CMS ENERGY CORP [CMS-PC] Filings

10-K 1 cms-20221231.htm FORM 10-K (CMS ENERGY AND CONSUMERS) cms-20221231

Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2022

☐ 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


Securities registered pursuant to Section 12(g) of the Act:			None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

CMS Energy Corporation:

Yes

☒

☐

Consumers Energy Company:

Yes

☒

☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

CMS Energy Corporation:

Yes

☐

☒

Consumers Energy Company:

Yes

☐

☒

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

CMS Energy Corporation:

☒

Consumers Energy Company:

☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

CMS Energy Corporation:

☐

Consumers Energy Company:

☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

CMS Energy Corporation:

☐

Consumers Energy Company:

☐

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

CMS Energy Corporation:

Yes

☐

☒

Consumers Energy Company:

Yes

☐

☒

The aggregate market value of CMS Energy voting and non‑voting common equity held by non‑affiliates was $19.588 billion for the 290,193,601 CMS Energy Corporation Common Stock shares outstanding on June 30, 2022 based on the closing sale price of $67.50 for CMS Energy Corporation Common Stock, as reported by the New York Stock Exchange on such date. There were no shares of Consumers common equity held by non‑affiliates as of June 30, 2022.

There were 291,264,195 shares of CMS Energy Corporation Common Stock outstanding on January 13, 2023. On January 13, 2023, CMS Energy held all 84,108,789 outstanding shares of common stock of Consumers.

Documents incorporated by reference in Part III: CMS Energy’s and Consumers’ proxy statement relating to their 2023 Annual Meetings of Shareholders to be held May 5, 2023.

Table of Contents

CMS Energy Corporation

Consumers Energy Company

Annual Reports on Form 10-K to the Securities and Exchange Commission for the Year Ended December 31, 2022

Table of Contents


Glossary		2
Filing Format		12

Forward-Looking Statements and Information		12
Part I		16
Item 1.	Business	16
Item 1A.	Risk Factors	37
Item 1B.	Unresolved Staff Comments	47
Item 2.	Properties	47
Item 3.	Legal Proceedings	48
Item 4.	Mine Safety Disclosures	48
Part II		48
Item 5.	Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	48
Item 6.	Reserved	50


Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	50
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	86
Item 8.	Financial Statements and Supplementary Data	87


Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	183
Item 9A.	Controls and Procedures	183

Item 9B.	Other Information	185
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	185








Part III		185
Item 10.	Directors, Executive Officers and Corporate Governance	185
Item 11.	Executive Compensation	186
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	187
Item 13.	Certain Relationships and Related Transactions, and Director Independence	187
Item 14.	Principal Accountant Fees and Services	187
Part IV		189
Item 15.	Exhibits and Financial Statement Schedules	189
Item 16.	Form 10-K Summary	202
Signatures		203

Table of Contents

Glossary

Certain terms used in the text and financial statements are defined below.


2016 Energy Law
Michigan’s Public Acts 341 and 342 of 2016




ABATE
Association of Businesses Advocating Tariff Equity

ABO
Accumulated benefit obligation; the liabilities of a pension plan based on service and pay to date, which differs from the PBO in that it does not reflect expected future salary increases

AFUDC
Allowance for borrowed and equity funds used during construction

AOCI
Accumulated other comprehensive income (loss)

ARO
Asset retirement obligation

ASC 715
Financial Accounting Standards Board Accounting Standards Codification Topic 715, Retirement Benefits




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

Aviator Wind Equity Holdings
Aviator Wind Equity Holdings, LLC, a VIE in which Grand River Wind has a 51‑percent interest

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

bcf
Billion cubic feet







CAO
Chief Accounting Officer

Table of Contents


CCR
Coal combustion residual




CEO
Chief Executive Officer

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

CFO
Chief Financial Officer

city-gate contract
An arrangement made for the point at which a local distribution company physically receives gas from a supplier or pipeline

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

Clean Energy Plan
Consumers’ long-term strategy for delivering clean, reliable, resilient, and affordable energy to its customers through the increased use of energy efficiency and customer demand management programs, additional renewable energy generation, and conservation voltage reduction

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

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

CMS Energy
CMS Energy Corporation and its consolidated subsidiaries, unless otherwise noted; the parent of Consumers, NorthStar Clean Energy, and, until October 1, 2021, EnerBank

CMS ERM
CMS Energy Resource Management Company, a wholly owned subsidiary of NorthStar Clean Energy




CMS Gas Transmission
CMS Gas Transmission Company, a wholly owned subsidiary of NorthStar Clean Energy

CMS Generation Michigan Power
CMS Generation Michigan Power L.L.C., a wholly owned subsidiary of HYDRA‑CO

Table of Contents


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




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

Consumers 2014 Securitization Funding
Consumers 2014 Securitization Funding LLC, a wholly owned consolidated bankruptcy-remote subsidiary of Consumers and special-purpose entity organized for the sole purpose of purchasing and owning securitization property, issuing securitization bonds, and pledging its interest in securitization property to a trustee to collateralize the securitization bonds

COVID‑19
Coronavirus disease 2019, a respiratory illness that was declared a pandemic in March 2020 and to which public and private agencies initially responded by instituting social-distancing and other measures designed to slow the spread of the disease

Craven
Craven County Wood Energy Limited Partnership, a VIE in which HYDRA‑CO has a 50-percent interest

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

DB Pension Plan A
Defined benefit pension plan of CMS Energy and Consumers, including certain present and former affiliates and subsidiaries, created as of December 31, 2017 for active employees who were covered under the defined benefit pension plan that closed in 2005

DB Pension Plan B
Defined benefit pension plan of CMS Energy and Consumers, including certain present and former affiliates and subsidiaries, amended as of December 31, 2017 to include only retired and former employees who were covered under the defined benefit pension plan that closed in 2005

DB Pension Plans
Defined benefit pension plans of CMS Energy and Consumers, comprising DB Pension Plan A and DB Pension Plan B

DB SERP
Defined Benefit Supplemental Executive Retirement Plan

Table of Contents


DCCP
Defined Company Contribution Plan

DC SERP
Defined Contribution Supplemental Executive Retirement Plan




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




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

DTE Electric
DTE Electric Company, a non‑affiliated company




EGLE
Michigan Department of Environment, Great Lakes, and Energy

EnerBank
EnerBank USA, until October 1, 2021, a wholly owned subsidiary of CMS Capital; on October 1, 2021, EnerBank was acquired by Regions Bank

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




EPA
U.S. Environmental Protection Agency

EPS
Earnings per share

ERCOT
Electric Reliability Council of Texas

Exchange Act
Securities Exchange Act of 1934







FERC
Federal Energy Regulatory Commission

Table of Contents


First Mortgage Bond Indenture
Indenture dated as of September 1, 1945 between Consumers and The Bank of New York Mellon, as Trustee, as amended and supplemented

FTR
Financial transmission right

GAAP
U.S. Generally Accepted Accounting Principles

GCC
Gas Customer Choice, which allows gas customers to purchase gas from alternative suppliers

GCR
Gas cost recovery

Genesee
Genesee Power Station Limited Partnership, a VIE in which HYDRA‑CO has a 50-percent interest

Grand River Wind
Grand River Wind, LLC, a wholly owned subsidiary of NorthStar Clean Energy

Grayling
Grayling Generating Station Limited Partnership, a VIE in which HYDRA‑CO has a 50-percent interest

GWh
Gigawatt-hour, a unit of energy equal to one billion watt-hours

HYDRA‑CO
HYDRA‑CO Enterprises, Inc., a wholly owned subsidiary of NorthStar Clean Energy

Internal Revenue Code
Internal Revenue Code of 1986, as amended

IRP
Integrated resource plan

IRS
Internal Revenue Service




kV
Thousand volts, a unit used to measure the difference in electrical pressure along a current

Table of Contents


kVA
Thousand volt-amperes, a unit used to reflect the electrical power capacity rating of equipment or a system

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

LIBOR
London Interbank Offered Rate

Ludington
Ludington pumped-storage plant, jointly owned by Consumers and DTE Electric

MATS
Mercury and Air Toxics Standards, which limit mercury, acid gases, and other toxic pollution from coal‑fueled and oil‑fueled power plants




MCV Facility
A 1,647-MW natural gas-fueled, combined-cycle cogeneration facility operated by the MCV Partnership

MCV Partnership
Midland Cogeneration Venture Limited Partnership, a non-affiliated company

MCV PPA
PPA between Consumers and the MCV Partnership




METC
Michigan Electric Transmission Company, LLC, a non‑affiliated company

MGP
Manufactured gas plant







MISO
Midcontinent Independent System Operator, Inc.

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

Table of Contents


MPSC
Michigan Public Service Commission

MRV
Market-related value of plan assets

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

MWh
Megawatt-hour, a unit of energy equal to one million watt-hours

NAAQS
National Ambient Air Quality Standards

NERC
North American Electric Reliability Corporation, a non‑affiliated company responsible for developing and enforcing reliability standards, monitoring the bulk power system, and educating and certifying industry personnel

New Covert Generating Facility
A 1,176-MW natural gas-fueled generating unit that is expected to be acquired by Consumers in May 2023 and is presently operated by New Covert Generating Company, LLC, a non-affiliated company

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




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

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




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

OPEB
Other Post-Employment Benefits

Table of Contents


OPEB Plan
Postretirement health care and life insurance plans of CMS Energy and Consumers, including certain present and former affiliates and subsidiaries

OSHA
Occupational Safety and Health Administration




PBO
Projected benefit obligation

PCB
Polychlorinated biphenyl

PFAS
Per- and polyfluoroalkyl substances




PISP
Performance Incentive Stock Plan

PJM
PJM Interconnection Inc.

PPA
Power purchase agreement

PSCR
Power supply cost recovery

PURPA
Public Utility Regulatory Policies Act of 1978

RCRA
Federal Resource Conservation and Recovery Act of 1976

REC
Renewable energy credit

Regions Bank
A subsidiary of Regions Financial Corporation, a non-affiliated company

ROA
Retail Open Access, which allows electric generation customers to choose alternative electric suppliers pursuant to Michigan’s Public Acts 141 and 142 of 2000, as amended

Table of Contents


S&P
Standard & Poor’s Financial Services LLC

SEC
U.S. Securities and Exchange Commission

securitization
A financing method authorized by statute and approved by the MPSC which allows a utility to sell its right to receive a portion of the rate payments received from its customers for the repayment of securitization bonds issued by a special-purpose entity affiliated with such utility

Series C preferred stock
CMS Energy 4.200 percent cumulative redeemable perpetual preferred stock, Series C, with a liquidation value of $25,000 per share




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

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

TCJA
Tax Cuts and Jobs Act of 2017

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

T.E.S. Filer City
T.E.S. Filer City Station Limited Partnership, a VIE in which HYDRA‑CO has a 50-percent interest

USW
United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO-CLC

UWUA
Utility Workers Union of America, AFL-CIO

VEBA trust
Voluntary employees’ beneficiary association trusts accounts established specifically to set aside employer-contributed assets to pay for future expenses of the OPEB Plan

Table of Contents


VIE
Variable interest entity

Table of Contents

Filing Format

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

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

Forward-Looking Statements and Information

This Form 10-K and other CMS Energy and Consumers disclosures may contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. The use of “might,” “may,” “could,” “should,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “projects,” “forecasts,” “predicts,” “assumes,” and other similar words is intended to identify forward-looking statements that involve risk and uncertainty. This discussion of potential risks and uncertainties is designed to highlight important factors that may impact CMS Energy’s and Consumers’ businesses and financial outlook. CMS Energy and Consumers have no obligation to update or revise forward-looking statements regardless of whether new information, future events, or any other factors affect the information contained in the statements. These forward-looking statements are subject to various factors that could cause CMS Energy’s and Consumers’ actual results to differ materially from the results anticipated in these statements. These factors include, but are not limited to, the following, all of which are potentially significant:

•the impact and effect of recent events, such as the war in Ukraine, the COVID-19 pandemic, and the responses to these events, and related economic disruptions including, but not limited to, labor shortages, inflation, and supply chain disruptions, all of which could impact CMS Energy’s and Consumers’ workforce, operations, revenues, expenses, uncollectible accounts, energy efficiency programs, postretirement benefits funding, PSCR and GCR costs, capital investment programs, cash flows, liquidity, maintenance of existing assets, and other operating expenses

•the impact of new regulation by the MPSC, FERC, and other applicable governmental proceedings and regulations, including any associated impact on electric or gas rates or rate structures

•potentially adverse regulatory treatment or failure to receive timely regulatory orders affecting Consumers that are or could come before the MPSC, FERC, or other governmental authorities

•changes in the performance of or regulations applicable to MISO, METC, pipelines, railroads, vessels, or other service providers that CMS Energy, Consumers, or any of their affiliates rely on to serve their customers

Table of Contents

•the adoption of or challenges to federal or state laws or regulations or changes in applicable laws, rules, regulations, principles, or practices, or in their interpretation, such as those related to energy policy, ROA, PURPA, infrastructure integrity or security, cybersecurity, gas pipeline safety, gas pipeline capacity, energy waste reduction, the environment, regulation or deregulation, reliability, health care reforms (including comprehensive health care reform enacted in 2010), taxes, accounting matters, climate change, air emissions, renewable energy, the Dodd-Frank Act, and other business issues that could have an impact on CMS Energy’s, Consumers’, or any of their affiliates’ businesses or financial results

•factors affecting operations, such as costs and availability of personnel, equipment, and materials; weather and climate conditions; natural disasters; catastrophic weather-related damage; scheduled or unscheduled equipment outages; maintenance or repairs; contractor performance; environmental incidents; failures of equipment or materials; electric transmission and distribution or gas pipeline system constraints; interconnection requirements; political and social unrest; general strikes; the government and/or paramilitary response to political or social events; and changes in trade policies or regulations

•increased frequency or intensity of storms and other adverse weather events due to climate change that could negatively impact infrastructure owned by CMS Energy or Consumers

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

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

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

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

•the potential effects on the credit and capital markets of the transition from LIBOR to an alternative reference interest rate, including SOFR, which may perform differently than LIBOR and could result in increased interest rate expense

•the investment performance of the assets of CMS Energy’s and Consumers’ pension and benefit plans, the discount rates, mortality assumptions, and future medical costs used in calculating the plans’ obligations, and the resulting impact on future funding requirements

•the impact of the economy, particularly in Michigan, and potential future volatility in the financial and credit markets on CMS Energy’s, Consumers’, or any of their affiliates’ revenues, ability to collect accounts receivable from customers, or cost and availability of capital

Table of Contents

•changes in the economic and financial viability of CMS Energy’s and Consumers’ suppliers, customers, and other counterparties and the continued ability of these third parties, including those in bankruptcy, to meet their obligations to CMS Energy and Consumers

•population changes in the geographic areas where CMS Energy and Consumers conduct business

•national, regional, and local economic, competitive, and regulatory policies, conditions, and developments

•loss of customer demand for electric generation supply to alternative electric suppliers, increased use of self-generation including distributed generation, energy waste reduction, or energy storage

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

•restricted ability to construct natural gas infrastructure due to environmental regulations or other governmental action

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

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

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

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

•any event, change, development, occurrence, or circumstance that could impact the implementation of the 2021 IRP, including any action by a regulatory authority or other third party to prohibit, delay, or impair the implementation of the 2021 IRP

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

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

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

•potential disruption to, interruption of, or other impacts on facilities, utility infrastructure, operations, or backup systems due to accidents, explosions, physical disasters, global pandemics, cyber incidents, civil unrest, vandalism, war, or terrorism, and the ability to obtain or maintain insurance coverage for these events

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

Table of Contents

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

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

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

•the ability to implement technology successfully

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

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

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

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

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

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

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

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

All forward-looking statements should be considered in the context of the risk and other factors described above and as detailed from time to time in CMS Energy’s and Consumers’ SEC filings. For additional details regarding these and other uncertainties, see Item 1A. Risk Factors; Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook; and Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 2, Regulatory Matters and Note 3, Contingencies and Commitments.

Table of Contents

Part I

Item 1. Business

General

CMS Energy

CMS Energy was formed as a corporation in Michigan in 1987 and is an energy company operating primarily in Michigan. It is the parent holding company of several subsidiaries, including Consumers, an electric and gas utility, and NorthStar Clean Energy (formerly known as CMS Enterprises Company), primarily a domestic independent power producer and marketer. Consumers serves individuals and businesses operating in the alternative energy, automotive, chemical, food, and metal products industries, as well as a diversified group of other industries. NorthStar Clean Energy, through its subsidiaries and equity investments, is engaged in domestic independent power production, including the development and operation of renewable generation, and the marketing of independent power production.

CMS Energy manages its businesses by the nature of services each provides, and operates principally in three business segments: electric utility; gas utility; and NorthStar Clean Energy, its non‑utility operations and investments. Consumers’ consolidated operations account for the substantial majority of CMS Energy’s total assets, income, and operating revenue. CMS Energy’s consolidated operating revenue was $8.6 billion in 2022, $7.3 billion in 2021, and $6.4 billion in 2020.

For further information about operating revenue, income, and assets and liabilities attributable to all of CMS Energy’s business segments and operations, see Item 8. Financial Statements and Supplementary Data—CMS Energy Consolidated Financial Statements and Notes to the Consolidated Financial Statements.

Consumers

Consumers has served Michigan customers since 1886. Consumers was incorporated in Maine in 1910 and became a Michigan corporation in 1968. Consumers owns and operates electric generation and distribution facilities and gas transmission, storage, and distribution facilities. It provides electricity and/or natural gas to 6.7 million of Michigan’s 10 million residents. Consumers’ rates and certain other aspects of its business are subject to the jurisdiction of the MPSC and FERC, as well as to NERC reliability standards, as described in Item 1. Business—CMS Energy and Consumers Regulation.

Consumers’ consolidated operating revenue was $8.2 billion in 2022, $7.0 billion in 2021, and $6.2 billion in 2020. For further information about operating revenue, income, and assets and liabilities attributable to Consumers’ electric and gas utility operations, see Item 8. Financial Statements and Supplementary Data—Consumers Consolidated Financial Statements and Notes to the Consolidated Financial Statements.

Consumers owns its principal properties in fee, except that most electric lines, gas mains, and renewable generation projects are located below or adjacent to public roads or on land owned by others and are accessed by Consumers through easements, leases, and other rights. Almost all of Consumers’ properties are subject to the lien of its First Mortgage Bond Indenture. For additional information on Consumers’ properties, see Item 1. Business—Business Segments—Consumers Electric Utility—Electric Utility Properties and Business Segments—Consumers Gas Utility—Gas Utility Properties.

Table of Contents

In 2022, Consumers served 1.9 million electric customers and 1.8 million gas customers in Michigan’s Lower Peninsula. Presented in the following map are Consumers’ service territories:








									Electric service territory

									Gas service territory

									Combination electric and gas service territory


			•						Electric generation and battery storage facilities

CMS Energy and Consumers—The Triple Bottom Line

For information regarding CMS Energy’s and Consumers’ purpose and impact on the “triple bottom line” of people, planet, and profit, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Executive Overview.

Business Segments

Consumers Electric Utility

Electric Utility Operations: Consumers’ electric utility operations, which include the generation, purchase, distribution, and sale of electricity, generated operating revenue of $5.4 billion in 2022, $5.0 billion in 2021, and $4.4 billion in 2020. Consumers’ electric utility customer base consists of a mix of primarily residential, commercial, and diversified industrial customers in Michigan’s Lower Peninsula.

Table of Contents

Presented in the following illustration is Consumers’ 2022 electric utility operating revenue of $5.4 billion by customer class:

Consumers’ electric utility operations are not dependent on a single customer, or even a few customers, and the loss of any one or even a few of Consumers’ largest customers is not reasonably likely to have a material adverse effect on Consumers’ financial condition.

In 2022, Consumers’ electric deliveries were 37 billion kWh, which included ROA deliveries of three billion kWh, resulting in net bundled sales of 34 billion kWh. In 2021, Consumers’ electric deliveries were 36 billion kWh, which included ROA deliveries of three billion kWh, resulting in net bundled sales of 33 billion kWh.

Consumers’ electric utility operations are seasonal. The consumption of electric energy typically increases in the summer months, due primarily to the use of air conditioners and other cooling equipment.

Table of Contents

Presented in the following illustration are Consumers’ monthly weather-normalized electric deliveries (deliveries adjusted to reflect normal weather conditions) to its customers, including ROA deliveries, during 2022 and 2021:

Consumers’ 2022 summer peak demand was 8,061 MW, which included ROA demand of 532 MW. For the 2021-2022 winter season, Consumers’ peak demand was 5,559 MW, which included ROA demand of 447 MW. As required by MISO reserve margin requirements, Consumers owns or controls, through long-term PPAs and short-term capacity purchases, all of the capacity required to supply its projected firm peak load and necessary reserve margin for summer 2023.

Electric Utility Properties: Consumers owns and operates electric generation and distribution facilities. For details about Consumers’ electric generation facilities, see the Electric Utility Generation and Supply Mix section that follows this Electric Utility Properties section. Consumers’ distribution system consists of:

•212 miles of high-voltage distribution overhead lines operating at 138 kV

•four miles of high-voltage distribution underground lines operating at 138 kV

•4,430 miles of high-voltage distribution overhead lines operating at 46 kV and 69 kV

•19 miles of high-voltage distribution underground lines operating at 46 kV

•82,326 miles of electric distribution overhead lines

•9,501 miles of underground distribution lines

•1,093 substations with an aggregate transformer capacity of 27 million kVA

•three battery facilities with storage capacity of 2 MWh

Consumers is interconnected to the interstate high-voltage electric transmission system owned by METC and operated by MISO. Consumers is also interconnected to neighboring utilities and to other transmission systems.

Table of Contents

Electric Utility Generation and Supply Mix: Consumers’ Clean Energy Plan details its strategy to meet customers’ long-term energy needs and provides the foundation for its goal to achieve net-zero carbon emissions from its electric business by 2040. This goal includes not only emissions from owned generation, but also emissions from the generation of power purchased through long-term PPAs and from the MISO energy market.

In June 2022, Consumers received approval of its 2021 IRP, which updated its Clean Energy Plan. With these updates, Consumers expects to meet 90 percent of its customers’ needs with clean energy sources by 2040 through execution of its plan, which calls for replacing its coal-fueled generation predominantly with investment in renewable energy. New technologies and carbon offset measures including, but not limited to, carbon sequestration, methane emission capture, forest preservation, and reforestation may be used to close the gap to achieving net-zero carbon emissions. Specifically, the Clean Energy Plan provides for the retirement of the D.E. Karn coal-fueled generating units in 2023 and the J.H. Campbell coal-fueled generating units in 2025. For further information on Consumers’ progress towards its net-zero carbon emissions goal, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Executive Overview.

Table of Contents

Presented in the following table are details about Consumers’ 2022 electric generation and supply mix:


Name and Location (Michigan)	Number of Units and Year Entered Service	2022 Generation Capacity (MW)	1	2022 Electric Supply (GWh)
Coal steam generation
J.H. Campbell 1 & 2 – West Olive2	2 Units, 1962-1967	610		2,869
J.H. Campbell 3 – West Olive2,3	1 Unit, 1980	785		4,449
D.E. Karn 1 & 2 – Essexville4	2 Units, 1959-1961	489		2,899
		1,884		10,217
Oil/Gas steam generation
D.E. Karn 3 & 4 – Essexville	2 Units, 1975-1977	1,213		167
Hydroelectric
Ludington – Ludington	6 Units, 1973	1,109	5	(370)	6
Conventional hydro generation	35 Units, 1906-1949	78		381
		1,187		11
Gas combined cycle
Jackson – Jackson	1 Unit, 2002	535		2,205
Zeeland – Zeeland	3 Units, 2002	533		3,456
		1,068		5,661
Gas combustion turbines
Zeeland (simple cycle) – Zeeland	2 Units, 2001	317		860
Wind generation
Cross Winds® Energy Park – Tuscola County	114 Turbines, 2014, 2018, and 2019	33		747
Lake Winds® Energy Park – Mason County	56 Turbines, 2012	13		269
Gratiot Farms Wind Project – Gratiot County	60 Turbines, 2020	10		421
Crescent Wind Farm – Hillsdale County	60 Turbines, 2021	8		392
		64		1,829
Solar generation
Solar Gardens – Allendale, Cadillac, and Kalamazoo	16,852 Panels, 2016-2021	3		7
Total owned generation		5,736		18,752
Purchased power7
Coal generation – T.E.S. Filer City		60		500
Gas generation – MCV Facility8		1,240		5,857
Other gas generation		155		1,325
Nuclear generation9		—		2,692
Wind generation		60		1,017
Solar generation		71		227
Other renewable generation		204		1,197
		1,790		12,815
Net interchange power10		—		3,943
Total purchased and interchange power		1,790		16,758
Total supply		7,526		35,510
Less distribution and transmission loss				1,940
Total net bundled sales				33,570

Table of Contents

1Represents generation capacity during the summer months (planning year 2022 capacity as reported to MISO and limited by interconnection service limits). For wind and solar generation, the amount represents the effective load-carrying capability.

2Consumers plans to retire these generating units in 2025.

3Represents Consumers’ share of the capacity of the J.H. Campbell 3 unit, net of the 6.69‑percent ownership interest of the Michigan Public Power Agency and Wolverine Power Supply Cooperative, Inc, each a non-affiliated company.

4Consumers plans to retire these generating units in 2023.

5Represents Consumers’ 51‑percent share of the capacity of Ludington. DTE Electric holds the remaining 49‑percent ownership interest.

6Represents Consumers’ share of net pumped-storage generation. The pumped-storage facility consumes electricity to pump water during off-peak hours for storage in order to generate electricity later during peak‑demand hours.

7Represents purchases under long-term PPAs.

8For information about Consumers’ long-term PPA related to the MCV Facility, see Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 3, Contingencies and Commitments—Contractual Commitments.

9Represents purchases from a nuclear generating facility that closed in May 2022.

10Represents purchases from the MISO energy market.

Table of Contents

Presented in the following table are the sources of Consumers’ electric supply for the last three years:


GWh
Years Ended December 31	2022	2021	2020
Owned generation
Coal	10,217	10,861	7,960
Gas	6,684	5,555	5,883
Renewable energy	2,217	1,974	1,505
Oil	4	7	6
Net pumped storage1	(370)	(321)	(371)
Total owned generation	18,752	18,076	14,983
Purchased power2
Gas generation	7,182	5,862	7,346
Nuclear generation	2,692	6,901	6,898
Renewable energy generation	2,441	2,408	2,225
Coal generation	500	494	513
Net interchange power3	3,943	645	2,655
Total purchased and interchange power	16,758	16,310	19,637
Total supply	35,510	34,386	34,620

1Represents Consumers’ share of net pumped-storage generation. During 2022, the pumped-storage facility consumed 1,339 GWh of electricity to pump water during off-peak hours for storage in order to generate 969 GWh of electricity later during peak-demand hours.

2Represents purchases under long-term PPAs.

3Represents purchases from the MISO energy market.

During 2022, Consumers acquired 47 percent of the electricity it provided to customers through long-term PPAs and the MISO energy market. Consumers offers its generation into the MISO energy market on a day-ahead and real-time basis and bids for power in the market to serve the demand of its customers. Consumers is a net purchaser of power and supplements its generation capability with purchases from the MISO energy market.

At December 31, 2022, Consumers had future commitments to purchase capacity and energy under long-term PPAs with various generating plants. These contracts require monthly capacity payments based on the plants’ availability or deliverability. The payments for 2023 through 2050 are estimated to total $8.5 billion and, for each of the next five years, range from $0.7 billion to $0.8 billion annually. These amounts may vary depending on plant availability and fuel costs. For further information about Consumers’ future capacity and energy purchase obligations, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources and Liquidity—Other Material Cash Requirements and Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 3, Contingencies and Commitments—Contractual Commitments.

During 2022, 29 percent of the energy Consumers provided to customers was generated by its coal-fueled generating units, which burned six million tons of coal and produced a combined total of 10,217 GWh of electricity. In order to obtain the coal it needs, Consumers enters into physical coal supply contracts.

Table of Contents

At December 31, 2022, Consumers had future commitments to purchase coal through 2024; payment obligations under these contracts totaled $104 million. Most of Consumers’ rail-supplied coal contracts have fixed prices, although some contain market-based pricing. At December 31, 2022, Consumers had 85 percent of its 2023 expected coal requirements under contract, as well as a 34-day supply of coal on hand.

In conjunction with its coal supply contracts, Consumers leases a fleet of railcars and has transportation contracts with various companies to provide rail services for delivery of purchased coal to Consumers’ generating facilities. Consumers’ coal transportation contracts are future commitments and expire on various dates through 2025; payment obligations under these contracts totaled $428 million at December 31, 2022.

During 2022, 19 percent of the energy Consumers provided to customers was generated by its natural gas‑fueled generating units, which burned 49 bcf of natural gas and produced a combined total of 6,684 GWh of electricity.

In order to obtain the gas it needs for electric generation fuel, Consumers’ electric utility purchases gas from the market near the time of consumption, at prices that allow it to compete in the electric wholesale market. For the Jackson and Zeeland plants, Consumers utilizes an agent that owns firm transportation rights to each plant to purchase gas from the market and transport the gas to the facilities. For units 3 & 4 of D.E. Karn, Consumers holds gas transportation contracts to transport to the plant gas that Consumers or an agent purchase from the market.

Electric Utility Competition: Consumers’ electric utility business is subject to actual and potential competition from many sources, in both the wholesale and retail markets, as well as in electric generation, electric delivery, and retail services.

Michigan law allows electric customers in Consumers’ service territory to buy electric generation service from alternative electric suppliers in an aggregate amount capped at ten percent of Consumers’ sales, with certain exceptions. At December 31, 2022, electric deliveries under the ROA program were at the ten‑percent limit. Of Consumers’ 1.9 million electric customers, fewer than 300, or 0.02 percent, purchased electric generation service under the ROA program. For additional information, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook—Consumers Electric Utility Outlook and Uncertainties.

Consumers also faces competition or potential competition associated with industrial customers relocating all or a portion of their production capacity outside of Consumers’ service territory for economic reasons; municipalities owning or operating competing electric delivery systems; and customer self-generation. Consumers addresses this competition in various ways, including:

•aggressively controlling operating, maintenance, and fuel costs and passing savings on to customers

•providing renewable energy options and energy waste reduction programs

•providing competitive rate-design options, particularly for large energy-intensive customers

•offering tariff-based incentives that support economic development

•monitoring activity in adjacent geographical areas

Table of Contents

Consumers Gas Utility

Gas Utility Operations: Consumers’ gas utility operations, which include the purchase, transmission, storage, distribution, and sale of natural gas, generated operating revenue of $2.7 billion in 2022, $2.1 billion in 2021, and $1.8 billion in 2020. Consumers’ gas utility customer base consists of a mix of primarily residential, commercial, and diversified industrial customers in Michigan’s Lower Peninsula.

Presented in the following illustration is Consumers’ 2022 gas utility operating revenue of $2.7 billion by customer class:

Consumers’ gas utility operations are not dependent on a single customer, or even a few customers, and the loss of any one or even a few of Consumers’ largest customers is not reasonably likely to have a material adverse effect on Consumers’ financial condition.

In 2022, deliveries of natural gas through Consumers’ pipeline and distribution network, including off-system transportation deliveries, totaled 391 bcf, which included GCC deliveries of 34 bcf. In 2021, deliveries of natural gas through Consumers’ pipeline and distribution network, including off-system transportation deliveries, totaled 347 bcf, which included GCC deliveries of 33 bcf. Consumers’ gas utility operations are seasonal. The consumption of natural gas increases in the winter, due primarily to colder temperatures and the resulting use of natural gas as heating fuel. Consumers injects natural gas into storage during the summer months for use during the winter months. During 2022, 48 percent of the natural gas supplied to all customers during the winter months was supplied from storage.

Table of Contents

Presented in the following illustration are Consumers’ monthly weather-normalized natural gas deliveries (deliveries adjusted to reflect normal weather conditions) to its customers, including GCC deliveries, during 2022 and 2021:

Gas Utility Properties: Consumers’ gas transmission, storage, and distribution system consists of:

•2,380 miles of transmission lines

•15 gas storage fields with a total storage capacity of 309 bcf and a working gas volume of 151 bcf

•28,170 miles of distribution mains

•eight compressor stations with a total of 157,893 installed and available horsepower

Under its Methane Reduction Plan, Consumers has set a goal of net-zero methane emissions from its natural gas delivery system by 2030. Consumers plans to reduce methane emissions from its system by about 80 percent by accelerating the replacement of aging pipe, rehabilitating or retiring outdated infrastructure, and adopting new technologies and practices. The remaining emissions will likely be offset by purchasing and/or producing renewable natural gas. For further information on Consumers’ progress towards its net-zero methane emissions goal, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Executive Overview.

Table of Contents

Gas Utility Supply: In 2022, Consumers purchased 86 percent of the gas it delivered from U.S. suppliers. The remaining 14 percent was purchased from authorized GCC suppliers and delivered by Consumers to customers in the GCC program. Presented in the following illustration are the supply arrangements for the gas Consumers delivered to GCC and GCR customers during 2022:

Firm gas transportation or firm city-gate contracts are those that define a fixed amount, price, and delivery time frame. Consumers’ firm gas transportation contracts are with Panhandle Eastern Pipe Line Company and Trunkline Gas Company, LLC, each a non‑affiliated company. Under these contracts, Consumers purchases and transports gas to Michigan for ultimate delivery to its customers. Consumers’ firm gas transportation contracts expire on various dates through 2024 with planned contract volumes providing 38 percent of Consumers’ total forecasted gas supply requirements for 2023. Consumers purchases the balance of its required gas supply under firm city-gate contracts and through authorized suppliers under the GCC program.

Gas Utility Competition: Competition exists in various aspects of Consumers’ gas utility business. Competition comes from GCC and transportation programs; system bypass opportunities for new and existing customers; and from alternative fuels and energy sources, such as propane, oil, and electricity.

Table of Contents

NorthStar Clean Energy—Non-Utility Operations and Investments

NorthStar Clean Energy, through various subsidiaries and certain equity investments, is engaged in domestic independent power production, including the development and operation of renewable generation, and the marketing of independent power production. NorthStar Clean Energy’s operating revenue was $445 million in 2022, $308 million in 2021, and $229 million in 2020.

Independent Power Production: Presented in the following table is information about the independent power plants in which CMS Energy had an ownership interest at December 31, 2022:


Location	Ownership Interest (%)	Primary Fuel Type	Gross Capacity (MW)	1	2022 Net Generation (GWh)
Dearborn, Michigan	100	Natural gas	770		4,786
Gaylord, Michigan	100	Natural gas	134		14
Paulding County, Ohio	100	Wind	100		317
Comstock, Michigan	100	Natural gas	76		111
Delta Township, Michigan	100	Solar	24		40
Phillips, Wisconsin	100	Solar	3		5
Paulding County, Ohio	100	Solar and storage	3		2
Coke County, Texas	51	Wind	525		1,894
Filer City, Michigan	50	Coal	73		498
New Bern, North Carolina	50	Wood waste	50		291
Flint, Michigan	50	Wood waste	40		163
Grayling, Michigan	50	Wood waste	38		219
Total			1,836		8,340

1Represents the intended full-load sustained output of each plant. The amount of capacity relating to CMS Energy’s ownership interest was 1,478 MW and net generation relating to CMS Energy’s ownership interest was 6,826 GWh at December 31, 2022.

The operating revenue from independent power production was $58 million in 2022, $48 million in 2021, and $32 million in 2020.

Energy Resource Management: CMS ERM purchases and sells energy commodities in support of CMS Energy’s generating facilities with a focus on optimizing CMS Energy’s independent power production portfolio. In 2022, CMS ERM marketed two bcf of natural gas and 6,494 GWh of electricity. Electricity marketed by CMS ERM was generated by independent power production of NorthStar Clean Energy and by unrelated third parties. CMS ERM’s operating revenue was $387 million in 2022, $260 million in 2021, and $197 million in 2020.

NorthStar Clean Energy Competition: NorthStar Clean Energy competes with other independent power producers. The needs of this market are driven by electric demand and the generation available.

Table of Contents

CMS Energy and Consumers Regulation

CMS Energy, Consumers, and their subsidiaries are subject to regulation by various federal, state, and local governmental agencies, including those described in the following sections. If CMS Energy or Consumers failed to comply with applicable laws and regulations, they could become subject to fines, penalties, or disallowed costs, or be required to implement additional compliance, cleanup, or remediation programs, the cost of which could be material. For more information on the potential impacts of government regulation affecting CMS Energy and Consumers, see Item 1A. Risk Factors, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook, and Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 2, Regulatory Matters.

FERC and NERC

FERC has exercised limited jurisdiction over several independent power plants and exempt wholesale generators in which NorthStar Clean Energy has ownership interests, as well as over CMS ERM, CMS Gas Transmission, and DIG. FERC’s jurisdiction includes, among other things, acquisitions, operations, disposals of certain assets and facilities, services provided and rates charged, and conduct among affiliates. FERC also has limited jurisdiction over holding company matters with respect to CMS Energy. FERC, in connection with NERC and with regional reliability organizations, also regulates generation and transmission owners and operators, load serving entities, purchase and sale entities, and others with regard to reliability of the bulk power system.

FERC regulates limited aspects of Consumers’ gas business, principally compliance with FERC capacity release rules, shipping rules, the prohibition against certain buy/sell transactions, and the price-reporting rule.

FERC also regulates certain aspects of Consumers’ electric operations, including compliance with FERC accounting rules, wholesale and transmission rates, operation of licensed hydroelectric generating plants, transfers of certain facilities, corporate mergers, and issuances of securities.

MPSC

Consumers is subject to the jurisdiction of the MPSC, which regulates public utilities in Michigan with respect to retail utility rates, accounting, utility services, certain facilities, certain asset transfers, corporate mergers, and other matters.

The Michigan Attorney General, ABATE, the MPSC Staff, residential customer advocacy groups, environmental organizations, and certain other parties typically participate in MPSC proceedings concerning Consumers. These parties often challenge various aspects of those proceedings, including the prudence of Consumers’ policies and practices, and seek cost disallowances and other relief. The parties also have appealed significant MPSC orders.

Rate Proceedings: For information regarding open rate proceedings, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook and Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 2, Regulatory Matters.

Table of Contents

Other Regulation

The U.S. Secretary of Energy regulates imports and exports of natural gas and has delegated various aspects of this jurisdiction to FERC and the U.S. Department of Energy’s Office of Fossil Fuels.

The U.S. Department of Transportation’s Office of Pipeline Safety regulates the safety and security of gas pipelines through the Natural Gas Pipeline Safety Act of 1968 and subsequent laws.

The Transportation Security Administration, an agency of the U.S. Department of Homeland Security, regulates certain activities related to the safety and security of natural gas pipelines.

CMS Energy and Consumers Environmental Strategy and Compliance

CMS Energy and Consumers are committed to protecting the environment; this commitment extends beyond compliance with applicable laws and regulations. Consumers’ Clean Energy Plan details its strategy to meet customers’ long-term energy needs and provides the foundation for its goal to achieve net-zero carbon emissions from its electric business by 2040. This goal includes not only emissions from owned generation, but also emissions from the generation of power purchased through long-term PPAs and from the MISO energy market.

Consumers expects to meet 90 percent of its customers’ needs with clean energy sources by 2040 through execution of its Clean Energy Plan, which calls for replacing its coal-fueled generation predominantly with investment in renewable energy. New technologies and carbon offset measures including, but not limited to, carbon sequestration, methane emission capture, forest preservation, and reforestation may be used to close the gap to achieving net-zero carbon emissions.

In June 2022, Consumers received approval of its 2021 IRP, which updated its Clean Energy Plan. With these updates, Consumers will eliminate the use of coal-fueled generation in 2025 and forecasts renewable energy capacity levels of over 60 percent in 2040. For additional information on Consumers’ Clean Energy Plan, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook—Consumers Electric Utility Outlook and Uncertainties.

In addition to Consumers’ efforts to reduce the electric utility’s carbon footprint, it is also making efforts to reduce the gas utility’s methane footprint. Under its Methane Reduction Plan, Consumers has set a goal of net-zero methane emissions from its natural gas delivery system by 2030. Consumers plans to reduce methane emissions from its system by about 80 percent by accelerating the replacement of aging pipe, rehabilitating or retiring outdated infrastructure, and adopting new technologies and practices. The remaining emissions will likely be offset by purchasing and/or producing renewable natural gas. For additional information on Consumers’ Methane Reduction Plan, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook—Consumers Gas Utility Outlook and Uncertainties—Gas Environmental Outlook.

CMS Energy, Consumers, and their subsidiaries are subject to various federal, state, and local environmental regulations for solid waste management, air and water quality, and other matters. Consumers expects to recover costs to comply with environmental regulations in customer rates but cannot guarantee this result. For additional information concerning environmental matters, see Item 1A. Risk Factors, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook, and Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 3, Contingencies and Commitments.

Table of Contents

CMS Energy has recorded a $45 million liability for its subsidiaries’ obligations associated with Bay Harbor and Consumers has recorded a $62 million liability for its obligations at a number of former MGP sites. For additional information, see Item 1A. Risk Factors and Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 3, Contingencies and Commitments.

Costs related to the construction, operation, corrective action, and closure of solid waste disposal facilities for coal ash are significant. Consumers’ coal ash disposal areas are regulated under Michigan’s solid waste rules and by the EPA’s rules regulating CCRs. To address some of the requirements of these rules, Consumers has converted all of its fly ash handling systems to dry systems. In addition, Consumers’ ash facilities have programs designed to protect the environment and are subject to quarterly EGLE inspections. Consumers’ estimate of capital and cost of removal expenditures to comply with regulations relating to ash disposal is $205 million from 2023 through 2027. Consumers’ future costs to comply with solid waste disposal regulations may vary depending on future legislation, litigation, executive orders, treaties, or rulemaking.

For further information concerning estimated capital expenditures related to environmental matters, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook—Consumers Electric Utility Outlook and Uncertainties—Electric Environmental Outlook.

Insurance

CMS Energy and its subsidiaries, including Consumers, maintain insurance coverage generally similar to comparable companies in the same lines of business. The insurance policies are subject to terms, conditions, limitations, and exclusions that might not fully compensate CMS Energy or Consumers for all losses. A portion of each loss is generally assumed by CMS Energy or Consumers in the form of deductibles and self-insured retentions that, in some cases, are substantial. As CMS Energy or Consumers renews its policies, it is possible that some of the present insurance coverage may not be renewed or obtainable on commercially reasonable terms due to restrictive insurance markets.

Human Capital

CMS Energy and Consumers employ a highly trained and skilled workforce comprised of union, non‑union, and seasonal employees. Presented in the following table are the number of employees of CMS Energy and Consumers:


December 31	2022	2021	2020
CMS Energy, including Consumers


Full-time and part-time employees	8,560	8,509	8,234
Seasonal employees1	513	613	603

Total employees	9,073	9,122	8,837
Consumers


Full-time and part-time employees	8,366	8,314	7,627
Seasonal employees1	513	613	603

Total employees	8,879	8,927	8,230

1Consumers’ seasonal workforce peaked at 587 employees during 2022, 622 employees during 2021, and 603 employees during 2020. Seasonal employees work primarily during the construction season.

Table of Contents

At December 31, 2022, unions represented 41 percent of CMS Energy’s employees and 42 percent of Consumers’ employees. The UWUA represents Consumers’ operating, maintenance, construction, and customer contact center employees. The USW represents Zeeland plant employees. The UWUA and USW agreements expire in 2025.

The safety of employees, customers, and the general public is a priority of CMS Energy and Consumers. Accordingly, CMS Energy and Consumers have worked to integrate a set of safety principles into their business operations and culture. These principles include complying with applicable safety, health, and security regulations and implementing programs and processes aimed at continually improving safety and security conditions. On an annual basis, CMS Energy and Consumers set various safety goals, with their primary measure being the OSHA recordable incident rate. The recordable incident rate was 1.17 in 2022 and 1.54 in 2021. The target recordable incident rate for 2023 is 1.07. Over the last ten years, Consumers’ OSHA recordable incident rate has decreased by 34 percent.

Within the utility industry, there is strong competition for rare, high-demand talent, including those related to renewable energy generation, technology, and data analytics. In order to address this competition and to be able to meet their human capital needs, CMS Energy and Consumers provide compensation and benefits that are competitive with industry peers. Furthermore, CMS Energy and Consumers have developed a comprehensive talent strategy, the People Strategy, to attract, develop, and retain highly skilled employees. The strategy focuses on three areas, which are summarized below.

•Cultivating a Purpose-Driven Culture: This goal is aimed at ensuring all co-workers understand how their work drives CMS Energy’s and Consumers’ key strategic goals. CMS Energy’s and Consumers’ progress toward a purpose-driven culture is measured through an engagement index and an empowerment index developed from data obtained through an annual employee engagement survey of union and non-union co-workers administered by a third party. For the year ended December 31, 2022, the employee engagement index score, which measures the percentage of employees that feel satisfied with the company, was 71 percent and ranked in the second quartile of general industry companies. The employee empowerment index score, which measures the percentage of employees that feel the workplace promotes empowerment, was 54 percent and ranked in the third quartile of general industry companies. The general industry benchmark was created by the third party who administered the survey through a targeted sampling of working adults within the U.S. who work for firms with widely respected reputations. CMS Energy and Consumers have a goal to achieve a first-quartile empowerment index score by 2030.

•Creating a Breakthrough Employee Experience: A breakthrough employee experience is one that instills pride and ownership in one’s work. To measure progress toward a breakthrough employee experience, CMS Energy and Consumers measure employees’ satisfaction with people processes, such as performance management and hiring and onboarding new employees. For the year ended December 31, 2022, the employee experience index was 54 percent; CMS Energy and Consumers have a goal to achieve a score of 80 percent by 2030.

•Building Skill Sets at Scale: With an overarching goal of ensuring employees have the right skills to succeed, CMS Energy and Consumers measure progress in this area through achievement of workforce planning and hiring milestones and through a first-time skill attainment index to evaluate the effectiveness of training. CMS Energy and Consumers develop skill sets in co-workers through a variety of means, including union apprenticeship programs and yearly trainings for newly required skills. In 2021, CMS Energy and Consumers launched a full-scale development program for leaders to enable robust succession planning and improve employee engagement and empowerment.

Table of Contents

This talent strategy allows CMS Energy and Consumers to shape employees’ experience and enable leaders to coach and develop co-workers, source talent, and anticipate and adjust to changing skill sets in the business environment.

Diversity, Equity, and Inclusion

As a part of their People Strategy, CMS Energy and Consumers also employ a comprehensive diversity, equity, and inclusion strategy designed to embed diversity, equity, and inclusion into all aspects of their business. This is done through embedding standards for diversity, equity, and inclusion into all company processes and ensuring these standards are incorporated into all employee experiences. To measure their success, CMS Energy and Consumers utilize select questions in the annual engagement survey to create a diversity, equity, and inclusion index. For the year ended December 31, 2022, the diversity, equity, and inclusion index score was 72 percent.

CMS Energy and Consumers are committed to building an inclusive workplace that embraces the diverse makeup of the communities that they serve. The following table presents the composition of CMS Energy’s and Consumers’ workforce:


December 31, 2022	CMS Energy, including Consumers		Consumers
Percent female employees	27	%	28	%
Percent racially or ethnically diverse employees	12		12
Percent employees with disabilities	5		5
Percent veteran employees	11		11

Co-workers are also empowered to engage in employee resource groups and events that encourage candid conversations around diversity, equity, and inclusion. There are eight employee resource groups available to all co-workers; these groups are, by date of origin:

•the Women’s Advisory Panel, contributing to the achievement of the corporate strategy by supporting the retention, development, and success of women

•the Minority Advisory Panel, promoting a culture of diversity and inclusion among all racial and ethnic minorities through education, leadership, development, and networking

•the Women’s Engineering Network, connecting and empowering women in the science, technology, engineering, and mathematics fields, while building capabilities to support company objectives

•the Veteran’s Advisory Panel, supporting former and active military personnel and assisting in recruiting and retaining veterans through career development

•GEN-ERGY, a multigenerational group designed to bridge the gap of learning, networking, and mentoring across the generations of the workforce

•the Pride Alliance of Consumers Energy, promoting an inclusive environment that is safe, supportive, and respectful for lesbian, gay, bi-sexual, and transgender persons and allies

•capABLE, aimed at removing barriers and creating pathways to meaningful work for employees of all abilities

•Interfaith, a space for co-workers of all backgrounds to gather and celebrate their unique beliefs, creating an environment of understanding and respect for all faiths, religions, and spiritual beliefs, including those with no faith affiliation

Table of Contents

Information About CMS Energy’s and Consumers’ Executive Officers

Presented in the following table are the company positions held during the last five years for each of CMS Energy’s and Consumers’ executive officers as of February 3, 2023:


Name, Age, Position(s)			Period
Garrick J. Rochow (age 48)
CMS Energy
President, CEO, and Director			12/2020 – Present
Executive Vice President			1/2020 – 12/2020
Senior Vice President			7/2016 – 1/2020
Consumers
President, CEO, and Director			12/2020 – Present
Executive Vice President			1/2020 – 12/2020
Senior Vice President			7/2016 – 1/2020
NorthStar Clean Energy
Chairman of the Board, CEO, and Director			12/2020 – Present
Rejji P. Hayes (age 48)
CMS Energy
Executive Vice President and CFO			5/2017 – Present
Consumers
Executive Vice President and CFO			5/2017 – Present
NorthStar Clean Energy
Executive Vice President, CFO, and Director			5/2017 – Present
EnerBank
Chairman of the Board and Director			10/2018 – 10/2021
Tonya L. Berry (age 50)
CMS Energy
Senior Vice President			2/2022 – Present
Consumers
Senior Vice President			2/2022 – Present
Vice President			11/2018 – 2/2022
Executive Director, Quality			7/2017 – 11/2018
Catherine A. Hendrian (age 54)
CMS Energy
Senior Vice President			4/2017 – Present
Consumers
Senior Vice President			4/2017 – Present

Table of Contents


Name, Age, Position(s)			Period
Brandon J. Hofmeister (age 46)
CMS Energy
Senior Vice President			7/2017 – Present
Consumers
Senior Vice President			7/2017 – Present
NorthStar Clean Energy
Senior Vice President			9/2017 – Present
Shaun M. Johnson (age 44)
CMS Energy
Senior Vice President and General Counsel			5/2019 – Present
Vice President and Deputy General Counsel			4/2016 – 5/2019
Consumers

CMS ENERGY CORP [CMS-PC] Filings
CMS ENERGY CORP [CMS] Filings
CMS ENERGY CORP [CMSA] Filings
CMS ENERGY CORP [CMSC] Filings
CMS ENERGY CORP [CMSD] Filings
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	[2018-02-14]
10-Q	[2017-10-26]
10-Q	[2017-07-28]
10-Q	[2017-05-01]
10-K	[2017-02-07]
10-Q	[2016-10-27]
10-Q	[2016-07-28]
10-Q	[2016-04-28]
10-K	[2016-02-11]
10-Q	[2015-10-29]
10-Q	[2015-07-23]
10-Q	[2015-04-23]
10-K	[2015-02-05]
10-Q	[2014-10-23]
10-Q	[2014-07-24]
10-Q	[2014-04-24]
10-K	[2014-02-06]
10-Q	[2013-10-24]
10-Q	[2013-07-25]
10-Q	[2013-04-25]
10-K	[2013-02-21]
10-Q	[2012-10-25]
10-Q	[2012-07-26]
10-Q	[2012-04-26]
10-K	[2012-02-23]

CMS ENERGY CORP [CMS-PC] Filings

CMS ENERGY CORP [CMS] Filings

CMS ENERGY CORP [CMSA] Filings

CMS ENERGY CORP [CMSC] Filings

CMS ENERGY CORP [CMSD] Filings