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MarketScreener Homepage  >  Equities  >  Nyse  >  CMS Energy Corporation    CMS

CMS ENERGY CORPORATION

(CMS)
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CMS Energy : CONSUMERS ENERGY CO Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

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02/06/2020 | 09:05am EDT
This Management's Discussion and Analysis of Financial Condition and Results of
Operations is a combined report of CMS Energy and Consumers.
Executive Overview
CMS Energy is an energy company operating primarily in Michigan. It is the
parent holding company of several subsidiaries, including Consumers, an electric
and gas utility; CMS Enterprises, primarily a domestic independent power
producer and marketer; and EnerBank, an industrial bank located in Utah.
Consumers' electric utility operations include the generation, purchase,
transmission, distribution, and sale of electricity, and Consumers' gas utility
operations include the purchase, transmission, storage, distribution, and sale
of natural gas. Consumers' customer base consists of a mix of residential,
commercial, and diversified industrial customers. CMS Enterprises, through its
subsidiaries and equity investments, is engaged in domestic independent power
production, including the development and operation of renewable generation, and
the marketing of independent power production. EnerBank provides unsecured
consumer installment loans, largely for financing home improvements.
CMS Energy and Consumers manage their businesses by the nature of services each
provides. CMS Energy operates principally in four business segments: electric
utility; gas utility; enterprises, its non­utility operations and investments;
and EnerBank. Consumers operates principally in two business segments: electric
utility and gas utility. CMS Energy's and Consumers' businesses are affected
primarily by:
• regulation and regulatory matters


• state and federal legislation


• economic conditions


• weather


• energy commodity prices


• interest rates

• their securities' credit ratings



The Triple Bottom Line
CMS Energy's and Consumers' purpose is to achieve world class performance while
delivering hometown service. In support of this purpose, the companies employ
the "Consumers Energy Way," a lean operating model designed to improve safety,
quality, cost, delivery, and employee morale.


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CMS Energy and Consumers measure their progress toward the purpose by
considering their impact on the "triple bottom line" of people, planet, and
profit, which is underpinned by performance; this consideration takes into
account not only the economic value that the companies create for customers and
investors, but also their responsibility to social and environmental goals. The
triple bottom line balances the interests of the companies' employees,
customers, suppliers, regulators, creditors, Michigan's residents, the
investment community, and other stakeholders, and it reflects the broader
societal impacts of the companies' activities.
                     [[Image Removed: graphic-cmsppp.jpg]]
Consumers' Sustainability Report, which is available to the public, describes
the company's progress toward world class performance measured in the areas of
people, planet, and profit.
People: The people element of the triple bottom line represents CMS Energy's and
Consumers' commitment to their employees, their customers, the residents of
local communities in which the companies do business, and other stakeholders.
The safety of employees, customers, and the general public is a priority of
CMS Energy and Consumers. Accordingly, CMS Energy and Consumers have worked to
integrate a set of safety principles into their business operations and culture.
These principles include complying with applicable safety, health, and security
regulations and implementing programs and processes aimed at continually
improving safety and security conditions. Over the last ten years, Consumers'
OSHA recordable incident rate has decreased by over 63 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, which has resulted in measurable improvements in customer
satisfaction.
Central to Consumers' commitment to its customers are the initiatives it has
undertaken to keep electricity and natural gas affordable, including:
•      replacement of coal-fueled generation and PPAs with renewable energy and

energy waste reduction and demand response programs

• targeted infrastructure investment to improve reliability and safety and

to reduce maintenance costs

• information and control system efficiencies

• employee and retiree health care cost sharing

• workforce productivity enhancements



In addition, Consumers' gas commodity costs declined by 62 percent from 2009
through 2019, due not only to a decrease in market prices but also to Consumers'
improvements to its gas infrastructure and optimization of its gas purchasing
and storage strategy. These gas commodity savings are passed on to customers.
Planet: The planet element of the triple bottom line represents CMS Energy's and
Consumers' commitment to protect the environment. This commitment extends beyond
compliance with various state and federal environmental, health, and safety laws
and regulations. Management considers climate change


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and other environmental risks in the companies' 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 by CMS Energy and Consumers, the companies have:
•      decreased their combined percentage of electric supply (self-generated and

purchased) from coal by 18 percentage points since 2015

• reduced carbon dioxide emissions by over 35 percent since 2005

• reduced the amount of water used to generate electricity by 31 percent

since 2012

• reduced landfill waste disposal by over 1.3 million tons since 1992

• reduced methane emissions by 17 percent since 2012



Additionally, over the last 20 years, Consumers has reduced its sulfur dioxide,
nitrogen oxide, particulate matter, and mercury emissions by over 90 percent.
Presented in the following illustration are Consumers' reductions in these
emissions (Consumers began tracking mercury emissions in 2007):
               [[Image Removed: chart-historicairemissions.jpg]]


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The 2016 Energy Law:
•      raised the renewable energy standard to 12.5 percent in 2019 and
       15 percent in 2021; Consumers met the 12.5-percent requirement in 2019
       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 has achieved 22 percent of the combined

renewable energy and energy waste reduction goal through 2019

• authorized incentives for demand response programs and expanded existing

incentives for energy efficiency programs, referring to the combined

initiatives as energy waste reduction programs

• established an integrated planning process for new generation resources



Consumers filed an IRP with the MPSC in June 2018, detailing its Clean Energy
Plan. In March 2019, Consumers and a broad coalition of key stakeholders,
including business customers, environmental groups, the MPSC Staff, and the
Michigan Attorney General, filed an agreement settling the IRP with the MPSC and
the MPSC approved it in June 2019.
Under its Clean Energy Plan, Consumers will meet the requirements of the
2016 Energy Law using its clean and lean strategy, which focuses on increasing
the generation of renewable energy, helping customers use less energy, and
offering demand response programs to reduce demand during critical peak times.
Further, Consumers plans to replace its coal-fueled generation predominantly
with investment in renewable energy, which will enable Consumers to meet and
exceed the 2016 Energy Law renewable energy requirements and fulfill increasing
customer demand for renewable energy. Through its Clean Energy Plan, Consumers
expects to reduce carbon emissions of its owned generation by more than
90 percent from its 2005 levels by 2040. Additionally, the plan will allow
Consumers to achieve a breakthrough goal of at least 50 percent combined
renewable energy and energy waste reduction by 2030.


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Presented in the following illustration is Consumers' 2019 capacity portfolio
and its future capacity portfolio as projected in the IRP. This illustration
includes the effects of purchased capacity and energy waste reduction and uses
the nameplate capacity of renewable energy sources:
                   [[Image Removed: chart-cecapacitymix.jpg]]
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. In October 2019, Consumers set a goal of net-zero methane emissions
from its natural gas delivery system by 2030. Consumers' Methane Reduction Plan,
released in November 2019, outlines its plan to reach this net-zero emissions
goal. 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 be eliminated by purchasing and/or producing
renewable natural gas.
Additionally, to advance its environmental stewardship in Michigan and to
minimize the impact of future regulations, Consumers announced the following
five­year targets during 2018:
•      to reduce its water use by one billion gallons; during 2018 and 2019,

Consumers reduced its water usage by over 400 million gallons

• to reduce the amount of waste taken to landfills by 35 percent; during

2018 and 2019, Consumers reduced its waste to landfills by 10 percent

• to enhance, restore, or protect 5,000 acres of land; during 2018 and 2019,

       Consumers enhanced, restored, or protected over 2,200 acres of land




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CMS Energy, through its non­utility businesses, continues to pursue further
opportunities for the development of renewable generation projects. In recent
years, CMS Enterprises completed the development of and now operates a wind
generation project and three solar generation projects.
CMS Energy and Consumers are monitoring numerous legislative, policy, and
regulatory initiatives, including those to regulate greenhouse gases, and
related litigation. While CMS Energy and Consumers cannot predict the outcome of
these matters, which could have a material effect on the companies, they intend
to continue to move forward with their clean and lean strategy.
Profit: The profit element of the triple bottom line represents CMS Energy's and
Consumers' commitment to meeting their financial objectives and providing
economic development opportunities and benefits in the communities in which they
do business. CMS Energy's and Consumers' financial strength allows them to
maintain solid investment-grade credit ratings and thereby reduce funding costs
for the benefit of customers and investors, to preserve and create jobs, and to
reinvest in the communities they serve.
In 2019, CMS Energy's net income available to common stockholders was
$680 million, and diluted EPS were $2.39. This compares with net income
available to common stockholders of $657 million and diluted EPS of $2.32 in
2018. In 2019, the benefits from electric and gas rate increases, higher gas
sales due primarily to colder weather, cost control measures, and the gain on
the sale of transmission equipment were offset partially by lower electric sales
due primarily to unfavorable weather, higher depreciation and maintenance,
higher service restoration costs from 2019 storms, lower earnings at the
enterprises segment, and an accrual for a legacy legal obligation. A more
detailed discussion of the factors affecting CMS Energy's and Consumers'
performance can be found in the Results of Operations section that follows this
Executive Overview.
Consumers projects that its electric weather-normalized deliveries will decrease
slightly and gas weather-normalized deliveries will remain stable through 2024.
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. Leveraging the Consumers Energy Way,
CMS Energy and Consumers accomplished the following during 2019:
•      received approval of Consumers' IRP, which supports the companies' clean
       energy goals

• launched a three-year electric vehicle pilot program


•      committed to invest $7.5 billion in Michigan businesses over the next
       five years; of that amount,$1.5 billion will be invested in diverse
       suppliers

• completed the deployment of automated gas meters in areas where Consumers

       provides only natural gas to customers, allowing for drive-by meter
       reading


•      ranked the highest in customer satisfaction among large natural gas

providers in the Midwest, according to a residential customer satisfaction

study conducted by J.D. Power, a global marketing information company



CMS Energy and Consumers will continue to utilize the Consumers Energy Way to
enable them to achieve world class performance and positively impact the triple
bottom line. Consumers' investment plan and the regulatory environment in which
it operates also drive its ability to impact the triple bottom line.
Investment Plan: Consumers expects to make capital investments of $25 billion
over the next ten years. Over the next five years, Consumers expects to make
significant expenditures on infrastructure upgrades


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and replacements and electric supply projects. While it has a large number of
potential investment opportunities that would add customer value, Consumers has
prioritized its spending based on the criteria of enhancing public safety,
increasing reliability, maintaining affordability for its customers, and
advancing its environmental stewardship. Consumers' investment program is
expected to result in annual rate-base growth of six to eight percent. This
rate-base growth, together with cost-control measures, should allow Consumers to
maintain affordable customer prices.
Presented in the following illustration are planned capital expenditures of
$12.2 billion that Consumers expects to make from 2020 through 2024:
               [[Image Removed: chart-cecapitalexpenditures.jpg]]
Of this amount, Consumers plans to spend $9.4 billion over the next five years
to maintain and upgrade its gas infrastructure and electric distribution systems
in order to enhance safety and reliability, improve customer satisfaction, and
reduce energy waste on those systems. The gas infrastructure projects comprise
$5.0 billion to sustain deliverability and enhance pipeline integrity and
safety. These projects, which involve replacement of mains and services and
enhancement of transmission and storage systems, should reduce the minor
quantity of methane emissions released as gas is transported. The electric
distribution projects comprise $4.4 billion to strengthen circuits and
substations and replace poles. Consumers also expects to spend $2.8 billion on
electric supply projects, primarily new renewable generation.
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.
•      2018 Electric Rate Case: In May 2018, Consumers filed an application with

the MPSC seeking an annual rate increase of $58 million, based on a 10.75

percent authorized return on equity. In October 2018, Consumers reduced

its requested annual rate increase to $44 million. In January 2019, the

MPSC approved a settlement agreement authorizing an annual rate decrease

       of $24 million, based on a 10.0 percent authorized return on equity. With
       the elimination of the




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$113 million TCJA credit to customer bills, the approved settlement agreement
resulted in an $89 million net increase in annual rates. The settlement
agreement also provided for deferred accounting treatment for
distribution-related capital investments exceeding certain amounts. Consumers
also agreed to not file a new electric rate case prior to January 2020.
•      2018 Gas Rate Case: In November 2018, Consumers filed an application with

the MPSC seeking an annual rate increase of $229 million, based on a 10.75

percent authorized return on equity. In April 2019, Consumers reduced its

       requested annual rate increase to $204 million. In September 2019, the
       MPSC approved an annual rate increase of $144 million, based on a 9.9

percent authorized return on equity. This increase includes a $13 million

adjustment to begin returning net regulatory tax liabilities associated

with the TCJA to customers. The MPSC also approved the continuation of a

revenue decoupling mechanism, which annually reconciles Consumers' actual

       weather-normalized, non­fuel revenues with the revenues approved by the
       MPSC.

• 2019 Gas Rate Case: In December 2019, Consumers filed an application with

the MPSC seeking an annual rate increase of $245 million, based on a

10.5 percent authorized return on equity. The filing also seeks approval

of a revenue decoupling mechanism that would annually reconcile Consumers'

actual weather-normalized non­fuel revenues with the revenues approved by

the MPSC.

• Tax Cuts and Jobs Act: The TCJA, which changed existing federal tax law

and included numerous provisions that affect businesses, was signed into

law in December 2017. In October 2018, Consumers filed an application to

address the December 31, 2017 remeasurement of its deferred income taxes

and other base rate impacts of the TCJA on customers. In September 2019,

the MPSC authorized Consumers to begin returning net regulatory tax

liabilities of $0.4 billion to gas customers through rates approved in the

2018 gas rate case and $1.2 billion to electric customers through rates to

be determined in Consumers' next electric rate case. Until then, the MPSC

authorized Consumers to refund $32 million to electric customers through a

temporary bill credit. For details on these proceedings, see Item 8.

Financial Statements and Supplementary Data-Notes to the Consolidated

Financial Statements-Note 3, Regulatory Matters.



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


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Results of Operations
CMS Energy Consolidated Results of Operations
                                    In Millions, Except Per Share Amounts
Years Ended December 31                         2019       2018       2017

Net Income Available to Common Stockholders $ 680$ 657$ 460 Basic Earnings Per Average Common Share $ 2.40$ 2.33$ 1.64 Diluted Earnings Per Average Common Share $ 2.39$ 2.32$ 1.64


                                                                                        In Millions
Years Ended December 31          2019        2018       Change        2018        2017       Change
Electric utility              $   509$   535$   (26 )$   535$   455$    80
Gas utility                       233         169           64         169         173           (4 )
Enterprises                        33          34           (1 )        34         (27 )         61
EnerBank                           49          38           11          38          28           10
Corporate interest and
other                            (144 )      (119 )        (25 )      (119 )      (169 )         50
Net Income Available to
Common Stockholders           $   680$   657$    23$   657$   460$   197




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Presented in the following table are specific after-tax changes to net income available to common stockholders for 2019 versus 2018:

                                                                         In Millions
Year Ended December 31, 2018                                                 $   657
Reasons for the change
Consumers electric utility and gas utility
Electric sales                                                   $   (36 )
Gas sales                                                             12
Electric rate increase                                                56
Gas rate increase                                                     66

Gain on sale of transmission equipment, net of voluntary gain sharing1

                                                              13
Lower pipeline integrity expenses                                      9
Lower distribution and transmission expenses                           6
Depreciation and amortization                                        (39 )
Higher service restoration costs                                     (28 )

Absence of 2018 income tax benefit associated with electric cost of removal2

                                                     (26 )
Higher property tax, reflecting higher capital spending              (14 )
Absence of 2018 research and development tax credits2                 (9 )

Absence of 2018 settlement of a property tax appeal related to the J.H. Campbell plant

                                               (7 )
Other                                                                 35     $    38
Enterprises
Gain on sale of transmission equipment1                               12
Lower expenses from legacy obligations, net                            4

Lower earnings due primarily to lower capacity revenue and higher operating and maintenance costs

                               (17 )        (1 )
EnerBank
Higher earnings based on growth in consumer lending                         

11

Corporate interest and other
Absence of 2018 loss on early extinguishment of debt                  12
2019 tax deductions primarily attributable to asset sales              4
Accrual for legacy legal obligation3                                 (22 )
Higher fixed charges due to higher debt                              (18 )
Higher administrative and other expenses                              (1 )       (25 )
Year Ended December 31, 2019                                                 $   680

1 See Note 3, Regulatory Matters and Note 22, Asset Sales and Exit Activities.


2  See Note 14, Income Taxes.

3 See Note 4, Contingencies and Commitments-CMS Energy Contingencies-Gas

Index Price Reporting Litigation.



For specific after-tax changes to net income available to common stockholders
for 2018 versus 2017, see Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations-Results of Operations-CMS Energy
Consolidated Results of Operations, in the   Form 10­K for the fiscal year ended
December 31, 2018, filed February 5, 2019  .


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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 2019 versus 2018 (amounts are presented pre-tax, with the exception of income tax changes):

                                                                         In 

Millions

Year Ended December 31, 2018                                                 $   535
Reasons for the change
Electric deliveries1 and rate increases
Rate increase, including the impacts of the January 2019 order   $    83
Lower sales due primarily to unfavorable weather                     (65 )
Effect of new leases accounting standard2                             12
Other revenues                                                         6     $    36
Maintenance and other operating expenses
Gain on sale of transmission equipment, net of voluntary gain
sharing3                                                              17

Lower other distribution, transmission, and generation expenses

                                                              13
Litigation settlement                                                  8
Higher service restoration costs from 2019 winter storms             (38 )  

-

Depreciation and amortization
Increased plant in service, reflecting higher capital spending                   (31 )
General taxes
Absence of 2018 settlement of a property tax appeal related to
the J.H. Campbell plant                                               (9 )
Higher property tax, reflecting higher capital spending               (6 )
Lower other general taxes                                              1         (14 )
Other income, net of expenses
Lower donations in 2019                                                6
Higher other income, net of expenses                                   6    

12

Interest charges
Effect of new leases accounting standard2                            (12 )
Lower PSCR and other interest charges                                  8          (4 )
Income taxes
Absence of 2018 income tax benefit associated with cost of
removal4                                                             (26 )
Absence of 2018 research and development tax credits4                 (8 )
Lower other income taxes                                               9         (25 )
Year Ended December 31, 2019                                                 $   509


1      Deliveries to end-use customers were 36.8 billion kWh in 2019 and
       38.2 billion kWh in 2018.


2 Under the provisions of ASU 2016-02, Leases, fixed energy and capacity

costs associated with Consumers' PPAs that are accounted for as finance

       leases are presented as amortization and interest expense, rather than
       purchased power expense. See Note 10, Leases and Palisades Financing for
       more information about Consumers' leases.


3  See Note 3, Regulatory Matters and Note 22, Asset Sales and Exit Activities.


4  See Note 14, Income Taxes.




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For detailed changes to the electric utility's net income available to common
stockholders for 2018 versus 2017, see Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations-Results of
Operations-Consumers Electric Utility Results of Operations, in the   Form 10-K
for the fiscal year ended December 31, 2018, filed February 5, 2019  .
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 2019 versus 2018 (amounts are
presented pre-tax, with the exception of income tax changes):
                                                                      In Millions
Year Ended December 31, 2018                                                $ 169
Reasons for the change
Gas deliveries1 and rate increases
Rate increase, including the impacts of the September 2019 order   $ 83
Higher sales, due primarily to colder weather                        16     $  99
Maintenance and other operating expenses
Lower pipeline integrity expenses                                    12
Higher leak repair and survey expenses                               (4 )
Lower maintenance and other operating expenses                        4     

12

Depreciation and amortization
Increased plant in service, reflecting higher capital spending                (22 )
General taxes
Higher property tax, reflecting higher capital spending                       (14 )
Other income, net of expenses
Lower donations in 2019                                               4

Higher AFUDC interest income and other income, net of expenses 7

11

Interest charges                                                               (4 )
Income taxes
Higher gas utility pre-tax earnings                                 (22 )
Lower other income taxes                                              4       (18 )
Year Ended December 31, 2019                                                $ 233

1 Deliveries to end-use customers were 313 bcf in 2019 and 310 bcf in 2018.

For detailed changes to the gas utility's net income available to common stockholders for 2018 versus 2017, see Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations-Consumers Gas Utility Results of Operations, in the Form 10-K for the fiscal year ended December 31, 2018, filed February 5, 2019 .

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Enterprises Results of Operations Presented in the following table are the detailed after-tax changes to the enterprises segment's net income available to common stockholders for 2019 versus 2018:

                                                                       In Millions
Year Ended December 31, 2018                                               $    34
Reason for the change
Gain on sale of transmission equipment1                                    $    12
Lower expenses from legacy obligations, net                                 

4

Lower earnings due primarily to lower capacity revenue and higher operating and maintenance costs

   (17 )
Year Ended December 31, 2019                                               $    33


1  See Note 22, Asset Sales and Exit Activities.


For detailed after-tax changes to the enterprises segment's net income available
to common stockholders for 2018 versus 2017, see Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations-Results of
Operations-Enterprises Results of Operations, in the   Form 10-K for the fiscal
year ended December 31, 2018, filed February 5, 2019  .
EnerBank Results of Operations
Presented in the following table are the detailed after-tax changes to
EnerBank's net income available to common stockholders for 2019 versus 2018:
                                                   In Millions
Year Ended December 31, 2018                              $ 38

Reason for the change Higher earnings based on growth in consumer lending $ 11 Year Ended December 31, 2019

                              $ 49

Presented in the following table are the detailed after-tax changes to EnerBank's net income available to common stockholders for 2018 versus 2017:

                                                                       In 

Millions

Year Ended December 31, 2017                                               $    28
Reasons for the change
Reduction of corporate income tax rate due to the impacts of
the TCJA1                                                                  

$ 7 Deferred income tax adjustment due to the TCJA, primarily the absence of the 2017 adjustment1

     3
Year Ended December 31, 2018                                               $    38


1  See Note 14, Income Taxes.




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Corporate Interest and Other Results of Operations Presented in the following table are the detailed after-tax changes to corporate interest and other results for 2019 versus 2018:

                                                           In Millions
Year Ended December 31, 2018                                    $ (119 )
Reasons for the change
Absence of 2018 loss on early extinguishment of debt            $   12
2019 tax deductions primarily attributable to asset sales            4
Accrual for legacy legal obligation1                               (22 )
Higher fixed charges due to higher debt                            (18 )
Higher administrative and other expenses                            (1 )
Year Ended December 31, 2019                                    $ (144 )

1 See Note 4, Contingencies and Commitments-CMS Energy Contingencies-Gas

Index Price Reporting Litigation.

Presented in the following table are the detailed after-tax changes to corporate interest and other results for 2018 versus 2017:

                                                                       In Millions
Year Ended December 31, 2017$  (169 )
Reasons for the change
Deferred income tax adjustment due to the TCJA, primarily the
absence of the 2017 adjustment1                                            

$ 55 2017 elimination of an intercompany gain on the donation of CMS Energy stock2

9

Lower fixed charges and administrative and other expenses                   

2

Lower tax benefit due to the impacts of the TCJA1                              (16 )
Year Ended December 31, 2018$  (119 )


1  See Note 14, Income Taxes.


2  Eliminated on CMS Energy's consolidated statements of income.




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Cash Position, Investing, and Financing
At December 31, 2019, CMS Energy had $157 million of consolidated cash and cash
equivalents, which included $17 million of restricted cash and cash equivalents.
At December 31, 2019, Consumers had $28 million of consolidated cash and cash
equivalents, which included $17 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 2019 versus 2018:
                                                                      In 

Millions

CMS Energy, including Consumers
Year Ended December 31, 2018                                            $   1,703
Reasons for the change
Higher net income                                                       $      23
Non­cash transactions1                                                        (40 )
Lower postretirement benefits contributions                                 

242

Unfavorable impact of changes in core working capital,2 due primarily to lower accounts payable and lower AMT credit refunds,3 offset partially by higher customer collections and lower gas inventories

(31 ) Unfavorable impact of changes in other assets and liabilities, due primarily to refunds to customers related to the TCJA and self-implemented electric rates

                                              (107 )
Year Ended December 31, 2019                                            $   

1,790

Consumers

Year Ended December 31, 2018                                            $   1,449
Reasons for the change
Higher net income                                                       $      38
Non­cash transactions1                                                        (77 )
Lower postretirement benefits contributions                                 

235

Unfavorable impact of changes in core working capital,2 due primarily to lower accounts payable, offset partially by higher customer collections and lower gas inventories

(16 ) Unfavorable impact of changes in other assets and liabilities, due primarily to refunds to customers related to the TCJA and self-implemented electric rates

                                               (28 )
Year Ended December 31, 2019                                            $   

1,601

1 Non­cash transactions comprise depreciation and amortization, changes in

       deferred income taxes and investment tax credits, bad debt expense, and
       other non­cash operating activities and reconciling adjustments.

2 Core working capital comprises accounts receivable, notes receivable,

accrued revenue, inventories, accounts payable, and accrued rate refunds.


3      CMS Energy received alternative minimum tax (AMT) credit refunds of
       $68 million in 2019 and $125 million in 2018.


For specific components of net cash provided by operating activities for 2018
versus 2017, see Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations-Cash Position, Investing, and
Financing-Operating Activities, in the   Form 10-K for the fiscal year ended
December 31, 2018, filed February 5, 2019  .


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Investing Activities
Presented in the following table are specific components of net cash used in
investing activities for 2019 versus 2018:
                                                                      In 

Millions

CMS Energy, including Consumers
Year Ended December 31, 2018$  (2,606 )
Reasons for the change
Higher capital expenditures at Consumers, offset partially by the
absence of the 2018 purchase of a wind generation project               $   

(30 ) Changes in EnerBank notes receivable, reflecting growth in consumer lending

                                                                       (94 )
Higher purchases of notes receivable by EnerBank                             (118 )
Absence of 2018 proceeds from DB SERP investments1                           (146 )
Proceeds from sale of EnerBank notes receivable                             

67

Proceeds from sale of transmission equipment in 20192                       

97

Other investing activities, primarily lower costs to retire property

   14
Year Ended December 31, 2019                                            $  (2,816 )
Consumers
Year Ended December 31, 2018                                            $  (1,971 )
Reasons for the change
Higher capital expenditures                                             $    (263 )
Proceeds from sale of transmission equipment in 20192                       

77

Other investing activities, primarily lower costs to retire property

    20
Year Ended December 31, 2019$  (2,137 )


1  See Note 7, Financial Instruments.


2  See Note 22, Asset Sales and Exit Activities


For specific components of net cash used in investing activities for 2018 versus
2017, see Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations-Cash Position, Investing, and Financing-Investing
Activities, in the   Form 10-K for the fiscal year ended December 31, 2018,
filed February 5, 2019  .


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Financing Activities
Presented in the following table are specific components of net cash provided by
financing activities for 2019 versus 2018:
                                                                      In 

Millions

CMS Energy, including Consumers
Year Ended December 31, 2018                                            $     874
Reasons for the change
Lower debt issuances                                                    $    (616 )
Lower debt retirements                                                        585

Increases in EnerBank certificates of deposit, reflecting higher borrowings

118

Lower repayments under Consumers' commercial paper program                  

66

Lower issuances of common stock under the continuous equity offering program

                                                                       (29 )
Higher payments of dividends on common and preferred stock                    (29 )
Lower debt prepayment costs                                                 

28

Other financing activities, primarily lower debt issuance costs and higher customer advances for construction

   11
Year Ended December 31, 2019                                            $   1,008
Consumers
Year Ended December 31, 2018                                            $     513
Reasons for the change
Lower debt issuances                                                    $  (1,113 )
Lower debt retirements                                                        652
Lower repayments under Consumers' commercial paper program                  

66

Higher stockholder contribution from CMS Energy

425

Higher payments of dividends on common and preferred stock                    (61 )
Lower debt prepayment costs                                                 

12

Other financing activities, primarily lower debt issuance costs and higher customer advances for construction

14

Year Ended December 31, 2019                                            $   

508



For specific components of net cash provided by (used in) financing activities
for 2018 versus 2017, see Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations-Cash Position, Investing, and
Financing-Financing Activities, in the   Form 10-K for the fiscal year ended
December 31, 2018, filed February 5, 2019  .


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Capital Resources and Liquidity
CMS Energy uses dividends and tax-sharing payments from its subsidiaries and
external financing and capital transactions to invest in its utility and
non­utility 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 debt covenants and 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 Item 8. Financial Statements and Supplementary
Data-Notes to the Consolidated Financial Statements-Note 5, Financings and
Capitalization-Dividend Restrictions. For the year ended December 31, 2019,
Consumers paid $592 million in dividends on its common stock to CMS Energy.
As a result of a provision in the TCJA, CMS Energy is required to recover all
alternative minimum tax credits over four years through offsets of regular tax
and through cash refunds. CMS Energy expects to be able to offset regular tax
primarily through the use of federal net operating loss carryforwards and,
accordingly, receive alternative minimum tax credit refunds through 2021.
Another provision in the TCJA excludes rate-regulated utilities from 100 percent
cost expensing of certain property. This provision will cause Consumers to make
higher tax-sharing payments to CMS Energy, which in turn might permit CMS Energy
to maintain lower levels of debt in order to invest in its businesses, pay
dividends, and fund its general obligations. Consumers expects to have
sufficient funding sources available to issue credits to customers for all
impacts of the TCJA.
In 2018, CMS Energy entered into an equity offering program under which it may
sell, from time to time, shares of CMS Energy common stock having an aggregate
sales price of up to $250 million. Under this program, CMS Energy may sell its
common stock in privately negotiated transactions, in "at the market" offerings,
through forward sales transactions or otherwise. CMS Energy has entered into
forward sales contracts having an aggregate sales price of $250 million. These
contracts allow CMS Energy to either physically settle the contracts by issuing
shares of its common stock at the then-applicable forward sale price specified
by the agreement or net settle the contracts through the delivery or receipt of
cash or shares. CMS Energy may settle the contracts at any time through their
maturity dates, and presently intends to physically settle the contracts by
delivering shares of its common stock. For more information on the forward sale
contracts, see Item 8. Financial Statements and Supplementary Data-Notes to the
Consolidated Financial Statements-Note 5, Financings and Capitalization-Issuance
of Common Stock.
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, contribute to its employee
benefit plans, and fund its other obligations. Accelerated pension funding in
prior years and several initiatives to reduce costs have helped improve cash
flows from operating activities.
Access to the financial and capital markets depends on CMS Energy's and
Consumers' credit ratings and on market conditions. As evidenced by past
financing transactions, CMS Energy and Consumers have had ready access to these
markets. Barring major market dislocations or disruptions, CMS Energy and
Consumers expect to continue to have ready access to the financial and capital
markets. 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.
At December 31, 2019, CMS Energy had $544 million of its revolving credit
facility available and Consumers had $1.1 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


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more placements, up to $500 million in the aggregate in 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
December 31, 2019, there were $90 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 Item 8.
Financial Statements and Supplementary Data-Notes to the Consolidated Financial
Statements-Note 5, Financings and Capitalization.
Certain of CMS Energy's and Consumers' credit agreements, debt indentures, and
other facilities contain covenants that require CMS Energy and Consumers to
maintain certain financial ratios, as defined therein. At December 31, 2019, no
default had occurred with respect to any financial covenants contained in
CMS Energy's and Consumers' credit agreements, debt indentures, or other
facilities. CMS Energy and Consumers were each in compliance with these
covenants as of December 31, 2019, as presented in the following table:
Credit Agreement, Indenture, or Facility        Limit      Actual
CMS Energy, parent only
Debt to EBITDA¹                          < 6.25 to 1.0  4.6 to 1.0
Consumers
Debt to Capital²                         < 0.65 to 1.0 0.48 to 1.0


1  Applies to CMS Energy's$550 million revolving credit agreement.


2      Applies to Consumers' $850 million and $250 million revolving credit

agreements and its $30 million and $35 million reimbursement agreements.



Components of CMS Energy's and Consumers' cash management plan include
controlling operating expenses and capital expenditures and evaluating market
conditions for financing and refinancing opportunities. CMS Energy's and
Consumers' present level of cash and expected cash flows from operating
activities, together with access to sources of liquidity, are anticipated to be
sufficient to fund the companies' contractual obligations for 2020 and beyond.


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Contractual Obligations: Presented in the following table are CMS Energy's and
Consumers' contractual obligations. The table excludes all amounts classified as
current liabilities on CMS Energy's and Consumers' consolidated balance sheets,
other than the current portion of long-term debt, leases, and other financing.
                                                                                                     In Millions
                                                                 Payments Due
                                             Less Than One      One to Three     Three to Five    More Than Five
December 31, 2019                  Total              Year             Years             Years             Years
CMS Energy, including
Consumers
Long-term debt                 $  13,188$     1,111$     1,892$     1,477$     8,708
Interest payments on
long-term debt                    10,863               480               897               777             8,709
Finance leases and other
financing                            220                37                59                34                90
Operating leases                      67                11                16                 5                35
AROs                               1,652                75                50                53             1,474
Deferred investment tax
credit                               120                 5                10                10                95
Environmental liabilities            131                17                36                21                57
Long-term payables                    34                 3                22                 3                 6
Purchase obligations
Total PPAs                         9,336             1,030             1,785             1,213             5,308
Other¹                             3,244             1,685               971               409               179
Total contractual
obligations                    $  38,855$     4,454$     5,738$     4,002$    24,661
Consumers
Long-term debt                 $   7,322$       202$       680$       686$     5,754
Interest payments on
long-term debt                     5,919               276               538               482             4,623
Finance leases and other
financing                            220                37                59                34                90
Operating leases                      56                 9                13                 5                29
AROs                               1,638                75                50                53             1,460
Deferred investment tax
credit                               120                 5                10                10                95
Environmental liabilities             73                12                28                13                20
Purchase obligations
PPAs
MCV PPA                            3,295               313               559               426             1,997
Palisades PPA                        899               388               511                 -                 -
Related-party PPAs²                  472                71               146               149               106
Other PPAs                         4,670               258               569               638             3,205
Total PPAs                         9,336             1,030             1,785             1,213             5,308
Other¹                             2,865             1,638               890               336                 1
Total contractual
obligations                    $  27,549$     3,284$     4,053$     2,832$    17,380

1 Long-term contracts for the purchase of commodities and related services,

       and construction and service agreements. The commodities and related
       services include natural gas and coal and associated transportation.


2  Long-term PPAs from certain affiliates of CMS Enterprises.


CMS Energy and Consumers also have recognized non­current liabilities for which
the timing of payments cannot be reasonably estimated. These items, which are
excluded from the table above, include regulatory liabilities, deferred income
taxes, workers' compensation liabilities, accrued liabilities under renewable
energy programs, and other liabilities. Retirement benefits are also excluded
from the table


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above. For details related to benefit payments, see Item 8. Financial Statements
and Supplementary Data-Notes to the Consolidated Financial Statements-Note 12,
Retirement Benefits.
Off-Balance-Sheet Arrangements: CMS Energy, Consumers, and certain of their
subsidiaries enter into various arrangements in the normal course of business to
facilitate commercial transactions with third parties. These arrangements
include indemnities, surety bonds, letters of credit, and financial and
performance guarantees. Additionally, CMS Energy has entered into forward sales
contracts to sell its common stock in order to invest in its utility and
non-utility businesses; these contracts have an aggregate sales price of
$250 million and mature in 2020. For additional details on the companies'
indemnity and guarantee arrangements, see Item 8. Financial Statements and
Supplementary Data-Notes to the Consolidated Financial Statements-Note 4,
Contingencies and Commitments-Guarantees. For additional details on letters of
credit and CMS Energy's forward sales contracts, see Item 8. Financial
Statements and Supplementary Data-Notes to the Consolidated Financial
Statements-Note 5, Financings and Capitalization.
Capital Expenditures: Over the next five years, Consumers expect to make
substantial capital investments. Consumers may revise its forecasts of capital
expenditures periodically due to a number of factors, including environmental
regulations, business opportunities, market volatility, economic trends, and the
ability to access capital. Presented in the following table are Consumers'
estimated capital expenditures, including lease commitments, for 2020 through
2024:
                                                                           In Billions
                               2020      2021      2022      2023      2024      Total
Consumers
Electric utility operations   $ 1.3$ 1.6$ 1.4$ 1.4$ 1.5$  7.2
Gas utility operations          0.9       1.1       0.9       1.1       1.0        5.0
Total Consumers               $ 2.2$ 2.7$ 2.3$ 2.5$ 2.5$ 12.2


Outlook
Several business trends and uncertainties may affect CMS Energy's and Consumers'
financial condition and results of operations. These trends and uncertainties
could have a material impact on CMS Energy's and Consumers' consolidated income,
cash flows, or financial position. For additional details regarding these and
other uncertainties, see Forward-Looking Statements and Information; Item 1A.
Risk Factors; Item 8. Financial Statements and Supplementary Data-Notes to the
Consolidated Financial Statements-Note 3, Regulatory Matters; and Note 4,
Contingencies and Commitments.
Consumers Electric Utility Outlook and Uncertainties
Clean Energy Plan: While Consumers continues to experience modest growth in
demand for electricity due to Michigan's growing economy and increased use of
air conditioning, consumer electronics, and other electric devices, it expects
that increase in demand to be offset by the effects of energy efficiency and
conservation.
In June 2018, Consumers filed an IRP with the MPSC detailing its Clean Energy
Plan. In March 2019, Consumers and a broad coalition of key stakeholders,
including business customers, environmental groups, the MPSC Staff, and the
Michigan Attorney General, filed an agreement settling the IRP with the MPSC and
the MPSC approved it in June 2019.


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Through its Clean Energy Plan, Consumers expects to reduce carbon emissions of
its owned generation by more than 90 percent from its 2005 levels by 2040 and
eliminate the use of coal to generate electricity by 2040. Specifically, the
Clean Energy Plan provides for:
•      the retirement of the D.E. Karn 1 & 2 coal-fueled generating units,

totaling 503 MW, in 2023

• the continued assessment in future IRP filings concerning the retirement

of the J.H. Campbell 1 & 2 coal-fueled generating units, totaling 609 MW,

in 2025 or earlier



Under the Clean Energy Plan, Consumers will replace the capacity to be retired
with:
• increased demand response programs


• increased energy efficiency

• increased renewable energy generation

• conservation voltage reduction

• increased pumped storage



Consumers will competitively bid new capacity and at least 50 percent of the new
capacity will be built and owned by third parties; the remainder will be owned
and operated by Consumers. In support of its Clean Energy Plan, Consumers issued
a request for proposals in September 2019 to acquire up to 300 MW of new
capacity from projects to be operational in Michigan'sLower Peninsula by
May 2022. Specifically, Consumers solicited offers to enter into PPAs with or
purchase solar generation projects ranging in size from 20 MW to 150 MW and to
enter into PPAs with PURPA qualifying facilities up to 20 MW. Any contracts
entered into as a result of the request for proposals would be subject to MPSC
approval.
As approved by the MPSC, the IRP allows Consumers to earn a financial incentive
on PPAs approved by the MPSC after January 1, 2019. Additionally, the IRP allows
for recovery of significant increases in demand response costs. The MPSC
separately approved an associated financial incentive for exceeding certain
demand response targets. Consumers is required to file a new IRP by June 2021.
PURPA: PURPA requires Consumers to purchase power from qualifying cogeneration
and small power production facilities at a price approved by the MPSC that is
meant to represent Consumers' "avoided cost" of generating power or purchasing
power from another source. In 2017, the MPSC issued an order establishing an
avoided-cost methodology for determining the price that Consumers must pay to
purchase power under PURPA. Among other things, the MPSC's order changed the
basis of Consumers' avoided cost from the cost of coal-fueled generating units
to that of natural gas-fueled generating units.
In order to address various complaints raised concerning the 2017 order,
Consumers and various PURPA developers filed a settlement agreement with the
MPSC in August 2019. Under the settlement agreement, which the MPSC approved in
September 2019, Consumers will enter into contracts to purchase 584 MW of power
from qualifying solar generation projects by September 2023. Of this amount,
170 MW will be purchased at the full avoided-cost rates set in the 2017 order.
The remaining 414 MW will be purchased at a capacity payment equal to the MISO
planning resource auction price and a designated energy price previously
approved by the MPSC.
In the approved IRP settlement agreement, Consumers agreed to a new method of
calculating avoided cost going forward, based on a competitive bidding process
that will enable Consumers to purchase energy from new generation at competitive
prices and mitigate the risk of forced purchases of unneeded or uneconomical
renewable generation.
In September 2019, FERC issued a notice of proposed rulemaking that could result
in modifications to the present federal regulations implementing PURPA. Among
other things, the proposal would change the rules for measuring the size of
qualifying facilities and determining whether certain PURPA projects have


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access to wholesale markets. The proposal would also provide states with more
flexibility to set the prices paid to PURPA projects. Consumers does not
anticipate the proposed rulemaking will affect the PURPA projects with which it
has agreements. Consumers cannot predict the outcome of this proposed
rulemaking.
Renewable Energy Plan: The 2016 Energy Law raised the renewable energy standard
to 15 percent in 2021, with an interim target of 12.5 percent in 2019. 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 the required percentage of Consumers' electric sales volume each
year. Under its renewable energy plan, Consumers expects to meet its renewable
energy requirement each year with a combination of newly generated RECs and
previously generated RECs carried over from prior years. Consumers met the
interim target of 12.5 percent for 2019 and will demonstrate its compliance by
filing the 2019 renewable energy cost reconciliation with the MPSC in June 2020.
In conjunction with its renewable energy plan, a third phase of Consumers' Cross
Winds® Energy Park, with nameplate capacity of 76 MW, began operations in
December 2019. This project qualifies for certain federal production tax
credits, generating cost savings that will be passed on to customers.
In February 2019, the MPSC issued an order ruling on amendments Consumers had
requested to its renewable energy plan, and approved the acquisition of up to
525 MW of new wind generation projects. Under the renewable energy plan,
Consumers is authorized to earn a 10.7 percent return on equity on any projects
approved by the MPSC. Also in February 2019, the MPSC approved an agreement
under which Consumers purchased a wind generation project under development,
with capacity of up to 150 MW, in Gratiot County, Michigan. Consumers began
on-site construction of this project during the fourth quarter of 2019 and
expects that it will be complete and operational in 2020.
In June 2019, Consumers entered into an agreement to purchase a wind generation
project under development in Hillsdale, Michigan, with capacity of up to 166 MW.
Under the agreement, which the MPSC unconditionally approved in December 2019,
Consumers expects to take full ownership and begin commercial operation of the
project in 2020. Additionally, in September 2019, the MPSC approved a 20­year
agreement under which Consumers will purchase 100 MW of renewable capacity,
energy, and RECs from a 149­MW solar generating facility to be constructed in
Calhoun County, Michigan. The facility is expected to be operational in 2021.
These agreements resulted from a request for proposals that Consumers issued in
June 2018 to acquire up to 400 MW of wind generation projects and up to 100 MW
of solar generation projects in Michigan.
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. Beginning
in June 2020, electric residential customers will transition to a summer peak
time-of-use rate that will allow them to take advantage of lower-cost energy
during off-peak times during the summer months. Thus, customers could reduce
their electric bills by shifting their consumption from on-peak to off-peak
times.


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Consumers expects weather-normalized electric deliveries over the next
five years to decrease slightly. This outlook reflects the effects of energy
waste reduction programs and appliance efficiency standards 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, 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, with certain exceptions. At
December 31, 2019, electric deliveries under the ROA program were at the
ten­percent limit. Of Consumers' 1.8 million electric customers, 285 customers,
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 new law also authorized the MPSC
to ensure that alternative electric suppliers have procured enough capacity to
cover their anticipated capacity requirements for the four-year forward period.
In 2017, the MPSC issued an order establishing a state reliability mechanism for
Consumers. Under this mechanism, beginning June 1, 2018, 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. All alternative electric suppliers have demonstrated that
they have procured their capacity requirements through the MISO planning year
beginning June 1, 2022.
In June 2018, the MPSC issued an order requiring all electric suppliers to
demonstrate that a portion of the capacity procured to serve customers during
peak demand times is located in the MISO footprint in Michigan'sLower
Peninsula. In July 2018, the Michigan Court of Appeals issued a decision that
the MPSC does not have statutory authority to implement such a requirement for
alternative electric suppliers. Consumers believes the 2016 Energy Law does give
such authorization to the MPSC. The MPSC and Consumers have filed applications
for leave to appeal the Court of Appeals' decision to the Michigan Supreme
Court. In June 2019, the Michigan Supreme Court issued orders directing the
filing of supplemental briefs and the scheduling of oral arguments in the case,
and will ultimately decide whether to consider and rule on the appeals. Oral
arguments occurred in November 2019, and the Michigan Supreme Court will issue
an order on the application for leave to appeal.
Electric Rate Matters: Rate matters are critical to Consumers' electric utility
business. For additional details on rate matters, see Item 8. Financial
Statements and Supplementary Data-Notes to the Consolidated Financial
Statements-Note 3, Regulatory Matters.
PSCR Plan: Consumers submitted its 2020 PSCR plan to the MPSC in September 2019
and, in accordance with its proposed plan, self-implemented the 2020 PSCR charge
beginning in January 2020.
Electric Environmental Outlook: Consumers' operations are subject to various
state and federal environmental laws and regulations. Consumers estimates that
it will incur capital expenditures of $275 million from 2020 through 2024 to
continue to comply with RCRA, the Clean Water Act, the Clean Air Act, and
numerous state and federal environmental regulations. Consumers expects to
recover these costs in customer rates, but cannot guarantee this result.
Consumers' primary environmental compliance focus includes, but is not limited
to, the following matters.


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Air Quality: Multiple air quality regulations apply, or may apply, to Consumers.
CSAPR, which became effective in 2015, requires Michigan and many other states
to improve air quality by reducing power plant emissions that, according to EPA
computer models, contribute to ground-level ozone and fine particle pollution in
other downwind states. In 2016, the EPA finalized new ozone season standards for
CSAPR, which became effective in 2017. Any litigation or remand to the EPA is
not expected to impact Consumers' compliance strategy, as Consumers expects its
emissions to be within the CSAPR allowance allocations.
In 2012, the EPA published emission standards for electric generating units,
known as MATS, based on Section 112 of the Clean Air Act. Under MATS, all of
Consumers' existing coal-fueled electric generating units were required to add
additional controls for hazardous air pollutants. Consumers met the extended
deadline of April 2016 for five coal-fueled units and two oil/gas-fueled units
it continues to operate and retired its seven remaining coal-fueled units. MATS
is presently being litigated. In addition, in December 2018, the EPA proposed
changes to the supporting analysis used to justify MATS, but did not propose any
changes to the MATS regulations. Any changes resulting from litigation or
rulemaking are expected to be minor and should not impact Consumers' MATS
compliance strategy. If the MATS regulations were repealed, Consumers would then
be required to comply with the Michigan Mercury Rule, which has similar
requirements to MATS. In addition, Consumers must comply with its settlement
agreement with the EPA entered into in 2014 concerning opacity and NSR, which
has similar emission requirements to MATS.
In 2015, the EPA lowered the NAAQS for ozone. The new ozone NAAQS will make it
more difficult to construct or modify power plants and other emission sources in
areas of the country that have not met the new ozone standard. In April 2018,
the EPA designated certain areas of Michigan as not meeting the new standard
with an August 2018 effective date. None of Consumers' fossil-fuel-fired
generating units are located in these areas. Some of Consumers' compressor
stations are located in areas impacted by the rule, but Consumers expects only
minor permitting impacts if those units are modified in the future. Consumers
does not expect that any litigation involving NAAQS for ozone will have a
material adverse impact on its generating assets.
Consumers' strategy to comply with air quality regulations, including CSAPR,
NAAQS, and MATS, as well as its legal obligations, involved the installation and
operation of emission control equipment at some facilities and the suspension of
operations at others; however, Consumers continues to evaluate these rules in
conjunction with other EPA and EGLE rulemakings, litigation, and congressional
action. 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 used

• the retirement, mothballing, or repowering with an alternative fuel of

some of Consumers' generating units

• changes in Consumers' environmental compliance costs



Greenhouse Gases: There have been numerous legislative and regulatory
initiatives at the state, regional, national, and international levels that
involve the potential regulation of greenhouse gases. Consumers continues to
monitor and comment on these initiatives and to follow litigation involving
greenhouse gases.
In 2015, the EPA finalized new rules pursuant to Section 111(b) of the Clean Air
Act to limit carbon dioxide emissions from new electric generating units, as
well as modified or reconstructed electric


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generating units. New coal-fueled units would not be able to meet this limit
without installing carbon dioxide control equipment using such methods as carbon
capture and sequestration.
In December 2018, the EPA proposed a revised Section 111(b) regulation to
replace the 2015 standard rule limiting carbon dioxide emissions from new
electric generating units, citing limited availability and high costs of carbon
capture and sequestration equipment as reasons to change the 2015 rule. The
revised Section 111(b) regulation requires new coal-fueled generating units to
meet a highly efficient steam cycle performance standard. Consumers does not
expect this proposal to change its existing environmental strategy.
In June 2019, the EPA finalized the Affordable Clean Energy rule. The rule
requires individual states to evaluate coal­fueled power plants for heat­rate
improvements that could increase overall plant efficiency. The evaluations to be
performed by the State of Michigan under the final rule may require Consumers to
make heat-rate improvements at its remaining coal-fueled units beginning in the
mid­2020s. This rule is presently being litigated. Consumers cannot evaluate the
potential impact of the rule until the State of Michigan completes its
evaluations.
In 2015, a group of 195 countries, including the U.S., finalized the Paris
Agreement, which governs carbon dioxide reduction measures beginning in 2020.
Although the U.S. has begun the process of withdrawing from the Paris Agreement,
it has stated a desire to renegotiate a new agreement in the future. At this
time, Consumers does not expect any adverse changes to its environmental
strategy as a result of these events.
While Consumers cannot predict the outcome of changes in U.S. policy or of other
legislative or regulatory initiatives involving the potential regulation of
greenhouse gases, it intends to continue to move forward with its Clean Energy
Plan, its present carbon reduction goal, and its emphasis on supply diversity.
Consumers will continue to monitor regulatory and legislative activity and
related litigation regarding greenhouse gas emissions standards that may affect
electric generating units.
Severe weather events and climate change associated with increasing levels of
greenhouse gases could affect Consumers' facilities and energy sales and could
have a material impact on its future results of operations. Consumers is unable
to predict these events or their financial impact; however, Consumers plans for
adverse weather and takes steps to reduce its potential impact.
Litigation, international treaties, federal laws and regulations (including
regulations by the EPA), and state laws and regulations, if enacted or ratified,
could ultimately require Consumers to replace equipment, install additional
emission control equipment, purchase emission allowances or credits, curtail
operations, arrange for alternative sources of supply, mothball or retire
facilities that generate certain emissions, pursue energy efficiency or demand
response measures more swiftly, or 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 and capital
expenditures in rates consistent with the recovery of other reasonable costs of
complying with environmental laws and regulations.
CCRs: In 2015, the EPA published a final rule regulating CCRs under RCRA. The
final rule adopts minimum standards for beneficially reusing and disposing of
non­hazardous CCRs. The rule establishes new minimum requirements for site
location, groundwater monitoring, flood protection, storm water design, fugitive
dust control, and public disclosure of information, including any groundwater
protection standard exceedances. The rule also sets out conditions under which
CCR units would be forced to cease receiving CCR and non­CCR wastewater and
initiate closure based on the inability to achieve minimum safety standards,
meet a location standard, or meet minimum groundwater standards. Consumers has
aligned with EGLE on closure plans for each of its unlined ash ponds to ensure
coordination between federal and state requirements. The unlined ash ponds have
ceased operation and have been replaced with


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double-lined ash ponds or concrete tanks. Significant closure work has been
completed at the remaining ash ponds.
Due to litigation, many aspects of the 2015 CCR rule have been remanded to the
EPA, which has resulted in various new rulemakings. These new rulemakings are
now in litigation. Continued litigation will add uncertainty around requirements
for compliance and state permit programs.
Separately, Congress passed legislation in 2016 allowing participating states to
develop permitting programs for CCRs under RCRA. In December 2018, the Michigan
Legislature adopted a permitting program, which requires the EPA's
authorization. This program should reduce costly, duplicative oversight over
CCRs and provide local oversight to CCR issues unique to Michigan. EGLE
submitted the state CCR permit program application to Michigan's Attorney
General in June 2019 for review and signature. The Attorney General's office is
engaged in a detailed review of the program and application with EGLE. Federal
rulemaking challenges may delay EPA approval of the Michigan permitting program.
Consumers has aligned with EGLE on closure plans for all of its coal ash
disposal sites, including those subject to the EPA's 2015 CCR rule, and adjusted
its recorded ARO accordingly. 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 and the corresponding rules
that were revised in 2014. The rules are aimed at reducing alleged harmful
impacts on aquatic organisms, such as fish. In April 2018, Consumers submitted
to EGLE for review and approval all required studies and recommended plans to
comply with Section 316(b), but has not yet received final approval.
In 2015, the EPA released its final effluent limitation guidelines for steam
electric generating plants. These guidelines, which are presently being
litigated, set stringent new requirements for the discharge from electric
generating units into wastewater streams. In 2017, the EPA announced that it
will undertake a rulemaking to replace specific portions of the rule and
proposed delaying the compliance start dates for two years, but maintained the
compliance end dates. Additional rulemaking began in November 2019 and will
continue in 2020. Consumers does not expect any adverse changes to its
environmental strategy as a result of any revisions to the rule.
In recent years, the EPA and the U.S. Army Corps of Engineers have proposed
rules redefining "Waters of the United States," which defines the scope of
federal jurisdiction under the Clean Water Act, and other changes to the Clean
Water Act regulations. For example, the EPA recently finalized a rule repealing
the 2015 definition of "Waters of the United States" and, in January 2020,
released a rule with its new definition. These rules are presently being, or are
likely to be, litigated.
A final definition would change the scope of water and wetlands regulations
under the Clean Water Act. The EPA has delegated authority to manage the
Michigan wetlands program to EGLE for a large portion of Consumers' service
territory, but dual jurisdiction exists between the EPA and the U.S. Army Corps
of Engineers in some locations in Michigan. As a result, regardless of the
ultimate outcome of the EPA's rules, Consumers expects to continue to operate
under Michigan's wetlands regulations, and under the applicable state and
federal water jurisdictional regulations. Thus, Consumers does not expect any
material adverse changes to its environmental strategy as a result of these
events, but under an expanded federal definition, could experience permitting
delays for infrastructure projects where dual jurisdiction exists.


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Many of Consumers' facilities maintain NPDES permits, which are renewed every
five years and are vital to the facilities' operations. 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.
Other Matters: Other electric environmental matters could have a material impact
on Consumers' outlook. For additional details on other electric environmental
matters, see Item 8. Financial Statements and Supplementary Data-Notes to the
Consolidated Financial Statements-Note 4, Contingencies and
Commitments-Consumers Electric Utility Contingencies-Electric Environmental
Matters.
Retention Incentive Program: In October 2019, Consumers announced a retention
incentive program to ensure necessary staffing at the D.E. Karn generating
complex through the anticipated retirement of the coal-fueled electric
generating units. Based on the number of employees that have chosen to
participate, the aggregate cost of the program through 2023 is estimated to be
$35 million. Consumers expects to recognize $15 million of expense related to
retention and severance benefits in 2020. Consumers will seek recovery of these
costs from customers. For additional details on this program, see Note 22, Asset
Sales and Exit Activities.
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. Consumers expects
weather-normalized gas deliveries over the next five years to remain stable
relative to 2019. This outlook reflects modest growth in gas demand offset by
the predicted effects of energy efficiency and conservation. Actual delivery
levels from year to year may vary from this expectation as a result of:
• weather fluctuations


• use by power producers

• availability and development of renewable energy sources

• gas price changes

Michigan economic conditions, including population trends and housing activity

• the price of competing energy sources or fuels

• energy efficiency and conservation impacts



Gas Rate Matters: Rate matters are critical to Consumers' gas utility business.
For additional details on rate matters, see Item 8. Financial Statements and
Supplementary Data-Notes to the Consolidated Financial Statements-Note 3,
Regulatory Matters.


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Gas Rate Case: In December 2019, Consumers filed an application with the MPSC
seeking an annual rate increase of $245 million, based on a 10.5 percent
authorized return on equity and a projected twelve-month period ending
September 30, 2021. The filing requests authority to recover new infrastructure
investment and related costs that will allow Consumers to improve system safety
and reliability. Presented in the following table are the components of the
requested increase in revenue:
                                              In Millions

Projected Twelve-Month Period Ending September 30 2021 Components of the requested rate increase Investment in rate base

                             $ 126
Operating and maintenance costs                        91
Cost of capital                                        26
Sales                                                   2
Total                                               $ 245


The filing also seeks approval of a revenue decoupling mechanism that would
annually reconcile Consumers' actual weather-normalized non­fuel revenues with
the revenues approved by the MPSC.
GCR Plan: Consumers submitted its 2020-2021 GCR plan to the MPSC in
December 2019 and, in accordance with its proposed plan, expects to
self-implement the 2020-2021 GCR charge beginning in April 2020.
Gas Pipeline and Storage Integrity and Safety: In October 2019, PHMSA published
a final rule that expands federal safety standards for gas transmission
pipelines. To comply with the rule, Consumers will incur increased capital costs
to install and remediate pipelines as well as increased operating and
maintenance costs to expand inspections, maintenance, and monitoring of its
existing pipelines. The requirements in the regulation take effect July 1, 2020,
with various implementation phases over numerous years.
In 2016, PHMSA published an interim final rule that established minimum federal
safety standards for underground natural gas storage facilities. To comply with
the interim rule, Consumers incurred increased capital and operating and
maintenance costs to expand inspections, maintenance, and monitoring of its
underground gas storage facilities. PHMSA expects to finalize additional
requirements in early 2020.
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 and capital expenditures in rates consistent with
the recovery of other reasonable costs of complying with laws and regulations.
Consumers will continue to monitor gas safety regulations and is implementing
the American Petroleum Institute's Recommended Practice 1173, Pipeline Safety
Management Systems. This program ensures that there are policies, procedures,
work instructions, forms, and records in place to streamline adoption and
deployment of any existing or future regulations.
Gas Environmental Outlook: Consumers expects to incur response activity costs at
a number of sites, including 23 former MGP sites. For additional details, see
Item 8. Financial Statements and Supplementary Data-Notes to the Consolidated
Financial Statements-Note 4, Contingencies and Commitments-Consumers Gas Utility
Contingencies-Gas Environmental Matters.
Greenhouse Gases: Consumers is making voluntary efforts to reduce its gas
utility's methane emissions. In October 2019, Consumers set a goal of net-zero
methane emissions from its natural gas delivery system by 2030. Under its
Methane Reduction Plan, Consumers plans to reduce methane emissions from its
system by about 80 percent by accelerating the replacement of aging pipe,
rehabilitating or retiring


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outdated infrastructure, and adopting new technologies and practices. The
remaining emissions will be eliminated by purchasing and/or producing renewable
natural gas.
There is also increasing interest at the federal, state, and local levels
involving potential regulation of greenhouse gases or its sources, which include
methane emissions and carbon dioxide from Consumers' gas utility. Such
regulation, if adopted, may involve requirements to reduce methane emissions
from natural gas use. No such measures apply to Consumers at this time.
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 Electric Utility and Gas Utility Outlook and Uncertainties
Energy Waste Reduction Plan: The 2016 Energy Law authorized incentives for
demand response programs and expanded existing incentives for energy efficiency
programs, referring to the combined initiatives as energy waste reduction
programs. The 2016 Energy Law:
•      extended the requirement to achieve annual reductions of 1.0 percent in

customers' electricity use through 2021 and 0.75 percent in customers'

natural gas use indefinitely

• removed limits on investments under the program and provided for a higher

       return on those investments; together, these provisions effectively
       doubled the financial incentives Consumers may earn for exceeding the
       statutory targets

• established a goal of 35 percent combined renewable energy and energy

waste reduction by 2025; Consumers has achieved 22 percent of the combined

renewable energy and energy waste reduction goal through 2019



Under its energy waste reduction plan, Consumers provides its customers with
incentives to reduce usage by offering energy audits, rebates and discounts on
purchases of highly efficient appliances, and other incentives and programs.
Enterprises Outlook and Uncertainties
CMS Energy's primary focus with respect to its enterprises businesses is to
maximize the value of generating assets, its share of which represents 1,234 MW
of capacity, and to pursue opportunities for the development of renewable
generation projects.
The enterprises segment's assets may be affected by environmental laws and
regulations. The new ozone NAAQS will make it more difficult to construct or
modify power plants and other emission sources in areas of the country that have
not met the new ozone standard. In April 2018, the EPA designated certain areas
of Michigan as not meeting the new standard with an August 2018 effective date.
The enterprises segment's DIG plant located in Dearborn, Michigan is in one such
area and, as a result, would be subject to additional permitting restrictions in
the event of any future modifications. For additional details regarding the new
ozone NAAQS, see Consumers Electric Utility Outlook and Uncertainties-Electric
Environmental Outlook.
Trends, uncertainties, and other matters related to the enterprises segment 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




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• changes in commodity prices and interest rates 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

• the outcome of certain legal proceedings, including gas price reporting

       litigation


•      indemnity and environmental remediation obligations at Bay Harbor,
       including an inability to renew an NPDES permit in 2020

• obligations related to a tax claim from the government of Equatorial Guinea

• representations, warranties, and indemnities provided by CMS Energy in

connection with previous sales of assets



For additional details regarding the enterprises segment's uncertainties, see
Item 8. Financial Statements and Supplementary Data-Notes to the Consolidated
Financial Statements-Note 4, Contingencies and Commitments.
EnerBank Outlook and Uncertainties
EnerBank is a Utah state-chartered, FDIC-insured industrial bank providing
unsecured consumer installment loans, largely for financing home improvements.
The carrying value of EnerBank's loan portfolio was $2.5 billion at
December 31, 2019. The 12-month rolling average net default rate on loans held
by EnerBank was 1.2 percent at December 31, 2019. EnerBank expects lending
growth of up to ten percent annually over the next five years.
EnerBank's loan portfolio was funded primarily by certificates of deposit of
$2.4 billion. CMS Energy is required both by law and by contract to provide
financial support, including infusing additional capital, to ensure that
EnerBank satisfies mandated capital requirements and has sufficient liquidity to
operate. With its self-funding plan, EnerBank has exceeded these requirements
historically and exceeded them as of December 31, 2019. For additional details
regarding EnerBank's loan portfolio, see Item 8. Financial Statements and
Supplementary Data-Notes to the Consolidated Financial Statements-Note 8, Notes
Receivable.
Other Outlook and Uncertainties
Employee Separation Program: In December 2019, CMS Energy and Consumers
announced a voluntary separation program for non-union employees. Under the
program, employees elected to request separation, and management decided which
requests to accept. In January 2020, management communicated its decisions to
affected employees, who will have 45 days to decide whether to separate.
CMS Energy and Consumers estimate that they will recognize an after-tax charge
of up to $10 million in 2020 related to the program. As a result of the program,
however, CMS Energy and Consumers expect to benefit from future cost savings, as
employee staffing levels will be better matched to workload demand, which
reflects the companies' ongoing workforce productivity improvements.
Litigation: CMS Energy, Consumers, and certain of their subsidiaries are named
as parties in various litigation matters, as well as in administrative
proceedings before various courts and governmental agencies, arising in the
ordinary course of business. For additional details regarding these and other
legal matters, see Item 8. Financial Statements and Supplementary Data-Notes to
the Consolidated Financial Statements-Note 3, Regulatory Matters and Note 4,
Contingencies and Commitments.


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Critical Accounting Policies and Estimates
The following information is important to understand CMS Energy's and Consumers'
results of operations and financial condition. For additional accounting
policies, see Item 8. Financial Statements and Supplementary Data-Notes to the
Consolidated Financial Statements-Note 1, Significant Accounting Policies.
In the preparation of CMS Energy's and Consumers' consolidated financial
statements, estimates and assumptions are used that may affect reported amounts
and disclosures. CMS Energy and Consumers use accounting estimates for asset
valuations, unbilled revenue, depreciation, amortization, financial and
derivative instruments, employee benefits, stock-based compensation, the effects
of regulation, indemnities, and contingencies. Actual results may differ from
estimated results due to changes in the regulatory environment, regulatory
decisions, lawsuits, competition, and other factors. CMS Energy and Consumers
consider all relevant factors in making these assessments.
Accounting for the Effects of Industry Regulation: Because Consumers has
regulated operations, it uses regulatory accounting to recognize the effects of
the regulators' decisions on its financial statements. Consumers continually
assesses whether future recovery of its regulatory assets is probable by
considering communications and experience with its regulators and changes in the
regulatory environment. If Consumers determined that recovery of a regulatory
asset were not probable, Consumers would be required to write off the asset and
immediately recognize the expense in earnings.
Contingencies: CMS Energy and Consumers make judgments regarding the future
outcome of various matters that give rise to contingent liabilities. For such
matters, they record liabilities when they are considered probable and
reasonably estimable, based on all available information. In particular,
CMS Energy and Consumers are participating in various environmental remediation
projects for which they have recorded liabilities. The recorded amounts
represent estimates that may take into account such considerations as the number
of sites, the anticipated scope, cost, and timing of remediation work, the
available technology, applicable regulations, and the requirements of
governmental authorities. For remediation projects in which the timing of
estimated expenditures is considered reliably determinable, CMS Energy and
Consumers record the liability at its net present value, using a discount rate
equal to the interest rate on monetary assets that are essentially risk-free and
have maturities comparable to that of the environmental liability. The amount
recorded for any contingency may differ from actual costs incurred when the
contingency is resolved. For additional details, see Item 8. Financial
Statements and Supplementary Data-Notes to the Consolidated Financial
Statements-Note 4, Contingencies and Commitments.
Derivative Instruments: CMS Energy and Consumers account for certain contracts
as derivative instruments. If a contract is a derivative and does not qualify
for the normal purchases and sales exception, it is recorded on the consolidated
balance sheets at its fair value. At CMS Energy, if the derivative is accounted
for as a cash flow hedge, unrealized gains and losses from changes in the fair
value of the derivative are recognized in AOCI and subsequently recognized in
earnings when the hedged transactions impact earnings. If the derivative is
accounted for as a fair value hedge, changes in the fair value of the derivative
and changes in the fair value of the hedged item due to the hedged risk are
recognized in earnings. For the FTRs at Consumers, changes in fair value are
deferred as regulatory assets or liabilities.
The criteria used to determine if an instrument qualifies for derivative
accounting or for an exception from derivative accounting are complex and often
require judgment in application. Changes in business strategies or market
conditions, as well as a requirement to apply different interpretations of the
derivative accounting literature, could result in changes in accounting for a
single contract or groups of contracts, which could have a material impact on
CMS Energy's and Consumers' financial statements. For


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additional details on CMS Energy's and Consumers' derivatives and how the fair
values of derivatives are determined, see Item 8. Financial Statements and
Supplementary Data-Notes to the Consolidated Financial Statements-Note 6, Fair
Value Measurements.
Income Taxes: The amount of income taxes paid by CMS Energy is subject to
ongoing audits by federal, state, and foreign tax authorities, which can result
in proposed assessments. An estimate of the potential outcome of any uncertain
tax issue is highly judgmental. CMS Energy believes adequate reserves have been
provided for these exposures; however, future results may include favorable or
unfavorable adjustments to the estimated tax liabilities in the period the
assessments are made or resolved or when statutes of limitation on potential
assessments expire. Additionally, CMS Energy's judgment as to the ability to
recover its deferred tax assets may change. CMS Energy believes the valuation
allowances related to its deferred tax assets are adequate, but future results
may include favorable or unfavorable adjustments. As a result, CMS Energy's
effective tax rate may fluctuate significantly over time. For additional
details, see Item 8. Financial Statements and Supplementary Data-Notes to the
Consolidated Financial Statements-Note 14, Income Taxes.
Pension and OPEB: CMS Energy and Consumers provide retirement pension benefits
to certain employees under non­contributory DB Pension Plans, and they provide
postretirement health and life benefits to qualifying retired employees under an
OPEB Plan.
CMS Energy and Consumers record liabilities for pension and OPEB on their
consolidated balance sheets at the present value of the future obligations, net
of any plan assets. The calculation of the liabilities and associated expenses
requires the expertise of actuaries, and requires many assumptions, including:
• life expectancies


• discount rates

• expected long-term rate of return on plan assets

• rate of compensation increases

• expected health care costs



A change in these assumptions could change significantly CMS Energy's and
Consumers' recorded liabilities and associated expenses.
Presented in the following table are estimates of costs and cash contributions
through 2022 for the DB Pension Plans and OPEB Plan. Actual future costs and
contributions will depend on future investment performance, discount rates, and
various factors related to the participants of the DB Pension Plans and OPEB
Plan. CMS Energy and Consumers will, at a minimum, contribute to the plans as
needed to comply with federal funding requirements.
                                                                                 In Millions
                                        DB Pension Plans                    OPEB Plan
                                     Cost        Contribution¹       Credit     Contribution
CMS Energy, including Consumers
2020                               $   29$       531$ (92 )      $       -
2021                                   13                    -          (93 )              -
2022                                    5                    -          (94 )              -
Consumers2
2020                               $   30$       518$ (86 )      $       -
2021                                   14                    -          (87 )              -
2022                                    7                    -          (88 )              -




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1 Contribution occurred in January 2020.

2 Consumers' pension and OPEB costs are recoverable through its general

ratemaking process.



Lowering the expected long-term rate of return on the assets of the DB Pension
Plans by 25 basis points would increase estimated pension cost for 2020 by
$6 million for both CMS Energy and Consumers. Lowering the PBO discount rates by
25 basis points would increase estimated pension cost for 2020 by $6 million for
both CMS Energy and Consumers.
Pension and OPEB plan assets are accounted for and disclosed at fair value. Fair
value measurements incorporate assumptions that market participants would use in
pricing an asset or liability, including assumptions about risk. Development of
these assumptions may require judgment.
For additional details on postretirement benefits, including the fair value
measurements for the assets of the DB Pension Plans and OPEB Plan, see Item 8.
Financial Statements and Supplementary Data-Notes to the Consolidated Financial
Statements-Note 12, Retirement Benefits.
Unbilled Revenues: Consumers' customers are billed monthly in cycles having
billing dates that do not generally coincide with the end of a calendar month.
This results in customers having received electricity or natural gas that they
have not been billed for as of the month-end. Consumers estimates its unbilled
revenues by applying an average billed rate to total unbilled deliveries for
each customer class. For additional information on unbilled revenues, see
Item 8. Financial Statements and Supplementary Data-Notes to the Consolidated
Financial Statements-Note 16, Revenue.
New Accounting Standards
For details regarding new accounting standards issued but not yet effective, see
Item 8. Financial Statements and Supplementary Data-Notes to the Consolidated
Financial Statements-Note 2, New Accounting Standards.
Item 7A.  Quantitative and Qualitative Disclosures About Market Risk
CMS Energy and Consumers are exposed to market risks including, but not limited
to, changes in interest rates, commodity prices, and investment security prices.
They may enter into various risk management contracts to mitigate exposure to
these risks, including swaps, options, futures, and forward contracts.
CMS Energy and Consumers enter into these contracts using established policies
and procedures, under the direction of an executive oversight committee
consisting of certain officers and a risk committee consisting of those and
other officers and business managers.
The following risk sensitivities illustrate the potential loss in fair value,
cash flows, or future earnings from financial instruments, assuming a
hypothetical adverse change in market rates or prices of ten percent. Potential
losses could exceed the amounts shown in the sensitivity analyses if changes in
market rates or prices were to exceed ten percent.
Interest-Rate Risk
Long-Term Debt: CMS Energy and Consumers are exposed to interest-rate risk
resulting from issuing fixed-rate and variable-rate debt instruments. CMS Energy
and Consumers use a combination of these instruments, and may also enter into
interest-rate swap agreements, in order to manage this risk and to achieve a
reasonable cost of capital.


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Presented in the following table is a sensitivity analysis of interest-rate risk
on CMS Energy's and Consumers' debt instruments, which includes the effects of
interest-rate swaps (assuming an adverse change in market interest rates of
ten percent):
                                                        In Millions
December 31                                          2019      2018
Fixed-rate financing-potential loss in fair value
CMS Energy, including Consumers                     $ 558$ 465
Consumers                                             355       330


The fair value losses in the above table could be realized only if CMS Energy
and Consumers transferred all of their fixed-rate financing to other creditors.
The annual earnings exposure related to variable-rate financing was immaterial
for both CMS Energy and Consumers at December 31, 2019 and 2018, assuming an
adverse change in market interest rates of ten percent.
Notes Receivable: CMS Energy is exposed to interest-rate risk resulting from
EnerBank's fixed-rate installment loans. EnerBank provides unsecured consumer
installment loans, largely for financing home improvements.
Presented in the following table is a sensitivity analysis of interest-rate risk
on EnerBank's notes receivable, which includes the effects of interest-rate
swaps (assuming an adverse change in market interest rates of ten percent):
                                                  In Millions
December 31                                     2019     2018

Notes receivable-potential loss in fair value $ 61$ 46



The fair value losses for CMS Energy in the above table could be realized only
if EnerBank's loans were sold to other parties. The annual earnings exposure
related to variable-rate interest receipts at EnerBank was immaterial at
December 31, 2019 and 2018. For additional details on financial instruments, see
Item 8. Financial Statements and Supplementary Data-Notes to the Consolidated
Financial Statements-Note 7, Financial Instruments.


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Item 8. Financial Statements and Supplementary Data Index to Financial Statements

  CMS Energy Consolidated Financial Statements                              

86

  Consolidated Statements of Income                                         

86

  Consolidated Statements of Comprehensive Income                           

87

  Consolidated Statements of Cash Flows                                     

88

  Consolidated Balance Sheets                                               

90

  Consolidated Statements of Changes in Equity                              

92

  Consumers Consolidated Financial Statements                               

94

  Consolidated Statements of Income                                         

94

  Consolidated Statements of Comprehensive Income                           

95

  Consolidated Statements of Cash Flows                                     

96

  Consolidated Balance Sheets                                               

98

  Consolidated Statements of Changes in Equity                             

100

  Notes to the Consolidated Financial Statements                           101
   1:     Significant Accounting Policies                                  101
   2:     New Accounting Standards                                         103
   3:     Regulatory Matters                                               105
   4:     Contingencies and Commitments                                    111
   5:     Financings and Capitalization                                    119
   6:     Fair Value Measurements                                          126
   7:     Financial Instruments                                            127
   8:     Notes Receivable                                                 130
   9:     Plant, Property, and Equipment                                   132
  10:     Leases and Palisades Financing                                   136
  11:     Asset Retirement Obligations                                     141
  12:     Retirement Benefits                                              143
  13:     Stock-Based Compensation                                         153
  14:     Income Taxes                                                     157
  15:     Earnings Per Share-CMS Energy                                    162
  16:     Revenue                                                          163
  17:     Other Income and Other Expense                                   166
  18:     Cash and Cash Equivalents                                        166
  19:     Reportable Segments                                              167
  20:     Related-Party Transactions-Consumers                             171
  21:     Variable Interest Entities                                       172
  22:     Asset Sales and Exit Activities                                  173
  23:     Quarterly Financial and Common Stock Information (Unaudited)     174
  Reports of Independent Registered Public Accounting Firm                 176
  CMS Energy                                                               176
  Consumers                                                                180




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CMS Energy Corporation
Consolidated Statements of Income
                                                  In Millions, Except Per Share Amounts
Years Ended December 31                                    2019        2018        2017
Operating Revenue                                       $ 6,845$ 6,873$ 6,583

Operating Expenses
Fuel for electric generation                                493         528         505
Purchased and interchange power                           1,496       1,613 

1,503

Purchased power - related parties                            75          81 

86

Cost of gas sold                                            769         836 

750

Maintenance and other operating expenses                  1,448       1,417       1,236
Depreciation and amortization                               992         933         881
General taxes                                               333         303         284
Total operating expenses                                  5,606       5,711       5,245

Operating Income                                          1,239       1,162       1,338

Other Income (Expense)
Interest income                                               7          11          12
Allowance for equity funds used during construction          10           6 

5

Income from equity method investees                          10           9 

15

Nonoperating retirement benefits, net                        91          90          24
Other income                                                  4           2           6
Other expense                                               (13 )       (48 )       (76 )
Total other income (expense)                                109          70         (14 )

Interest Charges
Interest on long-term debt                                  439         412         406
Interest expense - related parties                            9           - 

-

Other interest expense                                       75          49 

34

Allowance for borrowed funds used during construction        (4 )        (3 )        (2 )
Total interest charges                                      519         458         438

Income Before Income Taxes                                  829         774         886
Income Tax Expense                                          147         115         424

Net Income                                                  682         659         462
Income Attributable to Noncontrolling Interests               2           2 

2


Net Income Available to Common Stockholders             $   680$   657

$ 460


Basic Earnings Per Average Common Share                 $  2.40$  2.33$  1.64
Diluted Earnings Per Average Common Share               $  2.39$  2.32

$ 1.64

The accompanying notes are an integral part of these statements.

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CMS Energy Corporation
Consolidated Statements of Comprehensive Income
                                                                            In Millions
Years Ended December 31                                    2019        2018        2017
Net Income                                              $   682$   659$   462

Retirement Benefits Liability
Net loss arising during the period, net of tax of
$(3), $(1), and $(4)                                         (7 )        (4 

) (5 ) Prior service credit adjustment, net of tax of $-, $-, and $3

                                                    -          (1 

) 4 Amortization of net actuarial loss, net of tax of $1 for all periods

                                               3           4 

2

Amortization of prior service credit, net of tax of $-, $(1), and $-

                                             (2 )        (1 

) (1 )

Derivatives

Unrealized loss on derivative instruments, net of tax of $(1), $-, and $-

                                          (3 )        (2 

) - Reclassification adjustments included in net income, net of tax of $- for all periods

                              1           -           -

Other Comprehensive Loss                                     (8 )        (4 )         -

Comprehensive Income                                        674         655         462

Comprehensive Income Attributable to Noncontrolling Interests

                                                     2           2 

2

Comprehensive Income Attributable to CMS Energy$ 672$ 653

$ 460

The accompanying notes are an integral part of these statements.

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CMS Energy Corporation
Consolidated Statements of Cash Flows
                                                                                  In Millions
Years Ended December 31                                      2019          2018          2017
Cash Flows from Operating Activities
Net income                                              $     682$     659$     462
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization                                 992           933           881
Deferred income taxes and investment tax credits              150           182           417
Bad debt expense                                               67            54            49
Other non­cash operating activities and
reconciling adjustments                                       (58 )          22            82
Postretirement benefits contributions                         (10 )        (252 )         (12 )
Cash provided by (used in) changes in assets and
liabilities
Accounts and notes receivable and accrued revenue              45            15           (66 )
Inventories                                                    44            14           (46 )
Accounts payable and accrued rate refunds                     (69 )          22            49

Other current and non­current assets and liabilities (53 )

   54          (111 )
Net cash provided by operating activities                   1,790         

1,703 1,705

Cash Flows from Investing Activities Capital expenditures (excludes assets placed under finance lease)

                                             (2,104 )      (2,074 )      (1,665 )
Increase in EnerBank notes receivable                        (401 )        (307 )        (138 )
Purchase of notes receivable by EnerBank                     (343 )        (225 )           -
Proceeds from DB SERP investments                               -           146             -
Proceeds from sale of EnerBank notes receivable                67             -            50
Proceeds from sale of transmission equipment                   97             -             -
Cost to retire property and other investing
activities                                                   (132 )        (146 )        (115 )
Net cash used in investing activities                      (2,816 )      

(2,606 ) (1,868 )


Cash Flows from Financing Activities
Proceeds from issuance of debt                              2,151         2,767         1,633
Retirement of debt                                         (1,285 )      (1,870 )        (980 )
Increase in EnerBank certificates of deposit                  631           513            47
Decrease in notes payable                                      (7 )         (73 )        (228 )
Issuance of common stock                                       12            41            83
Payment of dividends on common and preferred stock           (436 )        (407 )        (377 )
Debt prepayment costs                                          (8 )         (36 )         (22 )
Other financing costs                                         (50 )         (61 )         (46 )
Net cash provided by financing activities                   1,008           874           110

Net Decrease in Cash and Cash Equivalents, Including Restricted Amounts

                                            (18 )         (29 )         (53 )
Cash and Cash Equivalents, Including Restricted
Amounts, Beginning of Period                                  175           204           257

Cash and Cash Equivalents, Including Restricted
Amounts, End of Period                                  $     157$     175$     204




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                                                                         In Millions
Years Ended December 31                                    2019       2018      2017

Other cash flow activities and non­cash investing and financing activities


Cash transactions
Interest paid (net of amounts capitalized)              $   498$ 458$ 418
Income taxes paid (refunds received), net                   (58 )     (123 )       5

Non­cash transactions
Capital expenditures not paid                               170        158       172
Other assets placed under finance lease                       -          -  

3

The accompanying notes are an integral part of these statements.

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CMS Energy Corporation
Consolidated Balance Sheets
ASSETS
                                                                          In Millions
December 31                                                       2019           2018
Current Assets
Cash and cash equivalents                                    $     140$     153
Restricted cash and cash equivalents                                17      

21

Accounts receivable and accrued revenue, less allowances of $20 in both periods

                                             886      

964

Notes receivable, less allowances of $33 in 2019 and $24 in 2018

                                                            223      

233

Notes receivable held for sale                                      19      

-

Accounts receivable - related parties                               17             14
Accrued gas revenue                                                  -             16
Inventories at average cost
Gas in underground storage                                         399            450
Materials and supplies                                             140            143
Generating plant fuel stock                                         66             57
Deferred property taxes                                            305            279
Regulatory assets                                                   33             37
Prepayments and other current assets                                86      

101

Total current assets                                             2,331      

2,468


Plant, Property, and Equipment
Plant, property, and equipment, gross                           25,390      

24,400

Less accumulated depreciation and amortization                   7,360      

7,037

Plant, property, and equipment, net                             18,030      

17,363

Construction work in progress                                      896      

763

Total plant, property, and equipment                            18,926         18,126

Other Non­current Assets
Regulatory assets                                                2,489          1,743
Accounts and notes receivable                                    2,281          1,645
Investments                                                         71             69
Other                                                              739            478
Total other non­current assets                                   5,580          3,935

Total Assets                                                 $  26,837$  24,529




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LIABILITIES AND EQUITY
                                                                          In Millions
December 31                                                       2019           2018
Current Liabilities
Current portion of long-term debt, finance leases, and
other financing                                              $   1,130$     996
Notes payable                                                       90             97
Accounts payable                                                   622            723
Accounts payable - related parties                                  13             10
Accrued rate refunds                                                35              4
Accrued interest                                                   104             94
Accrued taxes                                                      437            398
Regulatory liabilities                                              87            155
Other current liabilities                                          186            147
Total current liabilities                                        2,704          2,624

Non­current Liabilities
Long-term debt                                                  11,951         10,615
Non-current portion of finance leases and other financing           76             69
Regulatory liabilities                                           3,742          3,681
Postretirement benefits                                            674            436
Asset retirement obligations                                       477            432
Deferred investment tax credit                                     120      

99

Deferred income taxes                                            1,655      

1,487

Other non­current liabilities                                      383     

294

Total non­current liabilities                                   19,078     

17,113

Commitments and Contingencies (Notes 3 and 4)

Equity

Common stockholders' equity Common stock, authorized 350.0 shares; outstanding 283.9 shares in 2019 and 283.4 shares in 2018

                        3      

3

Other paid-in capital                                            5,113      

5,088

Accumulated other comprehensive loss                               (73 )          (65 )
Accumulated deficit                                                (25 )         (271 )
Total common stockholders' equity                                5,018          4,755
Noncontrolling interests                                            37             37
Total equity                                                     5,055          4,792

Total Liabilities and Equity                                 $  26,837

$ 24,529

The accompanying notes are an integral part of these statements.

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CMS Energy Corporation
Consolidated Statements of Changes in Equity

                    In Millions, Except Number of Shares in Thousands and 

Per Share Amounts

                                  Number of Shares

Years Ended December 31 2019 2018 2017 2019 2018 2017 Total Equity at Beginning of Period

                         $ 4,792     $ 

4,478 $ 4,290


Common Stock
At beginning and end of period                                    3           3           3

Other Paid-in Capital
At beginning of period      283,374   281,647   279,206       5,088       5,019       4,916
Common stock issued             710     1,554     2,492          35          59         102
Common stock repurchased       (181 )    (224 )    (317 )       (10 )       (10 )       (14 )
Common stock reissued             8       423       360           -          20          15
Common stock reacquired         (47 )     (26 )     (94 )         -           -           -
At end of period            283,864   283,374   281,647       5,113       5,088       5,019

Accumulated Other Comprehensive Loss
At beginning of period                                          (65 )       (50 )       (50 )
Retirement benefits liability
At beginning of period                                          (63 )       (50 )       (50 )
Cumulative effect of change in accounting principle               -         (11 )         -
Net loss arising during the period                               (7 )        (4 )        (5 )
Prior service credit adjustment                                   -          (1 )         4
Amortization of net actuarial loss                                3           4           2
Amortization of prior service credit                             (2 )        (1 )        (1 )
At end of period                                                (69 )       (63 )       (50 )
Derivative instruments
At beginning of period                                           (2 )         -           -
Unrealized loss on derivative instruments                        (3 )        (2 )         -
Reclassification adjustments included in net income               1           -           -
At end of period                                                 (4 )        (2 )         -
At end of period                                                (73 )       (65 )       (50 )




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                         In Millions, Except Number of Shares in Thousands and Per Share Amounts
                                       Number of Shares
Years Ended December 31             2019      2018      2017        2019        2018        2017

Accumulated Deficit
At beginning of period                                              (271 )      (531 )      (616 )
Cumulative effect of change in accounting principle                    -           8           -
Net income attributable to CMS Energy                                680         657         460
Dividends declared on common stock                                  (434 )      (405 )      (375 )
At end of period                                                     (25 )      (271 )      (531 )

Noncontrolling Interests
At beginning of period                                                37          37          37
Income attributable to noncontrolling interests                        2           2           2
Distributions and other changes in noncontrolling interests           (2 )        (2 )        (2 )
At end of period                                                      37    

37 37


Total Equity at End of Period                                    $ 5,055

$ 4,792$ 4,478


Dividends declared per common share                              $  1.53

$ 1.43$ 1.33

The accompanying notes are an integral part of these statements.

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Consumers Energy Company
Consolidated Statements of Income
                                                                            In Millions
Years Ended December 31                                    2019        2018        2017
Operating Revenue                                       $ 6,376$ 6,464$ 6,222

Operating Expenses
Fuel for electric generation                                375         407         398
Purchased and interchange power                           1,470       1,587 

1,491

Purchased power - related parties                            75          83 

90

Cost of gas sold                                            754         819 

730

Maintenance and other operating expenses                  1,275       1,287 

1,113

Depreciation and amortization                               975         921         872
General taxes                                               322         295         276
Total operating expenses                                  5,246       5,399       4,970

Operating Income                                          1,130       1,065       1,252

Other Income (Expense)
Interest income                                               5           8           9
Interest and dividend income - related parties                5           2 

1

Allowance for equity funds used during construction          10           6 

5

Nonoperating retirement benefits, net                        85          83          21
Other income                                                  3           2          17
Other expense                                               (13 )       (30 )       (58 )
Total other income (expense)                                 95          71          (5 )

Interest Charges
Interest on long-term debt                                  277         276         263
Interest expense - related parties                            9           - 

-

Other interest expense                                       15          16 

15

Allowance for borrowed funds used during construction        (4 )        (3 )        (2 )
Total interest charges                                      297         289         276

Income Before Income Taxes                                  928         847         971
Income Tax Expense                                          185         142         339

Net Income                                                  743         705         632
Preferred Stock Dividends                                     2           2           2

Net Income Available to Common Stockholder              $   741$   703

$ 630

The accompanying notes are an integral part of these statements.

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Consumers Energy Company
Consolidated Statements of Comprehensive Income
                                                                            In Millions
Years Ended December 31                                    2019        2018        2017
Net Income                                              $   743$   705$   632

Retirement Benefits Liability Net gain (loss) arising during the period, net of tax of $(3), $2, and $(1)

                                        (8 )         6 

(4 ) Amortization of net actuarial loss, net of tax of $- for all periods

                                               1           2 

1

Investments

Unrealized gain (loss) on investments, net of tax of $-, $-, and $1

                                                -          (1 

) 3 Reclassification adjustments included in net income, net of tax of $-, $-, and $(6)

                                -           1 

(9 )


Other Comprehensive Income (Loss)                            (7 )         8          (9 )

Comprehensive Income                                    $   736$   713$   623

The accompanying notes are an integral part of these statements.

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Consumers Energy Company
Consolidated Statements of Cash Flows
                                                                                  In Millions
Years Ended December 31                                      2019          2018          2017
Cash Flows from Operating Activities
Net income                                              $     743$     705$     632
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization                                 975           921           872
Deferred income taxes and investment tax credits               37           123           163
Bad debt expense                                               29            29            29

Other non­cash operating activities and reconciling adjustments

                                                   (32 )          13            59
Postretirement benefits contributions                          (7 )        (242 )          (8 )
Cash provided by (used in) changes in assets and
liabilities
Accounts and notes receivable and accrued revenue               8           (26 )         (63 )
Inventories                                                    40            15           (45 )
Accounts payable and accrued rate refunds                     (63 )          12            43

Other current and non-current assets and liabilities (129 ) (101 ) 33 Net cash provided by operating activities

                   1,601         

1,449 1,715

Cash Flows from Investing Activities Capital expenditures (excludes assets placed under finance lease)

                                             (2,085 )      (1,822 )      (1,632 )
Proceeds from DB SERP investments                               -           106             -
DB SERP investment in note receivable - related party           -          (106 )           -
Proceeds from sale of transmission equipment                   77             -             -
Cost to retire property and other investing
activities                                                   (129 )        (149 )        (119 )
Net cash used in investing activities                      (2,137 )      

(1,971 ) (1,751 )


Cash Flows from Financing Activities
Proceeds from issuance of debt                                993         2,106           834
Retirement of debt                                           (541 )      (1,193 )        (555 )
Decrease in notes payable                                      (7 )         (73 )        (228 )
Stockholder contribution                                      675           250           450
Payment of dividends on common and preferred stock           (594 )        (533 )        (524 )
Debt prepayment costs                                          (8 )         (20 )          (4 )
Other financing costs                                         (10 )         (24 )         (24 )
Net cash provided by (used in) financing activities           508           513           (51 )

Net Decrease in Cash and Cash Equivalents, Including Restricted Amounts

                                            (28 )          (9 )         (87 )
Cash and Cash Equivalents, Including Restricted
Amounts, Beginning of Period                                   56            65           152

Cash and Cash Equivalents, Including Restricted
Amounts, End of Period                                  $      28$      56$      65




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                                                                         In Millions
Years Ended December 31                                    2019       2018      2017

Other cash flow activities and non­cash investing and financing activities


Cash transactions
Interest paid (net of amounts capitalized)              $   279$ 287$ 266
Income taxes paid (refunds received), net                   132        156        (1 )

Non­cash transactions
Capital expenditures not paid                               160        143       160
Other assets placed under finance lease                       -          -  

3

The accompanying notes are an integral part of these statements.

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Consumers Energy Company
Consolidated Balance Sheets
ASSETS
                                                                          In Millions
December 31                                                       2019           2018
Current Assets
Cash and cash equivalents                                    $      11$      39
Restricted cash and cash equivalents                                17      

17

Accounts receivable and accrued revenue, less allowances of $20 in both periods

                                             827      

855

Accounts and notes receivable - related parties                      9             15
Accrued gas revenue                                                  -             16
Inventories at average cost
Gas in underground storage                                         399            450
Materials and supplies                                             135            137
Generating plant fuel stock                                         63             52
Deferred property taxes                                            305            279
Regulatory assets                                                   33             37
Prepayments and other current assets                                73      

83

Total current assets                                             1,872      

1,980


Plant, Property, and Equipment
Plant, property, and equipment, gross                           24,963      

23,963

Less accumulated depreciation and amortization                   7,272      

6,958

Plant, property, and equipment, net                             17,691      

17,005

Construction work in progress                                      879      

756

Total plant, property, and equipment                            18,570         17,761

Other Non-current Assets
Regulatory assets                                                2,489          1,743
Accounts receivable                                                 29             27
Accounts and notes receivable - related parties                    102      

104

Other                                                              637      

410

Total other non-current assets                                   3,257          2,284

Total Assets                                                 $  23,699$  22,025




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LIABILITIES AND EQUITY
                                                                          In Millions
December 31                                                       2019           2018
Current Liabilities
Current portion of long-term debt, finance leases, and
other financing                                              $     221$      48
Notes payable                                                       90             97
Accounts payable                                                   593            685
Accounts payable - related parties                                  20             14
Accrued rate refunds                                                35              4
Accrued interest                                                    67             59
Accrued taxes                                                      481            436
Regulatory liabilities                                              87            155
Other current liabilities                                          118            120
Total current liabilities                                        1,712          1,618

Non-current Liabilities
Long-term debt                                                   7,048          6,779
Non-current portion of finance leases and other financing           76             69
Regulatory liabilities                                           3,742          3,681
Postretirement benefits                                            622            392
Asset retirement obligations                                       474            428
Deferred investment tax credit                                     120      

99

Deferred income taxes                                            1,864      

1,809

Other non-current liabilities                                      304      

230

Total non-current liabilities                                   14,250      

13,487

Commitments and Contingencies (Notes 3 and 4)

Equity

Common stockholder's equity Common stock, authorized 125.0 shares; outstanding 84.1 shares in both periods

                                        841      

841

Other paid-in capital                                            5,374      

4,699

Accumulated other comprehensive loss                               (28 )          (21 )
Retained earnings                                                1,513      

1,364

Total common stockholder's equity                                7,700      

6,883

Cumulative preferred stock, $4.50 series                            37      

37

Total equity                                                     7,737      

6,920


Total Liabilities and Equity                                 $  23,699

$ 22,025

The accompanying notes are an integral part of these statements.

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Consumers Energy Company
Consolidated Statements of Changes in Equity
                                                                          In Millions
Years Ended December 31                                  2019        2018   

2017

Total Equity at Beginning of Period                   $ 6,920$ 6,488

$ 5,939


Common Stock
At beginning and end of period                            841         841         841

Other Paid-in Capital
At beginning of period                                  4,699       4,449       3,999
Stockholder contribution                                  675         250         450
At end of period                                        5,374       4,699       4,449

Accumulated Other Comprehensive Loss
At beginning of period                                    (21 )       (12 )        (3 )
Retirement benefits liability
At beginning of period                                    (21 )       (24 )       (21 )
Cumulative effect of change in accounting principle         -          (5 ) 

-

Net gain (loss) arising during the period                  (8 )         6          (4 )
Amortization of net actuarial loss                          1           2           1
At end of period                                          (28 )       (21 )       (24 )
Investments
At beginning of period                                      -          12          18

Cumulative effect of change in accounting principle - (12 )

-

Unrealized gain (loss) on investments                       -          (1 ) 

3

Reclassification adjustments included in net income         -           1          (9 )
At end of period                                            -           -          12
At end of period                                          (28 )       (21 )       (12 )

Retained Earnings
At beginning of period                                  1,364       1,173       1,065

Cumulative effect of change in accounting principle - 19

-

Net income                                                743         705   

632

Dividends declared on common stock                       (592 )      (531 )      (522 )
Dividends declared on preferred stock                      (2 )        (2 )        (2 )
At end of period                                        1,513       1,364       1,173

Cumulative Preferred Stock
At beginning and end of period                             37          37   

37


Total Equity at End of Period                         $ 7,737$ 6,920

$ 6,488

The accompanying notes are an integral part of these statements.

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CMS Energy CorporationConsumers Energy Company
Notes to the Consolidated Financial Statements
1: Significant Accounting Policies


Principles of Consolidation: CMS Energy and Consumers prepare their consolidated
financial statements in conformity with GAAP. CMS Energy's consolidated
financial statements comprise CMS Energy, Consumers, CMS Enterprises, EnerBank,
and all other entities in which CMS Energy has a controlling financial interest
or is the primary beneficiary. Consumers' consolidated financial statements
comprise Consumers and all other entities in which it has a controlling
financial interest or is the primary beneficiary. CMS Energy uses the equity
method of accounting for investments in companies and partnerships that are not
consolidated, where they have significant influence over operations and
financial policies but are not the primary beneficiary. CMS Energy and Consumers
eliminate intercompany transactions and balances.
Use of Estimates: CMS Energy and Consumers are required to make estimates using
assumptions that may affect reported amounts and disclosures. Actual results
could differ from those estimates.
Contingencies: CMS Energy and Consumers record estimated liabilities for
contingencies on their consolidated financial statements when it is probable
that a liability has been incurred and when the amount of loss can be reasonably
estimated. For environmental remediation projects in which the timing of
estimated expenditures is considered reliably determinable, CMS Energy and
Consumers record the liability at its net present value, using a discount rate
equal to the interest rate on monetary assets that are essentially risk-free and
have maturities comparable to that of the environmental liability. CMS Energy
and Consumers expense legal fees as incurred; fees incurred but not yet billed
are accrued based on estimates of work performed.
Debt Issuance Costs, Discounts, Premiums, and Refinancing Costs: Upon the
issuance of long-term debt, CMS Energy and Consumers defer issuance costs,
discounts, and premiums and amortize those amounts over the terms of the
associated debt. Debt issuance costs are presented as a direct deduction from
the carrying amount of long-term debt on the balance sheet. Upon the refinancing
of long-term debt, Consumers, as a regulated entity, defers any remaining
unamortized issuance costs, discounts, and premiums associated with the
refinanced debt and amortizes those amounts over the term of the newly issued
debt. For the non­regulated portions of CMS Energy's business, any remaining
unamortized issuance costs, discounts, and premiums associated with extinguished
debt are charged to earnings.
Derivative Instruments: In order to support ongoing operations, CMS Energy and
Consumers enter into contracts for the future purchase and sale of various
commodities, such as electricity, natural gas, and coal. These forward contracts
are generally long-term in nature and result in physical delivery of the
commodity at a contracted price. Most of these contracts are not subject to
derivative accounting for one or more of the following reasons:
•      they do not have a notional amount (that is, a number of units specified

in a derivative instrument, such as MWh of electricity or bcf of natural

gas)

• they qualify for the normal purchases and sales exception

• they cannot be net settled due in part to the absence of an active market

       for the commodity




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Consumers also uses FTRs to manage price risk related to electricity
transmission congestion. An FTR is a financial instrument that entitles its
holder to receive compensation or requires its holder to remit payment for
congestion-related transmission charges. Consumers accounts for FTRs as
derivatives.
Additionally, CMS Energy uses interest rate swaps to manage its interest rate
risk on certain long-term debt and notes receivable transactions.
CMS Energy and Consumers record derivative contracts that do not qualify for the
normal purchases and sales exception at fair value on their consolidated balance
sheets. At CMS Energy, if the derivative is accounted for as a cash flow hedge,
unrealized gains and losses from changes in the fair value of the derivative are
recognized in AOCI and subsequently recognized in earnings when the hedged
transactions impact earnings. If the derivative is accounted for as a fair value
hedge, changes in the fair value of the derivative and changes in the fair value
of the hedged item due to the hedged risk are recognized in earnings. For the
FTRs at Consumers, changes in fair value are deferred as regulatory assets or
liabilities. For details regarding CMS Energy's and Consumers' derivative
instruments recorded at fair value, see Note 6, Fair Value Measurements.
EPS: CMS Energy calculates basic and diluted EPS using the weighted-average
number of shares of common stock and dilutive potential common stock outstanding
during the period. Potential common stock, for purposes of determining diluted
EPS, includes the effects of nonvested stock awards and forward equity sales.
CMS Energy computes the effect on potential common stock using the treasury
stock method. Diluted EPS excludes the impact of antidilutive securities, which
are those securities resulting in an increase in EPS or a decrease in loss per
share. For EPS computations, see Note 15, Earnings Per Share-CMS Energy.
Impairment of Long-Lived Assets and Equity Method Investments: CMS Energy and
Consumers perform tests of impairment if certain triggering events occur or if
there has been a decline in value that may be other than temporary.
CMS Energy and Consumers evaluate long-lived assets held in use for impairment
by calculating the undiscounted future cash flows expected to result from the
use of the asset and its eventual disposition. If the undiscounted future cash
flows are less than the carrying amount, CMS Energy and Consumers recognize an
impairment loss equal to the amount by which the carrying amount exceeds the
fair value. CMS Energy and Consumers estimate the fair value of the asset using
quoted market prices, market prices of similar assets, or discounted future cash
flow analyses.
CMS Energy also assesses equity method investments for impairment whenever there
has been a decline in value that is other than temporary. This assessment
requires CMS Energy to determine the fair value of the equity method investment.
CMS Energy determines fair value using valuation methodologies, including
discounted cash flows, and assesses the ability of the investee to sustain an
earnings capacity that justifies the carrying amount of the investment.
CMS Energy records an impairment if the fair value is less than the carrying
amount and the decline in value is considered to be other than temporary.
Investment Tax Credits: Consumers amortizes its investment tax credits over the
life of the related property in accordance with regulatory treatment.
CMS Energy's non­regulated businesses use the deferral method of accounting for
investment tax credits. Under the deferral method, the book basis of the
associated assets is reduced by the amount of the credit, resulting in lower
depreciation expense over the life of the assets. Furthermore, the tax basis of
the assets is reduced by 50 percent of the related credit, resulting in a net
deferred tax asset. CMS Energy recognizes the tax benefit of this basis
difference as a reduction to income tax expense in the year in which the plant
reaches commercial operation.


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Inventory: CMS Energy and Consumers use the weighted-average cost method for
valuing working gas, recoverable base gas in underground storage facilities, and
materials and supplies inventory. CMS Energy and Consumers also use this method
for valuing coal inventory, and they classify these amounts as generating plant
fuel stock on their consolidated balance sheets.
CMS Energy and Consumers account for RECs and emission allowances as inventory
and use the weighted-average cost method to remove amounts from inventory. RECs
and emission allowances are used to satisfy compliance obligations related to
the generation of power. CMS Energy and Consumers classify these amounts within
other assets on their consolidated balance sheets.
CMS Energy and Consumers evaluate inventory for impairment as required to ensure
that its carrying value does not exceed the lower of cost or net realizable
value.
MISO Transactions: MISO requires the submission of hourly day-ahead and
real-time bids and offers for energy at locations across the MISO region.
CMS Energy and Consumers account for MISO transactions on a net hourly basis in
each of the real-time and day-ahead markets, netted across all MISO energy
market locations. CMS Energy and Consumers record net hourly purchases in
purchased and interchange power and net hourly sales in operating revenue on
their consolidated statements of income. They record net billing adjustments
upon receipt of settlement statements, record accruals for future net purchases
and sales adjustments based on historical experience, and reconcile accruals to
actual expenses and sales upon receipt of settlement statements.
Property Taxes: Property taxes are based on the taxable value of Consumers' real
and personal property assessed by local taxing authorities. Consumers records
property tax expense over the fiscal year of the taxing authority for which the
taxes are levied. The deferred property tax balance represents the amount of
Consumers' accrued property tax that will be recognized over future governmental
fiscal periods.
Renewable Energy Grant: In 2013, Consumers received a renewable energy cash
grant for Lake Winds® Energy Park under Section 1603 of the American Recovery
and Reinvestment Tax Act of 2009. Upon receipt of the grant, Consumers recorded
a regulatory liability, which Consumers is amortizing over the life of Lake
Winds® Energy Park. Consumers presents the amortization as a reduction to
maintenance and other operating expenses on its consolidated statements of
income. Consumers recorded the deferred income taxes related to the grant as a
reduction of the book basis of Lake Winds® Energy Park.
Other: For additional accounting policies, see:
• Note 8, Notes Receivable


• Note 9, Plant, Property, and Equipment

• Note 11, Asset Retirement Obligations

• Note 12, Retirement Benefits

• Note 14, Income Taxes

• Note 15, Earnings Per Share-CMS Energy

• Note 16, Revenue

• Note 18, Cash and Cash Equivalents

2: New Accounting Standards



Implementation of New Accounting Standards
ASU 2016­02, Leases: This standard, which was effective on January 1, 2019 for
CMS Energy and Consumers, establishes a new accounting model for leases. The
standard requires lessees to recognize


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lease assets and liabilities on the balance sheet for all leases with a term of
more than one year, including operating leases, which were not recorded on the
balance sheet under previous standards. The new guidance also amends the
definition of a lease to require that a lessee have the right to control the use
of a specified asset, and not simply control or take the output of the asset. On
the statement of income, operating leases are generally accounted for under a
straight-line expense model, while finance leases, which were previously
referred to as capital leases, are generally accounted for under a financing
model. Consistent with the previous lease guidance, however, the standard allows
rate-regulated utilities to recognize expense consistent with the timing of
recovery in rates.
CMS Energy and Consumers elected to use certain practical expedients permitted
by the standard, under which they were not required to perform lease assessments
or reassessments for agreements existing on the effective date. They also
elected a transition method under which they initially applied the standard on
January 1, 2019, without adjusting amounts presented for prior periods. Under
the standard, CMS Energy and Consumers recognized additional lease assets and
liabilities on their consolidated balance sheets as of January 1, 2019 for their
operating leases. In addition, in accordance with the standard, they have
provided additional disclosures about their leases in Note 10, Leases and
Palisades Financing. The standard did not have any impact on CMS Energy's and
Consumers' consolidated net income or cash flows, and there was no
cumulative-effect adjustment recorded to beginning retained earnings.
New Accounting Standards Not Yet Effective
ASU 2016­13, Measurement of Credit Losses on Financial Instruments: This
standard, effective January 1, 2020 for CMS Energy and Consumers, provides new
guidance for measuring and recognizing credit losses on financial instruments.
The standard applies to financial assets that are not measured at fair value
through net income as well as to certain off-balance sheet credit exposures.
Entities will apply the standard using a modified retrospective approach, with a
cumulative­effect adjustment recorded to beginning retained earnings on the
effective date.
The standard will require an increase to the allowance for loan losses at
EnerBank. At December 31, 2019, the allowance reflected expected credit losses
over a 12­month period, but the new standard will require the allowance to
reflect expected credit losses over the entire life of the loans. EnerBank
expects to record a $65 million increase to its expected credit loss reserves on
January 1, 2020, with the offsetting adjustment recorded to retained earnings,
net of taxes. The standard will also require an increase in the initial
provision for loan losses recognized in net income for new loans originated in
2020 and beyond. At Consumers, the new guidance will apply to the allowance for
uncollectible accounts; however, Consumers does not expect material impacts from
the standard.


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3: Regulatory Matters


Regulatory matters are critical to Consumers. The Michigan Attorney General,
ABATE, the MPSC Staff, and certain other parties typically participate in MPSC
proceedings concerning Consumers, such as Consumers' rate cases and PSCR and GCR
processes. These parties often challenge various aspects of those proceedings,
including the prudence of Consumers' policies and practices, and seek cost
disallowances and other relief. The parties also have appealed significant MPSC
orders. Depending upon the specific issues, the outcomes of rate cases and
proceedings, including judicial proceedings challenging MPSC orders or other
actions, could negatively affect CMS Energy's and Consumers' liquidity,
financial condition, and results of operations. Consumers cannot predict the
outcome of these proceedings.
There are multiple appeals pending that involve various issues concerning cost
recovery from customers, the adequacy of the record of evidence supporting the
recovery of Smart Energy investments, and other matters. Consumers is unable to
predict the outcome of these appeals.
Regulatory Assets and Liabilities
Consumers is subject to the actions of the MPSC and FERC and therefore prepares
its consolidated financial statements in accordance with the provisions of
regulatory accounting. A utility must apply regulatory accounting when its rates
are designed to recover specific costs of providing regulated services. Under
regulatory accounting, Consumers records regulatory assets or liabilities for
certain transactions that would have been treated as expense or revenue by
non­regulated businesses.


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Presented in the following table are the regulatory assets and liabilities on Consumers' consolidated balance sheets:

                                                                             In Millions
                                               End of Recovery
December 31                                   or Refund Period        2019          2018
Regulatory assets
Current
Energy waste reduction plan incentive1                    2020   $      33$      32
Other                                                     2019           -             5
Total current regulatory assets                                  $      33$      37
Non-current
Postretirement benefits2                               various   $   1,130$   1,028
Costs of coal-fueled electric generating
units to be retired3                                   various         667             -
Securitized costs3                                        2029         247           273
ARO4                                                   various         191           175
MGP sites4                                             various         130           133
Unamortized loss on reacquired debt4                   various          70  

68

Energy waste reduction plan incentive1                    2021          34            34
Energy waste reduction plan4                           various          10            26
Deferred capital spending4                             various           3             -
Gas storage inventory adjustments4                     various           3             4
Other                                                  various           4             2
Total non-current regulatory assets                              $   2,489$   1,743
Total regulatory assets                                          $   2,522$   1,780
Regulatory liabilities
Current
Income taxes, net                                         2020   $      65$      18
Gain to be shared with customers                          2020          17             -
Reserve for customer refunds                              2019           2            36
TCJA reserve for refund                                   2019           -            98
Other                                                     2020           3             3
Total current regulatory liabilities                             $      87$     155
Non-current
Cost of removal                                        various   $   2,126$   1,966
Income taxes, net                                      various       1,510         1,537
Renewable energy grant                                    2043          52            54
ARO                                                    various          26            38
Renewable energy plan                                     2028          17            42
TCJA reserve for refund                                various           -            35
Other                                                  various          11             9
Total non-current regulatory liabilities                         $   3,742$   3,681
Total regulatory liabilities                                     $   3,829

$ 3,836

1 These regulatory assets have arisen from an alternative revenue program

       and are not associated with incurred costs or capital investments.
       Therefore, the MPSC has provided for recovery without a return.

2 This regulatory asset is included in rate base, thereby providing a return.





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3      The MPSC has historically authorized and Consumers expects the MPSC to
       authorize a specific return on these regulatory assets.


4      These regulatory assets represent incurred costs for which the MPSC has

provided, or Consumers expects, recovery without a return on investment.



Regulatory Assets
Energy Waste Reduction Plan Incentive: In December 2019, the MPSC approved a
settlement agreement authorizing Consumers to collect $34 million during 2020 as
an incentive for exceeding its statutory savings targets in 2018. Consumers
recognized incentive revenue under this program of $34 million in 2018.
Consumers also exceeded its statutory savings targets in 2019, achieved certain
other goals, and will request the MPSC's approval to collect $34 million, the
maximum performance incentive, in the energy waste reduction reconciliation to
be filed in 2020. Consumers recognized incentive revenue under this program of
$34 million in 2019.
Postretirement Benefits: As part of the ratemaking process, the MPSC allows
Consumers to recover the costs of postretirement benefits. Accordingly,
Consumers defers the net impact of actuarial losses and gains as well as prior
service costs and credits associated with postretirement benefits as a
regulatory asset or liability. The asset or liability will decrease as the
deferred items are amortized and recognized as components of net periodic
benefit cost. For details about the amortization periods, see Note 12,
Retirement Benefits.
Costs of Coal-fueled Electric Generating Units to be Retired: In June 2019, the
MPSC approved the settlement agreement reached in Consumers' IRP, under which
Consumers plans to retire the D.E. Karn 1 & 2 coal-fueled electric generating
units in 2023. Under Michigan law, electric utilities have been permitted to use
highly rated, low-cost securitization bonds to finance the recovery of qualified
costs. Consumers will file for securitization financing by May 2023, requesting
the MPSC's approval to securitize the remaining book value of the
two coal-fueled electric generating units upon their retirement.
In 2019, Consumers removed from total plant, property, and equipment an amount
representing the remaining book value of the two coal-fueled electric generating
units upon their retirement, and recorded it as a regulatory asset. Until
securitization, the book value of the generating units will remain in rate base
and receive full regulatory returns in general rate cases.
Securitized Costs: In 2013, the MPSC issued a securitization financing order
authorizing Consumers to issue securitization bonds in order to finance the
recovery of the remaining book value of seven smaller coal-fueled electric
generating units that Consumers retired in 2016 and three smaller natural
gas-fueled electric generating units that Consumers retired in 2015. Upon
receipt of the MPSC's order, Consumers removed the book value of the ten units
from plant, property, and equipment and recorded this amount as a regulatory
asset. Consumers is amortizing the regulatory asset over the life of the related
securitization bonds, which it issued through a subsidiary in 2014. For
additional details regarding the securitization bonds, see Note 5, Financings
and Capitalization.
ARO: The recovery of the underlying asset investments and related removal and
monitoring costs of recorded AROs is approved by the MPSC in depreciation rate
cases. Consumers records a regulatory asset and a regulatory liability for
timing differences between the recognition of AROs for financial reporting
purposes and the recovery of these costs from customers. The recovery period
approximates the useful life of the assets to be removed.


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MGP Sites: Consumers is incurring environmental remediation and other response
activity costs at 23 former MGP facilities. The MPSC allows Consumers to recover
from its natural gas customers over a ten-year period the costs incurred to
remediate the MGP sites.
Unamortized Loss on Reacquired Debt: Under regulatory accounting, any
unamortized discount, premium, or expense related to debt redeemed with the
proceeds of new debt is capitalized and amortized over the life of the new debt.
Energy Waste Reduction Plan: The MPSC allows Consumers to collect surcharges
from customers to fund its energy waste reduction plan. The amount of spending
incurred in excess of surcharges collected is recorded as a regulatory asset and
amortized as surcharges are collected from customers over the plan period. The
amount of surcharges collected in excess of spending incurred is recorded as a
regulatory liability and amortized as costs are incurred.
Deferred Capital Spending: In January 2019, the MPSC approved a settlement
agreement in Consumers' 2018 electric rate case, which provided deferred
accounting treatment for distribution-related capital investments exceeding
certain threshold amounts. Thus, for actual capital spending above the threshold
amounts detailed in the settlement agreement, Consumers has deferred as a
regulatory asset the associated depreciation and property tax expense as well as
the debt component of the overall rate of return on such spending.
Gas Storage Inventory Adjustments: Consumers incurs inventory expenses related
to the loss of gas from its natural gas storage fields. The MPSC allows
Consumers to recover these costs from its natural gas customers over a five-year
period.
Regulatory Liabilities
Income Taxes, Net: Consumers records regulatory assets and liabilities to
reflect the difference between deferred income taxes recognized for financial
reporting purposes and amounts previously reflected in Consumers' rates. This
net balance will decrease over the remaining life of the related temporary
differences and flow through current income tax benefit. For additional details
on deferred income taxes, see the Consumers Electric Utility and Gas Utility-Tax
Cuts and Jobs Act section below and Note 14, Income Taxes.
Gain to be Shared with Customers: In December 2019, Consumers filed an
application with the MPSC requesting approval to share voluntarily with electric
utility customers half of the gain recognized on a sale of a portion of its
substation transmission equipment to METC. Consumers proposed the gain sharing
take place through an offset to additional spending in 2020 or through a bill
credit to customers in 2021.
Reserve for Customer Refunds: At December 31, 2018, Consumers had recorded a
provision for revenue subject to refund associated with electric rates it
self-implemented in 2017. In August 2019, the MPSC approved Consumers'
reconciliation of total revenues collected from rates it self-implemented to
those that would have been collected under the final rates approved in June 2018
and Consumers refunded the resulting amount in September 2019. The 2016 Energy
Law eliminated utilities' self-implementation of rates under general rate cases,
but provided for more timely processing of general rate cases.
TCJA Reserve for Refund: In early 2018, the MPSC ordered Consumers to file
various proceedings to determine the reduction in its electric and gas revenue
requirements as a result of the TCJA. For further information on the various
TCJA proceedings, see the Consumers Electric Utility and Gas Utility-Tax Cuts
and Jobs Act section below.


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Cost of Removal: The MPSC allows Consumers to collect amounts from customers to
fund future asset removal activities. This regulatory liability is reduced as
costs of removal are incurred. The refund period of this regulatory liability
approximates the useful life of the assets to be removed.
Renewable Energy Grant: In 2013, Consumers received a $69 million renewable
energy grant for Lake Winds® Energy Park, which began operations in 2012. This
grant reduces Consumers' cost of complying with Michigan's renewable portfolio
standard and, accordingly, reduces the overall renewable energy surcharge to be
collected from customers. The regulatory liability recorded for the grant will
be amortized over the life of Lake Winds® Energy Park.
Renewable Energy Plan: Consumers has collected surcharges to fund its renewable
energy plan. Amounts not yet spent under the plan are recorded as a regulatory
liability, which is amortized as incremental costs are incurred to operate and
depreciate Consumers' renewable generation facilities and to purchase RECs under
renewable energy purchase agreements. Incremental costs represent costs incurred
in excess of amounts recovered through the PSCR process.
Consumers Electric Utility and Gas Utility
Tax Cuts and Jobs Act: The TCJA, which changed existing federal tax law and
included numerous provisions that affect businesses, was signed into law in
December 2017.
In early 2018, the MPSC ordered Consumers to file various proceedings to
determine the reduction in its electric and gas revenue requirements as a result
of the reduction in the corporate income tax rate, and to implement bill credits
to reflect that reduction until customer rates could be adjusted through
Consumers' general rate cases. Consumers filed, and the MPSC approved, such
proceedings throughout 2018, resulting in credits to customer bills during 2018
to reflect reductions in Consumers' electric and gas revenue requirements.
Consumers filed additional proceedings to address amounts collected from
customers during 2018 prior to the implementation of bill credits. In late 2018,
the MPSC approved the refund of $31 million to gas customers over six months
beginning in December 2018 and the refund of $70 million to electric customers
over six months beginning in January 2019.
In October 2018, Consumers filed an application to address the December 31, 2017
remeasurement of its deferred income taxes and other base rate impacts of the
TCJA on customers. In September 2019, the MPSC authorized Consumers to begin
returning net regulatory tax liabilities of $0.4 billion to gas customers
through rates approved in the 2018 gas rate case and $1.2 billion to electric
customers through rates to be determined in Consumers' next electric rate case.
Until then, the MPSC authorized Consumers to refund $32 million to electric
customers through a temporary bill credit. Consumers' total $1.6 billion of net
regulatory tax liabilities comprises:
•      A regulatory tax liability of $1.7 billion associated with plant assets

that are subject to normalization, which is governed by the Internal

Revenue Code; this regulatory tax liability will be returned over the

remaining book life of the related plant assets, the average of which is

44 years for gas plant assets and 27 years for electric plant assets.

• A regulatory tax asset of $0.3 billion associated with plant assets that

are not subject to normalization; this regulatory tax asset will be

collected over 44 years from gas customers and over 27 years from electric

customers.

• A regulatory tax liability of $0.2 billion, which is primarily related to

       employee benefits; this regulatory tax liability will be refunded to
       customers over ten years.




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In January 2018, Consumers began to reduce the regulatory liability subject to
normalization by crediting income tax expense. Consumers fully reserved for the
eventual refund of these excess deferred taxes that it credited to income tax
expense in a separate non­current regulatory liability established by reducing
revenue. As a result of an order received in September 2019, Consumers began
refunding these excess deferred taxes to customers and will no longer reserve
for their refund. At the date of the order, this reserve for refund of these
excess deferred taxes totaled $62 million. For additional details on the
remeasurement, see Note 14, Income Taxes.
Consumers Electric Utility
2018 Electric Rate Case: In May 2018, Consumers filed an application with the
MPSC seeking an annual rate increase of $58 million, based on a 10.75 percent
authorized return on equity. In October 2018, Consumers reduced its requested
annual rate increase to $44 million. In January 2019, the MPSC approved a
settlement agreement authorizing an annual rate decrease of $24 million, based
on a 10.0 percent authorized return on equity. With the elimination of the
$113 million TCJA credit to customer bills, the approved settlement agreement
resulted in an $89 million net increase in annual rates. The settlement
agreement also provided for deferred accounting treatment for
distribution-related capital investments exceeding certain amounts. Consumers
also agreed to not file a new electric rate case prior to January 2020.
Consumers Gas Utility
2018 Gas Rate Case: In November 2018, Consumers filed an application with the
MPSC seeking an annual rate increase of $229 million, based on a 10.75 percent
authorized return on equity. In April 2019, Consumers reduced its requested
annual rate increase to $204 million. In September 2019, the MPSC approved an
annual rate increase of $144 million, based on a 9.90 percent authorized return
on equity. This increase includes a $13 million adjustment to begin returning
net regulatory tax liabilities associated with the TCJA to customers. The MPSC
also approved the continuation of a revenue decoupling mechanism, which annually
reconciles Consumers' actual weather-normalized, non­fuel revenues with the
revenues approved by the MPSC.
Power Supply Cost Recovery and Gas Cost Recovery
The PSCR and GCR ratemaking processes are designed to allow Consumers to recover
all of its power supply and purchased natural gas costs if incurred under
reasonable and prudent policies and practices. The MPSC reviews these costs,
policies, and practices in annual plan and reconciliation proceedings. Consumers
adjusts its PSCR and GCR billing charges monthly in order to minimize the
underrecovery or overrecovery amount in the annual reconciliations.
Underrecoveries represent probable future revenues that will be recovered from
customers; overrecoveries represent previously collected revenues that will be
refunded to customers.


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Presented in the following table are the assets and liabilities for PSCR and GCR
underrecoveries and overrecoveries reflected on Consumers' consolidated balance
sheets:
                         In Millions
December 31            2019     2018
Assets
GCR underrecoveries    $  -     $ 16
Accrued gas revenue    $  -     $ 16
Liabilities
PSCR overrecoveries    $ 33$  4
GCR overrecoveries        2        -
Accrued rate refunds   $ 35$  4



PSCR Plans and Reconciliations: In October 2019, the MPSC issued an order in
Consumers' 2017 PSCR reconciliation, authorizing recovery of $1.9 billion of
power costs and authorizing Consumers to reflect in its 2018 PSCR reconciliation
the overrecovery of $32 million.
In November 2019, the MPSC issued an order in Consumers' 2018 PSCR plan
authorizing the 2018 PSCR charge that Consumers self-implemented beginning in
January 2018. In March 2019, Consumers filed its 2018 PSCR reconciliation,
requesting full recovery of $2.0 billion of power costs and authorization to
reflect in its 2019 PSCR reconciliation the underrecovery of $31 million.
Consumers submitted its 2019 PSCR plan to the MPSC in September 2018 and, in
accordance with its proposed plan, self-implemented the 2019 PSCR charge
beginning in January 2019.
GCR Plans and Reconciliations: In September 2019, the MPSC issued an order in
Consumers' 2017-2018 GCR reconciliation, authorizing full recovery of
$0.6 billion of gas costs and authorizing Consumers to reflect in its 2018-2019
GCR reconciliation the overrecovery of $1 million.
In June 2019, Consumers filed its 2018-2019 GCR reconciliation, requesting full
recovery of $0.6 billion of gas costs and authorization to reflect in its
2019-2020 GCR reconciliation the underrecovery of $18 million.
In January 2020, the MPSC issued an order in Consumers' 2019-2020 GCR plan
authorizing the 2019-2020 GCR charge that Consumers self-implemented beginning
in April 2019.
4: Contingencies and Commitments


CMS Energy and Consumers are involved in various matters that give rise to
contingent liabilities. Depending on the specific issues, the resolution of
these contingencies could negatively affect CMS Energy's and Consumers'
liquidity, financial condition, and results of operations. In their disclosures
of these matters, CMS Energy and Consumers provide an estimate of the possible
loss or range of loss when such an estimate can be made. Disclosures that state
that CMS Energy or Consumers cannot predict the outcome of a matter indicate
that they are unable to estimate a possible loss or range of loss for the
matter.
CMS Energy Contingencies
Gas Index Price Reporting Litigation: CMS Energy, along with CMS MST, CMS Field
Services, Cantera Natural Gas, Inc., and Cantera Gas Company, were named as
defendants in four class action lawsuits and one individual lawsuit arising as a
result of alleged inaccurate natural gas price reporting to


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publications that report trade information. Allegations include price-fixing
conspiracies, restraint of trade, and artificial inflation of natural gas retail
prices in Kansas, Missouri, and Wisconsin. In 2016, CMS Energy entities reached
a settlement with the plaintiffs in the Kansas and Missouri class action cases
for an amount that was not material to CMS Energy. In 2017, the federal district
court approved the settlement. The following provides more detail on the
remaining cases in which CMS Energy or its affiliates were named as parties:
•      In 2006, a class action complaint, Arandell Corp., et al. v.

XCEL Energy Inc., et al., was filed in Wisconsin state court on behalf of

Wisconsin commercial entities that purchased natural gas between

January 2000 and October 2002. The defendants, including CMS Energy,

CMS ERM, and Cantera Gas Company, are alleged to have violated Wisconsin's

antitrust statute. The plaintiffs are seeking full consideration damages,

       treble damages, costs, interest, and attorneys' fees.


•      In 2009, a class action complaint, Newpage Wisconsin System v. CMS ERM,

et al., was filed in circuit court in Wood County, Wisconsin, against

       CMS Energy, CMS ERM, Cantera Gas Company, and others. The plaintiff is
       seeking full consideration damages, treble damages, costs, interest, and
       attorneys' fees.

• In 2005, J.P. Morgan Trust Company, N.A., in its capacity as trustee of

the FLI Liquidating Trust, filed an action in Kansas state court against

CMS Energy, CMS MST, CMS Field Services, and others. The complaint alleges

various claims under the Kansas Restraint of Trade Act. The plaintiff is

seeking statutory full consideration damages for its purchases of natural

gas in 2000 and 2001, costs, and attorneys' fees.



After removal to federal court, all of the cases were transferred to a single
federal district court pursuant to the multidistrict litigation process. In 2010
and 2011, all claims against CMS Energy defendants were dismissed by the
district court based on FERC preemption.
In 2013, the U.S. Court of Appeals for the Ninth Circuit reversed the district
court decision. The appellate court found that FERC preemption does not apply
under the facts of these cases. The appellate court affirmed the district
court's denial of leave to amend to add federal antitrust claims. The matter was
appealed to the U.S. Supreme Court, which in 2015 upheld the Ninth Circuit's
decision. The cases were remanded back to the federal district court.
In 2016, the federal district court granted the defendants' motion for summary
judgment in the individual lawsuit filed in Kansas based on a release in a prior
settlement involving similar allegations; the order of summary judgment was
subsequently appealed. In March 2018, the U.S. Court of Appeals for the Ninth
Circuit reversed the lower court's ruling and remanded the case back to the
federal district court.
In 2017, the federal district court denied plaintiffs' motion for class
certification in the two pending class action cases in Wisconsin. The plaintiffs
appealed that decision to the U.S. Court of Appeals for the Ninth Circuit and in
August 2018, the Ninth Circuit Court of Appeals reversed and remanded the matter
back to the federal district court for further consideration.
In January 2019, the judge in the multidistrict litigation granted motions filed
by plaintiffs for Suggestion of Remand of the actions back to the respective
transferor courts in Wisconsin and Kansas for further handling. In the Kansas
action, the Judicial Panel on Multidistrict Litigation ordered the remand and
the case has been transferred. In the Wisconsin actions, oppositions to the
remand were filed, but the Judicial Panel on Multidistrict Litigation granted
the remand in June 2019.


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CMS Energy and the plaintiffs in each of the Kansas and the Wisconsin actions
engaged in settlement discussions and CMS Energy has recorded a $30 million
liability at December 31, 2019 as a probable estimate to settle these two cases.
CMS Energy can give no assurances that it can reach a final settlement with the
plaintiffs in these two cases, of the actual amount CMS Energy would have to pay
in any settlement, or, in the Wisconsin case, that the Wisconsin court would
approve any such settlement. If settlement does not occur and the outcome after
appeals is unfavorable to CMS Energy, these cases could negatively affect CMS
Energy's liquidity, financial condition, and results of operations.
Bay Harbor: CMS Land retained environmental remediation obligations for the
collection and treatment of leachate at Bay Harbor after selling its interests
in the development in 2002. Leachate is produced when water enters into cement
kiln dust piles left over from former cement plant operations at the site. In
2012, CMS Land and EGLE finalized an agreement that established the final
remedies and the future water quality criteria at the site. CMS Land completed
all construction necessary to implement the remedies required by the agreement
and will continue to maintain and operate a system to discharge treated leachate
into Little Traverse Bay under an NPDES permit issued in 2010 and renewed in
2016. The renewed NPDES permit is valid through September 2020.
At December 31, 2019, CMS Energy had a recorded liability of $46 million for its
remaining obligations for environmental remediation. CMS Energy calculated this
liability based on discounted projected costs, using a discount rate of 4.34
percent and an inflation rate of one percent on annual operating and maintenance
costs. The undiscounted amount of the remaining obligation is $58 million.
CMS Energy expects to pay the following amounts for long-term leachate disposal
and operating and maintenance costs in each of the next five years:
                                                                                           In Millions
                                                  2020        2021        2022        2023        2024
CMS Energy
Long-term leachate disposal and operating
and maintenance costs                           $    5$    4$    4$    4$    4CMS Energy's estimate of response activity costs and the timing of expenditures
could change if there are changes in circumstances or assumptions used in
calculating the liability. Although a liability for its present estimate of
remaining response activity costs has been recorded, CMS Energy cannot predict
the ultimate financial impact or outcome of this matter.
Equatorial Guinea Tax Claim: In 2002, CMS Energy sold its oil, gas, and methanol
investments in Equatorial Guinea. The government of Equatorial Guinea claims
that, in connection with the sale, CMS Energy owes $152 million in taxes, plus
substantial penalties and interest that could be up to or exceed the amount of
the taxes claimed. In 2015, the matter was proceeding to formal arbitration;
however, since then, the government of Equatorial Guinea has stopped
communicating. CMS Energy has concluded that the government's tax claim is
without merit and will continue to contest the claim, but cannot predict the
financial impact or outcome of the matter. An unfavorable outcome could have a
material adverse effect on CMS Energy's liquidity, financial condition, and
results of operations.
Consumers Electric Utility Contingencies
Electric Environmental Matters: Consumers' operations are subject to
environmental laws and regulations. Historically, Consumers has generally been
able to recover, in customer rates, the costs to operate its facilities in
compliance with these laws and regulations.


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Cleanup and Solid Waste: Consumers expects to incur remediation and other
response activity costs at a number of sites under the NREPA. Consumers believes
that these costs should be recoverable in rates, but cannot guarantee that
outcome. Consumers estimates that its liability for NREPA sites for which it can
estimate a range of loss will be between $3 million and $4 million. At
December 31, 2019, Consumers had a recorded liability of $3 million, the minimum
amount in the range of its estimated probable NREPA liability, as no amount in
the range was considered a better estimate than any other amount.
Consumers is a potentially responsible party at a number of contaminated sites
administered under CERCLA. CERCLA liability is joint and several. In 2010,
Consumers received official notification from the EPA that identified Consumers
as a potentially responsible party for cleanup of PCBs at the Kalamazoo River
CERCLA site. The notification claimed that the EPA has reason to believe that
Consumers disposed of PCBs and arranged for the disposal and treatment of
PCB-containing materials at portions of the site. In 2011, Consumers received a
follow-up letter from the EPA requesting that Consumers agree to participate in
a removal action plan along with several other companies for an area of lower
Portage Creek, which is connected to the Kalamazoo River. All parties, including
Consumers, that were asked to participate in the removal action plan declined to
accept liability. Until further information is received from the EPA, Consumers
is unable to estimate a range of potential liability for cleanup of the river.
Based on its experience, Consumers estimates that its share of the total
liability for known CERCLA sites will be between $3 million and $8 million.
Various factors, including the number and creditworthiness of potentially
responsible parties involved with each site, affect Consumers' share of the
total liability. At December 31, 2019, Consumers had a recorded liability of
$3 million for its share of the total liability at these sites, the minimum
amount in the range of its estimated probable CERCLA liability, as no amount in
the range was considered a better estimate than any other amount.
The timing of payments related to Consumers' remediation and other response
activities at its CERCLA and NREPA sites is uncertain. Consumers periodically
reviews these cost estimates. A change in the underlying assumptions, such as an
increase in the number of sites, different remediation techniques, the nature
and extent of contamination, and legal and regulatory requirements, could affect
its estimates of NREPA and CERCLA liability.
Ludington PCB: In 1998, during routine maintenance activities, Consumers
identified PCB as a component in certain paint, grout, and sealant materials at
Ludington. Consumers removed part of the PCB material and replaced it with
non­PCB material. Consumers has had several communications with the EPA
regarding this matter, but cannot predict the financial impact or outcome.
MCV PPA: In 2017, the MCV Partnership initiated arbitration against Consumers,
asserting a breach of contract associated with the MCV PPA. Under this PPA,
Consumers pays the MCV Partnership a fixed energy charge based on Consumers'
annual average baseload coal generating plant operating and maintenance cost,
fuel inventory, and administrative and general expenses. The MCV Partnership
asserts that, under the Clean Air Act, Consumers should have installed pollution
control equipment on coal-fueled electric generating units years before they
were retired. The MCV Partnership also asserts that Consumers should have
installed pollution control equipment earlier on its remaining coal-fueled
electric generating units. Additionally, the MCV Partnership claims that
Consumers improperly characterized certain costs included in the calculation of
the fixed energy charge.
In January 2019, an arbitration panel issued an order concluding that the MCV
Partnership is not entitled to any damages associated with its claim against
Consumers related to the Clean Air Act; the majority of the MCV Partnership's
claim, which estimated damages and interest in excess of $270 million, was
related to this dismissed claim. Consumers believes that the MCV Partnership's
remaining claims are without merit, but cannot predict the financial impact or
outcome of the matter.


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Underwater Cables in Straits of Mackinac: Consumers owns certain underwater
electric cables in the Straits of Mackinac, which were de-energized and retired
in 1990. Consumers was notified that some of these cables were damaged as a
result of vessel activity in April 2018. Following the notification, Consumers
located, inspected, sampled, capped, and returned the damaged retired cables to
their original location on the lake bottom, and did not find any substantive
evidence of environmental contamination. After collaborating with the State of
Michigan, local Native American tribes, and other stakeholders, Consumers
submitted a permit application and removal work plan with EGLE and the U.S. Army
Corps of Engineers in December 2019 for partial removal of all Consumers-owned
cables. Upon EGLE's issuance of a permit or certificate of coverage, which is
expected in early 2020, Consumers will record an ARO for the cost to remove
partially its cables, estimated to be up to $5 million. If Consumers were
required to remove all the cables, it could incur costs of up to $10 million.
Consumers filed suit against the companies that own the vessels that allegedly
caused the damage and settled that matter. Consumers will seek recovery from
customers of any costs incurred.
Consumers Gas Utility Contingencies
Gas Environmental Matters: Consumers expects to incur remediation and other
response activity costs at a number of sites under the NREPA. These sites
include 23 former MGP facilities. Consumers operated the facilities on these
sites for some part of their operating lives. For some of these sites, Consumers
has no present ownership interest or may own only a portion of the original
site.
At December 31, 2019, Consumers had a recorded liability of $68 million for its
remaining obligations for these sites. This amount represents the present value
of long-term projected costs, using a discount rate of 2.57 percent and an
inflation rate of 2.5 percent. The undiscounted amount of the remaining
obligation is $73 million. Consumers expects to pay the following amounts for
remediation and other response activity costs in each of the next five years:
                                                                             In Millions
                                                2020     2021     2022     2023     2024
Consumers
Remediation and other response activity costs   $ 12$ 8$ 20$ 11$ 2



Consumers periodically reviews these cost estimates. Any significant change in
the underlying assumptions, such as an increase in the number of sites, changes
in remediation techniques, or legal and regulatory requirements, could affect
Consumers' estimates of annual response activity costs and the MGP liability.
Pursuant to orders issued by the MPSC, Consumers defers its MGP-related
remediation costs and recovers them from its customers over a ten-year period.
At December 31, 2019, Consumers had a regulatory asset of $130 million related
to the MGP sites.
Consumers estimates that its liability to perform remediation and other response
activities at NREPA sites other than the MGP sites could reach $3 million. At
December 31, 2019, Consumers had a recorded liability of less than $1 million,
the minimum amount in the range of its estimated probable liability, as no
amount in the range was considered a better estimate than any other amount.
Ray Compressor Station: On January 30, 2019, Consumers experienced a fire at the
Ray Compressor Station, which resulted in the Ray Storage Field being off­line
or operating at significantly reduced capacity, which negatively affected
Consumers' natural gas supply and delivery capacity. This incident, which
occurred during the extreme polar vortex weather condition, required Consumers
to request voluntary reductions in customer load, to implement contingency gas
supply purchases, and to implement


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a curtailment of natural gas deliveries for industrial and large commercial
customers pursuant to Consumers' MPSC curtailment tariff. The curtailment and
request for voluntary reductions of customer loads were canceled as of midnight,
February 1, 2019. Consumers investigated the cause of the incident, and filed a
report on the incident with the MPSC in April 2019. In response, the MPSC issued
an order in July 2019, directing Consumers to file additional reports regarding
the incident and to include detail of the resulting costs in a future rate
proceeding. The compressor station is presently operating at full capacity.
As a result of the fire and the resulting curtailment, Consumers could be
subject to disallowances of gas purchased and costs associated with the repairs
to the Ray Compressor Station. Consumers' incremental cost of gas purchased
during the incident was $7 million. Additionally, at December 31, 2019,
Consumers had incurred capital expenditures of $12 million to restore the
compressor station.Consumers may also be subject to various claims from impacted
customers, claims for damages, or regulatory penalties. At this time, Consumers
cannot predict the outcome of these matters or other gas-related incidents and a
reasonable estimate of a total loss cannot be made, but they could have a
material adverse effect on Consumers' results of operations, financial
condition, or liquidity, and could subject Consumers' gas utility to increased
regulatory scrutiny.
Consumers Electric and Gas Utility Contingencies
Electric and Gas Staking: In June 2019, the MPSC ordered Consumers to show cause
as to why it should not be found in violation of the MISS DIG Act. The MPSC
alleges that Consumers violated the law by failing to respond in a timely manner
to over 20,000 requests to mark the location of underground facilities in April
and May 2019 and only partially responding to others. The law provides the MPSC
with discretion in setting fines for violations, if any; however, the fines
cannot exceed $5,000 per violation. Consumers resolved the backlog of staking
requests, and Consumers, the MPSC Staff, and the Michigan Attorney General filed
an agreement with the MPSC settling this matter for an amount of less than
$1 million. The MPSC approved the settlement agreement in January 2020.
Guarantees
Presented in the following table are CMS Energy's and Consumers' guarantees at
December 31, 2019:
                                                                                                In Millions
Guarantee Description                Issue Date Expiration Date    Maximum Obligation       Carrying Amount
CMS Energy, including Consumers
Indemnity obligations from stock
and asset sale agreements1              various      indefinite      $            153         $           2
Guarantees2                             various      indefinite                    36                     -
Consumers
Guarantee2                            July 2011      indefinite      $             30         $           -


1 These obligations arose from stock and asset sale agreements under which

CMS Energy or a subsidiary of CMS Energy indemnified the purchaser for

losses resulting from various matters, primarily claims related to taxes.

The maximum obligation amount is mostly related to the Equatorial Guinea

tax claim discussed in the CMS Energy Contingencies section of this Note.

       CMS Energy believes the likelihood of material loss to be remote for the
       indemnity obligations not recorded as liabilities.


2      At Consumers, this obligation comprises a guarantee provided to the
       U.S. Department of Energy in connection with a settlement agreement

regarding damages resulting from the department's failure to accept spent

       nuclear fuel from nuclear power plants formerly owned by Consumers. At
       CMS Energy, the




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guarantee obligations comprise Consumers' guarantee to the U.S. Department of
Energy and CMS Energy's 1994 guarantee of non­recourse revenue bonds issued by
Genesee. For additional details on this guarantee, see Note 21, Variable
Interest Entities.
Additionally, in the normal course of business, CMS Energy, Consumers, and
certain other subsidiaries of CMS Energy have entered into various agreements
containing tax and other indemnity provisions for which they are unable to
estimate the maximum potential obligation. The carrying value of these indemnity
obligations is $1 million. CMS Energy and Consumers consider the likelihood that
they would be required to perform or incur substantial losses related to these
indemnities to be remote.
Other Contingencies
In addition to the matters disclosed in this Note and Note 3, Regulatory
Matters, there are certain other lawsuits and administrative proceedings before
various courts and governmental agencies, as well as unasserted claims that may
result in such proceedings, arising in the ordinary course of business to which
CMS Energy, Consumers, and certain other subsidiaries of CMS Energy are parties.
These other lawsuits, proceedings, and unasserted claims may involve personal
injury, property damage, contracts, environmental matters, federal and state
taxes, rates, licensing, employment, and other matters. Further, CMS Energy and
Consumers occasionally self-report certain regulatory non­compliance matters
that may or may not eventually result in administrative proceedings. CMS Energy
and Consumers believe that the outcome of any one of these proceedings and
potential claims will not have a material negative effect on their consolidated
results of operations, financial condition, or liquidity.
Contractual Commitments
Purchase Obligations: Purchase obligations arise from long-term contracts for
the purchase of commodities and related services, and construction and service
agreements. The commodities and related services include long-term PPAs, natural
gas and associated transportation, and coal and associated transportation.
Related-party PPAs are between Consumers and certain affiliates of
CMS Enterprises. Presented in the following table are CMS Energy's and
Consumers' contractual purchase obligations at December 31, 2019 for each of the
periods shown:
                                                                                             In Millions
                                                          Payments Due
                            Total        2020        2021      2022      2023      2024      Beyond 2024
CMS Energy, including Consumers
Total PPAs                $ 9,336$ 1,030$ 1,035$ 750$ 608$ 605$     5,308
Other                       3,244       1,685         520       451       210       199              179
Consumers
PPAs
MCV PPA                   $ 3,295$   313$   287$ 272$ 225$ 201$     1,997
Palisades PPA                 899         388         398       113         -         -                -
Related-party PPAs            472          71          72        74        74        75              106
Other PPAs                  4,670         258         278       291       309       329            3,205
Total PPAs                $ 9,336$ 1,030$ 1,035$ 750$ 608$ 605$     5,308
Other                       2,865       1,638         477       413       174       162                1





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MCV PPA: Consumers has a 35-year PPA that began in 1990 with the MCV Partnership
to purchase 1,240 MW of electricity. The MCV PPA, as amended and restated,
provides for:
• a capacity charge of $10.14 per MWh of available capacity


• a fixed energy charge based on Consumers' annual average baseload coal

generating plant operating and maintenance cost, fuel inventory, and

administrative and general expenses

• a variable energy charge based on the MCV Partnership's cost of production

when the plant is dispatched

• a $5 million annual contribution by the MCV Partnership to a renewable

resources program

• an option for Consumers to extend the MCV PPA for five years or purchase

the MCV Facility at the conclusion of the MCV PPA's term in March 2025;

although Consumers is not obligated to exercise either of these options,

the table above presents the impact on future cash flows of extending the

MCV PPA through 2030



Capacity and energy charges under the MCV PPA were $318 million in 2019,
$353 million in 2018, and $321 million in 2017.
Palisades PPA: Consumers has a PPA expiring in 2022 with Entergy to purchase
virtually all of the capacity and energy produced by Palisades, up to the annual
average capacity of 798 MW. For all delivered energy, the Palisades PPA has
escalating capacity and variable energy charges. Total capacity and energy
charges under the Palisades PPA were $395 million in 2019, $375 million in 2018,
and $366 million in 2017. For further details about Palisades, see Note 10,
Leases and Palisades Financing.
Other PPAs: Consumers has PPAs expiring through 2040 with various
counterparties. The majority of the PPAs have capacity and energy charges for
delivered energy. In addition, CMS Energy and Consumers account for several of
their PPAs as leases. Capacity and energy charges under these PPAs were
$336 million in 2019, $350 million in 2018, and $349 million in 2017. See
Note 10, Leases and Palisades Financing for more information about CMS Energy's
and Consumers' lease obligations.


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5: Financings and Capitalization



Presented in the following table is CMS Energy's long-term debt at December 31:
                                                                                    In Millions
                                       Interest Rate (%)    Maturity        2019           2018
CMS Energy, including Consumers
CMS Energy, parent only
Senior notes                                  5.050           2022      $    300$     300
                                              3.875           2024           250            250
                                              3.600           2025           250            250
                                              3.000           2026           300            300
                                              2.950           2027           275            275
                                              3.450           2027           350            350
                                              4.700           2043           250            250
                                              4.875           2044           300            300
Total senior notes                                                      $  2,275$   2,275

Term loans and revolving credit
agreements                                 variable           2019             -            180
                                           variable           2023             -             30
                                                                        $      -      $     210

Junior subordinated notes¹                    5.625           2078           200            200
                                              5.875           2078           280            280
                                              5.875           2079           630              -
                                                                        $  1,110$     480
Total CMS Energy, parent only                                           $  3,385$   2,965CMS Energy subsidiaries
CMS Enterprises, including
subsidiaries
Term loan facility                         variable 2         2025      $     92$      98
EnerBank
Certificates of deposit                       2.445 3    2020-2027         2,389          1,758
Consumers                                                                  7,322          6,862
Total principal amount outstanding                                      $ 13,188$  11,683
Current amounts                                                           (1,111 )         (974 )
Unamortized discounts                                                        (27 )          (21 )
Unamortized issuance costs                                                   (99 )          (73 )
Total long-term debt                                                    $ 11,951$  10,615




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1 These unsecured obligations rank subordinate and junior in right of

payment to all of CMS Energy's existing and future senior indebtedness.


2      A subsidiary of CMS Enterprises issued non­recourse debt to finance the
       acquisition of a wind generation project in Northwest Ohio. The debt bears

interest at an annual interest rate of LIBOR plus 1.500 percent through

October 2022 (3.445 percent at December 31, 2019 and 4.303 percent at

December 31, 2018). Beginning in October 2022, the debt will bear interest

       at an annual interest rate of LIBOR plus 1.750 percent. The same
       subsidiary of CMS Enterprises entered into interest rate swaps with the
       lending banks to fix the interest charges associated with the debt, at a

rate of 4.702 percent through October 2022 and 4.952 percent beginning in

       October 2022. Principal and interest payments are made quarterly. For
       information about the interest rate swaps, see Note 6, Fair Value
       Measurements.

3 The weighted-average interest rate for EnerBank's certificates of deposit

was 2.445 percent at December 31, 2019 and 2.440 percent at

December 31, 2018. EnerBank's primary deposit product consists of brokered

certificates of deposit with varying maturities and having a face value of

       $1,000.




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Presented in the following table is Consumers' long-term debt at December 31:
                                                                               In Millions
                                     Interest Rate
                                               (%)     Maturity        2019           2018
Consumers
First mortgage bonds                    5.650           2020       $      -      $     300
                                        3.770           2020            100            100
                                        2.850           2022            375            375
                                        5.300           2022            250            250
                                        3.375           2023            325            325
                                        3.125           2024            250            250
                                        3.190           2024             52             52
                                        3.680           2027            100            100
                                        3.390           2027             35             35
                                        3.800           2028            300            300
                                        3.180           2032            100            100
                                        5.800           2035            175            175
                                        3.520           2037            335            335
                                        4.010           2038            215            215
                                        6.170           2040             50             50
                                        4.970           2040             50             50
                                        4.310           2042            263            263
                                        3.950           2043            425            425
                                        4.100           2045            250            250
                                        3.250           2046            450            450
                                        3.950           2047            350            350
                                        4.050           2048            550            550
                                        4.350           2049            550            550
                                        3.750           2050            300              -
                                        3.100           2050            550              -
                                        3.860           2052             50             50
                                        4.280           2057            185            185
                                        4.350           2064            250            250
                                     variable   1       2069             76              -
Total first mortgage bonds                                         $  6,961$   6,335

Tax-exempt revenue bonds             variable   2       2035             35             35
                                        1.800   3       2049             75              -
                                                                   $    110$      35

Securitization bonds                    3.220   4  2025-2029 5          251            277
Revolving credit agreements          variable      2020-2023              -            215
Total principal amount outstanding                                 $  7,322$   6,862
Current amounts                                                        (202 )          (26 )
Unamortized discounts                                                   (23 )          (16 )
Unamortized issuance costs                                              (49 )          (41 )
Total long-term debt                                               $  7,048$   6,779




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1 The variable-rate bonds bear interest quarterly at a rate of three-month

       LIBOR minus 0.300 percent (1.594 percent at December 31, 2019).


2      The interest rate on these tax­exempt revenue bonds is reset weekly and
       was 1.740 percent at December 31, 2019 and 1.780 percent at
       December 31, 2018.


3      The interest rate on these tax­exempt revenue bonds will reset on
       October 1, 2024.


4      The weighted-average interest rate for Consumers' securitization bonds

issued through its subsidiary, Consumers 2014 Securitization Funding, was

3.220 percent at December 31, 2019 and 3.057 percent at December 31, 2018.

5 Principal and interest payments are made semiannually.

Financings: Presented in the following table is a summary of major long-term debt issuances during the year ended December 31, 2019:

                                      Principal (In     Interest
                                          Millions)     Rate (%)  Issuance Date  Maturity Date
CMS Energy, parent only
Term loan facility                    $         300     variable       January   December 2019
Junior subordinated notes1                      630        5.875      February      March 2079
Term loan facility                              165     variable          June       June 2020
Total CMS Energy, parent only         $       1,095
Consumers
First mortgage bonds                  $         300        3.750            May  February 2050
First mortgage bonds                            550        3.100      September    August 2050
First mortgage bonds                             76     variable      September September 2069
Tax-exempt revenue bonds                         75        1.800        October   October 2049
Total Consumers                       $       1,001
Total CMS Energy                      $       2,096

1 These unsecured obligations rank subordinate and junior in right of

payment to all of CMS Energy's existing and future senior indebtedness.

Presented in the following table is a summary of major long-term debt retirements during the year ended December 31, 2019:

                                       Principal (In    Interest
                                           Millions)    Rate (%)   Retirement Date Maturity Date
CMS Energy, parent only
Term loan facility                     $         300    variable         February  December 2019
Term loan facility                               180    variable         February     April 2019
Term loan facility                               165    variable   August-December     June 2020
Total CMS Energy, parent only          $         645
Consumers
First mortgage bonds                   $         300       5.650 %            May     April 2020
Total Consumers                        $         300
Total CMS Energy                       $         945





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Term Loan Credit Agreement: In January 2020, Consumers entered into a
$300 million unsecured term loan credit agreement. The term loan matures in
January 2021.
First Mortgage Bonds: Consumers secures its first mortgage bonds by a mortgage
and lien on substantially all of its property. Consumers' ability to issue first
mortgage bonds is restricted by certain provisions in the First Mortgage Bond
Indenture and the need for regulatory approvals under federal law. Restrictive
issuance provisions in the First Mortgage Bond Indenture include achieving a
two-times interest coverage ratio and having sufficient unfunded net property
additions.
Regulatory Authorization for Financings: Consumers is required to maintain FERC
authorization for financings. Its current authorization terminates on
August 31, 2021. Any long-term issuances during the authorization period are
exempt from FERC's competitive bidding and negotiated placement requirements.
Securitization Bonds: Certain regulatory assets held by Consumers' subsidiary,
Consumers 2014 Securitization Funding, collateralize Consumers' securitization
bonds. The bondholders have no recourse to Consumers' assets except for those
held by the subsidiary that issued the bonds. Consumers collects securitization
surcharges to cover the principal and interest on the bonds as well as certain
other qualified costs. The surcharges collected are remitted to a trustee and
are not available to creditors of Consumers or creditors of Consumers'
affiliates other than the subsidiary that issued the bonds.
Debt Maturities: At December 31, 2019, the aggregate annual contractual
maturities for long-term debt for the next five years were:
                                                                        In 

Millions

                                     2020      2021        2022      2023   

2024

CMS Energy, including Consumers
Long-term debt                    $ 1,111$ 538$ 1,354$ 669$ 808
Consumers
Long-term debt                    $   202$  27$   653$ 354$ 332

Revolving Credit Facilities: The following revolving credit facilities with banks were available at December 31, 2019:

                                                                                                                    In Millions
                                              Amount of                                Letters of Credit
Expiration Date                                Facility     Amount Borrowed                  Outstanding       Amount Available
CMS Energy, parent only
June 5, 20231                                $      550         $         -              $             6        $           544
CMS Enterprises, including subsidiaries
September 30, 20252                          $       18         $         -              $             8        $            10
Consumers3
June 5, 2023                                 $      850         $         -              $             7        $           843
November 19, 2021                                   250                   -                           10                    240
April 18, 2022                                       30                   -                           30                      -

1 During the year ended December 31, 2019, CMS Energy's average borrowings

totaled $5 million with a weighted-average interest rate of 3.859 percent.





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2 Under this facility, $8 million is available solely for the purpose of

issuing letters of credit. Obligations under this facility are secured by

the collateral accounts with the lending bank. There were no borrowings

under this facility during the year ended December 31, 2019.

3 Obligations under these facilities are secured by first mortgage bonds of

Consumers. During the year ended December 31, 2019, Consumers' average

       borrowings totaled $2 million with a weighted-average interest rate of
       3.225 percent.


Short-term Borrowings: Under Consumers' commercial paper program, Consumers may
issue, in one or more placements, investment-grade commercial paper notes with
maturities of up to 365 days at market interest rates. These issuances are
supported by Consumers' revolving credit facilities and may have an aggregate
principal amount outstanding of up to $500 million. While the amount of
outstanding commercial paper does not reduce the available capacity of the
revolving credit facilities, Consumers does not intend to issue commercial paper
in an amount exceeding the available capacity of the facilities. At
December 31, 2019, there were $90 million commercial paper notes outstanding
under this program at an annual interest rate of 2.050 percent, recorded as
current notes payable on the consolidated balance sheets of CMS Energy and
Consumers.
Dividend Restrictions: At December 31, 2019, payment of dividends by CMS Energy
on its common stock was limited to $5.0 billion under provisions of the Michigan
Business Corporation Act of 1972.
Under the provisions of its articles of incorporation, at December 31, 2019,
Consumers had $1.4 billion of unrestricted retained earnings available to pay
dividends on its common stock to CMS Energy. Provisions of the Federal Power Act
and the Natural Gas Act appear to restrict dividends payable by Consumers to the
amount of Consumers' retained earnings. Several decisions from FERC suggest
that, under a variety of circumstances, dividends from Consumers on its common
stock would not be limited to amounts in Consumers' retained earnings. Any
decision by Consumers to pay dividends on its common stock in excess of retained
earnings would be based on specific facts and circumstances and would be subject
to a formal regulatory filing process.
For the year ended December 31, 2019, Consumers paid $592 million in dividends
on its common stock to CMS Energy.
Capitalization: The authorized capital stock of CMS Energy consists of:
• 350 million shares of CMS Energy Common Stock, par value $0.01 per share


• 10 million shares of CMS Energy Preferred Stock, par value $0.01 per share





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Issuance of Common Stock: In 2018, CMS Energy entered into an equity offering
program under which it may sell, from time to time, shares of CMS Energy common
stock having an aggregate sales price of up to $250 million. Under this program,
CMS Energy may sell its common stock in privately negotiated transactions, in
"at the market" offerings, through forward sales transactions or otherwise.
CMS Energy has entered into forward sales contracts having an aggregate sales
price of $250 million. Presented in the following table are details of these
contracts:
                                                                   Initial Forward Price
Contract Date                Maturity Date     Number of Shares                Per Share
November 16, 2018             May 16, 2020            2,017,783           $        49.06
November 20, 2018             May 20, 2020              777,899                    50.91
February 21, 2019          August 21, 2020            2,083,340                    52.27



These contracts allow CMS Energy to either physically settle the contracts by
issuing shares of its common stock at the then-applicable forward sale price
specified by the agreement or net settle the contracts through the delivery or
receipt of cash or shares. CMS Energy may settle the contracts at any time
through their maturity dates, and presently intends to physically settle the
contracts by delivering shares of its common stock.
The initial forward price in the forward equity sale contracts includes a
deduction for commissions and will be adjusted on a daily basis over the term
based on an interest rate factor and decreased on certain dates by certain
predetermined amounts to reflect expected dividend payments.
No amounts have or will be recorded on CMS Energy's consolidated balance sheets
until settlements of the forward equity sale contracts occur. If CMS Energy had
elected to net share settle the contracts as of December 31, 2019, CMS Energy
would have been required to deliver 992,596 shares.
Preferred Stock of Subsidiary: Consumers' preferred stock is traded on the
New York Stock Exchange under the symbol CMS-PB. Presented in the following
table are details of Consumers' preferred stock at December 31, 2019 and 2018:
                                                                Optional    Number of     Number of
                                                              Redemption       Shares        Shares
                                              Par Value            Price  

Authorized Outstanding Cumulative, with no mandatory redemption $ 100$ 110 7,500,000 373,148





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6: Fair Value Measurements


Accounting standards define fair value as the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between
market participants. When measuring fair value, CMS Energy and Consumers are
required to incorporate all assumptions that market participants would use in
pricing an asset or liability, including assumptions about risk. A fair value
hierarchy prioritizes inputs used to measure fair value according to their
observability in the market. The three levels of the fair value hierarchy are as
follows:
•      Level 1 inputs are unadjusted quoted prices in active markets for
       identical assets or liabilities.

• Level 2 inputs are observable, market-based inputs, other than Level 1

       prices. Level 2 inputs may include quoted prices for similar assets or
       liabilities in active markets, quoted prices in inactive markets, and
       inputs derived from or corroborated by observable market data.


•      Level 3 inputs are unobservable inputs that reflect CMS Energy's or

Consumers' own assumptions about how market participants would value their

assets and liabilities.



CMS Energy and Consumers classify fair value measurements within the fair value
hierarchy based on the lowest level of input that is significant to the fair
value measurement in its entirety.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Presented in the following table are CMS Energy's and Consumers' assets and
liabilities recorded at fair value on a recurring basis:
                                                                                               In Millions
                                      CMS Energy, including Consumers                    Consumers
December 31                                   2019                   2018              2019           2018
Assets1
Cash equivalents                      $          -           $         27           $     -        $     -
Restricted cash and cash
equivalents                                     17                     21                17             17
CMS Energy common stock                          -                      -                 1              1
Nonqualified deferred
compensation plan assets                        18                     14                14             10
Other non-current assets                         -                      1                 -              -
Derivative instruments                           1                      1                 1              1
Total                                 $         36           $         64           $    33$    29
Liabilities1
Nonqualified deferred
compensation plan liabilities         $         18           $         14           $    14$    10
Derivative instruments                           8                      3                 -              -
Total                                 $         26           $         17           $    14$    10

1 All assets and liabilities were classified as Level 1 with the exception

of derivative contracts, which were classified as Level 2 or Level 3.



Cash Equivalents: Cash equivalents and restricted cash equivalents consist of
money market funds with daily liquidity. For further details, see Note 18, Cash
and Cash Equivalents.


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Nonqualified Deferred Compensation Plan Assets and Liabilities: The nonqualified
deferred compensation plan assets consist of mutual funds, which are valued
using the daily quoted net asset values. CMS Energy and Consumers value their
nonqualified deferred compensation plan liabilities based on the fair values of
the plan assets, as they reflect the amount owed to the plan participants in
accordance with their investment elections. CMS Energy and Consumers report the
assets in other non­current assets and the liabilities in other non­current
liabilities on their consolidated balance sheets.
Derivative Instruments: CMS Energy and Consumers value their derivative
instruments using either a market approach that incorporates information from
market transactions, or an income approach that discounts future expected cash
flows to a present value amount. CMS Energy's and Consumers' derivatives are
classified as Level 2 or Level 3.
The derivatives classified as Level 2 are interest rate swaps at CMS Energy,
which are valued using market-based inputs. CMS Energy uses interest rate swaps
to manage its interest rate risk on certain long­term debt obligations and
certain notes receivable at EnerBank.
In 2018, a subsidiary of CMS Enterprises entered into floating-to-fixed interest
rate swaps to reduce the impact of interest rate fluctuations associated with
future interest payments on certain long­term variable-rate debt. The interest
rate swaps are accounted for as cash flow hedges of the future variability of
interest payments on debt with a notional amount of $92 million at
December 31, 2019. Gains or losses on these swaps are initially reported in AOCI
and then, as interest payments are made on the hedged debt, are recognized in
earnings within other interest expense on CMS Energy's consolidated statements
of income. CMS Energy recorded losses in AOCI of $4 million for the year ended
December 31, 2019 and $2 million for the year ended December 31, 2018. There
were no material impacts on other interest expense associated with these swaps
during the years presented. The fair value of these swaps recorded in other
liabilities on CMS Energy's consolidated balance sheets totaled $5 million at
December 31, 2019 and $2 million at December 31, 2018. CMS Energy also has other
interest rate swaps that economically hedge interest rate risk on debt, but that
do not qualify for cash flow hedge accounting; the amounts associated with these
swaps were not material for the years presented.
In 2019, EnerBank entered into fixed-to-floating interest rate swaps to manage
interest rate risk exposure associated with changes in the fair value of certain
long­term fixed­rate loans. The interest rate swaps qualify as fair value hedges
of long­term, fixed­rate notes receivable with a notional amount of $134 million
at December 31, 2019. The fair value of these interest rate swaps recorded in
other liabilities was $1 million at December 31, 2019. CMS Energy is adjusting
the carrying value of the hedged notes receivable for the change in their fair
value due to the hedged risk. Both gains and losses on the swaps and the changes
to the carrying value of the hedged notes receivable are recorded within
operating revenue on CMS Energy's consolidated statements of income. There were
no material amounts recognized in operating revenue associated with these swaps
for the year ended December 31, 2019.
The majority of derivatives classified as Level 3 are FTRs held by Consumers.
Due to the lack of quoted pricing information, Consumers determines the fair
value of its FTRs based on Consumers' average historical settlements. There was
no material activity within the Level 3 categories of assets and liabilities
during the years presented.
7: Financial Instruments


Presented in the following table are the carrying amounts and fair values, by
level within the fair value hierarchy, of CMS Energy's and Consumers' financial
instruments that are not recorded at fair value. The table excludes cash, cash
equivalents, short-term financial instruments, and trade accounts receivable and
payable whose carrying amounts approximate their fair values. For information
about assets and liabilities


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recorded at fair value and for additional details regarding the fair value hierarchy, see Note 6, Fair Value Measurements.

                                                                                                                                      In Millions
                                      December 31, 2019                                                   December 31, 2018
                                                Fair Value                                                           Fair Value
               Carrying                                   Level                      Carrying                                 Level
                Amount         Total          1             2            3            Amount         Total         1           2            3
CMS Energy, including Consumers
Assets
Long-term
receivables1    $     20      $     20     $      -     $       -     $     20        $     22      $     22     $   -     $       -     $     22
Notes
receivable2        2,500         2,652            -             -        2,652           1,857         1,967         -             -        1,967
Securities
held to
maturity              26            26            -            26            -              22            21         -            21            -
Liabilities
Long-term
debt3             13,062        14,185        1,197        11,048        1,940          11,589        11,630       459         9,404        1,767
Long-term
payables4             30            32            -             -           32              27            27         -             -           27
Consumers
Assets
Long-term
receivables1    $     20      $     20     $      -     $       -     $     20        $     22      $     22     $   -     $       -     $     22
Notes
receivable -
related
party5               103           103            -             -          103             106           106         -             -          106
Liabilities
Long-term
debt6              7,250         8,010            -         6,070        1,940           6,805         6,833         -         5,066        1,767

1 Includes current portion of long-term accounts receivable of $13 million

       at December 31, 2019 and $14 million at December 31, 2018.


2      Includes current portion of notes receivable of $242 million at
       December 31, 2019 and $233 million at December 31, 2018. For further
       details, see Note 8, Notes Receivable.


3      Includes current portion of long-term debt of $1.1 billion at
       December 31, 2019 and $1.0 billion at December 31, 2018.


4      Includes current portion of long-term payables of $1 million at
       December 31, 2019 and December 31, 2018.

5 Includes current portion of notes receivable - related party of $7 million

       at December 31, 2019 and December 31, 2018. For further details on this
       note receivable, see the DB SERP discussion below.


6      Includes current portion of long-term debt of $202 million at
       December 31, 2019 and $26 million at December 31, 2018.




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The effects of third-party credit enhancements were excluded from the fair value
measurements of long-term debt. The principal amount of CMS Energy's long-term
debt supported by third-party credit enhancements was $35 million at
December 31, 2019 and December 31, 2018. The entirety of these amounts was at
Consumers.
DB SERP Securities: Presented in the following table is a summary of the sales
activity for investment securities held within the DB SERP and classified as
available for sale:
                                                            In Millions
Years Ended December 31                        2019      2018      2017
CMS Energy, including Consumers
Proceeds from sales of investment securities    $ -     $ 142     $ 145
Consumers
Proceeds from sales of investment securities    $ -     $ 103     $ 105



In 2018, CMS Energy and Consumers sold the DB SERP debt securities and
CMS Energy issued a $146 million demand note payable to the DB SERP rabbi trust.
The demand note bears interest at an annual rate of 4.10 percent and has a
maturity date of 2028. The demand note payable and associated DB SERP investment
were eliminated on CMS Energy's consolidated balance sheets. The portion of the
demand note attributable to Consumers was recorded as a note receivable -
related party on Consumers' consolidated balance sheets.
During 2017, CMS Energy and Consumers sold mutual fund securities held within
the DB SERP and used the proceeds to purchase the debt securities, which were
later sold in 2018. CMS Energy reclassified gains of $2 million ($1 million, net
of tax) from AOCI and included this amount in other income on the consolidated
statements of income. This amount included Consumers' gains of $2 million
($1 million, net of tax).
Debt securities classified as held to maturity consisted primarily of
mortgage-backed securities and Utah Housing Corporation bonds held by EnerBank.
Presented in the following table are these investment securities:
                                                                                                                                  In Millions
                                        December 31, 2019                                               December 31, 2018
                                    Unrealized         Unrealized        Fair                      Unrealized          Unrealized        Fair
                      Cost               Gains             Losses       Value         Cost              Gains              Losses       Value
CMS Energy
Debt securities     $   26        $          -        $         -      $   26       $   22        $         -        $          1      $   21





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8: Notes Receivable

Presented in the following table are details of CMS Energy's and Consumers' current and non­current notes receivable:

                                                                      In 

Millions

December 31                                                      2019       

2018

CMS Energy, including Consumers
Current
EnerBank notes receivable, net of allowance for loan losses   $   223     $ 

233

EnerBank notes receivable held for sale                            19           -
Non­current
EnerBank notes receivable                                       2,258       1,624
Total notes receivable                                        $ 2,500     $ 1,857
Consumers
Current
DB SERP note receivable - related party                       $     7     $ 

7

Non­current

DB SERP note receivable - related party                            96          99
Total notes receivable                                        $   103     $   106



EnerBank Notes Receivable
EnerBank notes receivable are primarily unsecured consumer installment loans,
largely for financing home improvements. EnerBank records its notes receivable
at cost, less an allowance for loan losses. During 2019, EnerBank completed
sales of notes receivable, receiving proceeds of $67 million and recording
immaterial gains. At December 31, 2019, $19 million of notes receivable were
classified as held for sale; the fair value of notes receivable held for sale
exceeded their carrying value. These notes are expected to be sold in 2020.
During 2019, EnerBank purchased a portfolio of secured and unsecured consumer
installment loans with a principal value of $373 million.
Authorized contractors pay fees to EnerBank to provide borrowers with
same-as-cash, zero interest, or reduced interest loans. Unearned income
associated with the loan fees, which is recorded as a reduction to notes
receivable on CMS Energy's consolidated balance sheets, was $134 million at
December 31, 2019 and $102 million at December 31, 2018. Unearned income
associated with loan fees for notes receivable held for sale was $2 million at
December 31, 2019.
The allowance for loan losses is a valuation allowance to reflect estimated
credit losses. The allowance is increased by the provision for loan losses and
decreased by loan charge-offs net of recoveries. Management estimates the
allowance balance required by taking into consideration historical loan loss
experience, the nature and volume of the portfolio, economic conditions, and
other factors. Loan losses are charged against the allowance when the loss is
confirmed, but no later than the point at which a loan becomes 120 days past
due.


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Presented in the following table are the changes in the allowance for loan losses:

                                   In Millions
Years Ended December 31          2019     2018
Balance at beginning of period   $ 24     $ 20
Charge-offs                       (35 )    (24 )
Recoveries                          6        3
Provision for loan losses          38       25
Balance at end of period         $ 33     $ 24



Loans that are 30 days or more past due are considered delinquent. The balance
of EnerBank's delinquent consumer loans was $33 million at December 31, 2019 and
$21 million at December 31, 2018. At December 31, 2019 and December 31, 2018,
EnerBank's loans that had been modified as troubled debt restructurings were
immaterial.
EnerBank has entered into interest rate swaps on $134 million of its loans
(notes receivable). For information about interest rate swaps, see Note 6, Fair
Value Measurements.
DB SERP Note Receivable - Related Party
The DB SERP note receivable - related party is Consumers' portion of a demand
note payable issued by CMS Energy to the DB SERP rabbi trust. The demand note
bears interest at an annual rate of 4.10 percent and has a maturity date of
2028.


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9: Plant, Property, and Equipment

Presented in the following table are details of CMS Energy's and Consumers' plant, property, and equipment:

                                                                                     In Millions
                                                               Estimated
                                                        Depreciable Life
December 31                                                     in Years       2019         2018
CMS Energy, including Consumers
Plant, property, and equipment, gross
Consumers                                                3   -    125      $ 24,963     $ 23,963
Enterprises
Independent power production1                            3   -    40            403          410
Other                                                    3   -    5               2            2
EnerBank                                                 1   -    7              22           25
Plant, property, and equipment, gross                                      $ 25,390     $ 24,400
Construction work in progress                                                   896          763
Accumulated depreciation and amortization                                    (7,360 )     (7,037 )
Total plant, property, and equipment                                       $ 18,926     $ 18,126
Consumers
Plant, property, and equipment, gross
Electric
Generation                                              22   -    125      $  5,942     $  6,305
Distribution                                            20   -    75          8,519        7,957
Transmission                                            46   -    75            113          154
Other                                                    5   -    50          1,258        1,316
Assets under finance leases and other financing2                                326          295
Gas
Distribution                                            20   -    85          5,235        4,651
Transmission                                            17   -    75          1,752        1,521
Underground storage facilities3                         27   -    75            987          910
Other                                                    5   -    50            797          823
Assets under finance leases2                                                     14           14
Other non­utility property                               3   -    51             20           17
Plant, property, and equipment, gross                                      $ 24,963     $ 23,963
Construction work in progress                                                   879          756
Accumulated depreciation and amortization                                    (7,272 )     (6,958 )
Total plant, property, and equipment4                                      

$ 18,570 $ 17,761

1 The majority of independent power production assets are leased to others

under operating leases. For information regarding CMS Energy's operating

leases of owned assets, see Note 10, Leases and Palisades Financing.

2 For information regarding the amortization terms of Consumers' assets

       under finance leases and other financing, see Note 10, Leases and
       Palisades Financing.




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3      Underground storage includes base natural gas of $26 million at
       December 31, 2019 and 2018. Base natural gas is not subject to
       depreciation.


4      For the year ended December 31, 2019, Consumers' plant additions were
       $2.0 billion and plant retirements were $380 million. For the year ended
       December 31, 2018, Consumers' plant additions were $1.8 billion and plant
       retirements were $190 million. Consumers plans to retire the
       D.E. Karn 1 & 2 coal-fueled electric generating units in 2023.
       Accordingly, in 2019, Consumers removed from total plant, property, and
       equipment $667 million, representing the remaining book value of the two
       units upon their retirement, and recorded it as a regulatory asset. For
       additional details, see Note 3, Regulatory Matters.

Intangible Assets: Included in net plant, property, and equipment are intangible assets. Presented in the following table are details about CMS Energy's and Consumers' intangible assets:

                                                                                                                  In Millions
                                                          December 31, 2019                        December 31, 2018
                             Amortization Life                           Accumulated                              Accumulated
Description                       in Years        Gross Cost¹           Amortization       Gross Cost¹           Amortization
CMS Energy, including Consumers
Software development             1   -    15       $      882         $          529        $    1,024         $          603
Rights of way                   50   -    85              180                     55               167                     52
Franchises and consents          5   -    50               16                      9                15                      9
Leasehold improvements            various²                  9                      7                 9                      7
Other intangibles                 various                  27                     15                27                     15
Total                                              $    1,114         $          615        $    1,242         $          686
Consumers
Software development             3   -    15       $      869         $          521        $    1,009         $          595
Rights of way                   50   -    85              180                     55               167                     52
Franchises and consents          5   -    50               16                      9                15                      9
Leasehold improvements            various²                  9                      7                 9                      7
Other intangibles                 various                  26                     15                26                     15
Total                                              $    1,100         $          607        $    1,226         $          678


1      For the year ended December 31, 2019, Consumers' intangible asset
       additions were $67 million and intangible asset retirements were

$193 million. For the year ended December 31, 2018, Consumers' intangible

asset additions were $90 million and intangible asset retirements were

$7 million.

2 Leasehold improvements are amortized over the life of the lease, which may

change whenever the lease is renewed or extended.



Capitalization: CMS Energy and Consumers record plant, property, and equipment
at original cost when placed into service. The cost includes labor, material,
applicable taxes, overhead such as pension and other benefits, and AFUDC, if
applicable. Consumers' plant, property, and equipment is generally recoverable
through its general ratemaking process.
With the exception of utility property for which the remaining book value has
been securitized, mothballed utility property stays in rate base and continues
to be depreciated at the same rate as before the mothball period. When utility
property is retired or otherwise disposed of in the ordinary course of business,
Consumers records the original cost to accumulated depreciation, along with
associated cost of removal, net of salvage. CMS Energy and Consumers recognize
gains or losses on the retirement or disposal of non­regulated assets in income.
Consumers records cost of removal collected from customers, but not spent, as a
regulatory liability.


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Software: CMS Energy and Consumers capitalize the costs to purchase and develop
internal-use computer software. These costs are expensed evenly over the
estimated useful life of the internal-use computer software. If computer
software is integral to computer hardware, then its cost is capitalized and
depreciated with the hardware.
AFUDC: Consumers capitalizes AFUDC on regulated major construction projects,
except pollution control facilities on its fossil-fuel-fired power plants. AFUDC
represents the estimated cost of debt and authorized return-on-equity funds used
to finance construction additions. Consumers records the offsetting credit as a
reduction of interest for the amount representing the borrowed funds component
and as other income for the equity funds component on the consolidated
statements of income. When construction is completed and the property is placed
in service, Consumers depreciates and recovers the capitalized AFUDC from
customers over the life of the related asset. Presented in the following table
are Consumers' average AFUDC capitalization rates:
Years Ended December 31 2019   2018   2017
Electric                 6.4 %  6.9 %  6.8 %
Gas                      5.8    5.9    6.0


Assets Under Finance Leases and Other Financing: Presented in the following table are further details about changes in Consumers' assets under finance leases and other financing:

                                            In Millions
Years Ended December 31                  2019      2018

Consumers

Balance at beginning of period $ 309 $ 312 Additions

                                  26         -

Net retirements and other adjustments 5 (3 ) Balance at end of period

                $ 340     $ 309



Assets under finance leases and other financing are presented as gross amounts.
Accumulated amortization of assets under finance leases and other financing was
$239 million at December 31, 2019 and $212 million at December 31, 2018 for
Consumers.
Depreciation and Amortization: Presented in the following table are further
details about CMS Energy's and Consumers' accumulated depreciation and
amortization:
                                          In Millions
December 31                          2019        2018
CMS Energy, including Consumers
Utility plant assets              $ 7,269     $ 6,956
Non­utility plant assets               91          81
Consumers
Utility plant assets              $ 7,269     $ 6,956
Non­utility plant assets                3           2


Consumers depreciates utility property on an asset-group basis, in which it applies a single MPSC-approved depreciation rate to the gross investment in a particular class of property within the electric and

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gas segments. Consumers performs depreciation studies periodically to determine appropriate group lives. Presented in the following table are the composite depreciation rates for Consumers' segment properties: Years Ended December 31 2019 2018 2017 Electric utility property 3.9 % 3.9 % 3.9 % Gas utility property 2.9 2.9 2.9 Other property

              10.0     10.1     10.0



CMS Energy and Consumers record property repairs and minor property replacement
as maintenance expense. CMS Energy and Consumers record planned major
maintenance activities as operating expense unless the cost represents the
acquisition of additional long-lived assets or the replacement of an existing
long-lived asset.
Presented in the following table are the components of CMS Energy's and
Consumers' depreciation and amortization expense:
                                                                      In 

Millions

Years Ended December 31                                  2019      2018     

2017

CMS Energy, including Consumers
Depreciation expense - plant, property, and equipment   $ 842     $ 778     $ 739
Amortization expense
Software                                                  121       127       114
Other intangible assets                                     3         3         3
Securitized regulatory assets                              26        25     

25

Total depreciation and amortization expense             $ 992     $ 933     $ 881
Consumers
Depreciation expense - plant, property, and equipment   $ 827     $ 768     $ 732
Amortization expense
Software                                                  119       125       112
Other intangible assets                                     3         3         3
Securitized regulatory assets                              26        25     

25

Total depreciation and amortization expense             $ 975     $ 921     

$ 872

Presented in the following table is CMS Energy's and Consumers' estimated amortization expense on intangible assets for each of the next five years:

                                                                        In 

Millions

                                         2020      2021      2022     2023  

2024

CMS Energy, including Consumers
Intangible asset amortization expense   $ 118     $ 112     $ 107     $ 87     $ 70
Consumers
Intangible asset amortization expense   $ 116     $ 110     $ 106     $ 87     $ 70






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Jointly Owned Regulated Utility Facilities
Presented in the following table are Consumers' investments in jointly owned
regulated utility facilities at December 31, 2019:
                                 In Millions, Except Ownership Share
                   J.H. Campbell Unit 3      Ludington         Other
Ownership share                    93.3 %         51.0 %     various
Utility plant in service        $ 1,731      $     486     $     233
Accumulated depreciation           (753 )         (166 )         (68 )
Construction work in progress        16             64            15
Net investment                  $   994      $     384     $     180



Consumers includes its share of the direct expenses of the jointly owned plants
in operating expenses. Consumers shares operation, maintenance, and other
expenses of these jointly owned utility facilities in proportion to each
participant's undivided ownership interest. Consumers is required to provide
only its share of financing for the jointly owned utility facilities.
10: Leases and Palisades Financing


Lessee

CMS Energy and Consumers lease various assets from third parties, including
coal-carrying railcars, real estate, service vehicles, and gas pipeline
capacity. In addition, CMS Energy and Consumers account for several of their
PPAs as leases.
CMS Energy and Consumers do not record right-of-use assets or lease liabilities
on their consolidated balance sheets for rentals with lease terms of 12 months
or less, most of which are for the lease of real estate and service vehicles.
Lease expense for these rentals is recognized on a straight-line basis over the
lease term.
CMS Energy and Consumers include future payments for all renewal options, fair
market value extensions, and buyout provisions reasonably certain of exercise in
their measurement of lease right-of-use assets and lease liabilities. In
addition, certain leases for service vehicles contain end-of-lease adjustment
clauses based on proceeds received from the sale or disposition of the vehicles.
CMS Energy and Consumers also include executory costs in the measurement of
their right-of-use assets and lease liabilities, except for maintenance costs
related to their coal-carrying railcar leases.
Most of Consumers' PPAs contain provisions at the end of the initial contract
terms to renew the agreements annually under mutually agreed­upon terms at the
time of renewal. Energy and capacity payments that vary depending on quantities
delivered are recognized as variable lease costs when incurred. Consumers
accounts for a PPA with one of CMS Energy's equity method subsidiaries as a
finance lease.


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Presented in the following table is information about CMS Energy's and Consumers' lease right-of-use assets and lease liabilities:

                                                                In Millions, Except as Noted
                                               CMS Energy, including
December 31, 2019                                          Consumers               Consumers
Operating leases
Right-of-use assets1                               $              47            $         40
Lease liabilities
Current lease liabilities2                                         9                       8
Non­current lease liabilities3                                    37                      32
Finance leases
Right-of-use assets                                $              71            $         71
Lease liabilities4
Current lease liabilities                                          6                       6
Non­current lease liabilities                                     60                      60
Weighted-average remaining lease term (in
years)
Operating leases                                                  17                      14
Finance leases                                                    12                      12
Weighted-average discount rate
Operating leases                                                 3.8 %                   3.7 %
Finance leases5                                                  1.9                     1.9


1      CMS Energy's and Consumers' operating right-of-use lease assets are

reported as other non­current assets on their consolidated balance sheets.


2      The current portion of CMS Energy's and Consumers' operating lease
       liabilities are reported as other current liabilities on their
       consolidated balance sheets.


3      The non­current portion of CMS Energy's and Consumers' operating lease
       liabilities are reported as other non­current liabilities on their
       consolidated balance sheets.


4      This includes $25 million for leases with related parties, of which less
       than $1 million is current.


5      This rate excludes the impact of Consumers' pipeline agreements and

long-term PPAs accounted for as finance leases. The required capacity

payments under these agreements, when compared to the underlying fair

value of the leased assets, result in effective interest rates that exceed

       market rates for leases with similar terms.




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CMS Energy and Consumers report operating, variable, and short-term lease costs
as operating expenses on their consolidated statements of income, except for
certain amounts that may be capitalized to other assets. Presented in the
following table is a summary of CMS Energy's and Consumers' total lease costs:
                                                                               In Millions
                                              CMS Energy, including
Year Ended December 31, 2019                              Consumers              Consumers
Operating lease costs                              $             11            $         9
Finance lease costs
Amortization of right-of-use assets                               6                      6
Interest on lease liabilities                                    18                     18
Variable lease costs                                             95                     95
Total lease costs                                  $            130            $       128


Presented in the following table is cash flow information related to amounts paid on CMS Energy's and Consumers' lease liabilities:

                                                                                 In Millions
                                               CMS Energy, including
Year Ended December 31, 2019                               Consumers               Consumers
Cash paid for amounts included in the
measurement of lease liabilities
Cash used in operating activities for
operating leases                                   $              11            $          9
Cash used in operating activities for
finance leases                                                    18                      18
Cash used in financing activities for
finance leases                                                     7                       7





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Presented in the following table are the minimum rental commitments under CMS Energy's and Consumers' non­cancelable leases:

                                                                                                   In Millions
                                                                                Finance Leases
December 31, 2019                           Operating Leases     Pipelines and PPAs       Other        Total
CMS Energy, including Consumers
2020                                           $          11        $             17       $    6       $   23
2021                                                      11                      17            6           23
2022                                                       5                      14            5           19
2023                                                       3                      13            5           18
2024                                                       2                      13            3           16
2025 and thereafter                                       35                      78           12           90
Total minimum lease payments                   $          67        $            152       $   37       $  189
Less discount                                             21                     119            4          123

Present value of minimum lease payments $ 46 $

      33       $   33       $   66
Consumers
2020                                           $           9        $             17       $    6       $   23
2021                                                       9                      17            6           23
2022                                                       4                      14            5           19
2023                                                       3                      13            5           18
2024                                                       2                      13            3           16
2025 and thereafter                                       29                      78           12           90
Total minimum lease payments                   $          56        $            152       $   37       $  189
Less discount                                             16                     119            4          123

Present value of minimum lease payments $ 40 $

      33       $   33       $   66



Lessor
CMS Energy and Consumers are the lessor under power sales and natural gas
delivery agreements that are accounted for as leases.
CMS Energy has power sales agreements that are accounted for as operating
leases. In addition to fixed payments, these agreements have variable payments
based on energy delivered. For the year ended December 31, 2019, CMS Energy's
lease revenue from its power sales agreements was $174 million, which included
variable lease payments of $119 million.


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Presented in the following table are the minimum rental payments to be received under CMS Energy's non­cancelable operating leases:

                         In Millions
December 31, 2019
2020                           $  55
2021                              55
2022                              48
2023                              43
2024                              43
2025 and thereafter               62

Total minimum lease payments $ 306




Consumers has an agreement to build, own, operate, and maintain a compressed
natural gas fueling station through December 2038. This agreement is accounted
for as a direct finance lease, under which the lessee has the option to purchase
the natural gas fueling station at the end of the lease term. Fixed monthly
payments escalate annually with inflation.
Beginning in December 2018, Consumers and a subsidiary of CMS Energy executed a
20­year natural gas transportation agreement, related to a pipeline owned by
Consumers. This agreement is accounted for as a direct finance lease and will
automatically extend annually unless terminated by either party. The effects of
the lease are eliminated on CMS Energy's consolidated financial statements.
Minimum rental payments to be received under Consumers' direct financing leases
are $1 million for each of the next five years and $19 million for the years
thereafter. The lease receivable was $10 million as of December 31, 2019, which
does not include unearned income of $14 million.
Minimum rental payments to be received under CMS Energy's direct finance lease
are less than $1 million for each of the next five years and $10 million for the
years thereafter. The lease receivable was $5 million as of December 31, 2019,
which does not include unearned income of $5 million.
Palisades Financing
In 2007, Consumers sold Palisades to Entergy and entered into a 15-year PPA to
purchase virtually all of the capacity and energy produced by Palisades, up to
the annual average capacity of 798 MW. Consumers accounted for this transaction
as a financing because of its continuing involvement with Palisades through
security provided to Entergy for the PPA obligation and other arrangements.
Palisades has therefore remained on Consumers' consolidated balance sheets and
Consumers has continued to depreciate it. At the time of the sale, Consumers
recorded the sales proceeds as a financing obligation, and has subsequently
recorded a portion of the payments under the PPA as interest expense and as a
reduction of the financing obligation.
Total amortization and interest charges under the financing were $15 million for
the year ended December 31, 2019, $16 million for the year ended
December 31, 2018, and $17 million for the year ended December 31, 2017. At
December 31, 2019, the Palisades asset and financing obligation both had a
balance of $29 million.


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Presented in the following table are the minimum Palisades PPA payments included
in the financing obligation:
                  In Millions
December 31, 2019
2020                     $ 14
2021                       14
2022                        3
Total minimum payments   $ 31
Less discount               2
Financing obligation     $ 29
Less current portion       13
Non-current portion      $ 16


11: Asset Retirement Obligations



CMS Energy and Consumers record the fair value of the cost to remove assets at
the end of their useful lives, if there is a legal obligation to remove them. If
a reasonable estimate of fair value cannot be made in the period in which the
ARO is incurred, such as for assets with indeterminate lives, the liability is
recognized when a reasonable estimate of fair value can be made. CMS Energy and
Consumers have not recorded liabilities for assets that have immaterial
cumulative disposal costs, such as substation batteries.
CMS Energy and Consumers calculate the fair value of ARO liabilities using an
expected present-value technique that reflects assumptions about costs and
inflation, and uses a credit-adjusted risk-free rate to discount the expected
cash flows. CMS Energy's ARO liabilities are primarily at Consumers.
Presented below are the categories of assets that CMS Energy and Consumers have
legal obligations to remove at the end of their useful lives and for which they
have an ARO liability recorded:
Company and ARO Description           In-Service Date            Long-Lived 

Assets

CMS Energy, including Consumers
Closure of gas treating plant and gas
wells                                         various Gas transmission and 

storage

                                                        Generating plants coal ash
Closure of coal ash disposal areas            various                       

areas

                                                        Gas distribution mains and
Gas distribution cut, purge, and cap          various                     services
                                                          Electric and gas utility
Asbestos abatement                               1973                        plant
Closure of renewable generation                          Wind and solar generation
assets                                        various                   facilities
Gas wells plug and abandon                    various Gas transmission and storage
Consumers
                                                        Generating plants coal ash
Closure of coal ash disposal areas            various                       

areas

                                                        Gas distribution mains and
Gas distribution cut, purge, and cap          various                     services
                                                          Electric and gas utility
Asbestos abatement                               1973                        plant
Closure of renewable generation                          Wind and solar generation
assets                                        various                   facilities
Gas wells plug and abandon                    various Gas transmission and storage


No assets have been restricted for purposes of settling AROs.

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Presented in the following tables are the changes in CMS Energy's and Consumers'
ARO liabilities:
                                                                                                                              In Millions
                                 ARO Liability                                                                              ARO Liability
Company and ARO Description         12/31/2018      Incurred       Settled       Accretion       Cash Flow Revisions           12/31/2019
CMS Energy, including Consumers
Consumers                         $        428      $     55      $    (37 )     $      21           $             7         $        474
Gas treating plant and gas
wells                                        1             -            (1 )             -                         -                    -
Renewable generation assets                  3             -             -               -                         -                    3
Total CMS Energy                  $        432      $     55      $    (38 )     $      21           $             7         $        477
Consumers
Coal ash disposal areas           $        179      $      -      $    (27 )     $       7           $             7         $        166
Gas distribution cut,
purge, and cap                             205            22            (8 )            12                         -                  231
Asbestos abatement                          33             -            (1 )             2                         -                   34
Renewable generation assets                 11            10             -               -                         -                   21
Gas wells plug and abandon                   -            23            (1 )             -                         -                   22
Total Consumers                   $        428      $     55      $    (37 )     $      21           $             7         $        474


                                                                                                                              In Millions
                                 ARO Liability                                                                              ARO Liability
Company and ARO Description         12/31/2017      Incurred       Settled       Accretion       Cash Flow Revisions           12/31/2018
CMS Energy, including Consumers
Consumers                         $        429      $     17      $    (40 )     $      22           $             -         $        428
Gas treating plant and gas
wells                                        1             -             -               -                         -                    1
Renewable generation assets                  -             3             -               -                         -                    3
Total CMS Energy                  $        430      $     20      $    (40 )     $      22           $             -         $        432
Consumers
Coal ash disposal areas           $        191      $      -      $    (20 )     $       8           $             -         $        179
Gas distribution cut,
purge, and cap                             186            17            (9 )            11                         -                  205
Asbestos abatement                          42             -           (11 )             2                         -                   33
Renewable generation assets                 10             -             -               1                         -                   11
Total Consumers                   $        429      $     17      $    (40 )     $      22           $             -         $        428





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12: Retirement Benefits


Benefit Plans: CMS Energy and Consumers provide pension, OPEB, and other
retirement benefits to employees under a number of different plans. These plans
include:
•      non­contributory, qualified DB Pension Plans (closed to new non­union
       participants as of July 1, 2003 and closed to new union participants as of
       September 1, 2005)


•      a non­contributory, qualified DCCP for employees hired on or after
       July 1, 2003

• benefits to certain management employees under a non­contributory,

       nonqualified DB SERP (closed to new participants as of March 31, 2006)

• a non­contributory, nonqualified DC SERP for certain management employees

hired or promoted on or after April 1, 2006

• a contributory, qualified defined contribution 401(k) plan

• health care and life insurance benefits under an OPEB Plan



DB Pension Plans: Participants in the pension plans include present and former
employees of CMS Energy and Consumers, including certain present and former
affiliates and subsidiaries. Pension plan trust assets are not distinguishable
by company. Effective December 31, 2017, CMS Energy's and Consumers'
then-existing pension plan was amended to include only retired and former
employees already covered; this amended plan is referred to as DB Pension
Plan B. Also effective December 31, 2017, active employees were moved to a newly
created pension plan, referred to as DB Pension Plan A, whose benefits mirror
those provided under DB Pension Plan B. Maintaining separate plans for the two
groups allows CMS Energy and Consumers to employ a more targeted investment
strategy and provides additional opportunities to mitigate risk and volatility.
DCCP: CMS Energy and Consumers provide an employer contribution to the
DCCP 401(k) plan for employees hired on or after July 1, 2003. The contribution
ranges from five to seven percent of base pay, depending on years of service.
Employees are not required to contribute in order to receive the plan's employer
contribution. DCCP expense for CMS Energy, including Consumers, was $30 million
for the year ended December 31, 2019, $26 million for the year ended
December 31, 2018, and $23 million for the year ended December 31, 2017. DCCP
expense for Consumers was $28 million for the year ended December 31, 2019,
$25 million for the year ended December 31, 2018, and $22 million for the year
ended December 31, 2017.
DB SERP: The DB SERP is a nonqualified plan as defined by the Internal Revenue
Code. DB SERP benefits are paid from a rabbi trust established in 1988. The
trust assets are not considered plan assets under ASC 715. DB SERP rabbi trust
earnings are taxable. Presented in the following table are the fair values of
trust assets, ABO, and contributions for CMS Energy's and Consumers' DB SERP:
                                      In Millions
Years Ended December 31            2019      2018
CMS Energy, including Consumers
Trust assets                      $ 143     $ 147
ABO                                 149       137
Contributions                         -         8
Consumers
Trust assets                      $ 104     $ 106
ABO                                 107        98
Contributions                         -         5





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DC SERP: On April 1, 2006, CMS Energy and Consumers implemented a DC SERP and
froze further new participation in the DB SERP. The DC SERP provides
participants benefits ranging from 5 percent to 15 percent of total
compensation. The DC SERP requires a minimum of five years of participation
before vesting. CMS Energy's and Consumers' contributions to the plan, if any,
are placed in a grantor trust. For CMS Energy and Consumers, trust assets were
$8 million at December 31, 2019 and $5 million at December 31, 2018. DC SERP
assets are included in other non­current assets on CMS Energy's and Consumers'
consolidated balance sheets. CMS Energy's and Consumers' DC SERP expense was
$2 million for the year ended December 31, 2019, and $1 million for each of the
years ended December 31, 2018 and 2017.
401(k) Plan: The 401(k) plan employer match equals 100 percent of eligible
contributions up to the first three percent of an employee's wages and 50
percent of eligible contributions up to the next two percent of an employee's
wages. The total 401(k) plan cost for CMS Energy, including Consumers, was
$28 million for the year ended December 31, 2019, $27 million for the year ended
December 31, 2018, and $26 million for the year ended December 31, 2017. The
total 401(k) plan cost for Consumers was $27 million for the year ended
December 31, 2019, $26 million for the year ended December 31, 2018, and
$25 million for the year ended December 31, 2017.
OPEB Plan: Participants in the OPEB Plan include all regular full-time employees
covered by the employee health care plan on the day before retirement from
either CMS Energy or Consumers at age 55 or older with at least ten full years
of applicable continuous service. Regular full-time employees who qualify for
disability retirement under the DB Pension Plans or are disabled and covered by
the DCCP and who have 15 years of applicable continuous service may also
participate in the OPEB Plan. Retiree health care costs were based on the
assumption that costs would increase 6.75 percent in 2020 and 7.00 percent in
2019 for those under 65 and would increase 7.25 percent in 2020 and 7.75 percent
in 2019 for those over 65. The rate of increase was assumed to decline to 4.75
percent by 2027 and thereafter for all retirees.
In 2017, CMS Energy and Consumers approved certain amendments to the OPEB Plan.
Under these amendments, effective January 1, 2019, certain Medicare-eligible
retirees will purchase health care plans from private Medicare exchanges.
CMS Energy and Consumers performed a remeasurement of the OPEB Plan as of
October 31, 2017, resulting in a significant reduction in the benefit
obligation. In July 2018, CMS Energy and Consumers approved an amendment to the
OPEB Plan to improve survivor benefits for certain Medicare-eligible retirees,
effective January 1, 2019, resulting in a $26 million increase in the benefit
obligation.


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Assumptions: Presented in the following table are the weighted-average assumptions used in CMS Energy's and Consumers' retirement benefits plans to determine benefit obligations and net periodic benefit cost: December 31

                                       2019   2018   2017
CMS Energy, including Consumers
Weighted average for benefit obligations1
Discount rate2
DB Pension Plan A                                 3.37 % 4.48 % 3.78 %
DB Pension Plan B                                 3.17   4.32   3.64
DB SERP                                           3.15   4.32   3.65
OPEB Plan                                         3.32   4.42   3.74
Rate of compensation increase
DB Pension Plan A                                 3.50   3.50   3.50
DB SERP                                           5.50   5.50   5.50
Weighted average for net periodic benefit cost1
Service cost discount rate2,3
DB Pension Plan A4                                4.55   3.85
DB SERP                                           4.58   3.83   4.51
OPEB Plan                                         4.63   3.93   4.89
Interest cost discount rate2,3
DB Pension Plan A4                                4.08   3.39
DB Pension Plan B4                                3.93   3.24
DB SERP                                           3.94   3.26   3.51
OPEB Plan                                         4.03   3.35   3.79
Expected long-term rate of return on plan assets5
DB Pension Plans                                  7.00   7.00   7.25
OPEB Plan                                         7.00   7.00   7.25
Rate of compensation increase
DB Pension Plan A4                                3.50   3.50
DB SERP                                           5.50   5.50   5.50

1 The mortality assumption for benefit obligations was based on the Pri-2012

       mortality table for 2019 and on the RP-2014 mortality table for 2018 and
       2017, with projection scales MP-2019 for 2019, MP-2018 for 2018, and
       MP-2017 for 2017. The mortality assumption for net periodic benefit cost
       for 2019, 2018, and 2017 was based on the RP-2014 mortality table, with
       projection scales MP-2018 for 2019, MP-2017 for 2018, and MP-2016 for
       2017.

2 The discount rate reflects the rate at which benefits could be effectively

settled and is equal to the equivalent single rate resulting from a

yield-curve analysis. This analysis incorporated the projected benefit

payments specific to CMS Energy's and Consumers' DB Pension Plans and OPEB

Plan and the yields on high-quality corporate bonds rated Aa or better.

3 CMS Energy and Consumers have elected to use a full-yield-curve approach

in the estimation of service cost and interest cost; this approach applies

individual spot rates along the yield curve to future projected benefit

       payments based on the time of payment.




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4 Effective December 31, 2017, CMS Energy's and Consumers' existing defined

benefit pension plan was amended to include only retired or inactive

employees; this amended plan is referred to as DB Pension Plan B. Active

employees were moved to a newly created pension plan, referred to as

DB Pension Plan A.



The assumptions used to measure the plan cost of the previous defined benefit
pension plan at December 31, 2017 were:
• service cost discount rate of 4.53 percent


• interest cost discount rate of 3.56 percent

• weighted-average rate of compensation increase of 3.60 percent


5      CMS Energy and Consumers determined the long-term rate of return using
       historical market returns, the present and expected future economic
       environment, the capital market principles of risk and return, and the

expert opinions of individuals and firms with financial market knowledge.

CMS Energy and Consumers considered the asset allocation of the portfolio

in forecasting the future expected total return of the portfolio. The goal

was to determine a long-term rate of return that could be incorporated

into the planning of future cash flow requirements in conjunction with the

change in the liability. Annually, CMS Energy and Consumers review for

reasonableness and appropriateness the forecasted returns for various

classes of assets used to construct an expected return model. CMS Energy's

and Consumers' expected long-term rate of return on the assets of the

DB Pension Plans was 7.00 percent in 2019. The actual return (loss) on the

assets of the DB Pension Plans was 21.0 percent in 2019, (6.7) percent in

2018, and 18.0 percent in 2017.

Costs: Presented in the following table are the costs (credits) and other changes in plan assets and benefit obligations incurred in CMS Energy's and Consumers' retirement benefits plans:

                                                                                           In Millions
                                      DB Pension Plans and DB SERP                   OPEB Plan
Years Ended December 31               2019          2018          2017        2019      2018      2017
CMS Energy, including Consumers
Net periodic cost (credit)
Service cost                       $    41       $    48       $    45       $  14     $  17     $  19
Interest cost                          103            95            93          41        34        51
Expected return on plan assets        (162 )        (149 )        (153 )       (88 )     (97 )     (90 )
Amortization of:
Net loss                                50            76            82          26        15        29
Prior service cost (credit)              1             3             5         (62 )     (67 )     (40 )
Net periodic cost (credit)         $    33       $    73       $    72       $ (69 )   $ (98 )   $ (31 )
Consumers
Net periodic cost (credit)
Service cost                       $    40       $    47       $    44       $  13     $  16     $  19
Interest cost                           97            88            90          40        33        49
Expected return on plan assets        (153 )        (139 )        (149 )       (82 )     (91 )     (84 )
Amortization of:
Net loss                                47            73            79          26        16        29
Prior service cost (credit)              1             3             4         (61 )     (65 )     (39 )
Net periodic cost (credit)         $    32       $    72       $    68       $ (64 )   $ (91 )   $ (26 )



CMS Energy and Consumers amortize net gains and losses in excess of ten percent
of the greater of the PBO or the MRV over the average remaining service period
for DB Pension Plan A and the OPEB Plan and, began in 2018, over the average
remaining life expectancy of participants for DB Pension Plan B.


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For DB Pension Plan A, the estimated period of amortization of gains and losses
was nine years for the years ended December 31, 2019 and 2018. For DB Pension
Plan B, the estimated period of amortization of gains and losses was 20 years
for the years ended December 31, 2019 and 2018. The estimated period of
amortization for gains and losses for CMS Energy and Consumers was ten years for
the DB Pension Plans for the year ended December 31, 2017. For the OPEB Plan,
the estimated amortization period was ten years for the year ended
December 31, 2019 and 2018 and 11 years for the year ended December 31, 2017.
Prior service cost (credit) amortization is established in the year in which the
prior service cost (credit) first occurred, and is based on the same
amortization period for all future years until the prior service cost (credit)
is fully amortized. CMS Energy and Consumers had new prior service costs
(credits) for OPEB in 2018 and 2017. The estimated period of amortization of
these new prior service costs (credits) for CMS Energy and Consumers is nine
years.
CMS Energy and Consumers determine the MRV for the assets of the DB Pension
Plans as the fair value of plan assets on the measurement date, adjusted by the
gains or losses that will not be admitted into the MRV until future years.
CMS Energy and Consumers reflect each year's gain or loss in the MRV in equal
amounts over a five-year period beginning on the date the original amount was
determined. CMS Energy and Consumers determine the MRV for OPEB Plan assets as
the fair value of assets on the measurement date.


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Reconciliations: Presented in the following table are reconciliations of the funded status of CMS Energy's and Consumers' retirement benefits plans with their retirement benefits plans' liabilities:

                                                                                             In Millions
                           DB Pension Plans                DB SERP                    OPEB Plan
Years Ended
December 31                 2019         2018           2019        2018          2019         2018
CMS Energy, including Consumers
Benefit obligation at
beginning of period      $ 2,512      $ 2,780        $   140     $   154       $ 1,045      $ 1,097
Service cost                  41           48              -           -            14           17
Interest cost                 98           90              5           5            41           34
Plan amendments                -            -              -           -             -           26

Actuarial loss (gain) 476 1 (258 ) 1 15 (10 )

        110   1      (74 ) 1
Benefits paid               (154 )       (148 )          (10 )        (9 )         (45 )        (55 )
Benefit obligation at
end of period            $ 2,973      $ 2,512        $   150     $   140       $ 1,165      $ 1,045
Plan assets at fair
value at beginning of
period                   $ 2,247      $ 2,305        $     -     $     -       $ 1,280      $ 1,420
Actual return on plan
assets                       453         (150 )            -           -           273          (86 )
Company contribution           -          240             10           9             -            -

Actual benefits paid (154 ) (148 ) (10 ) (9 )

        (44 )        (54 )
Plan assets at fair
value at end of period   $ 2,546      $ 2,247        $     -     $     -       $ 1,509      $ 1,280
Funded status            $  (427 ) 2  $  (265 ) 2    $  (150 )   $  (140 )     $   344      $   235
Consumers
Benefit obligation at
beginning of period                                  $   101     $   112       $ 1,004      $ 1,053
Service cost                                               -           -            13           16
Interest cost                                              4           4            40           33
Plan amendments                                            -           -             -           25
Actuarial loss (gain)                                     11          (8 )         106   1      (70 ) 1
Benefits paid                                             (7 )        (7 )         (43 )        (53 )
Benefit obligation at
end of period                                        $   109     $   101       $ 1,120      $ 1,004
Plan assets at fair
value at beginning of
period                                               $     -     $     -       $ 1,197      $ 1,329
Actual return on plan
assets                                                     -           -           255          (80 )
Company contribution                                       7           7             -            -
Actual benefits paid                                      (7 )        (7 )         (42 )        (52 )
Plan assets at fair
value at end of period                               $     -     $     -       $ 1,410      $ 1,197
Funded status                                        $  (109 )   $  (101 )     $   290      $   193


1      The actuarial loss for 2019 for the DB Pension Plans was primarily the

result of lower discount rates and lower interest rates used to calculate

the value of lump-sum payments. The actuarial gain for 2018 was primarily

the result of higher discount rates. The actuarial loss for 2019 for the

OPEB Plan was primarily the result of lower discount rates. The actuarial

       gain for 2018 was primarily the result of higher discount rates.




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2 The total funded status of the DB Pension Plans attributable to Consumers,

       based on an allocation of expenses, was $408 million at December 31, 2019
       and $246 million at December 31, 2018.

Presented in the following table is the classification of CMS Energy's and Consumers' retirement benefit plans' assets and liabilities:

                                     In Millions
December 31                        2019     2018
CMS Energy, including Consumers
Non­current assets
DB Pension Plans                  $ 104     $ 38
OPEB Plan                           344      235
Current liabilities
DB SERP                              10       10
Non­current liabilities
DB Pension Plans                    531      303
DB SERP                             140      130
Consumers
Non­current assets
DB Pension Plans                  $ 109     $ 49
OPEB Plan                           290      193
Current liabilities
DB SERP                               7        7
Non­current liabilities
DB Pension Plans                    517      295
DB SERP                             102       94


The ABO for the DB Pension Plans was $2.6 billion at December 31, 2019 and $2.2 billion at December 31, 2018. Presented in the following table is information related to the defined benefit pension plan for which the PBO and the ABO exceed plan assets:

                                          In Millions
December 31                          2019        2018
CMS Energy, including Consumers
PBO                               $ 1,736     $ 1,363
ABO                                 1,398       1,091
Fair value of plan assets           1,205       1,059





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Items Not Yet Recognized as a Component of Net Periodic Benefit Cost: Presented
in the following table are the amounts recognized in regulatory assets and AOCI
that have not been recognized as components of net periodic benefit cost. For
additional details on regulatory assets, see Note 3, Regulatory Matters.
                                                                                              In Millions
                                                 DB Pension Plans and DB SERP              OPEB Plan
Years Ended December 31                                 2019               2018          2019        2018
CMS Energy, including Consumers
Regulatory assets
Net loss                                        $      1,114       $        978       $   308     $   402
Prior service cost (credit)                                8                  9          (300 )      (361 )
Regulatory assets                               $      1,122       $        987       $     8     $    41
AOCI
Net loss (gain)                                          105                 90            (6 )         2
Prior service credit                                       -                  -            (8 )        (9 )
Total amounts recognized in regulatory
assets and AOCI                                 $      1,227       $      1,077       $    (6 )   $    34
Consumers
Regulatory assets
Net loss                                        $      1,114       $        978       $   308     $   402
Prior service cost (credit)                                8                  9          (300 )      (361 )
Regulatory assets                               $      1,122       $        987       $     8     $    41
AOCI
Net loss                                                  36                 27             -           -
Total amounts recognized in regulatory
assets and AOCI                                 $      1,158       $      1,014       $     8     $    41



Plan Assets: Presented in the following tables are the fair values of the assets
of CMS Energy's DB Pension Plans and OPEB Plan, by asset category and by level
within the fair value hierarchy. For additional details regarding the fair value
hierarchy, see Note 6, Fair Value Measurements.
                                                                                               In Millions
                                                           DB Pension Plans
                                      December 31, 2019                         December 31, 2018
                               Total       Level 1       Level 2         Total       Level 1       Level 2
CMS Energy, including Consumers
Cash and short-term
investments                  $    44      $     44      $      -       $   242      $    242      $      -
U.S. government and
agencies securities               66             -            66            11             -            11
Corporate debt                   493             -           493           400             -           400
State and municipal bonds         17             -            17             6             -             6
Foreign corporate bonds           33             -            33            35             -            35
Mutual funds                     640           640             -           552           552             -
                             $ 1,293      $    684      $    609       $ 1,246      $    794      $    452
Pooled funds                   1,253                                     1,001
Total                        $ 2,546                                   $ 2,247




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                                                                                               In Millions
                                                               OPEB Plan
                                      December 31, 2019                         December 31, 2018
                               Total       Level 1       Level 2         Total       Level 1       Level 2
CMS Energy, including Consumers
Cash and short-term
investments                  $     9      $      9      $      -       $    36      $     36      $      -
U.S. government and
agencies securities               10             -            10             2             -             2
Corporate debt                    71             -            71            55             -            55
State and municipal bonds          2             -             2             1             -             1
Foreign corporate bonds            5             -             5             5             -             5
Common stocks                     55            55             -            41            41             -
Mutual funds                     713           713             -           594           594             -
                             $   865      $    777      $     88       $   734      $    671      $     63
Pooled funds                     644                                       546
Total                        $ 1,509                                   $ 1,280



Cash and Short-Term Investments: Cash and short-term investments consist of
money market funds with daily liquidity.
U.S. Government and Agencies Securities: U.S. government and agencies securities
consist of U.S.Treasury notes and other debt securities backed by the
U.S. government and related agencies. These securities are valued based on
quoted market prices.
Corporate Debt: Corporate debt investments consist of investment grade bonds of
U.S. issuers from diverse industries. These securities are valued based on
quoted market prices, when available, or yields available on comparable
securities of issuers with similar credit ratings.
State and Municipal Bonds: State and municipal bonds are valued using a
matrix-pricing model that incorporates Level 2 market-based information. The
fair value of the bonds is derived from various observable inputs, including
benchmark yields, reported securities trades, broker/dealer quotes, bond
ratings, and general information on market movements for investment grade state
and municipal securities normally considered by market participants when pricing
such debt securities.
Foreign Corporate Bonds: Foreign corporate debt securities are valued based on
quoted market prices, when available, or on yields available on comparable
securities of issuers with similar credit ratings.
Common Stocks: Common stocks in the OPEB Plan consist of equity securities that
are actively managed and tracked to the S&P 500 Index. These securities are
valued at their quoted closing prices.
Mutual Funds: Mutual funds represent shares in registered investment companies
that are priced based on the daily quoted net asset values that are publicly
available and are the basis for transactions to buy or sell shares in the funds.
Pooled Funds: Pooled funds include both common and collective trust funds as
well as special funds that contain only employee benefit plan assets from two or
more unrelated benefit plans. These funds primarily consist of U.S. and foreign
equity securities, but also include U.S. and foreign fixed-income securities and
multi-asset investments. Since these investments are valued at their net asset
value as a practical expedient, they are not classified in the fair value
hierarchy.


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Asset Allocations: Presented in the following table are the investment components of the assets of CMS Energy's DB Pension Plans and OPEB Plan as of December 31, 2019:

                         DB Pension Plans     OPEB Plan
Equity securities                      55 %          48 %
Fixed-income securities                39            33
Multi-asset investments                 6            19
                                      100 %         100 %



CMS Energy's target asset allocation for the assets of the DB Pension Plans is
53 percent equity, 35 percent fixed income, and 12 percent multi-asset
investments. This target asset allocation is expected to continue to maximize
the long-term return on plan assets, while maintaining a prudent level of risk.
The level of acceptable risk is a function of the liabilities of the plan.
Equity investments are diversified mostly across the S&P 500 Index, with lesser
allocations to the S&P MidCap and SmallCap Indexes and Foreign Equity Funds.
Fixed-income investments are diversified across investment grade instruments of
government and corporate issuers as well as high-yield and global bond funds.
Multi-assets are diversified across absolute return investment approaches and
global tactical asset allocation, such as inflation protected securities, real
estate investment trusts, commodities, currency, and preferred stock. CMS Energy
uses annual liability measurements, quarterly portfolio reviews, and periodic
asset/liability studies to evaluate the need for adjustments to the portfolio
allocation.
CMS Energy established union and non­union VEBA trusts to fund future retiree
health and life insurance benefits. These trusts are funded through the
ratemaking process for Consumers and through direct contributions from the
non­utility subsidiaries. CMS Energy's target asset allocation for the health
trusts is 50 percent equity, 30 percent fixed income, and 20 percent multi-asset
investments. CMS Energy's target asset allocation for the life trusts is 42
percent equity, 28 percent fixed income, and 30 percent multi-asset investments.
These target allocations are expected to continue to maximize the long-term
return on plan assets, while maintaining a prudent level of risk. The level of
acceptable risk is a function of the liabilities of the plans. Equity
investments are diversified mostly across the S&P 500 Index, with lesser
allocations to the S&P SmallCap Index and Foreign Equity Funds. Fixed-income
investments are diversified across investment grade instruments of government
and corporate issuers. Multi-assets are diversified across absolute return
investment approaches and global tactical asset allocation, such as inflation
protected securities, real estate investment trusts, commodities, currency and
preferred stock. CMS Energy uses annual liability measurements, quarterly
portfolio reviews, and periodic asset/liability studies to evaluate the need for
adjustments to the portfolio allocation.
Contributions: Presented in the following table are the contributions to
CMS Energy's and Consumers' DB Pension Plans:
                                     In Millions
Years Ended December 31           2019      2018
CMS Energy, including Consumers
DB Pension Plans                   $ -     $ 240
Consumers
DB Pension Plans                   $ -     $ 234


Contributions comprise required amounts and discretionary contributions. Neither CMS Energy nor Consumers contributed to the OPEB Plan in 2019 and 2018. CMS Energy, including Consumers, contributed $531 million to the DB Pension Plans in January 2020. Consumers contributed $518 million

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to the DB Pension Plans in January 2020. Neither CMS Energy nor Consumers plans
to contribute to the OPEB Plan in 2020. Actual future contributions will depend
on future investment performance, discount rates, and various factors related to
the participants of the DB Pension Plans and OPEB Plan. CMS Energy and Consumers
will, at a minimum, contribute to the plans as needed to comply with federal
funding requirements.
Benefit Payments: Presented in the following table are the expected benefit
payments for each of the next five years and the five-year period thereafter:
                                                                      In Millions
                                    DB Pension Plans      DB SERP       OPEB Plan
CMS Energy, including Consumers
2020                                 $           174      $    10       $      58
2021                                             176           10              60
2022                                             177           10              62
2023                                             177           10              63
2024                                             175           10              64
2025-2029                                        870           46             319
Consumers
2020                                 $           165      $     7       $      56
2021                                             166            7              58
2022                                             167            7              59
2023                                             167            7              60
2024                                             166            7              61
2025-2029                                        825           32             305



Collective Bargaining Agreements: At December 31, 2019, unions represented 35
percent of CMS Energy's employees and 37 percent of Consumers' employees. The
UWUA represents Consumers' operating, maintenance, construction, and call center
employees. The USW represents Zeeland plant employees. Union contracts expire in
2020.
13: Stock-Based Compensation


CMS Energy and Consumers provide a PISP to officers, employees, and non­employee
directors based on their contributions to the successful management of the
company. The PISP has a ten-year term, expiring in May 2024.
In 2019, all awards were in the form of restricted stock or restricted stock
units. The PISP also allows for unrestricted common stock, stock options, stock
appreciation rights, phantom shares, performance units, and incentive options,
none of which was granted in 2019, 2018, or 2017.
Shares awarded or subject to stock options, phantom shares, or performance units
may not exceed 6.5 million shares from June 2014 through May 2024, nor may such
awards to any recipient exceed 500,000 shares in any calendar year. CMS Energy
and Consumers may issue awards of up to 3,258,000 shares of common stock under
the PISP as of December 31, 2019. Shares for which payment or exercise is in
cash, as well as shares that expire, terminate, or are canceled or forfeited,
may be awarded or granted again under the PISP.


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All awards under the PISP vest fully upon death. Upon a change of control of
CMS Energy or termination under an officer separation agreement, the awards will
vest in accordance with specific officer agreements. If stated in the award, for
restricted stock recipients who terminate employment due to retirement or
disability, a pro-rata portion of the award will vest upon termination, with any
market-based award also contingent upon the outcome of the market condition and
any performance-based award contingent upon the outcome of the performance
condition. The pro-rata portion is equal to the portion of the service period
served between the award grant date and the employee's termination date. The
remaining portion of the awards will be forfeited. All awards for directors vest
fully upon retirement. Restricted shares may be forfeited if employment
terminates for any other reason or if the minimum service requirements are not
met, as described in the award document.
Restricted Stock Awards: Restricted stock awards for employees under the PISP
are in the form of performance-based, market-based, and time-lapse restricted
stock. Award recipients receive shares of CMS Energy common stock that have
dividend and voting rights. The dividends on time-lapse restricted stock are
paid in cash or in CMS Energy common stock. The dividends on performance-based
and market-based restricted stock are paid in restricted shares equal to the
value of the dividends. These additional restricted shares are subject to the
same vesting conditions as the underlying restricted stock shares.
Performance-based restricted stock vesting is contingent on meeting at least a
36-month service requirement and a performance condition. The performance
condition is based on an adjusted measure of CMS Energy's EPS growth relative to
a peer group over a three-year period. The awards granted in 2019, 2018, and
2017 require a 38-month service period. Market-based restricted stock vesting is
generally contingent on meeting a three-year service requirement and a market
condition. The market condition is based on a comparison of CMS Energy's total
shareholder return with the median total shareholder return of a peer group over
the same three-year period. Depending on the outcome of the performance
condition or the market condition, a recipient may earn a total award ranging
from zero to 200 percent of the initial grant. Time-lapse restricted stock
generally vests after a service period of three years.
Restricted Stock Units: In 2019, 2018, and 2017, CMS Energy and Consumers
granted restricted stock units to certain non­employee directors who elected to
defer their restricted stock awards. The restricted stock units generally vest
after a service period of one year or, if earlier, at the next annual meeting.
The restricted stock units will be distributed to the recipients as shares in
accordance with the directors' deferral agreements. Restricted stock units do
not have voting rights, but do have dividend rights. In lieu of cash dividend
payments, the dividends on restricted stock units are paid in additional units
equal to the value of the dividends. These additional restricted stock units are
subject to the same vesting and distribution conditions as the underlying
restricted stock units. No restricted stock units were forfeited during 2019.


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Presented in the following tables is the activity for restricted stock and restricted stock units under the PISP:

                                              CMS Energy, including Consumers                                Consumers
                                                                  

Weighted-Average Grant Number of Weighted-Average Grant Year Ended December 31, 2019

            Number of Shares       Date Fair 

Value per Share Shares Date Fair Value per Share Nonvested at beginning of period

               1,211,229            $              39.70     1,158,836           $              39.71
Granted
Restricted stock                                 488,594                           43.57       464,485                          43.57
Restricted stock units                            14,899                           50.35        14,050                          51.15
Vested
Restricted stock                                (468,308 )                         31.09      (447,214 )                        31.11
Restricted stock units                           (12,503 )                         41.59       (11,836 )                        42.35
Forfeited - restricted stock                     (46,949 )                         45.81       (40,139 )                        45.69
Nonvested at end of period                     1,186,962            $              44.56     1,138,182           $              44.57


                                                   CMS Energy,
                                                     including
Year Ended December 31, 2019                         Consumers          Consumers
Granted
Time-lapse awards                                      119,167            113,627
Market-based awards                                    144,963            137,636
Performance-based awards                               144,963            137,636
Director restricted stock units                         13,575             

13,005

Dividend equivalents on market-based awards             12,779             

12,176

Dividend equivalents on performance-based
awards                                                  15,899             

15,145

Dividend equivalents on restricted stock
units                                                    1,324              

1,045

Additional market-based shares based on
achievement of condition                                15,320             

14,550

Additional performance-based shares based
on achievement of condition                             35,503             33,715
Total granted                                          503,493            478,535



CMS Energy and Consumers charge the fair value of the restricted stock awards to
expense over the required service period and charge the fair value of the
restricted stock units to expense immediately. For performance-based awards,
CMS Energy and Consumers estimate the number of shares expected to vest at the
end of the performance period based on the probable achievement of the
performance objective. Performance-based and market-based restricted stock
awards have graded vesting features for retirement-eligible employees, and
CMS Energy and Consumers recognize expense for those awards on a graded vesting
schedule over the required service period. Expense for performance-based and
market-based restricted stock awards for non­retirement-eligible employees and
time-lapse awards is recognized on a straight-line basis over the required
service period.
The fair value of performance-based and time-lapse restricted stock and
restricted stock units is based on the price of CMS Energy's common stock on the
grant date. The fair value of market-based restricted stock awards is calculated
on the grant date using a Monte Carlo simulation. CMS Energy and Consumers base
expected volatilities on the historical volatility of the price of CMS Energy
common stock. The risk-free rate for valuation of the market-based restricted
stock awards was based on the three-year U.S.Treasury yield at the award grant
date.


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Presented in the following table are the most important assumptions used to
estimate the fair value of the market-based restricted stock awards:
Years Ended December 31 2019   2018   2017
Expected volatility     14.9 % 16.7 % 18.0 %
Expected dividend yield  2.8    2.8    3.0
Risk-free rate           2.5    2.1    1.5



Presented in the following table is the weighted-average grant-date fair value
of all awards under the PISP:
Years Ended December 31                               2019        2018      

2017

CMS Energy, including Consumers
Weighted-average grant-date fair value per share
Restricted stock granted                           $ 43.57     $ 26.49     $ 28.61
Restricted stock units granted                       50.35       41.77      

41.98

Consumers

Weighted-average grant-date fair value per share
Restricted stock granted                           $ 43.57     $ 26.51     $ 28.67
Restricted stock units granted                       51.15       42.01      

41.97

Presented in the following table are amounts related to restricted stock awards and restricted stock units:

                                                               In Millions
Years Ended December 31                             2019     2018     2017

CMS Energy, including Consumers Fair value of shares that vested during the year $ 26 $ 27 $ 37 Compensation expense recognized

                       22       17       17
Income tax benefit recognized                          1        1        7

Consumers

Fair value of shares that vested during the year $ 25 $ 26 $ 35 Compensation expense recognized

                       21       16       16
Income tax benefit recognized                          1        1        7



At December 31, 2019, $21.7 million of total unrecognized compensation cost was
related to restricted stock for CMS Energy, including Consumers, and
$20.8 million of total unrecognized compensation cost was related to restricted
stock for Consumers. CMS Energy and Consumers expect to recognize this cost over
a weighted-average period of two years.


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14: Income Taxes


CMS Energy and its subsidiaries file a consolidated U.S. federal income tax
return as well as a Michigan Corporate Income Tax return for the unitary
business group and various other state unitary group combined income tax
returns. Income taxes are allocated based on each company's separate taxable
income in accordance with the CMS Energy tax sharing agreement.
In December 2017, the TCJA was enacted, which changed existing federal tax law
and included numerous provisions that affect businesses, with the primary impact
being a reduction of the corporate tax rate from 35 percent to 21 percent.
Presented in the following table is the difference between actual income tax
expense on continuing operations and income tax expense computed by applying the
statutory U.S. federal income tax rate:
                                                     In Millions, Except Tax Rate
Years Ended December 31                                  2019      2018     

2017

CMS Energy, including Consumers
Income from continuing operations before income taxes   $ 829     $ 774     $ 886
Income tax expense at statutory rate                      174       163     

310

Increase (decrease) in income taxes from:
State and local income taxes, net of federal effect1       48        46     

26

TCJA excess deferred taxes2                               (31 )     (26 )   

-

Production tax credits                                    (20 )     (14 )      (8 )
Accelerated flow-through of regulatory tax benefits3      (13 )     (39 )     (39 )
Research and development tax credits, net4                 (2 )     (11 )      (1 )
Impact of the TCJA5                                         -        (4 )     148
Other, net                                                 (9 )       -       (12 )
Income tax expense                                      $ 147     $ 115     $ 424
Effective tax rate                                       17.7 %    14.9 %    47.9 %
Consumers
Income from continuing operations before income taxes   $ 928     $ 847     $ 971
Income tax expense at statutory rate                      195       178     

340

Increase (decrease) in income taxes from:
State and local income taxes, net of federal effect1       53        51     

30

TCJA excess deferred taxes2                               (31 )     (26 )   

-

Accelerated flow-through of regulatory tax benefits3 (13 ) (39 )

   (39 )
Production tax credits                                    (12 )     (12 )      (8 )
Research and development tax credits, net4                 (2 )     (11 )      (1 )
Impact of the TCJA5                                         -         1        33
Other, net                                                 (5 )       -       (16 )
Income tax expense                                      $ 185     $ 142     $ 339
Effective tax rate                                       19.9 %    16.8 %    34.9 %


1 In 2017, CMS Energy completed the evaluation of its methodology for the

state apportionment of Consumers' electricity sales to MISO, taking into

account recent state tax law developments in the electric utility sector.

To recognize the anticipated refund and the impact of the expected lower

effective tax rate on their deferred state tax liabilities, CMS Energy,

       including Consumers, recorded a $14 million income tax benefit in 2017.
       These tax benefits were net of reserves for uncertain tax positions and
       primarily




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attributable to Consumers. In 2018, CMS Energy amended its 2013 Michigan
Corporate Income Tax return and submitted a refund claim for taxes previously
paid. The refund claim was denied by the State of Michigan. In 2019, CMS Energy
received an unfavorable informal conference decision and filed a petition with
the Michigan Tax Tribunal. A trial is anticipated in 2020. CMS Energy's
uncertain tax position on this matter remains unchanged.
2      In December 2017, Consumers remeasured its deferred tax assets and

liabilities at the new federal tax rate enacted by the TCJA and recorded a

net $1.6 billion regulatory liability. As a result of an order received in

September 2019, Consumers began refunding these excess deferred taxes to

       customers. For additional details on the order received, see Note 3,
       Regulatory Matters.

3 In 2013, the MPSC issued an order authorizing Consumers to accelerate the

flow-through to electric and gas customers of certain income tax benefits

associated primarily with the cost of removal of plant placed in service

before 1993. Consumers implemented this regulatory treatment beginning in

       2014, with the electric portion ending in 2018 and the gas portion
       continuing through 2025.

4 In March 2018, Consumers finalized a study of research and development tax

       credits for the tax years 2012 through 2016. As a result, Consumers
       recognized an $8 million increase in the credit, net of reserves for
       uncertain tax positions, at that time.

5 In December 2017, CMS Energy and Consumers recorded a reasonable estimate

to measure and account for the impact of the TCJA. In December 2018,

CMS Energy recorded a true-up of their estimate and eliminated the

$9 million valuation allowance on the sequestration of alternative minimum

       tax credits.




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Presented in the following table are the significant components of income tax expense on continuing operations:

                                                In Millions
Years Ended December 31            2019      2018      2017
CMS Energy, including Consumers
Current income taxes
Federal                           $ (31 )   $ (67 )   $   -
State and local                      28         -         6
                                  $  (3 )   $ (67 )   $   6
Deferred income taxes
Federal                           $  97     $ 112     $ 368
State and local                      32        58        36
                                  $ 129     $ 170     $ 404
Deferred income tax credit           21        12        14
Tax expense                       $ 147     $ 115     $ 424
Consumers
Current income taxes
Federal                           $ 107     $   6     $ 159
State and local                      41        13        17
                                  $ 148     $  19     $ 176
Deferred income taxes
Federal                           $ (10 )   $  60     $ 120
State and local                      26        51        29
                                  $  16     $ 111     $ 149
Deferred income tax credit           21        12        14
Tax expense                       $ 185     $ 142     $ 339



For the year ended December 31, 2017, the impact of the TCJA was a $148 million
increase in deferred income tax expense at CMS Energy, including Consumers, and
a $33 million increase in deferred income tax expense at Consumers. The TCJA had
no impact on current income tax expense in 2017.


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Presented in the following table are the principal components of deferred income tax assets (liabilities) recognized:

                                                                         In 

Millions

December 31                                                        2019     

2018

CMS Energy, including Consumers
Deferred income tax assets
Tax loss and credit carryforwards                              $    239     $    385
Net regulatory tax liability                                        385          395
Reserves and accruals                                                43           39
Total deferred income tax assets                               $    667     $    819
Valuation allowance                                                  (2 )         (8 )
Total deferred income tax assets, net of valuation allowance   $    665     $    811
Deferred income tax liabilities
Plant, property, and equipment                                 $ (2,033 )   $ (1,955 )
Employee benefits                                                  (172 )       (165 )
Securitized costs                                                   (59 )        (65 )
Gas inventory                                                       (32 )        (35 )
Other                                                               (24 )        (78 )
Total deferred income tax liabilities                          $ (2,320 )   $ (2,298 )
Total net deferred income tax liabilities                      $ (1,655 )   $ (1,487 )
Consumers
Deferred income tax assets
Net regulatory tax liability                                   $    385     $    395
Tax loss and credit carryforwards                                    20     

64

Reserves and accruals                                                24     

21

Total deferred income tax assets                               $    429     $    480
Deferred income tax liabilities
Plant, property, and equipment                                 $ (1,995 )   $ (1,943 )
Employee benefits                                                  (178 )       (172 )
Securitized costs                                                   (59 )        (65 )
Gas inventory                                                       (32 )        (35 )
Other                                                               (29 )        (74 )
Total deferred income tax liabilities                          $ (2,293 )   $ (2,289 )
Total net deferred income tax liabilities                      $ (1,864 )   

$ (1,809 )




Deferred tax assets and liabilities are recognized for the estimated future tax
effect of temporary differences between the tax basis of assets or liabilities
and the reported amounts on CMS Energy's and Consumers' consolidated financial
statements.


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Presented in the following table are the tax loss and credit carryforwards at
December 31, 2019:
                                                                                            In Millions
                                                       Gross Amount      Tax Attribute       Expiration
CMS Energy, including Consumers
Local net operating loss carryforwards                 $        389       $          4     2023 - 2036
General business credits                                        206                206      2026 - 2039
Alternative minimum tax credits                                  29                 29   Not applicable
Total tax attributes                                                      $        239
Consumers
General business credits                               $         20       $         20      2027 - 2039
Total tax attributes                                                      $         20



CMS Energy has provided a valuation allowance of $2 million for the local tax
loss carryforward. The TCJA repealed the corporate alternative minimum tax and
requires companies to recover (through offsets of regular tax and through cash
refunds) all alternative minimum tax credits over the four-year period ending in
2021. Therefore, for the year ended December 31, 2019, CMS Energy reclassified
$31 million of alternative minimum tax credits to a current receivable.
CMS Energy and Consumers expect to utilize fully their tax loss and credit
carryforwards for which no valuation allowance has been provided. It is
reasonably possible that further adjustments will be made to the valuation
allowances within one year.
Presented in the following table is a reconciliation of the beginning and ending
amount of uncertain tax benefits:
                                                      In Millions
Years Ended December 31                    2019     2018     2017
CMS Energy, including Consumers
Balance at beginning of period             $ 19     $ 14     $  5

Additions for current-year tax positions 1 1 10 Additions for prior-year tax positions 3 4 - Reductions for prior-year tax positions - - (1 ) Balance at end of period

                   $ 23     $ 19     $ 14

Consumers

Balance at beginning of period             $ 28     $ 21     $  5

Additions for current-year tax positions 1 2 17 Additions for prior-year tax positions 5 5 - Reductions for prior-year tax positions - - (1 ) Balance at end of period

                   $ 34     $ 28     $ 21



If recognized, all of these uncertain tax benefits would affect CMS Energy's and
Consumers' annual effective tax rates in future years.
CMS Energy and Consumers recognize accrued interest and penalties, where
applicable, as part of income tax expense. CMS Energy, including Consumers,
recognized no interest or penalties for the years ended December 31, 2019, 2018,
or 2017.


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The amount of income taxes paid is subject to ongoing audits by federal, state,
local, and foreign tax authorities, which can result in proposed assessments.
CMS Energy's federal income tax returns for 2016 and subsequent years remain
subject to examination by the IRS. CMS Energy's Michigan Corporate Income Tax
returns for 2013 and subsequent years remain subject to examination by the State
of Michigan. CMS Energy's and Consumers' estimate of the potential outcome for
any uncertain tax issue is highly judgmental. CMS Energy and Consumers believe
that their accrued tax liabilities at December 31, 2019 were adequate for all
years.
15: Earnings Per Share-CMS Energy


Presented in the following table are CMS Energy's basic and diluted EPS computations based on net income:

                                                  In Millions, Except Per Share Amounts
Years Ended December 31                                    2019        2018 

2017

Income available to common stockholders
Net income                                              $   682     $   659     $   462
Less income attributable to noncontrolling interests          2           2 

2

Net income available to common stockholders - basic and diluted

                                             $   680     $   657     $   460
Average common shares outstanding
Weighted-average shares - basic                           283.0       282.2 

280.0

Add dilutive nonvested stock awards                         0.7         0.7 

0.8

Add dilutive forward equity sale contracts                  0.6           - 

-

Weighted-average shares - diluted                         284.3       282.9 

280.8

Net income per average common share available to
common stockholders
Basic                                                   $  2.40     $  2.33     $  1.64
Diluted                                                    2.39        2.32        1.64



Nonvested Stock Awards
CMS Energy's nonvested stock awards are composed of participating and
non­participating securities. The participating securities accrue cash dividends
when common stockholders receive dividends. Since the recipient is not required
to return the dividends to CMS Energy if the recipient forfeits the award, the
nonvested stock awards are considered participating securities. As such, the
participating nonvested stock awards were included in the computation of basic
EPS. The non­participating securities accrue stock dividends that vest
concurrently with the stock award. If the recipient forfeits the award, the
stock dividends accrued on the non­participating securities are also forfeited.
Accordingly, the non­participating awards and stock dividends were included in
the computation of diluted EPS, but not in the computation of basic EPS.
Forward Equity Sale Contracts
In November 2018 and February 2019, CMS Energy entered into forward equity sale
contracts. These forward equity sale contracts are non­participating securities.
While the forward sale price in the forward equity sale contract is decreased on
certain dates by certain predetermined amounts to reflect expected dividend
payments, these price adjustments were set upon inception of the agreement and
the forward contract does not give the owner the right to participate in
undistributed earnings. Accordingly, the forward equity sale contracts were
included in the computation of diluted EPS, but not in the computation


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of basic EPS. For further details on the forward equity sale contracts, see Note 5, Financings and Capitalization. 16: Revenue

Presented in the following tables are the components of operating revenue:

                                                                                                          In Millions
                                      Electric
Year Ended December 31, 2019           Utility       Gas Utility       Enterprises1       EnerBank       Consolidated
CMS Energy, including Consumers
Consumers utility revenue            $   4,407       $     1,922       $          -       $      -       $      6,329
Other                                        -                 -                 74              -                 74
Revenue recognized from
contracts with customers             $   4,407       $     1,922       $         74       $      -       $      6,403
Leasing income                               -                 -                174              -                174
Financing income                             9                 5                  -            221                235
Consumers alternative-revenue
programs                                    23                10                  -              -                 33
Total operating revenue -
CMS Energy                           $   4,439       $     1,937       $        248       $    221       $      6,845
Consumers
Consumers utility revenue
Residential                          $   1,988       $     1,316       $          -       $      -       $      3,304
Commercial                               1,502               372                  -              -              1,874
Industrial                                 669                51                  -              -                720
Other                                      248               183                  -              -                431
Revenue recognized from
contracts with customers             $   4,407       $     1,922       $          -       $      -       $      6,329
Financing income                             9                 5                  -              -                 14
Alternative-revenue programs                23                10                  -              -                 33
Total operating revenue -
Consumers                            $   4,439       $     1,937       $          -       $      -       $      6,376


1      Amounts represent the enterprises segment's operating revenue from

independent power production and CMS ERM's sales of energy commodities in

       support of the independent power production portfolio.




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                                                                                                          In Millions
                                      Electric
Year Ended December 31, 2018           Utility       Gas Utility       Enterprises1       EnerBank       Consolidated
CMS Energy, including Consumers
Consumers utility revenue            $   4,528       $     1,882       $          -       $      -       $      6,410
Other                                        -                 -                 92              -                 92
Revenue recognized from
contracts with customers             $   4,528       $     1,882       $         92       $      -       $      6,502
Leasing income                               -                 -                160              -                160
Financing income                            10                 5                  -            157                172
Consumers alternative-revenue
programs                                    23                16                  -              -                 39
Total operating revenue -
CMS Energy                           $   4,561       $     1,903       $        252       $    157       $      6,873
Consumers
Consumers utility revenue
Residential                          $   2,049       $     1,284       $          -       $      -       $      3,333
Commercial                               1,545               367                  -              -              1,912
Industrial                                 674                55                  -              -                729
Other                                      260               176                  -              -                436
Revenue recognized from
contracts with customers             $   4,528       $     1,882       $          -       $      -       $      6,410
Financing income                            10                 5                  -              -                 15
Alternative-revenue programs                23                16                  -              -                 39
Total operating revenue -
Consumers                            $   4,561       $     1,903       $          -       $      -       $      6,464



1      Amounts represent the enterprises segment's operating revenue from

independent power production and CMS ERM's sales of energy commodities in

support of the independent power production portfolio.



Electric and Gas Utilities
Consumers Utility Revenue: Consumers recognizes revenue primarily from the sale
of electric and gas utility services at tariff-based rates regulated by the
MPSC. Consumers' customer base consists of a mix of residential, commercial, and
diversified industrial customers. Consumers' tariff-based sales performance
obligations are described below.
•      Consumers has performance obligations for the service of standing ready to

deliver electricity or natural gas to customers, and it satisfies these

performance obligations over time. Consumers recognizes revenue at a fixed

rate as it provides these services. These arrangements generally do not

have fixed terms and remain in effect as long as the customer consumes the

utility service. The rates are set by the MPSC through the rate-making

process and represent the stand-alone selling price of Consumers' service

to stand ready to deliver.

• Consumers has performance obligations for the service of delivering the

commodity of electricity or natural gas to customers, and it satisfies

these performance obligations upon delivery. Consumers recognizes revenue

at a price per unit of electricity or natural gas delivered, based on the

       tariffs established by the MPSC. These arrangements generally do not have
       fixed terms and remain in effect as long as the customer consumes the

utility service. The rates are set by the MPSC through the rate-making

process and represent the stand-alone selling price of a bundled product

comprising the commodity, electricity or natural gas, and the service of

       delivering such commodity.




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In some instances, Consumers has specific fixed-term contracts with large
commercial and industrial customers to provide electricity or gas at certain
tariff rates or to provide gas transportation services at contracted rates. The
amount of electricity and gas to be delivered under these contracts and the
associated future revenue to be received are generally dependent on the
customers' needs. Accordingly, Consumers recognizes revenues at the tariff or
contracted rate as electricity or gas is delivered to the customer. Consumers
also has other miscellaneous contracts with customers related to pole and other
property rentals, appliance service plans, and utility contract work. Generally,
these contracts are short term or evergreen in nature.
Accounts Receivable and Unbilled Revenues: Accounts receivable comprise trade
receivables and unbilled receivables. CMS Energy and Consumers record their
accounts receivable at cost, which approximates fair value. CMS Energy and
Consumers establish an allowance for uncollectible accounts based on historical
losses, management's assessment of existing economic conditions, customer
payment trends, and other factors. CMS Energy and Consumers assess late payment
fees on trade receivables based on contractual past-due terms established with
customers. CMS Energy and Consumers charge off accounts deemed uncollectible to
operating expense. Uncollectible expense for CMS Energy and Consumers was
$29 million for the year ended December 31, 2019 and $29 million for the year
ended December 31, 2018.
Consumers' customers are billed monthly in cycles having billing dates that do
not generally coincide with the end of a calendar month. This results in
customers having received electricity or natural gas that they have not been
billed for as of the month-end. Consumers estimates its unbilled revenues by
applying an average billed rate to total unbilled deliveries for each customer
class. Unbilled revenues, which are recorded as accounts receivable on
CMS Energy's and Consumers' consolidated balance sheets, were $426 million at
December 31, 2019 and $409 million at December 31, 2018.
Alternative­Revenue Programs: The energy waste reduction incentive mechanism
provides a financial incentive if the energy savings of Consumers' customers
exceed annual targets established by the MPSC. Consumers accounts for this
program as an alternative-revenue program that meets the criteria for
recognizing revenue related to the incentive as soon as energy savings exceed
the annual targets established by the MPSC.
Under a gas revenue decoupling mechanism authorized by the MPSC, Consumers is
allowed to adjust future gas rates for differences between Consumers' actual
weather­normalized, non­fuel revenues and the revenues approved by the MPSC.
Consumers accounts for this program as an alternative­revenue program that meets
the criteria for recognizing the effects of decoupling adjustments on revenue as
gas is delivered.
Consumers does not reclassify revenue from its alternative-revenue program to
revenue from contracts with customers at the time the amounts are collected from
customers.


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17: Other Income and Other Expense



Other income was not significant for any of the periods presented except for a
$14 million gain on the sale of CMS Energy common stock by Consumers in 2017.
This gain was eliminated on CMS Energy's consolidated statements of income.
Presented in the following table are the components of other expense at
CMS Energy and Consumers:
                                                         In Millions
Years Ended December 31                     2019      2018      2017
CMS Energy, including Consumers
Donations                                  $  (3 )   $ (13 )   $ (31 )
Civic and political expenditures              (6 )      (6 )     (27 )

Loss on reacquired and extinguished debt - (16 ) (18 ) All other

                                     (4 )     (13 )       -
Total other expense - CMS Energy           $ (13 )   $ (48 )   $ (76 )

Consumers

Donations                                  $  (3 )   $ (13 )   $ (31 )
Civic and political expenditures              (6 )      (6 )     (27 )
All other                                     (4 )     (11 )       -
Total other expense - Consumers            $ (13 )   $ (30 )   $ (58 )



18: Cash and Cash Equivalents

Presented in the following table are the components of total cash and cash equivalents, including restricted amounts, and their location on CMS Energy's and Consumers' consolidated balance sheets:

                                                              In Millions
December 31                                                2019      2018
CMS Energy, including Consumers
Cash and cash equivalents                                 $ 140     $ 153
Restricted cash and cash equivalents                         17        21
Other non­current assets                                      -         1

Cash and cash equivalents, including restricted amounts $ 157 $ 175 Consumers Cash and cash equivalents

                                 $  11     $  39
Restricted cash and cash equivalents                         17        17

Cash and cash equivalents, including restricted amounts $ 28 $ 56




Cash and Cash Equivalents: Cash and cash equivalents include short-term, highly
liquid investments with original maturities of three months or less.
Restricted Cash and Cash Equivalents: Restricted cash and cash equivalents are
held primarily for the repayment of securitization bonds and funds held in
escrow. Cash and cash equivalents may also be restricted to pay other
contractual obligations such as leasing of coal railcars. These amounts are
classified as current assets since they relate to payments that could or will
occur within one year.


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19: Reportable Segments


Reportable segments consist of business units defined by the products and
services they offer. CMS Energy and Consumers evaluate the performance of each
segment based on its contribution to net income available to CMS Energy's common
stockholders.
Accounting policies for CMS Energy's and Consumers' segments are as described in
Note 1, Significant Accounting Policies. The consolidated financial statements
reflect the assets, liabilities, revenues, and expenses of the individual
segments when appropriate. Accounts are allocated among the segments when common
accounts are attributable to more than one segment. The allocations are based on
certain measures of business activities, such as revenue, labor dollars,
customers, other operating and maintenance expense, construction expense, leased
property, taxes, or functional surveys. For example, customer receivables are
allocated based on revenue, and pension provisions are allocated based on labor
dollars.
Inter-segment sales and transfers are accounted for at current market prices and
are eliminated in consolidated net income available to common stockholders by
segment.
CMS Energy
The segments reported for CMS Energy are:
•      electric utility, consisting of regulated activities associated with the

generation, purchase, transmission, distribution, and sale of electricity

       in Michigan


•      gas utility, consisting of regulated activities associated with the

purchase, transmission, storage, distribution, and sale of natural gas in

Michigan

• enterprises, consisting of various subsidiaries engaging in domestic

independent power production, including the development and operation of

renewable generation, and the marketing of independent power production

• EnerBank, a Utah state-chartered, FDIC-insured industrial bank providing

unsecured consumer installment loans, largely for financing home

improvements



CMS Energy presents corporate interest and other expenses and Consumers' other
consolidated entities within other reconciling items. In 2019, EnerBank's assets
exceeded ten percent of CMS Energy's consolidated assets.
Consumers
The segments reported for Consumers are:
•      electric utility, consisting of regulated activities associated with the

generation, purchase, transmission, distribution, and sale of electricity

       in Michigan


•      gas utility, consisting of regulated activities associated with the

purchase, transmission, storage, distribution, and sale of natural gas in

Michigan

Consumers' other consolidated entities are presented within other reconciling items.



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Presented in the following tables is financial information by segment:

                                                                             In Millions
Years Ended December 31                                     2019        2018        2017
CMS Energy, including Consumers
Operating revenue
Electric utility                                         $ 4,439     $ 4,561     $ 4,448
Gas utility                                                1,937       1,903       1,774
Enterprises                                                  248         252         229
EnerBank                                                     221         157         132
Total operating revenue - CMS Energy                     $ 6,845     $ 6,873     $ 6,583
Consumers
Operating revenue
Electric utility                                         $ 4,439     $ 4,561     $ 4,448
Gas utility                                                1,937       1,903       1,774
Total operating revenue - Consumers                      $ 6,376     $ 6,464     $ 6,222
CMS Energy, including Consumers
Depreciation and amortization
Electric utility                                         $   713     $   682     $   654
Gas utility                                                  261         239         218
Enterprises                                                   14           8           6
EnerBank                                                       3           4           3
Other reconciling items                                        1           -           -
Total depreciation and amortization - CMS Energy         $   992     $   933     $   881
Consumers
Depreciation and amortization
Electric utility                                         $   713     $   682     $   654
Gas utility                                                  261         239         218
Other reconciling items                                        1           -           -
Total depreciation and amortization - Consumers          $   975     $   921     $   872
CMS Energy, including Consumers
Income from equity method investees¹
Enterprises                                              $    10     $     9     $    15
Total income from equity method investees - CMS Energy   $    10     $     9     $    15
CMS Energy, including Consumers
Interest charges
Electric utility                                         $   213     $   209     $   201
Gas utility                                                   83          79          74
Enterprises                                                    7           2           -
EnerBank                                                      59          32          19
Other reconciling items                                      157         136         144
Total interest charges - CMS Energy                      $   519     $   458     $   438




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                                                                               In Millions
Years Ended December 31                                     2019         2018         2017
Consumers
Interest charges
Electric utility                                        $    213     $    209     $    201
Gas utility                                                   83           79           74
Other reconciling items                                        1            1            1
Total interest charges - Consumers                      $    297     $    289     $    276
CMS Energy, including Consumers
Income tax expense (benefit)
Electric utility                                        $    134     $    109     $    245
Gas utility                                                   51           33           96
Enterprises                                                    2            2           72
EnerBank                                                      16           12           22
Other reconciling items                                      (56 )        (41 )        (11 )
Total income tax expense - CMS Energy                   $    147     $    115     $    424
Consumers
Income tax expense (benefit)
Electric utility                                        $    134     $    109     $    245
Gas utility                                                   51           33           96
Other reconciling items                                        -            -           (2 )
Total income tax expense - Consumers                    $    185     $    142     $    339
CMS Energy, including Consumers
Net income (loss) available to common stockholders
Electric utility                                        $    509     $    535     $    455
Gas utility                                                  233          169          173
Enterprises                                                   33           34          (27 )
EnerBank                                                      49           38           28
Other reconciling items                                     (144 )      

(119 ) (169 ) Total net income available to common stockholders - CMS Energy

                                              $    680     $    657     $    460
Consumers
Net income (loss) available to common stockholder
Electric utility                                        $    509     $    535     $    455
Gas utility                                                  233          169          173
Other reconciling items                                       (1 )        

(1 ) 2 Total net income available to common stockholder - Consumers

                                               $    741     $    703     $    630
CMS Energy, including Consumers
Plant, property, and equipment, gross
Electric utility2,3                                     $ 16,158     $ 16,027     $ 15,221
Gas utility²                                               8,785        7,919        7,080
Enterprises                                                  405          412          167
EnerBank                                                      22           25           21
Other reconciling items                                       20           17           17
Total plant, property, and equipment, gross -
CMS Energy                                              $ 25,390     $ 24,400     $ 22,506




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                                                                                   In Millions
Years Ended December 31                                         2019         2018         2017
Consumers
Plant, property, and equipment, gross
Electric utility2,3                                         $ 16,158     $ 16,027     $ 15,221
Gas utility²                                                   8,785        7,919        7,080
Other reconciling items                                           20           17           17
Total plant, property, and equipment, gross - Consumers     $ 24,963     $ 23,963     $ 22,318
CMS Energy, including Consumers
Investments in equity method investees¹
Enterprises                                                 $     71     $     69     $     64
Total investments in equity method investees - CMS Energy   $     71     $     69     $     64
CMS Energy, including Consumers
Total assets
Electric utility²                                           $ 14,911     $ 14,079     $ 13,906
Gas utility²                                                   8,659        7,806        7,139
Enterprises                                                      527          540          342
EnerBank                                                       2,692        2,006        1,453
Other reconciling items                                           48           98          210
Total assets - CMS Energy                                   $ 26,837     $ 24,529     $ 23,050
Consumers
Total assets
Electric utility²                                           $ 14,973     $ 14,143     $ 13,907
Gas utility²                                                   8,706        7,853        7,139
Other reconciling items                                           20           29           53
Total assets - Consumers                                    $ 23,699     $ 22,025     $ 21,099
CMS Energy, including Consumers
Capital expenditures4
Electric utility5                                           $  1,162     $    865     $    882
Gas utility5                                                     971          958          800
Enterprises                                                        5          246           33
EnerBank                                                           8           10            6
Other reconciling items                                            1            2            1
Total capital expenditures - CMS Energy                     $  2,147     $  2,081     $  1,722
Consumers
Capital expenditures4
Electric utility5                                           $  1,162     $    865     $    882
Gas utility5                                                     971          958          800
Other reconciling items                                            1            2            1
Total capital expenditures - Consumers                      $  2,134     $  

1,825 $ 1,683


1  Consumers had no significant equity method investments.

2 Amounts include a portion of Consumers' other common assets attributable

       to both the electric and gas utility businesses.




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3      Costs related to coal-fueled electric generating units to be retired in
       2023 were removed and recorded as a regulatory asset in June 2019. For
       additional details, see Note 3, Regulatory Matters.


4  Amounts include finance lease additions.


5 Amounts include a portion of Consumers' capital expenditures for plant and

equipment attributable to both the electric and gas utility businesses.

20: Related-Party Transactions-Consumers

Consumers enters into a number of transactions with related parties in the normal course of business. These transactions include: • purchases of electricity from affiliates of CMS Enterprises

• payments to and from CMS Energy related to parent company overhead costs




Transactions involving power supply purchases from certain affiliates of
CMS Enterprises are based on avoided costs under PURPA, state law, and
competitive bidding. The payment of parent company overhead costs is based on
the use of accepted industry allocation methodologies. These payments are for
costs that occur in the normal course of business.
Presented in the following table is Consumers' expense recorded from
related-party transactions for the years ended December 31:
                                                                            In Millions
Description                                      Related Party   2019     

2018 2017 Purchases of capacity and energy Affiliates of CMS Enterprises $ 75 $ 83 $ 90




Amounts payable to related parties for purchased power and other services were
$26 million at December 31, 2019 and $20 million at December 31, 2018. Accounts
receivable from related parties were $8 million at December 31, 2019 and
$13 million at December 31, 2018.
In 2018, CMS Energy and Consumers sold the DB SERP debt securities and
CMS Energy issued a demand note payable to the DB SERP rabbi trust. The portion
of the demand note attributable to Consumers was recorded as a note receivable -
related party on Consumers' consolidated balance sheets at December 31, 2019 and
December 31, 2018. For additional details about the note receivable - related
party, see Note 7, Financial Instruments and Note 8, Notes Receivable.
Beginning in December 2018, Consumers and a subsidiary of CMS Energy executed a
20­year natural gas transportation agreement, related to a pipeline owned by
Consumers. For additional details about the agreement, see Note 10, Leases and
Palisades Financing.
Consumers owned shares of CMS Energy common stock with a fair value of
$1 million at December 31, 2019 and December 31, 2018.
In January 2020, Consumers renewed a short-term credit agreement with
CMS Energy, permitting Consumers to borrow up to $300 million. At
December 31, 2019, there were no outstanding loans under the agreement.


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21: Variable Interest Entities



CMS Energy has variable interests in T.E.S. Filer City, Grayling, Genesee, and
Craven. While CMS Energy owns 50 percent of each partnership, it is not the
primary beneficiary of any of these partnerships because decision making is
shared among unrelated parties, and no one party has the ability to direct the
activities that most significantly impact the entities' economic performance,
such as operations and maintenance, plant dispatch, and fuel strategy. The
partners must agree on all major decisions for each of the partnerships.
Presented in the following table is information about these partnerships:
Name                   Nature of the Entity       Nature of CMS Energy's Involvement
T.E.S. Filer City         Coal-fueled power    Long-term PPA between partnership and
                                  generator                                Consumers
                                                       Employee assignment agreement

Grayling            Wood waste-fueled power    Long-term PPA between partnership and
                                  generator                                Consumers
                                                     Reduced dispatch agreement with
                                                                          Consumers¹
                                                   Operating and management contract

Genesee             Wood waste-fueled power    Long-term PPA between partnership and
                                  generator                                Consumers
                                                     Reduced dispatch agreement with
                                                                          Consumers¹
                                                   Operating and management contract
                                                       Guarantee of fixed rate debt²
                                                      Deferred collection of certain
                                                                        receivables³

Craven              Wood waste-fueled power        Operating and management contract
                                  generator


1 Reduced dispatch agreements allow the facilities to be dispatched based on

the market price of power compared with the cost of production of the

plants. This results in fuel cost savings that each partnership shares

with Consumers' customers.

2 CMS Energy's guarantee is capped at $3 million annually through 2021. For

       additional details on this guarantee, see Note 4, Contingencies and
       Commitments-Guarantees.

3 CMS Energy's maximum exposure to loss from these receivables is $10 million.



The creditors of these partnerships do not have recourse to the general credit
of CMS Energy or Consumers, except as noted in the table above. Consumers has
not provided any financial or other support during the periods presented that
was not previously contractually required.
CMS Energy's investment in these partnerships is included in investments on its
consolidated balance sheets in the amount of $71 million as of December 31, 2019
and $69 million as of December 31, 2018.


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22: Asset Sales and Exit Activities

Enterprises

In April 2019, DIG completed a sale of transmission equipment to ITC and
recognized a pre-tax gain of $16 million within maintenance and other operating
expenses on CMS Energy's consolidated statements of income.
Consumers
Asset Sale: In September 2019, Consumers completed a sale of a portion of its
electric utility's substation transmission equipment to METC. In December 2019,
Consumers filed an application with the MPSC requesting approval to share
voluntarily half of the gain from the sale with customers. As a result, during
2019, Consumers recorded a regulatory liability of $17 million and recognized a
pre-tax gain of $17 million within maintenance and other operating expenses on
its consolidated statements of income. For additional details on the sharing of
the gain with customers, see Note 3, Regulatory Matters.
Exit Activities: Under its Clean Energy Plan, Consumers plans to retire the
D.E. Karn 1 & 2 coal-fueled electric generating units in 2023. For additional
details on Consumers' plans to request recovery of the remaining book value of
the two units upon their retirement, see Note 3, Regulatory Matters.
In October 2019, Consumers announced a retention incentive program to ensure
necessary staffing at the D.E. Karn generating complex through the anticipated
retirement of the coal-fueled electric generating units. Based on the number of
employees that have chosen to participate, the aggregate cost of the program
through 2023 is estimated to be $35 million. Consumers will seek recovery of
these costs from customers.
In 2019, Consumers' electric utility recognized $6 million related to retention
and severance benefits within maintenance and other operating expenses on
Consumers' consolidated statements of income. The amount was reported as other
liabilities on its consolidated balance sheets at December 31, 2019, which
included $2 million of current liabilities.


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23: Quarterly Financial and Common Stock Information (Unaudited)


                                                         In Millions, Except Per Share Amounts
                                                                      2019
Quarters Ended                                    March 31     June 30     Sept 30      Dec 31
CMS Energy, including Consumers
Operating revenue                                  $ 2,059     $ 1,445     $ 1,546     $ 1,795
Operating income                                       359         218         351         311
Net income                                             213          94         207         168
Income attributable to noncontrolling interests          -           1           -           1
Net income available to common stockholders            213          93         207         167
Basic earnings per average common share¹              0.75        0.33        0.73        0.59
Diluted earnings per average common share¹            0.75        0.33        0.73        0.58
Consumers
Operating revenue                                  $ 1,943     $ 1,334     $ 1,429     $ 1,670
Operating income                                       328         175         319         308
Net income                                             226          98         213         206
Preferred stock dividends                                -           1           -           1
Net income available to common stockholder             226          97      

213 205



1      The sum of the quarters may not equal annual EPS due to changes in the
       number of shares outstanding.


                                                         In Millions, Except Per Share Amounts
                                                                      2018
Quarters Ended                                    March 31     June 30     Sept 30      Dec 31
CMS Energy, including Consumers
Operating revenue                                  $ 1,953     $ 1,492     $ 1,599     $ 1,829
Operating income                                       363         255         294         250
Net income                                             241         140         169         109
Income attributable to noncontrolling interests          -           1           -           1
Net income available to common stockholders            241         139         169         108
Basic earnings per average common share¹              0.86        0.49        0.60        0.38
Diluted earnings per average common share¹            0.86        0.49        0.59        0.38
Consumers
Operating revenue                                  $ 1,855     $ 1,395     $ 1,502     $ 1,712
Operating income                                       334         229         271         231
Net income                                             242         152         180         131
Preferred stock dividends                                -           1           -           1
Net income available to common stockholder             242         151      

180 130


1      The sum of the quarters may not equal annual EPS due to changes in the
       number of shares outstanding.




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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of CMS Energy Corporation
Opinions on the Financial Statements and Internal Control over Financial
Reporting
We have audited the accompanying consolidated balance sheets of CMS Energy
Corporation and its subsidiaries (the "Company") as of December 31, 2019 and
2018, and the related consolidated statements of income, comprehensive income,
changes in equity and cash flows for each of the three years in the period ended
December 31, 2019, including the related notes and financial statement schedules
of CMS Energy Corporation listed in the index appearing under Item 15
(collectively referred to as the "consolidated financial statements"). We also
have audited the Company's internal control over financial reporting as of
December 31, 2019, based on criteria established in Internal Control -
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 2019 and 2018, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2019 in conformity
with accounting principles generally accepted in the United States of America.
Also in our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2019, based on
criteria established in Internal Control - Integrated Framework (2013) issued by
the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial
statements, for maintaining effective internal control over financial reporting,
and for its assessment of the effectiveness of internal control over financial
reporting, included in Management's Annual Report on Internal Control Over
Financial Reporting appearing under Item 9A. Our responsibility is to express
opinions on the Company's consolidated financial statements and on the Company's
internal control over financial reporting based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud, and whether effective
internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing
procedures to assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.
Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary
in the circumstances. We believe that our audits provide a reasonable basis for
our opinions.


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Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company;
(ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the
current period audit of the consolidated financial statements that was
communicated or required to be communicated to the audit committee and that (i)
relates to accounts or disclosures that are material to the consolidated
financial statements and (ii) involved our especially challenging, subjective,
or complex judgments. The communication of critical audit matters does not alter
in any way our opinion on the consolidated financial statements, taken as a
whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or
disclosures to which it relates.
Accounting for the Effects of New Regulatory Matters
As described in Note 3 to the consolidated financial statements, the Company is
a utility and must apply regulatory accounting when its rates are designed to
recover specific costs of providing regulated services. Under regulatory
accounting, the Company records regulatory assets or liabilities for certain
transactions that would have been treated as expense or revenue by a
non-regulated business. As of December 31, 2019, the Company has recognized a
total of $2,522 million of regulatory assets and $3,829 million of regulatory
liabilities. As described by management, there are multiple participants to rate
case proceedings who often challenge various aspects of those proceedings,
including the prudence of the Company's policies and practices. These
participants often seek cost disallowances and other relief and have appealed
significant decisions reached by the regulators. The recovery of regulatory
assets and the settlement of regulatory liabilities are contingent upon the
outcomes of rate cases and regulatory proceedings.
The principal considerations for our determination that performing procedures
relating to management's accounting for the effects of new regulatory matters is
a critical audit matter are (i) there was a high degree of auditor judgment and
subjectivity applied to evaluate management's assessment of the potential
outcomes and related accounting impacts associated with pending rate case
proceedings, (ii) in some cases, there was significant audit effort necessary to
assess contrary evidence from various parties involved in rate case proceedings,
and (iii) there was significant audit effort necessary to evaluate audit
evidence related to the recovery of regulatory assets and the settlement of
regulatory liabilities.


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Addressing the matter involved performing procedures and evaluating audit
evidence in connection with forming our overall opinion on the consolidated
financial statements. These procedures included testing the effectiveness of
controls relating to management's assessment of regulatory proceedings,
including the probability of recovering incurred costs and the related
accounting and disclosure impacts. These procedures also included, among others,
obtaining and evaluating the Company's correspondence with regulators,
evaluating the reasonableness of management's assessment regarding whether
recovery of regulatory assets and settlement of regulatory liabilities is
probable and evaluating the sufficiency of the disclosures in the consolidated
financial statements. Procedures were performed to evaluate the regulatory
assets and liabilities, including those subject to pending rate cases, based on
provisions and formulas outlined in rate orders, other regulatory
correspondence, or application of relevant regulatory precedents.
/s/ PricewaterhouseCoopers LLPDetroit, Michigan
February 6, 2020
We have served as the Company's auditor since 2007.


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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholder of Consumers Energy Company
Opinions on the Financial Statements and Internal Control over Financial
Reporting
We have audited the accompanying consolidated balance sheets of Consumers Energy
Company and its subsidiaries (the "Company") as of December 31, 2019 and 2018,
and the related consolidated statements of income, comprehensive income, changes
in equity and cash flows for each of the three years in the period ended
December 31, 2019, including the related notes and financial statement schedule
of Consumers Energy Company listed in the index appearing under Item 15
(collectively referred to as the "consolidated financial statements"). We also
have audited the Company's internal control over financial reporting as of
December 31, 2019, based on criteria established in Internal Control -
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 2019 and 2018, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2019 in conformity
with accounting principles generally accepted in the United States of America.
Also in our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2019, based on
criteria established in Internal Control - Integrated Framework (2013) issued by
the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial
statements, for maintaining effective internal control over financial reporting,
and for its assessment of the effectiveness of internal control over financial
reporting, included in Management's Annual Report on Internal Control Over
Financial Reporting appearing under Item 9A. Our responsibility is to express
opinions on the Company's consolidated financial statements and on the Company's
internal control over financial reporting based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud, and whether effective
internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing
procedures to assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.
Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary
in the circumstances. We believe that our audits provide a reasonable basis for
our opinions.


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Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company;
(ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLPDetroit, Michigan
February 6, 2020
We have served as the Company's auditor since 2007.


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