigan that will facilitate employee training that is critical to keeping workers, customers, and the public safe

•announced plans to install more than 120 automatic transfer reclosers to improve electric reliability and help prevent power outages

•completed the first phase of its Mid-Michigan Pipeline Project, part of Consumers’ commitment to providing safe, reliable, and affordable natural gas to Michigan homes and businesses

•announced new efforts to install electric vehicle chargers at apartment buildings, condominiums, and overnight community locations across the state of Michigan

CMS Energy and Consumers will continue to utilize the CE Way to enable them to achieve world class performance and positively impact the triple bottom line. Consumers’ investment plan and the regulatory environment in which it operates also drive its ability to impact the triple bottom line.

Investment Plan: Over the next five years, Consumers expects to make significant expenditures on infrastructure upgrades, replacements, and clean generation. While it has a large number of potential investment opportunities that would add customer value, Consumers has prioritized its spending based on the criteria of enhancing public safety, increasing reliability, maintaining affordability for its customers, and advancing its environmental stewardship. Consumers’ investment program is expected to result in annual rate-base growth of over seven percent. This rate-base growth, together with cost-control measures, should allow Consumers to maintain affordable customer prices.

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Presented in the following illustration are Consumers’ planned capital expenditures through 2027 of $15.5 billion, which does not yet incorporate incremental capital spending proposed in our updated Reliability Roadmap:

Of this amount, Consumers plans to spend $12.4 billion over the next five years to primarily maintain and upgrade its gas infrastructure and electric distribution systems in order to enhance safety and reliability, improve customer satisfaction, reduce energy waste on those systems, and facilitate its clean energy transformation. The gas infrastructure projects comprise $6.3 billion to sustain deliverability, enhance pipeline integrity and safety, and reduce methane emissions. Electric distribution and other projects comprise $6.1 billion primarily to strengthen circuits and substations, replace poles, and interconnect clean energy resources. Consumers also expects to spend $3.1 billion on clean generation, which includes investments in wind, solar, and hydroelectric generation resources.

Regulation: Regulatory matters are a key aspect of Consumers’ business, particularly rate cases and regulatory proceedings before the MPSC, which permit recovery of new investments while helping to ensure that customer rates are fair and affordable. Important regulatory events and developments not already discussed are summarized below.

2022 Gas Rate Case: In December 2022, Consumers filed an application with the MPSC seeking an annual rate increase of $212 million, based on a 10.25‑percent authorized return on equity for the projected 12‑month period ending September 30, 2024. In June 2023, Consumers reduced its requested annual rate increase to $175 million, based on a 10.25‑percent authorized return on equity. In August 2023, the MPSC approved a settlement agreement authorizing an annual rate increase of $95 million, based on a 9.9‑percent authorized return on equity, effective October 1, 2023.

2023 Electric Rate Case: In May 2023, Consumers filed an application with the MPSC seeking a rate increase of $216 million, made up of two components. First, Consumers requested a $207 million annual rate increase, based on an authorized return on equity of 10.25 percent for the projected 12‑month period ending February 28, 2025. The filing requested authority to recover costs related to new infrastructure investment primarily in distribution system reliability and cleaner energy resources. Second, Consumers

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requested approval of a surcharge for the recovery of $9 million of distribution investments made in 2022 that exceeded the rates authorized in accordance with the December 2021 electric rate order. In September 2023, Consumers revised its requested increase to $169 million.

2022 Electric Rate Case: In January 2023, the MPSC approved a settlement agreement authorizing an annual rate increase of $155 million, based on a 9.9‑percent authorized return on equity. The MPSC also approved a surcharge for the recovery of $6 million of depreciation, property tax, and interest expense related to distribution investments made in 2021 that exceeded what was authorized in rates in accordance with the December 2020 electric rate order. The new rates became effective January 20, 2023.

Looking Forward

CMS Energy and Consumers will continue to consider the impact on the triple bottom line of people, planet, and profit in their daily operations as well as in their long-term strategic decisions. Consumers will continue to seek fair and timely regulatory treatment that will support its customer-driven investment plan, while pursuing cost-control measures that will allow it to maintain sustainable customer base rates. The CE Way is an important means of realizing CMS Energy’s and Consumers’ purpose of achieving world class performance while delivering hometown service.

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Results of Operations

CMS Energy Consolidated Results of Operations


In Millions, Except Per Share Amounts
	Three Months Ended									Nine Months Ended
September 30	2023			2022			Change			2023			2022			Change
Net Income Available to Common Stockholders		$	174		$	163		$	11		$	571		$	659		$	(88)
Basic Earnings Per Average Common Share		$	0.60		$	0.56		$	0.04		$	1.96		$	2.27		$	(0.31)
Diluted Earnings Per Average Common Share		$	0.60		$	0.56		$	0.04		$	1.96		$	2.27		$	(0.31)


In Millions
	Three Months Ended									Nine Months Ended
September 30	2023			2022			Change			2023			2022			Change
Electric utility		$	187		$	194		$	(7)		$	404		$	501		$	(97)
Gas utility		4			(13)			17			181			239			(58)
NorthStar Clean Energy		16			11			5			26			26			—
Corporate interest and other		(33)			(29)			(4)			(40)			(107)			67

Net Income Available to Common Stockholders		$	174		$	163		$	11		$	571		$	659		$	(88)

Amounts in the following tables are presented pre-tax, with the exception of income tax changes.

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Presented in the following table is a summary of changes to net income available to common stockholders for the three and nine months ended September 30, 2023 versus 2022:


In Millions
	Three Months Ended					Nine Months Ended
September 30, 2022				$	163				$	659
Reasons for the change
Consumers electric utility and gas utility
Electric sales		$	(28)				$	(108)
Gas sales		—					(100)
Electric rate increase		74					147
Gas rate increase		21					119
Lower other maintenance and operating expenses		18					24
Higher other income, net of expenses		2					19
Lower income tax expense		14					14


Higher service restoration costs		(35)					(93)
Higher interest charges		(29)					(84)
Higher depreciation and amortization		(17)					(37)
2023 voluntary separation program expenses		(5)					(33)
Higher property taxes, reflecting higher capital spending, and other		(5)					(23)
				$	10				$	(155)
NorthStar Clean Energy				5					—
Corporate interest and other				(4)					67

September 30, 2023				$	174				$	571

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Consumers Electric Utility Results of Operations

Presented in the following table are the detailed changes to the electric utility’s net income available to common stockholders for the three and nine months ended September 30, 2023 versus 2022:


In Millions
	Three Months Ended					Nine Months Ended
September 30, 2022				$	194				$	501
Reasons for the change
Electric deliveries1 and rate increases
Rate increase, including return on higher renewable capital spending		$	74				$	147
Higher energy waste reduction program revenues		6					24
Lower revenue due primarily to unfavorable weather and sales mix		(30)					(103)
Higher (lower) other revenues		2					(5)
				$	52				$	63
Maintenance and other operating expenses
Lower distribution and generation expenses		5					14
Higher service restoration costs due primarily to increased storm activity		(35)					(93)
Higher energy waste reduction program costs		(6)					(24)
2023 voluntary separation program expenses		(3)					(20)
Lower mutual insurance distribution		—					(9)




Higher other maintenance and operating expenses		—					(10)
				(39)					(142)
Depreciation and amortization
Increased plant in service, reflecting higher capital spending				(15)					(24)

General taxes
Higher property taxes, reflecting higher capital spending, and other				(4)					(13)


Other income, net of expenses
Higher interest income		5					15
Higher non-operating retirement benefits expenses		(4)					(6)
Higher other income, net of expenses		2					11
				3					20
Interest charges				(17)					(49)
Income taxes
Lower electric utility pre-tax earnings		5					37
Deferred tax liability reversal2		—					9
Lower renewable energy tax credits		—					(6)
Lower other income taxes		8					8
				13					48
September 30, 2023				$	187				$	404

1For the three months ended September 30, deliveries to end-use customers were 9.8 billion kWh in 2023 and 10.2 billion kWh in 2022. For the nine months ended September 30, deliveries to end-use customers were 27.5 billion kWh in 2023 and 28.5 billion kWh in 2022.

2See Note 7, Income Taxes.

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Consumers Gas Utility Results of Operations

Presented in the following table are the detailed changes to the gas utility’s net income available to common stockholders for the three and nine months ended September 30, 2023 versus 2022:


In Millions
	Three Months Ended					Nine Months Ended
September 30, 2022				$	(13)				$	239
Reasons for the change
Gas deliveries1 and rate increases
Rate increase		$	21				$	119
Higher energy waste reduction program revenues		4					12
Lower revenue due primarily to unfavorable weather		(2)					(105)
Higher other revenues		2					5
				$	25				$	31
Maintenance and other operating expenses
Lower distribution, transmission, and compression expenses		9					18
Absence of 2022 Ray Compressor Station impairment		—					10
2023 voluntary separation program expenses		(2)					(13)
Higher energy waste reduction program costs		(4)					(12)
Lower other maintenance and operating expenses		4					1
				7					4
Depreciation and amortization
Increased plant in service, reflecting higher capital spending				(2)					(13)
General taxes
Higher property taxes, reflecting higher capital spending, and other				(1)					(10)
Other income, net of expenses
Higher non-operating retirement benefits expenses		(5)					(11)
Higher other income, net of expenses		4					10
				(1)					(1)

Interest charges				(12)					(35)
Income taxes
Lower (higher) gas utility pre-tax earnings		(4)					6
Deferred tax liability reversal2		—					4
Absence of 2022 accelerated tax amortizations2		3					(46)
Lower other income taxes		2					2
				1					(34)
September 30, 2023				$	4				$	181

1For the three months ended September 30, deliveries to end-use customers were 30 bcf in 2023 and 31 bcf in 2022. For the nine months ended September 30, deliveries to end-use customers were 198 bcf in 2023 and 222 bcf in 2022.

2See Note 7, Income Taxes.

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NorthStar Clean Energy Results of Operations

Presented in the following table are the detailed changes to NorthStar Clean Energy’s net income available to common stockholders for the three and nine months ended September 30, 2023 versus 2022:


In Millions
	Three Months Ended			Nine Months Ended
September 30, 2022		$	11		$	26
Reason for the change
Higher renewable energy tax credits		$	9		$	9
Lower operating earnings, primarily at DIG		(5)			(6)

Other income tax benefit (expense)		1			(3)
September 30, 2023		$	16		$	26

Corporate Interest and Other Results of Operations

Presented in the following table are the detailed changes to corporate interest and other results for the three and nine months ended September 30, 2023 versus 2022:


In Millions
	Three Months Ended			Nine Months Ended
September 30, 2022		$	(29)		$	(107)
Reasons for the change
Gain on extinguishment of debt1		$	17		$	101
Higher interest earnings and other		5			11

Higher income tax expense due to higher pre-tax earnings		(19)			(30)
Higher interest charges		(7)			(12)
Lower discontinued operations		—			(3)
September 30, 2023		$	(33)		$	(40)

1See Note 3, Financings and Capitalization.

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Cash Position, Investing, and Financing

At September 30, 2023, CMS Energy had $184 million of consolidated cash and cash equivalents, which included $27 million of restricted cash and cash equivalents. At September 30, 2023, Consumers had $34 million of consolidated cash and cash equivalents, which included $27 million of restricted cash and cash equivalents.

Operating Activities

Presented in the following table are specific components of net cash provided by operating activities for the nine months ended September 30, 2023 versus 2022:


In Millions
CMS Energy, including Consumers
Nine Months Ended September 30, 2022	$	667
Reasons for the change
Lower net income	$	(93)
Non‑cash transactions1	(28)


Favorable impact of changes in core working capital,2 due primarily to higher collections, higher prices on gas sold to customers, and lower prices on gas purchased in 2023	1,306
Favorable impact of changes in other assets and liabilities, due primarily to recovery in 2023 of 2022 power supply costs,3 offset partially by higher voluntary separation program payments	52
Nine Months Ended September 30, 2023	$	1,904
Consumers
Nine Months Ended September 30, 2022	$	761
Reasons for the change
Lower net income	$	(168)
Non‑cash transactions1	74

Favorable impact of changes in core working capital,2 due primarily to higher collections, higher prices on gas sold to customers, and lower prices on gas purchased in 2023	1,304
Unfavorable impact of changes in other assets and liabilities, due primarily to higher income tax payments to CMS Energy and voluntary separation program payments, offset partially by recovery in 2023 of 2022 power supply costs3	(5)
Nine Months Ended September 30, 2023	$	1,966

1Non‑cash transactions comprise depreciation and amortization, changes in deferred income taxes and investment tax credits, and other non‑cash operating activities and reconciling adjustments.

2Core working capital comprises accounts receivable, accrued revenue, inventories, accounts payable, and accrued rate refunds.

3For information regarding the underrecovery of power supply costs, see Note 1, Regulatory Matters.

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Investing Activities

Presented in the following table are specific components of net cash used in investing activities for the nine months ended September 30, 2023 versus 2022:


In Millions
CMS Energy, including Consumers
Nine Months Ended September 30, 2022	$	(1,808)
Reasons for the change
Higher capital expenditures	$	(61)
Purchase of Covert Generating Facility1	(812)






Other investing activities, primarily absence of proceeds from sale of assets in 2022	(56)
Nine Months Ended September 30, 2023	$	(2,737)
Consumers
Nine Months Ended September 30, 2022	$	(1,715)
Reasons for the change
Higher capital expenditures	$	(16)
Purchase of Covert Generating Facility1	(812)

Other investing activities, primarily absence of proceeds from sale of assets in 2022	(49)
Nine Months Ended September 30, 2023	$	(2,592)

1See Note 12, Transition Activities.

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Financing Activities

Presented in the following table are specific components of net cash provided by financing activities for the nine months ended September 30, 2023 versus 2022:


In Millions
CMS Energy, including Consumers
Nine Months Ended September 30, 2022	$	860
Reasons for the change
Higher debt issuances	$	1,556
Higher debt retirements	(1,754)

Higher issuances of notes payable	227


Higher payments of dividends on common stock	(25)

Lower proceeds from sales of membership interests in VIEs to tax equity investors	(32)
Higher contributions from noncontrolling interest	4

Other financing activities, primarily higher debt issuance costs, offset partially by the absence of a payment of a long-term contract liability	(1)
Nine Months Ended September 30, 2023	$	835
Consumers
Nine Months Ended September 30, 2022	$	1,020
Reasons for the change
Higher debt issuances	$	671
Higher debt retirements	(1,625)
Higher issuances of notes payable	227
Lower repayments of borrowings from CMS Energy	392
Lower stockholder contribution from CMS Energy	(210)
Lower payments of dividends on common stock	132

Other financing activities, primarily higher debt issuance costs	(7)
Nine Months Ended September 30, 2023	$	600

Capital Resources and Liquidity

CMS Energy and Consumers expect to have sufficient liquidity to fund their present and future commitments. CMS Energy uses dividends and tax-sharing payments from its subsidiaries and external financing and capital transactions to invest in its utility and non‑utility businesses, retire debt, pay dividends, and fund its other obligations. The ability of CMS Energy’s subsidiaries, including Consumers, to pay dividends to CMS Energy depends upon each subsidiary’s revenues, earnings, cash needs, and other factors. In addition, Consumers’ ability to pay dividends is restricted by certain terms included in its articles of incorporation and potentially by FERC requirements and provisions under the Federal Power Act and the Natural Gas Act. For additional details on Consumers’ dividend restrictions, see Notes to the Unaudited Consolidated Financial Statements—Note 3, Financings and Capitalization—Dividend Restrictions. During the nine months ended September 30, 2023, Consumers paid $461 million in dividends on its common stock to CMS Energy.

Consumers uses cash flows generated from operations and external financing transactions, as well as stockholder contributions from CMS Energy, to fund capital expenditures, retire debt, pay dividends, and fund its other obligations. Consumers also uses these sources of funding to contribute to its employee benefit plans.

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Financing and Capital Resources: CMS Energy and Consumers rely on the capital markets to fund their robust capital plan. Barring any sustained market dislocations or disruptions, CMS Energy and Consumers expect to continue to have ready access to the financial and capital markets and will continue to explore possibilities to take advantage of market opportunities as they arise with respect to future funding needs. If access to these markets were to diminish or otherwise become restricted, CMS Energy and Consumers would implement contingency plans to address debt maturities, which could include reduced capital spending.

CMS Energy has entered into forward sales transactions that it may either settle physically by issuing shares of its common stock at the then-applicable forward sale price specified by the agreement or settle net by delivering or receiving cash or shares. CMS Energy may settle the contracts at any time through their maturity dates, and presently intends to physically settle the contracts by delivering shares of its common stock. As of September 30, 2023, these contracts have an aggregate sales price of $444 million, maturing through December 2024. For more information on these forward sale contracts, see Notes to the Unaudited Consolidated Financial Statements—Note 3, Financings and Capitalization—Issuance of Common Stock.

At September 30, 2023, CMS Energy had $530 million of its revolving credit facility available and Consumers had $1.3 billion available under its revolving credit facilities. CMS Energy and Consumers use these credit facilities for general working capital purposes and to issue letters of credit. An additional source of liquidity is Consumers’ commercial paper program, which allows Consumers to issue, in one or more placements, up to $500 million in aggregate principal amount of commercial paper notes with maturities of up to 365 days at market interest rates. These issuances are supported by Consumers’ revolving credit facilities. While the amount of outstanding commercial paper does not reduce the available capacity of the revolving credit facilities, Consumers does not intend to issue commercial paper in an amount exceeding the available capacity of the facilities. At September 30, 2023, there were $247 million commercial paper notes outstanding under this program. For additional details on CMS Energy’s and Consumers’ secured revolving credit facilities and commercial paper program, see Notes to the Unaudited Consolidated Financial Statements—Note 3, Financings and Capitalization.

Certain of CMS Energy’s and Consumers’ credit agreements contain covenants that require CMS Energy and Consumers to maintain certain financial ratios, as defined therein. At September 30, 2023, no default had occurred with respect to any financial covenants contained in CMS Energy’s and Consumers’ credit agreements. CMS Energy and Consumers were each in compliance with these covenants as of September 30, 2023, as presented in the following table:


	Limit	Actual
CMS Energy, parent only
Debt to Capital1	< 0.70 to 1.0	0.59 to 1.0
Consumers
Debt to Capital2	< 0.65 to 1.0	0.50 to 1.0

1Applies to CMS Energy’s revolving credit agreement and letter of credit reimbursement agreement, and a term loan agreement of a subsidiary of NorthStar Clean Energy.

2Applies to Consumers’ revolving credit agreements.

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Outlook

Several business trends and uncertainties may affect CMS Energy’s and Consumers’ financial condition and results of operations. These trends and uncertainties could have a material impact on CMS Energy’s and Consumers’ consolidated income, cash flows, or financial position. For additional details regarding these and other uncertainties, see Forward-looking Statements and Information; Notes to the Unaudited Consolidated Financial Statements—Note 1, Regulatory Matters and Note 2, Contingencies and Commitments; and Part II—Item 1A. Risk Factors.

Consumers Electric Utility Outlook and Uncertainties

Clean Energy Plan: Consumers’ Clean Energy Plan details its strategy to meet customers’ long-term energy needs and provides the foundation for its goal to achieve net-zero carbon emissions from its electric business by 2040. Under this net-zero goal, Consumers plans to eliminate the impact of carbon emissions created by the electricity it generates or purchases for customers. Additionally, through its Clean Energy Plan, Consumers continues to make progress on expanding its customer programs, namely its demand response, energy efficiency, and conservation voltage reduction programs, as well as increasing its renewable energy and pumped storage generation.

The Clean Energy Plan was most recently revised and approved by the MPSC in June 2022. Under this plan, Consumers will eliminate the use of coal-fueled generation in 2025 and expects to meet 90 percent of its customers’ needs with clean energy sources by 2040. Specifically, the Clean Energy Plan provides for:

•the retirement of the D.E. Karn coal-fueled generating units, totaling 515 MW of nameplate capacity; these units closed in June 2023

•the retirement of the J.H. Campbell coal-fueled generating units, totaling 1,407 MW of nameplate capacity, in 2025

•the retirement of the D.E. Karn oil and gas-fueled generating units, totaling 1,219 MW of nameplate capacity, in 2031

The MPSC has authorized Consumers to issue securitization bonds to finance the recovery of and return on the D.E. Karn coal-fueled generating units. Consumers plans to issue securitization bonds in the fourth quarter of 2023. Additionally, the MPSC has authorized regulatory asset treatment for Consumers to recover the remaining book value of the J.H. Campbell coal-fueled generating units, as well as a 9.0‑percent return on equity, commencing in 2025.

Under the Clean Energy Plan, Consumers:

•purchased the Covert Generating Facility, a natural gas-fueled generation facility with 1,200 MW of nameplate capacity in Van Buren County, Michigan in May 2023

•conducted a one‑time competitive solicitation for and is evaluating the acquisition of up to 700 MW of capacity through PPAs from sources able to deliver to Michigan’s Lower Peninsula beginning in 2025; of this amount, up to 500 MW was solicited from dispatchable sources

These actions are expected to help Consumers continue to provide controllable sources of electricity to customers while expanding its investment in renewable energy. The Clean Energy Plan forecasts renewable energy capacity levels of 30 percent in 2025, 43 percent in 2030, and 61 percent in 2040, including the addition of nearly 8,000 MW of solar generation. Additionally, Consumers plans to deploy battery storage beginning in 2024, with 75 MW of energy storage by 2027 and an additional 475 MW by 2040.

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Under its Clean Energy Plan, Consumers bids new capacity competitively and will own and operate approximately 50 percent of new capacity, with the remainder being built and owned by third parties. Additionally, Consumers earns a return equal to its weighted-average cost of capital on payments made under new competitively bid PPAs with non‑affiliated entities approved by the MPSC.

As a result of requests for proposals, Consumers has entered into PPAs to purchase renewable capacity, energy, and RECs from solar generating facilities and build transfer agreements to purchase solar generating facilities. Presented in the following illustration is the aggregate renewable capacity that Consumers expects to add to its portfolio as a result of these agreements:

In support of its Clean Energy Plan, Consumers issued a request for proposals in September 2022 to acquire up to 700 MW of capacity through PPAs from sources able to deliver to Michigan’s Lower Peninsula beginning in 2025. Specifically, Consumers solicited offers to acquire 500 MW of capacity from dispatchable sources and 200 MW of capacity from intermittent resources and dispatchable, non‑intermittent clean capacity resources (including battery storage resources).

Renewable Energy Plan: Michigan has established a 15‑percent renewable portfolio standard. Under this standard, Consumers is required to submit RECs, which represent proof that the associated electricity was generated from a renewable energy resource, in an amount equal to at least 15 percent of Consumers’ electric sales volume each year. Under its renewable energy plan, Consumers has met the 15‑percent requirement and expects to continue meeting the requirement going forward with a combination of newly generated RECs and previously generated RECs carried over from prior years.

Under Consumers’ renewable energy plan, the MPSC has approved the acquisition of up to 525 MW of new wind generation projects and authorized Consumers to earn a 10.7‑percent return on equity on any projects approved by the MPSC. Specifically, the MPSC has approved the following:

•purchase and construction of a 150‑MW wind generation project in Gratiot County, Michigan; the project became operational and Consumers took full ownership in 2020

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•purchase of a 166‑MW wind generation project in Hillsdale, Michigan; the project became operational and Consumers took full ownership in 2021

•purchase of a wind generation project under development, with capacity of up to 201 MW, in Gratiot County, Michigan; Consumers expects to take full ownership and begin commercial operation of the project in the fourth quarter of 2023

The MPSC also approved the execution of a 20-year PPA under which Consumers will purchase 100 MW of renewable capacity, energy, and RECs from a 149‑MW solar generating facility to be constructed in Calhoun County, Michigan; the facility is targeted to be operational in 2024.

Voluntary Large Customer Renewable Energy Program: Consumers provides service under a program that provides large full-service electric customers with the opportunity to advance the development of renewable energy beyond the requirements of the 2016 Energy Law. In 2021, the MPSC approved Consumers’ request to amend its renewable energy plan to remove the annual subscription limit associated with this program. The MPSC also approved up to 1,000 MW of new wind and solar generation projects between 2024 and 2027 to meet customer demand for the program. Consumers will competitively solicit for additional renewable energy assets based on customer applications and will construct the assets based on customer subscriptions to the program.

As part of this program, a 2022 request for proposals resulted in the execution of a build transfer agreement for a 309‑MW solar generating facility to be constructed in Calhoun County, Michigan; the facility is targeted to be operational in 2025. The build transfer agreement was approved by the MPSC in September 2023. Additionally, the request for proposals resulted in the selection of a solar generation project that Consumers will develop and construct at its D.E. Karn generating site, with a capacity of up to 85 MW. The facility is expected to be operational in 2026.

Electric Customer Deliveries and Revenue: Consumers’ electric customer deliveries are seasonal and largely dependent on Michigan’s economy. The consumption of electric energy typically increases in the summer months, due primarily to the use of air conditioners and other cooling equipment. In addition, Consumers’ electric rates, which follow a seasonal rate design, are higher in the summer months than in the remaining months of the year. Each year in June, electric residential customers transition to a summer peak time-of-use rate that allows them to take advantage of lower-cost energy during off-peak times during the summer months. Thus, customers can reduce their electric bills by shifting their consumption from on‑peak to off‑peak times.

Over the next five years, Consumers expects weather-normalized electric deliveries to remain relatively stable compared to 2022. This outlook reflects the effects of energy waste reduction programs offset largely by modest growth in electric demand. Actual delivery levels will depend on:

•energy conservation measures and results of energy waste reduction programs

•weather fluctuations

•Michigan’s economic conditions, including utilization, expansion, or contraction of manufacturing facilities, population trends, electric vehicle adoption, and housing activity

Electric ROA: Michigan law allows electric customers in Consumers’ service territory to buy electric generation service from alternative electric suppliers in an aggregate amount capped at ten percent of Consumers’ sales, with certain exceptions. At September 30, 2023, electric deliveries under the ROA program were at the ten‑percent limit. Of Consumers’ 1.9 million electric customers, fewer than 300, or 0.02 percent, purchased electric generation service under the ROA program.

The 2016 Energy Law established a path to ensure that forward capacity is secured for all electric customers in Michigan, including customers served by alternative electric suppliers under ROA. The law

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also authorized the MPSC to ensure that alternative electric suppliers have procured enough capacity to cover their anticipated capacity requirements for the four‑year forward period. In 2017, the MPSC issued an order establishing a state reliability mechanism for Consumers. Under this mechanism, if an alternative electric supplier does not demonstrate that it has procured its capacity requirements for the four‑year forward period, its customers will pay a set charge to the utility for capacity that is not provided by the alternative electric supplier.

During 2017, the MPSC issued orders finding that it has statutory authority to determine and implement a local clearing requirement, which requires all electric suppliers to demonstrate that a portion of the capacity used to serve customers is located in the MISO footprint in Michigan’s Lower Peninsula. In 2020, the Michigan Supreme Court affirmed the MPSC’s statutory authority to implement a local clearing requirement on individual electric providers.

In 2020, ABATE and another intervenor filed a complaint against the MPSC in the U.S. District Court for the Eastern District of Michigan challenging the constitutionality of a local clearing requirement. The complaint requests the federal court to issue a permanent injunction prohibiting the MPSC from implementing a local clearing requirement on individual electric providers. In February 2023, the U.S. District Court for the Eastern District of Michigan dismissed the complaint. In March 2023, ABATE and the other intervenor filed a claim of appeal of the Eastern District Court’s decision with the U.S. Court of Appeals for the Sixth Circuit. Oral arguments are scheduled for December 2023.

Electric Rate Matters: Rate matters are critical to Consumers’ electric utility business. For additional details on rate matters, see Notes to the Unaudited Consolidated Financial Statements—Note 1, Regulatory Matters and Note 2, Contingencies and Commitments.

MPSC Distribution System Audit: In October 2022, the MPSC ordered the state’s two largest electric utilities, including Consumers, to report on their compliance with regulations and past MPSC orders governing the utilities’ response to outages and downed lines. Consumers responded to the MPSC’s order in November 2022.

Additionally, as directed by the MPSC, the MPSC Staff has engaged a third‑party auditor to review all equipment and operations of the two utilities’ distribution systems; this audit began in August 2023. The third-party auditor must file a summary report on the audit’s progress by the end of 2023, with a final report expected in late summer 2024. Consumers is committed to working with the third‑party auditor and the MPSC to continue improving electric reliability and safety in Michigan.

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In September 2023, Consumers revised its requested increase to $169 million, primarily to reflect the delay of certain capital expenditures beyond the test year. Presented in the following table are the components of the revised requested increase in revenue:


In Millions
Projected 12-Month Period Ending February 28	2025
Components of the requested rate increase
Investment in rate base	$	101
Operating and maintenance costs	(14)
Sales and other revenue	(4)
Cost of capital	77
Subtotal	$	160
Surcharge	9
Total	$	169

Retention Incentive Program: Under its Clean Energy Plan, Consumers will retire the J.H. Campbell coal-fueled generating units in 2025. Consumers implemented a retention incentive program to ensure necessary staffing at the facility through retirement. The aggregate cost of the J.H. Campbell program through 2025 is estimated to be $50 million; Consumers expects to recognize $16 million of retention benefit costs in 2023. The MPSC has approved deferred accounting treatment for these costs; these expenses are deferred as a regulatory asset. For additional details on this program, see Notes to the Unaudited Consolidated Financial Statements—Note 12, Transition Activities.

Electric Environmental Outlook: Consumers’ electric operations are subject to various federal, state, and local environmental laws and regulations. Consumers estimates that it will incur capital expenditures of $210 million from 2023 through 2027 to continue to comply with RCRA, the Clean Air Act, and numerous other environmental regulations. Consumers expects to recover these costs in customer rates, but cannot guarantee this result. Multiple environmental laws and regulations are subject to litigation. Consumers’ primary environmental compliance focus includes, but is not limited to, the following matters.

Air Quality: Multiple air quality regulations apply, or may apply, to Consumers’ electric utility.

In 2012, the EPA published emission standards for electric generating units, known as MATS, based on Section 112 of the Clean Air Act. Consumers has complied, and continues to comply, with the MATS regulation, and does not expect MATS to materially impact its environmental strategy.

CSAPR requires Michigan and many other states to improve air quality by reducing power plant emissions that, according to EPA modeling, contribute to ground-level ozone in other downwind states. Since its 2015 effective date, CSAPR has been revised several times. In June 2023, the EPA published the “Good Neighbor Plan,” a revision to CSAPR. This regulation tightens allowance budgets for electric generating units in Michigan between 2023 and 2029 and changes the mechanism for allocating such allowances on a year-over-year basis beginning in 2026. Consumers’ initial evaluation of this regulation indicates that it will have minimal financial and operational impact in the near term. Additionally, Consumers does not expect any major financial and operational impact in the long term. However, due to the dynamic nature of this regulation, it is difficult to forecast the long-term impact.

In 2015, the EPA lowered the NAAQS for ozone and made it more difficult to construct or modify power plants and other emission sources in areas of the country that do not meet the ozone standard. As of May 2023, three counties in western Michigan have been designated as not meeting the ozone standard.

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None of Consumers’ fossil-fuel-fired generating units are located in these areas. Additionally, in January 2023, the EPA proposed lowering the NAAQS for particulate matter. Consumers will continue to monitor NAAQS rulemakings and evaluate potential impacts to its generating assets.

Consumers continues to evaluate these rules in conjunction with other EPA and EGLE rulemakings, litigation, executive orders, treaties, and congressional actions. This evaluation could result in:

•a change in Consumers’ fuel mix

•changes in the types of generating units Consumers may purchase or build in the future

•changes in how certain units are operated, including the installation of additional emission control equipment

•the retirement, mothballing, or repowering with an alternative fuel of some of Consumers’ generating units

•changes in Consumers’ environmental compliance costs

•the purchase or sale of allowances

Greenhouse Gases: There have been numerous legislative and regulatory initiatives at the state, regional, national, and international levels that involve the potential regulation and reporting of greenhouse gases. Consumers continues to monitor and comment on these initiatives, as appropriate.

In May 2023, the EPA released its proposed rule to address greenhouse gas emissions from existing fossil-fuel-fired electric generating units. Under its Clean Energy Plan, Consumers will eliminate the use of coal-fueled generation in 2025. Therefore, this proposed rule will not materially impact Consumers over the remaining operating lives of these coal-fueled facilities. The proposed rule has requirements for existing natural gas-fueled facilities, however, that could have a material impact on Consumers’ natural gas-fueled facilities. The EPA is scheduled to finalize the rule in April 2024.

Under the Paris Agreement, an international agreement addressing greenhouse gas emissions, the U.S. has committed to reduce greenhouse gas emissions by 50 to 52 percent from 2005 levels by 2030. Under its Clean Energy Plan, Consumers plans to reduce carbon emissions from its electric business by 60 percent from 2005 levels in 2025. At this time, Consumers does not expect any adverse changes to its environmental strategy as a result of this event, as its plans exceed the nationally committed reduction. The commitment made by the U.S. is not binding without new Congressional legislation.

In 2020, Michigan’s Governor signed an executive order creating the Michigan Healthy Climate Plan, which outlines goals for Michigan to achieve economy-wide net-zero greenhouse gas emissions and to be carbon neutral by 2050. The executive order aims for a 28‑percent reduction below 2005 levels of greenhouse gas emissions by 2025. These goals are aspirational in nature and any changes in law or regulation to achieve these goals would need to be approved by the Michigan Legislature or the relevant regulatory agency. Additionally, Consumers has already surpassed the 28‑percent reduction milestone for its owned electric generation and previously announced a goal of achieving net-zero carbon emissions from its electric business by 2040. Consumers does not expect any adverse changes to its environmental strategy as a result of this event.

Increased frequency or intensity of severe or extreme weather events, including those due to climate change, could materially impact Consumers’ facilities, energy sales, and results of operations. Consumers is unable to predict these events or their financial impact; however, Consumers evaluates the potential physical impacts of climate change on its operations, including increased frequency or intensity of storm activity; increased precipitation; increased temperature; and changes in lake and river levels. Consumers released a report addressing the physical risks of climate change on its infrastructure in 2022. Consumers is taking steps to mitigate these risks as appropriate.

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While Consumers cannot predict the outcome of changes in U.S. policy or of other legislative, executive, or regulatory initiatives involving the potential regulation or reporting of greenhouse gases, it intends to move forward with its Clean Energy Plan, its present net-zero goals, and its emphasis on reliable and resilient supply. Litigation, international treaties, executive orders, federal laws and regulations (including regulations by the EPA), and state laws and regulations, if enacted or ratified, could ultimately impact Consumers. Consumers may be required to:

•replace equipment

•install additional emission control equipment

•purchase emission allowances or credits (including potential greenhouse gas offset credits)

•curtail operations

•arrange for alternative sources of supply

•purchase or build facilities that generate fewer emissions

•mothball or retire facilities that generate certain emissions

•pursue energy efficiency or demand response measures more swiftly

•take other steps to manage or lower the emission of greenhouse gases

Although associated capital or operating costs relating to greenhouse gas regulation or legislation could be material and cost recovery cannot be assured, Consumers expects to recover these costs in rates consistent with the recovery of other reasonable costs of complying with environmental laws and regulations.

CCRs: In 2015, the EPA published a rule regulating CCRs under RCRA. This rule adopts minimum standards for the disposal of non‑hazardous CCRs in CCR landfills and surface impoundments and criteria for the beneficial use of CCRs. The rule also sets out conditions under which some CCR units would be forced to cease receiving CCR wastewater and initiate closure. Due to continued litigation, many aspects of the rule have been remanded to the EPA, resulting in more proposed and final rules.

Separately, Congress passed legislation in 2016 allowing participating states to develop permitting programs for CCRs under RCRA Subtitle D. The EPA was granted authority to review these permitting programs to determine if permits issued under the proposed program would be as protective as the federal rule. Once approved, permits issued from an authorized state would replace the requirement to certify compliance with each aspect of the CCR rule. In 2020, EGLE submitted a regulatory package for Michigan’s permit program to the EPA for its review, which is still pending.

Consumers, with agreement from EGLE, completed the work necessary to initiate closure by excavating CCRs or placing a final cover over each of its relevant CCR units prior to the closure initiation deadline. Consumers has historically been authorized to recover in electric rates costs related to coal ash disposal sites.

Water: Multiple water-related regulations apply, or may apply, to Consumers.

The EPA regulates cooling water intake systems of existing electric generating plants under Section 316(b) of the Clean Water Act. The rules seek to reduce alleged harmful impacts on aquatic organisms, such as fish. In 2018, Consumers submitted to EGLE for approval all required studies and recommended plans to comply with Section 316(b) for its coal-fueled units, but has not yet received final approval.

The EPA also regulates the discharge of wastewater through its effluent limitation guidelines for steam electric generating plants. In 2020, the EPA revised previous guidelines related to the discharge of certain wastewater, but allowed for extension of the compliance deadline from the end of 2023 to the end of 2025, upon approval by EGLE through the NPDES permitting process. Consumers received such an

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extension to 2025 for its J.H. Campbell generating facility, which it plans to retire in 2025. In March 2023, the EPA released a proposed rule seeking to replace its 2020 rule and corresponding effluent limitation guidelines. Consumers is evaluating the proposed effluent limitation guidelines for its potential impacts on its generating facilities.

In recent years, the EPA and the U.S. Army Corps of Engineers have proposed changes to the scope of federal jurisdiction over bodies of water and to the frequency of dual jurisdiction in states with authority to regulate the same waters; Michigan is one such state. A 2022 rule changed the definition of “Waters of the United States,” which defines the scope of waters protected under the Clean Water Act. Additionally, in May 2023, the U.S. Supreme Court issued a decision reducing the scope of “Waters of the United States.” Consumers does not expect adverse changes to its environmental strategy as a result of the current interpretations and court decision.

Many of Consumers’ facilities maintain NPDES permits, which are vital to the facilities’ operations. Consumers applies for renewal of these permits every five years. Failure of EGLE to renew any NPDES permit, a successful appeal against a permit, a change in the interpretation or scope of NPDES permitting, or onerous terms contained in a permit could have a significant detrimental effect on the operations of a facility.

Protected Wildlife: Multiple regulations apply, or may apply, to Consumers relating to protected species and habitats.

Statutes like the federal Endangered Species Act, the Migratory Bird Treaty Act, and the Bald and Golden Eagle Protection Act of 1940 may impact operations at Consumers’ facilities. In 2021, the U.S. Fish and Wildlife Service announced its intent to regulate incidental take under the Migratory Bird Treaty Act. Any resulting permitting and monitoring fees and/or restrictions on operations could impact Consumers’ existing and future operations, including wind and solar generation facilities.

Additionally, Consumers is monitoring proposed changes to the listing status of several species within its operational area due to an increase in wildlife-related regulatory activity at federal and state levels. A change in species listed under the Endangered Species Act may impact Consumers’ costs to mitigate its impact on protected species and habitats at certain existing facilities as well as siting choices for new facilities.

Other Matters: Other electric environmental matters could have a material impact on Consumers’ outlook. For additional details on other electric environmental matters, see Notes to the Unaudited Consolidated Financial Statements—Note 2, Contingencies and Commitments—Consumers Electric Utility Contingencies—Electric Environmental Matters.

Consumers Gas Utility Outlook and Uncertainties

Gas Deliveries: Consumers’ gas customer deliveries are seasonal. The peak demand for natural gas typically occurs in the winter due to colder temperatures and the resulting use of natural gas as heating fuel.

Over the next five years, Consumers expects weather-normalized gas deliveries to remain stable relative to 2022. This outlook reflects the effects of energy waste reduction programs offset largely by modest growth in gas demand. Actual delivery levels will depend on:

•weather fluctuations

•use by power producers

•availability and development of renewable energy sources

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•gas price changes

•Michigan’s economic conditions, including population trends and housing activity

•the price or demand of competing energy sources or fuels

•energy efficiency and conservation impacts

Gas Rate Matters: Rate matters are critical to Consumers’ gas utility business. For additional details on rate matters, see Notes to the Unaudited Consolidated Financial Statements—Note 1, Regulatory Matters and Note 2, Contingencies and Commitments.

Postretirement Benefits Expense Accounting Application: In January 2023, Consumers filed an application with the MPSC, requesting authority to defer the future recovery or refund of pension and OPEB expenses above or below the amounts used to set existing rates, respectively. Consumers requested this accounting treatment to begin in 2023 and to continue until rates are reset in the 2022 gas rate case. In March 2023, the MPSC denied Consumers’ application, instead recommending that this would be more appropriately considered as part of Consumers’ 2022 gas rate case.

Gas Pipeline and Storage Integrity and Safety: The U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration has published various rules that expand federal safety standards for gas transmission pipelines and underground storage facilities. Initial expanded requirements for transmission pipelines took effect in 2020, with additional requirements released in 2023. There are also proposed rules expanding requirements for gas distribution systems pending. To comply with these rules, Consumers will incur increased capital and operating and maintenance costs to install and remediate pipelines and to expand inspections, maintenance, and monitoring of its existing pipelines and storage facilities.

Although associated capital or operating and maintenance costs relating to these regulations could be material and cost recovery cannot be assured, Consumers expects to recover such costs in rates consistent with the recovery of other reasonable costs of complying with laws and regulations.

Gas Environmental Outlook: Consumers expects to incur response activity costs at a number of sites, including 23 former MGP sites. For additional details, see Notes to the Unaudited Consolidated Financial Statements—Note 2, Contingencies and Commitments—Consumers Gas Utility Contingencies—Gas Environmental Matters.

Consumers’ gas operations are subject to various federal, state, and local environmental laws and regulations. Multiple environmental laws and regulations are subject to litigation. Consumers’ primary environmental compliance focus includes, but is not limited to, the following matters.

Air Quality: Multiple air quality regulations apply, or may apply, to Consumers’ gas utility.

In June 2023, the EPA published the “Good Neighbor Plan,” a revision to CSAPR that impacts Michigan. This regulation will reduce interstate air pollution transport issues that EPA modeling suggests contribute to downwind states attaining or maintaining compliance with the NAAQS for ozone. While prior CSAPR

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regulations focused only on electric generating units, this latest rule includes other emission sources, including engines at natural gas compressor stations. Compliance with new NOx emission limits is required by May 2026, unless the EPA approves an extension. Consumers expects to incur costs to retrofit or replace equipment at some of its compressor stations.

In 2015, the EPA lowered the NAAQS for ozone and made it more difficult to construct or modify natural gas compressor stations and other emission sources in areas of the country that do not meet the ozone standard. As of May 2023, three counties in western Michigan have been designated as not meeting the ozone standard. One of Consumers’ compressor stations is located in an ozone nonattainment area. Consequently, Consumers has initiated plans to retrofit equipment at this compressor station to lower NOx emissions and comply with a rule proposed by the State of Michigan, as required for a source located in a moderate ozone nonattainment area. Additionally, in January 2023, the EPA proposed lowering the NAAQS for particulate matter. Consumers will continue to monitor NAAQS rulemakings and evaluate potential impacts to its compressor stations and other applicable natural gas storage and delivery assets.

Greenhouse Gases: There is increasing interest at the federal, state, and local levels in potential regulation of greenhouse gases or their sources. Such regulation, if adopted, may involve requirements to reduce methane emissions from Consumers’ gas utility operations and carbon dioxide emissions from customer use of natural gas. No such measures apply to Consumers at this time.

Under the Paris Agreement, an international agreement addressing greenhouse gas emissions, the U.S. has committed to reduce greenhouse gas emissions by 50 to 52 percent from 2005 levels by 2030. The commitment made by the U.S. is not binding without new Congressional legislation. Consumers continues to monitor these initiatives and comment as appropriate. Consumers cannot predict the impact of any potential future legislation or regulation on its gas utility.

Consumers is making voluntary efforts to reduce its gas utility’s methane emissions. Under its Methane Reduction Plan, Consumers has set a goal of net-zero methane emissions from its natural gas delivery system by 2030. Consumers plans to reduce methane emissions from its system by about 80 percent, from 2012 baseline levels, by accelerating the replacement of aging pipe, rehabilitating or retiring outdated infrastructure, and adopting new technologies and practices. The remaining emissions will likely be offset by purchasing and/or producing renewable natural gas. To date, Consumers has reduced methane emissions by more than 20 percent.

In March 2022, Consumers also announced a net-zero greenhouse gas emissions target for its entire natural gas system by 2050. This includes suppliers and customers, and has an interim goal of reducing customer emissions by 20 percent by 2030. Consumers’ Natural Gas Delivery Plan, a ten‑year strategic investment plan to deliver safe, reliable, clean, and affordable natural gas to customers, outlines ways in which Consumers can make early progress toward these goals in a cost-effective manner, including energy waste reduction or energy efficiency, carbon offsets, and renewable natural gas supply.

Consumers has already initiated work in these key areas, continuing to expand its energy waste reduction targets, launching a program allowing gas customers to purchase carbon offset credits on a voluntary basis, and announcing plans to begin development of renewable natural gas facilities that will capture methane from manure generated at Michigan-based farms and convert it into renewable natural gas.

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Consumers is evaluating and monitoring newer technologies to determine their role in achieving Consumers’ interim and long-term net-zero goals, including hydrogen, biofuels, and synthetic methane; carbon capture sequestration systems; and other innovative technologies.

NorthStar Clean Energy Outlook and Uncertainties

CMS Energy’s primary focus with respect to its NorthStar Clean Energy businesses is to maximize the value of generating assets, its share of which represents 1,658 MW of capacity, and to pursue opportunities for the development of renewable generation projects.

In August 2023, NorthStar Clean Energy sold a Class A membership interest in Newport Solar Holdings to tax equity investors. Newport Solar Holdings wholly owns Newport Solar, LLC, a 180-MW solar generation project located in Jackson County, Arkansas. The tax equity investors contributed $17 million to Newport Solar Holdings in August 2023 and $69 million in October 2023, after the project became commercially operational. All of the project’s nameplate capacity has been committed under a 15‑year PPA. NorthStar Clean Energy retained a Class B membership interest in Newport Solar Holdings. Earnings, tax attributes, and cash flows generated by Newport Solar Holdings will be allocated among and distributed to the membership classes in accordance with the ratios specified in the associated limited liability company operating agreement; these ratios change over time and are not representative of the ownership interest percentages of each membership class.

NorthStar Clean Energy’s operations may be subject to various federal, state, and local environmental laws and regulations. Multiple environmental laws and regulations are subject to litigation. NorthStar Clean Energy’s primary environmental compliance focus includes, but is not limited to, the following matters.

CSAPR requires Michigan and many other states to improve air quality by reducing power plant emissions that, according to EPA modeling, contribute to ground-level ozone in other downwind states. Since its 2015 effective date, CSAPR has been revised several times. In June 2023, the EPA published the “Good Neighbor Plan,” a revision to CSAPR. This regulation tightens allowance budgets for electric generating units in Michigan between 2023 and 2029 and changes the mechanism for allocating such allowances on a year-over-year basis beginning in 2026. NorthStar Clean Energy is evaluating this rule and its impact on NorthStar Clean Energy’s emission sources and may incur costs in allowance purchases or equipment retrofits.

For additional details regarding the ozone NAAQS or CSAPR rule, see Consumers Electric Utility Outlook and Uncertainties—Electric Environmental Outlook.

In May 2023, the EPA released its proposed rule to address greenhouse gas emissions from existing fossil-fuel-fired and natural gas-fueled electric generating units. This proposed regulation could have a material financial and operational impact on NorthStar Clean Energy, if the regulation ultimately applies to its facilities. The EPA is scheduled to finalize the rule in April 2024.

Many of NorthStar Clean Energy’s facilities maintain NPDES permits, which are vital to the facilities’ operations. NorthStar Clean Energy applies for renewal of these permits every five years. Failure of EGLE to renew any NPDES permit, a successful appeal against a permit, a change in the interpretation or

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scope of NPDES permitting, or onerous terms contained in a permit could have a significant detrimental effect on the operations of a facility.

Trends, uncertainties, and other matters related to NorthStar Clean Energy that could have a material impact on CMS Energy’s consolidated income, cash flows, or financial position include:

•investment in and financial benefits received from renewable energy and energy storage projects

•changes in energy and capacity prices

•severe weather events and climate change associated with increasing levels of greenhouse gases

•changes in commodity prices on certain derivative contracts that do not qualify for hedge accounting and must be marked to market through earnings

•changes in various environmental laws, regulations, principles, or practices, or in their interpretation

•indemnity obligations assumed in connection with ownership interests in facilities that involve tax equity financing

•representations, warranties, and indemnities provided by CMS Energy in connection with sales of assets

•delays or difficulties in obtaining environmental permits for facilities located in areas associated with environmental justice concerns

For additional details regarding NorthStar Clean Energy’s uncertainties, see Notes to the Unaudited Consolidated Financial Statements—Note 2, Contingencies and Commitments—Guarantees.

Other Outlook and Uncertainties

Litigation: CMS Energy, Consumers, and certain of their subsidiaries are named as parties in various litigation matters, as well as in administrative proceedings before various courts and governmental agencies, arising in the ordinary course of business. For additional details regarding these and other legal matters, see Notes to the Unaudited Consolidated Financial Statements—Note 1, Regulatory Matters and Note 2, Contingencies and Commitments.

Employee Separation Program: In April 2023, CMS Energy and Consumers announced a voluntary separation program for non‑union employees. For the nine months ended September 30, 2023, CMS Energy and Consumers recorded a pre-tax charge of $33 million related to the program, under which more than 400 employees were approved for and accepted early separation.

New Accounting Standards

There are no new accounting standards issued but not yet effective that are expected to have a material impact on CMS Energy’s or Consumers’ consolidated financial statements.

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CMS Energy Corporation

Consolidated Statements of Income (Unaudited)


In Millions, Except Per Share Amounts
	Three Months Ended						Nine Months Ended
September 30	2023			2022			2023			2022
Operating Revenue		$	1,673		$	2,024		$	5,512		$	6,318
Operating Expenses
Fuel for electric generation		162			312			409			720
Purchased and interchange power		377			572			1,060			1,510
Purchased power – related parties		21			21			57			56
Cost of gas sold		42			118			673			802
Maintenance and other operating expenses		447			413			1,284			1,139
Depreciation and amortization		262			243			870			830
General taxes		91			87			330			308
Total operating expenses		1,402			1,766			4,683			5,365
Operating Income		271			258			829			953
Other Income (Expense)




Non-operating retirement benefits, net		45			54			135			154
Other income		34			5			152			11
Other expense		(2)			(5)			(8)			(20)
Total other income		77			54			279			145
Interest Charges
Interest on long-term debt		158			127			454			370
Interest expense – related parties		3			3			9			9
Other interest expense		4			—			10			2
Allowance for borrowed funds used during construction		(1)			—			(2)			(1)
Total interest charges		164			130			471			380
Income Before Income Taxes		184			182			637			718
Income Tax Expense		11			19			81			72
Income From Continuing Operations		173			163			556			646
Income From Discontinued Operations, Net of Tax of $—, $—, $—, and $1		—			—			1			4
Net Income		173			163			557			650
Loss Attributable to Noncontrolling Interests		(3)			(2)			(21)			(16)
Net Income Attributable to CMS Energy		176			165			578			666
Preferred Stock Dividends		2			2			7			7
Net Income Available to Common Stockholders		$	174		$	163		$	571		$	659

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In Millions, Except Per Share Amounts
	Three Months Ended						Nine Months Ended
September 30	2023			2022			2023			2022
Basic Earnings Per Average Common Share
Income from continuing operations per average common share available to common stockholders		$	0.60		$	0.56		$	1.96		$	2.26
Income from discontinued operations per average common share available to common stockholders		—			—			—			0.01
Basic earnings per average common share		$	0.60		$	0.56		$	1.96		$	2.27
Diluted Earnings Per Average Common Share
Income from continuing operations per average common share available to common stockholders		$	0.60		$	0.56		$	1.96		$	2.26
Income from discontinued operations per average common share available to common stockholders		—			—			—			0.01
Diluted earnings per average common share		$	0.60		$	0.56		$	1.96		$	2.27

The accompanying notes are an integral part of these statements.

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CMS Energy Corporation

Consolidated Statements of Comprehensive Income (Unaudited)


In Millions
	Three Months Ended						Nine Months Ended
September 30	2023			2022			2023			2022
Net Income		$	173		$	163		$	557		$	650
Retirement Benefits Liability
Net gain (loss) arising during the period, net of tax of $—, $(1), $—, and $—		—			(1)			1			1


Amortization of net actuarial loss, net of tax of $

CONSUMERS ENERGY CO [CMS-PB] Filings
10-Q	[2023-10-26]
10-Q	[2023-07-27]
10-Q	[2023-04-27]
10-K	[2023-02-09]
10-Q	[2022-10-27]
10-Q	[2022-07-28]
10-Q	[2022-05-03]
10-K	[2022-02-10]
10-Q	[2021-10-28]
10-Q	[2021-07-29]
10-Q	[2021-04-29]
10-K	[2021-02-11]
10-Q	[2020-10-29]
10-Q	[2020-08-03]
10-Q	[2020-04-27]
10-K	[2020-02-06]
10-Q	[2019-10-24]
10-Q	[2019-07-25]
10-Q	[2019-04-25]
10-K	[2019-02-05]
10-Q	[2018-10-25]
10-Q	[2018-07-26]
10-Q	[2018-04-26]
10-K	[2018-03-08]
10-K	[2018-02-14]
10-Q	[2017-10-26]
10-Q	[2017-07-28]
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