In 2010,2013, Consumers served 1.8million electric customers and 1.7 million gas customers in Michigan’s Lower Peninsula. Presented in the following map is Consumers’ service territory:
15
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2013
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____to_____
Commission | |||||
Registrant; State of Incorporation; | IRS Employer | |||||||||
File Number | Address; and Telephone Number | Identification No. | ||||||||
1-9513 | ||||||||||
CMS ENERGY CORPORATION | 38-2726431 | |||||||||
(A Michigan Corporation) | ||||||||||
One Energy Plaza, Jackson, Michigan 49201 | ||||||||||
(517) 788-0550 | ||||||||||
1-5611 | CONSUMERS ENERGY COMPANY | 38-0442310 | ||||||||
(A Michigan Corporation) | ||||||||||
One Energy Plaza, Jackson, Michigan 49201 | ||||||||||
(517) 788-0550 | ||||||||||
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange | ||||
Registrant | Title of Class | on Which Registered | ||
CMS Energy Corporation | Common Stock, | New York Stock Exchange | ||
Consumers Energy Company | Cumulative Preferred | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
CMS Energy Corporation: Corporation: Yes x No oConsumers Energy Company: Company: Yes x No o
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
CMS Energy Corporation: Corporation: Yes o No xConsumers Energy Company:Company: Yes o No x
Indicate by check mark whether the RegistrantsRegistrant (1) havehas filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrants wereRegistrant was required to file such reports), and (2) havehas been subject to such filing requirements for the past 90 days.
CMS Energy Corporation: Corporation: Yes x No oConsumers Energy Company: Company: Yes x No o
Indicate by check mark whether the Registrants haveRegistrant has submitted electronically and posted on theirits corporate Web sites,site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrants wereRegistrant was required to submit and post such files).
CMS Energy Corporation: Corporation: Yes x No o Consumers Energy Company: Company: Yes x No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to thisForm 10-K. [ ]x
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” inRule 12b-2 of the Exchange Act.
CMS Energy Corporation:Corporation: Large accelerated filer x Accelerated filer o Non-Accelerated filer o Smaller reporting companyo
(Do not check if a smaller reporting company)
Consumers Energy Company:Company: Large accelerated filer o Accelerated filer o Non-Accelerated filer x Smaller reporting companyo
(Do not check if a smaller reporting company)
Indicate by check mark whether the Registrant is a shell company (as defined inRule 12b-2 of the Exchange Act).
CMS Energy Corporation:Corporation: Yes o No xConsumers Energy Company:Company: Yes o No x
The aggregate market value of CMS Energy voting and non-voting common equity held by non-affiliates was $3.326$7.253 billion for the 227,027,288266,947,124 CMS Energy Common Stock shares outstanding on June 30, 201028, 2013 based on the closing sale price of $14.65$27.17 for CMS Energy Common Stock, as reported by the New York Stock Exchange on such date.
There were 252,140,618267,207,862 shares of CMS Energy Common Stock outstanding on February 10, 2011.January 9, 2014, including 1,091,320 shares owned by Consumers Energy Company. On February 24, 2011,January 9, 2014, CMS Energy held all voting and non-voting common equity of Consumers. Documents incorporated by reference in Part III: CMS Energy’s proxy statement and Consumers’ information statement relating to the 20112014 annual meeting of stockholders to be held May 20, 2011.
Consumers Energy Company
Annual Reports onForm 10-K to the Securities and Exchange Commission for the Year Ended
December 31, 2010
2
GLOSSARY
2008 Energy | Comprehensive energy reform package enacted in | |
ABATE | Association of Businesses Advocating Tariff Equity | |
ABO | Accumulated | |
AFUDC | Allowance for borrowed and equity funds used during construction | |
AOCI | Accumulated | |
ARO | Asset retirement obligation | |
Bay Harbor | A residential/commercial real estate area located near Petoskey, | |
bcf | Billion cubic feet | |
Big Rock | Big Rock Point nuclear power plant, formerly owned by Consumers | |
Btu | British thermal | |
CAIR | The Clean Air Interstate Rule | |
Cantera Gas Company | Cantera Gas Company LLC, a non-affiliated company, formerly known as CMS Field Services | |
Cantera Natural Gas, Inc. | Cantera Natural Gas, Inc., a non-affiliated company that purchased CMS Field Services | |
CAO | Chief Accounting Officer | |
CCR | Coal combustion residual | |
CEO | ||
Chief Executive Officer | ||
CERCLA | Comprehensive Environmental Response, Compensation and Liability Act of 1980 | |
CFO | Chief Financial Officer |
city-gate contract | ||
An arrangement made for the point at which a local distribution company physically receives gas from a supplier or pipeline | ||
Clean Air Act | Federal Clean Air Act of 1963, as amended | |
Clean Water Act | Federal Water Pollution Control Act of 1972, as amended | |
CMS Capital | CMS Capital, L.L.C., a wholly owned subsidiary of CMS Energy |
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CMS Energy | CMS Energy Corporation, the parent of Consumers and CMS Enterprises | |
CMS Enterprises | CMS Enterprises Company, a wholly owned subsidiary of CMS Energy | |
CMS ERM | CMS Energy Resource Management Company, formerly known as CMS MST, a wholly owned subsidiary of CMS Enterprises | |
CMS Field Services | CMS Field Services, Inc., a former wholly owned subsidiary of CMS Gas Transmission | |
CMS Gas Transmission | CMS Gas Transmission Company, a wholly owned subsidiary of CMS Enterprises | |
CMS Land | CMS Land Company, a wholly owned subsidiary of CMS Capital | |
CMS MST | CMS Marketing, Services and Trading Company, a wholly owned subsidiary of CMS Enterprises, whose name was changed to CMS ERM | |
CMS Viron | CMS Viron Corporation, a wholly owned subsidiary of CMS ERM | |
Consumers | Consumers Energy Company, a wholly owned subsidiary of CMS Energy | |
Consumers Funding | Consumers Funding LLC, a wholly owned consolidated bankruptcy-remote subsidiary of Consumers and special-purpose entity organized for the sole purpose of purchasing and owning Securitization property, | |
CSAPR | The Cross-State Air Pollution Rule | |
DB SERP | Defined Benefit Supplemental Executive Retirement Plan | |
DCCP | Defined Company Contribution Plan |
DC SERP | Defined Contribution Supplemental Executive Retirement Plan | |
DIG | ||
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| Dearborn Industrial Generation, L.L.C., a wholly owned subsidiary of Dearborn Industrial Energy, L.L.C., a wholly owned subsidiary of CMS Energy | ||
Dodd-Frank Act | Dodd-Frank Wall Street Reform and Consumer Protection Act | |
DOE | U.S. Department of Energy | |
DOJ | U.S. Department of Justice | |
DTE Electric | DTE Electric Company, a non-affiliated company | |
DTE Gas | DTE Gas Company, a non-affiliated company | |
EBITDA | Earnings before interest, taxes, depreciation, and amortization | |
EGWP | Employer Group Waiver Plan | |
EnerBank | EnerBank USA, a wholly owned subsidiary of CMS Capital | |
Entergy | Entergy Corporation, a non-affiliated company | |
Environmental Mitigation Projects | Environmentally beneficial projects that a party agrees to undertake as part of the settlement of an enforcement action, but which the party is not otherwise legally required to perform | |
EPA | U.S. Environmental Protection Agency | |
EPS | Earnings per share | |
Exchange Act | Securities Exchange Act of 1934, as amended | |
FDIC | ||
Federal Deposit Insurance Corporation | ||
FERC | The Federal Energy Regulatory Commission | |
fine particulate matter | Particulate matter that is 2.5 microns or less in diameter | |
First Mortgage Bond Indenture | The indenture dated as of September 1, 1945 between Consumers and The Bank of New York Mellon, as Trustee, as amended and supplemented | |
FLI Liquidating Trust | Trust formed in Missouri bankruptcy court to accomplish the liquidation of Farmland Industries, Inc., a non-affiliated entity | |
FMB | First mortgage bond | |
FOV | Finding of Violation |
FTR | Financial transmission right | |
GAAP | U.S. Generally Accepted Accounting Principles | |
GCC | ||
Gas Customer Choice, which allows gas customers to purchase gas from alternative suppliers | ||
GCR | Gas cost recovery | |
Genesee | Genesee Power Station Limited Partnership, a VIE in which HYDRA-CO Enterprises, Inc., a wholly owned subsidiary of CMS Enterprises, has a 50 percent interest | |
Grayling | Grayling Generating Station Limited Partnership, a VIE in which HYDRA-CO Enterprises, Inc., a wholly owned subsidiary of CMS Enterprises, has a 50 percent interest | |
GWh | Gigawatt-hour, |
5billion watt-hours
Health Care Acts | Comprehensive health care reform enacted in March 2010, comprising the Patient Protection and Affordable Care Act and the related Health Care and Education Reconciliation Act | |
IRS | ||
Internal Revenue Service | ||
kilovolts | ||
Thousand volts, | ||
kVA | Thousand volt-amperes, | |
kWh | Kilowatt-hour, | |
LIBOR | The London Interbank Offered Rate | |
Ludington | ||
Ludington | ||
MACT | Maximum Achievable Control Technology, which is the emission control that is achieved in practice by the best-controlled similar source | |
MATS | Mercury and Air Toxics Standards, which limit mercury, acid gases, and other toxic pollution from coal-fueled and oil-fueled power plants | |
MBT | Michigan Business Tax | |
mcf | Thousand cubic feet | |
MCIT | Michigan Corporate Income Tax |
MCV Facility | A | |
MCV Partnership | Midland Cogeneration Venture Limited Partnership | |
MCV PPA | PPA between Consumers and the MCV Partnership | |
MD&A | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
MDEQ | Michigan Department of Environmental Quality | |
MDL | A pending multi-district litigation case in Nevada arising out of several consolidated cases | |
MGP | ||
Manufactured gas plant | ||
MISO | ||
The |
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mothball | To place a generating unit into a state of extended reserve shutdown in which the unit is inactive and unavailable for service for a specified period, during which the unit can be brought back into service after receiving appropriate notification and completing any necessary maintenance or other work; generation owners in MISO must request approval to mothball a unit, and MISO then evaluates the request for reliability impacts | |
MPSC | Michigan Public Service Commission | |
MRV | Market-related value of | |
MW | Megawatt, | |
MWh | Megawatt-hour, | |
NAV | Net asset value | |
NERC | The North American Electric Reliability Corporation, a non-affiliated company responsible for developing and enforcing reliability standards, monitoring the bulk power system, and educating and certifying industry personnel | |
NOV | ||
Notice of Violation | ||
NPDES | National Pollutant Discharge Elimination System, a permit system for regulating point sources of pollution under the Clean Water Act | |
NREPA | Part 201 of the Michigan Natural Resources and Environmental Protection Act, a statute that covers environmental activities including remediation |
NSR | ||
New Source Review, a construction-permitting program under the Clean Air Act | ||
NYMEX | The New York Mercantile Exchange | |
OPEB | Other Post-Employment Benefits | |
OPEB Plan | Defined benefit postretirement health-care and life insurance plans of CMS Energy, Consumers, and Panhandle | |
Palisades | Palisades nuclear power plant, sold by Consumers to Entergy in 2007 | |
Panhandle | Panhandle Eastern Pipe Line | |
PBO | Projected benefit obligation | |
PCB | Polychlorinated biphenyl | |
Pension Plan | Trusteed, non-contributory, defined benefit pension plan of CMS Energy, Consumers, and Panhandle | |
PISP | Performance Incentive Stock Plan | |
PPA | Power purchase agreement | |
PSCR | Power supply cost recovery | |
PSD | Prevention of Significant Deterioration | |
REC | ||
Renewable energy credit established under the 2008 Energy | ||
ReliabilityFirst Corporation | ReliabilityFirst Corporation, a non-affiliated company responsible for the preservation and enhancement of bulk power system reliability and security | |
Renewable Operating Permit | Michigan’s Title V permitting program under the Clean Air Act | |
Resource Conservation and Recovery Act | Federal Resource Conservation and Recovery Act of 1976 | |
RMRR | Routine maintenance, repair, and replacement |
7
ROA | Retail Open Access, which allows electric generation customers to choose alternative electric suppliers pursuant to | |
S&P | Standard | |
SEC | U.S. Securities and Exchange Commission |
Securitization | ||
A financing method authorized by statute and approved by the MPSC which allows a utility to sell its right to receive a portion of the rate payments received from its customers for the repayment of securitization bonds issued by a special-purpose entity affiliated with such utility | ||
Sherman Act | Sherman Antitrust Act | |
Smart Energy | Consumers’ Smart Energy grid modernization project, which includes the installation of smart meters that transmit and receive data, a two-way communications network, and modifications to | |
T.E.S. Filer City | T.E.S. Filer City Station Limited Partnership, a VIE in which HYDRA-CO Enterprises, Inc., a wholly owned subsidiary of CMS Enterprises, has a 50 percent interest | |
Title V | A federal program under the Clean Air Act designed to standardize air quality permits and the permitting process for major sources of emissions across the U.S. | |
Trunkline | Trunkline Gas Company, LLC, a |
8
TSR | ||
Total shareholder return | ||
USW | United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO-CLC | |
UWUA | Utility Workers Union of America, AFL-CIO | |
VEBA trust | ||
Voluntary employees’ beneficiary association trusts accounts established specifically to set aside employer-contributed assets to pay for future expenses of the OPEB | ||
VIE | Variable interest entity | |
9
This combinedForm 10-K is separately filed by CMS Energy and Consumers. Information in this combinedForm 10-K relating to each individual registrant is filed by such registrant on its own behalf. Consumers makes no representation regarding information relating to any other companies affiliated with CMS Energy other than its own subsidiaries. None of CMS Energy, CMS Enterprises, nor any of CMS Energy’s other subsidiaries (other than Consumers) has any obligation in respect of Consumers’ debt securities and holders of such debt securities should not consider the financial resources or results of operations of CMS Energy, CMS Enterprises, nor any of CMS Energy’s other subsidiaries (other than Consumers and its own subsidiaries (in relevant circumstances)) in making a decision with respect to Consumers’ debt securities. Similarly, none of Consumers nor any other subsidiary of CMS Energy has any obligation in respect of debt securities of CMS Energy.
FORWARD-LOOKING STATEMENTS AND INFORMATION
ThisForm 10-K and other written and oral statements that CMS Energy and Consumers make may contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. The use of “might,” “may,” “could,” “should,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “projects,” “forecasts,” “predicts,” “assumes,” and other similar words is intended to identify forward-looking statements that involve risk and uncertainty. This discussion of potential risks and uncertainties is designed to highlight important factors that may impact CMS Energy’s and Consumers’ businesses and financial outlook. CMS Energy and Consumers have no obligation to update or revise forward-looking statements regardless of whether new information, future events, or any other factors affect the information contained in the statements. These forward-looking statements are subject to various factors that could cause CMS Energy’s and Consumers’ actual results to differ materially from the results anticipated in these statements. These factors include, CMS Energy’s and Consumers’ inabilitybut are not limited to, predict or control the following, all of which are potentially significant:
10
·the impact of new regulation by the MPSC or FERC and other applicable governmental proceedings and regulations, including any associated impact on electric or gas rates or rate structures;
11
12
·the adoption of federal or state laws or regulations or changes in applicable laws, rules, regulations, principles, or practices, or in their interpretation, including those related to energy policy and ROA, the environment, regulation or deregulation, health care reforms (including the Health Care Acts), taxes, accounting matters, and other business issues that could have an impact on CMS Energy’s or Consumers’ businesses or financial results, including laws or regulations regarding climate change and air emissions and potential effects of the Dodd-Frank Act and related regulations on CMS Energy, Consumers, or any of their affiliates;
·potentially adverse regulatory or legal interpretations or decisions regarding environmental matters, or delayed regulatory treatment or permitting decisions that are or could come before the MDEQ, EPA, and/or U.S. Army Corps of Engineers, and potential environmental remediation costs associated with these interpretations or decisions, including those that may affect Bay Harbor or Consumers’ RMRR classification under NSR regulations;
·changes in energy markets, including availability and price of electric capacity and the timing and extent of changes in commodity prices and availability of coal, natural gas, natural gas liquids, electricity, oil, and certain related products;
·the price of CMS Energy common stock, the credit ratings of CMS Energy and Consumers, capital and financial market conditions, and the effect of these market conditions on CMS Energy’s and Consumers’ interest costs and access to the capital markets, including availability of financing to CMS Energy, Consumers, or any of their affiliates;
·the investment performance of the assets of CMS Energy’s and Consumers’ pension and benefit plans and the discount rates used in calculating the plans’ obligations, and the resulting impact on future funding requirements;
·the impact of the economy, particularly in Michigan, and potential future volatility in the financial and credit markets on CMS Energy’s, Consumers’, or any of their affiliates’ revenues, ability to collect accounts receivable from customers, or cost and availability of capital;
·changes in the economic and financial viability of CMS Energy’s and Consumers’ suppliers, customers, and other counterparties and the continued ability of these third parties, including third parties in bankruptcy, to meet their obligations to CMS Energy and Consumers;
·population changes in the geographic areas where CMS Energy and Consumers conduct business;
·national, regional, and local economic, competitive, and regulatory policies, conditions, and developments, including municipal bankruptcy filings;
·loss of customer demand for electric generation supply to alternative energy suppliers;
·federal regulation of electric sales and transmission of electricity, including periodic re-examination by federal regulators of CMS Energy’s and Consumers’ market-based sales authorizations in wholesale power markets without price restrictions;
·the impact of credit markets, economic conditions, and any new banking regulations on EnerBank;
·the availability, cost, coverage, and terms of insurance, the stability of insurance providers, and the ability of Consumers to recover the costs of any insurance from customers;
·the effectiveness of CMS Energy’s and Consumers’ risk management policies, procedures, and strategies, including strategies to hedge risk related to future prices of electricity, natural gas, and other energy-related commodities;
·factors affecting development of electric generation projects and distribution infrastructure replacement and expansion projects, including those related to project site identification, construction material pricing, availability of qualified construction personnel, permitting, and government approvals;
·factors affecting operations, such as costs and availability of personnel, equipment, and materials, unusual weather conditions, catastrophic weather-related damage, scheduled or unscheduled equipment outages, maintenance or repairs, environmental incidents, equipment failures, and electric transmission and distribution or gas pipeline system constraints;
·potential disruption to, interruption of, or other impacts on facilities, utility infrastructure, or operations due to accidents, explosions, physical disasters, war, or terrorism, and the ability to obtain or maintain insurance coverage for these events;
·changes or disruption in fuel supply, including but not limited to rail or vessel transport of coal and pipeline transport of natural gas;
·potential costs, lost revenues, or other consequences resulting from misappropriation of assets or sensitive information, corruption of data, or operational disruption in connection with a cyber attack or other cyber incident;
·technological developments in energy production, storage, delivery, usage, and metering, including Smart Energy and the success of its implementation;
·the impact of CMS Energy’s and Consumers’ integrated business software system and its operation on their activities, including utility customer billing and collections;
·adverse consequences resulting from any past or future assertion of indemnity or warranty claims associated with assets and businesses previously owned by CMS Energy or Consumers, including claims resulting from attempts by foreign or domestic governments to assess taxes on past operations or transactions;
·the outcome, cost, and other effects of legal or administrative proceedings, settlements, investigations, or claims;
·restrictions imposed by various financing arrangements and regulatory requirements on the ability of Consumers and other subsidiaries of CMS Energy to transfer funds to CMS Energy in the form of cash dividends, loans, or advances;
·earnings volatility resulting from the application of fair value accounting to certain energy commodity contracts or interest rate contracts;
·changes in financial or regulatory accounting principles or policies, including a possible future requirement to comply with International Financial Reporting Standards, which differ from GAAP in various ways, including the present lack of special accounting treatment for regulated activities; and
·other matters that may be disclosed from time to time in CMS Energy’s and Consumers’ SEC filings, or in other publicly issued documents.
All forward-looking statements should be considered in the context of the risk and other factors described above and as detailed from time to time in CMS Energy’s and Consumers’ SEC filings. For additional details regarding these and other uncertainties, see Item 1A. Risk Factors; Item 8. Financial Statements and Supplementary Data, MD&A — Outlook; and Item 8. Financial Statements and Supplementary Data, Notes to the “Outlook” section included in MD&A;Consolidated Financial Statements — Note 5,2, Regulatory Matters and Note 3, Contingencies and Commitments; and Note 6, Regulatory Matters.
13
PART I
ITEM 1. BUSINESS
CMS EnergyC
CMS Energy was formed as a corporation in Michigan in 1987 and is an energy company operating primarily in Michigan. It is the parent holding company of several subsidiaries, including Consumers, an electric and gas utility, and CMS Enterprises, primarily a domestic IPP.independent power producer. Consumers serves individuals and businesses operating in the alternative energy, automotive, chemical, metal, and food products industries, as well as a diversified group of other industries. CMS Enterprises, through its subsidiaries and equity investments, is engaged primarily in IPPindependent power production and owns power generation facilities fueled mostly by natural gas and biomass.
CMS Energy manages its businesses by the nature of services each provides, and operates principally in three business segments: electric utility, gas utility, and enterprises, its non-utility operations and investments. Consumers’ consolidated operations account for substantially all of CMS Energy’s total assets, income, and operating revenue. CMS Energy’s consolidated operating revenue was $6.4$6.6 billion in 2010, $6.22013, $6.3 billion in 2009,2012, and $6.8$6.5 billion in 2008.
For further information about operating revenue, net operating income, and identifiable assets and liabilities attributable to all of CMS Energy’s business segments and operations, see Item 8. Financial Statements and Supplementary Data, CMS Energy’s Selected Financial Information, Consolidated Financial Statements, and Notes to the Consolidated Financial Statements.
ConsumersC
Consumers has served Michigan customers since 1886. Consumers was incorporated in Maine in 1910 and became a Michigan corporation in 1968. Consumers owns and operates electric distribution and generation facilities and gas transmission, storage, and distribution facilities. It provides electricityand/or natural gas to 6.86.5 million of Michigan’s 10 million residents. Consumers’ rates and certain other aspects of its business are subject to the jurisdiction of the MPSC and FERC, as described in “CMS Energy and Consumers Regulation” in this Item 1.
Consumers’ consolidated operating revenue was $6.2$6.3 billion in 2010,2013, $6.0 billion in 2009,2012, and $6.4$6.3 billion in 2008.2011. For further information about operating revenue, net operating income, and identifiable assets and liabilities attributable to Consumers’ electric and gas utility operations, see Item 8. Financial Statements and Supplementary Data, Consumers’ Selected Financial Information, Consolidated Financial Statements, and Notes to the Consolidated Financial Statements.
Consumers owns its principal properties in fee, except that most electric lines and gas mains are located below public roads or on land owned by others and are accessed by Consumers through easements and other rights. Almost all of Consumers’ properties are subject to the lien of its First Mortgage Bond Indenture. For additional information on Consumers’ properties, see Consumers Electric Utility — Electric Utility Properties and Consumers Gas Utility — Gas Utility Properties in the “Business Segments” section of this Item 1.
14
In 2010,2013, Consumers served 1.8million electric customers and 1.7 million gas customers in Michigan’s Lower Peninsula. Presented in the following map is Consumers’ service territory:
15
BUSINESS SEGMENTS
Consumers Electric UtilityC
Electric Utility Operations: Consumers’ electric utility operations, which include the generation, purchase, distribution, and sale of electricity, generated operating revenue of $3.8$4.2 billion in 2010, $3.42013, $4.0 billion in 2009,2012, and $3.6$3.9 billion in 2008.2011. Consumers’ electric utility customer base consists of a mix of residential, commercial, and diversified industrial customers in Michigan’s Lower Peninsula. The automotive industry represented six percent of Consumers’ 2010 electric utility operating revenue.
Presented in the following illustration is Consumers’ 20102013 electric utility operating revenue of $3.8$4.2 billion by customer class:
Consumers’ electric utility operations are not dependent on a single customer, or even a few customers, and the loss of any one or even a few of itsConsumers’ largest customers is not reasonably likely to have a material adverse effect on Consumers’ financial condition.
In 2010,2013, Consumers’ electric deliveries excluding intersystem deliveries, were 38 million MWh,37 billion kWh, which included ROA deliveries of four million MWh, consistent with the ten-percent cap. Netbillion kWh, resulting in net bundled sales were 34 million MWh in 2010.of 33 billion kWh. In 2009,2012, Consumers’ electric deliveries excluding intersystem deliveries, were 36 million MWh,38 billion kWh, which included ROA deliveries of two million MWh,four billion kWh, resulting in net bundled sales of 34 million MWh.
Consumers’ electric utility operations are seasonal. The consumption of electric energy typically increases in the summer months, due primarily to the use of air conditioners and other cooling equipment.
16
Presented in the following illustration are Consumers’ monthly weather-adjusted electric deliveries (deliveries adjusted to reflect normal weather conditions) to its customers, including ROA deliveries, during 20102013 and 2009:
Consumers’ 20102013 summer peak demand was 8,1908,509 MW, which includesincluded ROA demand of 555556 MW. For the2009-2010 2012-2013 winter period, Consumers’ peak demand was 6,0935,845 MW, which includesincluded ROA demand of 425461 MW. As required by MISO reserve margin requirements, Consumers owns or controls, through long-term contracts, capacity necessaryrequired to supply most of its projected firm peak load and necessary reserve margin for summer 2011.
17
| 2010 | ||||||||||
| Summer Net | ||||||||||
| Demonstrated | 2010 Net | |||||||||
| Number of Units and Year | Capability(a) | Generation | ||||||||
Name and Location (Michigan) | Entered Service | (MW) | (GWh) | |||||||
Coal Generation | ||||||||||
| J. H. Campbell 1 & 2 — West Olive | 2 Units, 1962-1967 | 615 | 4,015 | |||||||
| J. H. Campbell 3 — West Olive(b) | 1 Unit, 1980 | 770 | 5,419 | |||||||
| B. C. Cobb — Muskegon | 2 Units, 1956-1957 | 310 | 1,932 | |||||||
| D. E. Karn — Essexville | 2 Units, 1959-1961 | 515 | 2,810 | |||||||
| J. C. Weadock — Essexville | 2 Units, 1955-1958 | 290 | 1,739 | |||||||
| J. R. Whiting — Erie | 3 Units, 1952-1953 | 328 | 1,964 | |||||||
| Total coal generation | 2,828 | 17,879 | ||||||||
Oil/Gas Generation | ||||||||||
| B. C. Cobb — Muskegon | 3 Units, 1999-2000(c) | — | — | |||||||
| D. E. Karn — Essexville | 2 Units, 1975-1977 | 1,276 | 99 | |||||||
| Zeeland — Zeeland | 1 Unit, 2002 | 538 | 720 | |||||||
| Total oil/gas generation | 1,814 | 819 | ||||||||
Hydroelectric | ||||||||||
| Conventional hydro generation | 13 Plants, 1906-1949 | 74 | 365 | |||||||
| Ludington — Ludington | 6 Units, 1973 | 955 | (d) | (366 | )(e) | |||||
| Total hydroelectric | 1,029 | (1 | ) | |||||||
Gas/Oil Combustion Turbine | ||||||||||
| Various plants | 7 Plants, 1966-1971 | 187 | 10 | |||||||
| Zeeland — Zeeland | 2 Units, 2001 | 330 | 235 | |||||||
| Total gas/oil combustion turbine | 517 | 245 | ||||||||
Total owned generation | 6,188 | 18,942 | ||||||||
Purchased and Interchange Power(f) | 3,058 | (g) | 18,048 | (h) | ||||||
Total Supply | 9,246 | 36,990 | ||||||||
| Generation and transmission use/loss | (3,373 | ) | ||||||||
Total Net Bundled Sales | 33,617 | |||||||||
18
·422 miles of high-voltage distribution radial lines operating at 120 kilovolts or above;
·4,259 miles of high-voltage distribution overhead lines operating at 23 kilovolts, 46 kilovolts, and 69 kilovolts;
·18 miles of high-voltage distribution underground lines operating at 23 kilovolts and 46 kilovolts;
·55,996 miles of electric distribution overhead lines;
·10,210 miles of underground distribution lines; and
·substations with an aggregate transformer capacity of 24 million kVA.
Consumers is interconnected to the interstate high-voltage electric transmission system owned by METCMichigan Electric Transmission Company, LLC, a non-affiliated company, and operated by MISO,MISO. Consumers is also interconnected to neighboring utilities and to other transmission systems.
At December 31, 2013, Consumers’ electric generating system consisted of the following:
|
| Number of Units and |
| 2013 Generation Capacity | 1 | 2013 Net Generation |
|
Name and Location (Michigan) |
| Year Entered Service |
| (MW) |
| (GWh) |
|
Coal generation |
|
|
|
|
|
|
|
J.H. Campbell 1 & 2 – West Olive |
| 2 Units, 1962-1967 |
| 607 |
| 3,167 |
|
J.H. Campbell 3 – West Olive2 |
| 1 Unit, 1980 |
| 751 |
| 5,054 |
|
B.C. Cobb 4 & 5 – Muskegon3 |
| 2 Units, 1956-1957 |
| 312 |
| 1,801 |
|
D.E. Karn 1 & 2 – Essexville |
| 2 Units, 1959-1961 |
| 515 |
| 2,630 |
|
J.C. Weadock 7 & 8 – Essexville3 |
| 2 Units, 1955-1958 |
| 290 |
| 1,639 |
|
J.R. Whiting 1-3 – Erie3 |
| 3 Units, 1952-1953 |
| 324 |
| 1,660 |
|
Total coal generation |
|
|
| 2,799 |
| 15,951 |
|
Oil/Gas steam generation |
|
|
|
|
|
|
|
B.C. Cobb 1-3 – Muskegon4 |
| 3 Units, 1999-2000 |
| - |
| - |
|
D.E. Karn 3 & 4 – Essexville |
| 2 Units, 1975-1977 |
| 1,276 |
| 35 |
|
Zeeland (combined cycle) – Zeeland |
| 1 Unit, 2002 |
| 519 |
| 1,209 |
|
Total oil/gas steam generation |
|
|
| 1,795 |
| 1,244 |
|
Hydroelectric |
|
|
|
|
|
|
|
Conventional hydro generation |
| 13 Plants, 1906-1949 |
| 76 |
| 443 |
|
Ludington – Ludington |
| 6 Units, 1973 |
| 953 | 5 | (371 | )6 |
Total hydroelectric |
|
|
| 1,029 |
| 72 |
|
Gas/Oil combustion turbine |
|
|
|
|
|
|
|
Various plants |
| 7 Plants, 1966-1971 |
| 40 |
| 4 |
|
Zeeland (simple cycle) – Zeeland |
| 2 Units, 2001 |
| 308 |
| 171 |
|
Total gas/oil combustion turbine |
|
|
| 348 |
| 175 |
|
Wind generation |
|
|
|
|
|
|
|
Lake Winds® Energy Park |
| 56 Turbines, 2012 |
| 13 |
| 261 |
|
Total wind generation |
|
|
| 13 |
| 261 |
|
Total owned generation |
|
|
| 5,984 |
| 17,703 |
|
Purchased and interchange power7 |
|
|
| 2,619 | 8 | 16,777 | 9 |
Total supply |
|
|
| 8,603 |
| 34,480 |
|
Generation and transmission use/loss |
|
|
|
|
| 1,582 |
|
Total net bundled sales |
|
|
|
|
| 32,898 |
|
1Represents each plant’s electric generation capacity during the summer months.
2Represents Consumers’ share of the capacity of the J.H. Campbell 3 unit, net of the 6.69-percent ownership interest of the Michigan Public Power Agency and Wolverine Power Purchase CapacitySupply Cooperative, Inc.
3Subject to a successful Securitization transaction, Consumers plans to retire these seven smaller coal-fueled generating units by Fuel Type:April 2016. For further information, see Item 8. Financial Statements and Supplementary Data, MD&A – Outlook, “Consumers Electric Utility Business Outlook and Uncertainties – Balanced Energy Initiative.”
4B.C. Cobb 1-3 were coal-fueled units that were retired and subsequently converted to gas-fueled units. B.C. Cobb 1-3 were placed back into service in the years indicated and mothballed beginning in April 2009. Subject to a successful Securitization transaction, Consumers plans to retire these units by April 2016.
5Represents Consumers’ 51-percent share of the capacity of Ludington. DTE Electric holds the remaining 49-percent ownership interest.
6Represents Consumers’ share of net pumped-storage generation. The pumped-storage facility consumes electricity to pump water during off-peak hours for storage in order to generate electricity later during peak-demand hours.
7Includes purchases from the MISO energy market, long-term purchase contracts, and seasonal purchases.
8Includes 1,240 MW of purchased contract capacity from the MCV Facility and 778 MW of purchased contract capacity from Palisades.
9Includes 2,381 GWh of purchased energy from the MCV Facility and 6,915 GWh of purchased energy from Palisades.
Consumers’ generation capacity is a measure of the maximum electric output that Consumers has available to meet peak load requirements. As shown in the following illustration, Consumers’ 20102013 generation capacity of 9,2468,603 MW, including purchased capacity of 3,0582,619 MW, purchased under PPAs, relied on a variety of fuel sources:
19
| GWh | ||||||||||||||||||||
Power Generated | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||
| Coal | 17,879 | 17,255 | 17,701 | 17,903 | 17,744 | |||||||||||||||
| Gas | 1,043 | 565 | 804 | 129 | 161 | |||||||||||||||
| Hydro(a) | 365 | 466 | 454 | 416 | 485 | |||||||||||||||
| Oil | 21 | 14 | 41 | 112 | 48 | |||||||||||||||
| Nuclear | — | — | — | 1,781 | 5,904 | |||||||||||||||
| Net pumped storage(b) | (366 | ) | (303 | ) | (382 | ) | (478 | ) | (426 | ) | ||||||||||
| Total owned generation | 18,942 | 17,997 | 18,618 | 19,863 | 23,916 | |||||||||||||||
| Purchased renewable energy(c) | 1,582 | 1,472 | 1,503 | 1,480 | 1,529 | |||||||||||||||
| Purchased generation-other(c) | 10,421 | 10,066 | 12,140 | 11,022 | 7,065 | |||||||||||||||
| Net interchange power(d) | 6,045 | 6,925 | 6,653 | 8,009 | 7,244 | |||||||||||||||
| Net purchased and interchange power | 18,048 | 18,463 | 20,296 | 20,511 | 15,838 | |||||||||||||||
| Total Net Power Supply | 36,990 | 36,460 | 38,914 | 40,374 | 39,754 | |||||||||||||||
1Represents Consumers’ share of net pumped-storage generation. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2Includes purchases from long-term purchase contracts.
3Includes purchases from the following table, fluctuates with the mix of fuel used.
| Cost per Million Btu | ||||||||||||||||||||
Fuel Consumed | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||
| Coal | $ | 2.51 | $ | 2.37 | $ | 2.01 | $ | 2.04 | $ | 2.09 | ||||||||||
| Gas | 5.57 | 6.57 | 10.94 | 10.29 | 8.92 | |||||||||||||||
| Oil | 10.98 | 9.59 | 11.54 | 8.21 | 8.68 | |||||||||||||||
| Nuclear | — | — | — | 0.42 | 0.24 | |||||||||||||||
| All Fuels(a) | $ | 2.71 | $ | 2.56 | $ | 2.47 | $ | 2.07 | $ | 1.72 | ||||||||||
During 2013, Consumers purchased 49 percent of the electricity it provided to customers through long-term PPAs, seasonal purchases, and the MISO energy provided by Consumers to meet customer demand.
20
At December 31, 2010,2013, Consumers had unrecognized future commitments (amounts for which liabilities, in accordance with GAAP, have not been recorded on its balance sheet) to purchase capacity and energy under long-term PPAs with various generating plants. These contracts require monthly capacity payments based on the plants’ availability or deliverability. TheseThe payments for 20112014 through 20302032 are estimated to total $15.3$12.1 billion and to range from $822$917 million to $1$1.1 billion annually for each of the next five years. These amounts may vary depending on plant availability and fuel costs. For further information about Consumers’ future capacity and energy purchase obligations, see Item 7.8. Financial Statements and Supplementary Data, MD&A “Capital– Capital Resources and Liquidity.”Liquidity and Note 3, Contingencies and Commitments – Contractual Commitments.
During 2013, 46 percent of the energy Consumers provided to customers was generated by its four coal-fueled generating sites, which burned nine million tons of coal and produced a combined total of 15,951 GWh of electricity.
In order to obtain the coal it needs, Consumers enters into physical coal supply contracts. At December 31, 2013, Consumers had contracts to purchase coal through 2015; payment obligations under these contracts totaled $163 million. Consumers’ rail-supplied coal contracts have fixed prices with the exception of one contract, which is for the purchase of coal through 2014 and contains market-based pricing. Consumers’ vessel-supplied coal contracts have fixed base prices that are adjusted monthly to reflect changes to the fuel cost of vessel transportation. At December 31, 2013, Consumers had
79 percent of its 2014 expected coal requirements under contract, as well as a 24-day supply of coal on hand.
In conjunction with its coal supply contracts, Consumers leases a fleet of rail cars and has transportation contracts with various companies to provide rail and vessel services for delivery of purchased coal to Consumers’ generating facilities. Consumers’ coal transportation contracts expire through 2014; payment obligations under these contracts totaled $227 million.
During 2013, four percent of the energy Consumers provided to customers was generated by gas-fueled generating sites, which burned 12 bcf of natural gas and produced a combined total of 1,415 GWh of electricity.
In order to obtain the gas it needs, Consumers’ electric utility purchases gas from the market near the time of consumption, at prices that allow it to compete in the electric generation market. For D.E. Karn, units 3 and 4, and the Zeeland plant, Consumers purchases gas from the market and transports the gas to the facilities on a firm basis. For its smaller combustion turbines, Consumers’ electric utility purchases and transports gas to its facilities as a bundled-rate tariff customer of either the gas utility or DTE Gas.
The cost of all fuels consumed, shown in the following table, fluctuates with the mix of fuel used.
|
|
|
|
|
|
|
| Cost Per Million Btu |
| |||||||
Fuel Consumed |
| 2013 |
| 2012 |
| 2011 |
| 2010 |
| 2009 |
| |||||
Coal |
| $ | 2.90 |
| $ | 2.98 |
| $ | 2.94 |
| $ | 2.51 |
| $ | 2.37 |
|
Gas |
| 4.68 |
| 3.16 |
| 4.95 |
| 5.57 |
| 6.57 |
| |||||
Oil |
| 19.47 |
| 19.08 |
| 18.55 |
| 10.98 |
| 9.59 |
| |||||
Weighted average fuel cost |
| $ | 3.07 |
| $ | 3.05 |
| $ | 3.18 |
| $ | 2.71 |
| $ | 2.56 |
|
Electric Utility Competition: Consumers’ electric utility business is subject to actual and potential competition from many sources, in both the wholesale and retail markets, as well as in electric generation, electric delivery, and retail services.
A Michigan statute enacted in 2000 allows Consumers’ electric customers to buy electric generation service from Consumers or from alternative electric suppliers. The 2008 Energy Law revised the statute by limiting alternative electric supply to ten percent of Consumers’ weather-adjusted retail sales for the preceding calendar year. At December 31, 2013, Consumers’ electric deliveries under the ROA program were at the ten-percent limit and alternative electric suppliers were providing 787 MW of electric generation service to 310 ROA customers.
In December 2013, a bill was introduced to the Michigan House of Representatives that, if enacted, would revise the 2008 Energy Law by removing the ten-percent limit and allowing all of Consumers’ electric customers to take service from alternative electric suppliers. Presently, the proportion of Consumers’ electric deliveries under the ROA program and on the ROA waiting list is 25 percent. The bill also proposes to deregulate electric generation service in Michigan within two years. No definitive action has been taken on this bill or on a similar bill introduced to the Michigan Senate in February 2013. The Senate bill, if enacted, would revise the 2008 Energy Law and allow customers on the ROA program waiting list to take service from alternative electric suppliers. The Senate bill also proposes an increase in the cap of six percentage points per year from 2014 through 2016.
Consumers is unable to predict the outcome of these legislative proposals. In addition, the Michigan legislature has conducted hearings on the subject of energy competition. If the ROA limit were increased or if electric generation service in Michigan were deregulated, it could have a material adverse effect on Consumers’ financial results and operations.
Consumers also has competition or potential competition from:
·industrial customers relocating all or a portion of their production capacity outside of Consumers’ service territory for economic reasons;
·municipalities owning or operating competing electric delivery systems; and
·customer self-generation.
Consumers addresses this competition by monitoring activity in adjacent areas and compliance with the MPSC’s and FERC’s rules, by providing non-energy services and value to customers through Consumers’ rates and service, and by offering tariff-based incentives that support economic development.
Consumers Gas UtilityCONSUMERS GAS UTILITY
Gas Utility Operations:
Presented in the following illustration is Consumers’ 20102013 gas utility operating revenue of $2.1 billion by customer class:
Consumers’ gas utility operations are not dependent on a single customer, or even a few customers, and the loss of any one or even a few of itsConsumers’ largest customers is not reasonably likely to have a material adverse effect on Consumers’ financial condition.
In 2010,2013, deliveries of natural gas, including off-system transportation deliveries, through Consumers’ pipeline and distribution network, totaled 317352 bcf, which included GCC deliveries of 3663 bcf. In 2009,2012, deliveries of natural gas, including off-system transportation deliveries, through Consumers’ pipeline and distribution network, totaled 319329 bcf, which included GCC deliveries of 2749 bcf. Consumers’ gas utility operations are seasonal. Consumers injects natural gas into storage during the summer months for use
during the winter months when the demand for natural gas is higher. Peak demand occurs in the winter due to colder temperatures and the resulting use of natural gas as a heating fuel. During 2010, 462013, 53 percent of the natural gas supplied to all customers during the winter months
21
Presented in the following illustration are Consumers’ monthly weather-adjusted gas deliveries (deliveries adjusted to reflect normal weather conditions) to its customers, including GCC deliveries, during 20102013 and 2009:
Gas Utility Properties: Consumers’ gas distribution and transmission system located in Michigan’s Lower Peninsula consists of:
·26,819 miles of distribution mains;
·1,661 miles of transmission lines;
·seven compressor stations with a total of 150,027 installed and available horsepower; and
·15 gas storage fields with an aggregate storage capacity of 309 bcf and a working storage capacity of 143 bcf.
Gas Utility Supply: In 2010,2013, Consumers purchased 6166 percent of the gas it delivered from U.S. producers and 2110 percent from Canadian producers. The remaining 1824 percent was purchased from authorized GCC suppliers and
22
Firm transportation or firm city-gate contracts are those that define a fixed amount, price, and delivery time frame. Consumers’ firm gas transportation contracts are with ANR Pipeline Company, Great Lakes Gas Transmission, L.P., Panhandle, Trunkline, and Vector Pipeline L.P.Trunkline. Under these contracts, Consumers purchases and transports gas to Michigan for ultimate delivery to its customers. Consumers’ firm gas transportation contracts expire through 2017 and provide for the delivery of 7147 percent of Consumers’ total gas supply requirements.
Gas Utility Competition: Competition exists in various aspects of Consumers’ gas utility business. Competition comes from GCC and interruptible transportation contracts to purchase its gas supply. Under interruptible transportation contracts, the transportation provider is permitted to interrupt service. Consumers’ use of incremental firm transportation contractsfrom alternative fuels and interruptible transportation contracts is generally during off-peak summer monthsenergy sources, such as propane, oil, and after Consumers has fully utilized the services under the firm transportation contracts. The amount of interruptible transportation service and its use vary primarily with the price for this service and the availability and price of purchased and transported spot supplies.
Enterprises Segment — Non-Utility Operations and InvestmentsE
CMS Energy’s enterprises segment, through various subsidiaries and certain equity investments, is engaged primarily in domestic IPPindependent power production and the marketing of IPP. In 2007, the enterprises segment made a significant change in business strategy by exiting the international marketplace and refocusing on its independent power business in the U.S.
23
| Gross Capacity | ||||||||||||||
| Under Long-Term | ||||||||||||||
| Primary | Ownership Interest | Gross Capacity | Contract | |||||||||||
Location | Fuel Type | (%) | (MW) | (%) | ||||||||||
| Connecticut(a) | Scrap tire | 100 | 31 | — | ||||||||||
| Michigan | Natural gas | 100 | 710 | 88 | ||||||||||
| Michigan | Natural gas | 100 | 224 | 89 | ||||||||||
| Michigan | Coal | 50 | 73 | 100 | ||||||||||
| Michigan | Biomass | 50 | 40 | 100 | ||||||||||
| Michigan | Biomass | 50 | 38 | 100 | ||||||||||
| North Carolina | Biomass | 50 | 50 | — | ||||||||||
Total | 1,166 | |||||||||||||
|
|
|
| Gross Capacity |
| Primary | Ownership | Gross Capacity | Under Long-Term |
Location | Fuel Type | Interest (%) | (MW) | Contract (%) |
Dearborn, Michigan | Natural gas | 100 | 710 | 61 |
Gaylord, Michigan | Natural gas | 100 | 156 | 40 |
Comstock, Michigan | Natural gas | 100 | 68 | 40 |
Filer City, Michigan | Coal | 50 | 73 | 100 |
Flint, Michigan | Biomass | 50 | 40 | 100 |
Grayling, Michigan | Biomass | 50 | 38 | 100 |
New Bern, North Carolina | Biomass | 50 | 50 | 100 |
Total |
|
| 1,135 |
|
The operating revenue from independent power production was $17 million in 2013, $16 million in 2012, and $17 million in 2011. CMS Energy’s independent power production business faces competition from generators, marketers and brokers, and utilities marketing power in the wholesale market.
Energy Resource Management: CMS ERM purchases and sells energy commodities in support of CMS Energy’s generating facilities.facilities and continues to focus on optimizing CMS Energy’s independent power production portfolio. In 2010,2013, CMS ERM marketed 1511 bcf of natural gas and 2,3083,596 GWh of electricity. AllElectricity marketed electricityby CMS ERM was generated by IPPsindependent power production of the enterprises segment.segment and unrelated third parties. CMS ERM’s operating revenue included in Income From Continuing Operationsincome from continuing operations in CMS Energy’s Consolidated Financial Statementsconsolidated financial statements was $220$164 million in 2010, $1982013, $167 million in 2009,2012, and $343$187 million in 2008.
OTHER BUSINESSESO
EnerBank:EnerBank a wholly owned subsidiary of CMS Energy, is a Utah state-chartered, FDIC-insured industrial bank providing unsecured consumer installment loans for financing home improvements. EnerBank’s operating revenue included in Income From Continuing Operationsincome from continuing operations in CMS Energy’s Consolidated Financial Statementsconsolidated financial statements was $38$64 million in 2010, $262013, $57 million in 2009,2012, and $21$46 million in 2008.
CMS ENERGY AND CONSUMERS REGULATION
CMS Energy, Consumers, and their subsidiaries are subject to regulation by various federal, state, local, and foreign governmental agencies, including those described in the following sections.
24
FERC has exercised limited jurisdiction over several independent power plants and exempt wholesale generators in which CMS Enterprises has ownership interests, as well as over CMS ERM, CMS Gas Transmission, and DIG. Among other things, FERC has jurisdiction over acquisitions, operations, and disposals of certain assets and facilities, services provided and rates charged, conduct among affiliates, and limited jurisdiction over holding company matters with respect to CMS Energy. FERC, in connection with NERC and with regional reliability organizations, also regulates generation owners and operators, load serving entities, purchase and sale entities, and others with regard to reliability of the bulk power system. CertainFERC regulates limited aspects of Consumers’ gas business, are also subject to regulation byprincipally compliance with FERC including a blanket transportation tariff under which Consumers may transport gas in interstate commerce.capacity release rules, shipping rules, the prohibition against certain buy/sell transactions, and the price-reporting rule.
FERC also regulates certain aspects of Consumers’ electric operations, including compliance with FERC accounting rules, wholesale rates, operation of licensed hydroelectric generating plants, transfers of certain facilities, corporate mergers, and issuances of securities.
Other RegulationMPSC
Consumers is subject to the jurisdiction of the MPSC, which regulates public utilities in Michigan with respect to retail utility rates, accounting, utility services, certain facilities, certain asset transfers, corporate mergers, and other matters.
The Michigan Attorney General, ABATE, the MPSC Staff, and certain other parties typically participate in MPSC proceedings concerning Consumers. The Michigan Attorney General, ABATE, and others often appeal significant MPSC orders.
Rate Proceedings: For information regarding open rate proceedings, see Item 8. Financial Statements and Supplementary Data, MD&A — Outlook and Notes to the Consolidated Financial Statements — Note 2, Regulatory Matters.
OTHER REGULATION
The U.S. Secretary of Energy regulates imports and exports of natural gas and has delegated various aspects of this jurisdiction to FERC and the DOE’s Office of Fossil Fuels.
The U.S. Department of Transportation Office of Pipeline Safety regulates the safety and security of gas pipelines are subject tothrough the Natural Gas Pipeline Safety Act of 1968 and the Pipeline Safety Improvement Act of 2002, which regulate the safety of gas pipelines.
EnerBank is regulated by the State of Utah and the FDIC.
ENERGY LEGISLATION
CMS Energy, Consumers, and their subsidiaries are subject to various legislative-driven matters, including Michigan’s 2008 Energy Law. This law requires that at least ten percent of Consumers’ electric sales volume come from renewable energy sources by 2015, and includes requirements for specific capacity additions. The 2008 Energy Law also requires Consumers to prepare an energy optimization plan and achieve annual sales reduction targets through at least 2015. The targets increase annually, with the goal of achieving a six percent reduction in customers’ electricity use and a four percent reduction in customers’ natural gas use by December 31, 2015. The 2008 Energy Law also revised a Michigan statute by limiting alternative energy supply to ten percent of Consumers’ weather-adjusted retail sales of the preceding calendar year. For additional information regarding Consumers’ renewable energy and energy optimization plans and electric ROA, see Item 8. Financial Statements and Supplementary Data, MD&A — Outlook, “Consumers Electric Utility Business Outlook and Uncertainties.”
CMS ENERGY AND CONSUMERS ENVIRONMENTAL COMPLIANCE
CMS Energy, Consumers, and their subsidiaries are subject to various federal, state, and local regulations for environmental quality, including air and water quality, solid waste management, and other matters. For additional
25
Consumers has recorded a significant liability for its affiliates’ obligations associated with Bay Harbor.at a number of MGP sites. For additional information, see Item 1A. Risk Factors and Item 8. Financial Statements and Supplementary Data, Notes to the Consolidated Financial Statements — Note 5,3, Contingencies and Commitments.
Air: Consumers continues to installstate-of-the-art emissions control equipment at its electric generating plants and to convert electric generating units to burn cleaner fuels.plants. Consumers estimates that it will incur expenditures of $1.4 billion$507 million from 20112014 through 2018 to comply with present and future federal and state environmental regulations that will require extensive reductions in nitrogen oxides, sulfur dioxides, particulate matter, and mercury emissions. Consumers’ estimate may increase if additional or more stringent laws or regulations are adopted or implemented regarding greenhouse gases, including carbon dioxide. For additional information concerning estimated capital expenditures related to emissions control, see Item 7. MD&A, Outlook, “Consumers’ Electric Utility Business Outlook and Uncertainties — Electric Environmental Estimates.”
Solid Waste Disposal: Costs related to the construction, operation, and closure of solid waste disposal facilities for coal ash are significant. Historically, Consumers has worked with others to reuse 30 to 40 percent of ash produced by its coal-fueled plants, and sells ash for use as a Portland cement replacement in concrete products, as feedstock for the manufacture of Portland cement, and for other environmentally-compatible uses. Consumers’ solid waste disposal areas are regulated under Michigan’s solid waste rules. Consumers has converted all of its fly ash handling systems to dry systems, which reduce landfill venting substantially.systems. All of Consumers’ ash facilities have programs designed to protect the environment and are subject to quarterly MDNREMDEQ inspections. Furthermore, an independent consultant has assessed dike integrity and stability. No major deficiencies were identified that could immediately jeopardize continued safe and reliable operation of the project structures. The draft reports of three EPA contractors who have since inspected these facilities with regard to National Dam Safety Program Act requirements comport with this conclusion. The EPA has proposed new federal regulations for ash disposal areas. Consumers preliminarily estimates that it will incur expenditures of $320$204 million from 20112014 through 2018 to comply with future regulations relating to ash disposal. For additional information concerning estimated capital expenditures related todisposal, assuming ash is regulated as a non-hazardous solid waste disposal, see Item 7. MD&A, Outlook, “Consumers’ Electric Utility Business Outlook and Uncertainties — Electric Environmental Estimates.”
Water: Consumers uses significant amounts of water to operate and cool its electric generating plants. Water discharge quality is regulated and administered by the MDNREMDEQ under the federal NPDES program. To comply with such regulation, Consumers’ facilities have discharge monitoring programs. The EPA is developing new regulations related to cooling water intake systems.systems that likely will be finalized in early 2014. Consumers estimates that it willdoes not presently expect to incur any major expenditures of $180 million from 2011 through 2018 to comply with future regulations relating to cooling water intake systems. systems through 2018. Significant expenditures could be required beyond 2018, but until a rule is final, any potential expenditures are difficult to predict. Consumers also expects the EPA to issue final federal regulations for wastewater discharges from electric generating plants in 2014. Consumers’ preliminary estimate of expenditures to comply with these expected regulations is $131 million from 2014 through 2018.
For additionalfurther information concerning estimated capital expenditures related to coolingair, solid waste disposal, and water intake systems, see Item 7.8. Financial Statements and Supplementary Data, MD&A — Outlook, “Consumers’“Consumers Electric Utility Business Outlook and Uncertainties — Electric Environmental Estimates.”
CMS ENERGY AND CONSUMERS COMPETITION
26
CMS Energy and its subsidiaries, including Consumers, maintain insurance coverage generally similar to comparable companies in the same lines of business. The insurance policies are subject to terms, conditions, limitations, and exclusions that might not fully compensate CMS Energy or Consumers for all losses. A portion of each loss is generally assumed by CMS Energy or Consumers in the form of deductibles and self-insured retentions that, in some cases, are substantial. As CMS Energy or Consumers renews its policies, it is possible that some of the present insurance coverage may not be renewed or obtainable on commercially reasonable terms due to restrictive insurance markets.
CMS Energy’s and Consumers’ present insurance program does not cover the risks of certain environmental cleanup costs and environmental damages, such as claims for air pollution, damage to sites owned by CMS Energy or Consumers, and some long-term storage or disposal of wastes.
EMPLOYEES
Presented in the following table are the number of employees of CMS Energy and its wholly owned subsidiaries, including Consumers, had 7,822 full-time equivalent employees. Included in the total are 3,310 full-time operating, maintenance, and constructionConsumers:
December 31 | 2013 | 2012 | 2011 |
CMS Energy, including Consumers |
|
|
|
Full-time employees | 7,736 | 7,487 | 7,699 |
Part-time employees | 45 | 54 | 55 |
Total employees1 | 7,781 | 7,541 | 7,754 |
Consumers |
|
|
|
Full-time employees | 7,410 | 7,188 | 7,418 |
Part-time employees | 25 | 33 | 34 |
Total employees2 | 7,435 | 7,221 | 7,452 |
1Excluding seasonal employees, and full-time and part-time call center employees who are represented by the Union.
2Excluding seasonal employees, 7,114 at December 31, 2013 and construction7,183 at December 31, 2012. There were no seasonal employees and full-time and part-time call center employees who are represented by the Union.
27
CMS ENERGY EXECUTIVE OFFICERS (as of February(AS OF FEBRUARY 1, 2011)2014)
Name | Age | Position | Period | |||
John G. Russell | 56 | President, CEO, and | ||||
| Director of CMS Energy | 5/ | |||||
President, CEO, and Director of Consumers | 5/ | |||||
Chairman of the Board, President, CEO, and | 5/ | |||||
President and Chief Operating Officer of Consumers | 10/2004 – 5/2010 | |||||
Thomas J. Webb | 61 | Executive Vice President and CFO of CMS Energy | 8/2002 – Present | |||
Executive Vice President and CFO of Consumers | 8/2002 – Present | |||||
Executive Vice President, CFO, | ||||||
| and Director of CMS Enterprises | 8/2002 – Present | |||||
James E. Brunner | 61 | Senior Vice President and Chief Legal Counsel of CMS Energy | 10/2013 – Present | |||
Senior Vice President and Chief Legal Counsel of Consumers | 10/2013 – Present | |||||
Senior Vice President and General Counsel of CMS Enterprises | 11/2007 – 1/2014 | |||||
Director of CMS Enterprises | 9/2006 – 1/2014 | |||||
Senior Vice President and General Counsel of CMS Energy | 2/2006 – 10/2013 | |||||
Senior Vice President and General Counsel of Consumers | 2/2006 – 10/2013 | |||||
John M. Butler | 49 | |||||
Senior Vice President of CMS Enterprises | 9/2006 – Present | |||||
Senior Vice President of CMS Energy | 7/2006 – Present | |||||
Senior Vice President of Consumers | 7/2006 – Present | |||||
28
| David G. Mengebier | 56 | Senior Vice President and Chief Compliance Officer of CMS Energy | 11/ | |||
Senior Vice President and Chief Compliance Officer of Consumers | 11/ | |||||
Senior Vice President of CMS Enterprises | 3/2003 – Present | |||||
Catherine M. Reynolds | 56 | Senior Vice President, General Counsel, and Director of CMS | 1/2014 – Present | |||
Senior Vice President and General Counsel of | 10/2013 – Present | |||||
Senior Vice President and General Counsel of Consumers | 10/2013 – Present | |||||
Vice President, Deputy General Counsel, and Corporate Secretary of CMS Energy | 1/2012 – 10/2013 | |||||
Vice President, Deputy General Counsel, and Corporate Secretary of Consumers | 1/2012 – 10/2013 | |||||
Vice President and Corporate Secretary of CMS Energy | 9/2006 – 1/2012 | |||||
Vice President and Corporate Secretary of Consumers | 9/2006 – 1/2012 | |||||
Vice President and Secretary of CMS Enterprises | 9/2006 – 1/2014 | |||||
Glenn P. Barba | 48 | Vice President, Controller, and | 11/2007 – Present | |||
Vice President, Controller, and | 2/2003 – Present | |||||
Vice President, | ||||||
1/2003 – Present |
There are no family relationships among executive officers and directors of CMS Energy.
CONSUMERS EXECUTIVE OFFICERS (as of February(AS OF FEBRUARY 1, 2011)2014)
Name | Age | Position | Period | |||
John G. Russell | 56 | President, CEO, and | ||||
| Director of CMS Energy | 5/ | |||||
President, CEO, and Director of Consumers | 5/ | |||||
Chairman of the Board, President, CEO, and | 5/ | |||||
President and Chief Operating Officer of Consumers | 10/2004 – 5/2010 | |||||
Thomas J. Webb | 61 | Executive Vice President and CFO of CMS Energy | 8/2002 – Present | |||
Executive Vice President and CFO of Consumers | 8/2002 – Present | |||||
Executive Vice President, CFO, | ||||||
| and Director of CMS Enterprises | 8/2002 – Present | |||||
James E. Brunner | 61 | Senior Vice President and Chief Legal Counsel of CMS Energy | 10/2013 – Present | |||
Senior Vice President and Chief Legal Counsel of Consumers | 10/2013 – Present | |||||
Senior Vice President and General Counsel of CMS Enterprises | 11/2007 – 1/2014 | |||||
Director of CMS Enterprises | 9/2006 – 1/2014 | |||||
Senior Vice President and General Counsel of CMS Energy | 2/2006 – 10/2013 | |||||
Senior Vice President and General Counsel of Consumers | 2/2006 – 10/2013 | |||||
John M. Butler | 49 | |||||
Senior Vice President of CMS Enterprises |
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9/2006 – Present
Senior Vice President of CMS Energy | 7/2006 – Present | |||||
Senior Vice President of Consumers | 7/2006 – Present | |||||
David G. Mengebier | 56 | Senior Vice President and Chief Compliance Officer of CMS Energy | 11/ | |||
Senior Vice President and Chief Compliance Officer of Consumers | 11/ | |||||
Senior Vice President of CMS Enterprises | 3/2003 – Present | |||||
Jackson L. Hanson | 57 | |||||
Senior Vice President of Consumers | 5/2010 – Present | |||||
Vice President of Consumers | 11/2006 – 5/2010 | |||||
Daniel J. Malone | 53 | Senior Vice President of Consumers | 5/2010 – Present | |||
Vice President of Consumers | 6/2008 – 5/ | |||||
Catherine M. Reynolds | 56 | |||||
Senior Vice President, General Counsel, and Director of | 1/2014 – Present | |||||
Senior Vice President and General Counsel of | 10/2013 – Present | |||||
Senior Vice President and General Counsel of Consumers | 10/2013 – Present | |||||
Vice President, Deputy General Counsel, and Corporate Secretary of CMS Energy | 1/2012 – 10/2013 | |||||
Vice President, Deputy General Counsel, and Corporate Secretary of Consumers | 1/2012 – 10/2013 | |||||
Vice President and Corporate Secretary of CMS Energy | 9/2006 – 1/2012 | |||||
Vice President and Corporate Secretary of Consumers | 9/2006 – 1/2012 | |||||
Vice President and Secretary of CMS Enterprises | 9/2006 – 1/2014 | |||||
Glenn P. Barba | 48 | Vice President, Controller, and | 11/2007 – Present | |||
Vice President, Controller, and | 2/2003 – Present | |||||
Vice President, Controller, and | 1/2003 – Present | |||||
Patricia K. Poppe | 45 | Vice President |
1/2011 – Present | |||
Ronn J. Rasmussen | 57 | Vice President of Consumers | 11/2006 |
There are no family relationships among executive officers and directors of Consumers.
AVAILABLE INFORMATION
CMS Energy’s internet address is www.cmsenergy.com. Information contained on CMS Energy’s website is not incorporated herein. All of CMS Energy’s annual reports onForm 10-K, quarterly reports onForm 10-Q, current reports onForm 8-K, and amendments to those reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act
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·Corporate Governance Principles;
·Codes of Conduct:
·CMS Energy Corporation/Consumers Energy Company Board of Directors Code of Conduct — January 2013, and
·CMS Energy Corporation/Consumers Energy Company Employees Code of Conduct and Guide to Ethical Business Behavior 2014;
·Committee Charters (including the Audit Committee, the Compensation and Human Resources Committee, the Finance Committee, and the Governance and Public Responsibility Committee); and
·Articles of Incorporation (and amendments) and Bylaws.
CMS Energy will provide this information in print to any stockholder who requests it.
Any materials CMS Energy files with the SEC may also be read and copied at the SEC’s Public Reference Room at 100 F Street, NE,N.E., Washington, D.C., 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at1-800-SEC-0330. The SEC also maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address is www.sec.gov.
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ITEM 1A. RISK FACTORS
Actual results in future periods for CMS Energy and Consumers could differ materially from historical results and the forward-looking statements contained in this report. Factors that might cause or contribute to these differences include, but are not limited to, those discussed in the following sections. CMS Energy’s and Consumers’ businesses are influenced by many factors that are difficult to predict, that involve uncertainties that may materially affect results, and that are often beyond their control. Additional risks and uncertainties not presently known or that the companies’ management believes to be immaterial may also adversely affect the companies.CMS Energy or Consumers. The risk factors described in the following sections, as well as the other information included in this report and in other documents filed with the SEC, should be considered carefully before making an investment in securities of CMS Energy or Consumers. Risk factors of Consumers are also risk factors of CMS Energy. All of these risk factors are potentially significant.
CMS Energy depends on dividends from its subsidiaries to meet its debt service obligations.
Due to its holding company structure, CMS Energy depends on dividends from its subsidiaries to meet its debt service and other payment obligations. RestrictionsConsumers’ ability to pay dividends or acquire its own stock from CMS Energy is limited by restrictions contained in Consumers’ preferred stock provisions and potentially by other legal restrictions, such as certain terms in its articles of incorporation and FERC requirements, limit Consumers’ ability to pay dividends or acquire its own stock from CMS Energy.requirements. At December 31, 2010,2013, under its articles of incorporation, Consumers had $404$662 million of unrestricted retained earnings available to pay common stock dividends. If sufficient dividends arewere not paid to CMS Energy by its subsidiaries, CMS Energy maymight not be able to generate the funds necessary to fulfill its payment obligations, which could have a material adverse effect on CMS Energy’s liquidity and financial condition.
CMS Energy has indebtedness that could limit its financial flexibility and hence its ability to meet its debt service obligations.
At December 31, 2010,2013, CMS Energy, including Consumers, had $7.2$7.7 billion aggregate principal amount of indebtedness, including $29 million of subordinated indebtedness relating to its convertible preferred securities. CMS Energyindebtedness. Consumers had $2.3$4.6 billion aggregate principal amount of indebtedness at December 31, 2010. At December 31, 2010, there were no borrowings and $3 million of letters of credit outstanding under CMS Energy’s revolving credit agreement.2013. CMS Energy and its subsidiaries may incur additional indebtedness in the future.
The level of CMS Energy’s present and future indebtedness could have several important effects on its future operations, including, among others:
·a significant portion of CMS Energy’s cash flow from operations could be dedicated to the payment of principal and interest on its indebtedness and would not be available for other purposes;
·covenants contained in CMS Energy’s existing debt arrangements, which require it to meet certain financial tests, could affect its flexibility in planning for, and reacting to, changes in its business;
·CMS Energy’s ability to obtain additional financing for working capital, capital expenditures, acquisitions, and general corporate and other purposes could become limited;
·CMS Energy could be placed at a competitive disadvantage to its competitors that are less leveraged;
·CMS Energy’s vulnerability to adverse economic and industry conditions could increase; and
·CMS Energy’s future credit ratings could fluctuate.
CMS Energy’s ability to meet its debt service obligations and to reduce its total indebtedness will depend on its future performance, which will be subject to general economic conditions, industry cycles, changes in laws or regulatory decisions, (including with respect to environmental matters), and financial, business, and other factors affecting its operations, many of which are beyond its control. CMS Energy cannot make assurances that its business will continue to
generate sufficient cash flow from operations to service its indebtedness. If CMS Energy iswere unable to generate sufficient cash flows from operations, it maycould be required to sell assets, which might require regulatory approval, or obtain additional financing. CMS Energy cannot ensure that additional financing will be available on commercially acceptable terms or at all.
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CMS Energy and Consumers may be subject to liquidity demands under commercial commitments, guarantees, indemnities, and letters of credit.credit, and other contingent liabilities. Consumers’ capital requirements are expected to be substantial over the next several years as it implementsinvests in the Smart Energy program, construction or acquisition of power generation, environmental controls, decommissioning of older facilities, and environmental projects,other electric and thosegas infrastructure to upgrade delivery systems. Those requirements may increase if additional laws or regulations are adopted or implemented regarding greenhouse gases, including carbon dioxide.
CMS Energy and Consumers rely on the capital markets, particularly for publicly offered debt, as well as on bank syndications, to meet their financial commitments and short-term liquidity needs if sufficient internal funds are not available from Consumers’ operations and, in the case of CMS Energy’sEnergy, from dividends paid by Consumers and Consumers’ respective operations.its other subsidiaries. CMS Energy and Consumers also use letters of credit issued under certain of their revolving credit facilities to support certain operations and investments.
Longer term disruptions in the capital and credit markets as a result of uncertainty, changing or increased regulation, reduced alternatives, or failures of significant financial institutions could adversely affect CMS Energy’s and Consumers’ access to liquidity needed for their respective businesses.businesses, as could Consumers’ inability to obtain prior FERC authorization for any securities issuances, including publicly offered debt, as is required under the Federal Power Act. Any disruption or inability to obtain FERC authorization could require CMS Energy and Consumers to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding for their business needs can be arranged. These measures could include deferring capital expenditures, changing CMS Energy’s and Consumers’ commodity purchasing strategy to avoid collateral-posting requirements, and reducing or eliminating future share repurchases, dividend payments, or other discretionary uses of cash.
CMS Energy continues to explore financing opportunities to supplement its financial plan. These potential opportunities include refinancingand/or issuing new capital markets debt, preferred stockand/or common equity, commercial paper, and bank financing. Similarly, Consumers plans to seek funds through the capital markets, commercial lenders, and leasing arrangements. Entering into new financings is subject in part to capital market receptivity to utility industry securities in general and to CMS Energy’s and Consumers’ securities issuances in particular. CMS Energy and Consumers cannot guarantee the capital markets’ acceptance of their securities or predict the impact of factors beyond their control, such as actions of rating agencies. If CMS Energy or Consumers is unable to obtain bank financing or access the capital markets to incur or refinance indebtedness, or is unable to obtain commercially reasonable terms for any financing, there could be a material adverse effect on its liquidity, financial condition, and results of operations.
Certain of CMS Energy’s securities and those of its affiliates, including Consumers, are rated by various credit rating agencies. Any reduction or withdrawal of one or more of its credit ratings could have a material adverse impact on CMS Energy’s or Consumers’ ability to access capital on acceptable terms and maintain commodity lines of credit, could make its cost of borrowing higher, and could cause CMS Energy or Consumers to reduce its capital expenditures. If it iswere unable to maintain commodity
lines of credit, CMS Energy or Consumers maymight have to post collateral or make prepayments to certain of its suppliers under existing contracts. Further, since Consumers provides dividends to CMS Energy, any adverse developments affecting Consumers that result in a lowering of its credit ratings could have an adverse effect on CMS Energy’s credit ratings. CMS Energy and Consumers cannot
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There are risks associated with Consumers’ significant capital investment program planned for the next five years.
Consumers’ planned investments include the Smart Energy program, construction or acquisition of power generation, gas infrastructure, environmental controls, decommissioning of older facilities, and other electric and gas investments to upgrade delivery systems. The success of these capital investments depends on or could be affected by a variety of factors that include, but are not limited to:
·effective pre-acquisition evaluation of asset values, future operating costs, potential environmental and other liabilities, and other factors beyond Consumers’ control;
·effective cost and schedule management of new capital projects;
·future changes in commodity and other prices;
·future operational performance;
·future changes in environmental, legislative and regulatory requirements; and
·regulatory cost recovery.
Consumers cannot predict the impact that any of these factors could have on the success of its capital investment program. It is possible that adverse events associated with these factors could have a material adverse effect on Consumers’ liquidity, financial condition, and results of operations.
Electric industry legislation in Michigan, coupled with increased competition in gas and electric markets, could have a material adverse effect on CMS Energy’s and Consumers’ businesses.
The 2008 Energy Law, among other things, limits alternative electric supply to ten percent of Consumers’ weather-adjusted retail sales of the preceding calendar year. Lower natural gas prices due to a large supply of natural gas on the market, coupled with low capacity prices in the electric supply market, are placing increasing competitive pressure on the cost of Consumers’ electric supply. Presently, Consumers’ electric rates are above the Midwest average, while the ROA level on Consumers’ system is at the ten-percent limit and the proportion of Consumers’ electric deliveries under the ROA program and on the ROA waiting list is 25 percent. Bills have been introduced to the Michigan House of Representatives and the Michigan Senate to raise or remove the ROA limit. The House bill also proposes to deregulate electric generation service in Michigan within two years. In addition, the Michigan legislature has conducted hearings on the subject of energy competition. If the ROA limit were increased or if electric generation service in Michigan were deregulated, it could have a material adverse effect on Consumers’ financial results and operations.
In 2013, Michigan’s governor instituted a process to prepare a series of reports addressing energy efficiency, renewable energy, the electricity market and ROA, and other subjects. The process was designed to help the governor and other lawmakers determine the state’s next steps regarding energy policies. Following a series of public hearings, the chairman of the MPSC and Michigan’s Energy Office Director released four reports summarizing the information gathered. In December 2013, the governor outlined several key goals for Michigan’s energy policy, including reducing the state’s reliance on coal, increasing the use of renewable energy and natural gas, and improving energy affordability and reliability while protecting the environment.
Other new legislation or interpretations could change how the businesses of CMS Energy and Consumers could incur additional significantoperate, impact Consumers’ ability to recover costs to comply with environmental requirements.
CMS Energy and Consumers are subject to rate regulation, which could have an adverse effect on financial results.
CMS Energy and Consumers are subject to rate regulation. Consumers’ electric and gas rates are set by the MPSC and cannot be increased without regulatory authorization. Consumers is permitted by the 2008 Energy Law to self-implement rate changes six months after a rate filing with the MPSC, subject to certain limitations. If a final rate order from the MPSC provides for emission controls, purchase carbon emissions allowances, curtail operations, investlower rates than Consumers self-implemented, Consumers must refund the difference, with interest. Also, the MPSC may delay or deny implementation of a rate increase upon showing of good cause.
In addition, Consumers’ plans for making significant capital investments, including modifications to meet new environmental requirements and investment in non-fossil-fuel generating capacity,the construction or take other significant steps to manageacquisition of power generation, could be affected adversely or lower the emission of greenhouse gases. The following risks related to climate change could also have a material adverse impacteffect on Consumers if rate regulators fail to provide timely rate relief. Regulators seeking to avoid or minimize rate increases could resist raising customer rates sufficiently to permit Consumers to recover the full cost of modifications to meet environmental requirements and other prudent investments. In addition, because certain costs are mandated by state requirements for cost recovery, such as resource additions to meet Michigan’s renewable resource standard, regulators could be more inclined to oppose rate increases for other requested items and investments. Rate regulators could also face pressure to avoid or limit rate increases for a number of reasons, including failure of Michigan’s economy to improve sufficiently or diminishment of Consumers’ customer base. In addition to potentially affecting Consumers’ investment program, any limitation of cost recovery through rates could have a material adverse effect on Consumers’ liquidity, financial condition, and results of operations.
Orders of the MPSC could limit recovery of costs of providing service including, but not limited to, environmental and safety related expenditures for coal-fueled plants and other utility properties, regulatory assets, power supply and natural gas supply costs, operating and maintenance expenses, additional utility-based investments, sunk investment in mothballed or retired generating plants, costs associated with the proposed retirement and decommissioning of facilities, depreciation expense, MISO energy and transmission costs, costs associated with energy efficiency investments and state or federally mandated renewable resource standards, Smart Energy program costs, or expenditures subject to tracking mechanisms. These orders could also result in adverse regulatory treatment of other matters. For example, the orders could prevent or curtail Consumers from shutting off non-paying customers, could prevent or curtail Consumers from self-implementing rate changes, could prevent or curtail the implementation of a gas revenue mechanism, or could require Consumers to refund previously self-implemented rates.
FERC authorizes certain subsidiaries of CMS Energy to sell electricity at market-based rates. Failure of these subsidiaries to maintain this FERC authority could have a material adverse effect on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations:
The EPA is considering regulating CCBs, such as coal ash, as hazardous wastes under the Resource Conservation and Recovery Act. Michigan already regulates CCBs as low-hazard industrial waste. If coal ash is regulated as a hazardous waste, Consumers would likely cease the beneficial re-use of this product, resulting in significantly more coal ash requiring costly disposal. Additionally, it is possible that existing landfills could be closed if the upgrades to hazardous waste landfill standards are economically prohibitive. Costsvarious risks associated with this potentialthe MPSC and FERC regulation could be substantial.
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Utility regulation could have a material adverse effect on CMS Energy’s and Consumers’ businesses.
Utility regulation has changed dramatically in the last two decades and could continue to change over the next several years. These changes could have a material adverse effect on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations.
CMS Energy and Consumers are subject to, or affected by, extensive federal and state utility regulation. In CMS Energy’s and Consumers’ business planning and management of operations, they must address the effects of existing and proposed regulations on their businesses and changes in the regulatory framework, including initiatives by federal and state legislatures, regional transmission organizations, utility regulators, and taxing authorities. Adoption of new regulations by federal or state agencies, or changes to present regulations and interpretations of these regulations, could have a material adverse effect on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations.
There are multiple FERC-related matters that could impact utility regulation. These include matters relating to electric industry restructuring, asset reclassification, and gas pipeline capacity matters. CMS Energy and Consumers cannot predict the impact of these utility matters on their liquidity, financial condition, and results of operations.
Periodic reviews of the values of CMS Energy’s and Consumers’ assets could result in accountingimpairment charges.
CMS Energy and Consumers are required by GAAP to review periodically the carrying value of their assets, including those that may be sold. Market conditions, the operational characteristics of their assets, and other factors could result in recording impairment charges for their assets, which could have an adverse effect on their stockholders’stockholders equity and their access to additional financing. In addition, CMS Energy and Consumers may be required to record impairment charges at the time they sell assets, depending on the sale prices they are able to secure and other factors.
CMS Energy and Consumers could incur significant costs to comply with environmental requirements.
CMS Energy and Consumers are subject to costly and increasingly stringent environmental regulations. They believe that environmental laws and regulations related to their operations will continue to become more stringent and require them to make additional significant capital expenditures for emissions control equipment, CCR disposal, cooling water intake equipment, effluent treatment, and PCB remediation. Present and reasonably anticipated state and federal environmental statutes and regulations, including but not limited to the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, and CERCLA, will continue to have a material effect on CMS Energy and Consumers.
In 2013, 96 percent of the energy generated by Consumers came from fossil-fuel-fired power plants, with 88 percent coming from coal-fueled power plants. CMS Enterprises also has interests in fossil-fuel-fired power plants and other types of power plants that produce greenhouse gases. In June 2013, President Obama issued his Climate Action Plan. The Climate Action Plan, which is to be implemented by the EPA, will regulate greenhouse gas emissions from both new and existing electric generating units. Federal environmental laws and rules and international accords and treaties could require CMS Energy and Consumers to install additional equipment for emission controls, purchase carbon emissions allowances, curtail operations, invest in non-fossil-fuel-fired generating capacity, or take other significant steps to manage or lower the emission of greenhouse gases.
The following risks related to climate change and emissions could also have a material adverse impact on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations:
·litigation originated by third parties against CMS Energy, Consumers, or their subsidiaries due to CMS Energy’s or Consumers’ greenhouse gas or other emissions;
·impairment of CMS Energy’s or Consumers’ reputation due to their greenhouse gas or other emissions and public perception of their response to potential environmental regulations, rules, and legislation; and
·extreme weather conditions, such as severe storms, that may affect customer demand, company operations, or assets.
Consumers plans to retire seven smaller coal-fueled electric generating units and three smaller gas-fueled electric generating units by April 2016, subject to a successful Securitization transaction. Once the facilities and equipment on these sites are taken out of service, Consumers may encounter previously unknown environmental conditions that will need to be addressed in a timely fashion with state and federal environmental regulators.
CMS Energy and Consumers expect to collect fully from their customers, through the ratemaking process, expenditures incurred to comply with environmental regulations, but cannot guarantee this outcome. If Consumers were unable to recover these expenditures from customers in rates, it could negatively affect CMS Energy’s and/or Consumers’ liquidity, results of operations, and financial condition and CMS Energy and/or Consumers could be required to seek significant additional financing to fund these expenditures.
For additional information regarding compliance with environmental regulations, see Item 1. Business, CMS Energy and Consumers Environmental Compliance and Item 8. Financial Statements and Supplementary Data, MD&A – Outlook, “Consumers Electric Utility Business Outlook and Uncertainties.”
CMS Energy’s and Consumers’ businesses could be affected adversely by any delay in meeting environmental requirements.
A delay or failure by CMS Energy or Consumers to obtain or maintain any necessary environmental permits, approvals under the MISO tariff, or approvals to satisfy any applicable environmental regulatory requirements or install emission control equipment could:
·prevent the construction of new facilities;
·prevent the continued operation and sale of energy from existing facilities;
·prevent the suspension of operations at existing facilities;
·prevent the modification of existing facilities; or
·result in significant additional costs that could have a material adverse effect on their liquidity, financial condition, and results of operations.
CMS Energy and Consumers expect to incur additional significant costs related to remediation of legacy environmental sites.
Consumers is presently monitoring or remediating 23 former MGP sites. Consumers is working collaboratively with the MDEQ to agree upon executable remediation plans. About one-third of the 23 sites have been remediated to the extent possible and are now being monitored. The MDEQ established a provision for a “No Further Action” status for these sites and others like them in 2010. Consumers has received the “No Further Action” designation for one of these sites as of December 31, 2013. The remaining sites are being actively remediated through excavation, treatment at the site, containment, and/or natural reduction; two of these sites require complex remediation plans due to the involvement of surface water.
CMS Energy and Consumers expect to incur additional significant costs related to the remediation of these former MGP sites. Based upon prior MPSC orders, Consumers expects to be able to recover the costs of these cleanup activities through its gas rates, but cannot guarantee that outcome.
In addition, CMS Energy 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. CMS Energy has signed agreements with the EPA and the MDEQ relating to Bay Harbor. If CMS Energy were unable to meet its commitments under these agreements, or if unanticipated events occurred, CMS Energy could incur additional material costs relating to its Bay Harbor remediation obligations.
Consumers also expects to incur remediation and other response activity costs at a number of other sites under NREPA and CERCLA. Consumers believes these costs should be recoverable in rates, but cannot guarantee that outcome.
CMS Energy and Consumers could be affected adversely by legacy litigation and retained liabilities.
In 2002, CMS Energy notified appropriate regulatory and governmental agencies that some employees at CMS MST and CMS Field Services appeared to have provided inaccurate information regarding natural gas trades to various energy industry publications which compile and report index prices. CMS Energy has cooperated with the DOJ’s investigation regarding this matter. CMS Energy is unable to predict the outcome of the DOJ investigation or the amount of any fines or penalties that may be imposed and what effect, if any, the investigation will have on CMS Energy.
CMS Energy, CMS MST, CMS Field Services, Cantera Natural Gas, Inc., and Cantera Gas Company were named as defendants in various lawsuits arising as a result of alleged false natural gas price reporting. Allegations included manipulation of NYMEX natural gas futures and options prices, price-fixing conspiracies, and artificial inflation of natural gas retail prices in Kansas, Missouri, and Wisconsin. CMS Energy cannot predict the outcome of the lawsuits or the amount of damages for which CMS Energy may be liable. It is possible that the outcome in one or more of the lawsuits could have a material adverse effect on CMS Energy’s liquidity, financial condition, and results of operations.
The agreements that CMS Energy and Consumers enter into for the sale of assets customarily include provisions whereby they are required to:
·retain specified preexisting liabilities, such as for taxes, pensions, or environmental conditions;
·indemnify the buyers against specified risks, including the inaccuracy of representations and warranties that CMS Energy and Consumers make; and
·make payments to the buyers depending on the outcome of post-closing adjustments, litigation, audits, or other reviews, including claims resulting from attempts by foreign or domestic governments to assess taxes on past operations or transactions.
Many of these contingent liabilities can remain open for extended periods of time after the sales are closed. Depending on the extent to which the buyers might ultimately seek to enforce their rights under these contractual provisions, and the resolution of any disputes concerning them, there could be a material adverse effect on CMS Energy’s or Consumers’ liquidity, financial condition, and results of operations.
In 2002, CMS Energy sold its oil, gas, and methanol investments in Equatorial Guinea. The government of Equatorial Guinea claims that CMS Energy owes $142 million in taxes, plus significant penalties and interest, in connection with the sale and has requested arbitration. CMS Energy is vigorously contesting the claim, and cannot predict the financial impact or outcome of this matter. It is possible that the outcome of this matter could have a material adverse effect on CMS Energy’s liquidity, financial condition, and results of operations.
CMS Energy’s and Consumers’ energy sales and operations are affected by seasonal factors and varying weather conditions from year to year.
CMS Energy’s and Consumers’ utility operations are seasonal. The consumption of electric energy typically increases in the summer months, due primarily to the use of air conditioners and other cooling equipment, while peak demand for natural gas occurs in the winter due to colder temperatures and the resulting use of natural gas as heating fuel. In addition, Consumers’ electric rates, which follow a seasonal rate design, are higher in the summer months than in the remaining months of the year. Accordingly, CMS Energy’s and Consumers’ overall results in the future may fluctuate substantially on a seasonal basis. Mild temperatures during the summer cooling season and winter heating season could have a material adverse effect on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations.
Consumers is exposed to risks related to general economic conditions in its service territories.
Consumers’ electric and gas utility businesses are affected by the economic conditions impacting the customers they serve. If the Michigan economy becomes sluggish or declines, Consumers could experience reduced demand for electricity or natural gas that could result in decreased earnings and cash flow. In addition, economic conditions in Consumers’ service territory affect its collections of accounts receivable and levels of lost or stolen gas, which in turn impact its liquidity, financial condition, and results of operations.
CMS Energy and Consumers are subject to information security risks, risks of unauthorized access to their systems, and technology failures.
In the regular course of business, CMS Energy and Consumers handle a range of sensitive security and customer information. CMS Energy and Consumers are subject to laws and rules issued by various agencies concerning safeguarding and maintaining the confidentiality of this information. A security breach of CMS Energy’s and Consumers’ information systems could involve theft or the inappropriate release of certain types of information, such as confidential customer information or, separately, system operating information. These events could disrupt operations, subject CMS Energy and Consumers to possible financial liability, damage their reputation and diminish the confidence of customers, and have a material adverse effect on CMS Energy’s and Consumers’ liquidity, financial conditions, and results of operations.
CMS Energy and Consumers operate in a highly regulated industry that requires the continued operation of sophisticated information technology systems and network infrastructure. Despite implementation of security measures, CMS Energy’s and Consumers’ technology systems are vulnerable to being disabled, to failures, to cyber crime, and to unauthorized access. Such events could impact the reliability of electric and gas generation and delivery and also subject CMS Energy and Consumers to financial harm. Cyber crime, which includes the use of malware, computer viruses, and other means for disruption or unauthorized access against companies, including CMS Energy and Consumers, has increased in frequency, scope, and potential impact in recent years. While CMS Energy and Consumers have not been subject to cyber crime incidents that have had a material impact on their operations to date, their security measures in place may be insufficient to prevent a major cyber attack in the future. If CMS Energy’s and Consumers’ technology systems were to fail or be breached, CMS Energy and Consumers might not be able to fulfill critical business functions, and sensitive confidential and proprietary data could be compromised, which could have a material adverse effect on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations.
A variety of technological tools and systems, including both company-owned information technology and technological services provided by outside parties, support critical functions. The failure of these technologies, or the inability of CMS Energy and Consumers to have these technologies supported,
updated, expanded, or integrated into other technologies, could hinder their business operations and materially adversely affect their liquidity, financial condition, and results of operations.
CMS Energy’s and Consumers’ businesses have safety risks.
Consumers’ electric and gas delivery systems, power plants, gas infrastructure, wind energy equipment, and energy products and the independent power plants owned in whole or in part by CMS Energy could be involved in accidents that result in injury or property loss to customers, employees, or the public. Although CMS Energy and Consumers have insurance coverage for many potential incidents (subject to deductibles and self-insurance amounts that could be material), depending upon the nature or severity of any incident or accident, CMS Energy or Consumers could suffer financial loss, damage to its reputation, and negative repercussions from regulatory agencies or other public authorities.
CMS Energy’s and Consumers’ revenues and results of operations are subject to risks that are beyond their control, including but not limited to natural disasters, terrorist attacks or related acts of war, hostile cyber intrusions, or other catastrophic events.
The impact of natural disasters, severe weather, wars, terrorist acts, cyber intrusions, pandemics, and other catastrophic events on the facilities and operations of CMS Energy and Consumers could have a material adverse affecteffect on their liquidity, financial condition, and results of operations. A terrorist attack on physical infrastructure or a major natural disaster could result in severe damage to CMS Energy’s and Consumers’ assets beyond what could be recovered through insurance policies. Hostile cyber intrusions, including those targeting information systems as well as electronic control systems used at the generating plants and for the electric and gas distribution systems, could severely disrupt
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Instability in the financial markets as a result of terrorism, war, natural disasters, credit crises, recessions, or other factors, could have a material adverse effect on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations.
CMS Energy and Consumers are exposed to significant reputational risks.
Consumers is actively engaged in multiple regulatory oversight processes and has a large electric and gas customer base. As a result, Consumers has a highly visible public profile in Michigan. Consumers and CMS Energy could suffer negative impacts to their reputations as a result of operational incidents, violations of corporate compliance policies, regulatory violations, or other events. This could have a material adverse effect on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. It could also result in negative customer perception and increased regulatory oversight.
The markets for alternative energy and distributed generation could impact financial results.
Technology advances and government incentives and subsidies could reduce or shift the cost of alternative methods of producing electricity, such as fuel cells, microturbines, wind turbines, and photovoltaic (solar) cells, and could place additional system burdens on CMS Energy and Consumers. It is also possible that electric customers could reduce their electric consumption significantly through demand-side energy conservation and energy efficiency programs. Changes in technology could also alter the channels through which electric customers buy electricity. Any of these changes could have a
material adverse effect on CMS Energy’s and Consumers’ liquidity, financial condition, or results of operations.
Energy risk management strategies maymight not be effective in managing fuel and electricity pricing risks, which could result in unanticipated liabilities to ConsumersCMS Energy and CMS EnergyConsumers or increased volatility ofin their earnings.
Consumers is exposed to changes in market prices for natural gas, coal, electricity, emission allowances, and RECs. Prices for natural gas, coal, electricity, emission allowances, and RECs may fluctuate substantially over relatively short periods of time and expose Consumers to commodity price risk. A substantial portion of Consumers’ operating expenses for its plants consists of the costs of obtaining these commodities. Consumers manages these risks using established policies and procedures, and it may use various contracts to manage these risks, including swaps, options, futures, and forward contracts. No assurance can be made that these strategies will be successful in managing Consumers’ pricing risk or that they will not result in net liabilities to Consumers as a result of future volatility in these markets.
Natural gas prices in particular have been historically volatile. Consumers routinely enters into contracts to mitigate exposure to the risks of demand, market effects of weather, and changes in commodity prices associated with its gas distribution business. These contracts are executed in conjunction with the GCR mechanism, which is designed to allow Consumers to recover prudently incurred costs associated with those positions. If the MPSC determined that any of these contracts or related contracting policies were imprudent, recovery of these costs could be disallowed. Consumers does not always hedge the entire exposure of its operations from commodity price volatility. Furthermore, the ability to hedge exposure to commodity price volatility depends on liquid commodity markets. As a result, to the extent the commodity markets are illiquid, Consumers maymight not be able to execute its risk management strategies, which could result in greater unhedged positions than preferred at a given time. To the extent that unhedged positions exist, fluctuating commodity prices could have a negative effect on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations.
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Unplanned power plant outagesCMS Energy and Consumers are exposed to credit risk of those with whom they do business.
CMS Energy and Consumers are exposed to credit risk of counterparties with whom they do business. Adverse economic conditions or financial difficulties experienced by these counterparties could impair the ability of these counterparties to pay for CMS Energy’s and Consumers’ services or fulfill their contractual obligations, including performance and payment of damages. CMS Energy and Consumers depend on these counterparties to remit payments and perform services timely. Any delay or default in payment or performance of contractual obligations could have a material adverse effect on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations.
In recent years, the capital and credit markets have experienced unprecedented high levels of volatility and disruption. Market volatility and disruption could have a negative impact on CMS Energy’s and Consumers’ lenders, suppliers, customers, and other counterparties, causing them to fail to meet their obligations. Adverse economic conditions could also have a negative impact on the loan portfolio of CMS Energy’s banking subsidiary, EnerBank.
Consumers might not be costly for Consumers.able to obtain an adequate supply of natural gas or coal, which could limit its ability to operate its electric generation facilities or serve its natural gas customers.
Consumers has natural gas and coal supply and transportation contracts in place for the natural gas and coal it requires for its electric generating capacity. Consumers also has interstate transportation and supply agreements in place to facilitate delivery of natural gas to its customers. Apart from the contractual and monetary remedies available to Consumers in the event of a counterparty’s failure to
perform under any of these contracts, there can be no assurances that the counterparties to these contracts will fulfill their obligations to provide natural gas or other equipment, Consumers maycoal to Consumers. The counterparties under the agreements could experience financial or operational problems that inhibit their ability to fulfill their obligations to Consumers. In addition, counterparties under these contracts might not be required to incur unplanned expenses andsupply natural gas or coal to make spot market purchasesConsumers under certain circumstances, such as in the event of electricity that exceeda natural disaster or severe weather.
If, for its costs of generation. Ifelectric generating capacity, Consumers were unable to recover anyobtain its natural gas or coal requirements under existing or future natural gas and coal supply and transportation contracts, it could be required to purchase natural gas or coal at higher prices or forced to purchase electricity from higher-cost generating resources in the MISO energy market. If, for natural gas delivery to its customers, Consumers were unable to obtain its natural gas supply requirements under existing or future natural gas supply and transportation contracts, it could be required to purchase natural gas at higher prices from other sources or implement its natural gas curtailment program filed with the MPSC. These alternatives could increase Consumers’ working capital requirements and could decrease its revenues.
Market performance and other changes could decrease the value of employee benefit plan assets, which then could require significant funding.
The performance of the capital markets affects the values of assets that are held in trust to satisfy future obligations under CMS Energy’s and Consumers’ pension and postretirement benefit plans. CMS Energy and Consumers have significant obligations under these plans and hold significant assets in these trusts. These assets are subject to market fluctuations and will yield uncertain returns, which could fall below CMS Energy’s and Consumers’ forecasted return rates. A decline in the market value of the assets or a change in the level of interest rates used to measure the required minimum funding levels could significantly increase the funding requirements of these obligations. Also, changes in demographics, including an increased costsnumber of retirements or changes in rates,life expectancy assumptions, could significantly increase the funding requirements of the obligations related to the pension and postretirement benefit plans. Additionally, while CMS Energy and Consumers do not expect that the Health Care Acts will significantly increase obligations of their postretirement benefit plans, they cannot guarantee this outcome. If CMS Energy and Consumers are unable to manage their pension and postretirement plan assets successfully, it could have a material adverse effect on Consumers’their liquidity, financial condition, and results of operations.
A work interruption or other union actions could adversely affect CMS Energy and Consumers.
Over 40 percent of CMS Energy’s and Consumers’ employees are represented by a union.unions. If these employees were to engage in a strike, work stoppage, or other slowdown, or if the terms and conditions in future labor agreements were renegotiated, CMS Energy and Consumers could experience a significant disruption in theirits operations and higher ongoing labor costs.
Failure to attract and retain an appropriately qualified workforce could harm CMS Energy’s and Consumers’ results of operations.
The workforce of CMS Energy and Consumers is aging and a number of employees will become eligible to retire within the next few years. If CMS Energy and Consumers were unable to match skill sets to future needs, they could encounter operating challenges and increased costs. These challenges could include a lack of resources, loss of knowledge, and delays in skill development. Additionally, higher costs could result from the use of contractors to replace employees, loss of productivity, and safety incidents. Failing to train replacement employees adequately and to transfer internal knowledge and expertise could affect CMS Energy’s and Consumers’ ability to manage and operate their businesses. If CMS Energy and Consumers were unable to attract and retain an appropriately qualified workforce, their results of operations could be affected negatively.
Consumers may notUnplanned power plant outages could be able to obtain an adequate supply of coal or natural gas, which could limit its ability to operate its electric generation facilities or serve its natural gas customers.costly for Consumers.
Unforeseen maintenance of its electric generating capacity. While Consumers has coal supply and transportation contracts in place, there can be no assurance that the counterparties to these agreements will fulfill their obligations to supply coal to Consumers. The suppliers under the agreementsour power plants may experience financial or operational problems that inhibit their ability to fulfill their obligations to Consumers. In addition, suppliers under these agreements may not be required to supply coal to Consumers under certain circumstances,for many reasons, including catastrophic events such as fires, explosions, floods or other acts of God, equipment failure, operator error, or to comply with environmental or safety regulations. When unplanned maintenance work is required on power plants or other equipment, Consumers will not only incur unexpected maintenance expenses, but it may also have to make spot market purchases of replacement electricity that exceed Consumers’ costs of generation. Additionally, unplanned maintenance work may reduce the capacity credit Consumers receives from MISO and may cause Consumers to incur additional capacity costs in the event of a natural disaster.future years. If Consumers were unable to obtain its coal requirements under existing or future coal supply and transportation contracts, it may be required to purchase coal at higher
38
39
Changes in taxation as well as the inherent difficulty in quantifying potential tax effects of business decisions could arise from the MPSC’s adoptionnegatively impact CMS Energy’s and Consumers’ results of mechanisms to decouple revenues from electricity and gas sales. The MPSC’s adoption or future treatment of these mechanisms could impact future revenues.
CMS Energy and Consumers are required to sell electricitymake judgments regarding the potential tax effects of various financial transactions and results of operations in order to estimate their obligations to taxing authorities. The tax obligations include income, real estate, sales and use taxes, employment-related taxes, and ongoing issues related to these tax matters. The judgments include determining reserves for potential adverse outcomes regarding tax positions that have been taken and may be subject to challenge by the IRS and/or other taxing authorities. Unfavorable settlements of any of the issues related to these reserves at market-based rates. FailureCMS Energy or Consumers could have a material adverse effect on their liquidity, financial condition, and results of operations.
CMS Energy and Consumers are subject to changing tax laws. Increases in local, state, or federal tax rates or other changes in tax laws could have adverse impacts on their liquidity, financial condition, and results of operations.
CMS Energy and its subsidiaries, including Consumers and EnerBank, must comply with the Dodd-Frank Act and its related regulations, which are subject to change and could involve material costs or affect operations.
In 2010, the Dodd-Frank Act was passed into law. The Dodd-Frank Act is a sweeping piece of legislation, and the financial services industry is still assessing the impacts. Congress detailed some significant changes, but the Dodd-Frank Act leaves many details to be determined by regulation and further study. Regulations that are intended to implement the Dodd-Frank Act are being adopted by the appropriate agencies. The Dodd-Frank Act also created the Bureau of Consumer Financial Protection, which is part of the Federal Reserve and has been granted significant rule-making authority in the area of consumer financial products and services. The direction that the Bureau of Consumer Financial Protection will take, the regulations it will adopt, and its interpretation of existing laws and regulations are not yet fully known.
The Dodd-Frank Act added a new Section 13 to the Bank Holding Company Act. Known as the Volcker Rule, it generally restricts certain banking entities (such as EnerBank) and their subsidiaries or affiliates from engaging in proprietary trading activities and from owning equity in or sponsoring any private equity or hedge fund. The statutory effective date of the Volcker Rule was July 2012, but it is subject to certain transition periods and exceptions for “permitted activities.” In April 2012, the Federal Reserve Board issued a statement clarifying that banks and other financial institutions have until July 2014 to conform fully their activities and investments to the requirements. Under the statute, the activities of CMS Energy and Consumersits subsidiaries (including EnerBank) are not expected to obtain adequate ratesbe materially affected; however, they will be restricted from engaging in proprietary trading, investing in third-party hedge or private equity funds, and sponsoring these funds in the future unless CMS Energy qualifies for
an exemption from the rule. CMS Energy is studying the final regulations, which were issued in December 2013, but cannot predict the full impact of the Volcker Rule on CMS Energy’s or EnerBank’s operations or financial condition.
Furthermore, effective July 2011, all companies that directly or indirectly control an FDIC-insured bank are required to serve as a source of financial strength for that institution. As a result, CMS Energy could be called upon by the FDIC to infuse additional capital into EnerBank to the extent that EnerBank fails to satisfy its capital requirements. In addition, CMS Energy is contractually required (i) to make cash capital contributions to EnerBank in the event that EnerBank does not maintain required minimum capital ratios and (ii) to provide EnerBank financial support, in an amount and duration as may be necessary for EnerBank to meet the cash needs of its depositors and other operations. EnerBank has exceeded these requirements historically and exceeds them as of February 2014.
In addition, the Dodd-Frank Act potentially provides for regulation by the Commodity Futures Trading Commission of certain energy-related contracts. Although CMS Energy and its subsidiaries qualify for an end-user exception, these regulations could affect the ability of CMS Energy and its subsidiaries to participate in these markets and could add additional regulatory approvalsoversight over their contracting activities.
CMS Energy could be required to pay cash to certain security holders in connection with the optional conversion of their convertible securities.
CMS Energy has outstanding one series of cash-convertible securities, of which an aggregate principal amount of $172 million was outstanding at December 31, 2013. If the trading price of CMS Energy’s common stock exceeds a timely mannerspecified amount at the end of a particular fiscal quarter, then holders of these convertible securities will have the option to convert their securities in the following fiscal quarter, with the principal amount payable in cash by CMS Energy. Accordingly, if the trading price minimum is satisfied and security holders exercise their conversion rights, CMS Energy might be required to outlay a significant amount of cash to those security holders and recognize losses, which could have a material adverse effect on CMS Energy’s and Consumers’ liquidity financial condition, and results of operations.
CMS Energy’s and Consumers’ financial statements, including their reported earnings, could be significantly impacted by convergence with International Financial Reporting Standards.
The FASBFinancial Accounting Standards Board is expected to make broad changes to GAAP as part of an overall initiative to converge U.S. standards with International Financial Reporting Standards. These changes could have significant impacts on the financial statements of CMS Energy and Consumers. Also, the SEC ishas been considering incorporating International Financial Reporting Standards into the financial reporting system for U.S. registrants. A transition to International Financial Reporting Standards could significantly impact CMS Energy’s and Consumers’ financial results, since these standards differ from GAAP in many ways. One of the major differences is the lack of special accounting treatment for regulated activities under International Financial Reporting Standards, which could result in greater earnings volatility for CMS Energy and Consumers.
CMS Energy and Consumers are exposed to credit riskTable of those with whom they do business.Contents
40
None.
ITEM 2. PROPERTIES
Descriptions of CMS Energy’s and Consumers’ properties are found in the following sections of Item 1,1. Business, all of which are incorporated by reference in this Item 2:
·General, “CMS Energy”;
·General, “Consumers”;
·Business Segments, “Consumers Electric Utility – Electric Utility Properties”;
·Business Segments, “Consumers Gas Utility – Gas Utility Properties”; and
·Business Segments, “Enterprises Segment – Non-Utility Operations and Investments – Independent Power Production.”
ITEM 3. LEGAL PROCEEDINGS
For information regarding CMS Energy’s, Consumers’, and their subsidiaries’ significant pending administrative and judicial proceedings involving regulatory, operating, transactional, environmental, and other matters, see Item 8. Financial Statements and Supplementary Data, Notes to the Consolidated Financial Statements – Note 5,2, Regulatory Matters and Note 3, Contingencies and Commitments and Note 6, Regulatory Matters.
CMS Energy, Consumers, and certain of their subsidiaries and affiliates are also parties to routine lawsuits and administrative proceedings incidental to their businesses involving, for example, claims for personal injury and property damage, contractual matters, various taxes, and rates and licensing.
ITEM 4. REMOVED AND RESERVED
41
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
CMS EnergyE
CMS Energy’s common stock is traded on the New York Stock Exchange. Market prices for CMS Energy’s common stock and related security holder matters are contained in Item 7. MD&A and Item 8. Financial Statements and Supplementary Data, MD&A and Notes to the Consolidated Financial Statements – Note 22,20, Quarterly Financial and Common Stock Information (Unaudited), which are incorporated by reference herein. At February 10, 2011,January 9, 2014, the number of registered holders of CMS Energy’s common stock totaled 42,360,36,670, based on the number of record holders. Presented in the following table are CMS Energy’s dividends on its common stock:
| Per Share | ||||||||||||||||
| February | May | August | November | |||||||||||||
| 2010 | $ | 0.150 | $ | 0.150 | $ | 0.150 | $ | 0.210 | ||||||||
| 2009 | $ | 0.125 | $ | 0.125 | $ | 0.125 | $ | 0.125 | ||||||||
|
|
|
|
|
|
|
| Per Share |
|
Period |
| February |
| May |
| August |
| November |
|
2013 |
| $ 0.255 |
| $ 0.255 |
| $ 0.255 |
| $ 0.255 |
|
2012 |
| 0.240 |
| 0.240 |
| 0.240 |
| 0.240 |
|
Information regarding securities authorized for issuance under equity compensation plans is included in CMS Energy’s definitive proxy statement, which is incorporated by reference herein. For additional information regarding dividends and dividend restrictions, see Item 8. Financial Statements and Supplementary Data, Notes to the Consolidated Financial Statements – Note 7,4, Financings and Capitalization.
ConsumersC
Consumers’ common stock is privately held by its parent, CMS Energy, and does not trade in the public market. Presented in the following table are Consumers’ cash dividends on its common stock:
| In Millions | ||||||||||||||||
| February | May | August | November | |||||||||||||
| 2010 | $ | 114 | $ | 54 | $ | 91 | $ | 99 | ||||||||
| 2009 | $ | 72 | $ | 58 | $ | 103 | $ | 52 | ||||||||
|
|
|
|
|
|
|
| In Millions |
|
Period |
| February |
| May |
| August |
| November |
|
2013 |
| $ 93 |
| $ 101 |
| $ 106 |
| $ 106 |
|
2012 |
| 115 |
| 43 |
| 144 |
| 91 |
|
For additional information regarding dividends and dividend restrictions, see Item 8. Financial Statements and Supplementary Data, Notes to the Consolidated Financial Statements – Note 7,4, Financings and Capitalization.
Issuer Repurchases of Equity SecuritiesI
Presented in the following table are CMS Energy’s repurchases of equity securities for the three months ended December 31, 2010:
| Total Number of | Maximum Number of | |||||||||||||||
| Shares Purchased as | Shares that May Yet | |||||||||||||||
| Total Number of | Average | Part of Publicly | Be Purchased Under | |||||||||||||
| Shares Purchased | Price Paid | Announced Plans or | Publicly Announced | |||||||||||||
Period | (a) | per Share | Programs | Plans or Programs | ||||||||||||
| October 1, 2010 to October 31, 2010 | 2,071 | $ | 18.54 | — | — | |||||||||||
| November 1, 2010 to November 30, 2010 | — | — | — | — | ||||||||||||
| December 1, 2010 to December 31, 2010 | 1,861 | 18.62 | — | — | ||||||||||||
| Total | 3,932 | $ | 18.58 | — | — | |||||||||||
42
|
|
|
|
|
| Total Number of |
| Maximum Number of |
|
|
|
|
|
|
| Shares Purchased as |
| Shares That May Yet Be |
|
|
| Total Number |
| Average |
| Part of Publicly |
| Purchased Under Publicly |
|
|
| of Shares |
| Price Paid |
| Announced Plans or |
| Announced Plans or |
|
Period |
| Purchased1 |
| per Share |
| Programs |
| Programs |
|
October 1, 2013 to |
|
|
|
|
|
|
|
|
|
October 31, 2013 |
| 2,211 |
| $ 26.57 |
| - |
| - |
|
November 1, 2013 to |
|
|
|
|
|
|
|
|
|
November 30, 2013 |
| - |
| - |
| - |
| - |
|
December 1, 2013 to |
|
|
|
|
|
|
|
|
|
December 31, 2013 |
| - |
| - |
| - |
| - |
|
Total |
| 2,211 |
| $ 26.57 |
| - |
| - |
|
UNREGISTERED SALESOF EQUITY SECURITIES
None.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial information for CMS Energy and Consumers is contained in Item 8. Financial Statements and Supplementary Data, CMS Energy’s Selected Financial Information, which is incorporated by reference herein.
Consumers
Management’s discussion and analysis of financial condition and results of operations for CMS Energy and Consumers is contained in Item 8. Financial Statements and Supplementary Data, MD&A, which is incorporated by reference herein.
Consumers
Quantitative and qualitative disclosures about market risk for CMS Energy and Consumers are contained in Item 8. Financial Statements and Supplementary Data, MD&A – Critical Accounting Policies and Estimates, “Financial and Derivative Instruments and Market Risk Information,” which is incorporated by reference herein.
Consumers
43
Index to Financial | Page | |||
Selected Financial Information | ||||
48 | ||||
49 | ||||
50 | ||||
Consolidated Financial Statements | ||||
82 | ||||
92 | ||||
99 | ||||
Reports of Independent Registered Public Accounting | ||||
160 | ||||
44
161
45
46
| 2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||||||
| Operating revenue (in millions) | ($) | 6,432 | 6,205 | 6,807 | 6,451 | 6,117 | ||||||||||||||||||||||
| Income (loss) from equity method investees (in millions) | ($) | 11 | (2 | ) | 5 | 40 | 89 | |||||||||||||||||||||
| Income (loss) from continuing operations (in millions)(a) | ($) | 366 | 220 | 301 | (120 | ) | (242 | ) | ||||||||||||||||||||
| Income (loss) from discontinued operations (in millions) | ($) | (23 | ) | 20 | 1 | (110 | ) | 60 | ||||||||||||||||||||
| Net income (loss) available to common stockholders (in millions) | ($) | 324 | 218 | 284 | (234 | ) | (96 | ) | ||||||||||||||||||||
| Average common shares outstanding (in thousands) | 231,473 | 227,169 | 225,671 | 224,473 | 221,618 | |||||||||||||||||||||||
| Earnings (loss) from continuing operations per average common share | ||||||||||||||||||||||||||||
| CMS Energy — Basic | ($) | 1.50 | 0.87 | 1.25 | (0.65 | ) | (0.67 | ) | ||||||||||||||||||||
| - Diluted | ($) | 1.36 | 0.83 | 1.20 | (0.65 | ) | (0.67 | ) | ||||||||||||||||||||
| Earnings (loss) per average common share | ||||||||||||||||||||||||||||
| CMS Energy — Basic | ($) | 1.40 | 0.96 | 1.25 | (1.04 | ) | (0.43 | ) | ||||||||||||||||||||
| - Diluted | ($) | 1.28 | 0.91 | 1.20 | (1.04 | ) | (0.43 | ) | ||||||||||||||||||||
| Cash provided by operations (in millions) | ($) | 959 | 848 | 557 | 23 | 688 | ||||||||||||||||||||||
| Capital expenditures, excluding assets placed under capital lease (in millions) | ($) | 821 | 818 | 792 | 1,263 | 670 | ||||||||||||||||||||||
| Total assets (in millions) | ($) | 15,616 | 15,256 | 14,901 | 14,180 | 15,324 | ||||||||||||||||||||||
| Long-term debt, excluding current portion (in millions) | ($) | 6,448 | 5,895 | 6,015 | 5,533 | 6,338 | ||||||||||||||||||||||
| Non-current portion of capital and finance lease obligations (in millions) | ($) | 188 | 197 | 206 | 225 | 42 | ||||||||||||||||||||||
| Total preferred stock (in millions) | ($) | — | 239 | 243 | 250 | 261 | ||||||||||||||||||||||
| Cash dividends declared per common share | ($) | 0.66 | 0.50 | 0.36 | 0.20 | — | ||||||||||||||||||||||
| Market price of common stock at year-end | ($) | 18.60 | 15.66 | 10.11 | 17.38 | 16.70 | ||||||||||||||||||||||
| Book value per common share at year-end | ($) | 11.19 | 11.42 | 10.93 | 9.54 | 10.14 | ||||||||||||||||||||||
| Number of employees at year-end (full-time equivalents) | 7,822 | 8,039 | 7,970 | 7,898 | 8,640 | |||||||||||||||||||||||
Electric Utility Statistics | ||||||||||||||||||||||||||||
| Sales (billions of kWh) | 38 | 36 | 37 | 39 | 38 | |||||||||||||||||||||||
| Customers (in thousands) | 1,792 | 1,796 | 1,814 | 1,799 | 1,797 | |||||||||||||||||||||||
| Average sales rate per kWh | (¢) | 10.54 | 9.81 | 9.48 | 8.65 | 8.46 | ||||||||||||||||||||||
Gas Utility Statistics | ||||||||||||||||||||||||||||
| Sales and transportation deliveries (bcf) | 317 | 319 | 338 | 340 | 309 | |||||||||||||||||||||||
| Customers (in thousands)(b) | 1,711 | 1,708 | 1,713 | 1,710 | 1,714 | |||||||||||||||||||||||
| Average sales rate per mcf | ($) | 10.60 | 10.73 | 11.25 | 10.66 | 10.44 | ||||||||||||||||||||||
47
| ELECTED FINANCIAL INFORMATION |
| 2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
| Operating revenue (in millions) | ($) | 6,156 | 5,963 | 6,421 | 6,064 | 5,721 | ||||||||||||||||||
| Income from equity method investees (in millions) | ($) | — | — | — | — | 1 | ||||||||||||||||||
| Net income (in millions) | ($) | 434 | 293 | 364 | 312 | 186 | ||||||||||||||||||
| Net income available to common stockholder (in millions) | ($) | 432 | 291 | 362 | 310 | 184 | ||||||||||||||||||
| Cash provided by operations (in millions) | ($) | 910 | 922 | 873 | 440 | 474 | ||||||||||||||||||
| Capital expenditures, excluding assets placed under capital lease (in millions) | ($) | 815 | 811 | 789 | 1,258 | 646 | ||||||||||||||||||
| Total assets (in millions) | ($) | 14,839 | 14,622 | 14,246 | 13,401 | 12,845 | ||||||||||||||||||
| Long-term debt, excluding current portion (in millions) | ($) | 4,488 | 4,063 | 3,908 | 3,692 | 4,127 | ||||||||||||||||||
| Non-current portion of capital and finance lease obligations (in millions) | ($) | 188 | 197 | 206 | 225 | 42 | ||||||||||||||||||
| Total preferred stock (in millions) | ($) | 44 | 44 | 44 | 44 | 44 | ||||||||||||||||||
| Number of preferred stockholders at year-end | 1,496 | 1,531 | 1,584 | 1,641 | 1,728 | |||||||||||||||||||
| Number of employees at year-end (full-time equivalents) | 7,522 | 7,755 | 7,697 | 7,614 | 8,026 | |||||||||||||||||||
Electric Utility Statistics | ||||||||||||||||||||||||
| Sales (billions of kWh) | 38 | 36 | 37 | 39 | 38 | |||||||||||||||||||
| Customers (in thousands) | 1,792 | 1,796 | 1,814 | 1,799 | 1,797 | |||||||||||||||||||
| Average sales rate per kWh | (¢) | 10.54 | 9.81 | 9.48 | 8.65 | 8.46 | ||||||||||||||||||
Gas Utility Statistics | ||||||||||||||||||||||||
| Sales and transportation deliveries (bcf) | 317 | 319 | 338 | 340 | 309 | |||||||||||||||||||
| Customers (in thousands)(a) | 1,711 | 1,708 | 1,713 | 1,710 | 1,714 | |||||||||||||||||||
| Average sales rate per mcf | ($) | 10.60 | 10.73 | 11.25 | 10.66 | 10.44 | ||||||||||||||||||
CMSENERGY CORPORATION | ||
48
|
|
| 2013 |
| 2012 |
| 2011 |
| 2010 |
| 2009 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Operating revenue (in millions) |
| ($) | 6,566 |
| 6,253 |
| 6,503 |
| 6,432 |
| 6,205 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Income (loss) from equity method investees (in millions) |
| ($) | 13 |
| 17 |
| 9 |
| 11 |
| (2 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Income from continuing operations (in millions)1 |
| ($) | 454 |
| 377 |
| 415 |
| 366 |
| 220 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Income (loss) from discontinued operations (in millions) |
| ($) | - |
| 7 |
| 2 |
| (23 | ) | 20 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net income available to common stockholders (in millions) |
| ($) | 452 |
| 382 |
| 415 |
| 324 |
| 218 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Average common shares outstanding (in thousands) |
|
| 264,511 |
| 260,678 |
| 250,824 |
| 231,473 |
| 227,169 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Earnings from continuing operations per average common share |
|
|
|
|
|
|
|
|
|
|
|
| |
CMS Energy | - Basic |
| ($) | 1.71 |
| 1.43 |
| 1.65 |
| 1.50 |
| 0.87 |
|
| - Diluted |
| ($) | 1.66 |
| 1.39 |
| 1.57 |
| 1.36 |
| 0.83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Earnings per average common share |
|
|
|
|
|
|
|
|
|
|
|
| |
CMS Energy | - Basic |
| ($) | 1.71 |
| 1.46 |
| 1.66 |
| 1.40 |
| 0.96 |
|
| - Diluted |
| ($) | 1.66 |
| 1.42 |
| 1.58 |
| 1.28 |
| 0.91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cash provided by operations (in millions) |
| ($) | 1,421 |
| 1,241 |
| 1,169 |
| 959 |
| 848 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Capital expenditures, excluding assets placed under capital lease (in millions) |
| ($) | 1,325 |
| 1,227 |
| 882 |
| 821 |
| 818 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total assets (in millions) |
| ($) | 17,416 |
| 17,131 |
| 16,452 |
| 15,616 |
| 15,256 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Long-term debt, excluding current portion (in millions) |
| ($) | 7,101 |
| 6,710 |
| 6,040 |
| 6,448 |
| 5,895 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Non-current portion of capital leases and financing obligation (in millions) |
| ($) | 138 |
| 153 |
| 167 |
| 188 |
| 197 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total preferred stock (in millions) |
| ($) | - |
| - |
| - |
| - |
| 239 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cash dividends declared per common share |
| ($) | 1.02 |
| 0.96 |
| 0.84 |
| 0.66 |
| 0.50 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Market price of common stock at year-end |
| ($) | 26.77 |
| 24.38 |
| 22.08 |
| 18.60 |
| 15.66 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Book value per common share at year-end |
| ($) | 12.98 |
| 12.09 |
| 11.92 |
| 11.19 |
| 11.42 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total employees at year-end |
|
| 7,781 |
| 7,541 |
| 7,754 |
| 7,859 |
| 8,075 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Electric Utility Statistics |
|
|
|
|
|
|
|
|
|
|
|
| |
Sales (billions of kWh) |
|
| 37 |
| 38 |
| 38 |
| 38 |
| 36 |
| |
Customers (in thousands) |
|
| 1,793 |
| 1,786 |
| 1,791 |
| 1,792 |
| 1,796 |
| |
Average sales rate per kWh |
| (¢) | 11.52 |
| 10.94 |
| 10.80 |
| 10.54 |
| 9.81 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Gas Utility Statistics |
|
|
|
|
|
|
|
|
|
|
|
| |
Sales and transportation deliveries (bcf) |
|
| 352 |
| 329 |
| 337 |
| 317 |
| 319 |
| |
Customers (in thousands)2 |
|
| 1,724 |
| 1,715 |
| 1,713 |
| 1,711 |
| 1,708 |
| |
Average sales rate per mcf |
| ($) | 8.51 |
| 9.55 |
| 9.98 |
| 10.60 |
| 10.73 |
| |
2 Excludes off-system transportation customers.
CONSUMERS ENERGY COMPANY |
|
|
| 2013 |
| 2012 |
| 2011 |
| 2010 |
| 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue (in millions) |
| ($) | 6,321 |
| 6,013 |
| 6,253 |
| 6,156 |
| 5,963 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (in millions) |
| ($) | 534 |
| 439 |
| 467 |
| 434 |
| 293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholder (in millions) |
| ($) | 532 |
| 437 |
| 465 |
| 432 |
| 291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by operations (in millions) |
| ($) | 1,351 |
| 1,353 |
| 1,323 |
| 910 |
| 922 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures, excluding assets placed under capital lease (in millions) |
| ($) | 1,320 |
| 1,222 |
| 876 |
| 815 |
| 811 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets (in millions) |
| ($) | 16,179 |
| 16,275 |
| 15,662 |
| 14,839 |
| 14,622 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, excluding current portion (in millions) |
| ($) | 4,579 |
| 4,297 |
| 3,987 |
| 4,488 |
| 4,063 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current portion of capital leases and financing obligation (in millions) |
| ($) | 138 |
| 153 |
| 167 |
| 188 |
| 197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total preferred stock (in millions) |
| ($) | 37 |
| 44 |
| 44 |
| 44 |
| 44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of preferred stockholders at year-end |
|
| 1,248 |
| 1,378 |
| 1,428 |
| 1,496 |
| 1,531 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total employees at year-end |
|
| 7,435 |
| 7,221 |
| 7,452 |
| 7,551 |
| 7,787 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electric Utility Statistics |
|
|
|
|
|
|
|
|
|
|
|
|
Sales (billions of kWh) |
|
| 37 |
| 38 |
| 38 |
| 38 |
| 36 |
|
Customers (in thousands) |
|
| 1,793 |
| 1,786 |
| 1,791 |
| 1,792 |
| 1,796 |
|
Average sales rate per kWh |
| (¢) | 11.52 |
| 10.94 |
| 10.80 |
| 10.54 |
| 9.81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas Utility Statistics |
|
|
|
|
|
|
|
|
|
|
|
|
Sales and transportation deliveries (bcf) |
|
| 352 |
| 329 |
| 337 |
| 317 |
| 319 |
|
Customers (in thousands)1 |
|
| 1,724 |
| 1,715 |
| 1,713 |
| 1,711 |
| 1,708 |
|
Average sales rate per mcf |
| ($) | 8.51 |
| 9.55 |
| 9.98 |
| 10.60 |
| 10.73 |
|
1 Excludes off-system transportation customers.
CMS Energy Corporation
Consumers Energy Company
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This MD&A is a combined report of CMS Energy and Consumers.
EXECUTIVE OVERVIEW
CMS Energy is an energy company operating primarily in Michigan. It is the parent holding company of several subsidiaries, including Consumers, an electric and gas utility, and CMS Enterprises, primarily a domestic IPP.independent power producer. Consumers’ electric utility operations include the generation, purchase, distribution, and sale of electricity, and Consumers’ gas utility operations include the purchase, transmission, storage, distribution, and sale of natural gas. Consumers’ customer base consists of a mix of residential, commercial, and diversified industrial customers. CMS Enterprises, through its subsidiaries and equity investments, owns and operates power generation facilities.
CMS Energy and Consumers manage their businesses by the nature of services each provides. CMS Energy operates principally in three business segments: electric utility; gas utility; and enterprises, its non-utility investmentsoperations and operations.investments. Consumers operates principally in two business segments: electric utility and gas utility.
CMS Energy and Consumers earn revenue and generate cash from operations by providing electric and natural gas utility services; electric distribution and generation; gas transmission, storage, and distribution; and other energy-related services. Their businesses are affected primarily by:
·regulation and regulatory matters;
·economic conditions;
·weather;
·energy commodity prices;
·interest rates; and
·CMS Energy���s and Consumers’ securities’ credit ratings.
CMS Energy’s “Growing Forward” business strategy has emphasizedemphasizes the following key elements:elements depicted below:
Utility Investment
Accountability is a comprehensive energy resource plan to meet Consumers’ projected short-term and long-term electric power requirements with energy efficiency, demand management, expanded use of renewable energy, development of new power plants, pursuit of
49
50
In October 2013, Consumers released its first-ever accountability report. The report provides an overview of Consumers’ efforts to continue meeting Michigan’s energy needs safely and efficiently, and highlights Consumers’ commitment to Michigan businesses, its corporate citizenship, and its role in reducing the state’s air emissions.
SafetyS
The safety and security of employees, customers, and the general public remainremains 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.
51
CUSTOMER VALUE
Consumers is undertaking a number of initiatives that reflect its intensified customer focus. Consumers’ planned investments in reliability are aimed at improving safety, reducing customer outage frequency, reducing repetitive outages, and increasing customer satisfaction. Also, in order to minimize increases in customer base rates, Consumers has undertaken several additional initiatives to reduce costs. These initiatives, together with Consumers’ plans to accelerate further cost reductions, should allow Consumers to avoid increasing electric and gas base rates through 2014. Consumers may reconsider this expectation should its assumptions change regarding the economy or other matters.
Consumers has also worked to lower commodity costs for its customers. Consumers’ gas commodity costs have declined by 44 percent over the last five years, due in part to Consumers’ improvements to its gas infrastructure and optimization of its gas purchasing and storage strategy. These savings are all passed on to customers.
Financial PerformanceUTILITY INVESTMENT
Consumers expects to make capital investments of about $7 billion from 2014 through 2018, as presented in 2010the following illustration:
Consumers has limited its capital investment program to those investments it believes are needed to provide safe, reliable, and Beyondefficient service to its customers. Consumers’ capital investment program is expected to result in annual rate base growth of five to seven percent while allowing Consumers to maintain sustainable customer base rate increases (excluding PSCR and GCR charges) at or below the rate of inflation.
Among the key components of Consumers’ investment program are projects that will enhance customer value. Consumers’ planned base capital investments of $3.5 billion represent projects to maintain Consumers’ system and comprise $2.1 billion at the electric utility to preserve reliability and capacity and $1.4 billion at the gas utility to sustain deliverability and enhance pipeline integrity. An additional $1.9 billion of planned reliability investments at Consumers are aimed at reducing outages and improving customer satisfaction; these investments comprise $1.0 billion at the electric utility to strengthen circuits and substations, replace poles, and upgrade the Ludington pumped-storage plant and $0.9 billion at the gas utility to replace mains and enhance transmission and storage systems. Consumers also expects to spend $0.8 billion on environmental investments needed to comply with state and federal laws and regulations.
Consumers’ Smart Energy program, with an estimated total project capital cost of $0.8 billion, also represents a major capital investment. The full-scale deployment of advanced metering infrastructure began in 2012 and is planned to continue through 2017. Consumers has spent $0.3 billion through 2013 on its Smart Energy program, and expects to spend an additional $0.5 billion, following a phased approach, from 2014 through 2017.
Renewable energy projects are another major component of Consumers’ planned capital investments. Consumers expects to spend $0.2 billion on renewable energy investments, under an MPSC-approved
renewable energy plan, from 2014 through 2018. The 2008 Energy Law requires that at least ten percent of Consumers’ electric sales volume come from renewable energy sources by 2015, and it includes requirements for specific capacity additions. Consumers has historically included renewable resources as part of its portfolio, with about eight percent of its present power supply coming from such renewable sources as hydropower, landfill gas, biomass, wind, anaerobic digestion, and solar.
In December 2013, Consumers signed an agreement to purchase a 540-MW gas-fueled electric generating plant located in Jackson, Michigan for $155 million from AlphaGen Power LLC and DPC Juniper, LLC, affiliates of JPMorgan Chase & Co. Consumers expects to close the purchase, which is subject to MPSC, FERC, and other approvals, by January 2016. In January 2014, as a result of this planned purchase, Consumers announced plans to defer the development of its proposed 700-MW gas-fueled electric generating plant at its Thetford complex in Genesee County, Michigan, which Consumers estimated would have cost $700 million.
R
Regulatory matters are a key aspect of CMS Energy’s and Consumers’ businesses, particularly Consumers’ rate cases and regulatory proceedings before the MPSC. In 2010,July 2013, Michigan Governor Rick Snyder appointed Sally Talberg to serve on the three-member MPSC for a six-year term, replacing Orjiakor Isiogu. Ms. Talberg has served in various energy-related consulting, management, and public service roles during her career. She represents political independents on the MPSC. Other important regulatory events and developments are summarized below.
·Electric Rate Case: Consumers filed a general electric rate case with the MPSC in September 2012, seeking an annual rate increase of $148 million. In March 2013, Consumers self-implemented an annual rate increase of $110 million, subject to refund with interest. The MPSC approved a partial settlement agreement in May 2013, authorizing an annual rate increase of $89 million, based on a 10.3 percent authorized rate of return on equity. In February 2014, the MPSC found that total revenues collected during self-implementation did not exceed those that would have been collected under final rates and that no refund was required.
·Income Tax Benefits Accounting Order: In September 2013, the MPSC issued an order approving, with modification, Consumers’ request 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. The order authorized Consumers to implement a regulatory treatment beginning in January 2014 that will allow Consumers to return $211 million of income tax benefits over five years to electric customers and $264 million of income tax benefits over 12 years to gas customers. Consumers estimates that this new treatment will result in an annual benefit of $42 million to electric customers and $22 million to gas customers.
·Securitization Order: In September 2013, Consumers filed an application with the MPSC requesting an alternative method to recover its investment in seven smaller coal-fueled electric generating units and three smaller gas-fueled electric generating units. In December 2013, the MPSC approved Consumers’ application, with modification, authorizing Consumers to proceed, at its sole discretion, with the sale of up to $389 million in Securitization bonds through a newly formed subsidiary. Under Michigan law, electric utilities are permitted to use highly rated, low-cost Securitization bonds to finance the recovery of qualified costs. The qualified costs that the MPSC authorized Consumers to securitize are principally the remaining book value of the ten units described above. Subject to a successful Securitization transaction, Consumers plans to retire these ten units by April 2016.
Consumers expects to proceed with the Securitization financing and issue Securitization bonds in 2014, subject to market conditions. Upon issuance of the Securitization bonds, Consumers will
adjust its retail electric base rates to exclude the revenue requirement associated with these costs. Consumers will then collect a surcharge to pay the principal and interest on the Securitization bonds, as well as all related costs. Consumers estimates that employing this recovery mechanism in place of existing ratemaking treatment will provide initial annual cost savings to full-service customers of $15 million.
·Gas Revenue Decoupling Mechanism: The gas revenue decoupling mechanism, authorized by the MPSC in its 2009 order in Consumers’ gas rate case and extended through April 2012, allowed Consumers to adjust future gas rates to the degree that actual average weather-adjusted sales per customer differed from the rate order. In August 2012, Consumers filed its final reconciliation of the gas revenue decoupling mechanism, requesting recovery of $17 million from customers for the period June 2011 through April 2012. In December 2013, the MPSC approved Consumers’ reconciliation for the full amount of its request and authorized recovery over four months beginning in January 2014.
The 2008 Energy Law limits alternative electric supply to ten percent of Consumers’ weather-adjusted retail sales of the preceding calendar year. At December 31, 2013, Consumers’ electric deliveries under the ROA program were at the ten-percent limit. Bills have been introduced to the Michigan House of Representatives and the Michigan Senate to raise or remove the ROA limit. The House bill also proposes to deregulate electric generation service in Michigan within two years. Consumers is unable to predict the outcome of these legislative proposals. In addition, the Michigan legislature has conducted hearings on the subject of energy competition. If the ROA limit were increased or if electric generation service in Michigan were deregulated, it could have a material adverse effect on Consumers’ financial results and operations.
Environmental regulation is another area of importance for CMS Energy and Consumers, and they are monitoring numerous legislative and regulatory initiatives, including initiatives to regulate greenhouse gases, and related litigation. CMS Energy and Consumers believe that environmental laws and regulations related to their operations will continue to become more stringent and require them to make additional significant capital expenditures for emissions control equipment, CCR disposal, cooling water intake equipment, effluent treatment, and PCB remediation. Present and reasonably anticipated state and federal environmental statutes and regulations, including but not limited to the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, and CERCLA, will continue to have a material effect on CMS Energy and Consumers.
FINANCIAL PERFORMANCE IN 2013 AND BEYOND
In 2013, CMS Energy’s net income available to common stockholders was $324$452 million, and diluted earnings per shareEPS were $1.28.$1.66. This compares with net income available to common stockholders of $218$382 million and diluted earnings per shareEPS of $0.91$1.42 in 2009.
Consumers’ utility operations are seasonal. The consumption of electric energy typically increases in the Big Rock decommissioning refund order, increased deliveriessummer months, due primarily to the use of electricity,air conditioners and an insurance settlement related to a previously sold investment.
CMS Energy’s viewEnergy and Consumers believe that economic conditions in Michigan have stabilized. Although Michigan’s economy continues to be affected by the recession and its impact on the state’s automotive industry, by high unemployment rates, and by a modestly shrinking population, there are indications that the recession is easing in Michigan.improving. Consumers expects its electric salesdeliveries to increase annually by about 1.50.5 to 1.0 percent annuallyon average through 2016,2018, driven largely by the continued rise in industrial production. Excluding the impacts of energy efficiency
programs, Consumers expects its electric deliveries to increase by about 1.5 to 2.0 percent annually through 2018. Consumers is projecting that its gas salesdeliveries will declineremain stable through 2018. This outlook reflects growth in gas demand offset by about one percent annually through 2016, due largely to energy efficiency and conservation.
As Consumers continuesseeks to seekcontinue to receive fair and timely regulatory treatment, delivering customer value will remain a key strategic priority. To keep costs down for its utility customers,In order to minimize increases in customer base rates, Consumers has set aggressive goals forto achieve further annual productivity improvements. Additionally, Consumers will strive to give priority to capital investments that increase customer value or lower costs.
Consumers expects to continue to have sufficient capacity to fund its investment-based growth plans. CMS Energy also expects its sources of liquidity to remain sufficient to meet its cash requirements. CMS Energy and Consumers will continue to monitor developments in the financial and credit markets, as well as government policy responses to those developments, for potential implications for their businesses and their future financial needs.
RESULTS OF OPERATIONS
CMS Energy’s Consolidated Results of Operations
Years Ended December 31 | 2010 | 2009 | 2008 | |||||||||
| In Millions (except for Per Share Amounts) | ||||||||||||
| Net Income Available to Common Stockholders | $ | 324 | $ | 218 | $ | 284 | ||||||
| Basic Earnings Per Share | $ | 1.40 | $ | 0.96 | $ | 1.25 | ||||||
| Diluted Earnings Per Share | $ | 1.28 | $ | 0.91 | $ | 1.20 | ||||||
52
|
| In Millions, Except Per Share Amounts |
| |||||||
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
| |||
Net Income Available to Common Stockholders |
| $ | 452 |
| $ | 382 |
| $ | 415 |
|
Basic Earnings Per Share |
| $ | 1.71 |
| $ | 1.46 |
| $ | 1.66 |
|
Diluted Earnings Per Share |
| $ | 1.66 |
| $ | 1.42 |
| $ | 1.58 |
|
|
|
|
|
|
|
|
|
|
|
|
| In Millions |
| ||||||
Years Ended December 31 |
| 2013 |
| 2012 |
| Change |
| 2012 |
| 2011 |
| Change |
| ||||||
Electric utility |
| $ | 363 |
| $ | 325 |
| $ | 38 |
| $ | 325 |
| $ | 333 |
| $ | (8 | ) |
Gas utility |
| 168 |
| 110 |
| 58 |
| 110 |
| 130 |
| (20 | ) | ||||||
Enterprises |
| 2 |
| 16 |
| (14 | ) | 16 |
| 32 |
| (16 | ) | ||||||
Corporate interest and other |
| (81 | ) | (76 | ) | (5 | ) | (76 | ) | (82 | ) | 6 |
| ||||||
Discontinued operations |
| — |
| 7 |
| (7 | ) | 7 |
| 2 |
| 5 |
| ||||||
Net Income Available to Common Stockholders |
| $ | 452 |
| $ | 382 |
| $ | 70 |
| $ | 382 |
| $ | 415 |
| $ | (33 | ) |
Years Ended December 31 | 2010 | 2009 | Change | 2009 | 2008 | Change | ||||||||||||||||||
| In Millions | ||||||||||||||||||||||||
| Electric Utility | $ | 303 | $ | 194 | $ | 109 | $ | 194 | $ | 271 | $ | (77 | ) | |||||||||||
| Gas Utility | 127 | 96 | 31 | 96 | 89 | 7 | ||||||||||||||||||
| Enterprises | 36 | (7 | ) | 43 | (7 | ) | 13 | (20 | ) | |||||||||||||||
| Corporate Interest and Other | (119 | ) | (85 | ) | (34 | ) | (85 | ) | (90 | ) | 5 | |||||||||||||
| Discontinued Operations | (23 | ) | 20 | (43 | ) | 20 | 1 | 19 | ||||||||||||||||
| Net Income Available to Common Stockholders | $ | 324 | $ | 218 | $ | 106 | $ | 218 | $ | 284 | $ | (66 | ) | |||||||||||
In Millions | ||||||||
Reasons for the change | 2013 better/(worse) than 2012 |
| ||||||
Gas sales |
|
| $ | 67 |
|
|
|
|
Electric sales |
|
|
| (9 | ) |
|
|
|
Electric and gas rate orders |
|
|
| 57 |
|
|
|
|
Lower employee benefit costs, primarily OPEB |
|
|
| 17 |
|
|
|
|
Absence of contributions related to a 2012 Michigan ballot proposal |
|
|
| 11 |
|
|
|
|
Depreciation and property tax |
|
|
| (41 | ) |
|
|
|
Distribution and restoration cost |
|
|
| (22 | ) |
|
|
|
Absence of 2012 recovery of development costs related to cancelled coal-fueled plant |
|
|
| (9 | ) |
|
|
|
Gas decoupling |
|
|
| (7 | ) |
|
|
|
Absence of 2012 gain on DOE settlement |
|
|
| (7 | ) |
|
|
|
Other |
|
|
| (4 | ) | $ | 53 |
|
|
|
|
|
|
|
|
|
|
Higher income tax expense and lower subsidiary earnings of enterprises segment |
|
|
|
|
|
| (13 | ) |
Higher corporate fixed charges and other, offset by higher EnerBank earnings |
|
|
|
|
|
| (5 | ) |
Absence of 2012 charge to write off electric decoupling regulatory asset |
|
|
|
|
|
| 36 |
|
Absence of voluntary separation plan cost in 2012 |
|
|
|
|
|
| 7 |
|
Other, including the absence of the elimination, in 2012, of a liability associated with a prior asset sale |
|
|
|
|
|
| (8 | ) |
Total change |
|
|
|
|
| $ | 70 |
|
| 2010 Over/(Under) 2009 | ||||||||||||
| (In Millions) | ||||||||||||
| Electric and gas rate orders | $ | 90 | ||||||||||
| Electric sales: | ||||||||||||
| Weather | $ | 52 | ||||||||||
| Customer shift to energy-only rates and to ROA | (36 | ) | ||||||||||
| Decoupling benefit | 11 | 27 | ||||||||||
| Gas sales, primarily weather | (14 | ) | ||||||||||
| 2009 net benefits, primarily asset sale gain and tax credit | (17 | ) | ||||||||||
| Write-off of proposed coal-fueled plant cost | (14 | ) | ||||||||||
| Other, mainly depreciation | (5 | ) | $ | 67 | ||||||||
| Subsidiary earnings of enterprises segment | 13 | |||||||||||
| Cost of debt retirements and preferred stock redemptions, net | (20 | ) | ||||||||||
| Interest expense | (9 | ) | ||||||||||
| Other, mainly tax adjustments | (6 | ) | (35 | ) | ||||||||
| 2009 Big Rock decommissioning refund | 79 | |||||||||||
| Insurance settlement recovery | 31 | |||||||||||
| 2009 gain on indemnity expiration | (31 | ) | ||||||||||
| Other, including increase in Bay Harbor environmental liability | (18 | ) | 61 | |||||||||
| Total change | $ | 106 | ||||||||||
Presented in the following table are specific after-tax changes to net income available to common stockholders for 20092012 versus 2008:
| 2009 Over/(Under) 2008 | ||||||||||||
| (In Millions) | ||||||||||||
| Electric and gas rate orders | $ | 139 | ||||||||||
| Electric and gas sales: | ||||||||||||
| Weather | $ | (34 | ) | |||||||||
| Lower deliveries, mainly economic conditions | (14 | ) | (48 | ) | ||||||||
| 2008 net benefits, primarily sulfur dioxide credits | (23 | ) | ||||||||||
| Plant maintenance expense | (20 | ) | ||||||||||
| Pension and OPEB expenses | (19 | ) | ||||||||||
| Forestry and tree trimming costs | (12 | ) | ||||||||||
| Other, mainly higher property tax and interest expense | (19 | ) | $ | (2 | ) | |||||||
| Subsidiary earnings of enterprises segment | 5 | |||||||||||
| Gain on early retirement of debt | 7 | |||||||||||
| Other, mainly tax adjustments | 3 | 10 | ||||||||||
| Big Rock decommissioning refund | (79 | ) | ||||||||||
| Increase in Bay Harbor environmental liability | (22 | ) | ||||||||||
| Gain on indemnity expiration | 31 | |||||||||||
| Other | (9 | ) | (79 | ) | ||||||||
| Total change | $ | (66 | ) | |||||||||
53
In Millions | ||||||||
Reasons for the change | 2012 better/(worse) than 2011 |
| ||||||
Electric sales |
|
| $ | 19 |
|
|
|
|
Gas sales |
|
|
| (33 | ) |
|
|
|
Electric and gas rate orders |
|
|
| 90 |
|
|
|
|
Recovery of development costs related to cancelled coal-fueled plant |
|
|
| 9 |
|
|
|
|
Depreciation and property tax |
|
|
| (31 | ) |
|
|
|
Operating and maintenance expenses and expenses related to a 2012 Michigan ballot proposal |
|
|
| (12 | ) |
|
|
|
Other regulatory impacts (absence of electric decoupling, offset partially by a gain on DOE settlement) |
|
|
| (13 | ) |
|
|
|
Other |
|
|
| (13 | ) | $ | 16 |
|
|
|
|
|
|
|
|
|
|
Income tax benefits and higher subsidiary earnings of enterprises segment |
|
|
|
|
|
| 9 |
|
Lower corporate fixed charges, higher EnerBank earnings, and other |
|
|
|
|
|
| 10 |
|
Charge to write off electric decoupling regulatory asset |
|
|
|
|
|
| (36 | ) |
Absence of tax benefit related to MCIT enactment in 2011 |
|
|
|
|
|
| (32 | ) |
Total change |
|
|
|
|
| $ | (33 | ) |
CONSUMERS ELECTRIC UTILITY RESULTS OF OPERATIONS
| In Millions |
| |||||||||||||
Years Ended December 31 | 2013 | 2012 | Change |
|
| 2012 | 2011 | Change |
| ||||||
Net Income Available to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stockholders | $ | 363 | $ | 325 | $ | 38 |
|
| $ | 325 | $ | 333 | $ | (8 | ) |
Reasons for the change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electric deliveries and rate increases |
|
|
|
| $ | 95 |
|
|
|
|
|
| $ | 81 |
|
Power supply costs and related revenue |
|
|
|
|
| (1 | ) |
|
|
|
|
|
| 2 |
|
Other income, net of expenses |
|
|
|
|
| 15 |
|
|
|
|
|
|
| (16 | ) |
Maintenance and other operating expenses |
|
|
|
|
| (24 | ) |
|
|
|
|
|
| 5 |
|
Depreciation and amortization |
|
|
|
|
| (25 | ) |
|
|
|
|
|
| (47 | ) |
General taxes |
|
|
|
|
| (5 | ) |
|
|
|
|
|
| (10 | ) |
Interest charges |
|
|
|
|
| (1 | ) |
|
|
|
|
|
| 12 |
|
Income taxes |
|
|
|
|
| (16 | ) |
|
|
|
|
|
| (35 | ) |
Total change |
|
|
|
| $ | 38 |
|
|
|
|
|
| $ | (8 | ) |
Following is a discussion of Operations
Years Ended December 31 | 2010 | 2009 | Change | 2009 | 2008 | Change | ||||||||||||||||||
| In Millions | ||||||||||||||||||||||||
| Net Income Available to Common Stockholders | $ | 303 | $ | 194 | $ | 109 | $ | 194 | $ | 271 | $ | (77 | ) | |||||||||||
| Reasons for the change: | ||||||||||||||||||||||||
| Electric deliveries and rate increases | $ | 266 | $ | (6 | ) | |||||||||||||||||||
| Power supply costs and related revenue | (7 | ) | (1 | ) | ||||||||||||||||||||
| Other income, net of expenses | (27 | ) | 14 | |||||||||||||||||||||
| Maintenance and other operating expenses | (59 | ) | (77 | ) | ||||||||||||||||||||
| Depreciation and amortization | (9 | ) | (2 | ) | ||||||||||||||||||||
| General taxes | 2 | (10 | ) | |||||||||||||||||||||
| Interest charges | 23 | (42 | ) | |||||||||||||||||||||
| Income taxes | (80 | ) | 47 | |||||||||||||||||||||
| Total change | $ | 109 | $ | (77 | ) | |||||||||||||||||||
Electric deliveries and rate increases: For 2010,2013, electric delivery revenues increased $266$95 million compared with 2009.2012. This variance included $84increase reflected a $64 million associated with favorable weather in 2010, offset partially by $40 million of decreased demand revenues and $19 million from lower customer usage. Additionally, revenues increased $32 million due to surcharges from MPSC orders allowing recovery of retirement benefit expenses, and $100 million from authorized rate increases in November 2010 and November 2009. Revenues also increased $99 million due to the absence of a refund ordered in 2009 related to the Big Rock decommissioning case. For more details regarding the Big Rock decommissioning order, see Note 6, Regulatory Matters. Other miscellaneous revenue increases totaled $10 million. Overall, deliveries to end-use customers were 37.7 billion kWh in 2010, an increase of 1.9 billion kWh or 5.3 percent compared with 2009.
54
Years Ended December 31 | 2010 | 2009 | Change | 2009 | 2008 | Change | ||||||||||||||||||
| In Millions | ||||||||||||||||||||||||
| Net Income Available to Common Stockholders | $ | 127 | $ | 96 | $ | 31 | $ | 96 | $ | 89 | $ | 7 | ||||||||||||
| Reasons for the change: | ||||||||||||||||||||||||
| Gas deliveries and rate increases | $ | 60 | $ | 29 | ||||||||||||||||||||
| Other income, net of expenses | (2 | ) | 13 | |||||||||||||||||||||
| Maintenance and other operating expenses | (7 | ) | (32 | ) | ||||||||||||||||||||
| Depreciation and amortization | (4 | ) | 18 | |||||||||||||||||||||
| General taxes | 2 | (4 | ) | |||||||||||||||||||||
| Interest charges | (7 | ) | (5 | ) | ||||||||||||||||||||
| Income taxes | (11 | ) | (12 | ) | ||||||||||||||||||||
| Total change | $ | 31 | $ | 7 | ||||||||||||||||||||
For 2009, gas2012, electric delivery revenues increased $29$81 million compared with 2008,2011. This increase was due to additional revenues of $32$106 million resulting from a June 2012 rate increase that Consumers self-
implemented in December 2011, $19 million from an authorized ratehigher deliveries in 2012, and a $46 million increase in December 2008other revenues, primarily from energy optimization and a self-implemented rate increase in November 2009. In addition, surcharge and other miscellaneous revenues increased $28 million.renewable energy programs. These increases were offset partially by $10a $59 million associated with unfavorable weathercharge to write off Consumers’ electric decoupling mechanism regulatory asset, and the absence, in 2009 and $212012, of $31 million due to lower customer usage. Gas deliveries, including miscellaneous transportationof electric decoupling revenues recognized in 2011. Deliveries to end-use customers, excluding deliveries to Consumers’ largest customer, which is on an economic development rate, were 284.3 bcf35.4 billion kWh in 2009, a decrease of 19.4 bcf or 6.4 percent compared with 2008.
Other income, net of expenses: Other income in 2010 was not materially different from For 2013, other income, in 2009.
Maintenance and other operating expenses: For 2010,2013, maintenance and other operating expenses increased $7$24 million compared with 20092012. This change reflected a $51 million increase in service restoration costs, less $16 million of estimated insurance proceeds, associated with severe storms that occurred in November and December 2013. Additionally, expenses were higher due primarily to energy optimization program costs.
For 2009,2012, maintenance and other operating expenses increased $32decreased $5 million compared with 2008, due primarily to2011. This decrease reflected the authorized recovery of $14 million associated with Consumers’ cancelled coal-fueled plant, an $11 million decrease in service restoration costs, a $12 million benefit related to Consumers’ settlement with the DOE, and an $8 million decrease in uncollectible accounts expense. These decreases were offset partially by an $18 million increase in energy optimization program costs, a $14 million increase in other operating expenses, including higher costs related to system reliability, and higher benefit expenses of $12 million.
Depreciation and amortization: For 2010,2013, depreciation and amortization expense increased $25 million compared with 2012. This increase was due primarily to increased plant in service and an increase in depreciation rates authorized in a June 2012 rate order, offset partially by lower amortization expense on certain regulatory assets.
For 2012, depreciation and amortization expense increased $47 million compared with 2011, due primarily to increased plant in service and an increase in depreciation rates authorized in a June 2012 rate order.
General Taxes: For 2013, general taxes increased $5 million compared with 2012, due primarily to increased property taxes, reflecting higher capital spending.
For 2012, general taxes increased $10 million compared with 2011, due primarily to the absence, in 2012, of a favorable outcome to a Michigan single business tax audit in 2011.
Interest Charges: For 2012, interest charges decreased $12 million compared with 2011, due to lower average debt levels and lower average interest rates in 2012.
Income taxes: For 2013, income taxes increased $16 million compared with 2012, primarily reflecting higher electric utility earnings offset partially by the absence, in 2013, of non-deductible contributions related to a 2012 Michigan ballot proposal.
For 2012, income taxes increased $35 million compared with 2011. This increase was due to higher electric utility earnings, a change from the MBT to the MCIT in January 2012, and the absence, in 2012, of a $4 million benefit related to the Medicare Part D subsidy.
CONSUMERS GAS UTILITY RESULTS OF OPERATIONS
|
|
|
|
|
|
| In Millions |
| |||||||||||
Years Ended December 31 | 2013 | 2012 | Change |
| 2012 | 2011 | Change |
| |||||||||||
Net Income Available to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stockholders |
| $ | 168 |
| $ | 110 | $ | 58 |
|
| $ | 110 |
| $ | 130 |
| $ | (20 | ) |
Reasons for the change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas deliveries and rate increases |
|
|
|
|
|
| $ | 89 |
|
|
|
|
|
|
|
| $ | (29 | ) |
Other income, net of expenses |
|
|
|
|
|
|
| (2 | ) |
|
|
|
|
|
|
|
| (2 | ) |
Maintenance and other operating expenses |
| 11 |
|
|
|
|
|
|
|
|
| 8 |
| ||||||
Depreciation and amortization |
|
|
|
|
|
|
| (4 | ) |
|
|
|
|
|
|
|
| (4 | ) |
General taxes |
|
|
|
|
|
|
| (1 | ) |
|
|
|
|
|
|
|
| (7 | ) |
Interest charges |
|
|
|
|
|
|
| (1 | ) |
|
|
|
|
|
|
|
| 8 |
|
Income taxes |
|
|
|
|
|
|
| (34 | ) |
|
|
|
|
|
|
|
| 6 |
|
Total change |
|
|
|
|
|
| $ | 58 |
|
|
|
|
|
|
|
| $ | (20 | ) |
Following is a discussion of significant changes to net income available to common stockholders for 2013 versus 2012 and for 2012 versus 2011.
Gas deliveries and rate increases: For 2013, gas delivery revenues increased $89 million compared with 2012. This increase reflected an $82 million benefit from higher customer deliveries, due primarily to colder weather in 2013, offset partially by the impact on 2012 revenues of the gas revenue decoupling mechanism. Additionally, revenue increased $7 million due to a June 2012 rate increase that Consumers self-implemented in March 2012. Deliveries to end-use customers were 307 bcf in 2013 and 259 bcf in 2012.
For 2012, gas delivery revenues decreased $29 million compared with 2011. This decrease reflected a $43 million reduction resulting from lower customer deliveries, due primarily to milder weather in early 2012, and a $5 million decrease in other revenues. These decreases were offset partially by $19 million of additional revenues from rate increases. Gas deliveries, including transportation to end-use customers, were 259 bcf in 2012 and 287 bcf in 2011.
Maintenance and other operating expenses: For 2013, maintenance and other operating expenses decreased $11 million compared with 2012. This decrease was due to a $10 million reduction in OPEB cost resulting from OPEB Plan changes adopted in July 2013, and a $5 million reduction in OPEB cost due to favorable OPEB Plan performance. These decreases were offset partially by a $4 million increase in other operating expenses.
For 2012, maintenance and other operating expenses decreased $8 million compared with 2011. This decrease was due to an $8 million reduction in uncollectible accounts expense and a $4 million reduction in other operating expenses, offset partially by a $4 million increase associated with voluntary separation program expenses.
Depreciation and amortization: For 2013, depreciation and amortization expense increased $4 million compared with 2009, due primarily to increased plant in service. For 2009,2012, and for 2012, depreciation and amortization expense decreased $18increased $4 million compared with 2008 due to the December 2008 gas rate order, which reduced depreciation expense.
Years Ended December 31 | 2010 | 2009 | Change | 2009 | 2008 | Change | ||||||||||||||||||
| In Millions | ||||||||||||||||||||||||
| Net Income (Loss) Available to Common Stockholders | $ | 36 | $ | (7 | ) | $ | 43 | $ | (7 | ) | $ | 13 | $ | (20 | ) | |||||||||
55
Interest Charges: For 2012, interest charges decreased $8 million compared with 2011, due to lower average debt levels and lower average interest rates in 2012.
Income taxes: For 2013, income taxes increased $34 million compared with 2012, due primarily to higher gas utility earnings.
For 2012, income taxes decreased $6 million compared with 2011, due primarily to lower gas utility earnings offset partially by the absence, in 2012, of a $9$2 million tax benefit related to the Michigan Business Tax. Additionally,Medicare Part D subsidy.
ENTERPRISES RESULTS OF OPERATIONS
|
|
|
|
|
|
| In Millions |
| ||||||||||||
Years Ended December 31 | 2013 | 2012 | Change |
| 2012 | 2011 | Change |
| ||||||||||||
Net Income Available to Common Stockholders |
| $ | 2 |
| $ | 16 |
| $ | (14 | ) |
| $ | 16 |
| $ | 32 |
| $ | (16 | ) |
For 2013, net income increasedof the enterprises segment decreased $14 million compared with 2012. This decrease was attributable to the absence, in 2013, of $6 million of tax benefits in 2012 due primarily to law changes related to Medicare Part D, $4 million of additional tax expense in 2013 due to OPEB Plan changes adopted in July 2013, and $4 million in higher gas and power salesafter-tax expenses due primarily to the absence in 2013 of a 2012 insurance settlement.
For 2012, net income of the enterprises segment decreased $16 million compared with 2011, due to the absence, in 2012, of a $28 million income tax benefit resulting from the enactment of the MCIT in May 2011, offset partially by increased maintenance and other operating expenses. These increases were offset by a $3$6 million decrease associated with Bay Harbor; in 2010, the enterprises segment recorded a $25 million after-tax increase in the environmental remediation liability associated with Bay Harbor, compared with a $22 million after-tax increase in 2009. For more details regarding Bay Harbor, see Note 5, Contingencies and Commitments.
For further details about the environmental remediation liability associated with Bay Harbor.
Corporate Interest and Other Results of OperationsC
Years Ended December 31 | 2010 | 2009 | Change | 2009 | 2008 | Change | ||||||||||||||||||
| In Millions | ||||||||||||||||||||||||
| Net Loss Available to Common Stockholders | $ | (119 | ) | $ | (85 | ) | $ | (34 | ) | $ | (85 | ) | $ | (90 | ) | $ | 5 | |||||||
|
|
|
|
|
|
| In Millions |
| ||||||||||||
Years Ended December 31 | 2013 | 2012 | Change |
| 2012 | 2011 | Change |
| ||||||||||||
Net Income (Reduction) Available to Common Stockholders |
| $ | (81 | ) | $ | (76 | ) | $ | (5 | ) |
| $ | (76 | ) | $ | (82 | ) | $ | 6 |
|
For 2010,2013, corporate interest and other net expenses increased $34$5 million compared with 2009, reflecting an $182012, due to a $5 million gain recognizedincrease in 2009 on the early retirement of long-term debt — related parties and $15 million due primarily to higher tax expense in 2010 related to the Michigan Business Tax. Additionally, interest expense, reflecting increased $10 million due to higher debt levels at higher average interest rates. These items were offset partially by $9 million of higher net earnings at EnerBank and lower legal fees.
For 2009,2012, corporate interest and other net expenses decreased $5$6 million reflecting an $18 million gain oncompared with 2011, due primarily to higher net earnings at EnerBank.
DISCONTINUED OPERATIONS
For 2013, the early retirement of long-term debt — related parties, offset partially by $11 million in premiums paid on the early retirement of senior notes.
For 2009, income of $20 million was recorded fromfurther details regarding discontinued operations, compared with incomesee Note 19, Asset Sales and Discontinued Operations.
Cash Position, Investing, and FinancingCASH POSITION, INVESTING, AND FINANCING
At December 31, 2010,2013, CMS Energy had $270$204 million of consolidated cash and cash equivalents, which included $23$32 million of restricted cash and cash equivalents. At December 31, 2010,2013, Consumers had $94$49 million of consolidated cash and cash equivalents, which included $23$31 million of restricted cash and cash equivalents.
56
OPERATING ACTIVITIES
Presented in the following table are specific components of net cash provided by operating activities for the years ended December 31, 20102013, 2012, and 2009:
Years Ended December 31 | 2010 | 2009 | Change | |||||||||
| In Millions | ||||||||||||
CMS Energy, including Consumers | ||||||||||||
| • Net income | $ | 343 | $ | 240 | $ | 103 | ||||||
| • Non-cash transactions(a) | 1,112 | 877 | 235 | |||||||||
| $ | 1,455 | $ | 1,117 | $ | 338 | |||||||
| • Sale of gas purchased in the prior year | 756 | 845 | (89 | ) | ||||||||
| • Purchase of gas in the current year | (663 | ) | (718 | ) | 55 | |||||||
| • Accounts receivable sales, net | (50 | ) | (120 | ) | 70 | |||||||
| • Postretirement benefits contributions | (463 | ) | (262 | ) | (201 | ) | ||||||
| • Change in other core working capital(b) | (22 | ) | (62 | ) | 40 | |||||||
| • Other changes in assets and liabilities, net | (54 | ) | 48 | (102 | ) | |||||||
| Net cash provided by operating activities | $ | 959 | $ | 848 | $ | 111 | ||||||
Consumers | ||||||||||||
| • Net income | $ | 434 | $ | 293 | $ | 141 | ||||||
| • Non-cash transactions(a) | 1,103 | 841 | 262 | |||||||||
| $ | 1,537 | $ | 1,134 | $ | 403 | |||||||
| • Sale of gas purchased in the prior year | 756 | 845 | (89 | ) | ||||||||
| • Purchase of gas in the current year | (663 | ) | (718 | ) | 55 | |||||||
| • Accounts receivable sales, net | (50 | ) | (120 | ) | 70 | |||||||
| • Postretirement benefits contributions | (447 | ) | (254 | ) | (193 | ) | ||||||
| • Change in other core working capital(b) | (19 | ) | (58 | ) | 39 | |||||||
| • Other changes in assets and liabilities, net | (204 | ) | 93 | (297 | ) | |||||||
| Net cash provided by operating activities | $ | 910 | $ | 922 | $ | (12 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| In Millions |
| ||||||
Years Ended December 31 |
| 2013 |
| 2012 |
| Change |
| 2012 |
| 2011 |
| Change |
| ||||||
CMS Energy, including Consumers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 454 |
| $ | 384 |
| $ | 70 |
| $ | 384 |
| $ | 417 |
| $ | (33 | ) |
Non-cash transactions1 |
|
| 1,129 |
|
| 1,085 |
|
| 44 |
|
| 1,085 |
|
| 981 |
|
| 104 |
|
|
|
| 1,583 |
|
| 1,469 |
|
| 114 |
|
| 1,469 |
|
| 1,398 |
|
| 71 |
|
Postretirement benefits contributions |
|
| (229 | ) |
| (72 | ) |
| (157 | ) |
| (72 | ) |
| (323 | ) |
| 251 |
|
Proceeds from government grant |
|
| 69 |
|
| - |
|
| 69 |
|
| - |
|
| - |
|
| - |
|
Changes in core working capital2 |
|
| 88 |
|
| (48 | ) |
| 136 |
|
| (48 | ) |
| 135 |
|
| (183 | ) |
Changes in other assets and liabilities, net |
|
| (90 | ) |
| (108 | ) |
| 18 |
|
| (108 | ) |
| (41 | ) |
| (67 | ) |
Net cash provided by operating activities |
| $ | 1,421 |
| $ | 1,241 |
| $ | 180 |
| $ | 1,241 |
| $ | 1,169 |
| $ | 72 |
|
Consumers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 534 |
| $ | 439 |
| $ | 95 |
| $ | 439 |
| $ | 467 |
| $ | (28 | ) |
Non-cash transactions1 |
|
| 1,003 |
|
| 993 |
|
| 10 |
|
| 993 |
|
| 947 |
|
| 46 |
|
|
|
| 1,537 |
|
| 1,432 |
|
| 105 |
|
| 1,432 |
|
| 1,414 |
|
| 18 |
|
Postretirement benefits contributions |
|
| (222 | ) |
| (68 | ) |
| (154 | ) |
| (68 | ) |
| (315 | ) |
| 247 |
|
Proceeds from government grant |
|
| 69 |
|
| - |
|
| 69 |
|
| - |
|
| - |
|
| - |
|
Changes in core working capital2 |
|
| 103 |
|
| (31 | ) |
| 134 |
|
| (31 | ) |
| 138 |
|
| (169 | ) |
Changes in other assets and liabilities, net |
|
| (136 | ) |
| 20 |
|
| (156 | ) |
| 20 |
|
| 86 |
|
| (66 | ) |
Net cash provided by operating activities |
| $ | 1,351 |
| $ | 1,353 |
| $ | (2 | ) | $ | 1,353 |
| $ | 1,323 |
| $ | 30 |
|
1 Non-cash transactions comprise depreciation and amortization, changes in deferred income taxes, postretirement benefits expense, and other non-cash items.
2 Core working capital comprises accounts receivable and accrued revenues, inventories, and accounts payable.
For the year ended December 31, 2010,2013, net cash provided by operating activities at CMS Energy increased $111$180 million compared with 2009. The increase was2012, and net cash provided by operating activities at Consumers decreased $2 million compared with 2012. Increases in net cash provided by operating activities were due primarily to higher net income, net of non-cash transactions, the receipt of a $69 million renewable energy grant for Lake Winds® Energy Park, and a reduction in working capital due to higher usage of gas and other fuel from inventory and the collection of PSCR underrecoveries. At CMS Energy, these increases were offset partially by higher pension contributions.
For the year ended December 31, 2010,2012, net cash provided by operating activities at CMS Energy increased $72 million compared with 2011, and net cash provided by operating activities at Consumers decreased $12increased $30 million compared with 2009.2011. The decrease wasincreases were due primarily to higherthe absence of a pension contributionsfund contribution and refundsthe impact of lower gas prices on inventory purchased in 2012, offset partially by lower cash collections resulting from the increase in accumulated credits applied to customers. These changes were offset largely by increased billings due to recent regulatory actions.
57
INVESTING ACTIVITIES
Presented in the following table are specific components of net cash provided by operating activities for the years ended December 31, 2009 and 2008:
Years Ended December 31 | 2009 | 2008 | Change | |||||||||
| In Millions | ||||||||||||
CMS Energy, including Consumers | ||||||||||||
| • Net income | $ | 240 | $ | 302 | $ | (62 | ) | |||||
| • Non-cash transactions(a) | 877 | 911 | (34 | ) | ||||||||
| $ | 1,117 | $ | 1,213 | $ | (96 | ) | ||||||
| • Sale of gas purchased in the prior year | 845 | 915 | (70 | ) | ||||||||
| • Purchase of gas in the current year | (718 | ) | (963 | ) | 245 | |||||||
| • Electric sales contract termination payment | — | (275 | ) | 275 | ||||||||
| • Accounts receivable sales, net | (120 | ) | 170 | (290 | ) | |||||||
| • Postretirement benefits contributions | (262 | ) | (51 | ) | (211 | ) | ||||||
| • Change in other core working capital(b) | (62 | ) | (278 | ) | 216 | |||||||
| • Other changes in assets and liabilities, net | 48 | (174 | ) | 222 | ||||||||
| Net cash provided by operating activities | $ | 848 | $ | 557 | $ | 291 | ||||||
Consumers | ||||||||||||
| • Net income | $ | 293 | $ | 364 | $ | (71 | ) | |||||
| • Non-cash transactions(a) | 841 | 956 | (115 | ) | ||||||||
| $ | 1,134 | $ | 1,320 | $ | (186 | ) | ||||||
| • Sale of gas purchased in the prior year | 845 | 915 | (70 | ) | ||||||||
| • Purchase of gas in the current year | (718 | ) | (963 | ) | 245 | |||||||
| • Accounts receivable sales, net | (120 | ) | 170 | (290 | ) | |||||||
| • Postretirement benefits contributions | (254 | ) | (50 | ) | (204 | ) | ||||||
| • Change in other core working capital(b) | (58 | ) | (289 | ) | 231 | |||||||
| • Other changes in assets and liabilities, net | 93 | (230 | ) | 323 | ||||||||
| Net cash provided by operating activities | $ | 922 | $ | 873 | $ | 49 | ||||||
58
Years Ended December 31 | 2010 | 2009 | Change | |||||||||
| In Millions | ||||||||||||
CMS Energy, including Consumers | ||||||||||||
| • Capital expenditures | $ | (821 | ) | $ | (818 | ) | $ | (3 | ) | |||
| • Cash effect of deconsolidation of partnerships | (10 | ) | — | (10 | ) | |||||||
| • Increase in loans and notes receivable | (131 | ) | (83 | ) | (48 | ) | ||||||
| • Costs to retire property and other | (41 | ) | (34 | ) | (7 | ) | ||||||
| Net cash used in investing activities | $ | (1,003 | ) | $ | (935 | ) | $ | (68 | ) | |||
Consumers | ||||||||||||
| • Capital expenditures | $ | (815 | ) | $ | (811 | ) | $ | (4 | ) | |||
| • Costs to retire property and other | (44 | ) | (39 | ) | (5 | ) | ||||||
| Net cash used in investing activities | $ | (859 | ) | $ | (850 | ) | $ | (9 | ) | |||
|
|
|
|
|
|
|
|
|
| In Millions | |||||||||
Years Ended December 31 |
| 2013 |
| 2012 |
| Change |
| 2012 |
| 2011 |
| Change | |||||||
CMS Energy, including Consumers |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Capital expenditures |
| $ | (1,325 | ) | $ | (1,227 | ) | $ | (98 | ) | $ | (1,227 | ) | $ | (882 | ) | $ | (345 | ) |
Increase in EnerBank notes receivable |
| (139 | ) | (63 | ) | (76 | ) | (63 | ) | (100 | ) | 37 |
| ||||||
Costs to retire property and other |
| (68 | ) | (60 | ) | (8 | ) | (60 | ) | (76 | ) | 16 |
| ||||||
Net cash used in investing activities |
| $ | (1,532 | ) | $ | (1,350 | ) | $ | (182 | ) | $ | (1,350 | ) | $ | (1,058 | ) | $ | (292 | ) |
Consumers |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Capital expenditures |
| $ | (1,320 | ) | $ | (1,222 | ) | $ | (98 | ) | $ | (1,222 | ) | $ | (876 | ) | $ | (346 | ) |
Costs to retire property and other |
| (67 | ) | (57 | ) | (10 | ) | (57 | ) | (75 | ) | 18 |
| ||||||
Net cash used in investing activities |
| $ | (1,387 | ) | $ | (1,279 | ) | $ | (108 | ) | $ | (1,279 | ) | $ | (951 | ) | $ | (328 | ) |
For the year ended December 31, 2010,2013, net cash used in investing activities at CMS Energy increased $68$182 million compared with 2009. The change was due primarily to an increase in EnerBank consumer lending. For the year ended December 31, 2010,2012, and net cash used in investing activities at Consumers increased $9$108 million compared with 2009,2012. The increases were due to increases in capital expenditures under Consumers’ capital investment program and, costs to retire property.
Years Ended December 31 | 2009 | 2008 | Change | |||||||||
| In Millions | ||||||||||||
CMS Energy, including Consumers | ||||||||||||
| • Capital expenditures | $ | (818 | ) | $ | (792 | ) | $ | (26 | ) | |||
| • Increase in non-current notes receivable | (83 | ) | (19 | ) | (64 | ) | ||||||
| • Costs to retire property and other | (34 | ) | (28 | ) | (6 | ) | ||||||
| Net cash used in investing activities | $ | (935 | ) | $ | (839 | ) | $ | (96 | ) | |||
Consumers | ||||||||||||
| • Capital expenditures | $ | (811 | ) | $ | (789 | ) | $ | (22 | ) | |||
| • Costs to retire property and other | (39 | ) | (34 | ) | (5 | ) | ||||||
| Net cash used in investing activities | $ | (850 | ) | $ | (823 | ) | $ | (27 | ) | |||
For the year ended December 31, 2009,2012, net cash used in investing activities at CMS Energy increased $96$292 million compared with 2008. For the year ended December 31, 2009,2011, and net cash used in investing activities at Consumers increased $27$328 million compared with 2008.2011. The increases at CMS Energy were due primarily to increases in capital expenditures under Consumers’ capital investment program. At CMS Energy, these increases were offset partially by slower growth in EnerBank consumer lending and in Consumers’ capital expenditures.
59
Financing ActivitiesF
Presented in the following table are specific components of net cash provided by (used in) financing activities for the years ended December 31, 20102013, 2012, and 2009:
Years Ended December 31 | 2010 | 2009 | Change | |||||||||
| In Millions | ||||||||||||
CMS Energy, including Consumers | ||||||||||||
| • Issuance of FMBs, convertible senior notes, senior notes, and other debt | $ | 1,704 | $ | 1,374 | $ | 330 | ||||||
| • Retirement of debt and other debt maturity payments | (1,033 | ) | (1,271 | ) | 238 | |||||||
| • Payments of common and preferred stock dividends | (162 | ) | (125 | ) | (37 | ) | ||||||
| • Redemption of preferred stock | (239 | ) | (4 | ) | (235 | ) | ||||||
| • Changes in EnerBank notes payable | (40 | ) | 40 | (80 | ) | |||||||
| • Other financing activities | (28 | ) | (49 | ) | 21 | |||||||
| Net cash provided by (used in) financing activities | $ | 202 | $ | (35 | ) | $ | 237 | |||||
Consumers | ||||||||||||
| • Issuance of FMBs | $ | 600 | $ | 500 | $ | 100 | ||||||
| • Retirement of debt and other debt maturity payments | (482 | ) | (387 | ) | (95 | ) | ||||||
| • Payments of common and preferred stock dividends | (360 | ) | (287 | ) | (73 | ) | ||||||
| • Stockholder’s contribution from CMS Energy | 250 | 100 | 150 | |||||||||
| • Other financing activities | (27 | ) | (28 | ) | 1 | |||||||
| Net cash used in financing activities | $ | (19 | ) | $ | (102 | ) | $ | 83 | ||||
|
|
|
|
|
|
|
|
|
|
| In Millions | ||||||||
Years Ended December 31 |
| 2013 |
| 2012 |
| Change |
| 2012 |
| 2011 |
| Change | |||||||
CMS Energy, including Consumers |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Issuance of FMBs, senior notes, and other debt |
| $ | 1,456 |
| $ | 2,017 |
| $ | (561 | ) | $ | 2,017 |
| $ | 725 |
| $ | 1,292 |
|
Retirement of debt |
| (1,047 | ) | (1,829 | ) | 782 |
| (1,829 | ) | (708 | ) | (1,121 | ) | ||||||
Issuance of common stock |
| 36 |
| 30 |
| 6 |
| 30 |
| 29 |
| 1 |
| ||||||
Redemption of preferred stock |
| (7 | ) | - |
| (7 | ) | - |
| - |
| - |
| ||||||
Payments of common and preferred stock dividends |
| (273 | ) | (252 | ) | (21 | ) | (252 | ) | (211 | ) | (41 | ) | ||||||
Other financing activities |
| 25 |
| 75 |
| (50 | ) | 75 |
| (34 | ) | 109 |
| ||||||
Net cash provided by (used in) financing activities |
| $ | 190 |
| $ | 41 |
| $ | 149 |
| $ | 41 |
| $ | (199 | ) | $ | 240 |
|
Consumers |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Issuance of FMBs |
| $ | 750 |
| $ | 1,075 |
| $ | (325 | ) | $ | 1,075 |
| $ | - |
| $ | 1,075 |
|
Retirement of debt |
| (466 | ) | (1,064 | ) | 598 |
| (1,064 | ) | (80 | ) | (984 | ) | ||||||
Payment of common and preferred stock dividends |
| (408 | ) | (395 | ) | (13 | ) | (395 | ) | (376 | ) | (19 | ) | ||||||
Redemption of preferred stock |
| (7 | ) | - |
| (7 | ) | - |
| - |
| - |
| ||||||
Stockholder contribution from CMS Energy |
| 150 |
| 150 |
| - |
| 150 |
| 125 |
| 25 |
| ||||||
Other financing activities |
| 30 |
| 80 |
| (50 | ) | 80 |
| (27 | ) | 107 |
| ||||||
Net cash provided by (used in) financing activities |
| $ | 49 |
| $ | (154 | ) | $ | 203 |
| $ | (154 | ) | $ | (358 | ) | $ | 204 |
|
For the year ended December 31, 2010,2013, net cash provided by financing activities at CMS Energy increased $237$149 million compared to 2009. The change waswith 2012 and net cash provided by financing activities at Consumers increased $203 million compared with 2012. These increases were due primarily to an increase in net proceeds from borrowings by CMS Energy,debt issuances, offset partially by an increase in common stock dividends and a decrease in borrowingsproceeds from Consumers’ revolving accounts receivable sales program.
For 2012, net cash provided by EnerBank.
Years Ended December 31 | 2009 | 2008 | Change | |||||||||
| In Millions | ||||||||||||
CMS Energy, including Consumers | ||||||||||||
| • Issuance of FMBs, convertible senior notes, senior notes, and other debt | $ | 1,374 | $ | 1,396 | $ | (22 | ) | |||||
| • Retirement of debt and other debt maturity payments | (1,271 | ) | (1,130 | ) | (141 | ) | ||||||
| • Payments of common and preferred stock dividends | (125 | ) | (93 | ) | (32 | ) | ||||||
| • Changes in EnerBank notes payable | 40 | — | 40 | |||||||||
| • Other financing activities | (53 | ) | (26 | ) | (27 | ) | ||||||
| Net cash provided by (used in) financing activities | $ | (35 | ) | $ | 147 | $ | (182 | ) | ||||
Consumers | ||||||||||||
| • Issuance of FMBs | $ | 500 | $ | 600 | $ | (100 | ) | |||||
| • Retirement of debt and other debt maturity payments | (387 | ) | (444 | ) | 57 | |||||||
| • Payments of common and preferred stock dividends | (287 | ) | (299 | ) | 12 | |||||||
| • Stockholder’s contribution from CMS Energy | 100 | — | 100 | |||||||||
| • Other financing activities | (28 | ) | (33 | ) | 5 | |||||||
| Net cash used in financing activities | $ | (102 | ) | $ | (176 | ) | $ | 74 | ||||
60
CMS Energy uses dividends from its subsidiaries and external financing and capital transactions to invest in its utility and non-utility businesses, retire debt, pay dividends, and fund its other obligations. The ability of CMS Energy’s subsidiaries, including Consumers, to pay dividends to CMS Energy depends upon each subsidiary’s revenues, earnings, cash needs, and other factors. In addition, Consumers’ ability to pay dividends is restricted by certain terms included in its debt covenants and articles of incorporation, as well asand potentially by provisions under the Federal Power Act and the Natural Gas Act and FERC requirements. For additional details on Consumers’ dividend restrictions, see Note 4, Financings and Capitalization – Dividend Restrictions. For the year ended December 31, 2010,2013, Consumers paid $358$406 million in common stock dividends to CMS Energy.
CMS Energy has entered into two continuous equity offering programs permitting it to sell, from time to time through “at the market” offerings, common stock having an aggregate sales price of up to
$50 million per program. Under the first program, entered into in 2011, CMS Energy issued common stock and received net proceeds of $20 million in March 2013 and $15 million in each of 2012 and 2011. In April 2013, CMS Energy entered into the second continuous equity offering program, but has not yet issued any equity under this program.
Consumers uses cash flows generated from operations and external financing transactions, as well as stockholder’sstockholder contributions from CMS Energy, to fund capital expenditures, retire debt, pay dividends, contribute to its employee benefit plans, and fund its other obligations.
Consumers also expects to issue Securitization bonds in 2014, subject to market conditions. The MPSC, in a December 2013 order, authorized Consumers to proceed, at its sole discretion, with the sale of up to $389 million in highly rated, low-cost Securitization bonds to finance the recovery of the remaining book value of ten electric generating units that Consumers plans to retire by April 2016, if the Securitization transaction is successful.
CMS Energy’s and Consumers’ access to the financial and capital markets depends on their credit ratings and on market conditions. As evidenced by past financing transactions, CMS Energy and Consumers have had ready access to these markets and, barring major market dislocations or disruptions, they expect to continue to have such access. If access to these markets were to become diminisheddiminish or otherwise become restricted, however, CMS Energy and Consumers would implement contingency plans to address debt maturities, which could include reduced capital spending. CMS Energy and Consumers also havehad the following secured revolving credit facilities available:
At December 31, 2010 | Amount of Facility | Amount Available | Expiration Date | |||||||||
| In Millions | ||||||||||||
CMS Energy | ||||||||||||
| Revolving credit facility | $ | 550 | $ | 547 | April 2012 | |||||||
Consumers | ||||||||||||
| Revolving credit facility | 500 | 200 | March 2012 | |||||||||
| Revolving credit facility | 150 | 150 | August 2013 | |||||||||
|
|
|
|
|
|
|
|
|
| In Millions |
|
|
| Amount of |
| Amount |
| Letters of Credit |
| Amount |
|
|
|
|
| Facility |
| Borrowed |
| Outstanding |
| Available |
| Expiration Date |
|
CMS Energy |
|
|
|
|
|
|
|
|
|
|
|
Revolving credit facility1 |
| $ 550 |
| $ - |
| $ 2 |
| $ 548 |
| December 2018 |
|
Consumers |
|
|
|
|
|
|
|
|
|
|
|
Revolving credit facility2 |
| $ 650 |
| $ - |
| $ - |
| $ 650 |
| December 2018 |
|
Revolving credit facility2 |
| 30 |
| - |
| 30 |
| - |
| September 2014 |
|
1 Obligations under this facility are secured by Consumers common stock.
2 Obligations under this facility are secured by FMBs of Consumers.
CMS Energy and Consumers presently use these credit facilities for general working capital purposes and to issue letters of credit, and they intend to renew these facilities at reasonable terms before their expiration.credit. An additional source of liquidity is Consumers’ revolving accounts receivable sales program, which allows it to transfer up to $250 million of eligible accounts receivable as a secured borrowing. At December 31, 2010, $2502013, $170 million of accountaccounts receivable had been transferred and an additional $80 million were eligible for transfer under this program.
Certain of CMS Energy’s and Consumers’ credit agreements, and debt indentures, and other facilities contain covenants that require CMS Energy and Consumers to maintain certain financial ratios. CMS Energy’s $550 million revolving credit agreement specifies a maximum debt to EBITDA ratio, as defined therein, and a minimum interest coverage ratio, as defined therein. Also, certain of CMS Energy’s senior notes indenture supplements specify a minimum interest coverage ratio, as defined therein. Consumers’ revolving credit agreements specify a maximum debt to capital ratio,ratios, as defined therein. At December 31, 2010,2013, no events of default had occurred with respect to any debtfinancial covenants contained in CMS EnergyEnergy’s and Consumers’ credit agreements, debt indentures, or debt indentures.other facilities. CMS Energy and Consumers were each in compliance with these limitscovenants as of December 31, 2010,2013, as presented in the following table:
December 31, 2013 | |||||||||||||
Credit Agreement, Indenture, or Facility | Description | Limit | Actual | ||||||||||
CMS Energy | |||||||||||||
$550 million revolving credit agreement and | |||||||||||||
$180 million term loan credit agreement | Debt to EBITDA | < | 6.0 to 1.0 | 4.6 to 1.0 | |||||||||
$180 million term loan credit agreement | Interest Coverage | > | 2.0 to 1.0 | 4.5 to 1.0 | |||||||||
Consumers | |||||||||||||
$650 million and $30 million revolving credit agreements, | |||||||||||||
$35 million and $68 million reimbursement agreements, and | |||||||||||||
$250 million revolving accounts receivable sales agreement | Debt to Capital | < | 0.65 to 1.0 | 0.49 to 1.0 | |||||||||
61
Contractual Obligations: Presented in the following table are CMS Energy’s and Consumers’ contractual cash obligations for each of the periods presented. The table excludes all amounts classified as current liabilities on CMS Energy’s and Consumers’ Consolidated Balance Sheets,consolidated balance sheets, other than the current portion of long-term debt, capital leases, and capitalfinancing obligation.
|
|
|
|
|
|
|
|
|
| In Millions |
| |||||
|
| Payments Due |
| |||||||||||||
|
|
|
| Less Than |
| One to |
| Three to |
| More Than |
| |||||
December 31, 2013 |
| Total |
| One Year |
| Three Years |
| Five Years |
| Five Years |
| |||||
CMS Energy, including Consumers |
|
|
|
|
|
|
|
|
|
|
| |||||
Long-term debt |
| $ | 7,654 |
| $ | 368 |
| $ | 1,207 |
| $ | 1,443 |
| $ | 4,636 |
|
Interest payments on long-term debt |
| 3,335 |
| 364 |
| 694 |
| 573 |
| 1,704 |
| |||||
Capital leases and financing obligation |
| 159 |
| 23 |
| 43 |
| 38 |
| 55 |
| |||||
Interest payments on capital leases and financing obligation |
| 64 |
| 10 |
| 17 |
| 15 |
| 22 |
| |||||
Operating leases |
| 164 |
| 26 |
| 45 |
| 37 |
| 56 |
| |||||
Asset retirement obligations |
| 1,215 |
| 11 |
| 37 |
| 36 |
| 1,131 |
| |||||
Deferred investment tax credit |
| 40 |
| 3 |
| 6 |
| 5 |
| 26 |
| |||||
Environmental liabilities |
| 198 |
| 14 |
| 34 |
| 36 |
| 114 |
| |||||
Purchase obligations1 |
| 12,068 |
| 1,879 |
| 2,015 |
| 2,007 |
| 6,167 |
| |||||
Purchase obligations – related parties2 |
| 1,244 |
| 89 |
| 170 |
| 175 |
| 810 |
| |||||
Total contractual obligations |
| $ | 26,141 |
| $ | 2,787 |
| $ | 4,268 |
| $ | 4,365 |
| $ | 14,721 |
|
Consumers | �� |
|
|
|
|
|
|
|
|
|
| |||||
Long-term debt |
| $ | 4,625 |
| $ | 43 |
| $ | 449 |
| $ | 848 |
| $ | 3,285 |
|
Interest payments on long-term debt |
| 2,259 |
| 225 |
| 441 |
| 370 |
| 1,223 |
| |||||
Capital leases and financing obligation |
| 159 |
| 23 |
| 43 |
| 38 |
| 55 |
| |||||
Interest payments on capital leases and financing obligation |
| 64 |
| 10 |
| 17 |
| 15 |
| 22 |
| |||||
Operating leases |
| 164 |
| 26 |
| 45 |
| 37 |
| 56 |
| |||||
Asset retirement obligations |
| 1,214 |
| 11 |
| 37 |
| 36 |
| 1,130 |
| |||||
Deferred investment tax credit |
| 40 |
| 3 |
| 6 |
| 5 |
| 26 |
| |||||
Environmental liabilities |
| 127 |
| 8 |
| 24 |
| 28 |
| 67 |
| |||||
Purchase obligations1 |
| 11,838 |
| 1,803 |
| 1,960 |
| 1,953 |
| 6,122 |
| |||||
Purchase obligations – related parties2 |
| 1,244 |
| 89 |
| 170 |
| 175 |
| 810 |
| |||||
Total contractual obligations |
| $ | 21,734 |
| $ | 2,241 |
| $ | 3,192 |
| $ | 3,505 |
| $ | 12,796 |
|
1 Long-term contracts for purchase of commodities and finance leases.
| Payments Due | ||||||||||||||||||||
| Less Than | One to | Three to | More Than | |||||||||||||||||
At December 31, 2010 | Total | One Year | Three Years | Five Years | Five Years | |||||||||||||||
| In Millions | ||||||||||||||||||||
CMS Energy, including Consumers | ||||||||||||||||||||
| Long-term debt(a) | $ | 7,206 | $ | 439 | $ | 1,019 | $ | 976 | $ | 4,772 | ||||||||||
| Interest payments on long-term debt(b) | 2,909 | 357 | 662 | 587 | 1,303 | |||||||||||||||
| Capital and finance leases(c) | 212 | 23 | 50 | 42 | 97 | |||||||||||||||
| Interest payments on capital and finance leases(d) | 98 | 14 | 22 | 18 | 44 | |||||||||||||||
| Operating leases(e) | 260 | 29 | 57 | 51 | 123 | |||||||||||||||
| Purchase obligations(f) | 15,794 | 1,996 | 2,613 | 1,751 | 9,434 | |||||||||||||||
| Purchase obligations — related parties(f) | 1,735 | 87 | 180 | 193 | 1,275 | |||||||||||||||
| Total contractual obligations | $ | 28,214 | $ | 2,945 | $ | 4,603 | $ | 3,618 | $ | 17,048 | ||||||||||
Consumers | ||||||||||||||||||||
| Long-term debt(a) | $ | 4,529 | $ | 37 | $ | 755 | $ | 567 | $ | 3,170 | ||||||||||
| Interest payments on long-term debt(b) | 1,899 | 238 | 436 | 365 | 860 | |||||||||||||||
| Capital and finance leases(c) | 212 | 23 | 50 | 42 | 97 | |||||||||||||||
| Interest payments on capital and finance leases(d) | 98 | 14 | 22 | 18 | 44 | |||||||||||||||
| Operating leases(e) | 260 | 29 | 57 | 51 | 123 | |||||||||||||||
| Purchase obligations(f) | 15,794 | 1,996 | 2,613 | 1,751 | 9,434 | |||||||||||||||
| Purchase obligations — related parties(f) | 1,735 | 87 | 180 | 193 | 1,275 | |||||||||||||||
| Total contractual obligations | $ | 24,527 | $ | 2,424 | $ | 4,113 | $ | 2,987 | $ | 15,003 | ||||||||||
2 Long-term power purchase agreements from certain affiliates of CMS Enterprises.
CMS Energy and Consumers also have recognized non-current 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 above. For details related to benefit payments, see Note 11, Retirement Benefits.
62
indemnities for which such amounts were estimable was $471 million at December 31, 2013. While CMS Energy and Consumers believe it is unlikely that they will incur any material losses related to indemnities they have not recorded as liabilities, they cannot predict the impact of these contingent obligations on their liquidity and financial condition. For additional details on these and other guarantee arrangements, see Note 5,3, Contingencies and Commitments “Guarantees.”
Capital Expenditures: Over the next five years, CMS Energy and Consumers expect to make capital investments of more than $6about $7 billion. CMS Energy and Consumers may revise their 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 CMS Energy’s and Consumers’ estimated capital expenditures, including lease commitments, for 20112014 through 2015:
| Five Years | ||||||||||||||||||||||||
| 2011 | 2012 | 2013 | 2014 | 2015 | Total | |||||||||||||||||||
| In Millions | ||||||||||||||||||||||||
CMS Energy, including Consumers | ||||||||||||||||||||||||
| Consumers | $ | 1,070 | $ | 1,290 | $ | 1,280 | $ | 1,530 | $ | 1,260 | $ | 6,430 | ||||||||||||
| Enterprises | 6 | 8 | 1 | 1 | 1 | 17 | ||||||||||||||||||
| Total CMS Energy | $ | 1,076 | $ | 1,298 | $ | 1,281 | $ | 1,531 | $ | 1,261 | $ | 6,447 | ||||||||||||
Consumers | ||||||||||||||||||||||||
| Electric utility operations(a)(b) | $ | 790 | $ | 1,060 | $ | 1,060 | $ | 1,310 | $ | 1,030 | $ | 5,250 | ||||||||||||
| Gas utility operations(b) | 280 | 230 | 220 | 220 | 230 | 1,180 | ||||||||||||||||||
| Total Consumers | $ | 1,070 | $ | 1,290 | $ | 1,280 | $ | 1,530 | $ | 1,260 | $ | 6,430 | ||||||||||||
63
|
|
|
|
|
|
|
|
|
|
| In Millions |
| |||||||
|
| 2014 |
| 2015 |
| 2016 |
| 2017 |
| 2018 |
| Total |
| ||||||
CMS Energy, including Consumers |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Consumers |
| $ | 1,650 |
| $ | 1,500 |
| $ | 1,450 |
| $ | 1,250 |
| $ | 1,250 |
| $ | 7,100 |
|
Enterprises |
| 12 |
| 12 |
| 11 |
| 11 |
| 11 |
| 57 |
| ||||||
Total CMS Energy |
| $ | 1,662 |
| $ | 1,512 |
| $ | 1,461 |
| $ | 1,261 |
| $ | 1,261 |
| $ | 7,157 |
|
Consumers |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Electric utility operations1,2 |
| $ | 1,200 |
| $ | 1,000 |
| $ | 1,000 |
| $ | 800 |
| $ | 800 |
| $ | 4,800 |
|
Gas utility operations2 |
| 450 |
| 500 |
| 450 |
| 450 |
| 450 |
| 2,300 |
| ||||||
Total Consumers |
| $ | 1,650 |
| $ | 1,500 |
| $ | 1,450 |
| $ | 1,250 |
| $ | 1,250 |
| $ | 7,100 |
|
1 These amounts include estimates for capital expenditures that may be required by environmental laws, regulations, or potential consent decrees.
2 These amounts include estimates for capital spending for 2011 through 2015:
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-LookingForward-Looking Statements and Information;” Note 5, Contingencies and Commitments; and Part I, Item 1A. Risk Factors.
CONSUMERSELECTRICUTILITYANDGASUTILITYBUSINESSOUTLOOKANDUNCERTAINTIES
Rate Matters: Rate matters are critical to Consumers’ Electric Utility Business Outlookelectric and Uncertaintiesgas utility businesses. For additional details on rate matters, see Note 2, Regulatory Matters.
Future Rate Cases: In order to minimize increases in customer base rates, Consumers has undertaken several initiatives to reduce costs through voluntary separation plans, accelerated pension funding, employee and retiree health-care cost sharing, negotiated labor agreements, information system efficiencies, and productivity improvement programs. Consumers has also received approval from the MPSC for certain applications, including the accounting application described in the following paragraph, that will result in cost savings for customers. These initiatives, together with Consumers’ plans to accelerate further cost reductions, should allow Consumers to avoid increasing electric and gas base rates through 2014. Consumers may reconsider this expectation should its assumptions change regarding the economy or other matters.
Income Tax Benefits Accounting Order: In August 2013, Consumers filed an application with the MPSC requesting approval 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. Under the regulatory treatment that Consumers has been using, Consumers has estimated that it would take at least 50 years to flow through these income tax benefits to customers. In September 2013, the MPSC approved Consumers’ application with modification, authorizing Consumers to return $211 million of income tax benefits over five years to electric customers and $264 million of income tax benefits over 12 years to gas customers. The MPSC authorized Consumers to implement this regulatory treatment effective January 2014. Consumers estimates that this new treatment will result in an annual benefit of $42 million to electric customers and $22 million to gas customers.
Smart Energy: Consumers’ grid modernization effort continues. In 2012, Consumers began installing smart meters in Muskegon County, Michigan. One of the functions of smart meters is to allow customers to monitor and manage their energy usage, which Consumers expects will help reduce demand during critical peak times, resulting in lower peak capacity requirements. The installation of smart meters should also provide for both operational and customer benefits. As of December 31, 2013, Consumers had upgraded 160,000 electric residential and small business customers in western Michigan to smart meters. Of the customers scheduled for the upgrade, 0.6 percent have chosen not to participate in the smart meter program.
Consumers is able to read and bill from smart meters remotely; further functionality will continue to be added through mid-2015. Consumers expects to have installed 385,000 smart meters throughout western Michigan by the end of 2014. Consumers also plans to install communication modules on gas meters in areas where Consumers provides both electricity and natural gas to customers.
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Balanced Energy Initiative: Consumers’ Consumers continues to experience increasing demand for electricity due to Michigan’s recovering economy and increased use of air conditioning, consumer electronics, and other electric devices, offset partially by the predicted effects of energy efficiency and conservation. In July 2012, customers set a peak demand record of 9,006 MW.
Subject to a successful Securitization transaction, as discussed below, Consumers plans to retire seven smaller coal-fueled electric generating units and three smaller gas-fueled electric generating units by April 2016. Consumers had previously announced plans to mothball the seven coal-fueled units effective April 2016 and had received approval from MISO to do so. The three gas-fueled units were mothballed in April 2009. For additional details on the Securitization financing order, see Note 2, Regulatory Matters.
With the planned retirement of these units and the potential tightening of the MISO capacity market, Consumers could experience a shortfall in generation capacity of up to 1,500 MW in 2016. In order to address future capacity requirements and growing electric demand in Michigan, Consumers updated its balanced energy initiative, is a comprehensive energy resource plan designed to meet its projectedthe short-term and long-term electricity needs of its customers through:
·energy efficiency;
·demand management;
·expanded use of renewable energy;
·construction or purchase of electric power requirements through:
·continued operation or upgrade of existing units.
In May 2010,December 2013, Consumers signed an agreement to purchase a 540-MW gas-fueled electric generating plant located in Jackson, Michigan for $155 million from AlphaGen Power LLC and DPC Juniper, LLC, affiliates of JPMorgan Chase & Co. Consumers expects to close the purchase, which is subject to MPSC,
FERC, and other approvals, by January 2016. In January 2014, as a result of this planned purchase, Consumers announced plans to defer the development of its proposed 830 MW coal-fueled700-MW gas-fueled electric generating plant at its Karn/WeadockThetford complex in Genesee County, Michigan, which Consumers estimated would have cost $700 million.
Electric Rate Matters: In August and September 2013, Consumers filed two applications with the MPSC to propose alternative methods to recover its investment in the seven smaller coal-fueled electric generating complex. This decision reflects reduced customer demand for electricity dueunits and three smaller gas-fueled electric generating units discussed above.
In the first of these applications, filed in August 2013, Consumers requested MPSC advanced approval to use standard utility plant retirement accounting in the recession, forecasted lower natural gas prices dueevent of early retirement of these ten units. Specifically, Consumers requested the MPSC to recent developmentsprovide assurance that the full amount of the undepreciated investment, demolition costs, and cost of removal, including a return on the assets, would, upon their early retirement, be recovered through retail electric base rates.
The second application, which Consumers filed in shale gasSeptember 2013, requested approval to issue up to $454 million in Securitization bonds through a newly formed subsidiary. Under Michigan law, electric utilities are permitted to use highly rated, low-cost Securitization bonds to finance the recovery technology,of qualified costs. The qualified costs that Consumers requested approval to securitize were principally the remaining book value and projected surplus generating capacitydemolition costs of the ten units described above.
The MPSC approved, with modification, Consumers’ Securitization application in December 2013 and issued a Securitization financing order that authorizes Consumers to proceed, at its sole discretion, with the MISO market.sale of up to $389 million in Securitization bonds to finance the recovery of the remaining book value of the ten units described above. Consumers has been monitoring customer demand, fuelexpects to proceed with the Securitization financing and power prices,issue Securitization bonds in 2014, subject to market conditions. Upon issuance of the Securitization bonds, Consumers will adjust its retail electric base rates to exclude the revenue requirement associated with the securitized costs. Consumers will then collect a surcharge to pay the principal and other market conditions, and has not set a timetable for a future decision aboutinterest on the project; however, the likelihood that the plant will be constructed has diminished significantly. Consumers’ alternatives to
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As a result of the MPSC’s issuance of the Securitization financing order, Consumers has taken action to suspend and extend indefinitely the schedule in the case related to the application Consumers filed in August 2013 requesting MPSC advanced approval to use standard utility plant retirement accounting in the event of early retirement of these ten units.
Pending Power Supply Cost Recovery Plan: Consumers submitted its 2014 PSCR plan to the MPSC in September 2013, and in accordance with its proposed plan, self-implemented the 2014 PSCR charge beginning in January 2014.
For additional details on rate matters, see Note 2, Regulatory Matters.
Renewable Energy Plan: Consumers’ renewable energy plan details how Consumers willexpects to meet REC and capacity standards prescribed by the 2008 Energy Legislation.Law. This legislationlaw requires Consumers to obtainuse RECs, in an amount equal to at least ten percent of its electric sales volume (estimated to be 3.6 million RECs annually) by 2015. RECswhich represent proof that the associated electricity was generated from a renewable energy resource. The legislation also requires Consumersresource, to obtain 500 MW of capacity fromachieve certain renewable energy resources bytargets through at least 2015. The targets increase annually, with a goal of using RECs in an amount equal to at least ten percent of Consumers’ electric sales volume (estimated to be 3.3 million RECs annually) in 2015 either through generation resources owned by Consumers or through agreements to purchase capacity from other parties.
The 2008 Energy Law also requires Consumers generates or purchases 1.6 million RECs per year, which represents 44 percent of the 2015 renewable energy requirement. In 2010, Consumers contracted for the purchase of 900,000 RECs per year, which represents an additional 25 percent of the 2015 renewable energy requirement. In addition, at December 2010, Consumers held three million RECs in inventory for use over the next 15 years beginning in 2015. This inventory will provide 200,000 RECs per year, or 5.5 percent of the 2015 renewable energy requirement.
agreements to purchase capacity by 2015.from other parties. Through December 2010,2013, Consumers has contracted for the purchase of 296302 MW of nameplate capacity from renewable energy suppliers which represents 59 percentand owns 100 MW of the 2015 renewablenameplate capacity requirement.
Consumers expects to be operational in late 2012. Consumers will continue to seek opportunities for wind generation development in supportmeet the balance of the renewable capacity standards.
Energy Optimization Plan: The 2008 Energy Law requires Consumers to achieve energy savings equivalent to annual sales reduction targets through at least 2015. The targets increase annually, with the goal of achieving a six percent reduction in customers’ electricity use and a four percent reduction in customers’ natural gas use by December 31, 2015. Under its energy optimization 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. Consumers estimates that, through its gas and electric energy optimization programs, its customers realized $211 million in energy savings during 2013.
Electric Customer Deliveries and Revenue: Consumers’ electric customer deliveries are largely dependent on Michigan’s economy, which has suffered from economic and financial instability in the automotive and real estate sectors.
Over the next five years, Consumers expects weather-adjusted electric deliveries in 2011 to be at a similar level to 2010. Consumers’ outlook reflects the impact of reduced deliveries associated with its investment in energy efficiency programs prescribed by the 2008 Energy Legislation, as well as recent projections of Michigan’s economic conditions.
·energy conservation measures and results of | ||
·fluctuations in weather; and
·Michigan economic conditions, including utilization, expansion, or contraction of manufacturing facilities, population trends, and conservation. Consumers expects this mechanism to reduce volatility of electric utility revenue.
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In May 2010,December 2013, a bill was introduced to the Michigan Senate and House of Representatives that, if enacted, would increaserevise the 2008 Energy Law by removing the ten-percent limit and allowing all of Consumers’ electric customers to take service from ten percent to 25 percent the proportion of an electric utility’s sales for which service may be provided by an alternative electric supplier. Presently, the proportion of Consumers’ electric deliveries under the ROA program and on the ROA waiting list is 25 percent. The 2010 legislative session ended without anybill also proposes to deregulate electric generation service in Michigan within two years. No definitive action beinghas been taken on this bill.bill or on a similar bill introduced to the Michigan Senate in February 2013. The Senate bill, if enacted, would revise the 2008 Energy Law and allow customers on the ROA program
waiting list to take service from alternative electric suppliers. The Senate bill also proposes an increase in the cap of six percentage points per year from 2014 through 2016.
Consumers is unable to predict the outcome of these legislative proposals. In addition, the Michigan legislature has conducted hearings on the subject of energy competition. If the ROA limit were increased or if electric generation service in Michigan were deregulated, it could have a material adverse effect on Consumers’ financial results and operations.
Governor’s Energy Initiative: In 2013, Michigan’s governor instituted a process to prepare a series of reports addressing energy efficiency, renewable energy, the electricity market and ROA, and other subjects. The process was designed to help the governor and other lawmakers determine the state’s next steps regarding energy policies. Following a series of public hearings, the chairman of the MPSC and Michigan’s Energy Office Director released four reports summarizing the information gathered. In December 2013, the governor outlined several key goals for Michigan’s energy policy, including reducing the state’s reliance on coal, increasing the use of renewable energy and natural gas, and improving energy affordability and reliability while protecting the environment.
Electric Transmission: In 2011, FERC issued an order in a rulemaking proceeding concerning regional electric transmission planning and cost allocations. Consumers and several other electric utilities filed a joint petition seeking clarification/rehearing of FERC’s order and opposing the allocation methodology. In 2012, following FERC’s denial of their requests for clarification/rehearing, Consumers and several other electric utilities filed a petition for review of FERC’s order with the U.S. Court of Appeals for the D.C. Circuit. In May 2013, Consumers, along with other electric utilities, filed briefs in this matter.
In a related matter, in 2010, MISO filed and FERC approved a tariff revision proposing a cost allocation methodology for a new category of transmission projects. Under this tariff revision, the cost of these new transmission projects will be spread proportionally across the MISO energy market. Consumers believes that Michigan customers will bear additional costs under MISO’s tariff without receiving comparable benefits from these projects. In 2011, Consumers, along with the Michigan Attorney General, ABATE, DTE Electric, and other parties, filed a petition for review of FERC’s order with the U.S. Court of Appeals for the Seventh Circuit. In June 2013, the Court of Appeals issued an opinion largely affirming FERC’s orders regarding the cost allocation methodology. In October 2013, the Michigan Attorney General filed, and Consumers and other parties joined, a petition with the U.S. Supreme Court seeking review of the Court of Appeals’ opinion. Regardless of the final outcome of these appeals, Consumers expects to continue to recover transmission expenses, including those associated with the MISO tariff revision, through the PSCR process.
In 2012, ReliabilityFirst Corporation informed Consumers that Consumers may not be properly registered to meet certain NERC electric reliability standards. Consumers has assessed its registration status, taking into consideration FERC’s December 2012 order on the definition of a bulk electric system, and in August 2013 notified ReliabilityFirst Corporation that it is preparing to change its registration. In light of this order, Consumers is reviewing the classification of its electric distribution assets under FERC’s modified definition of the bulk electric system.
Electric Environmental Estimates: Consumers’ operations are subject to various state and federal environmental laws and regulations. Consumers continuesestimates that it will incur expenditures of $0.8 billion from 2014 through 2018 to focus on complyingcontinue to comply with the Clean Air Act, Clean Water Act, and numerous state and federal environmental regulations. Consumers estimates that it will incur expenditures of $1.9 billion from 2011 through 2018 to comply with these 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:
Clean Air Interstate Rule/Clean Air Transport Rule:Quality: Due to a December 2008 court decision that remanded CAIR back to In 2011, the EPA released CSAPR, a final replacement rule for CAIR, remainswhich requires Michigan and 27 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 effect at this time, pendingother downwind states. In 2012, the EPA’s finalizationU.S. Court of Appeals for the D.C. Circuit voided CSAPR and held that CAIR would remain in place until the EPA promulgated a new rule. This matter was appealed to the U.S. Supreme Court and a decision is expected in 2014.
In July 2010,2012, the EPA released CATR, a proposed rule that would replace CAIR. Consumers is evaluating this proposed rule. If adopted inpublished its present form, CATR could result in additional or accelerated environmental compliance costs related to Consumers’ fossil-fueled power plants and retirement of some or all of the older, smaller generating units in Consumers’ fleet. Presently, Consumers’ strategy to comply with CAIR involves the installation ofstate-of-the-art emission control equipment.
In 2012, the EPA finalized a rule that strengthens the air quality standard for fine particulate matter. Consumers expects short-term impacts to be limited, but this new standard could give rise to air quality concerns in states downwind of Michigan and put pressure on Michigan and other Midwestern states to reduce emissions further. Given its present strategy for CAIR and MATS compliance, however, Consumers will already be achieving significant reductions in emissions that contribute to the formation of fine particulate matter.
Presently, Consumers’ strategy to comply with air quality regulations, including CAIR and MATS, involves the installation 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 rulemakings, litigation, and congressional action. This evaluation could result in:
·changes in environmental compliance costs related to Consumers’ coal-fueled power plants;
·a change in the fuel mix at coal-fueled and oil-fueled power plants;
·changes in how certain plants are used; and
·the retirement, mothballing, or repowering with an alternative fuel of some of Consumers’ generating units.
The MDEQ renewed and issued the Renewable Operating Permit for B.C. Cobb in August 2011 and for J.H. Campbell in July 2013 after an extensive review and a public comment period. The Sierra Club and the Natural Resources Defense Council filed separate petitions with the EPA to object to the MDEQ’s issuance of the state Renewable Operating Permit for both of these facilities, alleging that the facilities are not in compliance with certain provisions of the Clean Air Act, including NSR and Title V. Consumers has responded to these allegations. The EPA could either deny the petition outright or grant the petition and remand the matter to the MDEQ for further action. The Sierra Club or the Natural Resources Defense Council could also file suit in federal district court seeking EPA action on the petition. Consumers is unable to predict the impactoutcome of this proposed regulation, but expects tothese actions.
Greenhouse Gases: In the recent past, there have a better understanding of the potential impact upon the release a proposed rule, which is expected in March 2011. Existing sources must meet the standards generally within three years of issuance of the final rule. The final rule is expected to be issued in November 2011.
In May 2010,January 2014, the EPA releasedpublished proposed rules pursuant to Section 111 of the Clean Air Act to limit carbon dioxide emissions from new gas-fueled electric 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. The proposed rules for new sources are expected to be finalized in 2014. President Obama has also directed the EPA to address existing, modified, and reconstructed fossil-
fuel-fired steam electric generating units with proposed standards, regulations, or guidelines to be completed by June 1, 2014, and final standards, regulations, or guidelines to be completed by June 1, 2015. Subsequent state implementation plans are due by June 30, 2016. Consumers believes that its Preventionbalanced energy initiative, its present carbon reduction target, and its emphasis on supply diversity will position it favorably to deal with the impact of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule. The final rule, which numerous parties have challenged incarbon regulation, but cannot predict the U.S. Courtnature or outcome of Appeals for the D.C. Circuit, sets limits forthese proposals. Consumers will continue to monitor regulatory activity regarding greenhouse gas emissions standards that define when permits are required for new and existing industrial facilities under NSR PSD and Title V Operating Permit programs. Consumers does not expect that this regulation will require it to incur significant expenditures for efficiency upgrades for modified or new facilities at this time.
Litigation, as well as federal laws, EPA regulations regarding greenhouse gases, or similar treaties, state laws, or rules, if enacted or ratified, could require Consumers to replace equipment, install additional equipment for emission controls,control equipment, purchase emission allowances, curtail operations, arrange for alternative sources of supply, 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.
In 2010,2013, carbon dioxide emissions from fossil-fueledfossil-fuel-fired power plants owned by Consumers, excluding the portion of J.H. Campbell Unit 3 that is owned by others, exceeded 18were 17 million metric tons. During the same period, coal-fueled plants owned by the enterprises segment emitted about 700,000four million metric tons of carbon dioxide.
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Water: In 2004, theThe EPA issued rules that governis expected to issue a final rule in early 2014 to regulate existing electric generating plant cooling water intake systems. These rules require a significant reduction in the number of fish harmed by cooling water intake structures at existing power plants. The EPA compliance options in the rule were challenged before the U.S. Court of Appeals for the Second Circuit, which remanded the bulksystems under Section 316(b) of the rule back toClean Water Act aimed at reducing alleged harmful impacts on fish and shellfish. Consumers also expects the EPA for reconsideration in 2007. In April 2009, the U.S. Supreme Court ruled in favor of the utility industry’s position that the EPA can rely on a cost-benefit analysis in setting the national performance standards for fish protection. The EPA is scheduled to issue a draft rulefinal regulations in the first half2014 that may require physical and/or chemical treatment of 2011wastewater discharges from electric generating plants. Consumers will evaluate these rules and a final rule in 2012.
PCBs:In April 2010, the EPA issued an Advance Notice of Proposed Rulemaking, indicating that it is considering a variety of regulatory actions with respect to PCBs. One proposal aimsapproach would aim to phase out equipment containing PCBs by 2025. Another proposal eliminatesapproach would eliminate an exemption for small equipment containing PCBs. To comply with any such regulatory actions, Consumers could incur substantial costs associated with the regulation of PCBs due to prior installation ofexisting electrical equipment potentially containing PCBs.
Other electric environmental matters could have a major impact on Consumers’ outlook. For additional details on other electric environmental matters, see Note 5,3, Contingencies and Commitments “Consumers’– Consumers Electric Utility Contingencies, — Electric“Electric Environmental Matters.”
Consumers’ Gas Utility Business Outlook and UncertaintiesC
Gas Deliveries: Consumers expects 2011 weather-adjusted gas deliveries to decline by one percent compared with 2010, due to continuing conservation and overall economic conditions in Michigan. In addition, Consumers expects weather-adjusted gas deliveries in 2014 and over the next five years to decline an average of one percent annually from 2012 through 2016, which includes expectedremain stable relative to 2013. This outlook reflects modest growth in gas demand offset by the predicted effects of energy efficiency programs and continued conservation. Actual delivery levels from year to year may vary from this trendexpectation due to:
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·fluctuations in weather;
·availability and development of renewable energy sources;
·changes in gas prices;
·Michigan economic conditions, including population trends and housing activity;
·the price of competing energy sources or fuels; and
·energy efficiency and conservation impacts.
Gas Transmission: In May 2013, the MPSC approved Consumers’ application to build a 24-mile, 36-inch natural gas pipeline in St. Joseph and Branch Counties, Michigan, and Consumers began construction in October 2013. Consumers expects that it will spend about $120 million for this project, and that the pipeline will be operational by the end of 2014.
Gas Transportation: In 2012, Trunkline filed a proposal with FERC to cease transporting natural gas through one of its two main transmission pipelines serving Michigan. More than 60 percent of the natural gas supplied to Consumers’ gas customers is delivered by Trunkline’s two main transmission pipelines. In August 2012, Consumers filed a motion with FERC to protest against the proposed abandonment on the grounds that it would negatively impact customers and that it could hamper the development of gas-fueled electric generation in Michigan. In its motion, Consumers stated that if Trunkline’s proposal is granted, the abandonment could result in higher gas prices and reduced availability for Michigan gas customers. Michigan’s governor, the MPSC, and various other parties also filed protests with FERC. In November 2013, however, FERC issued an order granting the abandonment request. Consumers filed a request for rehearing of FERC’s order in December 2013. In January 2014, FERC issued an order indicating that it would take Consumers’ request for rehearing under advisement.
Gas Rate Case: In February 2013, Consumers filed an application with the MPSC seeking an annual rate increase of $49 million, based on a 10.5 percent authorized byreturn on equity. Subsequent to this filing, Consumers’ projection of non-fuel costs decreased and Consumers filed a petition with the MPSC to close the docket or, alternatively, to suspend and extend indefinitely the schedule in this case. In June 2013, the MPSC approved Consumers’ petition to suspend and extend indefinitely the schedule. In November 2013, Consumers filed an application with the MPSC requesting to withdraw the case and close the docket. The MPSC approved Consumers’ request and closed the docket in December 2013.
Pending Gas Cost Recovery Plan: Consumers submitted its 2014-2015 GCR plan to the MPSC in Consumers’ 2009 gasDecember 2013, and in accordance with its proposed plan, expects to self-implement the 2014-2015 GCR charge beginning in April 2014.
For additional details on rate case order, allows Consumers to adjust future gas rates to compensate for changes in sales volumes by class arising frommatters, see Note 2, Regulatory Matters.
Gas Pipeline Safety: In 2012, President Obama signed the difference betweenPipeline Safety, Regulatory Certainty, and Job Creation Act of 2011. The law reauthorizes existing federal pipeline safety programs of the level of average sales per customer adoptedPipeline and Hazardous Materials Safety Administration through 2015 and it contains provisions mandating:
·an increase in the order and actual average weather-adjusted sales per customer. The mechanism will not provide rate adjustmentsmaximum fine for changes in sales volumes arising from weather fluctuations. Consumers expects this mechanism to mitigate the impacts of energy efficiency programs, conservation, and changes in economic conditions on its gas revenue.
·an increase in the number of pipeline ownerinspectors;
·a study regarding application of integrity management requirements outside of “high consequence areas”;
·a survey regarding existing plans for safe management and replacement of cast iron pipelines;
·prescribed notification and on-site incident response times;
·installation of automatic or operator.
·historical design and construction documentation to the natural gas pipeline explosion that occurredverify maximum allowable operating pressures; and
·establishment of new regulations for testing (pressure tests or equivalent methods) of previously untested pipelines in San Bruno, California in September 2010, the U.S. House of Representatives and the U.S. Senate have proposed bills stipulating stricter regulation of natural gas pipelines nationwide. These proposed bills affect primarily transmission pipelines and contain provisions mandating:
Consumers continues to comply with laws and regulations governing natural gas pipeline safety. If these proposedThese laws are put into effect,and regulations could cause Consumers couldto incur significant additional costs related to its natural gas pipeline safety programs. Consumers expects that it would be able to recover the costs in rates, consistent with the recovery of other reasonable costs of complying with laws and regulations.
Gas Environmental Estimates: Consumers expects to incur response activity costs at a number of sites, including 23 former MGP sites. For additional details, see Note 5,3, Contingencies and Commitments “Consumers’– Consumers Gas Utility Contingencies, — Gas“Gas Environmental Matters.”
Consumers’ Other Outlook and UncertaintiesE
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Trends, uncertainties, and other matters that could have a material impact on CMS Energy’s consolidated income, cash flows, or financial position include:
·indemnity and environmental remediation obligations at Bay Harbor;
·obligations related to a tax claim from the government of Equatorial Guinea;
·the outcome of certain legal proceedings;
·impacts of declines in electricity prices on the profitability of the enterprises segment’s generating units;
·representations, warranties, and indemnities provided by CMS Energy or its subsidiaries in connection with previous sales of assets;
·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; and
·economic conditions in Michigan, including population trends and housing activity.
For additional details regarding the enterprises segment’s uncertainties, see Note 5,3, Contingencies and Commitments.
Other OutlookOTHER OUTLOOK AND UNCERTAINTIES
EnerBank: EnerBank is a Utah state-chartered, FDIC-insured industrial bank providing unsecured consumer installment loans for financing home improvements. EnerBank represented two percent of CMS Energy’s net assets at December 31, 2013, and Uncertaintiesfour percent of CMS Energy’s net income available to common stockholders for the year ended December 31, 2013. The carrying value of EnerBank’s loan portfolio was $683 million at December 31, 2013. Its loan portfolio was funded primarily by deposit liabilities of $652 million. The twelve-month rolling average default rate on loans held by EnerBank has declined from 0.8 percent at December 31, 2012 to 0.6 percent at December 31, 2013. 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, 2013.
Litigation:
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The following accounting policies and related information are important to an understanding of CMS Energy’s and Consumers’ results of operations and financial condition and should be considered an integral part of their MD&A.condition. For additional accounting policies, see Note 1, Significant Accounting Policies.
Use of Estimates and AssumptionsU
In the preparation of CMS Energy’s and Consumers’ Consolidated Financial Statements,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.
Allowance for Uncollectible Accounts: CMS Energy and Consumers make ongoing estimates related to the collectibility of their accounts receivable and establish an allowance for uncollectible accounts based on historical losses, management’s assessment of existing economic conditions, customer trends, and other factors. Actual future losses from uncollectible accounts may differ from those estimated by CMS Energy and Consumers.
Asset Retirement Obligations: CMS Energy and Consumers are required to 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. CMS Energy and Consumers have legal obligations to remove some of their assets at the end of their useful lives. CMS Energy and Consumers calculate the fair value of ARO liabilities using an expected present-value technique that reflects assumptions about costs, inflation, and profit margin that third parties would require to assume the obligation. CMS Energy’s ARO liabilities are primarily at Consumers. As a regulated entity, Consumers defers the effects of any changes in assumptions on the fair values of its ARO liabilities, adjusting the associated regulatory assets or liabilities rather than recognizing such effects in earnings. For additional details, see Note 10, Asset Retirement Obligations.
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 Note 3, Contingencies and Commitments.
Fair Value Measurements: CMS Energy and Consumers have assets and liabilities that are accounted for or disclosed at fair value. Fair value measurements incorporate assumptions that market participants would use in
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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.
Long-Lived Assets and Equity Method Investments: CMS Energy and Consumers assess the recoverability of their long-lived assets and equity method investments by performing impairment tests if certain triggering events occur or if there has been a decline in value that may be other than temporary. CMS Energy and Consumers base their evaluations of impairment on such indicators as:
·the nature of the assets;
·projected future economic benefits;
·regulatory and political environments;
·historical and future cash flow and profitability measurements; and
·other external market conditions and factors.
The estimates CMS Energy and Consumers use may change over time, which could have a material impact on their Consolidated Financial Statements. For additional details, see Note 20, Asset Sales, Discontinued Operations, and Impairment Charges.
Unbilled Revenues: CMS Energy’s and 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 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 Accountsaccounts receivable on CMS Energy’s and Consumers’ Consolidated Balance Sheets,consolidated balance sheets, were $439$434 million at December 31, 20102013 and $477$403 million at December 31, 2009.
Accounting for the Effects of Industry RegulationA
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 toin earnings.
Alternative-Revenue Program: In 2009, the MPSC approved an energy optimization incentive mechanism that provides a financial incentive if the energy savings of Consumers’ customers exceed annual targets established by the MPSC in 2009 and 2010, Consumers was granted authority to implement revenue decoupling mechanisms. The electric decoupling mechanism adjusts customer rates to collect or refund the change in marginal revenue arising from the difference between the level of average sales per customer adopted in the electric rate order and actual average sales per customer. The gas decoupling mechanism is similar, but does not adjust customer rates for changes in sales volumes resulting from weather fluctuations.MPSC. Consumers accounts for these programsthis program as an alternative-revenue programsprogram that meetmeets the criteria for recognizing revenue related to the effectsincentive as soon as energy savings
Table of decoupling adjustments onContents
exceed the annual targets established by the MPSC. Consumers recognized revenue as electricityunder this program of $22 million in 2013, $13 million in 2012, and gas are delivered.
Revenue Subject to Refund: Unless prohibited by the MPSC upon a showing of good cause, Consumers is allowed to self-implement new energy rates six months after a new rate case filing; however, the rates that Consumers self-implements may be
70
FINANCIAL AND DERIVATIVE INSTRUMENTS AND MARKET RISK INFORMATION
Financial and Derivative Instruments and Market Risk InformationInstruments:
Derivative Instruments:CMS Energy and Consumers account for certain contracts as derivative instruments. The criteria used to determine if an instrument qualifies for derivative accounting are complex and often require significant judgment in application. If a contract is a derivative and does not qualify for the normal purchases and sales exception, it is recorded on the consolidated balance sheetsheets at its fair value. Each quarter, the resulting asset or liability is adjusted to reflect any change in the fair value of the contract.
The criteria used to determine if an instrument qualifies for derivative accounting or for an exception from derivative accounting are complex and often require significant 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 significant 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 additional details on CMS Energy’s and Consumers’ derivatives see Note 10, Derivative Instruments.
71
The following risk sensitivities illustrate the potential loss in fair value, cash flows, or future earnings from financial instruments, including derivative contracts, 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:Risk: CMS Energy and Consumers are exposed to interest-rate risk resulting from issuing fixed-rate and variable-rate financing 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.
Interest-Rate Risk Sensitivity Analysis (assuming an adverse change in market interest rates of ten percent):
December 31 | 2010 | 2009 | ||||||
| In Millions | ||||||||
| Fixed-rate financing — potential loss in fair value CMS Energy, including Consumers | $ | 187 | $ | 183 | ||||
| Consumers | 113 | 122 | ||||||
|
| In Millions |
| ||
December 31 |
| 2013 |
| 2012 |
|
Fixed-rate financing - potential loss in fair value |
|
|
|
|
|
CMS Energy, including Consumers |
| $ 187 |
| $ 127 |
|
Consumers |
| 129 |
| 84 |
|
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 insignificant for both CMS Energy and Consumers at December 31, 20102013 and 2009,2012, assuming an adverse change in market interest rates of ten percent.
Commodity Price Risk: CMS Energy and Consumers are exposed to commodity price risk, which arises from fluctuations in the price of electricity, natural gas, coal, and other commodities. Commodity prices are influenced by a number of factors, including weather, changes in supply and demand, and liquidity of commodity markets. In order to manage commodity price risk, they may enter into various non-trading derivative contracts, such as forward purchase and sale contracts, options, and swaps.
72
December 31 | 2010 | 2009 | ||||||
| In Millions | ||||||||
CMS Energy, including Consumers | ||||||||
Potential reduction in fair value ofavailable-for-sale: | ||||||||
| SERP: | ||||||||
| Mutual fund | $ | 6 | $ | — | ||||
| State & municipal bonds | — | 1 | ||||||
Consumers | ||||||||
Potential reduction in fair value ofavailable-for-sale: | ||||||||
| SERP: | ||||||||
| Mutual fund | $ | 4 | $ | — | ||||
| CMS Energy common stock | 3 | 3 | ||||||
|
| In Millions |
| ||
December 31 |
| 2013 |
| 2012 |
|
CMS Energy, including Consumers |
|
|
|
|
|
Potential reduction in fair value of available-for-sale securities |
|
|
|
|
|
DB SERP |
|
|
|
|
|
Mutual funds |
| $ 14 |
| $ 13 |
|
Consumers |
|
|
|
|
|
Potential reduction in fair value of available-for-sale securities |
|
|
|
|
|
DB SERP |
|
|
|
|
|
Mutual funds |
| $ 10 |
| $ 9 |
|
CMS Energy common stock |
| 3 |
| 3 |
|
Notes Receivable Risk: CMS Energy is exposed to interest-rate risk resulting from EnerBank’s fixed-rate installment loans. EnerBank provides these loans to homeowners to finance home improvements.
Notes Receivable Sensitivity Analysis (assuming an adverse change in market interest rates of ten percent):
December 31 | 2010 | 2009 | ||||||
| In Millions | ||||||||
CMS Energy, including Consumers | ||||||||
| Potential reduction in fair value: | ||||||||
| Notes receivable | $ | 6 | $ | 5 | ||||
|
| In Millions |
| ||
December 31 |
| 2013 |
| 2012 | �� |
CMS Energy, including Consumers |
|
|
|
|
|
Potential reduction in fair value |
|
|
|
|
|
Notes receivable |
| $ 12 |
| $ 9 |
|
The fair value losses in the above table could be realized only if EnerBank sold its loans to other parties. For additional details on market risk, financial instruments, and derivatives, see Note 9,6, Financial Instruments and Note 10, Derivative Instruments.
Retirement BenefitsR
Pension: CMS Energy and Consumers have external trust funds to provide retirement pension benefits to their employees under a non-contributory, defined benefit Pension Plan. On September 1, 2005, the defined benefit Pension Plan was closed to new participants and CMS Energy and Consumers
implemented the qualified DCCP, which provides an employer contribution of six percent of base pay to the existing 401(k) plan. An employee contribution is not required to receive the plan’s employer cash contribution. All employees hired on or after September 1, 2005 participate in this plan as part of their retirement benefit program. Previous cash balance Pension Plan participants also participate in the DCCP as of September 1, 2005. Additional pay credits under the cash balance Pension Plan were discontinued as of that date.
401(k):CMS Energy and Consumers provide an employer match in their 401(k) plan equal to 60 percent on eligible contributions up to the first six percent of an employee’s wages.
OPEB: CMS Energy and Consumers provide postretirement health and life benefits under their OPEB planPlan to qualifying retired employees.
CMS Energy and Consumers record liabilities for pension and OPEB on their Consolidated Balance Sheetsconsolidated 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:
73
·life expectancies;
·expected long-term rate of return on plan assets;
·rate of compensation increases; and
·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 CMS Energy’s and Consumers’ pension cost, OPEB cost, and cash contributions through 2013:
| Pension Cost | OPEB Cost | Pension Contribution | OPEB Contribution | |||||||||||||
| In Millions | ||||||||||||||||
CMS Energy, including Consumers | ||||||||||||||||
| 2011 | $ | 104 | $ | 49 | $ | — | $ | 65 | ||||||||
| 2012 | 106 | 57 | — | 49 | ||||||||||||
| 2013 | 102 | 53 | 154 | 57 | ||||||||||||
Consumers | ||||||||||||||||
| 2011 | $ | 101 | $ | 51 | $ | — | $ | 64 | ||||||||
| 2012 | 103 | 59 | — | 48 | ||||||||||||
| 2013 | 99 | 55 | 149 | 56 | ||||||||||||
|
|
|
|
|
|
|
| In Millions |
|
|
| Pension |
| OPEB |
| Pension |
| OPEB |
|
|
| Cost |
| Cost (Credit | ) | Contribution |
| Contribution |
|
CMS Energy, including Consumers |
|
|
|
|
|
|
|
|
|
2014 |
| $ 63 |
| $ (51 | ) | $ - |
| $ 75 |
|
2015 |
| 68 |
| (44 | ) | - |
| 25 |
|
2016 |
| 58 |
| (45 | ) | - |
| - |
|
Consumers |
|
|
|
|
|
|
|
|
|
2014 |
| $ 62 |
| $ (46 | ) | $ - |
| $ 74 |
|
2015 |
| 66 |
| (38 | ) | - |
| 25 |
|
2016 |
| 56 |
| (39 | ) | - |
| - |
|
Contribution estimates include amountsboth required and discretionary contributions. Consumers’ pension and OPEB costs are recoverable through its general ratemaking process. Actual future pension cost and contributions will depend on future investment performance, changes in future discount rates, and various other factors related to the populations participating in the Pension Plan.
Lowering the expected long-term rate of return on the Pension Plan assets by 0.25 percentage point (from 8.07.50 percent to 7.757.25 percent) would increase estimated pension cost for 20112014 by $4 million for both CMS Energy and Consumers. Lowering the discount rate by 0.25 percentage point (from 5.404.90 percent to 5.154.65 percent) would increase estimated pension cost for 20112014 by $5 million for both CMS Energy and Consumers.
Asset Retirement Obligations
NEW ACCOUNTING STANDARDS
There are no new accounting standards issued that arebut not yet effective see Note 2, New Accounting Standards.that are expected to have a material impact on CMS Energy’s or Consumers’ consolidated financial statements.
74
| Years Ended December 31 | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| In Millions | ||||||||||||
Operating Revenue | $ | 6,432 | $ | 6,205 | $ | 6,807 | ||||||
Operating Expenses | ||||||||||||
| Fuel for electric generation | 604 | 541 | 600 | |||||||||
| Purchased and interchange power | 1,239 | 1,163 | 1,335 | |||||||||
| Purchased power — related parties | 85 | — | — | |||||||||
| Cost of gas sold | 1,590 | 1,866 | 2,277 | |||||||||
| Maintenance and other operating expenses | 1,206 | 1,163 | 1,019 | |||||||||
| Depreciation and amortization | 576 | 570 | 588 | |||||||||
| General taxes | 210 | 217 | 203 | |||||||||
| Insurance settlement | (50 | ) | — | — | ||||||||
| Gain on asset sales, net | (6 | ) | (13 | ) | (9 | ) | ||||||
| Total operating expenses | 5,454 | 5,507 | 6,013 | |||||||||
Operating Income | 978 | 698 | 794 | |||||||||
Other Income (Expense) | ||||||||||||
| Interest and dividends | 19 | 18 | 24 | |||||||||
| Allowance for equity funds used during construction | 5 | 6 | 6 | |||||||||
| Income (loss) from equity method investees | 11 | (2 | ) | 5 | ||||||||
| Other income | 32 | 80 | 48 | |||||||||
| Other expense | (24 | ) | (30 | ) | (37 | ) | ||||||
| Total other income | 43 | 72 | 46 | |||||||||
Interest Charges | ||||||||||||
| Interest on long-term debt | 394 | 383 | 371 | |||||||||
| Other interest | 40 | 56 | 33 | |||||||||
| Allowance for borrowed funds used during construction | (3 | ) | (4 | ) | (4 | ) | ||||||
| Total interest charges | 431 | 435 | 400 | |||||||||
Income Before Income Taxes | 590 | 335 | 440 | |||||||||
Income Tax Expense | 224 | 115 | 139 | |||||||||
Income From Continuing Operations | 366 | 220 | 301 | |||||||||
Income (Loss) From Discontinued Operations, Net of Tax Expense of $2, $13, and $1 | (23 | ) | 20 | 1 | ||||||||
Net Income | 343 | 240 | 302 | |||||||||
Income Attributable to Noncontrolling Interests | 3 | 11 | 7 | |||||||||
Net Income Attributable to CMS Energy | 340 | 229 | 295 | |||||||||
Charge for Deferred Issuance Costs on Preferred Stock | 8 | — | — | |||||||||
Preferred Stock Dividends | 8 | 11 | 11 | |||||||||
Net Income Available to Common Stockholders | $ | 324 | $ | 218 | $ | 284 | ||||||
75
|
|
|
|
|
| In Millions |
|
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
|
|
|
|
|
|
|
|
|
Operating Revenue |
| $ 6,566 |
| $ 6,253 |
| $ 6,503 |
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
Fuel for electric generation |
| 621 |
| 598 |
| 636 |
|
Purchased and interchange power |
| 1,387 |
| 1,364 |
| 1,282 |
|
Purchased power – related parties |
| 90 |
| 87 |
| 82 |
|
Cost of gas sold |
| 1,228 |
| 1,150 |
| 1,512 |
|
Maintenance and other operating expenses |
| 1,236 |
| 1,224 |
| 1,237 |
|
Depreciation and amortization |
| 628 |
| 598 |
| 546 |
|
General taxes |
| 234 |
| 229 |
| 205 |
|
Total operating expenses |
| 5,424 |
| 5,250 |
| 5,500 |
|
|
|
|
|
|
|
|
|
Operating Income |
| 1,142 |
| 1,003 |
| 1,003 |
|
|
|
|
|
|
|
|
|
Other Income (Expense) |
|
|
|
|
|
|
|
Interest income |
| 3 |
| 5 |
| 9 |
|
Allowance for equity funds used during construction |
| 6 |
| 8 |
| 6 |
|
Income from equity method investees |
| 13 |
| 17 |
| 9 |
|
Other income |
| 10 |
| 11 |
| 16 |
|
Other expense |
| (20 | ) | (33 | ) | (22 | ) |
Total other income |
| 12 |
| 8 |
| 18 |
|
|
|
|
|
|
|
|
|
Interest Charges |
|
|
|
|
|
|
|
Interest on long-term debt |
| 385 |
| 372 |
| 396 |
|
Other interest expense |
| 16 |
| 21 |
| 23 |
|
Allowance for borrowed funds used during construction |
| (3 | ) | (4 | ) | (4 | ) |
Total interest charges |
| 398 |
| 389 |
| 415 |
|
|
|
|
|
|
|
|
|
Income Before Income Taxes |
| 756 |
| 622 |
| 606 |
|
Income Tax Expense |
| 302 |
| 245 |
| 191 |
|
|
|
|
|
|
|
|
|
Income From Continuing Operations |
| 454 |
| 377 |
| 415 |
|
Income From Discontinued Operations, Net of Tax of $-, $4, and $- |
| - |
| 7 |
| 2 |
|
|
|
|
|
|
|
|
|
Net Income |
| 454 |
| 384 |
| 417 |
|
Income Attributable to Noncontrolling Interests |
| 2 |
| 2 |
| 2 |
|
|
|
|
|
|
|
|
|
Net Income Available to Common Stockholders |
| $ 452 |
| $ 382 |
| $ 415 |
|
| Years Ended December 31 | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| In Millions, Except Per | ||||||||||||
| Share Amounts | ||||||||||||
Net Income Attributable to Common Stockholders | ||||||||||||
| Amounts Attributable to Continuing Operations | $ | 347 | $ | 198 | $ | 283 | ||||||
| Amounts Attributable to Discontinued Operations | (23 | ) | 20 | 1 | ||||||||
| Net Income Available to Common Stockholders | $ | 324 | $ | 218 | $ | 284 | ||||||
Income Attributable to Noncontrolling Interests | ||||||||||||
| Amounts Attributable to Continuing Operations | $ | 3 | $ | 11 | $ | 7 | ||||||
| Amounts Attributable to Discontinued Operations | — | — | — | |||||||||
| Income Attributable to Noncontrolling Interests | $ | 3 | $ | 11 | $ | 7 | ||||||
Basic Earnings Per Average Common Share | ||||||||||||
| Basic Earnings from Continuing Operations | $ | 1.50 | $ | 0.87 | $ | 1.25 | ||||||
| Basic Earnings (Loss) from Discontinued Operations | (0.10 | ) | 0.09 | — | ||||||||
| Basic Earnings Attributable to Common Stock | $ | 1.40 | $ | 0.96 | $ | 1.25 | ||||||
| �� | ||||||||||||
Diluted Earnings Per Average Common Share | ||||||||||||
| Diluted Earnings from Continuing Operations | $ | 1.36 | $ | 0.83 | $ | 1.20 | ||||||
| Diluted Earnings (Loss) from Discontinued Operations | (0.08 | ) | 0.08 | — | ||||||||
| Diluted Earnings Attributable to Common Stock | $ | 1.28 | $ | 0.91 | $ | 1.20 | ||||||
Dividends Declared Per Common Share | $ | 0.66 | $ | 0.50 | $ | 0.36 | ||||||
|
|
|
|
|
| In Millions | ||||
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
| |||
|
|
|
|
|
|
|
| |||
Net Income Attributable to Common Stockholders |
|
|
|
|
|
|
| |||
Amounts attributable to continuing operations |
| $ | 452 |
| $ | 375 |
| $ | 413 |
|
Amounts attributable to discontinued operations |
| - |
| 7 |
| 2 |
| |||
Net income available to common stockholders |
| $ | 452 |
| $ | 382 |
| $ | 415 |
|
|
|
|
|
|
|
|
| |||
Income Attributable to Noncontrolling Interests |
|
|
|
|
|
|
| |||
Amounts attributable to continuing operations |
| $ | 2 |
| $ | 2 |
| $ | 2 |
|
Amounts attributable to discontinued operations |
| - |
| - |
| - |
| |||
Income attributable to noncontrolling interests |
| $ | 2 |
| $ | 2 |
| $ | 2 |
|
|
|
|
|
|
|
|
| |||
Basic Earnings Per Average Common Share |
|
|
|
|
|
|
| |||
Basic earnings from continuing operations |
| $ | 1.71 |
| $ | 1.43 |
| $ | 1.65 |
|
Basic earnings from discontinued operations |
| - |
| 0.03 |
| 0.01 |
| |||
Basic earnings attributable to common stock |
| $ | 1.71 |
| $ | 1.46 |
| $ | 1.66 |
|
|
|
|
|
|
|
|
| |||
Diluted Earnings Per Average Common Share |
|
|
|
|
|
|
| |||
Diluted earnings from continuing operations |
| $ | 1.66 |
| $ | 1.39 |
| $ | 1.57 |
|
Diluted earnings from discontinued operations |
| - |
| 0.03 |
| 0.01 |
| |||
Diluted earnings attributable to common stock |
| $ | 1.66 |
| $ | 1.42 |
| $ | 1.58 |
|
|
|
|
|
|
|
|
| |||
Dividends Declared Per Common Share |
| $ | 1.02 |
| $ | 0.96 |
| $ | 0.84 |
|
The accompanying notes are an integral part of these statements.
76
CMS Energy Corporation
| Years Ended December 31 | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| In Millions | ||||||||||||
Cash Flows from Operating Activities | ||||||||||||
| Net Income | $ | 343 | $ | 240 | $ | 302 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities | ||||||||||||
| Depreciation and amortization | 576 | 570 | 589 | |||||||||
| Deferred income taxes and investment tax credit | 227 | 122 | 126 | |||||||||
| Postretirement benefits expense | 213 | 181 | 144 | |||||||||
| Capital lease and other amortization | 40 | 42 | 44 | |||||||||
| Bad debt expense | 57 | 54 | 51 | |||||||||
| Gain due to expiration of indemnification obligation | — | (50 | ) | — | ||||||||
| Other non-cash operating activities | (1 | ) | (42 | ) | (43 | ) | ||||||
| Postretirement benefits contributions | (463 | ) | (262 | ) | (51 | ) | ||||||
| Electric sales contract termination payment | — | — | (275 | ) | ||||||||
| Changes in other assets and liabilities: | ||||||||||||
| Increase in accounts receivable, notes receivable, and accrued revenue | (105 | ) | (91 | ) | (80 | ) | ||||||
| Decrease (increase) in accrued power supply revenue | 33 | (41 | ) | 35 | ||||||||
| Decrease (increase) in inventories | 133 | 86 | (71 | ) | ||||||||
| Decrease in accounts payable | (7 | ) | (50 | ) | (5 | ) | ||||||
| Increase (decrease) in accrued expenses | 22 | (6 | ) | (31 | ) | |||||||
| Decrease (increase) in other current and non-current assets | (28 | ) | 59 | 12 | ||||||||
| Increase (decrease) in current and non-current regulatory liabilities | (69 | ) | 102 | (178 | ) | |||||||
| Decrease in other current and non-current liabilities | (12 | ) | (66 | ) | (12 | ) | ||||||
| Net cash provided by operating activities | 959 | 848 | 557 | |||||||||
Cash Flows from Investing Activities | ||||||||||||
| Capital expenditures (excludes assets placed under capital lease) | (821 | ) | (818 | ) | (792 | ) | ||||||
| Cost to retire property | (43 | ) | (49 | ) | (34 | ) | ||||||
| Cash effect of deconsolidation of partnerships | (10 | ) | — | — | ||||||||
| Increase in loans and notes receivable | (131 | ) | (83 | ) | (19 | ) | ||||||
| Other investing activities | 2 | 15 | 6 | |||||||||
| Net cash used in investing activities | (1,003 | ) | (935 | ) | (839 | ) | ||||||
77
|
|
|
|
|
| In Millions | |
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
|
|
|
|
|
|
|
|
|
Net Income |
| $ 454 |
| $ 384 |
| $ 417 |
|
|
|
|
|
|
|
|
|
Retirement Benefits Liability |
|
|
|
|
|
|
|
Net gain (loss) arising during the period, net of tax (tax benefit) of $16, $(7), and $(7) |
| 26 |
| (10 | ) | (11 | ) |
Prior service credit adjustment, net of tax of $3, $-, and $- |
| 5 |
| - |
| - |
|
Amortization of net actuarial loss, net of tax of $3, $1, and $1 |
| 4 |
| 2 |
| 2 |
|
|
|
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
|
Unrealized gain (loss) on investments, net of tax (tax benefit) of $(1), $1, and $- |
| (2 | ) | 2 |
| - |
|
|
|
|
|
|
|
|
|
Other Comprehensive Income (Loss) |
| 33 |
| (6 | ) | (9 | ) |
|
|
|
|
|
|
|
|
Comprehensive Income |
| 487 |
| 378 |
| 408 |
|
|
|
|
|
|
|
|
|
Comprehensive Income Attributable to Noncontrolling Interests |
| 2 |
| 2 |
| 2 |
|
|
|
|
|
|
|
|
|
Comprehensive Income Attributable to CMS Energy |
| $ 485 |
| $ 376 |
| $ 406 |
|
| Years Ended December 31 | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| In Millions | ||||||||||||
Cash Flows from Financing Activities | ||||||||||||
| Proceeds from issuance of long-term debt | 1,400 | 1,218 | 1,265 | |||||||||
| Proceeds from EnerBank notes, net | 149 | 39 | 23 | |||||||||
| Issuance of common stock | 10 | 9 | 9 | |||||||||
| Retirement of long-term debt | (878 | ) | (1,154 | ) | (1,022 | ) | ||||||
| Payment of common stock dividends | (154 | ) | (114 | ) | (82 | ) | ||||||
| Payment of preferred stock dividends | (8 | ) | (11 | ) | (11 | ) | ||||||
| Redemption of preferred stock | (239 | ) | (4 | ) | (1 | ) | ||||||
| Payment of capital and finance lease obligations | (23 | ) | (23 | ) | (26 | ) | ||||||
| Increase (decrease) in notes payable | (40 | ) | 40 | — | ||||||||
| Other financing costs | (15 | ) | (35 | ) | (8 | ) | ||||||
| Net cash (used in) provided by financing activities | 202 | (35 | ) | 147 | ||||||||
Net Increase (Decrease) in Cash and Cash Equivalents, Including Assets Held for Sale | 158 | (122 | ) | (135 | ) | |||||||
Decrease (Increase) in Cash and Cash Equivalents Included in Assets Held for Sale | (1 | ) | 5 | (2 | ) | |||||||
Net Increase (Decrease) in Cash and Cash Equivalents | 157 | (117 | ) | (137 | ) | |||||||
Cash and Cash Equivalents, Beginning of Period | 90 | 207 | 344 | |||||||||
Cash and Cash Equivalents, End of Period | $ | 247 | $ | 90 | $ | 207 | ||||||
Other cash flow activities and non-cash investing and financing activities were: | ||||||||||||
Cash transactions | ||||||||||||
| Interest paid (net of amounts capitalized) | $ | 405 | $ | 422 | $ | 372 | ||||||
| Income taxes paid (net of refunds of $-, $-, and $2) | 14 | 17 | 3 | |||||||||
Non-cash transactions | ||||||||||||
| Capital expenditures not paid | $ | 56 | $ | 15 | $ | 31 | ||||||
| Other assets placed under capital lease | 16 | 16 | 5 | |||||||||
| December 31 | ||||||||
| 2010 | 2009 | |||||||
| In Millions | ||||||||
ASSETS | ||||||||
Current Assets | ||||||||
| Cash and cash equivalents | $ | 247 | $ | 90 | ||||
| Restricted cash and cash equivalents | 23 | 32 | ||||||
| Accounts receivable and accrued revenue, less allowances of $25 in 2010 and $23 in 2009 | 981 | 948 | ||||||
| Notes receivable | 70 | 81 | ||||||
| Accounts receivable — related parties | 10 | — | ||||||
| Accrued power supply revenue | 15 | 48 | ||||||
| Inventories at average cost | ||||||||
| Gas in underground storage | 946 | 1,043 | ||||||
| Materials and supplies | 104 | 118 | ||||||
| Generating plant fuel stock | 125 | 158 | ||||||
| Deferred property taxes | 180 | 172 | ||||||
| Regulatory assets | 19 | 19 | ||||||
| Assets held for sale | 2 | 2 | ||||||
| Prepayments and other current assets | 37 | 31 | ||||||
| Total current assets | 2,759 | 2,742 | ||||||
Plant, Property & Equipment (at cost) | ||||||||
| Plant, property & equipment, gross | 14,145 | 13,716 | ||||||
| Less accumulated depreciation, depletion and amortization | 4,646 | 4,540 | ||||||
| Plant, property & equipment, net | 9,499 | 9,176 | ||||||
| Construction work in progress | 570 | 506 | ||||||
| Total plant, property & equipment | 10,069 | 9,682 | ||||||
Non-current Assets | ||||||||
| Regulatory assets | 2,093 | 2,291 | ||||||
| Notes receivable, less allowances of $5 in 2010 and $6 in 2009 | 397 | 297 | ||||||
| Investments | 49 | 9 | ||||||
| Assets held for sale | 4 | 9 | ||||||
| Other non-current assets | 245 | 226 | ||||||
| Total non-current assets | 2,788 | 2,832 | ||||||
Total Assets | $ | 15,616 | $ | 15,256 | ||||
79
|
|
|
|
|
| In Millions |
| |||
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
| |||
|
|
|
|
|
|
|
| |||
Cash Flows from Operating Activities |
|
|
|
|
|
|
| |||
Net income |
| $ | 454 |
| $ | 384 |
| $ | 417 |
|
Adjustments to reconcile net income to net cash provided by operating activities |
|
|
|
|
|
|
| |||
Depreciation and amortization |
| 628 |
| 598 |
| 546 |
| |||
Deferred income taxes and investment tax credit |
| 268 |
| 227 |
| 167 |
| |||
Postretirement benefits expense |
| 144 |
| 187 |
| 161 |
| |||
Bad debt expense |
| 67 |
| 57 |
| 74 |
| |||
Other non-cash operating activities |
| 22 |
| 16 |
| 33 |
| |||
Postretirement benefits contributions |
| (229 | ) | (72 | ) | (323 | ) | |||
Proceeds from government grant |
| 69 |
| - |
| - |
| |||
Cash provided by (used in) changes in assets and liabilities |
|
|
|
|
|
|
| |||
Accounts receivable, notes receivable, and accrued revenue |
| (120 | ) | (147 | ) | 119 |
| |||
Inventories |
| 202 |
| 104 |
| (14 | ) | |||
Accounts payable |
| 6 |
| (5 | ) | 30 |
| |||
Accrued expenses |
| 16 |
| (38 | ) | (34 | ) | |||
Other current and non-current assets and liabilities |
| (106 | ) | (70 | ) | (7 | ) | |||
Net cash provided by operating activities |
| 1,421 |
| 1,241 |
| 1,169 |
| |||
|
|
|
|
|
|
|
| |||
Cash Flows from Investing Activities |
|
|
|
|
|
|
| |||
Capital expenditures (excludes assets placed under capital lease) |
| (1,325 | ) | (1,227 | ) | (882 | ) | |||
Cost to retire property |
| (56 | ) | (49 | ) | (54 | ) | |||
Increase in EnerBank notes receivable |
| (139 | ) | (63 | ) | (100 | ) | |||
Other investing activities |
| (12 | ) | (11 | ) | (22 | ) | |||
Net cash used in investing activities |
| (1,532 | ) | (1,350 | ) | (1,058 | ) | |||
|
|
|
|
|
|
|
| |||
Cash Flows from Financing Activities |
|
|
|
|
|
|
| |||
Proceeds from issuance of long-term debt |
| 1,025 |
| 1,650 |
| 375 |
| |||
Proceeds from EnerBank notes, net |
| 125 |
| 65 |
| 98 |
| |||
Issuance of common stock |
| 36 |
| 30 |
| 29 |
| |||
Retirement of long-term debt |
| (741 | ) | (1,527 | ) | (413 | ) | |||
Payment of DOE liability |
| - |
| - |
| (43 | ) | |||
Payment of common and preferred stock dividends |
| (273 | ) | (252 | ) | (211 | ) | |||
Redemption of preferred stock |
| (7 | ) | - |
| - |
| |||
Payment of capital lease obligations and other financing costs |
| (35 | ) | (35 | ) | (34 | ) | |||
Increase in notes payable |
| 60 |
| 110 |
| - |
| |||
Net cash provided by (used in) financing activities |
| 190 |
| 41 |
| (199 | ) | |||
|
|
|
|
|
|
|
| |||
Net Increase (Decrease) in Cash and Cash Equivalents, Including Assets Held for Sale |
| 79 |
| (68 | ) | (88 | ) | |||
Increase in Cash and Cash Equivalents included in Assets Held for Sale |
| - |
| - |
| 2 |
| |||
|
|
|
|
|
|
|
| |||
Net Increase (Decrease) in Cash and Cash Equivalents |
| 79 |
| (68 | ) | (86 | ) | |||
Cash and Cash Equivalents, Beginning of Period |
| 93 |
| 161 |
| 247 |
| |||
|
|
|
|
|
|
|
| |||
Cash and Cash Equivalents, End of Period |
| $ | 172 |
| $ | 93 |
| $ | 161 |
|
| December 31 | ||||||||
| 2010 | 2009 | |||||||
| In Millions | ||||||||
LIABILITIES AND EQUITY | ||||||||
Current Liabilities | ||||||||
| Current portion of long-term debt, capital and finance lease obligations | $ | 750 | $ | 694 | ||||
| Notes payable | — | 40 | ||||||
| Accounts payable | 492 | 509 | ||||||
| Accounts payable — related parties | 9 | — | ||||||
| Accrued rate refunds | 19 | 21 | ||||||
| Accrued interest | 102 | 96 | ||||||
| Accrued taxes | 302 | 283 | ||||||
| Deferred income taxes | 180 | 43 | ||||||
| Regulatory liabilities | 22 | 145 | ||||||
| Liabilities held for sale | 1 | — | ||||||
| Other current liabilities | 144 | 123 | ||||||
| Total current liabilities | 2,021 | 1,954 | ||||||
Non-current Liabilities | ||||||||
| Long-term debt | 6,448 | 5,895 | ||||||
| Non-current portion of capital and finance lease obligations | 188 | 197 | ||||||
| Regulatory liabilities | 1,988 | 1,991 | ||||||
| Postretirement benefits | 1,135 | 1,460 | ||||||
| Asset retirement obligations | 245 | 229 | ||||||
| Deferred investment tax credit | 49 | 51 | ||||||
| Deferred income taxes | 438 | 231 | ||||||
| Other non-current liabilities | 267 | 310 | ||||||
| Total non-current liabilities | 10,758 | 10,364 | ||||||
| Commitments and Contingencies (Notes 5, 6, 7, 9, and 10) | ||||||||
Equity | ||||||||
| Common stockholders’ equity | ||||||||
| Common stock, authorized 350.0 shares; outstanding 249.6 shares in 2010 and 227.9 shares in 2009 | 2 | 2 | ||||||
| Other paid-in capital | 4,588 | 4,560 | ||||||
| Accumulated other comprehensive loss | (40 | ) | (33 | ) | ||||
| Accumulated deficit | (1,757 | ) | (1,927 | ) | ||||
| Total common stockholders’ equity | 2,793 | 2,602 | ||||||
| Preferred stock | — | 239 | ||||||
| Noncontrolling interests | 44 | 97 | ||||||
| Total equity | 2,837 | 2,938 | ||||||
Total Liabilities and Equity | $ | 15,616 | $ | 15,256 | ||||
|
|
|
|
|
| In Millions |
| |||
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
| |||
|
|
|
|
|
|
|
| |||
Other cash flow activities and non-cash investing and financing activities |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Cash transactions |
|
|
|
|
|
|
| |||
Interest paid (net of amounts capitalized) |
| $ | 382 |
| $ | 377 |
| $ | 397 |
|
Income taxes paid |
| 34 |
| 19 |
| 27 |
| |||
|
|
|
|
|
|
|
| |||
Non-cash transactions |
|
|
|
|
|
|
| |||
Capital expenditures not paid |
| 176 |
| 110 |
| 92 |
| |||
Other assets placed under capital lease |
| 6 |
| 9 |
| 4 |
| |||
The accompanying notes are an integral part of these statements.
80
CMS Energy Corporation
| Years Ended December 31 | ||||||||||||||||||||||||
| 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | |||||||||||||||||||
| Number of Shares in Thousands | In Millions | |||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||
| At beginning and end of period | $ | 2 | $ | 2 | $ | 2 | ||||||||||||||||||
Other Paid-in Capital | ||||||||||||||||||||||||
| At beginning of period | 227,891 | 226,414 | 225,146 | 4,560 | 4,533 | 4,517 | ||||||||||||||||||
| Common stock issued | 22,090 | 1,793 | 1,751 | 22 | 17 | 17 | ||||||||||||||||||
| Common stock repurchased | (148 | ) | (78 | ) | (38 | ) | (2 | ) | (1 | ) | (1 | ) | ||||||||||||
| Common stock reacquired | (205 | ) | (238 | ) | (445 | ) | — | — | — | |||||||||||||||
| Conversion option on convertible debt | — | — | — | — | 11 | — | ||||||||||||||||||
| Charge for deferred issuance costs | — | — | — | 8 | — | — | ||||||||||||||||||
| At end of period | 249,628 | 227,891 | 226,414 | 4,588 | 4,560 | 4,533 | ||||||||||||||||||
Accumulated Other Comprehensive Loss | ||||||||||||||||||||||||
| Retirement benefits liability | ||||||||||||||||||||||||
| At beginning of period | (32 | ) | (27 | ) | (15 | ) | ||||||||||||||||||
| Net loss arising during the period(a) | (9 | ) | (6 | ) | (12 | ) | ||||||||||||||||||
| Amortization of net actuarial loss(a) | 1 | 1 | — | |||||||||||||||||||||
| Prior service credit adjustment(a) | 1 | — | — | |||||||||||||||||||||
| At end of period | (39 | ) | (32 | ) | (27 | ) | ||||||||||||||||||
| Investments | ||||||||||||||||||||||||
| At beginning of period | — | — | — | |||||||||||||||||||||
| Unrealized gain (loss) on investments(a) | — | 5 | (15 | ) | ||||||||||||||||||||
| Reclassification adjustments included in net income(a) | — | (5 | ) | 15 | ||||||||||||||||||||
| At end of period | — | — | — | |||||||||||||||||||||
| Derivative instruments | ||||||||||||||||||||||||
| At beginning and end of period | (1 | ) | (1 | ) | (1 | ) | ||||||||||||||||||
| Foreign currency translation | ||||||||||||||||||||||||
| At beginning of period | — | — | (128 | ) | ||||||||||||||||||||
| Sale of interests in TGN(a) | — | — | 128 | |||||||||||||||||||||
| At end of period | — | — | — | |||||||||||||||||||||
| At end of period | (40 | ) | (33 | ) | (28 | ) | ||||||||||||||||||
Accumulated Deficit | ||||||||||||||||||||||||
| At beginning of period | (1,927 | ) | (2,031 | ) | (2,227 | ) | ||||||||||||||||||
| Effects of changing the retirement plans measurement date | ||||||||||||||||||||||||
| Service cost, interest cost, and expected return on plan assets for December 1 through December 31, 2007, net of tax | — | — | (4 | ) | ||||||||||||||||||||
| Additional loss from December 1 through December 31, 2007, net of tax | — | — | (2 | ) | ||||||||||||||||||||
| Net income attributable to CMS Energy(a) | 340 | 229 | 295 | |||||||||||||||||||||
| Common stock dividends declared | (154 | ) | (114 | ) | (82 | ) | ||||||||||||||||||
| Preferred stock dividends declared | (8 | ) | (11 | ) | (11 | ) | ||||||||||||||||||
| Charge for deferred issuance costs | (8 | ) | — | — | ||||||||||||||||||||
| At end of period | (1,757 | ) | (1,927 | ) | (2,031 | ) | ||||||||||||||||||
Preferred Stock | ||||||||||||||||||||||||
| At beginning of period | 239 | 243 | 250 | |||||||||||||||||||||
| Conversion of preferred stock | (239 | ) | (4 | ) | (7 | ) | ||||||||||||||||||
| At end of period | — | 239 | 243 | |||||||||||||||||||||
Noncontrolling Interests | ||||||||||||||||||||||||
| At beginning of period | 97 | 96 | 97 | |||||||||||||||||||||
| Income attributable to noncontrolling interests | 3 | 11 | 7 | |||||||||||||||||||||
| Distributions and other changes in noncontrolling interests | (56 | ) | (10 | ) | (8 | ) | ||||||||||||||||||
| At end of period | 44 | 97 | 96 | |||||||||||||||||||||
Total Equity | $ | 2,837 | $ | 2,938 | $ | 2,815 | ||||||||||||||||||
81
ASSETS |
|
|
|
|
| ||
|
|
|
| In Millions |
| ||
December 31 |
| 2013 |
| 2012 |
| ||
|
|
|
|
|
| ||
Current Assets |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 172 |
| $ | 93 |
|
Restricted cash and cash equivalents |
| 32 |
| 29 |
| ||
Accounts receivable and accrued revenue, less allowances of $33 in 2013 and $32 in 2012 |
| 914 |
| 855 |
| ||
Notes receivable |
| 63 |
| 41 |
| ||
Accounts receivable – related parties |
| 10 |
| 10 |
| ||
Accrued power supply revenue |
| - |
| 32 |
| ||
Inventories at average cost |
|
|
|
|
| ||
Gas in underground storage |
| 660 |
| 820 |
| ||
Materials and supplies |
| 107 |
| 96 |
| ||
Generating plant fuel stock |
| 114 |
| 168 |
| ||
Deferred income taxes |
| 126 |
| - |
| ||
Deferred property taxes |
| 202 |
| 190 |
| ||
Regulatory assets |
| 40 |
| 35 |
| ||
Prepayments and other current assets |
| 86 |
| 53 |
| ||
Total current assets |
| 2,526 |
| 2,422 |
| ||
|
|
|
|
|
| ||
Plant, Property, and Equipment |
|
|
|
|
| ||
Plant, property, and equipment, gross |
| 16,184 |
| 15,592 |
| ||
Less accumulated depreciation and amortization |
| 5,087 |
| 5,121 |
| ||
Plant, property, and equipment, net |
| 11,097 |
| 10,471 |
| ||
Construction work in progress |
| 1,149 |
| 1,080 |
| ||
Total plant, property, and equipment |
| 12,246 |
| 11,551 |
| ||
|
|
|
|
|
| ||
Other Non-current Assets |
|
|
|
|
| ||
Regulatory assets |
| 1,530 |
| 2,287 |
| ||
Accounts and notes receivable, less allowances of $5 in 2013 and 2012 |
| 646 |
| 521 |
| ||
Investments |
| 59 |
| 57 |
| ||
Other |
| 409 |
| 293 |
| ||
Total other non-current assets |
| 2,644 |
| 3,158 |
| ||
|
|
|
|
|
| ||
Total Assets |
| $ | 17,416 |
| $ | 17,131 |
|
| Years Ended December 31 | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| In Millions | ||||||||||||
(a) Disclosure of Comprehensive Income: | ||||||||||||
| Net income | $ | 343 | $ | 240 | $ | 302 | ||||||
| Income attributable to noncontrolling interests | 3 | 11 | 7 | |||||||||
| Net income attributable to CMS Energy | $ | 340 | $ | 229 | $ | 295 | ||||||
| Retirement benefits liability: | ||||||||||||
| Net loss arising during the period, net of tax benefit of ($6) in 2010, ($3) in 2009, and ($6) in 2008 | (9 | ) | (6 | ) | (12 | ) | ||||||
| Amortization of net actuarial loss, net of tax of $- in 2010 and 2009 | 1 | 1 | — | |||||||||
| Prior service credit adjustment, net of tax of $1 in 2010 | 1 | — | — | |||||||||
| Investments: | ||||||||||||
| Unrealized gain (loss) on investments, net of tax (tax benefit) of $- in 2010, $3 in 2009, and ($9) in 2008 | — | 5 | (15 | ) | ||||||||
| Reclassification adjustments included in net income (loss), net of tax (tax benefit) of $- in 2010, ($3) in 2009, and $9 in 2008 | — | (5 | ) | 15 | ||||||||
| Foreign currency translation: | ||||||||||||
| Sale of interests in TGN, net of tax of $69 | — | — | 128 | |||||||||
| Total Comprehensive Income | $ | 333 | $ | 224 | $ | 411 | ||||||
LIABILITIES AND EQUITY |
|
|
|
|
| ||
|
|
|
| In Millions |
| ||
December 31 |
| 2013 |
| 2012 |
| ||
|
|
|
|
|
| ||
Current Liabilities |
|
|
|
|
| ||
Current portion of long-term debt, capital leases, and financing obligation |
| $ | 562 |
| $ | 541 |
|
Notes payable |
| 170 |
| 110 |
| ||
Accounts payable |
| 585 |
| 512 |
| ||
Accounts payable – related parties |
| 10 |
| 9 |
| ||
Accrued rate refunds |
| 12 |
| 6 |
| ||
Accrued interest |
| 96 |
| 95 |
| ||
Accrued taxes |
| 297 |
| 279 |
| ||
Deferred income taxes |
| - |
| 68 |
| ||
Regulatory liabilities |
| 67 |
| 25 |
| ||
Other current liabilities |
| 146 |
| 152 |
| ||
Total current liabilities |
| 1,945 |
| 1,797 |
| ||
|
|
|
|
|
| ||
Non-current Liabilities |
|
|
|
|
| ||
Long-term debt |
| 7,101 |
| 6,710 |
| ||
Non-current portion of capital leases and financing obligation |
| 138 |
| 153 |
| ||
Regulatory liabilities |
| 2,215 |
| 2,101 |
| ||
Postretirement benefits |
| 239 |
| 1,451 |
| ||
Asset retirement obligations |
| 325 |
| 312 |
| ||
Deferred investment tax credit |
| 40 |
| 43 |
| ||
Deferred income taxes |
| 1,616 |
| 1,015 |
| ||
Other non-current liabilities |
| 306 |
| 311 |
| ||
Total non-current liabilities |
| 11,980 |
| 12,096 |
| ||
|
|
|
|
|
| ||
Commitments and Contingencies (Notes 2, 3, 4, and 6) |
|
|
|
|
| ||
|
|
|
|
|
| ||
Equity |
|
|
|
|
| ||
Common stockholders equity |
|
|
|
|
| ||
Common stock, authorized 350.0 shares; outstanding 266.1 shares in 2013 and 264.1 shares in 2012 |
| 3 |
| 3 |
| ||
Other paid-in capital |
| 4,715 |
| 4,669 |
| ||
Accumulated other comprehensive loss |
| (22 | ) | (55 | ) | ||
Accumulated deficit |
| (1,242 | ) | (1,423 | ) | ||
Total common stockholders equity |
| 3,454 |
| 3,194 |
| ||
Noncontrolling interests |
| 37 |
| 44 |
| ||
Total equity |
| 3,491 |
| 3,238 |
| ||
|
|
|
|
|
| ||
Total Liabilities and Equity |
| $ | 17,416 |
| $ | 17,131 |
|
The accompanying notes are an integral part of these statements.
82
CMS Energy Corporation
83
|
|
|
|
|
|
|
|
|
|
|
| In Millions | |||||
|
| Number of Shares |
|
|
|
|
|
|
|
| |||||||
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
| 2013 |
| 2012 |
| 2011 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total Equity at Beginning of Period |
|
|
|
|
|
|
| $ | 3,238 |
| $ | 3,072 |
| $ | 2,837 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
At beginning of period |
|
|
|
|
|
|
| 3 |
| 3 |
| 2 |
| ||||
Common stock issued |
|
|
|
|
|
|
| - |
| - |
| 1 |
| ||||
At end of period |
|
|
|
|
|
|
| 3 |
| 3 |
| 3 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other Paid-in Capital |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
At beginning of period |
| 264,072 |
| 254,100 |
| 249,628 |
| 4,669 |
| 4,627 |
| 4,588 |
| ||||
Common stock issued |
| 2,238 |
| 10,107 |
| 4,541 |
| 51 |
| 45 |
| 40 |
| ||||
Common stock reissued |
| 205 |
| 272 |
| 269 |
| 5 |
| 6 |
| 5 |
| ||||
Common stock repurchased |
| (356 | ) | (389 | ) | (323 | ) | (10 | ) | (9 | ) | (6 | ) | ||||
Common stock reacquired |
| (22 | ) | (18 | ) | (15 | ) | - |
| - |
| - |
| ||||
At end of period |
| 266,137 |
| 264,072 |
| 254,100 |
| 4,715 |
| 4,669 |
| 4,627 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Accumulated Other Comprehensive Loss |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
At beginning of period |
|
|
|
|
|
|
| (55 | ) | (49 | ) | (40 | ) | ||||
Retirement benefits liability |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
At beginning of period |
|
|
|
|
|
|
| (56 | ) | (48 | ) | (39 | ) | ||||
Net gain (loss) arising during the period |
|
|
|
|
|
|
| 26 |
| (10 | ) | (11 | ) | ||||
Prior service credit adjustment |
|
|
|
|
|
|
| 5 |
| - |
| - |
| ||||
Amortization of net actuarial loss |
|
|
|
|
|
|
| 4 |
| 2 |
| 2 |
| ||||
At end of period |
|
|
|
|
|
|
| (21 | ) | (56 | ) | (48 | ) | ||||
Investments |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
At beginning of period |
|
|
|
|
|
|
| 2 |
| - |
| - |
| ||||
Unrealized gain (loss) on investments |
|
|
|
|
|
|
| (2 | ) | 2 |
| - |
| ||||
At end of period |
|
|
|
|
|
|
| - |
| 2 |
| - |
| ||||
Derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
At beginning and end of period |
|
|
|
|
|
|
| (1 | ) | (1 | ) | (1 | ) | ||||
At end of period |
|
|
|
|
|
|
| (22 | ) | (55 | ) | (49 | ) | ||||
| Years Ended December 31 | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| In Millions | ||||||||||||
Operating Revenue | $ | 6,156 | $ | 5,963 | $ | 6,421 | ||||||
Operating Expenses | ||||||||||||
| Fuel for electric generation | 520 | 460 | 483 | |||||||||
| Purchased and interchange power | 1,224 | 1,151 | 1,313 | |||||||||
| Purchased power — related parties | 84 | 81 | 75 | |||||||||
| Cost of gas sold | 1,516 | 1,778 | 2,079 | |||||||||
| Maintenance and other operating expenses | 1,109 | 1,045 | 935 | |||||||||
| Depreciation and amortization | 572 | 559 | 574 | |||||||||
| General taxes | 205 | 209 | 195 | |||||||||
| Loss (gain) on asset sales, net | — | (9 | ) | 1 | ||||||||
| Total operating expenses | 5,230 | 5,274 | 5,655 | |||||||||
Operating Income | 926 | 689 | 766 | |||||||||
Other Income (Expense) | ||||||||||||
| Interest and dividends | 18 | 17 | 20 | |||||||||
| Allowance for equity funds used during construction | 5 | 6 | 6 | |||||||||
| Other income | 31 | 47 | 45 | |||||||||
| Other expense | (15 | ) | (11 | ) | (28 | ) | ||||||
| Total other income | 39 | 59 | 43 | |||||||||
Interest Charges | ||||||||||||
| Interest on long-term debt | 246 | 250 | 229 | |||||||||
| Other interest | 34 | 46 | 22 | |||||||||
| Allowance for borrowed funds used during construction | (3 | ) | (4 | ) | (4 | ) | ||||||
| Total interest charges | 277 | 292 | 247 | |||||||||
Income Before Income Taxes | 688 | 456 | 562 | |||||||||
Income Tax Expense | 254 | 163 | 198 | |||||||||
Net Income | 434 | 293 | 364 | |||||||||
Preferred Stock Dividends | 2 | 2 | 2 | |||||||||
Net Income Available to Common Stockholder | $ | 432 | $ | 291 | $ | 362 | ||||||
|
|
|
|
|
| In Millions | ||||
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
| |||
|
|
|
|
|
|
|
| |||
Accumulated Deficit |
|
|
|
|
|
|
| |||
At beginning of period |
| (1,423 | ) | (1,553 | ) | (1,757 | ) | |||
Net income attributable to CMS Energy |
| 452 |
| 382 |
| 415 |
| |||
Common stock dividends declared |
| (271 | ) | (252 | ) | (211 | ) | |||
At end of period |
| (1,242 | ) | (1,423 | ) | (1,553 | ) | |||
|
|
|
|
|
|
|
| |||
Noncontrolling Interests |
|
|
|
|
|
|
| |||
At beginning of period |
| 44 |
| 44 |
| 44 |
| |||
Income attributable to noncontrolling interests |
| 2 |
| 2 |
| 2 |
| |||
Distributions, redemptions, and other changes in noncontrolling interests |
| (9 | ) | (2 | ) | (2 | ) | |||
At end of period |
| 37 |
| 44 |
| 44 |
| |||
|
|
|
|
|
|
|
| |||
Total Equity at End of Period |
| $ | 3,491 |
| $ | 3,238 |
| $ | 3,072 |
|
The accompanying notes are an integral part of these statements.
84
85
| Years Ended December 31 | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| In Millions | ||||||||||||
Cash Flows from Operating Activities | ||||||||||||
| Net Income | $ | 434 | $ | 293 | $ | 364 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities | ||||||||||||
| Depreciation and amortization | 572 | 559 | 574 | |||||||||
| Deferred income taxes and investment tax credit | 246 | 67 | 196 | |||||||||
| Postretirement benefits expense | 208 | 177 | 141 | |||||||||
| Capital lease and other amortization | 24 | 26 | 30 | |||||||||
| Bad debt expense | 53 | 47 | 47 | |||||||||
| Other non-cash operating activities | — | (35 | ) | (32 | ) | |||||||
| Postretirement benefits contributions | (447 | ) | (254 | ) | (50 | ) | ||||||
| Changes in other assets and liabilities: | ||||||||||||
| Increase in accounts receivable, notes receivable, and accrued revenue | (92 | ) | (92 | ) | (79 | ) | ||||||
| Decrease (increase) in accrued power supply revenue | 33 | (41 | ) | 35 | ||||||||
| Decrease (increase) in inventories | 132 | 91 | (89 | ) | ||||||||
| Increase (decrease) in accounts payable | (16 | ) | (50 | ) | 1 | |||||||
| Increase (decrease) in accrued expenses | (83 | ) | 2 | (79 | ) | |||||||
| Decrease (increase) in other current and non-current assets | (21 | ) | 60 | 14 | ||||||||
| Increase (decrease) in current and non-current regulatory liabilities | (69 | ) | 101 | (178 | ) | |||||||
| Decrease in other current and non-current liabilities | (64 | ) | (29 | ) | (22 | ) | ||||||
| Net cash provided by operating activities | 910 | 922 | 873 | |||||||||
Cash Flows from Investing Activities | ||||||||||||
| Capital expenditures (excludes assets placed under capital lease) | (815 | ) | (811 | ) | (789 | ) | ||||||
| Cost to retire property | (43 | ) | (49 | ) | (34 | ) | ||||||
| Other investing activities | (1 | ) | 10 | — | ||||||||
| Net cash used in investing activities | (859 | ) | (850 | ) | (823 | ) | ||||||
86
|
|
|
|
|
| In Millions |
| |||
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
| |||
|
|
|
|
|
|
|
| |||
Operating Revenue |
| $ | 6,321 |
| $ | 6,013 |
| $ | 6,253 |
|
|
|
|
|
|
|
|
| |||
Operating Expenses |
|
|
|
|
|
|
| |||
Fuel for electric generation |
| 541 |
| 517 |
| 559 |
| |||
Purchased and interchange power |
| 1,361 |
| 1,339 |
| 1,267 |
| |||
Purchased power – related parties |
| 89 |
| 86 |
| 81 |
| |||
Cost of gas sold |
| 1,187 |
| 1,110 |
| 1,438 |
| |||
Maintenance and other operating expenses |
| 1,174 |
| 1,162 |
| 1,175 |
| |||
Depreciation and amortization |
| 622 |
| 592 |
| 542 |
| |||
General taxes |
| 229 |
| 223 |
| 206 |
| |||
Total operating expenses |
| 5,203 |
| 5,029 |
| 5,268 |
| |||
|
|
|
|
|
|
|
| |||
Operating Income |
| 1,118 |
| 984 |
| 985 |
| |||
|
|
|
|
|
|
|
| |||
Other Income (Expense) |
|
|
|
|
|
|
| |||
Interest income |
| 2 |
| 4 |
| 7 |
| |||
Interest and dividend income – related parties |
| 1 |
| 1 |
| 2 |
| |||
Allowance for equity funds used during construction |
| 6 |
| 8 |
| 6 |
| |||
Other income |
| 14 |
| 16 |
| 19 |
| |||
Other expense |
| (16 | ) | (33 | ) | (20 | ) | |||
Total other income (expense) |
| 7 |
| (4 | ) | 14 |
| |||
|
|
|
|
|
|
|
| |||
Interest Charges |
|
|
|
|
|
|
| |||
Interest on long-term debt |
| 237 |
| 232 |
| 251 |
| |||
Other interest expense |
| 11 |
| 16 |
| 18 |
| |||
Allowance for borrowed funds used during construction |
| (3 | ) | (4 | ) | (4 | ) | |||
Total interest charges |
| 245 |
| 244 |
| 265 |
| |||
|
|
|
|
|
|
|
| |||
Income Before Income Taxes |
| 880 |
| 736 |
| 734 |
| |||
Income Tax Expense |
| 346 |
| 297 |
| 267 |
| |||
|
|
|
|
|
|
|
| |||
Net Income |
| 534 |
| 439 |
| 467 |
| |||
Preferred Stock Dividends and Distribution |
| 2 |
| 2 |
| 2 |
| |||
|
|
|
|
|
|
|
| |||
Net Income Available to Common Stockholder |
| $ | 532 |
| $ | 437 |
| $ | 465 |
|
| Years Ended December 31 | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| In Millions | ||||||||||||
Cash Flows from Financing Activities | ||||||||||||
| Proceeds from issuance of long-term debt | 600 | 500 | 600 | |||||||||
| Retirement of long-term debt | (482 | ) | (387 | ) | (444 | ) | ||||||
| Payment of common stock dividends | (358 | ) | (285 | ) | (297 | ) | ||||||
| Payment of preferred stock dividends | (2 | ) | (2 | ) | (2 | ) | ||||||
| Stockholder’s contribution | 250 | 100 | — | |||||||||
| Payment of capital and finance lease obligations | (23 | ) | (23 | ) | (26 | ) | ||||||
| Other financing costs | (4 | ) | (5 | ) | (7 | ) | ||||||
| Net cash used in financing activities | (19 | ) | (102 | ) | (176 | ) | ||||||
Net Increase (Decrease) in Cash and Cash Equivalents | 32 | (30 | ) | (126 | ) | |||||||
Cash and Cash Equivalents, Beginning of Period | 39 | 69 | 195 | |||||||||
Cash and Cash Equivalents, End of Period | $ | 71 | $ | 39 | $ | 69 | ||||||
Other cash flow activities and non-cash investing and financing activities were: | ||||||||||||
Cash transactions | ||||||||||||
| Interest paid (net of amounts capitalized) | $ | 259 | $ | 276 | $ | 223 | ||||||
| Income taxes paid | 149 | 104 | 84 | |||||||||
Non-cash transactions | ||||||||||||
| Capital expenditures not paid | $ | 56 | $ | 15 | $ | 31 | ||||||
| Other assets placed under capital lease | 16 | 16 | 5 | |||||||||
87
Consumers Energy Company
| December 31 | ||||||||
| 2010 | 2009 | |||||||
| In Millions | ||||||||
ASSETS | ||||||||
Current Assets | ||||||||
| Cash and cash equivalents | $ | 71 | $ | 39 | ||||
| Restricted cash and cash equivalents | 23 | 22 | ||||||
| Accounts receivable and accrued revenue, less allowances of $23 in 2010 and $21 in 2009 | 963 | 935 | ||||||
| Notes receivable | 55 | 79 | ||||||
| Accrued power supply revenue | 15 | 48 | ||||||
| Accounts receivable — related parties | 1 | 2 | ||||||
| Inventories at average cost | ||||||||
| Gas in underground storage | 941 | 1,038 | ||||||
| Materials and supplies | 100 | 111 | ||||||
| Generating plant fuel stock | 124 | 148 | ||||||
| Deferred property taxes | 180 | 172 | ||||||
| Regulatory assets | 19 | 19 | ||||||
| Prepayments and other current assets | 27 | 23 | ||||||
| Total current assets | 2,519 | 2,636 | ||||||
Plant, Property & Equipment (at cost) | ||||||||
| Plant, property & equipment, gross | 14,022 | 13,352 | ||||||
| Less accumulated depreciation, depletion, and amortization | 4,593 | 4,386 | ||||||
| Plant, property & equipment, net | 9,429 | 8,966 | ||||||
| Construction work in progress | 566 | 505 | ||||||
| Total plant, property & equipment | 9,995 | 9,471 | ||||||
Non-current Assets | ||||||||
| Regulatory assets | 2,093 | 2,291 | ||||||
| Investments | 34 | 29 | ||||||
| Other non-current assets | 198 | 195 | ||||||
| Total non-current assets | 2,325 | 2,515 | ||||||
Total Assets | $ | 14,839 | $ | 14,622 | ||||
88
|
|
|
|
|
| In Millions |
| |||
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
| |||
|
|
|
|
|
|
|
| |||
Net Income |
| $ | 534 |
| $ | 439 |
| $ | 467 |
|
|
|
|
|
|
|
|
| |||
Retirement Benefits Liability |
|
|
|
|
|
|
| |||
Net gain (loss) arising during the period, net of tax (tax benefit) of $4, $(5), and $(3) |
| 5 |
| (8 | ) | (4 | ) | |||
Amortization of net actuarial loss, net of tax of $2, $1, and $1 |
| 3 |
| 2 |
| 1 |
| |||
|
|
|
|
|
|
|
| |||
Investments |
|
|
|
|
|
|
| |||
Unrealized gain on investments, net of tax of $-, $2, and $- |
| 1 |
| 3 |
| 1 |
| |||
Reclassification adjustments included in net income, net of tax of $(1), $(2), and $- |
| (3 | ) | (3 | ) | - |
| |||
|
|
|
|
|
|
|
| |||
Other Comprehensive Income (Loss) |
| 6 |
| (6 | ) | (2 | ) | |||
|
|
|
|
|
|
|
| |||
Comprehensive Income |
| $ | 540 |
| $ | 433 |
| $ | 465 |
|
| December 31 | ||||||||
| 2010 | 2009 | |||||||
| In Millions | ||||||||
LIABILITIES AND EQUITY | ||||||||
Current Liabilities | ||||||||
| Current portion of long-term debt, capital and finance lease obligations | $ | 61 | $ | 365 | ||||
| Accounts payable | 471 | 490 | ||||||
| Accounts payable — related parties | 11 | 11 | ||||||
| Accrued rate refunds | 19 | 21 | ||||||
| Accrued interest | 74 | 70 | ||||||
| Accrued taxes | 199 | 277 | ||||||
| Deferred income taxes | 209 | 206 | ||||||
| Regulatory liabilities | 22 | 145 | ||||||
| Other current liabilities | 95 | 86 | ||||||
| Total current liabilities | 1,161 | 1,671 | ||||||
Non-current Liabilities | ||||||||
| Long-term debt | 4,488 | 4,063 | ||||||
| Non-current portion of capital and finance lease obligations | 188 | 197 | ||||||
| Regulatory liabilities | 1,988 | 1,991 | ||||||
| Postretirement benefits | 1,076 | 1,396 | ||||||
| Asset retirement obligations | 244 | 228 | ||||||
| Deferred investment tax credit | 49 | 51 | ||||||
| Deferred income taxes | 1,289 | 926 | ||||||
| Other non-current liabilities | 176 | 241 | ||||||
| Total non-current liabilities | 9,498 | 9,093 | ||||||
| Commitments and Contingencies (Notes 5, 6, 7, 9, and 10) | ||||||||
Equity | ||||||||
| Common stockholder’s equity | ||||||||
| Common stock, authorized 125.0 shares; outstanding 84.1 shares for both periods | 841 | 841 | ||||||
| Other paid-in capital | 2,832 | 2,582 | ||||||
| Accumulated other comprehensive income | — | 2 | ||||||
| Retained earnings | 463 | 389 | ||||||
| Total common stockholder’s equity | 4,136 | 3,814 | ||||||
| Preferred stock | 44 | 44 | ||||||
| Total equity | 4,180 | 3,858 | ||||||
Total Liabilities and Equity | $ | 14,839 | $ | 14,622 | ||||
| Years Ended December 31 | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| In Millions | ||||||||||||
Common Stock | ||||||||||||
| At beginning and end of period(a) | $ | 841 | $ | 841 | $ | 841 | ||||||
Other Paid-in Capital | ||||||||||||
| At beginning of period | 2,582 | 2,482 | 2,482 | |||||||||
| Stockholder’s contribution | 250 | 100 | — | |||||||||
| At end of period | 2,832 | 2,582 | 2,482 | |||||||||
Accumulated Other Comprehensive Income (Loss) | ||||||||||||
| Retirement benefits liability | ||||||||||||
| At beginning of period | (11 | ) | (7 | ) | (15 | ) | ||||||
| Retirement benefits liability adjustments(b) | — | — | 6 | |||||||||
| Net gain (loss) arising during the period(b) | (5 | ) | (4 | ) | 2 | |||||||
| At end of period | (16 | ) | (11 | ) | (7 | ) | ||||||
| Investments | ||||||||||||
| At beginning of period | 13 | 6 | 15 | |||||||||
| Unrealized gain (loss) on investments(b) | 3 | 10 | (19 | ) | ||||||||
| Reclassification adjustments included in net income(b) | — | (3 | ) | 10 | ||||||||
| At end of period | 16 | 13 | 6 | |||||||||
| At end of period | — | 2 | (1 | ) | ||||||||
Retained Earnings | ||||||||||||
| At beginning of period | 389 | 383 | 324 | |||||||||
| Effects of changing the retirement plans measurement date | ||||||||||||
| Service cost, interest cost, and expected return on plan assets for December 1 through December 31, 2007, net of tax | — | — | (4 | ) | ||||||||
| Additional loss from December 1 through December 31, 2007, net of tax | — | — | (2 | ) | ||||||||
| Net income(b) | 434 | 293 | 364 | |||||||||
| Common stock dividends declared | (358 | ) | (285 | ) | (297 | ) | ||||||
| Preferred stock dividends declared | (2 | ) | (2 | ) | (2 | ) | ||||||
| At end of period | 463 | 389 | 383 | |||||||||
Preferred Stock | ||||||||||||
| At beginning and end of period | 44 | 44 | 44 | |||||||||
Total Equity | $ | 4,180 | $ | 3,858 | $ | 3,749 | ||||||
90
|
|
|
|
|
| In Millions |
| |||
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
| |||
|
|
|
|
|
|
|
| |||
Cash Flows from Operating Activities |
|
|
|
|
|
|
| |||
Net income |
| $ | 534 |
| $ | 439 |
| $ | 467 |
|
Adjustments to reconcile net income to net cash provided by operating activities |
|
|
|
|
|
|
| |||
Depreciation and amortization |
| 622 |
| 592 |
| 542 |
| |||
Deferred income taxes and investment tax credit |
| 164 |
| 150 |
| 161 |
| |||
Postretirement benefits expense |
| 142 |
| 184 |
| 158 |
| |||
Bad debt expense |
| 63 |
| 53 |
| 70 |
| |||
Other non-cash operating activities |
| 12 |
| 14 |
| 16 |
| |||
Postretirement benefits contributions |
| (222 | ) | (68 | ) | (315 | ) | |||
Proceeds from government grant |
| 69 |
| - |
| - |
| |||
Cash provided by (used in) changes in assets and liabilities |
|
|
|
|
|
|
| |||
Accounts receivable, notes receivable, and accrued revenue |
| (116 | ) | (145 | ) | 112 |
| |||
Inventories |
| 205 |
| 107 |
| (17 | ) | |||
Accounts payable |
| 14 |
| 7 |
| 43 |
| |||
Accrued expenses |
| (27 | ) | 51 |
| 74 |
| |||
Other current and non-current assets and liabilities |
| (109 | ) | (31 | ) | 12 |
| |||
Net cash provided by operating activities |
| 1,351 |
| 1,353 |
| 1,323 |
| |||
|
|
|
|
|
|
|
| |||
Cash Flows from Investing Activities |
|
|
|
|
|
|
| |||
Capital expenditures (excludes assets placed under capital lease) |
| (1,320 | ) | (1,222 | ) | (876 | ) | |||
Cost to retire property |
| (56 | ) | (49 | ) | (56 | ) | |||
Other investing activities |
| (11 | ) | (8 | ) | (19 | ) | |||
Net cash used in investing activities |
| (1,387 | ) | (1,279 | ) | (951 | ) | |||
|
|
|
|
|
|
|
| |||
Cash Flows from Financing Activities |
|
|
|
|
|
|
| |||
Proceeds from issuance of long-term debt |
| 750 |
| 1,075 |
| - |
| |||
Retirement of long-term debt |
| (466 | ) | (1,064 | ) | (37 | ) | |||
Payment of DOE liability |
| - |
| - |
| (43 | ) | |||
Payment of common and preferred stock dividends |
| (408 | ) | (395 | ) | (376 | ) | |||
Redemption of preferred stock |
| (7 | ) | - |
| - |
| |||
Stockholder contribution |
| 150 |
| 150 |
| 125 |
| |||
Payment of capital lease obligations and other financing costs |
| (30 | ) | (30 | ) | (27 | ) | |||
Increase in notes payable |
| 60 |
| 110 |
| - |
| |||
Net cash provided by (used in) financing activities |
| 49 |
| (154 | ) | (358 | ) | |||
|
|
|
|
|
|
|
| |||
Net Increase (Decrease) in Cash and Cash Equivalents |
| 13 |
| (80 | ) | 14 |
| |||
|
|
|
|
|
|
|
| |||
Cash and Cash Equivalents, Beginning of Period |
| 5 |
| 85 |
| 71 |
| |||
|
|
|
|
|
|
|
| |||
Cash and Cash Equivalents, End of Period |
| $ | 18 |
| $ | 5 |
| $ | 85 |
|
| Years Ended December 31 | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| In Millions | ||||||||||||
(a) Number of shares of common stock outstanding was 84,108,789 for all periods presented. | ||||||||||||
(b) Disclosure of Comprehensive Income: | ||||||||||||
| Net income | $ | 434 | $ | 293 | $ | 364 | ||||||
| Retirement benefits liability | ||||||||||||
| Retirement benefits liability adjustments, net of tax of $2 in 2008 | — | — | 6 | |||||||||
| Net gain (loss) arising during the period, net of tax (tax benefit) of $(3) in 2010, $(2) in 2009 and $1 in 2008 | (5 | ) | (4 | ) | 2 | |||||||
| Investments | ||||||||||||
| Unrealized gain (loss) on investments, net of tax (tax benefit) of $2 in 2010, $6 in 2009, and $(10) in 2008 | 3 | 10 | (19 | ) | ||||||||
| Reclassification adjustments included in net income, net of tax (tax benefit) of $- in 2010, $(2) in 2009 and $6 in 2008 | — | (3 | ) | 10 | ||||||||
| Total Comprehensive Income | $ | 432 | $ | 296 | $ | 363 | ||||||
|
|
|
|
|
| In Millions |
| |||
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
| |||
|
|
|
|
|
|
|
| |||
Other cash flow activities and non-cash investing and financing activities |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Cash transactions |
|
|
|
|
|
|
| |||
Interest paid (net of amounts capitalized) |
| $ | 236 |
| $ | 224 |
| $ | 253 |
|
Income taxes paid |
| 225 |
| 63 |
| 8 |
| |||
|
|
|
|
|
|
|
| |||
Non-cash transactions |
|
|
|
|
|
|
| |||
Capital expenditures not paid |
| 176 |
| 110 |
| 92 |
| |||
Other assets placed under capital lease |
| 6 |
| 9 |
| 4 |
| |||
The accompanying notes are an integral part of these statements.
Consumers Energy Company
Consolidated Balance Sheets
ASSETS |
|
|
|
|
| ||
|
|
|
| In Millions |
| ||
December 31 |
| 2013 |
| 2012 |
| ||
|
|
|
|
|
| ||
Current Assets |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 18 |
| $ | 5 |
|
Restricted cash and cash equivalents |
| 31 |
| 28 |
| ||
Accounts receivable and accrued revenue, less allowances of $31 in 2013 and $30 in 2012 |
| 902 |
| 844 |
| ||
Notes receivable |
| 14 |
| - |
| ||
Accounts receivable – related parties |
| 4 |
| 1 |
| ||
Accrued power supply revenue |
| - |
| 32 |
| ||
Inventories at average cost |
|
|
|
|
| ||
Gas in underground storage |
| 653 |
| 816 |
| ||
Materials and supplies |
| 103 |
| 92 |
| ||
Generating plant fuel stock |
| 113 |
| 167 |
| ||
Deferred property taxes |
| 202 |
| 190 |
| ||
Regulatory assets |
| 40 |
| 35 |
| ||
Prepayments and other current assets |
| 77 |
| 45 |
| ||
Total current assets |
| 2,157 |
| 2,255 |
| ||
|
|
|
|
|
| ||
Plant, Property, and Equipment |
|
|
|
|
| ||
Plant, property, and equipment, gross |
| 16,044 |
| 15,456 |
| ||
Less accumulated depreciation and amortization |
| 5,022 |
| 5,061 |
| ||
Plant, property, and equipment, net |
| 11,022 |
| 10,395 |
| ||
Construction work in progress |
| 1,147 |
| 1,080 |
| ||
Total plant, property, and equipment |
| 12,169 |
| 11,475 |
| ||
|
|
|
|
|
| ||
Other Non-current Assets |
|
|
|
|
| ||
Regulatory assets |
| 1,530 |
| 2,287 |
| ||
Accounts and notes receivable |
| 11 |
| 17 |
| ||
Investments |
| 29 |
| 32 |
| ||
Other |
| 283 |
| 209 |
| ||
Total other non-current assets |
| 1,853 |
| 2,545 |
| ||
|
|
|
|
|
| ||
Total Assets |
| $ | 16,179 |
| $ | 16,275 |
|
LIABILITIES AND EQUITY |
|
|
|
|
| ||
|
|
|
| In Millions |
| ||
December 31 |
| 2013 |
| 2012 |
| ||
|
|
|
|
|
| ||
Current Liabilities |
|
|
|
|
| ||
Current portion of long-term debt, capital leases, and financing obligation |
| $ | 64 |
| $ | 63 |
|
Notes payable |
| 170 |
| 110 |
| ||
Accounts payable |
| 571 |
| 501 |
| ||
Accounts payable – related parties |
| 13 |
| 11 |
| ||
Accrued rate refunds |
| 12 |
| 6 |
| ||
Accrued interest |
| 63 |
| 65 |
| ||
Accrued taxes |
| 353 |
| 376 |
| ||
Deferred income taxes |
| 55 |
| 144 |
| ||
Regulatory liabilities |
| 67 |
| 25 |
| ||
Other current liabilities |
| 112 |
| 109 |
| ||
Total current liabilities |
| 1,480 |
| 1,410 |
| ||
|
|
|
|
|
| ||
Non-current Liabilities |
|
|
|
|
| ||
Long-term debt |
| 4,579 |
| 4,297 |
| ||
Non-current portion of capital leases and financing obligation |
| 138 |
| 153 |
| ||
Regulatory liabilities |
| 2,215 |
| 2,101 |
| ||
Postretirement benefits |
| 179 |
| 1,385 |
| ||
Asset retirement obligations |
| 324 |
| 311 |
| ||
Deferred investment tax credit |
| 40 |
| 43 |
| ||
Deferred income taxes |
| 2,115 |
| 1,741 |
| ||
Other non-current liabilities |
| 252 |
| 252 |
| ||
Total non-current liabilities |
| 9,842 |
| 10,283 |
| ||
|
|
|
|
|
| ||
Commitments and Contingencies (Notes 2, 3, 4, and 6) |
|
|
|
|
| ||
|
|
|
|
|
| ||
Equity |
|
|
|
|
| ||
Common stockholder equity |
|
|
|
|
| ||
Common stock, authorized 125.0 shares; outstanding 84.1 shares for both periods |
| 841 |
| 841 |
| ||
Other paid-in capital |
| 3,257 |
| 3,107 |
| ||
Accumulated other comprehensive loss |
| (2 | ) | (8 | ) | ||
Retained earnings |
| 724 |
| 598 |
| ||
Total common stockholder equity |
| 4,820 |
| 4,538 |
| ||
Preferred stock |
| 37 |
| 44 |
| ||
Total equity |
| 4,857 |
| 4,582 |
| ||
|
|
|
|
|
| ||
Total Liabilities and Equity |
| $ | 16,179 |
| $ | 16,275 |
|
The accompanying notes are an integral part of these statements.
Consumers Energy Company
Consolidated Statements of Changes in Equity
|
|
|
|
|
| In Millions |
| |||
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
| |||
|
|
|
|
|
|
|
| |||
Total Equity at Beginning of Period |
| $ | 4,582 |
| $ | 4,394 |
| $ | 4,180 |
|
|
|
|
|
|
|
|
| |||
Common Stock |
|
|
|
|
|
|
| |||
At beginning and end of period |
| 841 |
| 841 |
| 841 |
| |||
|
|
|
|
|
|
|
| |||
Other Paid-in Capital |
|
|
|
|
|
|
| |||
At beginning of period |
| 3,107 |
| 2,957 |
| 2,832 |
| |||
Stockholder contribution |
| 150 |
| 150 |
| 125 |
| |||
At end of period |
| 3,257 |
| 3,107 |
| 2,957 |
| |||
|
|
|
|
|
|
|
| |||
Accumulated Other Comprehensive Loss |
|
|
|
|
|
|
| |||
At beginning of period |
| (8 | ) | (2 | ) | - |
| |||
Retirement benefits liability |
|
|
|
|
|
|
| |||
At beginning of period |
| (25 | ) | (19 | ) | (16 | ) | |||
Net gain (loss) arising during the period |
| 5 |
| (8 | ) | (4 | ) | |||
Amortization of net actuarial loss |
| 3 |
| 2 |
| 1 |
| |||
At end of period |
| (17 | ) | (25 | ) | (19 | ) | |||
Investments |
|
|
|
|
|
|
| |||
At beginning of period |
| 17 |
| 17 |
| 16 |
| |||
Unrealized gain on investments |
| 1 |
| 3 |
| 1 |
| |||
Reclassification adjustments included in net income |
| (3 | ) | (3 | ) | - |
| |||
At end of period |
| 15 |
| 17 |
| 17 |
| |||
At end of period |
| (2 | ) | (8 | ) | (2 | ) | |||
|
|
|
|
|
|
|
| |||
Retained Earnings |
|
|
|
|
|
|
| |||
At beginning of period |
| 598 |
| 554 |
| 463 |
| |||
Net income |
| 534 |
| 439 |
| 467 |
| |||
Common stock dividends declared |
| (406 | ) | (393 | ) | (374 | ) | |||
Preferred stock dividends and distribution declared |
| (2 | ) | (2 | ) | (2 | ) | |||
At end of period |
| 724 |
| 598 |
| 554 |
| |||
|
|
|
|
|
|
|
| |||
Preferred Stock |
|
|
|
|
|
|
| |||
At beginning of period |
| 44 |
| 44 |
| 44 |
| |||
Preferred stock redeemed |
| (7 | ) | - |
| - |
| |||
At end of period |
| 37 |
| 44 |
| 44 |
| |||
|
|
|
|
|
|
|
| |||
Total Equity at End of Period |
| $ | 4,857 |
| $ | 4,582 |
| $ | 4,394 |
|
The accompanying notes are an integral part of these statements.
91
Consumers Energy Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1:SIGNIFICANT ACCOUNTING POLICIES
|
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.
Revenue Recognition Policy: CMS Energy and Consumers recognize revenue from deliveries of electricity and natural gas, and from the transportation, processing, and storage of natural gas, when services are provided. CMS Energy and Consumers record unbilled revenue for the estimated amount of energy delivered to customers but not yet billed. CMS Energy and Consumers record sales tax net and exclude it from revenue. CMS Energy recognizes revenue on sales of marketed electricity, natural gas, and other energy products at delivery.
Alternative-Revenue Programs: The MPSC’s 2009 order in Consumers’ gas rate case authorized Consumers to implement a gas revenue decoupling mechanism. This mechanism, which the MPSC extended through April 2012 in its 2010 order in Consumers’ gas rate case, allowed Consumers to adjust future gas rates to the degree that actual average weather-adjusted sales per customer differed from the rate order. Consumers accounted for this program as an alternative-revenue program that met the criteria for recognizing the effects of decoupling adjustments on revenue as gas was delivered.
In September 2009, the MPSC approved an energy optimization incentive mechanism that 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.
Self-Implemented Rates: Unless prohibited by the MPSC upon a showing of good cause, Consumers is allowed to self-implement new energy rates six months after a new rate case filing if the MPSC has not issued an order in the case. The MPSC then has another six months to issue a final order. If the MPSC does not issue ana final order within that period, the filed rates are considered approved. If the MPSC issues ana final order within that period, the rates that Consumers self-implemented may be subject to refund, with interest. Consumers recognizes revenue associated with self-implemented rates. If Consumers considers it probable that it will be required to refund a portion of its self-implemented rates, then
92
Accounts Receivable: 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 Consumers’ self-implemented rates, see Note 6, Regulatory Matters.historical losses, management’s assessment of existing economic conditions, customer 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.
AccountingCash and Cash Equivalents: Cash and cash equivalents include short-term, highly liquid investments with original maturities of three months or less.
Contingencies: CMS Energy and Consumers record estimated liabilities for Legal Fees: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. CMS Energy and Consumers expense legal fees as incurred; fees incurred but not yet billed are accrued based on estimates of work performed. This policy also applies to any fees incurred on behalf of employees and officers under indemnification agreements; such fees are billed directly to CMS Energy or Consumers.
Accounting for MISO Transactions: MISO requires the submission of hourly day-aheadDebt Issuance Costs, Discounts, Premiums, and real-time bids and offers for energy at locations across the MISO region. Consumers and CMS ERM account for MISO transactions on a net hourly basis in each of the real-time and day-ahead markets, and they net transactions across all MISO energy market locations.Refinancing Costs: CMS Energy and Consumers record net purchases in a single hour in Purchaseddefer issuance costs, discounts, and interchange powerpremiums associated with long-term debt and net sales in a single hour in Operating Revenue onamortize those amounts over the Consolidated Statementsterms of Income. They record net sale billing adjustments upon invoice receipt, record expense accruals for future net purchases adjustments based on historical experience,the debt issues. For the non-regulated portions of CMS Energy’s and reconcile accrualsConsumers’ businesses, refinancing costs are expensed as incurred. For the regulated portions of CMS Energy’s and Consumers’ businesses, any remaining unamortized issuance costs, discounts, and premiums associated with refinanced debt are amortized over the term of the newly issued debt.
Derivative Instruments: In order to actual expenses upon invoice receipt.
·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; or
·there is not an active market for the commodity.
Consumers’ coal purchase contracts are not derivatives because there is not an active market for the coal it purchases. If an active market for coal develops in the future, some of these contracts may qualify as derivatives. Since Consumers is subject to regulatory accounting, the resulting fair value gains and losses would be deferred as regulatory assets or liabilities and would not affect net income.
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 receivable at cost, which approximatesfor FTRs as derivatives. All changes in fair value. CMS Energyvalue associated with FTRs are deferred as regulatory assets and Consumers establish an allowance for uncollectible accounts and loan losses based on historical losses, management’s assessment of existing economic conditions, customer 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.
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. If a derivative qualifies for cash flow hedge accounting, changesconsolidated balance sheets. Each reporting period, the resulting asset or liability is adjusted to reflect any change in the fair value of the contract. Since none of CMS Energy’s or Consumers’ derivatives has been designated as an accounting hedge, all changes in fair value are recorded in AOCI; otherwise, changes areeither reported in earnings. For additional details regardingearnings or deferred as regulatory assets or liabilities. CMS Energy and Consumers did not have significant amounts recorded as derivative instruments, see Note 10, Derivative Instruments.
Determination of Pension and OPEB MRV of Plan Assets: CMS Energy and Consumers determine the MRV for pension planPension Plan assets 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 planPlan assets as the fair value of assets on the measurement date. CMS Energy and Consumers use the MRV in the calculation of net pension and OPEB costs.
Earnings Per Share: 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 dilutive stock options, warrants,non-vested stock awards, and convertible securities. CMS Energy computes the effect on potential common stock using the treasury stock method or the if-converted method, as applicable. 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 8,14, Earnings Per Share —– CMS Energy.
Financial Instruments: CMS Energy and Consumers record debt and equity securities classified as available for sale at fair value as determined from quoted market prices or other observable, market-based inputs. Unrealized gains and losses onresulting from changes in fair value of these securities are determined on a specific-identification basis. CMS Energy and Consumers report unrealized gains and losses from changes in fair value of the equityon these securities, net of tax, in equity as part of AOCI, except that unrealized losses determined to be other than temporary are reported in earnings. CMS Energy
93
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.
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 Generatinggenerating plant fuel stock on their Consolidated Balance Sheets.
CMS Energy and Consumers classifyaccount for RECs and emission allowances as materials and supplies inventory and use the averageweighted-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 use thelower-of-cost-or-market method to evaluate inventory for impairment.
MaintenanceMISO Transactions: MISO requires the submission of hourly day-ahead and Depreciation: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 property repairsnet hourly purchases in purchased and minor property replacement as maintenance expense. CMS Energyinterchange power and Consumersnet hourly sales in operating revenue on their consolidated statements of income. They record planned major maintenance activities as operating expense unless the cost represents the acquisitionnet billing adjustments upon receipt of additional long-lived assets or the replacementsettlement 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 an existing long-lived asset.
Years Ended December 31 | 2010 | 2009 | 2008 | |||||||||
| Electric utility property | 3.0 | % | 3.0 | % | 3.0 | % | ||||||
| Gas utility property | 2.9 | % | 2.9 | % | 3.6 | % | ||||||
| Other property | 7.4 | % | 7.6 | % | 8.5 | % | ||||||
94
| Past Due | Past Due | Past Due | Total | Total | ||||||
| 30-59 Days | 60-89 Days | Over 90 Days | Delinquent | Current | Outstanding | |||||
| In Millions | ||||||||||
| $1 | $1 | $— | $2 | $383 | $385 | |||||
Years Ended December 31 | 2010 | 2009 | 2008 | |||||||||
| AFUDC capitalization rate | 7.6 | % | 7.6 | % | 7.7 | % | ||||||
95
Reclassifications: CMS Energy and Consumers have reclassified certain prior-period amounts on their Consolidated Financial Statementsconsolidated financial statements to conform to the presentation for the current period. These reclassifications did not affect consolidated net income or cash flows for the periods presented.
Renewable Energy Grant: In January 2013, Consumers received a $69 million 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 for $69 million, which Consumers is amortizing over the life of Lake Winds® Energy Park. Consumers presents the amortization as a reduction to maintenance and other operating expense. Consumers recorded the deferred income taxes related to the grant as a reduction of the book basis of Lake Winds® Energy Park.
Restricted Cash and Cash Equivalents:CMS Energy and Consumers have restricted cash and cash equivalents dedicated for repayment of Securitization bonds and for payment under performance guarantees. CMS Energy and Consumers classify these amounts as a current asset asif they relate to payments that could or will occur within one year.
Unamortized Debt Premium, Discount,2:REGULATORY MATTERS
Regulatory matters are critical to Consumers. The Michigan Attorney General, ABATE, the MPSC Staff, and Expense: CMS Energycertain other parties typically participate in MPSC proceedings concerning Consumers, such as Consumers’ rate cases and Consumers defer premiums, discounts,PSCR and issuance costsGCR processes. These parties often challenge various aspects of long-term debtthose proceedings, including the prudence of Consumers’ policies and amortize those costs overpractices, and seek cost disallowances and other relief. The parties also have appealed significant MPSC orders. Depending upon the termsspecific issues, the outcomes of the debt issues. For the non-regulated portions ofrate cases and proceedings, including judicial proceedings challenging MPSC orders or other actions, could have a material adverse effect on CMS Energy’s and Consumers’ businesses, refinancing costsliquidity, financial condition, and results of operations. Consumers cannot predict the outcome of these proceedings.
There are expensed as incurred. Formultiple appeals pending that involve various issues concerning cost allocation among customers, the regulated portionsallocation of CMS Energy’s and Consumers’ businesses, any remaining unamortized premiums, discounts, and issuance costs associated with refinanced debt are amortized overrefunds among customer groups, the termadequacy of the newly issued debt.
Implementation of New Accounting StandardsR
Because Consumers January 1, 2010, removesis subject to the concept of a qualifying special-purpose entity from guidance relating to transfers of financial assets and extinguishments of liabilities. It also removes the exceptions from applying guidance relating to VIEs to qualifying special-purpose entities. This standard revises and clarifies when an entity is required to derecognize a financial asset that it has transferred to another entity. It further clarifies how to measure beneficial interests received as proceeds in connection with a transfer of a financial asset, and introduces the concept of a “participating interest,” the conditions of which must be met for a partial asset transfer to qualify for sale accounting treatment. The standard also requires enhanced disclosures related to continuing involvement with financial assets. Under this standard, transactions entered into under Consumers’ revolving accounts receivable sales program, discussed in Note 7, Financings and Capitalization, are accounted for as secured borrowings rather than as sales. CMS Energy and Consumers present outstanding amounts under the program as short-term debt collateralized by accounts receivable.
96
Presented in the following table are the components of Other income and Other expense at CMS Energy and Consumers:
Years Ended December 31 | 2010 | 2009 | 2008 | |||||||||
| In Millions | ||||||||||||
CMS Energy, including Consumers | ||||||||||||
| Other income: | ||||||||||||
| Gain on early retirement of long-term debt | $ | — | $ | 28 | $ | — | ||||||
| Regulatory return on capital expenditures | 17 | 26 | 33 | |||||||||
| Gain on SERP investment | — | 8 | — | |||||||||
| Return on stranded and security costs | 4 | 5 | 5 | |||||||||
| Electric restructuring return | — | — | 1 | |||||||||
| Foreign currency gain | — | — | 2 | |||||||||
| All other | 11 | 13 | 7 | |||||||||
| Total other income | $ | 32 | $ | 80 | $ | 48 | ||||||
| Other expense: | ||||||||||||
| Loss on reacquired and extinguished debt | $ | (8 | ) | $ | (18 | ) | $ | — | ||||
| Unrealized investment loss | — | — | (24 | ) | ||||||||
| Donations | (6 | ) | — | — | ||||||||
| Civic and political expenditures | (3 | ) | (3 | ) | (5 | ) | ||||||
| All other | (7 | ) | (9 | ) | (8 | ) | ||||||
| Total other expense | $ | (24 | ) | $ | (30 | ) | $ | (37 | ) | |||
Consumers | ||||||||||||
| Other income: | ||||||||||||
| Regulatory return on capital expenditures | $ | 17 | $ | 26 | $ | 33 | ||||||
| Gain on SERP investment | — | 5 | — | |||||||||
| Return on stranded and security costs | 4 | 5 | 5 | |||||||||
| Electric restructuring return | — | — | 1 | |||||||||
| All other | 10 | 11 | 6 | |||||||||
| Total other income | $ | 31 | $ | 47 | $ | 45 | ||||||
97
Years Ended December 31 | 2010 | 2009 | 2008 | |||||||||
| In Millions | ||||||||||||
| Other expense: | ||||||||||||
| Unrealized investment loss | $ | — | $ | — | $ | (16 | ) | |||||
| Donations | (6 | ) | — | — | ||||||||
| Civic and political expenditures | (3 | ) | (3 | ) | (5 | ) | ||||||
| All other | (6 | ) | (8 | ) | (7 | ) | ||||||
| Total other expense | $ | (15 | ) | $ | (11 | ) | $ | (28 | ) | |||
|
|
|
|
|
| In Millions |
| ||
December 31 |
| End of Recovery |
| 2013 |
| 2012 |
| ||
Regulatory assets |
|
|
|
|
|
|
| ||
Current |
|
|
|
|
|
|
| ||
Energy optimization plan incentive1 |
| 2014 |
| $ | 17 |
| $ | 15 |
|
Gas revenue decoupling mechanism1 |
| 2014 |
| 17 |
| 16 |
| ||
Cancelled coal-fueled plant costs2 |
| 2014 |
| 5 |
| 4 |
| ||
Other2 |
| 2014 |
| 1 |
| - |
| ||
Total current regulatory assets |
|
|
| $ | 40 |
| $ | 35 |
|
Non-current |
|
|
|
|
|
|
| ||
Postretirement benefits3 |
| various |
| $ | 634 |
| $ | 1,700 |
|
Costs of electric generating units to be retired and securitized2 |
| 2029 |
| 362 |
| - |
| ||
MGP sites4 |
| various |
| 148 |
| 152 |
| ||
Other securitized costs2 |
| 2016 |
| 129 |
| 192 |
| ||
ARO4 |
| various |
| 129 |
| 123 |
| ||
Unamortized debt costs4 |
| various |
| 74 |
| 55 |
| ||
Gas storage inventory adjustments4 |
| various |
| 23 |
| 15 |
| ||
Energy optimization plan incentive1 |
| 2015 |
| 18 |
| 17 |
| ||
Major maintenance2 |
| various |
| 10 |
| 5 |
| ||
Cancelled coal-fueled plant costs2 |
| 2015 |
| 2 |
| 7 |
| ||
Gas revenue decoupling mechanism1 |
| 2014 |
| - |
| 17 |
| ||
Other2 |
| various |
| 1 |
| 4 |
| ||
Total non-current regulatory assets |
|
|
| $ | 1,530 |
| $ | 2,287 |
|
Total regulatory assets |
|
|
| $ | 1,570 |
| $ | 2,322 |
|
Regulatory liabilities |
|
|
|
|
|
|
| ||
Current |
|
|
|
|
|
|
| ||
Income taxes, net |
| 2014 |
| $ | 64 |
| $ | - |
|
Renewable energy grant |
| 2014 |
| 2 |
| - |
| ||
DOE settlement |
| 2013 |
| - |
| 23 |
| ||
Other |
| 2014 |
| 1 |
| 2 |
| ||
Total current regulatory liabilities |
|
|
| $ | 67 |
| $ | 25 |
|
Non-current |
|
|
|
|
|
|
| ||
Cost of removal |
| various |
| $ | 1,599 |
| $ | 1,441 |
|
Renewable energy plan |
| 2028 |
| 159 |
| 175 |
| ||
Income taxes, net |
| various |
| 157 |
| 336 |
| ||
Postretirement benefits |
| various |
| 98 |
| - |
| ||
ARO |
| various |
| 93 |
| 103 |
| ||
Renewable energy grant |
| 2043 |
| 65 |
| - |
| ||
Energy optimization plan |
| 2015 |
| 31 |
| 34 |
| ||
Other |
| various |
| 13 |
| 12 |
| ||
Total non-current regulatory liabilities |
|
|
| $ | 2,215 |
| $ | 2,101 |
|
Total regulatory liabilities |
|
|
| $ | 2,282 |
| $ | 2,126 |
|
1 These regulatory assets have arisen from alternative revenue programs and are not associated with incurred costs or capital investments. Therefore, the MPSC has provided for recovery without a return.
2 These regulatory assets either are included in rate base (or are expected to be included, for costs incurred subsequent to the most recently approved rate case), thereby providing a return on expenditures, or provide a specific return on investment authorized by the MPSC.
3 This regulatory asset is offset partially by liabilities. The net amount is included in rate base, thereby providing a return.
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 Optimization Plan Incentive: In May 2013, Consumers filed its fourth annual report and reconciliation for its energy optimization plan, requesting approval of its energy optimization plan costs for 2012. In November 2013, the MPSC approved a settlement agreement authorizing Consumers to collect $17 million from customers during 2014 as an incentive payment for exceeding statutory targets under both its gas and electric energy optimization plans during 2012.
During 2013, Consumers achieved 140 percent of its electric savings target and 122 percent of its gas savings target. For achieving these savings levels, Consumers will request the MPSC’s approval to collect $18 million, the maximum incentive, in the energy optimization reconciliation to be filed in 2014.
Gas Revenue Decoupling Mechanism: The MPSC’s 2009 order in Consumers’ gas rate case authorized Consumers to implement a gas revenue decoupling mechanism. This mechanism, which the MPSC extended through April 2012 in its 2010 order in Consumers’ gas rate case, allowed Consumers to adjust future gas rates to the degree that actual average weather-adjusted sales per customer differed from the rate order. This mechanism was not affected by a separate Michigan Court of Appeals decision on electric revenue decoupling.
In August 2012, Consumers filed its final reconciliation of the gas revenue decoupling mechanism, requesting recovery of $17 million from customers for the period June 2011 through April 2012. In December 2013, the MPSC approved Consumers’ reconciliation for the full amount of its request and authorized recovery over four months beginning in January 2014.
Cancelled Coal-Fueled Plant Costs: In its June 2012 order in Consumers’ electric rate case, the MPSC authorized recovery over a three-year period of $14 million of development costs associated with Consumers’ cancelled 830-MW coal-fueled plant. In September 2012, a party in Consumers’ electric rate case filed an appeal with the Michigan Court of Appeals to dispute the MPSC’s conclusion that authorized Consumers to recover these costs.
Postretirement Benefits: As part of the ratemaking process, the MPSC allows Consumers to defer the impact of actuarial losses and prior service costs associated with postretirement benefits as a regulatory asset and to recover these costs from customers. Conversely, Consumers defers the impact of actuarial gains as a regulatory liability and refunds these amounts to customers. The asset and liability will decrease as the deferred items are amortized and recognized as components of net periodic benefit cost.
Costs of Electric Generating Units to be Retired and Securitized: In December 2013, the MPSC issued a Securitization financing order that authorizes Consumers to proceed, at fair value. Ifits sole discretion, with the sale of up to $389 million in Securitization bonds through a newly formed subsidiary. Under Michigan law, electric utilities are permitted to use highly rated, low-cost Securitization bonds to finance the recovery of qualified costs. The qualified costs that Consumers intends to securitize are principally the remaining book value of seven smaller coal-fueled electric generating units and three smaller gas-fueled electric generating units that Consumers plans to retire in 2016 if the Securitization transaction is successful.
Upon receipt of the Securitization financing order from the MPSC, Consumers removed the book value of the ten units from plant, property, and equipment and recorded this informationamount as a regulatory asset. Consumers will amortize the regulatory asset in accordance with current depreciation rates while the assets remain in rate base. Upon issuance of the Securitization bonds, Consumers will remove the book
value of the units from rate base and amortize the regulatory asset over the life of the related Securitization bonds.
MGP Sites: Consumers expects to incur 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.
Other Securitized Costs: In 2000, the MPSC authorized Consumers to securitize certain qualified costs incurred as a result of electric utility restructuring legislation. This regulatory asset is unavailable, they use market-corroborated data or reasonable estimates about market participant assumptions. CMSamortized over the life of the related Securitization bonds.
ARO: The recovery of the underlying asset investments and related removal costs of recorded AROs are 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.
Unamortized Debt Costs: Under regulatory accounting, any unamortized debt costs related to debt redeemed with the proceeds of new debt are capitalized and amortized over the life of the new debt.
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.
Major Maintenance: In its June 2012 order in Consumers’ electric rate case, the MPSC allowed Consumers to defer major maintenance costs associated with certain plants in excess of the costs approved in the rate order and recover these excess costs from customers, subject to MPSC approval.
REGULATORY LIABILITIES
Income Taxes, Net: These costs represent 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.
Renewable Energy Grant: In January 2013, Consumers received a $69 million renewable energy grant for Lake Winds® Energy Park, which began operations in November 2012. The grant was received from the U.S. Department of Treasury under Section 1603 of the American Recovery and Reinvestment Tax Act of 2009.
As reflected in Consumers’ 2011 biennial renewable energy plan, which the MPSC approved in 2012, this grant reduces Consumers’ cost of complying with the renewable portfolio standards prescribed by the 2008 Energy Law 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.
DOE Settlement: In 2011, Consumers classify fair value measurements withinentered into an agreement with the fair value hierarchyDOE to settle, for $120 million, a complaint filed by Consumers against the DOE in 2002 for nuclear storage costs incurred as a result of the DOE’s failure to accept spent nuclear fuel. In December 2012, the MPSC approved Consumers’ proposed treatment of this settlement amount, including a refund to customers of $23 million for spent nuclear fuel costs previously collected through rates. Consumers refunded this amount to customers during 2013. In March 2013, a party filed an appeal with the Michigan Court of Appeals to dispute the MPSC’s December 2012 order.
Cost of Removal: These amounts have been collected from customers to fund future asset removal activities. This regulatory liability is reduced as costs of removal are incurred.
Renewable Energy Plan: At December 31, 2013 and 2012, surcharges collected from customers to fund Consumers’ renewable energy plan exceeded Consumers’ spending. This regulatory liability is amortized as incremental costs are incurred to operate and depreciate Consumers’ wind parks and to purchase RECs under renewable energy purchase agreements. Incremental costs represent costs incurred in excess of amounts recovered through the PSCR process.
Energy Optimization Plan: At December 31, 2013 and 2012, surcharges collected from customers to fund Consumers’ energy optimization plan exceeded Consumers’ spending. The associated regulatory liability is amortized as costs are incurred under Consumers’ energy optimization plan.
CONSUMERS’ ELECTRIC UTILITY
Electric Rate Case: In September 2012, Consumers filed an application with the MPSC seeking an annual rate increase of $148 million, based on a 10.5 percent authorized return on equity. In January 2013, Consumers supplemented its electric rate case application to reflect certain changes, which reduced its requested annual rate increase to $145 million. In March 2013, Consumers self-implemented an annual rate increase of $110 million out of its requested $145 million, subject to refund with interest. The MPSC approved a partial settlement agreement in May 2013, authorizing an annual rate increase of $89 million, based on a 10.3 percent authorized rate of return on equity. In June 2013, in connection with this electric rate case, the lowest level of inputMPSC approved Consumers’ application for authority to continue the advanced metering infrastructure program and implement a non-transmitting meter provision.
Consumers filed an application in July 2013 requesting that is significantthe MPSC find that the total revenues collected during self-implementation did not exceed those that would have been collected under final rates. In February 2014, the MPSC approved Consumers’ application, finding that no refund was required.
Electric Revenue Decoupling Mechanism: The MPSC’s 2009 order in Consumers’ electric rate case authorized Consumers to implement an electric revenue decoupling mechanism. This decoupling mechanism allowed Consumers to adjust future electric rates to the fair value measurementdegree that actual average sales per customer differed from the rate order. The MPSC extended the electric revenue decoupling mechanism for a second year in its entirety.
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In April 2012, the Michigan Court of Appeals ruled that the MPSC lacks statutory authority to approve or direct the use of a revenue decoupling mechanism for electric providers. Subsequently, in November 2012, the Michigan Court of Appeals ruled in an appeal of the MPSC’s 2010 order in Consumers’ electric rate case. The Court reversed the portion of the 2010 order related to Consumers’ electric revenue decoupling mechanism and remanded the case to the MPSC for further proceedings related to the revenue decoupling mechanism. In 2013, the MPSC issued an order reversing its prior approval of Consumers’ authority to implement a revenue decoupling mechanism.
POWER SUPPLY COST RECOVERY AND GAS COST RECOVERY
The PSCR and GCR processes are designed to allow Consumers Energy Company
PSCR Plans: In January 2014, the MPSC approved Consumers’ 2012 PSCR plan, authorizing the 2012 PSCR charge that Consumers self-implemented beginning in January 2012.
Consumers submitted its 2013 PSCR plan to the MPSC in September 2012, and in accordance with its proposed plan, self-implemented the 2013 PSCR charge beginning in January 2013.
PSCR Reconciliations: Presented in the following table are CMS Energy’sdetails about the PSCR reconciliation filing pending with the MPSC:
PSCR Year |
| Date Filed |
| Net |
| PSCR Cost of |
| ||
2012 |
| March 2013 |
| $ | 18 |
| $ | 1.9 |
|
In May 2013, the MPSC issued an order in Consumers’ 2011 PSCR reconciliation, approving full recovery of $1.8 billion of power costs and authorizing Consumers to roll into its 2012 PSCR plan the overrecovery of $8 million.
GCR Plans: In February 2013, the MPSC approved Consumers’ assets2012-2013 GCR plan, authorizing the 2012-2013 GCR charge that Consumers self-implemented beginning in April 2012.
Consumers submitted its 2013-2014 GCR plan to the MPSC in December 2012, and liabilities, by level withinin accordance with its proposed plan, self-implemented the fair value hierarchy, reported at fair value on a recurring basis at December 31, 2010:
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| In Millions | ||||||||||||||||
CMS Energy, including Consumers | ||||||||||||||||
| Assets: | ||||||||||||||||
| Cash equivalents | $ | 183 | $ | 183 | $ | — | $ | — | ||||||||
| Restricted cash equivalents | 6 | 6 | — | — | ||||||||||||
| Nonqualified deferred compensation plan assets | 6 | 6 | — | — | ||||||||||||
SERP: | ||||||||||||||||
| Cash equivalents | 1 | 1 | — | — | ||||||||||||
| Mutual fund | 62 | 62 | — | — | ||||||||||||
| State and municipal bonds | 28 | — | 28 | — | ||||||||||||
| Derivative instruments: | ||||||||||||||||
| Commodity contracts(a) | 1 | — | — | 1 | ||||||||||||
| Total(b) | $ | 287 | $ | 258 | $ | 28 | $ | 1 | ||||||||
| Liabilities: | ||||||||||||||||
| Nonqualified deferred compensation plan liabilities | $ | 6 | $ | 6 | $ | — | $ | — | ||||||||
| Derivative instruments: | ||||||||||||||||
| Commodity contracts(c) | 4 | — | — | 4 | ||||||||||||
| Total(d) | $ | 10 | $ | 6 | $ | — | $ | 4 | ||||||||
Consumers | ||||||||||||||||
| Assets: | ||||||||||||||||
| Cash equivalents | $ | 19 | $ | 19 | $ | — | $ | — | ||||||||
| Restricted cash equivalents | 6 | 6 | — | — | ||||||||||||
| CMS Energy common stock | 34 | 34 | — | — | ||||||||||||
| Nonqualified deferred compensation plan assets | 4 | 4 | — | — | ||||||||||||
SERP: | ||||||||||||||||
| Cash equivalents | 1 | 1 | — | — | ||||||||||||
| Mutual fund | 39 | 39 | — | — | ||||||||||||
| State and municipal bonds | 17 | — | 17 | — | ||||||||||||
| Derivative instruments: | ||||||||||||||||
| Commodity contracts | 1 | — | — | 1 | ||||||||||||
| Total(e) | $ | 121 | $ | 103 | $ | 17 | $ | 1 | ||||||||
| Liabilities: | ||||||||||||||||
| Nonqualified deferred compensation plan liabilities | $ | 4 | $ | 4 | $ | — | $ | — | ||||||||
| Total | $ | 4 | $ | 4 | $ | — | $ | — | ||||||||
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GCR Year |
| Date Filed |
| Net |
| GCR Cost of |
| ||
2012-2013 |
| June 2013 |
| $ | 22 |
| $ | 0.9 |
|
In May 2013, the MPSC issued an order in Consumers’ 2011-2012 GCR reconciliation, approving full recovery of $0.9 billion in gas costs and authorizing Consumers to roll into its 2012-2013 GCR plan the overrecovery of $2 million.
Consumers’ PSCR and GCR mechanisms also represent probable future revenues that will be recovered from customers or previously collected revenues that will be refunded to customers through the ratemaking process. Underrecoveries are included in accrued power supply and overrecoveries are included in accrued rate refunds on Consumers’ consolidated balance sheets.
Consumers reflected the following assets and liabilities for PSCR and GCR underrecoveries and overrecoveries on its consolidated balance sheets:
|
|
|
| In Millions |
| ||
December 31 |
| 2013 |
| 2012 |
| ||
Accrued power supply revenue |
| $ | - |
| $ | 32 |
|
Accrued rate refunds |
| 12 |
| 6 |
| ||
3:CONTINGENCIES AND COMMITMENTS
CMS Energy and Consumers are involved in various matters that give rise to contingent liabilities. Depending on the specific issues, the resolution of these contingencies could have a material effect on CMS Energy’s and Consumers’ assetsliquidity, financial condition, and liabilities, by level within the fair value hierarchy, reported at fair value on a recurring basis at December 31, 2009:
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| In Millions | ||||||||||||||||
CMS Energy, including Consumers | ||||||||||||||||
| Assets: | ||||||||||||||||
| Cash equivalents | $ | 57 | $ | 57 | $ | — | $ | — | ||||||||
| Restricted cash equivalents | 12 | 12 | — | — | ||||||||||||
| Nonqualified deferred compensation plan assets | 5 | 5 | — | — | ||||||||||||
SERP: | ||||||||||||||||
| Cash equivalents | 49 | 49 | — | — | ||||||||||||
| State and municipal bonds | 27 | — | 27 | — | ||||||||||||
| Derivative instruments: | ||||||||||||||||
| Commodity contracts(a) | 1 | — | 1 | — | ||||||||||||
| Total | $ | 151 | $ | 123 | $ | 28 | $ | — | ||||||||
| Liabilities: | ||||||||||||||||
| Nonqualified deferred compensation plan liabilities | $ | 5 | $ | 5 | $ | — | $ | — | ||||||||
| Derivative instruments: | �� | |||||||||||||||
| Commodity contracts(b) | 9 | 1 | 1 | 7 | ||||||||||||
| Interest rate contracts | 1 | — | — | 1 | ||||||||||||
| Total(c) | $ | 15 | $ | 6 | $ | 1 | $ | 8 | ||||||||
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| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| In Millions | ||||||||||||||||
Consumers | ||||||||||||||||
| Assets: | ||||||||||||||||
| Cash equivalents | $ | 31 | $ | 31 | $ | — | $ | — | ||||||||
| Restricted cash equivalents | 5 | 5 | — | — | ||||||||||||
| CMS Energy common stock | 29 | 29 | — | — | ||||||||||||
| Nonqualified deferred compensation plan assets | 4 | 4 | — | — | ||||||||||||
SERP: | ||||||||||||||||
| Cash equivalents | 30 | 30 | — | — | ||||||||||||
| State and municipal bonds | 16 | — | 16 | — | ||||||||||||
| Total | $ | 115 | $ | 99 | $ | 16 | $ | — | ||||||||
| Liabilities: | ||||||||||||||||
| Nonqualified deferred compensation plan liabilities | $ | 4 | $ | 4 | $ | — | $ | — | ||||||||
| Total | $ | 4 | $ | 4 | $ | — | $ | — | ||||||||
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cannot predict the outcome of a matter indicate that they are unable to the counterparty based on an internal credit-scoring model. This model considers various inputs, including the counterparty’s financial statements, credit reports, trade press, and other information that would be available to market participants. To the extent that the internal ratings are comparable to credit ratings published by independent rating agencies, the resulting credit adjustment is classified within Level 2. If the internal model results inestimate a rating that is outside of thepossible loss or range of ratings given by the independent agencies and the credit adjustment is significant to the overall valuation, the derivative fair value is classified as Level 3. CMS Energy and Consumers adjust their derivative liabilities downward to reflect the risk of their own nonperformance, based on their published credit ratings. Adjustments for credit risk using the approach outlined within this paragraph are not materially different from the adjustments that would result from using credit default swap ratesloss for the contracts presently held. For additional details about derivative contracts, see Note 10, Derivative Instruments.
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Years Ended December 31 | 2010 | 2009 | 2008 | |||||||||
| In Millions | ||||||||||||
| Balance at January 1 | $ | (8 | ) | $ | (16 | ) | $ | (19 | ) | |||
| Total gains included in earnings(a) | 8 | 17 | 2 | |||||||||
| Purchases, sales, issuances, and settlements (net) | (3 | ) | (9 | ) | 1 | |||||||
| Balance at December 31 | $ | (3 | ) | $ | (8 | ) | $ | (16 | ) | |||
| Unrealized gains included in earnings for the years ended December 31 relating to assets and liabilities still held at December 31(a) | $ | 4 | $ | 6 | $ | 3 | ||||||
Years Ended December 31 | 2010 | 2009 | 2008 | |||||||||
| In Millions | ||||||||||||
| Balance at January 1 | $ | — | $ | — | $ | — | ||||||
| Total gains (losses) included in earnings(a) | 4 | 10 | (1 | ) | ||||||||
| Purchases, sales, issuances, and settlements (net) | (3 | ) | (10 | ) | 1 | |||||||
| Balance at December 31 | $ | 1 | $ | — | $ | — | ||||||
| Unrealized gains included in earnings for the years ended December 31 relating to assets and liabilities still held at December 31(a) | $ | 1 | $ | — | $ | — | ||||||
| Gains | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | (Losses) | |||||||||||||
| In Millions | ||||||||||||||||
CMS Energy, including Consumers | ||||||||||||||||
| Assets held for sale | $ | — | $ | 5 | $ | — | $ | (6 | ) | |||||||
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Gas Index Price Reporting Investigation: In 2002, CMS Energy notified appropriate regulatory and governmental agencies that some employees at CMS MST and CMS Field Services appeared to have provided inaccurate information regarding natural gas trades to various energy industry publications which compile and report index prices. CMS Energy cooperated with an investigation by the DOJ regarding this matter. Although CMS Energy has not received any formal notification that the DOJ has completed its investigation, the DOJ’s last request for information occurred in 2003, and CMS Energy completed its response to this request in 2004. CMS Energy is unable to predict the outcome of the DOJ investigation and what effect, if any, the investigation will have on CMS Energy.
Gas Index Price Reporting Litigation: CMS Energy, along with CMS MST, CMS Field Services, Cantera Natural Gas, Inc., and Cantera Gas Company, arehave been named as defendants in various class action and individual lawsuits arising as a result of alleged inaccurate natural gas price reporting to publications that report trade information. Allegations include manipulation of NYMEX natural gas futures and options prices, price-fixing conspiracies, restraint of trade, and artificial inflation of natural gas retail prices in Colorado, Kansas, Missouri, and Wisconsin. The following provides more detail on these proceedings:
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·In 2005, CMS Energy, CMS MST, and CMS Field Services were named as defendants in a putative class action filed in Kansas state court, Learjet, Inc., et al. v. Oneok, Inc., et al. The complaint alleges that during the putative class period, January 1, 2000 through October 31, 2002, the defendants engaged in a scheme to violate the Kansas Restraint of Trade Act. The plaintiffs are seeking statutory full consideration damages consisting of the full consideration paid by the plaintiffs for natural gas allegedly purchased from the defendants.
·In 2007, a class action complaint, Heartland Regional Medical Center, et al. v. Oneok, Inc. et al., was filed as a putative class action in Missouri state court alleging violations of Missouri antitrust laws. The defendants, including CMS Energy, CMS Field Services, and CMS MST, are alleged to have violated the Missouri antitrust law in connection with their natural gas reporting activities. The plaintiffs are seeking full consideration damages and treble damages.
·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 1, 2000 and October 31, 2002. The defendants, including CMS Energy, CMS ERM, and Cantera Gas Company,
·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.
After removal to federal court, all of the Learjet, Heartland, Breckenridge, both Arandell cases Newpage, and J.P. Morgan casesdescribed above were transferred to the MDL case. CMS Energy was dismissed from the Learjet, Heartland, and J.P. Morgan cases in 2009, but other CMS Energy defendants remain parties. All CMS Energy defendants were dismissed from the Breckenridge case in 2009. It is expected that the plaintiffs in this case will appeal this decision after all claims against defendants have been dismissed. At this time, there is no pending appeal.MDL. In June 2010, CMS Energy and Cantera Gas Company were dismissed from the Newpage case;case. In 2011, all claims
against remaining CMS Energy defendants in the Arandell (Wisconsin) case was reinstated against CMS ERM; and the Arandell (Wisconsin) case was consolidated with the Newpage case. These two consolidatedMDL cases remain pending only against CMS ERM. Pending before the courtwere dismissed based on FERC preemption. Plaintiffs filed appeals in all of the MDLcases. The issues on appeal were whether the district court erred in dismissing the cases are the defendants’ renewed motions for summary judgment based on FERC preemption. In all but the J.P. Morgan case, there are also pending plaintiffs’ motions for class certification. These motions are not yet decided. In October 2010, the MDL court entered an orderpreemption and denying the plaintiffs’ motionmotions for leave to amend their complaintcomplaints to add a federal Sherman Act antitrust claim.
In April 2013, the U.S. Court of Appeals for the Ninth Circuit reversed the MDL decision and remanded the case to the MDL judge for further proceedings. The appellate court found that FERC preemption does not apply under the facts of these cases. The Court affirmed the MDL court’s denial of leave to amend to add federal antitrust claims.
In August 2013, the joint defense group in these cases, of which CMS Energy defendants are members, filed a petition with the U.S. Supreme Court in an attempt to overturn the decision of the U.S. Court of Appeals for the Ninth Circuit. The petition is pending action by the U.S. Supreme Court. The Supreme Court has asked the Solicitor General for an opinion regarding this matter and may follow his guidance on whether to grant the petition.
These cases involve complex facts, a large number of similarly situated defendants with different factual positions, and multiple jurisdictions. Presently, any estimate of liability would be highly speculative; the amount of CMS Energy’s possible loss would be based on widely varying models previously untested in this context. Defenses are being pursued vigorously, which could result in the dismissal of the cases completely, but CMS Energy is unable to predictIf the outcome of these matters. If the outcomeafter appeals is unfavorable, these cases could have a material adverse impact on CMS Energy’s liquidity, financial condition, and results of operations.
Bay Harbor: As part CMS Energy retained environmental remediation obligations for the collection and treatment of leachate, a liquid consisting of water and other substances, at Bay Harbor after selling its interests in the development of Bay Harbor by certain subsidiaries of CMS Energy, and under an agreement with the MDNRE, third parties constructed a golf course and park over several abandoned CKD piles left over from the former cement plant operations on the Bay Harbor site. The third parties also undertook a series of response activities, including constructing a leachate collection system in one area where CKD-impacted groundwater was entering Little Traverse Bay.2002. Leachate is produced when water enters into cement kiln dust piles left over from former cement plant operations at the CKD piles.site. In 2002,2012, CMS Energy sold its interest in Bay Harbor, but retained its obligations under environmental indemnities entered intoand the MDEQ finalized an agreement that established the final remedies and the future release criteria at the start of the project.
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Various claims have been brought against CMS Land or its affiliates, including CMS Energy, alleging environmental damage to property, loss of property value, insufficient disclosure of environmental matters, breach of agreement relating to access, or other matters. There is presently one lawsuit (Jankowski v. CMS Energy, CMS Capital, and CMS Land) pending that was filed in June 2010 in Emmet County Circuit Court in Michigan relating to such subjects. Resolution of this lawsuit is not expected to have a material impact on CMS Energy’s consolidated income, cash flows, or financial position. In October 2010, CMS Land and other parties received a demand for payment from the EPA in the amount of $7 million, plus interest, whereby the EPA is seeking recovery as allowed under Superfund,CERCLA of the EPA’s response costs incurred at the Bay Harbor site. CMS Land believeshas communicated to the EPA that it does not believe that this is not a valid claim and intends to dispute it.
CMS Energy has recorded a cumulative charge related to Bay Harbor of $222$229 million, which withincludes accretion expense, includes $43 million recorded in 2010, $37 million in 2009, and $1 million in 2008, in Other operating expenses on the Consolidated Statements of Income.expense. At December 31, 2010,2013, CMS Energy had a recorded liability of $98$52 million for its remaining obligations. 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. CMS Energy based the discount rate on the interest rate for30-year U.S. Treasury securities at December 31, 2010. The undiscounted amount of the remaining obligation is $121$71 million. CMS Energy expects to pay $34 million during 2011, $12$6 million in 2012,2014, $5 million in 2013,2015, $5 million in 2014,2016, $4 million in 2015,2017, and $4 million in 2018, and the remaining amount thereafter on long-term liquid disposal and operating and maintenance costs.
CMS Energy’s estimate of response activity costs and the timing of expenditures could change if there are additional major changes in circumstances or assumptions, including but not limited to:
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·a significant increase in the cost of the present long-term water disposal strategy;
·requirements to alter the present long-term water disposal strategy upon expiration of the NPDES permit if the MDEQ or EPA identify a more suitable alternative;
·an increase in the number of contamination areas;
·the nature and extent of contamination;
·delays in the receipt of requested permits;
·delays following the receipt of any requested permits due to legal appeals of third parties;
·unanticipated difficulties in meeting the technical commitments in the agreement with the MDEQ;
·additional or new legal or regulatory requirements; or
·new or different landowner claims.
Depending on the size of any indemnity obligation or liability under environmental laws, an adverse outcome of this matter could have a material adverse effect on CMS Energy’s liquidity and financial condition and could negatively affect CMS Energy’s financial results. 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.
State Street Bank and TSU Litigation: In 2002, State Street Bank sued CMS Viron in the District Court of Harris County, Texas, claiming primarily a breach of representations and warranties and seeking $9 million plus interest from CMS Viron. During the same year, CMS Viron filed a counterclaim, as well as third-party actions against TSU, Academic Capital Group, Inc., and Academic Services, Inc. for breach of contract and fiduciary duties and conversion. At December 31, 2010, CMS Energy had a recorded liability of $3 million for its potential obligation related to this matter. This case was resolved in January 2011 for an amount that will not have a material impact on CMS Energy’s consolidated income, cash flows, or financial position.
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CONSUMERS ELECTRIC UTILITY CONTINGENCIES
Consumers’ Electric Utility Contingencies
Cleanup and Solid Waste: Consumers expects to incur remediation and other response activity costs at a number of sites under NREPA. Consumers believes that these costs should be recoverable in rates, but cannot guarantee that outcome. Consumers estimates that its liability for NREPA sites will be between $4 million and $6 million. At December 31, 2010,2013, Consumers had a recorded liability of $2$4 million, the minimum amount in the range of its estimated probable NREPA liability.
Consumers is a potentially responsible party at a number of contaminated sites administered under the Superfund. SuperfundCERCLA. CERCLA liability is joint and several. In addition to Consumers, many other creditworthy parties with substantial assets are potentially responsible with respect to the individual sites. In November 2010, Consumers received official notification from the EPA that identified Consumers as a potentially responsible party for cleanup of PCBs at the Kalamazoo River SuperfundCERCLA 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 April 2011, Consumers responded to the EPA in December 2010, stating that it has no information showing that it disposed of PCBs or arranged for disposal or treatment of PCB-containing material at portions of the site and requesting further informationreceived a follow-up letter from the EPA beforerequesting that Consumers would commitagree to perform or finance cleanup activities atparticipate in a removal action plan along with several other companies for an area of lower Portage Creek, which is connected to the site.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 other known SuperfundCERCLA sites will be between $2$3 million and $8$9 million. Various factors, including the number of potentially responsible parties involved with each site, affect Consumers’ share of the total liability. At December 31, 2010,2013, Consumers had a recorded liability of $2$3 million for its share of the total liability at these sites, the minimum amount in the range of its estimated probable SuperfundCERCLA liability.
The timing of payments related to Consumers’ remediation and other response activities at its SuperfundCERCLA and NREPA sites is uncertain. Consumers periodically reviews these cost estimates. Any significant 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 SuperfundCERCLA 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 and replaced part of the PCB material with non-PCB material. Since proposing a plan to take action with respect to the remaining materials, Consumers has had several communications with the EPA.EPA regarding this matter. Although Consumers is not able to predict when the EPA will issue a final ruling and cannot predict the financial impact or outcome of this matter.
108
Consumers is engaged in discussions with the EPA on all of these matters. Depending upon the outcome of these discussions, the EPA could bring legal action against Consumersand/or Consumers could be required to install additional pollution control equipment at some or all of its coal-fueled electric generating plants, surrender emission allowances, engage in Supplemental Environmental Mitigation Projects,and/or pay fines. Additionally, Consumers would need to assess the viability of continuing operations at certain plants. The potential costs relating to these matters could be material and the extent of cost recovery cannot be reasonably estimated. Although Consumers cannot predict the financial impact or outcome of these matters,material. Consumers expects that it would be able to recover some or all of the costs in rates, consistent with the recovery of other reasonable costs of complying with environmental laws and regulations.
Nuclear Matters:Matters
Consumers filed a U.S. Court of Appeals decision confirmed that the DOE was to begin accepting deliveries of spent nuclear fuelcomplaint in 2002 for disposal by January 1998. Subsequent U.S. Court of Appeals litigation, in which Consumers and other utilities participated, has not been successful in producing more specific relief fordamages resulting from the DOE’s failure to accept the spent nuclear fuel.
Renewable Energy Matters: In April 2013, a group of landowners filed a Petition for Rehearinglawsuit in Mason County (Michigan) Circuit Court alleging, among other things, personal injury, loss of property value, and Clarification, requesting thatimpacts to use and enjoyment of their land as a result of the MPSC modify its conclusion thatoperations of Lake Winds® Energy Park. Consumers cannot predict the ultimate financial impact or outcome of this amount be placed in a trust.
Consumers’ Gas Utility ContingenciesC
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, 2010,2013, Consumers estimatedhad a recorded liability of $117 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 $127 million. Consumers expects to incur remediation and other response activity costs to be between $31 million and
109
|
|
|
|
|
|
|
| In Millions |
| |||||||
|
| 2014 |
| 2015 |
| 2016 |
| 2017 |
| 2018 |
| |||||
Consumers |
|
|
|
|
|
|
|
|
|
|
| |||||
Remediation and other response activity costs |
| $ | 8 |
| $ | 12 |
| $ | 12 |
| $ | 9 |
| $ | 19 |
|
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, 2013, Consumers had a regulatory asset of $148 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 will be up to $3 million. At December 31, 2013, Consumers had a recorded liability of less than $1 million, the minimum amount in the range of its estimated probable liability.
GuaranteesC
Other Environmental Matters: Consumers initiated preliminary investigations during 2012 at a number of potentially contaminated sites it owns with the intention of determining whether any contamination existed and the extent of any identified contamination. The sites investigated included combustion turbine sites, generating sites, compressor stations, and above-ground fuel storage tank locations. Consumers completed the investigations in 2013 and found no additional risk associated with contamination that would warrant further investigation.
GUARANTEES
Presented in the following table are CMS Energy’s and Consumers’ guarantees at December 31, 2010:
| Maximum | Carrying | |||||||||||
Guarantee Description | Issue Date | Expiration Date | Obligation | Amount | ||||||||
| In Millions | ||||||||||||
| Indemnity obligations from asset sales and other agreements | Various | Various through June 2022 | $ | 512 | (a) | $ | 21 | |||||
| Guarantees and put options(b) | Various | Various through December 2011 | 36 | 1 | ||||||||
1 The majority of this amount arises from stock and asset sale agreements under which CMS Energy or a subsidiary of CMS Energy, other than Consumers, indemnified | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
matters, including claims related to tax disputes, claims related to power purchase agreements, and carrying amountsdefects in title to the assets or stock sold to the purchaser by CMS Energy subsidiaries. Except for Consumers’ guarantees were less than $1 million.
Presented in the following table is additional information regarding CMS Energy’s and Consumers’ guarantees:
Guarantee Description | How Guarantee Arose | Events That Would Require Performance | |||
CMS Energy, including Consumers | |||||
Indemnity obligations from asset | Stock and asset sale | Findings of misrepresentation, | |||
sales and other agreements | agreements | breach of warranties, tax claims, and | |||
other specific events or | |||||
circumstances | |||||
Guarantees | Normal operating | Nonperformance or non-payment by a | |||
activity | subsidiary under a related contract | ||||
Consumers | |||||
Indemnity obligations and | Normal operating | Nonperformance or claims made by a third | |||
other guarantees | activity | party under a related contract |
CMS Energy, Consumers, and certain other subsidiaries of CMS Energy also enter into various agreements containing tax and other indemnity provisions for which they are unable to estimate the maximum potential
110
Other ContingenciesO
Other:In addition to the matters disclosed in this Note and Note 6,2, Regulatory Matters, there are certain other lawsuits and administrative proceedings before various courts and governmental agencies arising in the ordinary course of business to which CMS Energy, Consumers, and certain other subsidiaries of CMS Energy are parties. These other lawsuits and proceedings may involve personal injury, property damage, contracts, environmental issues,matters, federal and state taxes, rates, licensing, employment, and other matters. Further, CMS Energy and Consumers occasionally self-report certain regulatory non-compliance matters that may or may not eventually result in administrative proceedings. CMS Energy and Consumers believe that the outcome of any one of these proceedings will not have a material adverse effect on their consolidated results of operations, financial condition, or liquidity.
Contractual CommitmentsC
Purchase Obligations: Presented in the following table are CMS Energy’s and Consumers’ contractual cashpurchase obligations at December 31, 20102013 for each of the periods shown. CMS Energy did not have any contractual cash obligations at December 31, 2010 that were not included in Consumers’ reported amounts.
| Payments Due | ||||||||||||||||||||
| Less Than | One to | Three to | More Than | |||||||||||||||||
| Total | One Year | Three Years | Five Years | Five Years | ||||||||||||||||
| In Millions | ||||||||||||||||||||
Consumers | ||||||||||||||||||||
| Purchase obligations | $ | 15,794 | $ | 1,996 | $ | 2,613 | $ | 1,751 | $ | 9,434 | ||||||||||
| Purchase obligations — related parties | 1,735 | 87 | 180 | 193 | 1,275 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| In Millions |
| ||||||||
| Payments Due |
| ||||||||||||||||||||
|
| Total |
| 2014 |
| 2015 |
| 2016 |
| 2017 |
| 2018 |
| Beyond |
| |||||||
CMS Energy, including Consumers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Purchase obligations |
| $ | 12,068 |
| $ | 1,879 |
| $ | 983 |
| $ | 1,032 |
| $ | 1,001 |
| $ | 1,006 |
| $ | 6,167 |
|
Purchase obligations – related parties |
| 1,244 |
| 89 |
| 84 |
| 86 |
| 88 |
| 87 |
| 810 |
| |||||||
Consumers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Purchase obligations |
| $ | 11,838 |
| $ | 1,803 |
| $ | 955 |
| $ | 1,005 |
| $ | 974 |
| $ | 979 |
| $ | 6,122 |
|
Purchase obligations – related parties |
| 1,244 |
| 89 |
| 84 |
| 86 |
| 88 |
| 87 |
| 810 |
| |||||||
The MCV PPA: Consumers has a35-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 average administrative and general expenses;
·a variable energy charge for all delivered energy that reflects the MCV Partnership’s cost of production;
·a $5 million annual contribution by the MCV Partnership to a renewable resources program; and
·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.
Capacity and energy charges net of RCP replacement energy and benefits, under the MCV PPA were $285$278 million in 2010, $2462013, $319 million in 2009,2012, and $320$292 million in 2008. Based on a 2008 contract amendment and approval by the MPSC that allows Consumers to manage the contract more cost effectively,2011. Consumers estimates that capacity and energy charges under the MCV PPA will average $320 million annually. These amounts are included in the table above.
111
Rate Matters
| Consumers’ | ||||||||||||
| Increase Authorized | Self-Implemented | |||||||||||
| Components of the increase in revenue | by the MPSC | Increase | Difference | |||||||||
| In Millions | ||||||||||||
| Investment in rate base | $ | 102 | $ | 106 | $ | (4 | ) | |||||
| Recovery of operating and maintenance costs | 25 | 21 | 4 | |||||||||
| Cost of capital | — | 18 | (18 | ) | ||||||||
| Impact of sales declines | 19 | 5 | 14 | |||||||||
| Total | $ | 146 | $ | 150 | $ | (4 | ) | |||||
112
113
114
| Consumers’ | ||||||||||||
| Proposed | ||||||||||||
| Increase Recommended | Self-Implemented | |||||||||||
| Components of the increase in revenue | by the MPSC Staff | Increase | Difference | |||||||||
| In Millions | ||||||||||||
| Investment in rate base | $ | 25 | $ | 28 | $ | (3 | ) | |||||
| Recovery of operating and maintenance costs | 2 | 7 | (5 | ) | ||||||||
| Cost of capital | (20 | ) | (9 | ) | (11 | ) | ||||||
| Impact of sales declines | (2 | ) | 3 | (5 | ) | |||||||
| Total | $ | 5 | $ | 29 | $ | (24 | ) | |||||
115
| End of | ||||||||||
| Recovery | ||||||||||
| or Refund | ||||||||||
December 31 | Period | 2010 | 2009 | |||||||
| In Millions | ||||||||||
| Regulatory Assets: | ||||||||||
| Postretirement benefits (Note 11)(a) | various | $ | 1,383 | $ | 1,464 | |||||
| Securitized costs (Note 7)(b) | 2015 | 310 | 364 | |||||||
| ARO (Note 16)(b) | various | 107 | 100 | |||||||
| Big Rock nuclear decommissioning and related costs(b)(c) | n/a | 85 | 85 | |||||||
| MGP sites (Note 5)(a) | 2020 | 58 | 63 | |||||||
| Unamortized debt costs(b) | n/a | 52 | 56 | |||||||
| Stranded costs(d) | 2013 | 46 | 67 | |||||||
| Decoupling mechanisms(d)(e) | n/a | 39 | 5 | |||||||
| Energy optimization plan incentive(b)(f) | various | 14 | 6 | |||||||
| Uncollectible expense tracking mechanism(d)(g) | n/a | 3 | 6 | |||||||
| Customer Choice Act(d) | 2013 | 2 | 42 | |||||||
| Other(d)(h) | various | 13 | 52 | |||||||
| Total regulatory assets(i) | $ | 2,112 | $ | 2,310 | ||||||
| Regulatory Liabilities: | ||||||||||
| Cost of removal(j) | various | $ | 1,311 | $ | 1,247 | |||||
| Income taxes, net (Note 12) | various | 410 | 529 | |||||||
| ARO (Note 16) | various | 122 | 130 | |||||||
| Renewable energy plan(k) | n/a | 101 | 25 | |||||||
| Energy optimization plan(k) | n/a | 34 | 6 | |||||||
| Self-implemented rate refunds(l) | 2011 | 14 | 18 | |||||||
| Refund of revenue in excess of nuclear decommissioning costs(m) | 2011 | 7 | 86 | |||||||
| Palisades refund(n) | 2011 | 2 | 85 | |||||||
| Other(h) | various | 9 | 10 | |||||||
| Total regulatory liabilities(i) | $ | 2,010 | $ | 2,136 | ||||||
116
117
Years Ended December 31 | 2010 | 2009 | ||||||
| In Millions | ||||||||
| Regulatory assets for PSCR and GCR underrecoveries | $ | 15 | $ | 48 | ||||
| Regulatory liabilities for PSCR and GCR overrecoveries | $ | 19 | $ | 21 | ||||
118
Presented in the following table is CMS Energy’s Long-termlong-term debt at December 31:
| Interest Rate (%) | Maturity | 2010 | 2009 | |||||||||||
| In Millions | ||||||||||||||
CMS Energy | ||||||||||||||
| Senior notes | 7.750 | 2010 | $ | — | $ | 67 | ||||||||
| 8.500 | 2011 | 146 | 214 | |||||||||||
| 6.300 | 2012 | 50 | 150 | |||||||||||
| Variable | (a) | 2013 | 150 | 150 | ||||||||||
| 6.875 | 2015 | 125 | 125 | |||||||||||
| 4.250 | 2015 | 250 | — | |||||||||||
| 6.550 | 2017 | 250 | 250 | |||||||||||
| 5.050 | 2018 | 250 | — | |||||||||||
| 8.750 | 2019 | 300 | 300 | |||||||||||
| 6.250 | 2020 | 300 | — | |||||||||||
| 3.375 | (b) | 2023 | 4 | 140 | ||||||||||
| 2.875 | (b) | 2024 | 288 | 288 | ||||||||||
| 5.500 | (b) | 2029 | 172 | 172 | ||||||||||
| $ | 2,285 | $ | 1,856 | |||||||||||
| Revolving credit facility | — | 25 | ||||||||||||
| Total — CMS Energy | $ | 2,285 | $ | 1,881 | ||||||||||
Consumers | $ | 4,529 | $ | 4,411 | ||||||||||
Other CMS Energy Subsidiaries | ||||||||||||||
| EnerBank brokered certificates of deposit | 1.707 | (c) | 2011-2018 | 363 | 214 | |||||||||
| Genesee tax exempt bonds(e) | 7.500 | 2011-2021 | — | 54 | ||||||||||
| Grayling tax exempt bonds(e) | Variable | (d) | 2011-2012 | — | 15 | |||||||||
| Trust Preferred Securities | 7.750 | 2027 | 29 | — | ||||||||||
| Total — other CMS Energy subsidiaries | $ | 392 | $ | 283 | ||||||||||
Long-term debt — related parties | 7.750 | 2027 | $ | — | $ | 34 | ||||||||
| Total CMS Energy principal amount outstanding | $ | 7,206 | $ | 6,609 | ||||||||||
| Current amounts | (726 | ) | (672 | ) | ||||||||||
| Net unamortized discount | (32 | ) | (42 | ) | ||||||||||
| Total CMS Energy Long-term debt | $ | 6,448 | $ | 5,895 | ||||||||||
119
|
|
|
|
|
|
|
|
| In Millions |
| ||
|
| Interest Rate |
| Maturity |
|
| 2013 |
| 2012 |
| ||
CMS Energy |
|
|
|
|
|
|
|
|
|
| ||
Senior notes |
| 2.750 | 1 | 2014 |
|
| $ | - |
| $ | 250 |
|
|
| 6.875 |
| 2015 |
|
| 125 |
| 125 |
| ||
|
| 4.250 |
| 2015 |
|
| 250 |
| 250 |
| ||
|
| 6.550 |
| 2017 |
|
| 250 |
| 250 |
| ||
|
| 5.050 |
| 2018 |
|
| 250 |
| 250 |
| ||
|
| 8.750 |
| 2019 |
|
| 300 |
| 300 |
| ||
|
| 6.250 |
| 2020 |
|
| 300 |
| 300 |
| ||
|
| 5.050 |
| 2022 |
|
| 300 |
| 300 |
| ||
|
| 5.500 | 2 | 2029 |
|
| 172 |
| 172 |
| ||
|
| 4.700 |
| 2043 |
|
| 250 |
| - |
| ||
Total CMS Energy senior notes |
|
|
|
|
|
| $ | 2,197 |
| $ | 2,197 |
|
Term loan facility |
| variable | 3 | 2016 |
|
| 180 |
| 180 |
| ||
Total CMS Energy parent |
|
|
|
|
|
| $ | 2,377 |
| $ | 2,377 |
|
Consumers |
|
|
|
|
|
| $ | 4,625 |
| $ | 4,341 |
|
Other CMS Energy subsidiaries |
|
|
|
|
|
|
|
|
|
| ||
EnerBank certificates of deposits |
| 1.095 | 4 | 2014-2021 |
|
| $ | 652 |
| $ | 527 |
|
Total other CMS Energy subsidiaries |
|
|
|
|
|
| $ | 652 |
| $ | 527 |
|
Total CMS Energy principal amount outstanding |
|
|
|
|
|
| $ | 7,654 |
| $ | 7,245 |
|
Current amounts |
|
|
|
|
|
| (541 | ) | (519 | ) | ||
Net unamortized discounts |
|
|
|
|
|
| (12 | ) | (16 | ) | ||
Total CMS Energy long-term debt |
|
|
|
|
|
| $ | 7,101 |
| $ | 6,710 |
|
2 CMS Energy’s contingently convertible notes. See the “Contingently Convertible Securities” section in this Note for further discussion of the conversion features.
3 Outstanding borrowings bear interest at an annual interest rate of LIBOR plus 1.75 percent (1.92 percent at December 31, 2013).
4 The weighted-average interest rate for EnerBank’s certificates of deposit was 1.09 percent at December 31, 2013 and 1.16 percent at December 31, 2012. EnerBank’s primary deposit product consists of brokered certificates of deposit with varying maturities and having a face value of $1,000.
Presented in the following table is Consumers’ Long-termlong-term debt at December 31:
| Interest Rate (%) | Maturity | 2010 | 2009 | |||||||||||
| In Millions | ||||||||||||||
Consumers | ||||||||||||||
| FMBs(a) | 4.000 | 2010 | $ | — | $ | 250 | ||||||||
| 5.000 | 2012 | 300 | 300 | |||||||||||
| 5.375 | 2013 | 375 | 375 | |||||||||||
| 6.000 | 2014 | 200 | 200 | |||||||||||
| 5.000 | 2015 | 225 | 225 | |||||||||||
| 2.600 | 2015 | 50 | — | |||||||||||
| 5.500 | 2016 | 350 | 350 | |||||||||||
| 5.150 | 2017 | 250 | 250 | |||||||||||
| 3.210 | 2017 | 100 | — | |||||||||||
| 5.650 | 2018 | 250 | 250 | |||||||||||
| 6.125 | 2019 | 350 | 350 | |||||||||||
| 6.700 | 2019 | 500 | 500 | |||||||||||
| 5.650 | 2020 | 300 | 300 | |||||||||||
| 3.770 | 2020 | 100 | — | |||||||||||
| 5.300 | 2022 | 250 | — | |||||||||||
| 5.650 | 2035 | — | 139 | |||||||||||
| 5.800 | 2035 | 175 | 175 | |||||||||||
| 6.170 | 2040 | 50 | — | |||||||||||
| 4.970 | 2040 | 50 | — | |||||||||||
| $ | 3,875 | $ | 3,664 | |||||||||||
| Senior notes | 6.875 | 2018 | 180 | 180 | ||||||||||
| Securitization bonds | 5.613 | (b) | 2011-2015 | 208 | 243 | |||||||||
| Nuclear fuel disposal liability to DOE | (c | ) | (c) | 163 | 163 | |||||||||
| Tax-exempt pollution control revenue bonds | Various | 2018-2035 | 103 | 161 | ||||||||||
| Total Consumers principal amount outstanding | $ | 4,529 | $ | 4,411 | ||||||||||
| Current amounts | (37 | ) | (343 | ) | ||||||||||
| Net unamortized discount | (4 | ) | (5 | ) | ||||||||||
| Total Consumers Long-term debt | $ | 4,488 | $ | 4,063 | ||||||||||
120
|
|
|
|
|
|
|
| In Millions |
| |||
|
| Interest Rate |
| Maturity |
|
| 2013 |
| 2012 |
| ||
Consumers |
|
|
|
|
|
|
|
|
|
| ||
FMBs1 |
| 6.000 | 2 | 2014 |
|
| $ | - |
| $ | 200 |
|
|
| 5.000 | 2 | 2015 |
|
| - |
| 225 |
| ||
|
| 2.600 |
| 2015 |
|
| 50 |
| 50 |
| ||
|
| 5.500 |
| 2016 |
|
| 350 |
| 350 |
| ||
|
| 5.150 |
| 2017 |
|
| 250 |
| 250 |
| ||
|
| 3.210 |
| 2017 |
|
| 100 |
| 100 |
| ||
|
| 5.650 |
| 2018 |
|
| 250 |
| 250 |
| ||
|
| 6.125 |
| 2019 |
|
| 350 |
| 350 |
| ||
|
| 6.700 |
| 2019 |
|
| 500 |
| 500 |
| ||
|
| 5.650 |
| 2020 |
|
| 300 |
| 300 |
| ||
|
| 3.770 |
| 2020 |
|
| 100 |
| 100 |
| ||
|
| 5.300 |
| 2022 |
|
| 250 |
| 250 |
| ||
|
| 2.850 |
| 2022 |
|
| 375 |
| 375 |
| ||
|
| 3.375 |
| 2023 |
|
| 325 |
| - |
| ||
|
| 3.190 |
| 2024 |
|
| 52 |
| 52 |
| ||
|
| 3.390 |
| 2027 |
|
| 35 |
| 35 |
| ||
|
| 5.800 |
| 2035 |
|
| 175 |
| 175 |
| ||
|
| 6.170 |
| 2040 |
|
| 50 |
| 50 |
| ||
|
| 4.970 |
| 2040 |
|
| 50 |
| 50 |
| ||
|
| 4.310 |
| 2042 |
|
| 263 |
| 263 |
| ||
|
| 3.950 |
| 2043 |
|
| 425 |
| - |
| ||
|
|
|
|
|
|
| $ | 4,250 |
| $ | 3,925 |
|
Senior notes |
| 6.875 |
| 2018 |
|
| 180 |
| 180 |
| ||
Securitization bonds |
| 5.760 | 3 | 2015 |
|
| 92 |
| 133 |
| ||
Tax-exempt pollution control revenue bonds |
| various |
| 2018-2035 |
|
| 103 |
| 103 |
| ||
Total Consumers principal amount outstanding |
|
|
|
|
|
| $ | 4,625 |
| $ | 4,341 |
|
Current amounts |
|
|
|
|
|
| (43 | ) | (41 | ) | ||
Net unamortized discounts |
|
|
|
|
|
| (3 | ) | (3 | ) | ||
Total Consumers long-term debt |
|
|
|
|
|
| $ | 4,579 |
| $ | 4,297 |
|
1 The weighted-average interest rate for Consumers’ FMBs was 4.90 percent at December 31, 2013 and 5.19 percent at December 31, 2012.
2 In June 2013, Consumers Energy Companyretired its 6.00 percent and 5.00 percent FMBs.
3 The weighted-average interest rate for Consumers’ Securitization bonds was 5.76 percent at December 31, 2013 and 5.72 percent at December 31, 2012.
Financings: Presented in the following table is a summary of significantmajor long-term debt transactions during 2010:
| Principal | Interest Rate | Issue/Retirement Date | Maturity Date | |||||||||||||
| (In Millions) | ||||||||||||||||
Debt Issuances: | ||||||||||||||||
CMS Energy | ||||||||||||||||
| Senior notes | $ | 300 | 6.25 | % | January 2010 | February 2020 | ||||||||||
| Senior notes | 250 | 4.25 | % | September 2010 | September 2015 | |||||||||||
| Senior notes(a) | 250 | 5.05 | % | November 2010 | February 2018 | |||||||||||
Consumers | ||||||||||||||||
| FMBs | 250 | 5.30 | % | September 2010 | September 2022 | |||||||||||
| FMBs | 50 | 6.17 | % | September 2010 | September 2040 | |||||||||||
| FMBs | 50 | 2.60 | % | October 2010 | October 2015 | |||||||||||
| FMBs | 100 | 3.21 | % | October 2010 | October 2017 | |||||||||||
| FMBs | 100 | 3.77 | % | October 2010 | October 2020 | |||||||||||
| FMBs | 50 | 4.97 | % | October 2010 | October 2040 | |||||||||||
Debt Retirements: | ||||||||||||||||
CMS Energy | ||||||||||||||||
| Senior notes | $ | 67 | 7.75 | % | August 2010 | August 2010 | ||||||||||
| Senior notes(b) | 100 | 6.30 | % | December 2010 | February 2012 | |||||||||||
| Senior notes(c) | 68 | 8.50 | % | December 2010 | April 2011 | |||||||||||
| Contingently convertible senior notes(a) | 136 | 3.375 | % | August and December 2010 | July 2023 | |||||||||||
Consumers | ||||||||||||||||
| FMBs | 250 | 4.00 | % | May 2010 | May 2010 | |||||||||||
| FMBs | 137 | 5.65 | % | October 2010 | April 2035 | |||||||||||
| Tax-exempt pollution control revenue bonds | 58 | Various | June 2010 | June 2010 | ||||||||||||
|
| Principal |
|
|
| Issue/Retirement |
|
|
| |
| (In Millions) |
| Interest Rate |
| Date |
| Maturity Date |
| ||
Debt issuances |
|
|
|
|
|
|
|
|
| |
CMS Energy |
|
|
|
|
|
|
|
|
| |
Senior notes |
| $ | 250 |
| 4.700 | % | March 2013 |
| March 2043 |
|
Total CMS Energy parent |
| $ | 250 |
|
|
|
|
|
|
|
Consumers |
|
|
|
|
|
|
|
|
| |
FMBs |
| $ | 425 |
| 3.950 | % | May 2013 |
| May 2043 |
|
FMBs |
| 325 |
| 3.375 | % | August 2013 |
| August 2023 |
| |
Total Consumers |
| $ | 750 |
|
|
|
|
|
|
|
Total debt issuances |
| $ | 1,000 |
|
|
|
|
|
|
|
Debt retirements |
|
|
|
|
|
|
|
|
| |
CMS Energy |
|
|
|
|
|
|
|
|
| |
Senior notes |
| $ | 250 |
| 2.750 | % | September 2013 |
| May 2014 |
|
Total CMS Energy parent |
| $ | 250 |
|
|
|
|
|
|
|
Consumers |
|
|
|
|
|
|
|
|
| |
FMBs |
| $ | 200 |
| 6.000 | % | June 2013 |
| February 2014 |
|
FMBs |
| 225 |
| 5.000 | % | June 2013 |
| March 2015 |
| |
Total Consumers |
| $ | 425 |
|
|
|
|
|
|
|
Total debt retirements |
| $ | 675 |
|
|
|
|
|
|
|
FMBs: Consumers secures its FMBs by a mortgage and lien on substantially all of its property. Consumers’ ability to issue FMBs is restricted by certain provisions in the First Mortgage Bond Indenture and the need for
121
Regulatory Authorization for Financings:FERC has authorized Consumers to have outstanding at any one time, up to $1.0 billion$500 million of secured and unsecured short-term securities for general corporate purposes. The remaining availability is $670was $200 million at December 31, 2010.2013. FERC has also authorized Consumers to issue and sell up to $1.1$1.9 billion of secured and unsecured long-term securities for general corporate purposes. The remaining availability is $650was $800 million at December 31, 2010.2013. The authorizations are for the period ending June 30, 2012.2014. Any long-term issuances during the authorization period are exempt from FERC’s competitive bidding and negotiated placement requirements.
Securitization Bonds:Certain regulatory assets owned by Consumers’ subsidiary Consumers Funding collateralize Consumers’ Securitization bonds. The bondholders have no recourse to Consumers’ other assets. Through its rate structure, Consumers bills customers for Securitization surcharges to fund the payment of principal, interest, and other related expenses. The surcharges collected are remitted to a trustee and are not available to creditors of Consumers or creditors of Consumers’ affiliates other than Consumers Funding. Securitization surcharges totaled $49 million in 2010 and $46 million in 2009.
Debt Maturities:At December 31, 2010,2013, the aggregate annual contractual maturities for long-term debt for the next five years were:
| Payments Due | ||||||||||||||||||||
| 2011 | 2012 | 2013 | 2014 | 2015 | ||||||||||||||||
| In Millions | ||||||||||||||||||||
CMS Energy, including Consumers | ||||||||||||||||||||
| Long-term debt | $ | 439 | $ | 429 | $ | 590 | $ | 262 | $ | 714 | ||||||||||
Consumers | ||||||||||||||||||||
| Long-term debt | $ | 37 | $ | 339 | $ | 416 | $ | 243 | $ | 324 | ||||||||||
122
|
|
|
|
|
|
|
|
| In Millions |
| ||||||
|
| 2014 |
| 2015 |
| 2016 |
| 2017 |
| 2018 |
| |||||
CMS Energy, including Consumers |
|
|
|
|
|
|
|
|
|
|
| |||||
Long-term debt |
| $ | 368 |
| $ | 599 |
| $ | 608 |
| $ | 657 |
| $ | 786 |
|
Consumers |
|
|
|
|
|
|
|
|
|
|
| |||||
Long-term debt |
| $ | 43 |
| $ | 99 |
| $ | 350 |
| $ | 350 |
| $ | 498 |
|
| Letters of | ||||||||||||||||||
| Amount of | Amount | Credit | Amount | |||||||||||||||
Company | Expiration Date | Facility | Borrowed | Outstanding | Available | |||||||||||||
| In Millions | ||||||||||||||||||
| CMS Energy(a) | April 2, 2012 | $ | 550 | $ | — | $ | 3 | $ | 547 | |||||||||
| Consumers(b) | September 21, 2011 | 30 | — | 30 | — | |||||||||||||
| Consumers | March 30, 2012 | 500 | — | 300 | 200 | |||||||||||||
| Consumers | August 9, 2013 | 150 | — | — | 150 | |||||||||||||
|
|
|
|
|
|
| In Millions |
| |||||
|
|
| Letters of Credit |
|
| ||||||||
Expiration Date | Amount of Facility | Amount Borrowed | Outstanding | Amount Available |
| ||||||||
CMS Energy |
|
|
|
|
|
|
|
|
| ||||
December 20, 20181 |
| $ | 550 |
| $ | - |
| $ | 2 |
| $ | 548 |
|
Consumers |
|
|
|
|
|
|
|
|
| ||||
December 20, 20182 |
| $ | 650 |
| $ | - |
| $ | - |
| $ | 650 |
|
September 9, 20142 |
| 30 |
| - |
| 30 |
| - |
| ||||
1 Obligations under this facility are secured by Consumers common stock. CMS Energy’s average borrowings during the year ended December 31, 2013 were $4 million, with a weighted-average annual interest rate of 1.67 percent, representing LIBOR plus 1.50 percent.
2 Obligations under this facility are secured by FMBs of Consumers.
Short-term Borrowings: Under Consumers’ revolving accounts receivable sales program, Consumers may transfer up to $250 million of accounts receivable, subject to certain eligibility requirements, to a wholly owned, consolidated, bankruptcy-remote special-purpose entity. In turn, the special purpose entity may transfer an undivided interest in the receivables. Under accounting rules effective January 1, 2010,requirements. These transactions entered into under this program are accounted for as short-term secured borrowings rather than as sales.borrowings. At December 31, 2010, $2502013, $170 million of accounts receivable were eligible for transfer, and no accounts receivable had been transferred under the program. Prior to 2010, Consumers accounted for these transfers as sales. At December 31, 2009, $250 million of accounts receivable were eligible for sale, of which $50 million were sold.
Contingently Convertible Securities: Presented in the following table are the significant terms of CMS Energy’s contingently convertible securities at December 31, 2010:
| Outstanding | Adjusted | Adjusted | ||||||||||||||
Security | Maturity | (In Millions) | Conversion Price | Trigger Price | ||||||||||||
| 2.875% senior notes | 2024 | $ | 288 | $ | 13.09 | $ | 15.70 | |||||||||
| 3.375% senior notes | 2023 | 4 | 9.47 | 11.36 | ||||||||||||
| 5.50% senior notes | 2029 | 172 | 14.46 | 18.80 | ||||||||||||
|
|
| Outstanding | Adjusted | Adjusted |
| ||||||
Security |
| Maturity | (In Millions) | Conversion Price | Trigger Price |
| ||||||
5.50% senior notes |
| 2029 |
| $ | 172 |
| $ | 13.55 |
| $ | 17.61 |
|
The securities become convertible for a calendar quarter if the price of CMS Energy’s common stock remains at or above the trigger price for 20 of 30 consecutive trading days ending on the last trading day of the previous quarter. The trigger price at which these securities become convertible is 120130 percent of the conversion price for the 2.875 percent senior notes and 130 percent for the 5.5 percent senior notes.price. The conversion and trigger prices are subject to adjustmentadjustments in certain circumstances, including payments or distributions to CMS Energy’s common stockholders. The conversion and trigger price adjustment is made when the cumulative change in conversion and trigger prices is one percent or more. During 20 of the last 30 trading days ended December 2010, trigger price31, 2013, the adjusted trigger-price contingencies were met for the 2.875 percentcontingently convertible senior notes.
CMS Energy’s contingently convertible securities, if converted, require CMS Energy to pay cash up to the principal amount of the securities. Any conversion value in excess of thatthe principal amount iscan be paid in cash or in shares of CMS Energy’s common stock.
123
| 4.5 percent | Conversion | Common Stock | Cash Paid on | |||||||||||||||
| cumulative convertible | Conversion | Shares | Value | Issued | Settlement | |||||||||||||
preferred stock(a) | Date | Converted | per Share | on Settlement | (In Millions) | |||||||||||||
| Voluntary conversion | June 2010 | 100 | $ | 84.75 | 228 | $ | — | |||||||||||
| Voluntary conversion | July 2010 | 250,000 | $ | 89.43 | 614,940 | 13 | ||||||||||||
| Voluntary conversion | October 2010 | 1,000 | $ | 102.32 | 2,852 | — | ||||||||||||
| Voluntary conversion | October 2010 | 632,971 | $ | 103.88 | 1,831,604 | 32 | ||||||||||||
| Mandatory conversion | October 2010 | 3,884,929 | $ | 104.22 | 11,276,277 | 194 | ||||||||||||
| 4,769,000 | 13,725,901 | $ | 239 | |||||||||||||||
| Conversion | ||||||||||||||||||
| 3.375 percent | Principal | Value | Common Stock | Cash Paid on | ||||||||||||||
| contingently convertible | Conversion | Converted | per $1,000 of | Issued | Settlement | |||||||||||||
senior notes due 2023(b) | Date | (In Millions) | principal | on Settlement | (In Millions) | |||||||||||||
| Voluntary conversion | August 2010 | $ | 8 | $ | 1,666.57 | 331,008 | $ | 8 | ||||||||||
| Voluntary conversion | December 2010 | 75 | $ | 1,982.59 | 3,941,770 | 75 | ||||||||||||
| Voluntary conversion | December 2010 | 21 | $ | 1,987.87 | 1,102,299 | 21 | ||||||||||||
| Voluntary conversion | December 2010 | 29 | $ | 1,996.32 | 1,504,074 | 29 | ||||||||||||
| Voluntary conversion | December 2010 | 3 | $ | 2,006.88 | 166,930 | 3 | ||||||||||||
| $ | 136 | 7,046,081 | $ | 136 | ||||||||||||||
Dividend Restrictions: Under provisions of CMS Energy’s senior notes indenture,the Michigan Business Corporation Act of 1972, as amended, at December 31, 2010,2013, payment of common stock dividends by CMS Energy was limited to $959 million.
Under the provisions of its articles of incorporation, at December 31, 2010,2013, Consumers had $404$662 million of unrestricted retained earnings available to pay common stock dividends 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 common stock dividends from Consumers would not be limited to amounts in Consumers’ retained earnings. Any decision by Consumers to pay common stock dividends in excess of retained earnings would be based on specific facts and circumstances and would result only after a formal regulatory filing process.
For the year ended December 31, 2013, CMS Energy received $358$406 million of common stock dividends from Consumers.
124
·350 million shares of CMS Energy Common Stock, par value $0.01 per share, and
·10 million shares of CMS Energy Preferred Stock, par value $0.01 per share.
Issuance of Common Stock: CMS Energy has entered into two continuous equity offering programs permitting it to sell, from time to time in “at the market” offerings, common stock having an aggregate sales price of up to $50 million per program.
Presented in the following table are the transactions that CMS Energy entered into under the first program:
|
| Number of | Average | Proceeds |
| ||||
|
| Shares Issued | Price per Share | (In Millions) |
| ||||
June 2011 |
| 762,925 |
| $ | 19.66 |
| $ | 15 |
|
June 2012 |
| 650,235 |
| 23.07 |
| 15 |
| ||
March 2013 |
| 735,873 |
| 27.18 |
| 20 |
| ||
Total |
| 2,149,033 |
| $ | 23.27 |
| $ | 50 |
|
In April 2013, CMS Energy entered into the second continuous equity offering program, but has not yet issued any equity under this program.
Preferred Stock of Subsidiary: In July 2013, Consumers redeemed all of its $4.16 preferred stock at a redemption price of $103.25 per share, which represented an aggregate redemption price of $7 million paid to redeem 68,451 outstanding shares.
Presented in the following table are details about Consumers’ preferred stock outstanding:
|
|
|
| Optional |
| Number of |
| Balance |
| |||
|
|
|
| Redemption |
| Shares |
| Outstanding |
| |||
|
| Series |
| Price |
| Outstanding |
| (In Millions) |
| |||
December 31 |
|
|
|
|
|
|
|
|
| 2013 | 2012 |
|
Cumulative, $100 par value, authorized 7,500,000 shares, with no mandatory redemption |
| $ | 4.50 |
| $ | 110.00 |
| 373,148 |
| $ 37 | $ 37 |
|
|
|
| 4.16 |
|
| 103.25 |
| 68,451 |
| - | 7 |
|
Total preferred stock of Consumers |
|
|
|
|
|
|
|
|
| $ 37 | $ 44 |
|
5:FAIR VALUE MEASUREMENTS
Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. When measuring fair value, CMS Energy and Consumers are required to incorporate all assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. A fair value hierarchy prioritizes inputs used to measure fair value according to their observability in the market. The three levels of the fair value hierarchy are as follows:
·Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
·Level 2 inputs are observable, market-based inputs, other than Level 1 prices. Level 2 inputs may include quoted prices for similar assets or liabilities in active markets, quoted prices in inactive markets, and inputs derived from or corroborated by observable market data.
·Level 3 inputs are unobservable inputs that reflect CMS Energy’s or Consumers’ own assumptions about how market participants would value their assets and liabilities.
To the extent possible, CMS Energy and Consumers use quoted market prices or other observable market pricing data in valuing assets and liabilities measured at fair value. If this information is unavailable, they use market-corroborated data or reasonable estimates about market participant assumptions. 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, by level within the fair value hierarchy, recorded at fair value on a recurring basis:
|
|
| In Millions | |||||||||||||||||||||
| December 31, 2013 |
| December 31, 2012 | |||||||||||||||||||||
|
|
| Level |
|
|
| Level | |||||||||||||||||
|
| Total |
| 1 |
| 2 |
| 3 |
| Total |
| 1 |
| 2 |
| 3 | ||||||||
CMS Energy, including Consumers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Cash equivalents |
| $ | 87 |
| $ | 87 |
| $ | - |
| $ | - |
| $ | 53 |
| $ | 53 |
| $ | - |
| $ | - |
Restricted cash equivalents |
| 16 |
| 16 |
| - |
| - |
| 14 |
| 14 |
| - |
| - | ||||||||
Nonqualified deferred compensation plan assets |
| 6 |
| 6 |
| - |
| - |
| 5 |
| 5 |
| - |
| - | ||||||||
DB SERP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Cash equivalents |
| - |
| - |
| - |
| - |
| 2 |
| 2 |
| - |
| - | ||||||||
Mutual funds |
| 136 |
| 136 |
| - |
| - |
| 126 |
| 126 |
| - |
| - | ||||||||
Derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Commodity contracts |
| 5 |
| - |
| 1 |
| 4 |
| 3 |
| - |
| - |
| 3 | ||||||||
Total |
| $ | 250 |
| $ | 245 |
| $ | 1 |
| $ | 4 |
| $ | 203 |
| $ | 200 |
| $ | - |
| $ | 3 |
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Nonqualified deferred compensation plan liabilities |
| $ | 6 |
| $ | 6 |
| $ | - |
| $ | - |
| $ | 5 |
| $ | 5 |
| $ | - |
| $ | - |
Derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Commodity contracts |
| 1 |
| - |
| 1 |
| - |
| 4 |
| - |
| 3 |
| 1 | ||||||||
Total |
| $ | 7 |
| $ | 6 |
| $ | 1 |
| $ | - |
| $ | 9 |
| $ | 5 |
| $ | 3 |
| $ | 1 |
Consumers |
|
|
|
|
|
|
|
|
|
|
|
|
|
| �� |
| ||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Restricted cash equivalents |
| $ | 15 |
| $ | 15 |
| $ | - |
| $ | - |
| $ | 13 |
| $ | 13 |
| $ | - |
| $ | - |
CMS Energy common stock |
| 29 |
| 29 |
| - |
| - |
| 32 |
| 32 |
| - |
| - | ||||||||
Nonqualified deferred compensation plan assets |
| 4 |
| 4 |
| - |
| - |
| 4 |
| 4 |
| - |
| - | ||||||||
DB SERP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Cash equivalents |
| - |
| - |
| - |
| - |
| 1 |
| 1 |
| - |
| - | ||||||||
Mutual funds |
| 95 |
| 95 |
| - |
| - |
| 85 |
| 85 |
| - |
| - | ||||||||
Derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Commodity contracts |
| 4 |
| - |
| - |
| 4 |
| 2 |
| - |
| - |
| 2 | ||||||||
Total |
| $ | 147 |
| $ | 143 |
| $ | - |
| $ | 4 |
| $ | 137 |
| $ | 135 |
| $ | - |
| $ | 2 |
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Nonqualified deferred compensation plan liabilities |
| $ | 4 |
| $ | 4 |
| $ | - |
| $ | - |
| $ | 4 |
| $ | 4 |
| $ | - |
| $ | - |
Total |
| $ | 4 |
| $ | 4 |
| $ | - |
| $ | - |
| $ | 4 |
| $ | 4 |
| $ | - |
| $ | - |
Cash Equivalents: Cash equivalents and restricted cash equivalents consist of money market funds with daily liquidity. Short-term debt instruments classified as restricted cash equivalents on the consolidated balance sheets are not included since they are recorded at amortized cost.
Nonqualified Deferred Compensation Plan Assets and Liabilities: The nonqualified deferred compensation plan assets consist of mutual funds, which are valued using the daily quoted NAVs that are publicly available and are the basis for transactions to buy or sell shares in each fund. CMS Energy and Consumers value their nonqualified deferred compensation plan liabilities based on the fair values of the plan assets, as they reflect what is owed to the plan participants in accordance with their investment
| Optional | ||||||||||||||||
| Redemption | Number of | |||||||||||||||
December 31, 2010 and 2009 | Series | Price | Shares | In Millions | ||||||||||||
| Cumulative $100 par value, authorized 7,500,000 shares, with no mandatory redemption | $ | 4.16 | $ | 103.25 | 68,451 | $ | 7 | |||||||||
| $ | 4.50 | $ | 110.00 | 373,148 | 37 | |||||||||||
| Total preferred stock of Consumers | $ | 44 | ||||||||||||||
elections. CMS Energy and Consumers report the assets in other non-current assets and the liabilities in other non-current liabilities on their consolidated balance sheets.
DB SERP Assets: CMS Energy and Consumers value their DB SERP assets using a market approach that incorporates quoted market prices. The DB SERP cash equivalents consist of a money market fund with daily liquidity. The DB SERP invests in mutual funds that hold primarily fixed-income instruments of varying maturities. In order to meet their investment objectives, the funds hold investment-grade debt securities, and may invest a portion of their assets in high-yield securities, foreign debt, and derivative instruments. CMS Energy and Consumers value these funds using the daily quoted NAVs that are publicly available and are the basis for transactions to buy or sell shares in each fund. CMS Energy and Consumers report their DB SERP assets in other non-current assets on their consolidated balance sheets. For additional details about DB SERP securities, see Note 6, Financial Instruments.
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 values its exchange-traded derivative contracts based on Level 1 quoted prices and values other derivatives using Level 2 inputs, including commodity forward prices and credit risk factors. CMS Energy and Consumers have classified certain derivatives as Level 3 since the fair value measurements incorporate assumptions that cannot be observed or confirmed through market transactions.
The most significant 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.
ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS USING SIGNIFICANT LEVEL 3INPUTS
Presented in the following table are reconciliations of changes in the fair values of Level 3 assets and liabilities at CMS Energy and Consumers:
|
|
|
|
| In Millions |
| ||||
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
| |||
CMS Energy, including Consumers |
|
|
|
|
|
|
| |||
Balance at beginning of period |
| $ | 2 |
| $ | (2 | ) | $ | (3 | ) |
Total gains included in earnings1 |
| - |
| 3 |
| 2 |
| |||
Total gains offset through regulatory accounting |
| 3 |
| 6 |
| 2 |
| |||
Purchases |
| - |
| 1 |
| 1 |
| |||
Sales |
| - |
| - |
| (4 | ) | |||
Settlements |
| (1 | ) | (6 | ) | - |
| |||
Balance at end of period |
| $ | 4 |
| $ | 2 |
| $ | (2 | ) |
Unrealized gains (losses) included in earnings relating to assets and liabilities still held at end of period1 |
| $ | (1 | ) | $ | 2 |
| $ | 2 |
|
Consumers |
|
|
|
|
|
|
| |||
Balance at beginning of period |
| $ | 2 |
| $ | 2 |
| $ | 1 |
|
Total gains offset through regulatory accounting |
| 3 |
| 6 |
| 2 |
| |||
Purchases |
| - |
| 1 |
| 1 |
| |||
Settlements |
| (1 | ) | (7 | ) | (2 | ) | |||
Balance at end of period |
| $ | 4 |
| $ | 2 |
| $ | 2 |
|
1CMS Energy records realized and unrealized gains and losses for Level 3 recurring fair value measurements in earnings as a component of operating revenue or maintenance and other operating expenses on its consolidated statements of income.
6:FINANCIAL INSTRUMENTS
Presented in the following table are the carrying amounts and fair values, by level within the fair value hierarchy, of CMS Energy’s and Consumers’ financial instruments that are not recorded at fair value. The table does not include information on cash, cash equivalents, short-term accounts and notes receivable, short-term investments, and current liabilities since the carrying amounts of these items approximate their fair values because of their short-term nature. For information about assets and liabilities recorded at fair value and for additional details regarding the fair value hierarchy, see Note 5, Fair Value Measurements.
|
|
|
|
|
|
|
| In Millions | ||||||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||
|
| December 31, 2013 |
| December 31, 2012 | ||||||||||||||||||||||||||||||||
|
|
|
| Fair Value |
|
|
| Fair Value | ||||||||||||||||||||||||||||
|
| Carrying |
|
|
| Level |
| Carrying |
|
|
| Level | ||||||||||||||||||||||||
|
| Amount |
| Total |
| 1 |
| 2 |
| 3 |
| Amount |
| Total |
| 1 |
| 2 |
| 3 | ||||||||||||||||
CMS Energy, including Consumers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Securities held to maturity |
| $ 10 |
| $ | 10 |
| $ | - |
| $ | 10 |
| $ | - |
| $ | 9 |
| $ | 10 |
| $ | - |
| $ | 10 |
| $ | - | |||||||
Notes receivable1 |
| 683 |
| 724 |
| - |
| - |
| 724 |
| 544 |
| 581 |
| - |
| - |
| 581 | ||||||||||||||||
Long-term debt2 |
| 7,642 |
| 8,368 |
| - |
| 7,406 |
| 962 |
| 7,229 |
| 8,347 |
| - |
| 7,321 |
| 1,026 | ||||||||||||||||
Consumers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Long-term debt3 |
| $ 4,622 |
| $ | 4,940 |
| $ | - |
| $ | 3,978 |
| $ | 962 |
| $ | 4,338 |
| $ | 5,015 |
| $ | - |
| $ | 3,989 |
| $ | 1,026 | |||||||
1 Includes current portion of notes receivable of $48 million at December 31, 2013 and $40 million at December 31, 2012.
2 Includes current portion of long-term debt of $541 million at December 31, 2013 and $519 million at December 31, 2012.
3 Includes current portion of long-term debt of $43 million at December 31, 2013 and $41 million at December 31, 2012.
Notes receivable consist of EnerBank’s fixed-rate installment loans. EnerBank estimates the fair value of these loans using a discounted cash flows technique that incorporates market interest rates as well as assumptions about the remaining life of the loans and credit risk.
CMS Energy and Consumers estimate the fair value of their long-term debt using quoted prices from market trades of the debt, if available. In the absence of quoted prices, CMS Energy and Consumers calculate market yields and prices for the debt using a matrix method that incorporates market data for similarly rated debt. Depending on the information available, other valuation techniques and models may be used that rely on assumptions that cannot be observed or confirmed through market transactions. CMS Energy includes the value of the conversion features in estimating the fair value of its convertible debt, and incorporates, as appropriate, information on the market prices of CMS Energy common stock.
The effects of third-party credit enhancements are excluded from the fair value measurements of long-term debt. At December 31, 2013 and December 31, 2012, CMS Energy’s long-term debt included $103 million principal amount that was supported by third-party credit enhancements. This entire principal amount was at Consumers.
Presented in the following table are CMS Energy’s and Consumers’ investment securities classified as available for sale or held to maturity:
| |||||||||||||||||||||||||
In Millions | |||||||||||||||||||||||||
| December 31, 2013 |
| December 31, 2012 | ||||||||||||||||||||||
|
| Unrealized | Unrealized | Fair |
|
| Unrealized | Unrealized | Fair | ||||||||||||||||
| Cost | Gains | Losses | Value |
| Cost | Gains | Losses | Value | ||||||||||||||||
CMS Energy, including Consumers |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Available for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
DB SERP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Mutual funds |
| $ | 136 |
| $ | - |
| $ | - |
| $ | 136 |
|
| $ | 123 |
| $ | 3 |
| $ | - |
| $ | 126 |
Held to maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Debt securities |
| 10 |
| - |
| - |
| 10 |
|
| 9 |
| 1 |
| - |
| 10 | ||||||||
Consumers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Available for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
DB SERP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Mutual funds |
| $ | 95 |
| $ | - |
| $ | - |
| $ | 95 |
|
| $ | 83 |
| $ | 2 |
| $ | - |
| $ | 85 |
CMS Energy common stock |
| 5 |
| 24 |
| - |
| 29 |
|
| 6 |
| 26 |
| - |
| 32 | ||||||||
The mutual funds classified as available for sale hold primarily fixed-income instruments of varying maturities. During the year ended December 31, 2013, CMS Energy contributed $16 million to the DB SERP, which included a contribution of $13 million by Consumers. The contributions were used to acquire additional shares in the mutual funds. Debt securities classified as held to maturity consist primarily of mortgage-backed securities and Utah Housing Corporation bonds held by EnerBank.
Presented in the following table is a summary of the sales activity for CMS Energy’s and Consumers’ investment securities:
|
|
|
| In Millions |
| |||||
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
| |||
CMS Energy, including Consumers |
|
|
|
|
|
|
| |||
Proceeds from sales of investment securities |
| $ | 3 |
| $ | 3 |
| $ | 29 |
|
Consumers |
|
|
|
|
|
|
| |||
Proceeds from sales of investment securities |
| $ | 2 |
| $ | 2 |
| $ | 19 |
|
The sales proceeds for all periods represent sales of investments that were held within the DB SERP and classified as available for sale. Realized gains and losses on the sales were not significant for either CMS Energy or Consumers during each period. In 2011, CMS Energy and Consumers sold their DB SERP investments in state and municipal bonds, and reinvested the proceeds in mutual funds that hold fixed-income instruments of varying maturities.
Consumers recognized gains of $4 million in 2013, $5 million in 2012, and $4 million in 2011 from transferring shares of CMS Energy common stock to a related charitable foundation. The gains reflected the excess of fair value over cost of the stock donated and were included in income.
7:NOTES RECEIVABLE
Presented in the following table are details of CMS Energy’s and Consumers’ current and non-current notes receivable:
|
|
|
|
|
|
| ||||
In Millions |
| |||||||||
| December 31, 2013 | December 31, 2012 |
| |||||||
CMS Energy, including Consumers |
|
|
|
|
| |||||
Current |
|
|
|
|
| |||||
EnerBank notes receivable, net of allowance for loan losses | $ | 48 | $ | 40 |
| |||||
Other |
| 15 |
| 1 |
| |||||
Non-current |
|
|
|
|
| |||||
EnerBank notes receivable, net of allowance for loan losses |
| 635 |
| 504 |
| |||||
Other |
| - |
| 16 |
| |||||
Total notes receivable | $ | 698 | $ | 561 |
| |||||
Consumers |
|
|
|
|
| |||||
Current |
|
|
|
|
| |||||
Other | $ | 14 | $ | - |
| |||||
Non-current |
|
|
|
|
| |||||
Other |
| - |
| 16 |
| |||||
Total notes receivable | $ | 14 | $ | 16 |
| |||||
EnerBank notes receivable are unsecured consumer installment loans for financing home improvements.
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.
Presented in the following table are the changes in the allowance for loan losses:
|
| In Millions |
| ||||
Years Ended December 31 |
| 2013 |
| 2012 |
| ||
Balance at beginning of period |
| $ | 5 |
| $ | 5 |
|
Charge-offs |
| (5 | ) | (5 | ) | ||
Recoveries |
| 1 |
| 1 |
| ||
Provision for loan losses |
| 4 |
| 4 |
| ||
Balance at end of period |
| $ | 5 |
| $ | 5 |
|
Loans that are 30 days or more past due are considered delinquent. The balance of EnerBank’s delinquent consumer loans was $4 million at December 31, 2013, and $3 million at December 31, 2012.
At December 31, 2013 and December 31, 2012, $1 million of EnerBank’s loans had been modified as troubled debt restructurings.
8: �� PLANT, PROPERTY, AND EQUIPMENT
Presented in the following table are details of CMS Energy’s and Consumers’ plant, property, and equipment:
|
|
|
|
|
| In Millions |
| ||||
Years Ended December 31 |
| Estimated |
| 2013 |
| 2012 |
| ||||
CMS Energy, including Consumers |
|
|
|
|
|
|
|
|
| ||
Electric |
|
|
|
|
|
|
|
|
| ||
Generation |
| 22 | - | 125 |
| $ | 3,992 |
| $ | 4,254 |
|
Distribution |
| 23 | - | 75 |
| 6,140 |
| 5,831 |
| ||
Other |
| 5 | - | 50 |
| 770 |
| 677 |
| ||
Assets under capital leases and other arrangements |
|
|
|
|
| 284 |
| 279 |
| ||
Gas |
|
|
|
|
|
|
|
|
| ||
Distribution |
| 28 | - | 80 |
| 3,015 |
| 2,861 |
| ||
Transmission |
| 17 | - | 75 |
| 821 |
| 770 |
| ||
Underground storage facilities1 |
| 29 | - | 65 |
| 535 |
| 339 |
| ||
Other |
| 5 | - | 50 |
| 465 |
| 424 |
| ||
Capital leases |
|
|
|
|
| 7 |
| 6 |
| ||
Enterprises |
|
|
|
|
|
|
|
|
| ||
Independent power production |
| 3 | - | 30 |
| 89 |
| 89 |
| ||
Other |
| 3 | - | 40 |
| 26 |
| 24 |
| ||
Other |
| 1 | - | 51 |
| 40 |
| 38 |
| ||
Construction work in progress |
|
|
|
|
| 1,149 |
| 1,080 |
| ||
Less accumulated depreciation and amortization |
|
|
|
|
| (5,087 | ) | (5,121 | ) | ||
Net plant, property, and equipment2 |
|
|
|
|
| $ | 12,246 |
| $ | 11,551 |
|
Consumers |
|
|
|
|
|
|
|
|
| ||
Electric |
|
|
|
|
|
|
|
|
| ||
Generation |
| 22 | - | 125 |
| $ | 3,992 |
| $ | 4,254 |
|
Distribution |
| 23 | - | 75 |
| 6,140 |
| 5,831 |
| ||
Other |
| 5 | - | 50 |
| 770 |
| 677 |
| ||
Assets under capital leases and other arrangements |
|
|
|
|
| 284 |
| 279 |
| ||
Gas |
|
|
|
|
|
|
|
|
| ||
Distribution |
| 28 | - | 80 |
| 3,015 |
| 2,861 |
| ||
Transmission |
| 17 | - | 75 |
| 821 |
| 770 |
| ||
Underground storage facilities1 |
| 29 | - | 65 |
| 535 |
| 339 |
| ||
Other |
| 5 | - | 50 |
| 465 |
| 424 |
| ||
Capital leases |
|
|
|
|
| 7 |
| 6 |
| ||
Other non-utility property |
| 8 | - | 51 |
| 15 |
| 15 |
| ||
Construction work in progress |
|
|
|
|
| 1,147 |
| 1,080 |
| ||
Less accumulated depreciation and amortization |
|
|
|
|
| (5,022 | ) | (5,061 | ) | ||
Net plant, property, and equipment2 |
|
|
|
|
| $ | 12,169 |
| $ | 11,475 |
|
1Underground storage includes base natural gas of $26 million at December 31, 2013 and 2012. Base natural gas is not subject to depreciation.
2For the year ended December 31, 2013, utility plant additions were $1.3 billion and utility plant retirements were $156 million. Subject to a successful Securitization transaction, Consumers plans to retire seven smaller coal-fueled electric generating units and three smaller gas-fueled electric generating units by April 2016. Accordingly, Consumers removed the net book value of the ten units from plant, property, and equipment and recorded this amount as a regulatory asset at December 31, 2013. As a result, net plant, property, and equipment decreased by $362 million. For additional details, see Note 2, Regulatory Matters.
For the year ended December 31, 2012, utility plant additions were $999 million and utility plant retirements were $168 million.
Presented in the following table is further detail on changes in Consumers’ assets under capital leases and other arrangements:
|
| In Millions |
| ||||
Years Ended December 31 |
| 2013 |
| 2012 |
| ||
Consumers |
|
|
|
|
| ||
Balance at beginning of period |
| $ | 285 |
| $ | 280 |
|
Additions |
| 12 |
| 9 |
| ||
Net retirements and other adjustments |
| (6 | ) | (4 | ) | ||
Balance at end of period |
| $ | 291 |
| $ | 285 |
|
Assets under capital leases and other arrangements are presented as gross amounts. Accumulated amortization of assets under capital leases and other arrangements was $124 million at December 31, 2013 and $108 million at December 31, 2012 for Consumers.
Presented in the following table is further detail on CMS Energy’s and Consumers’ accumulated depreciation and amortization:
|
|
|
| In Millions |
| ||
Years Ended December 31 |
| 2013 |
| 2012 |
| ||
CMS Energy, including Consumers |
|
|
|
|
| ||
Utility plant assets |
| $ | 5,021 |
| $ | 5,060 |
|
Non-utility plant assets |
| 66 |
| 61 |
| ||
Consumers |
|
|
|
|
| ||
Utility plant assets |
| $ | 5,021 |
| $ | 5,060 |
|
Non-utility plant assets |
| 1 |
| 1 |
| ||
Maintenance and Depreciation: 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.
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 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 |
| 2013 |
| 2012 |
| 2011 |
|
Electric utility property |
| 3.5 | % | 3.2 | % | 3.0 | % |
Gas utility property |
| 2.8 | % | 2.9 | % | 2.9 | % |
Other property |
| 7.0 | % | 7.2 | % | 7.4 | % |
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 rate making process. For additional details, see Note 2, Regulatory Matters.
When utility property is mothballed, the property stays in rate base and continues to be depreciated at the same rate as before the mothball period. When utility property is retired or otherwise disposed of in the
ordinary course of business, Consumers records the original cost to accumulated depreciation, along with associated cost of removal, net of salvage. CMS Energy and Consumers recognize gains or losses on the retirement or disposal of non-regulated assets in income. Consumers records cost of removal collected from customers, but not spent, as a regulatory liability.
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’ composite AFUDC capitalization rates:
|
|
|
|
|
|
|
|
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
|
AFUDC capitalization rate |
| 7.3 | % | 7.3 | % | 7.6 | % |
CMS Energy and Consumers capitalize the purchase and development of 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. The types of costs capitalized are consistent for all periods presented by the financial statements.
Intangible Assets: Included in net plant, property, and equipment are intangible assets. Presented in the following table are CMS Energy’s and Consumers’ intangible assets:
|
|
|
|
|
|
|
|
|
| In Millions |
| ||||||
Years Ended December 31 |
|
|
|
|
| 2013 |
| 2012 |
| ||||||||
Description |
| Amortization Life in years |
| Gross Cost1 |
| Accumulated Amortization |
| Gross Cost1 |
| Accumulated Amortization |
| ||||||
CMS Energy, including Consumers |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Software development |
| 3 | - | 15 |
| $ | 508 |
| $ | 174 |
| $ | 466 |
| $ | 172 |
|
Plant acquisition adjustments |
| 40 | - | 46 |
| 216 |
| 32 |
| 214 |
| 27 |
| ||||
Rights of way |
| 50 | - | 75 |
| 135 |
| 42 |
| 130 |
| 40 |
| ||||
Leasehold improvements |
| various2 |
| 14 |
| 11 |
| 13 |
| 10 |
| ||||||
Franchises and consents |
| 5 | - | 30 |
| 15 |
| 7 |
| 14 |
| 6 |
| ||||
Other intangibles |
| various |
| 21 |
| 14 |
| 18 |
| 14 |
| ||||||
Total |
|
|
|
|
| $ | 909 |
| $ | 280 |
| $ | 855 |
| $ | 269 |
|
Consumers |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Software development |
| 3 | - | 15 |
| $ | 506 |
| $ | 173 |
| $ | 464 |
| $ | 172 |
|
Plant acquisition adjustments |
| 40 | - | 46 |
| 216 |
| 32 |
| 214 |
| 27 |
| ||||
Rights of way |
| 50 | - | 75 |
| 135 |
| 42 |
| 130 |
| 40 |
| ||||
Leasehold improvements |
| various2 |
| 14 |
| 11 |
| 13 |
| 10 |
| ||||||
Franchises and consents |
| 5 | - | 30 |
| 15 |
| 7 |
| 14 |
| 6 |
| ||||
Other intangibles |
| various |
| 20 |
| 14 |
| 18 |
| 14 |
| ||||||
Total |
|
|
|
|
| $ | 906 |
| $ | 279 |
| $ | 853 |
| $ | 269 |
|
1 Net intangible asset additions for Consumers’ utility plant were $53 million during 2013 and $108 million during 2012 and primarily represented software development costs.
2 Leasehold improvements are amortized over the life of the lease, which may change whenever the lease is renewed or extended.
Presented in the following table is CMS Energy’s and Consumers’ amortization expense related to intangible assets:
|
|
|
|
|
|
|
| In Millions |
| ||||
|
| CMS Energy, including Consumers |
| Consumers |
| ||||||||
Years Ended December 31 |
| Total |
| Software |
| Total |
| Software |
| ||||
2013 |
| $ | 48 |
| $ | 39 |
| $ | 47 |
| $ | 39 |
|
2012 |
| 39 |
| 31 |
| 38 |
| 30 |
| ||||
2011 |
| 32 |
| 24 |
| 32 |
| 24 |
| ||||
Amortization of intangible assets is expected to range between $54 million and $73 million per year over the next five years.
JOINTLYOWNEDREGULATEDUTILITYFACILITIES
Presented in the following table are Consumers’ investments in jointly owned regulated utility facilities at December 31, 2013:
|
| In Millions, Except Ownership Share |
| |||||||
|
| J.H. Campbell Unit 3 |
| Ludington |
| Distribution |
| |||
Ownership share |
| 93.3 | % | 51.0 | % | various |
| |||
Utility plant in service |
| $ | 1,073 |
| $ | 193 |
| $ | 190 |
|
Accumulated depreciation |
| (456 | ) | (152 | ) | (59 | ) | |||
Construction work-in-progress |
| 81 |
| 71 |
| 2 |
| |||
Net investment |
| $ | 698 |
| $ | 112 |
| $ | 133 |
|
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.
9:LEASES
CMS Energy and Consumers lease various assets, including railcars, service vehicles, gas pipeline capacity, and buildings. In addition, CMS Energy and Consumers account for a number of their PPAs as capital and operating leases.
Operating leases for coal-carrying railcars have lease terms, which range from three to 15 years, expiring without extension provisions over the next ten years and with extension provisions over the next 13 years. These leases contain fair market value extension and buyout provisions, with some providing for predetermined extension period rentals. Capital leases for Consumers’ vehicle fleet operations have a maximum term of 120 months with some having end-of-lease rental adjustment clauses based on the proceeds received from the sale or disposition of the vehicles, and others having fixed percentage purchase options.
Consumers has capital leases for gas transportation pipelines to the D.E. Karn generating complex and Zeeland. The capital lease for the gas transportation pipeline into the D.E. Karn generating complex has a term of 15 years with a provision to extend the contract from month to month. The remaining term of the contract was eight years at December 31, 2013. The capital lease for the gas transportation pipeline to Zeeland was extended in 2012 for five years pursuant to the renewal provision at the end of the contract. At December 31, 2013, the remaining term of the contract was four years with a renewal provision of an
additional five years at the end of the contract. The remaining terms of Consumers’ long-term PPAs accounted for as leases range between two and 19 years. Most of these PPAs contain provisions at the end of the initial contract terms to renew the agreements annually.
Presented in the following table are Consumers’ minimum lease expense and contingent rental expense. For each of the years ended December 31, 2013, 2012, and 2011, all of CMS Energy’s minimum lease expense and contingent rental expense were attributable to Consumers.
|
|
|
| In Millions |
| |||||
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
| |||
Consumers |
|
|
|
|
|
|
| |||
Minimum operating lease expense |
|
|
|
|
|
|
| |||
PPAs |
| $ | 6 |
| $ | 6 |
| $ | 10 |
|
Other agreements |
| 21 |
| 23 |
| 22 |
| |||
Contingent rental expense1 |
| 77 |
| 33 |
| 11 |
| |||
1Contingent rental expense is related to capital and operating lease PPAs and is based on delivery of energy and capacity in excess of minimum lease payments.
Consumers is authorized by the MPSC to record operating lease payments as operating expense and recover the total cost from customers.
Presented in the following table are the minimum annual rental commitments under Consumers’ non-cancelable leases at December 31, 2013. All of CMS Energy’s non-cancelable leases at December 31, 2013 were attributable to Consumers.
|
|
|
|
|
|
| In Millions |
| |||
|
| Capital Leases |
| Financing1 |
|
| Operating Leases |
| |||
Consumers |
|
|
|
|
|
|
|
| |||
2014 |
| $ | 14 |
| $ | 19 |
|
| $ | 26 |
|
2015 |
| 14 |
| 18 |
|
| 25 |
| |||
2016 |
| 11 |
| 17 |
|
| 20 |
| |||
2017 |
| 10 |
| 17 |
|
| 20 |
| |||
2018 |
| 10 |
| 16 |
|
| 17 |
| |||
2019 and thereafter |
| 31 |
| 46 |
|
| 56 |
| |||
Total minimum lease payments |
| $ | 90 |
| $ | 133 |
|
| $ | 164 |
|
Less imputed interest |
| 39 |
| 25 |
|
|
|
| |||
Present value of net minimum lease payments |
| $ | 51 |
| $ | 108 |
|
|
|
| |
Less current portion |
| 8 |
| 13 |
|
|
|
| |||
Non-current portion |
| $ | 43 |
| $ | 95 |
|
|
|
| |
1 In 2007, Consumers sold Palisades to Entergy and entered into a 15-year PPA to buy all of the capacity and energy then capable of being produced by Palisades. Consumers has continuing involvement with Palisades through security provided to Entergy for Consumers’ PPA obligation and other arrangements. Because of these ongoing arrangements, Consumers accounted for the transaction as a financing of Palisades and not a sale. Accordingly, no gain on the sale of Palisades was recognized on the consolidated statements of income. Consumers accounted for the remaining non-real-estate assets and liabilities associated with the transaction as a sale.
Palisades remains on Consumers’ consolidated balance sheets and Consumers continues to depreciate it. Consumers recorded the related proceeds as a finance obligation with payments recorded to interest expense and the finance obligation based on the amortization of the obligation over the life of the Palisades PPA. The value of the finance obligation was determined based on an allocation of the transaction proceeds to the fair values of the net assets sold and fair value of the plant asset under the financing. Total amortization and interest
charges under the financing were $20 million for each of the years ended December 31, 2013 and December 31, 2012 and $21 million for the year ended December 31, 2011.
10: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. No market risk premiums were included in CMS Energy’s and Consumers’ ARO fair value estimates since reasonable estimates could not be made. If a five percent market risk premium were assumed, CMS Energy’s and Consumers’ ARO liabilities would be $16 million higher at December 31, 2013 and December 31, 2012. In 2012, Consumers updated the ARO for coal ash disposal areas to reflect a revised estimate of future obligations and recorded the initial estimate for the Lake Winds® Energy Park ARO.
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 insignificant cumulative disposal costs, such as substation batteries.
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:
In-Service | ||||
Company and ARO Description | Date | Long-Lived Assets | ||
| ||||
Closure of gas treating plant and gas wells | Various | Gas transmission and storage | ||
Closure of coal ash disposal areas | Various | Generating plants coal ash areas | ||
Closure of wells at gas storage fields | Various | Gas storage fields | ||
Asbestos abatement | 1973 | Electric and gas utility plant | ||
Gas distribution cut, purge, and cap | Various | Gas distribution mains and services | ||
Closure of wind park | 2012 | Wind generation facilities | ||
| ||||
Closure of coal ash disposal areas | Various | Generating plants coal ash areas | ||
Closure of wells at gas storage fields | Various | Gas storage fields | ||
Asbestos abatement | 1973 | Electric and gas utility plant | ||
Gas distribution cut, purge, and cap | Various | Gas distribution mains and services | ||
Closure of wind park | 2012 | Wind generation facilities |
No assets have been restricted for purposes of settling AROs.
Presented in the following tables are the changes in CMS Energy’s and Consumers’ ARO liabilities:
|
|
|
|
|
|
|
|
|
| In Millions |
| ||||||||
|
| ARO |
|
|
|
|
|
|
|
|
| ARO |
| ||||||
|
| Liability |
|
|
|
|
|
|
| Cash flow |
| Liability |
| ||||||
Company and ARO Description |
| 12/31/2012 |
| Incurred |
| Settled1 |
| Accretion |
| Revisions |
| 12/31/2013 |
| ||||||
CMS Energy, including Consumers |
|
|
| �� |
|
|
|
|
| ||||||||||
Gas treating plant and gas wells |
| $ | 1 |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | 1 |
|
Consumers |
| 311 |
| (3 | ) | (6 | ) | 18 |
| 4 |
| 324 |
| ||||||
Total CMS Energy |
| $ | 312 |
| $ | (3 | ) | $ | (6 | ) | $ | 18 |
| $ | 4 |
| $ | 325 |
|
Consumers |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Coal ash disposal areas |
| $ | 114 |
| $ | - |
| $ | (1 | ) | $ | 5 |
| $ | - |
| $ | 118 |
|
Asbestos abatement |
| 43 |
| - |
| (1 | ) | 3 |
| 4 |
| 49 |
| ||||||
Gas distribution cut, purge, and cap |
| 151 |
| (3 | ) | (4 | ) | 10 |
| - |
| 154 |
| ||||||
Wind park |
| 3 |
| - |
| - |
| - |
| - |
| 3 |
| ||||||
Total Consumers |
| $ | 311 |
| $ | (3 | ) | $ | (6 | ) | $ | 18 |
| $ | 4 |
| $ | 324 |
|
|
|
|
|
|
|
|
|
|
| In Millions |
| ||||||||
|
| ARO |
|
|
|
|
|
|
|
|
| ARO |
| ||||||
|
| Liability |
|
|
|
|
|
|
| Cash flow |
| Liability |
| ||||||
Company and ARO Description |
| 12/31/2011 |
| Incurred |
| Settled | 1 | Accretion |
| Revisions |
| 12/31/2012 |
| ||||||
CMS Energy, including Consumers |
|
|
|
|
|
|
|
|
| ||||||||||
Gas treating plant and gas wells |
| $ | 1 |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | 1 |
|
Consumers |
| 253 |
| 7 |
| (8 | ) | 19 |
| 40 |
| 311 |
| ||||||
Total CMS Energy |
| $ | 254 |
| $ | 7 |
| $ | (8 | ) | $ | 19 |
| $ | 40 |
| $ | 312 |
|
Consumers |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Coal ash disposal areas |
| $ | 70 |
| $ | - |
| $ | (3 | ) | $ | 7 |
| $ | 40 |
| $ | 114 |
|
Wells at gas storage fields |
| 1 |
| - |
| (1 | ) | - |
| - |
| - |
| ||||||
Asbestos abatement |
| 42 |
| - |
| (1 | ) | 2 |
| - |
| 43 |
| ||||||
Gas distribution cut, purge, and cap |
| 140 |
| 4 |
| (3 | ) | 10 |
| - |
| 151 |
| ||||||
Wind park |
| - |
| 3 |
| - |
| - |
| - |
| 3 |
| ||||||
Total Consumers |
| $ | 253 |
| $ | 7 |
| $ | (8 | ) | $ | 19 |
| $ | 40 |
| $ | 311 |
|
1Cash payments of $6 million in 2013 and $8 million in 2012 were included in other current and non-current assets and liabilities as a component of net cash provided by operating activities in CMS Energy’s and Consumers’ consolidated statements of cash flow.
11:RETIREMENT BENEFITS
CMS Energy and Consumers provide pension, OPEB, and other retirement benefits to employees under a number of different plans. These plans include:
·a non-contributory, qualified defined benefit Pension Plan (closed to new non-union participants as of July 1, 2003 and closed to new union participants as of September 1, 2005);
·a qualified cash balance Pension Plan for certain employees hired between July 1, 2003 and August 31, 2005;
·a non-contributory, qualified DCCP for employees hired on or after September 1, 2005;
·benefits to certain management employees under a non-contributory, nonqualified DB SERP (closed to new participants as of March 31, 2006);
·a non-contributory, non-qualified DC SERP for certain management employees hired or promoted on or after April 1, 2006;
·health care and life insurance benefits under an OPEB Plan; and
·a contributory, qualified defined contribution 401(k) plan.
Pension Plan: Participants in the Pension Plan include CMS Energy’s and Consumers’ present employees, employees of their subsidiaries, and employees of Panhandle. Pension Plan trust assets are not distinguishable by company.
CMS Energy and Consumers provide an employer contribution of six percent of base pay to the DCCP 401(k) plan for employees hired on or after September 1, 2005. Employees are not required to contribute in order to receive the plan’s employer contribution.
Participants in the cash balance Pension Plan, effective July 1, 2003 to August 31, 2005, also participate in the DCCP as of September 1, 2005. Additional pay credits under the cash balance Pension Plan were discontinued as of September 1, 2005. DCCP expense for CMS Energy and Consumers was $10 million for the year ended December 31, 2013, $8 million for the year ended December 31, 2012, and $7 million for the year ended December 31, 2011.
DB SERP: The DB SERP is a non-qualified plan as defined by the Internal Revenue Code. DB SERP benefits are paid from a rabbi trust established in 1988. DB SERP rabbi trust earnings are taxable. Presented in the following table are the fair value of trust assets, ABO, and contributions for CMS Energy’s and Consumers’ DB SERP:
|
| In Millions |
| ||||
Years Ended December 31 |
| 2013 |
| 2012 |
| ||
CMS Energy, including Consumers |
|
|
|
|
| ||
Trust assets |
| $ | 136 |
| $ | 128 |
|
ABO |
| 122 |
| 130 |
| ||
Contributions |
| 16 |
| 13 |
| ||
Consumers |
|
|
|
|
| ||
Trust assets |
| $ | 96 |
| $ | 87 |
|
ABO |
| 82 |
| 86 |
| ||
Contributions |
| 13 |
| 9 |
| ||
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 $1 million at December 31, 2013 and December 31, 2012. DC SERP assets are included in other non-current assets on CMS Energy’s and
Consumers’ consolidated balance sheets. CMS Energy’s and Consumers’ DC SERP expense was less than $1 million for each of the years ended December 31, 2013, 2012, and 2011.
401(k): The 401(k) plan employer match equals 60 percent of eligible contributions up to the first six percent of an employee’s wages. The total 401(k) plan cost for CMS Energy, including Consumers, and for Consumers was $17 million for the year ended December 31, 2013 and $16 million for each of the years ended December 31, 2012 and 2011.
OPEB: 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 Pension Plan disability retirement and 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 6.5 percent for those under 65 and 6.5 percent for those over 65 in 2014 and 8.0 percent for those under 65 and 7.5 percent for those over 65 in 2013. The rate of increase was assumed to decline to 4.75 percent for all retirees by 2024 and thereafter.
In July 2013, CMS Energy and Consumers approved certain amendments to their OPEB Plan. Accordingly, CMS Energy and Consumers performed a remeasurement of the OPEB Plan as of July 1, 2013. As a result of these changes, CMS Energy’s (including Consumers’) OPEB liability decreased by $638 million, its OPEB regulatory asset of $580 million was eliminated, and an OPEB regulatory liability of $34 million was established as of July 1, 2013. CMS Energy’s accumulated other comprehensive loss decreased by $24 million. Consumers’ OPEB liability decreased by $614 million, its OPEB regulatory asset of $580 million was eliminated, and an OPEB regulatory liability of $34 million was established as of July 1, 2013.
CMS Energy and Consumers also remeasured certain deferred tax assets as a result of the approved change to the Medicare drug program. Effective January 2015, CMS Energy and Consumers will no longer receive Medicare Part D drug subsidies. Accordingly, CMS Energy (including Consumers) decreased its deferred tax assets by $148 million, reduced its regulatory income tax liabilities by $144 million, and increased its income tax expense by $4 million. Consumers decreased its deferred tax assets by $144 million, and reduced its regulatory income tax liabilities by an equal amount.
The assumptions used in the health care cost-trend rate affect service, interest, and PBO costs. Presented in the following table are the effects of a one-percentage-point change in the health care cost-trend assumption:
|
|
|
| In Millions |
| ||
|
| One Percentage |
| One Percentage |
| ||
Years Ended December 31 |
| Point Increase |
| Point Decrease |
| ||
CMS Energy, including Consumers |
|
|
|
|
| ||
Effect on total service and interest cost component |
| $ | 16 |
| $ | (14 | ) |
Effect on PBO |
| 151 |
| (133 | ) | ||
Consumers |
|
|
|
|
| ||
Effect on total service and interest cost component |
| $ | 16 |
| $ | (13 | ) |
Effect on PBO |
| 147 |
| (130 | ) | ||
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:
|
| Pension and DB SERP |
| OPEB |
| ||||||||
December 31 |
| 2013 |
| 2012 |
| 2011 |
| 2013 |
| 2012 |
| 2011 |
|
CMS Energy, including Consumers |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average for benefit obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate1 |
| 4.90 | % | 4.10 | % | 4.90 | % | 5.10 | % | 4.40 | % | 5.10 | % |
Mortality table2 |
| 2000 |
| 2000 |
| 2000 |
| 2000 |
| 2000 |
| 2000 |
|
Rate of compensation increase |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension |
| 3.00 | % | 3.00 | % | 3.50 | % |
|
|
|
|
|
|
DB SERP |
| 5.50 | % | 5.50 | % | 5.50 | % |
|
|
|
|
|
|
Weighted average for net periodic benefit cost obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate1 |
| 4.10 | % | 4.90 | % | 5.40 | % | 4.40 | % | 5.10 | % | 5.60 | % |
Expected long-term rate of return on plan assets3 |
| 7.75 | % | 7.75 | % | 8.00 | % | 7.25 | % | 7.25 | % | 7.50 | % |
Mortality table2 |
| 2000 |
| 2000 |
| 2000 |
| 2000 |
| 2000 |
| 2000 |
|
Rate of compensation increase |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension |
| 3.00 | % | 3.50 | % | 4.00 | % |
|
|
|
|
|
|
DB SERP |
| 5.50 | % | 5.50 | % | 5.50 | % |
|
|
|
|
|
|
1The 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’ Pension Plan and OPEB Plan and the yields on high quality corporate bonds rated Aa or better.
2The mortality assumption was based on the RP-2000 mortality tables with projection of future mortality improvements using Scale AA, which aligned with the IRS prescriptions for cash funding valuations under the Pension Protection Act of 2006.
3CMS 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 Pension Plan assets was 7.75 percent in 2013. The actual return on Pension Plan assets was 12.5 percent in 2013, 14.1 percent in 2012, and 4.0 percent in 2011.
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 |
| ||||||||||
|
| Pension and DB SERP |
| OPEB |
| ||||||||||||||
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
| 2013 |
| 2012 |
| 2011 |
| ||||||
CMS Energy, including Consumers |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net periodic cost (credit) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Service cost |
| $ | 54 |
| $ | 49 |
| $ | 49 |
| $ | 29 |
| $ | 32 |
| $ | 27 |
|
Interest expense |
| 100 |
| 105 |
| 106 |
| 65 |
| 82 |
| 77 |
| ||||||
Expected return on plan assets |
| (127 | ) | (125 | ) | (112 | ) | (77 | ) | (66 | ) | (66 | ) | ||||||
Amortization of: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net loss |
| 101 |
| 79 |
| 65 |
| 26 |
| 46 |
| 30 |
| ||||||
Prior service cost (credit) |
| 3 |
| 5 |
| 5 |
| (31 | ) | (20 | ) | (20 | ) | ||||||
Net periodic cost (credit) |
| $ | 131 |
| $ | 113 |
| $ | 113 |
| $ | 12 |
| $ | 74 |
| $ | 48 |
|
Consumers |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net periodic cost (credit) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Service cost |
| $ | 52 |
| $ | 48 |
| $ | 48 |
| $ | 28 |
| $ | 31 |
| $ | 26 |
|
Interest expense |
| 96 |
| 100 |
| 101 |
| 63 |
| 79 |
| 74 |
| ||||||
Expected return on plan assets |
| (124 | ) | (122 | ) | (109 | ) | (72 | ) | (61 | ) | (61 | ) | ||||||
Amortization of: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net loss |
| 98 |
| 77 |
| 63 |
| 27 |
| 47 |
| 31 |
| ||||||
Prior service cost (credit) |
| 3 |
| 5 |
| 5 |
| (30 | ) | (20 | ) | (20 | ) | ||||||
Net periodic cost (credit) |
| $ | 125 |
| $ | 108 |
| $ | 108 |
| $ | 16 |
| $ | 76 |
| $ | 50 |
|
For CMS Energy, the estimated net loss and prior service cost for the defined benefit Pension Plans that will be amortized into net periodic benefit cost in 2014 from the regulatory asset is $57 million and from AOCI is $2 million. For Consumers, the estimated net loss and prior service cost for the defined benefit Pension Plans that will be amortized into net periodic benefit cost in 2014 from the regulatory asset is $57 million. For CMS Energy, the estimated net loss and prior service credit for the OPEB Plan that will be amortized into net periodic benefit cost in 2014 from the regulatory liability is $37 million, with a decrease from AOCI of $1 million. For Consumers, the estimated net loss and prior service credit for the OPEB Plan that will be amortized into net periodic benefit cost in 2014 from the regulatory liability is $37 million.
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. The estimated period of amortization of gains and losses for CMS Energy and Consumers was ten years for pension for the year ended December 31, 2013 and 11 years for pension for the years ended December 31, 2012 and 2011 and 13 years for OPEB for the years ended December 31, 2013, 2012, and 2011. 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 a new prior service credit for OPEB in 2013. The estimated period of amortization of this new prior service credit for CMS Energy and Consumers is ten years for OPEB for the year ended December 31, 2013.
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 |
| ||||||
|
| Pension |
| DB SERP |
| OPEB |
| ||||||||||||
Years Ended December 31 |
| 2013 |
| 2012 |
| 2013 |
| 2012 |
| 2013 |
| 2012 |
| ||||||
CMS Energy, including Consumers |
|
|
|
|
|
|
|
|
|
|
| ||||||||
Benefit obligation at beginning of period |
| $ | 2,354 |
| $ | 2,072 |
| $ | 144 |
| $ | 127 |
| $ | 1,729 |
| $ | 1,641 |
|
Service cost |
| 53 |
| 48 |
| 1 |
| 1 |
| 29 |
| 32 |
| ||||||
Interest cost |
| 94 |
| 99 |
| 6 |
| 6 |
| 65 |
| 82 |
| ||||||
Plan amendments |
| - |
| - |
| - |
| - |
| (208 | )2 | - |
| ||||||
Actuarial (gain) loss |
| (308 | ) | 249 |
| (12 | ) | 16 |
| (440 | ) | 25 |
| ||||||
Benefits paid |
| (120 | ) | (114 | ) | (7 | ) | (6 | ) | (52 | )3 | (51 | )3 | ||||||
Benefit obligation at end of period |
| $ | 2,073 |
| $ | 2,354 |
| $ | 132 |
| $ | 144 |
| $ | 1,123 |
| $ | 1,729 | 4 |
Plan assets at fair value at beginning of period |
| $ | 1,727 |
| $ | 1,626 |
| $ | - |
| $ | - |
| $ | 1,047 |
| $ | 924 |
|
Actual return on plan assets |
| 206 |
| 215 |
| - |
| - |
| 150 |
| 108 |
| ||||||
Company contribution |
| 150 |
| - |
| 7 |
| 6 |
| 72 |
| 65 |
| ||||||
Actual benefits paid |
| (119 | ) | (114 | ) | (7 | ) | (6 | ) | (51 | )3 | (50 | )3 | ||||||
Plan assets at fair value at end of period |
| $ | 1,964 |
| $ | 1,727 |
| $ | - |
| $ | - |
| $ | 1,218 |
| $ | 1,047 |
|
Funded status |
| $ | (109 | )1 | $ | (627 | )1 | $ | (132 | ) | $ | (144 | ) | $ | 95 |
| $ | (682 | ) |
Consumers |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Benefit obligation at beginning of period |
|
|
|
|
| $ | 100 |
| $ | 85 |
| $ | 1,670 |
| $ | 1,585 |
| ||
Service cost |
|
|
|
|
| 1 |
| 1 |
| 28 |
| 31 |
| ||||||
Interest cost |
|
|
|
|
| 4 |
| 4 |
| 63 |
| 79 |
| ||||||
Plan amendments |
|
|
|
|
| - |
| - |
| (200 | )2 | - |
| ||||||
Actuarial (gain) loss |
|
|
|
|
| (8 | ) | 13 |
| (424 | ) | 24 |
| ||||||
Benefits paid |
|
|
|
|
| (4 | ) | (3 | ) | (49 | )3 | (49 | )3 | ||||||
Benefit obligation at end of period |
|
|
|
|
| $ | 93 |
| $ | 100 |
| $ | 1,088 |
| $ | 1,670 | 4 | ||
Plan assets at fair value at beginning of period |
|
|
|
|
| $ | - |
| $ | - |
| $ | 978 |
| $ | 861 |
| ||
Actual return on plan assets |
|
|
|
|
| - |
| - |
| 141 |
| 101 |
| ||||||
Company contribution |
|
|
|
|
| 4 |
| 3 |
| 71 |
| 64 |
| ||||||
Actual benefits paid |
|
|
|
|
| (4 | ) | (3 | ) | (49 | )3 | (48 | )3 | ||||||
Plan assets at fair value at end of period |
|
|
|
|
| $ | - |
| $ | - |
| $ | 1,141 |
| $ | 978 |
| ||
Funded status |
|
|
|
|
| $ | (93 | ) | $ | (100 | ) | $ | 53 |
| $ | (692 | ) | ||
1 At December 31, 2013, $86 million of the total funded status of the Pension Plan was attributable to Consumers based on an allocation of expenses. At December 31, 2012, $590 million of the total funded status of the Pension Plan was attributable to Consumers based on an allocation of expenses.
2 Plan amendments resulted from changing the Medicare drug program provided through the OPEB Plan from an employer-sponsored prescription drug plan with a retiree drug subsidy to an EGWP to begin on January 1, 2015, and from certain benefit changes to the OPEB Plan, to begin on January 1, 2016.
3 CMS Energy received payments of $5 million in each of 2013, 2012, and 2011 for the Medicare Part D subsidies. Consumers received payments of $4 million in 2013 and $5 million in each of 2012 and 2011 for the Medicare Part D subsidies. The Medicare Part D subsidy payments are used to pay OPEB Plan benefits.
4 The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 established a prescription drug benefit under Medicare (Medicare Part D) and a federal subsidy, which is tax-exempt, to sponsors of retiree health care benefit plans that provide a benefit that is actuarially equivalent to Medicare Part D. In 2010, the Health Care Acts repealed these tax-exempt deductions for years beginning after December 31, 2012. The Medicare Part D subsidy annualized reduction in net OPEB cost for CMS Energy was $20 million for 2012 and $26 million for 2011. Consumers’ Medicare Part D subsidy annualized reduction in net OPEB costs was $19 million for 2012 and $25 million for 2011. The reduction for CMS Energy and Consumers included $7 million for 2012 and $9 million for 2011 in capitalized OPEB costs.
Presented in the following table is the classification of CMS Energy’s and Consumers’ retirement benefit plans’ assets (liabilities):
|
|
|
| In Millions |
| ||
Years Ended December 31 |
| 2013 |
| 2012 |
| ||
CMS Energy, including Consumers |
|
|
|
|
| ||
Current assets (liabilities) |
|
|
|
|
| ||
DB SERP |
| $ | (8 | ) | $ | (7 | ) |
Non-current assets (liabilities) |
|
|
|
|
| ||
DB SERP |
| (124 | ) | (137 | ) | ||
OPEB |
| 95 |
| (682 | ) | ||
Pension |
| (109 | ) | (627 | ) | ||
Consumers |
|
|
|
|
| ||
Current assets (liabilities) |
|
|
|
|
| ||
DB SERP |
| $ | (5 | ) | $ | (4 | ) |
Non-current assets (liabilities) |
|
|
|
|
| ||
DB SERP |
| (88 | ) | (96 | ) | ||
OPEB |
| 53 |
| (692 | ) | ||
Pension |
| (86 | ) | (590 | ) | ||
Presented in the following table are the Pension Plan PBO, ABO, and fair value of plan assets:
|
|
|
| In Millions |
| ||
Years Ended December 31 |
| 2013 |
| 2012 |
| ||
CMS Energy, including Consumers |
|
|
|
|
| ||
Pension PBO |
| $ | 2,073 |
| $ | 2,354 |
|
Pension ABO |
| 1,843 |
| 2,054 |
| ||
Fair value of Pension Plan assets |
| 1,964 |
| 1,727 |
| ||
Items Not Yet Recognized as a Component of Net Periodic Benefit Cost: Presented in the following table are the amounts recognized in regulatory assets, regulatory liabilities, and AOCI that have not been recognized as components of net periodic benefit cost. For additional details on regulatory assets and liabilities, see Note 2, Regulatory Matters.
|
|
|
|
|
|
|
| In Millions |
| ||||
|
| Pension and DB SERP |
| OPEB |
| ||||||||
Years Ended December 31 |
| 2013 |
| 2012 |
| 2013 |
| 2012 |
| ||||
CMS Energy, including Consumers |
|
|
|
|
|
|
|
|
| ||||
Regulatory assets (liabilities) |
|
|
|
|
|
|
|
|
| ||||
Net loss |
| $ | 625 |
| $ | 1,095 |
| $ | 184 |
| $ | 704 |
|
Prior service cost (credit) |
| 9 |
| 13 |
| (282 | ) | (112 | ) | ||||
Regulatory assets (liabilities) |
| $ | 634 |
| $ | 1,108 |
| $ | (98 | ) | $ | 592 |
|
AOCI |
|
|
|
|
|
|
|
|
| ||||
Net loss (gain) |
| 69 |
| 98 |
| (26 | ) | (7 | ) | ||||
Prior service cost (credit) |
| - |
| - |
| (10 | ) | (3 | ) | ||||
Total amounts recognized in regulatory assets (liabilities) and AOCI |
| $ | 703 |
| $ | 1,206 |
| $ | (134 | ) | $ | 582 |
|
Consumers |
|
|
|
|
|
|
|
|
| ||||
Regulatory assets (liabilities) |
|
|
|
|
|
|
|
|
| ||||
Net loss |
| $ | 625 |
| $ | 1,095 |
| $ | 184 |
| $ | 704 |
|
Prior service cost (credit) |
| 9 |
| 13 |
| (282 | ) | (112 | ) | ||||
Regulatory assets (liabilities) |
| $ | 634 |
| $ | 1,108 |
| $ | (98 | ) | $ | 592 |
|
AOCI |
|
|
|
|
|
|
|
|
| ||||
Net loss |
| 25 |
| 38 |
| - |
| - |
| ||||
Total amounts recognized in regulatory assets (liabilities) and AOCI |
| $ | 659 |
| $ | 1,146 |
| $ | (98 | ) | $ | 592 |
|
Plan Assets: Presented in the following tables are the fair values of CMS Energy’s and Consumers’ Pension Plan and OPEB Plan assets, by asset category and by level within the fair value hierarchy. For additional details regarding the fair value hierarchy, see Note 5, Fair Value Measurements.
|
|
|
|
|
|
|
|
|
|
|
| In Millions |
| ||||||
|
| Pension Plan |
| ||||||||||||||||
|
| December 31, 2013 |
| December 31, 2012 |
| ||||||||||||||
|
| Total |
| Level 1 |
| Level 2 |
| Total |
| Level 1 |
| Level 2 |
| ||||||
CMS Energy, including Consumers |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Asset category |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash and short-term investments |
| $ | 109 |
| $ | 109 |
| $ | - |
| $ | 33 |
| $ | 33 |
| $ | - |
|
U.S. government and agencies securities |
| 25 |
| - |
| 25 |
| 26 |
| - |
| 26 |
| ||||||
Corporate debt |
| 188 |
| - |
| 188 |
| 277 |
| - |
| 277 |
| ||||||
State and municipal bonds |
| 5 |
| - |
| 5 |
| 8 |
| - |
| 8 |
| ||||||
Foreign corporate bonds |
| 20 |
| - |
| 20 |
| 27 |
| - |
| 27 |
| ||||||
Mutual funds |
| 449 |
| 449 |
| - |
| 319 |
| 319 |
| - |
| ||||||
Pooled funds |
| 1,168 |
| - |
| 1,168 |
| 1,037 |
| - |
| 1,037 |
| ||||||
Total |
| $ | 1,964 |
| $ | 558 |
| $ | 1,406 |
| $ | 1,727 |
| $ | 352 |
| $ | 1,375 |
|
|
|
|
|
|
|
|
|
|
|
|
| In Millions |
| ||||||
|
| OPEB Plan |
| ||||||||||||||||
|
| December 31, 2013 |
| December 31, 2012 |
| ||||||||||||||
|
| Total |
| Level 1 |
| Level 2 |
| Total |
| Level 1 |
| Level 2 |
| ||||||
CMS Energy, including Consumers |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Asset category |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash and short-term investments |
| $ | 44 |
| $ | 44 |
| $ | - |
| $ | 118 |
| $ | 118 |
| $ | - |
|
U.S. government and agencies securities |
| 3 |
| - |
| 3 |
| 4 |
| - |
| 4 |
| ||||||
Corporate debt |
| 26 |
| - |
| 26 |
| 38 |
| - |
| 38 |
| ||||||
State and municipal bonds |
| 1 |
| - |
| 1 |
| 1 |
| - |
| 1 |
| ||||||
Foreign corporate bonds |
| 3 |
| - |
| 3 |
| 4 |
| - |
| 4 |
| ||||||
Common stocks |
| 71 |
| 71 |
| - |
| 75 |
| 75 |
| - |
| ||||||
Mutual funds |
| 343 |
| 343 |
| - |
| 300 |
| 300 |
| - |
| ||||||
Pooled funds |
| 727 |
| - |
| 727 |
| 507 |
| - |
| 507 |
| ||||||
Total |
| $ | 1,218 |
| $ | 458 |
| $ | 760 |
| $ | 1,047 |
| $ | 493 |
| $ | 554 |
|
Consumers |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Asset category |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash and short-term investments |
| $ | 41 |
| $ | 41 |
| $ | - |
| $ | 111 |
| $ | 111 |
| $ | - |
|
U.S. government and agencies securities |
| 3 |
| - |
| 3 |
| 3 |
| - |
| 3 |
| ||||||
Corporate debt |
| 25 |
| - |
| 25 |
| 35 |
| - |
| 35 |
| ||||||
State and municipal bonds |
| 1 |
| - |
| 1 |
| 1 |
| - |
| 1 |
| ||||||
Foreign corporate bonds |
| 3 |
| - |
| 3 |
| 3 |
| - |
| 3 |
| ||||||
Common stocks |
| 66 |
| 66 |
| - |
| 70 |
| 70 |
| - |
| ||||||
Mutual funds |
| 321 |
| 321 |
| - |
| 281 |
| 281 |
| - |
| ||||||
Pooled funds |
| 681 |
| - |
| 681 |
| 474 |
| - |
| 474 |
| ||||||
Total |
| $ | 1,141 |
| $ | 428 |
| $ | 713 |
| $ | 978 |
| $ | 462 |
| $ | 516 |
|
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 were valued based on quoted market prices.
Corporate Debt: At December 31, 2013, corporate debt investments in the Pension Plan and OPEB Plan comprised investment grade bonds of U.S. issuers from diverse industries. At December 31, 2012, corporate debt investments in the Pension Plan and OPEB Plan comprised investment grade bonds (68 percent) and non-investment grade, high-yield bonds (32 percent) of U.S. issuers from diverse industries. These securities are valued based on quoted market prices, when available, or yields presently available on comparable securities of issuers with similar credit ratings.
State and Municipal Bonds: State and municipal bonds were valued using a matrix-pricing model that incorporates Level 2 market-based information. The fair value of the bonds was 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 were 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 with low transaction costs that were actively managed and tracked by the S&P 500 Index. These securities were valued at their quoted closing prices.
Mutual Funds: Mutual funds represent shares in registered investment companies that are priced based on the daily quoted NAVs that are publicly available and are the basis for transactions to buy or sell shares in the funds.
Pooled Funds: Pooled funds in the Pension Plan and OPEB Plan 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. At December 31, 2013, these funds comprised investments in U.S. equity securities (Pension: 61 percent; OPEB: 60 percent), foreign equity securities (Pension: 28 percent; OPEB: 20 percent), foreign fixed-income securities (Pension: three percent; OPEB: four percent), U.S. fixed-income securities (Pension: four percent; OPEB: 14 percent), and alternative investments (Pension: four percent; OPEB: two percent).
At December 31, 2012, these funds comprised investments in U.S. equity securities (Pension: 51 percent; OPEB: 65 percent), foreign equity securities (Pension: 26 percent; OPEB: 21 percent), foreign fixed-income securities (Pension: 14 percent; OPEB: nine percent), U.S. fixed-income securities (Pension: four percent; OPEB: three percent), and alternative investments (Pension: five percent; OPEB: two percent). These investments were valued at the quoted NAV provided by the fund managers that is the basis for transactions to buy or sell shares in the funds.
Presented in the following table are the contributions to CMS Energy’s and Consumers’ OPEB Plan and Pension Plan:
|
|
|
| In Millions |
| ||
Years Ended December 31 |
| 2013 |
| 2012 |
| ||
CMS Energy, including Consumers |
|
|
|
|
| ||
OPEB1 |
|
|
|
|
| ||
VEBA trust |
| $ | 55 |
| $ | 45 |
|
401(h) component |
| 17 |
| 20 |
| ||
|
| $ | 72 |
| $ | 65 |
|
Pension2 |
| $ | 150 |
| $ | - |
|
Consumers |
|
|
|
|
| ||
OPEB1 |
|
|
|
|
| ||
VEBA trust |
| $ | 55 |
| $ | 45 |
|
401(h) component |
| 16 |
| 19 |
| ||
|
| $ | 71 |
| $ | 64 |
|
Pension2 |
| $ | 147 |
| $ | - |
|
1 CMS Energy, including Consumers, plans to contribute $75 million to the OPEB Plan in 2014, of which Consumers plans to contribute $74 million.
2 CMS Energy, including Consumers, does not presently plan to contribute to the Pension Plan in 2014.
Contributions include required and discretionary amounts. Actual future contributions will depend on future investment performance, changes in discount rates, and various factors related to the populations participating in the plans.
In 2011, CMS Energy reached its target asset allocation for Pension Plan assets of 50 percent equity, 30 percent fixed income, and 20 percent alternative-strategy 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. Alternative strategies are diversified across absolute return investment approaches and global tactical asset allocation. CMS Energy and Consumers use annual liability measurements, quarterly portfolio reviews, and periodic asset/liability studies to evaluate the need for adjustments to the portfolio allocation.
CMS Energy and Consumers established union and non-union VEBA trusts to fund their future retiree health and life insurance benefits. These trusts are funded through the ratemaking process for Consumers and through direct contributions from the non-utility subsidiaries. In 2012, CMS Energy and Consumers adjusted their target asset allocation to 50 percent equity, 20 percent fixed income, and 30 percent alternative-strategy investments. This target 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 SmallCap Index and Foreign Equity Funds. Fixed-income investments are diversified across investment grade instruments of government and corporate issuers. Alternative strategies are diversified across absolute return investment approaches and global tactical asset allocation. CMS Energy and Consumers use annual liability measurements, quarterly portfolio reviews, and periodic asset/liability studies to evaluate the need for adjustments to the portfolio allocation.
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 |
| |||
|
| Pension |
| DB SERP |
| OPEB | 1 | |||
CMS Energy, including Consumers |
|
|
|
|
|
|
| |||
2014 |
| $ | 119 |
| $ | 8 |
| $ | 58 |
|
2015 |
| 127 |
| 8 |
| 59 |
| |||
2016 |
| 134 |
| 8 |
| 61 |
| |||
2017 |
| 139 |
| 8 |
| 64 |
| |||
2018 |
| 144 |
| 8 |
| 66 |
| |||
2019-2023 |
| 760 |
| 48 |
| 364 |
| |||
Consumers |
|
|
|
|
|
|
| |||
2014 |
| $ | 116 |
| $ | 4 |
| $ | 56 |
|
2015 |
| 124 |
| 5 |
| 57 |
| |||
2016 |
| 131 |
| 5 |
| 59 |
| |||
2017 |
| 136 |
| 5 |
| 61 |
| |||
2018 |
| 140 |
| 5 |
| 64 |
| |||
2019-2023 |
| 740 |
| 27 |
| 349 |
| |||
1 CMS Energy’s and Consumers’ OPEB benefit payments are net of employee contributions and expected Medicare Part D subsidy payments for 2014. CMS Energy and Consumers plan to change the Medicare drug program provided through the OPEB Plan from an employer-sponsored drug plan to an EGWP to begin on January 1, 2015; therefore, no Medicare Part D subsidy is expected after 2014. For CMS Energy, subsidies to be received are estimated to be $6 million for 2014. For Consumers, subsidies to be received are estimated to be $5 million for 2014.
Collective Bargaining Agreements: At December 31, 2013, unions represented 43 percent of CMS Energy’s employees and 45 percent of Consumers’ employees. The UWUA represents Consumers’ operating, maintenance, construction, and call center employees. The USW represents Zeeland employees. Union contracts expire in 2015.
12:STOCK-BASED COMPENSATION
CMS Energy and Consumers provide a PISP to key employees and non-employee directors based on their contributions to the successful management of the company. The PISP has a five-year term, expiring in May 2014.
All grants under the PISP for 2013, 2012, and 2011 were in the form of TSR restricted stock and time-lapse restricted stock. Of the restricted stock awards granted to officers in 2013 and 2012, 75 percent were TSR restricted stock and 25 percent were time-lapse restricted stock. Restricted stock award recipients receive shares of CMS Energy common stock that have dividend and voting rights. In lieu of cash dividend payments, however, the TSR restricted stock shares receive additional restricted shares equal to the value of the dividend. These additional restricted shares are subject to the same vesting conditions as the underlying restricted stock shares.
TSR restricted stock vesting is contingent on meeting a three-year service requirement and a specific market condition. The market condition is based entirely on a comparison of CMS Energy’s TSR with the median TSR of a peer group over the same three-year period. Depending on the outcome of the market condition, a recipient may earn a total award ranging from zero to 200 percent of the initial grant. Time-lapse restricted stock vests after a service period of three years.
All restricted stock awards vest fully upon death. Upon a change of control of CMS Energy or termination under an officer separation agreement, restricted stock awards will vest in accordance with specific officer agreements. For restricted stock award recipients who terminate employment due to retirement or disability, a pro-rata portion of the award equal to the portion of the service period served between the award grant date and the employee’s termination date will vest upon termination with any TSR award also contingent upon the outcome of the market condition. The remaining portion of the award will be forfeited. Restricted shares are forfeited fully if employment terminates for any other reason or if the minimum service requirements are not met or waived.
The PISP also allows for stock options, stock appreciation rights, phantom shares, performance units, and incentive options, none of which was granted in 2013, 2012, or 2011.
Shares awarded or subject to stock options, phantom shares, or performance units may not exceed 6 million shares from June 2009 through May 2014, nor may such awards to any recipient exceed 500,000 shares in any fiscal year. CMS Energy and Consumers may issue awards of up to 2,068,751 shares of common stock under the PISP at December 31, 2013. Shares for which payment or exercise is in cash, as well as shares or stock options forfeited for any reason other than failure to meet a market condition, may be awarded or granted again under the PISP.
Presented in the following table is restricted stock activity under the PISP:
Year Ended December 31, 2013 |
| Number of Shares |
| Weighted-Average Grant Date |
| |
CMS Energy, including Consumers |
|
|
|
|
| |
Nonvested at beginning of period |
| 1,654,776 |
| $ | 19.15 |
|
Granted1 |
| 920,587 |
| 16.65 |
| |
Vested |
| (927,164 | ) | 10.85 |
| |
Forfeited |
| (22,343 | ) | 22.33 |
| |
Nonvested at end of period |
| 1,625,856 |
| $ | 22.42 |
|
Consumers |
|
|
|
|
| |
Nonvested at beginning of period |
| 1,547,123 |
| $ | 19.22 |
|
Granted1 |
| 879,150 |
| 16.76 |
| |
Vested |
| (841,728 | ) | 10.84 |
| |
Forfeited |
| (22,343 | ) | 22.33 |
| |
Nonvested at end of period |
| 1,562,202 |
| $ | 22.31 |
|
1 During 2013, CMS Energy granted 326,518 TSR shares, 271,250 time-lapse shares, 45,486 shares from dividends paid on TSR shares, and 277,333 shares granted as a result of the outcome of the TSR awards’ market condition. During 2013, Consumers granted 310,454 TSR shares, 264,283 time-lapse shares, 43,450 shares from dividends paid on TSR shares, and 260,963 shares granted as a result of the outcome of the TSR awards’ market condition.
CMS Energy and Consumers charge the fair value of the awards to expense over the required service period. TSR 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 TSR restricted stock awards for non-retirement-eligible employees and time-lapse awards is recognized on a straight-line basis over the required service period.
The fair value of time-lapse restricted stock is based on the price of CMS Energy’s common stock on the grant date. The fair value of TSR 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 TSR restricted stock awards was based on the three-year U.S. Treasury yield at the award grant date.
Presented in the following table are the significant assumptions used to estimate the fair value of the TSR restricted stock awards:
|
| 2013 |
| 2012 |
| 2011 |
|
Expected volatility |
| 17.4 | % | 20.3 | % | 29.6 | % |
Expected dividend yield |
| 3.9 |
| 4.1 |
| 4.6 |
|
Risk-free rate |
| 0.4 |
| 0.3 |
| 1.0 |
|
Presented in the following table is the weighted-average grant-date fair value of all awards under the PISP:
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
| |||
CMS Energy, including Consumers |
|
|
|
|
|
|
| |||
Weighted-average grant-date fair value per share |
|
|
|
|
|
|
| |||
Restricted stock granted |
| $ | 16.65 |
| $ | 12.32 |
| $ | 13.89 |
|
Consumers |
|
|
|
|
|
|
| |||
Weighted-average grant-date fair value per share |
|
|
|
|
|
|
| |||
Restricted stock granted |
| $ | 16.76 |
| $ | 12.28 |
| $ | 14.17 |
|
Presented in the following table are amounts related to all restricted stock awards:
|
|
|
|
|
| In Millions |
| |||
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
| |||
CMS Energy, including Consumers |
|
|
|
|
|
|
| |||
Fair value of shares that vested during the year |
| $ | 10 |
| $ | 10 |
| $ | 7 |
|
Compensation expense recognized |
| 14 |
| 12 |
| 10 |
| |||
Income tax benefit recognized |
| 5 |
| 5 |
| 4 |
| |||
Consumers |
|
|
|
|
|
|
| |||
Fair value of shares that vested during the year |
| $ | 9 |
| $ | 8 |
| $ | 7 |
|
Compensation expense recognized |
| 14 |
| 11 |
| 10 |
| |||
Income tax benefit recognized |
| 5 |
| 4 |
| 4 |
| |||
At December 31, 2013, $10 million of total unrecognized compensation cost was related to restricted stock for CMS Energy, including Consumers, and $10 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 1.8 years.
Since CMS Energy has utilized tax loss carryforwards, CMS Energy was unable to realize excess tax benefits upon vesting of restricted stock. Therefore, CMS Energy did not recognize the related excess tax benefits in equity. As of December 31, 2013, CMS Energy has $58 million of unrealized excess tax benefits.
13:INCOME TAXES
CMS Energy and its subsidiaries file a consolidated U.S. federal income tax return and a unitary Michigan income tax return. Income taxes are allocated based on each company’s separate taxable income in accordance with the CMS Energy tax sharing agreement.
Presented in the following table is the difference between actual income tax expense on continuing operations, excluding noncontrolling interests, and income tax expense computed by applying the statutory U.S. federal income tax rate:
|
| In Millions, Except Tax Rate |
| |||||||
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
| |||
CMS Energy, including Consumers |
|
|
|
|
|
|
| |||
Income from continuing operations before income taxes |
| $ | 754 |
| $ | 620 |
| $ | 604 |
|
|
|
|
|
|
|
|
| |||
Income tax expense at statutory rate |
| 264 |
| 217 |
| 211 |
| |||
Increase (decrease) in income taxes from: |
|
|
|
|
|
|
| |||
MCIT law change, net of federal effect1 |
| - |
| - |
| (32 | ) | |||
State and local income taxes, net of federal effect |
| 37 |
| 27 |
| 21 |
| |||
Other, net |
| 1 |
| 1 |
| (9 | ) | |||
Income tax expense |
| $ | 302 |
| $ | 245 |
| $ | 191 |
|
Effective tax rate |
| 40.1 | % | 39.5 | % | 31.6 | % | |||
Consumers |
|
|
|
|
|
|
| |||
Income from continuing operations before income taxes |
| $ | 880 |
| $ | 736 |
| $ | 734 |
|
|
|
|
|
|
|
|
| |||
Income tax expense at statutory rate |
| 308 |
| 258 |
| 257 |
| |||
Increase (decrease) in income taxes from: |
|
|
|
|
|
|
| |||
State and local income taxes, net of federal effect |
| 43 |
| 36 |
| 24 |
| |||
Other, net |
| (5 | ) | 3 |
| (14 | ) | |||
Income tax expense |
| $ | 346 |
| $ | 297 |
| $ | 267 |
|
Effective tax rate |
| 39.3 | % | 40.4 | % | 36.4 | % | |||
1 For the year ended December 31, 2011, CMS Energy and Consumers remeasured their Michigan deferred income tax assets and liabilities due to the enactment in May 2011 of the MCIT, which became effective January 1, 2012. The MCIT, a simplified six percent corporate income tax, replaced the MBT, a complex multi-part tax. CMS Energy recognized a one-time non-cash deferred tax benefit of $32 million as a result of this remeasurement. Consumers recognized a $128 million regulatory asset (not including the effects of income tax gross-ups) related to this change in tax law.
Presented in the following table are the significant components of income tax expense on continuing operations:
|
|
|
| In Millions |
| |||||
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
| |||
CMS Energy, including Consumers |
|
|
|
|
|
|
| |||
Current income taxes |
|
|
|
|
|
|
| |||
Federal |
| $ | - |
| $ | 1 |
| $ | 2 |
|
State and local |
| 34 |
| 21 |
| 24 |
| |||
|
| $ | 34 |
| $ | 22 |
| $ | 26 |
|
Deferred income taxes |
|
|
|
|
|
|
| |||
Federal |
| $ | 248 |
| $ | 205 |
| $ | 207 |
|
State and local |
| 23 |
| 21 |
| 11 |
| |||
MCIT law change |
| - |
| - |
| (49 | ) | |||
|
| $ | 271 |
| $ | 226 |
| $ | 169 |
|
Deferred income tax credit |
| (3 | ) | (3 | ) | (4 | ) | |||
Tax expense |
| $ | 302 |
| $ | 245 |
| $ | 191 |
|
Consumers |
|
|
|
|
|
|
| |||
Current income taxes |
|
|
|
|
|
|
| |||
Federal |
| $ | 137 |
| $ | 110 |
| $ | 74 |
|
State and local |
| 45 |
| 37 |
| 32 |
| |||
|
| $ | 182 |
| $ | 147 |
| $ | 106 |
|
Deferred income taxes |
|
|
|
|
|
|
| |||
Federal |
| $ | 147 |
| $ | 134 |
| $ | 159 |
|
State and local |
| 20 |
| 19 |
| 6 |
| |||
|
| $ | 167 |
| $ | 153 |
| $ | 165 |
|
Deferred income tax credit |
| (3 | ) | (3 | ) | (4 | ) | |||
Tax expense |
| $ | 346 |
| $ | 297 |
| $ | 267 |
|
Presented in the following table are the principal components of deferred income tax assets (liabilities) recognized:
|
|
| In Millions |
| |||
December 31 |
| 2013 |
| 2012 |
| ||
CMS Energy, including Consumers |
|
|
|
|
| ||
Employee benefits |
| $ | (99 | ) | $ | 3 |
|
Gas inventory |
| (130 | ) | (147 | ) | ||
Plant, property, and equipment |
| (1,856 | ) | (1,783 | ) | ||
Net regulatory tax liability |
| 86 |
| 131 |
| ||
Reserves and accruals |
| 57 |
| 71 |
| ||
Securitized costs |
| (190 | ) | (73 | ) | ||
Tax loss and credit carryforwards |
| 629 |
| 733 |
| ||
Other |
| 15 |
| (15 | ) | ||
|
| $ | (1,488 | ) | $ | (1,080 | ) |
Less valuation allowance |
| (2 | ) | (3 | ) | ||
Total net deferred income tax liabilities |
| $ | (1,490 | ) | $ | (1,083 | ) |
Deferred tax assets, net of valuation reserves |
| $ | 785 |
| $ | 935 |
|
Deferred tax liabilities |
| (2,275 | ) | (2,018 | ) | ||
Total net deferred income tax liabilities |
| $ | (1,490 | ) | $ | (1,083 | ) |
Consumers |
|
|
|
|
| ||
Employee benefits |
| $ | (119 | ) | $ | (36 | ) |
Gas inventory |
| (130 | ) | (147 | ) | ||
Plant, property, and equipment |
| (1,911 | ) | (1,848 | ) | ||
Net regulatory tax liability |
| 86 |
| 131 |
| ||
Reserves and accruals |
| 31 |
| 41 |
| ||
Securitized costs |
| (190 | ) | (73 | ) | ||
Tax loss and credit carryforwards |
| 48 |
| 61 |
| ||
Other |
| 16 |
| (13 | ) | ||
|
| $ | (2,169 | ) | $ | (1,884 | ) |
Less valuation allowance |
| (1 | ) | (1 | ) | ||
Total net deferred income tax liabilities |
| $ | (2,170 | ) | $ | (1,885 | ) |
Deferred tax assets, net of valuation reserves |
| $ | 180 |
| $ | 232 |
|
Deferred tax liabilities |
| (2,350 | ) | (2,117 | ) | ||
Total net deferred income tax liabilities |
| $ | (2,170 | ) | $ | (1,885 | ) |
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. Deferred tax assets and liabilities are classified as current or non-current according to the classification of the related assets or liabilities. Deferred tax assets and liabilities not related to assets or liabilities are classified according to the expected reversal date of the temporary differences.
Presented in the following table are the tax loss and credit carryforwards at December 31, 2013:
|
|
|
|
|
| In Millions |
| ||
|
| Gross Amount |
| Tax Attribute |
| Expiration |
| ||
CMS Energy, including Consumers |
|
|
|
|
|
|
| ||
Federal net operating loss carryforward |
| $ | 900 |
| $ | 315 |
| 2026 – 2031 |
|
Local net operating loss carryforwards |
|
| 420 |
|
| 4 |
| 2023 – 2031 |
|
State capital loss carryforward |
|
| 18 |
|
| 1 |
| 2014 |
|
Alternative minimum tax credits |
|
| 270 |
|
| 270 |
| No expiration |
|
Charitable contribution carryover |
|
| 5 |
|
| 2 |
| 2016 |
|
General business credits |
|
| 37 |
|
| 37 |
| 2018 – 2033 |
|
Total tax attributes |
|
|
|
| $ | 629 |
|
|
|
Consumers |
|
|
|
|
|
|
|
|
|
Federal net operating loss carryforward |
| $ | 129 |
| $ | 45 |
| 2026 – 2031 |
|
State capital loss carryforward |
|
| 10 |
|
| 1 |
| 2014 |
|
Charitable contribution carryover |
|
| 5 |
|
| 2 |
| 2016 |
|
Total tax attributes |
|
|
|
| $ | 48 |
|
|
|
CMS Energy has provided a valuation allowance of $1 million for the local tax loss carryforward, and a valuation allowance of $1 million for the state capital loss carryforward. Consumers has provided a valuation allowance of $1 million for the state capital loss carryforward. CMS Energy and Consumers expect to utilize fully tax loss and credit carryforwards for which no valuation 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 |
| 2013 |
| 2012 |
| 2011 |
| |||
CMS Energy, including Consumers |
|
|
|
|
|
|
| |||
Balance at beginning of period |
| $ | 1 |
| $ | 4 |
| $ | 4 |
|
Reductions for prior-year tax positions |
| - |
| (4 | ) | (1 | ) | |||
Additions for prior-year tax positions |
| 3 |
| 1 |
| 1 |
| |||
Balance at end of period |
| $ | 4 |
| $ | 1 |
| $ | 4 |
|
Consumers |
|
|
|
|
|
|
| |||
Balance at beginning of period |
| $ | 1 |
| $ | 4 |
| $ | 3 |
|
Reductions for prior-year tax positions |
| - |
| (4 | ) | - |
| |||
Additions for prior-year tax positions |
| 3 |
| 1 |
| 1 |
| |||
Balance at end of period |
| $ | 4 |
| $ | 1 |
| $ | 4 |
|
CMS Energy, including Consumers, had uncertain tax benefits of $4 million at December 31, 2013, $1 million at December 31, 2012 and $4 million at December 31, 2011 that, if recognized, would affect the annual effective tax rate in future years. Consumers had uncertain tax benefits of $4 million at December 31, 2013, $1 million at December 31, 2012, and $4 million at December 31, 2011 that, if recognized, would affect the annual effective tax rate 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 for the years ended December 31, 2013, 2012, or 2011.
In May 2012, the IRS completed its audit of CMS Energy and its subsidiaries for 2008 and 2009, as well as its audit of research and development tax credit claims for 2001 through 2009. The audits resulted in a
$45 million increase in the net operating loss carryforward. The impact to net income as a result of the completion of the audits was a decrease of $1 million.
CMS Energy’s federal income tax returns for 2010 and subsequent years remain subject to examination by the IRS. CMS Energy’s MCIT and MBT returns for 2008 and subsequent years remain subject to examination by the State of Michigan.
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 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, 2013 were adequate for all years.
14:EARNINGS PER SHARE – CMS ENERGY
Presented in the following table are CMS Energy’s basic and diluted EPS computations based on Incomeincome from Continuing Operations:
Years Ended December 31 | 2010 | 2009 | 2008 | |||||||||
| In Millions, Except Per Share Amounts | ||||||||||||
Income Available to Common Stockholders | ||||||||||||
| Income from Continuing Operations | $ | 366 | $ | 220 | $ | 301 | ||||||
| Less Income Attributable to Noncontrolling Interests | (3 | ) | (11 | ) | (7 | ) | ||||||
| Less Charge for Deferred Issuance Costs on Preferred Stock | (8 | ) | — | — | ||||||||
| Less Preferred Stock Dividends | (8 | ) | (11 | ) | (11 | ) | ||||||
| Income from Continuing Operations Available to Common Stockholders — Basic and Diluted | $ | 347 | $ | 198 | $ | 283 | ||||||
Average Common Shares Outstanding | ||||||||||||
| Weighted average shares — basic | 231.5 | 227.2 | 225.7 | |||||||||
| Add dilutive contingently convertible securities | 21.3 | 10.6 | 10.3 | |||||||||
| Add dilutive non-vested stock awards, options, and warrants | 0.1 | 0.1 | 0.2 | |||||||||
| Weighted average shares — diluted | 252.9 | 237.9 | 236.2 | |||||||||
Income from Continuing Operations per Average Common Share Available to Common Stockholders | ||||||||||||
| Basic | $ | 1.50 | $ | 0.87 | $ | 1.25 | ||||||
| Diluted | $ | 1.36 | $ | 0.83 | $ | 1.20 | ||||||
In Millions, Except Per Share Amounts |
| |||||||||
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
| |||
Income available to common stockholders |
|
|
|
|
|
|
| |||
Income from continuing operations |
| $ | 454 |
| $ | 377 |
| $ | 415 |
|
Less income attributable to noncontrolling interests |
| 2 |
| 2 |
| 2 |
| |||
Income from continuing operations available to |
| $ | 452 |
| $ | 375 |
| $ | 413 |
|
Average common shares outstanding |
|
|
|
|
|
|
| |||
Weighted-average shares – basic |
| 264.5 |
| 260.7 |
| 250.8 |
| |||
Add dilutive contingently convertible securities |
| 6.4 |
| 6.8 |
| 12.2 |
| |||
Add dilutive non-vested stock awards and options |
| 1.0 |
| 1.1 |
| 0.4 |
| |||
Weighted-average shares – diluted |
| 271.9 |
| 268.6 |
| 263.4 |
| |||
Income from continuing operations per average |
|
|
|
|
|
|
| |||
Basic |
| $ | 1.71 |
| $ | 1.43 |
| $ | 1.65 |
|
Diluted |
| 1.66 |
| 1.39 |
| 1.57 |
| |||
Contingently Convertible Securities:CONTINGENTLY CONVERTIBLE SECURITIES
When CMS Energy has earnings from continuing operations, its contingently convertible securities dilute EPS to the extent that the conversion value of a security, which is based on the average market price of CMS Energy’sEnergy common stock, exceeds the principal value of that security.
125
NON-VESTED STOCK AWARDS
CMS Energy’s non-vested stock awards are composed of participating and non-participating securities. The participating securities accrue cash dividends when common stockholders receive dividends. Since the recipient is not required to return the dividends to CMS Energy if the recipient forfeits the award, the non-vested stock awards are considered participating securities. As such, the participating non-vested stock awards were included in the computation of basic EPS. The non-participating securities accrue stock dividends that vest concurrently with the stock award. If the recipient forfeits the award, the stock dividends accrued on the non-participating securities are also forfeited. Accordingly, the non-participating awards and stock dividends were included in the computation of diluted EPS, but not basic EPS.
| 2010 | 2009 | |||||||||||||||
| Cost or | Cost or | |||||||||||||||
| Carrying | Carrying | |||||||||||||||
December 31 | Amount | Fair Value | Amount | Fair Value | ||||||||||||
| In Millions | ||||||||||||||||
CMS Energy, including Consumers | ||||||||||||||||
| Securities held to maturity | $ | 5 | $ | 6 | $ | 4 | $ | 4 | ||||||||
| Securities available for sale | 90 | 90 | 26 | 27 | ||||||||||||
| Notes receivable(a) | 386 | 407 | 269 | 279 | ||||||||||||
| Long-term debt(b) | 7,174 | 7,861 | 6,567 | 7,013 | ||||||||||||
Consumers | ||||||||||||||||
| Securities available for sale | $ | 64 | $ | 90 | $ | 24 | $ | 45 | ||||||||
| Long-term debt(c) | 4,525 | 4,891 | 4,406 | 4,635 | ||||||||||||
126
15:OTHER INCOME AND OTHER EXPENSE
| 2010 | 2009 | |||||||||||||||||||||||||||||||
| Unrealized | Unrealized | Fair | Unrealized | Unrealized | Fair | |||||||||||||||||||||||||||
December 31 | Cost | Gains | Losses | Value | Cost | Gains | Losses | Value | ||||||||||||||||||||||||
| In Millions | ||||||||||||||||||||||||||||||||
CMS Energy, including Consumers | ||||||||||||||||||||||||||||||||
| Available for sale: | ||||||||||||||||||||||||||||||||
| SERP: | ||||||||||||||||||||||||||||||||
| Mutual fund | $ | 62 | $ | — | $ | — | $ | 62 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
| State and municipal bonds | 28 | — | — | 28 | 26 | 1 | — | 27 | ||||||||||||||||||||||||
| Held to maturity: | ||||||||||||||||||||||||||||||||
| Debt securities | 5 | 1 | — | 6 | 4 | — | — | 4 | ||||||||||||||||||||||||
Consumers | ||||||||||||||||||||||||||||||||
| Available for sale: | ||||||||||||||||||||||||||||||||
| SERP: | ||||||||||||||||||||||||||||||||
| Mutual fund | $ | 39 | $ | — | $ | — | $ | 39 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
| State and municipal bonds | 17 | — | — | 17 | 16 | — | — | 16 | ||||||||||||||||||||||||
| CMS Energy common stock | 8 | 26 | — | 34 | 8 | 21 | — | 29 | ||||||||||||||||||||||||
127
Years Ended December 31 | 2010 | 2009 | 2008 | |||||||||
| In Millions | ||||||||||||
CMS Energy, including Consumers: | ||||||||||||
| Proceeds from sales of investment securities | $ | 1 | $ | 53 | $ | 2 | ||||||
| Realized gains | — | 8 | — | |||||||||
| Net gains from AOCI recognized in net income | — | 5 | — | |||||||||
Consumers: | ||||||||||||
| Proceeds from sales of investment securities | $ | — | $ | 32 | $ | 2 | ||||||
| Realized gains | — | 5 | — | |||||||||
| Net gains from AOCI recognized in net income | — | 3 | — | |||||||||
| CMS Energy, | ||||||||
| including | ||||||||
| Consumers | Consumers | |||||||
| In Millions | ||||||||
| Due one year or less | $ | 1 | $ | — | ||||
| Due after one year through five years | 12 | 7 | ||||||
| Due after five years through ten years | 9 | 6 | ||||||
| Due after ten years | 6 | 4 | ||||||
| Total | $ | 28 | $ | 17 | ||||
128
129
| Derivative Assets | Derivative Liabilities | |||||||||||||||||||||||
| Balance Sheet | Fair Value at December 31 | Balance Sheet | Fair Value at December 31 | |||||||||||||||||||||
| Location | 2010 | 2009 | Location | 2010 | 2009 | |||||||||||||||||||
| In Millions | ||||||||||||||||||||||||
CMS Energy, including Consumers | ||||||||||||||||||||||||
Derivatives not designated as hedging instruments: | ||||||||||||||||||||||||
| Commodity contracts(a) | Other assets | $ | 1 | $ | 1 | Other liabilities(b | ) | $ | 4 | $ | 9 | |||||||||||||
| Interest rate contracts(c) | Other assets | — | — | Other liabilities | — | 1 | ||||||||||||||||||
| Total CMS Energy | $ | 1 | $ | 1 | $ | 4 | $ | 10 | ||||||||||||||||
Consumers | ||||||||||||||||||||||||
Derivatives not designated as hedging instruments: | ||||||||||||||||||||||||
| Commodity contracts | Other assets | $ | 1 | $ | — | Other liabilities | $ | — | $ | — | ||||||||||||||
130
| Amount of Gain (Loss) | ||||||||||
| Location of Gain (Loss) | on Derivatives | |||||||||
| on Derivatives | Recognized in Income | |||||||||
Twelve Months Ended December 31 | Recognized in Income | 2010 | 2009 | |||||||
| In Millions | ||||||||||
CMS Energy, including Consumers | ||||||||||
Derivatives not designated as hedging instruments: | ||||||||||
| Commodity contracts | Operating Revenue | $ | 4 | $ | 7 | |||||
| Fuel for electric generation | 4 | (3 | ) | |||||||
| Cost of gas sold | — | (2 | ) | |||||||
| Purchased and interchange power | 2 | — | ||||||||
| Other income | 4 | 9 | ||||||||
| Interest rate contracts | Other expense | — | (1 | ) | ||||||
| Foreign exchange contracts(a) | Other expense | — | (1 | ) | ||||||
| Total CMS Energy | $ | 14 | $ | 9 | ||||||
Consumers | ||||||||||
Derivatives not designated as hedging instruments: | ||||||||||
| Commodity contracts | Other income | $ | 4 | $ | 9 | |||||
131
Years Ended December 31 | 2010 | 2009 | ||||||
| In Millions | ||||||||
CMS Energy, including Consumers | ||||||||
| Trust assets(a) | $ | 91 | $ | 77 | ||||
| ABO | 107 | 93 | ||||||
| Contributions | 17 | 2 | ||||||
Consumers | ||||||||
| Trust assets(a) | $ | 57 | $ | 50 | ||||
| ABO | 66 | 54 | ||||||
| Contributions | 11 | 1 | ||||||
132
| One Percentage | One Percentage | |||||||
| Point Increase | Point Decrease | |||||||
| In Millions | ||||||||
CMS Energy, including Consumers | ||||||||
| Effect on total service and interest cost component | $ | 19 | $ | (16 | ) | |||
| Effect on PBO | $ | 201 | $ | (175 | ) | |||
Consumers | ||||||||
| Effect on total service and interest cost component | $ | 18 | $ | (15 | ) | |||
| Effect on PBO | $ | 196 | $ | (170 | ) | |||
133
| Pension and SERP | OPEB | |||||||||||||||||||||||
Years Ended December 31 | 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | ||||||||||||||||||
CMS Energy, including Consumers | ||||||||||||||||||||||||
| Discount rate(a) | 5.40 | % | 5.85 | % | 6.50 | % | 5.60 | % | 6.00 | % | 6.50 | % | ||||||||||||
| Expected long-term rate of return on plan assets(b) | 8.00 | % | 8.00 | % | 8.25 | % | 7.50 | % | 7.50 | % | 7.75 | % | ||||||||||||
| Mortality table(c) | 2000 | 2000 | 2000 | 2000 | 2000 | 2000 | ||||||||||||||||||
| Rate of compensation increase: | ||||||||||||||||||||||||
| Pension | 4.00 | % | 4.00 | % | 4.00 | % | ||||||||||||||||||
| SERP | 5.50 | % | 5.50 | % | 5.50 | % | ||||||||||||||||||
| Pension and SERP | OPEB | |||||||||||||||||||||||
Years Ended December 31 | 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | ||||||||||||||||||
CMS Energy, including Consumers | ||||||||||||||||||||||||
| Discount rate(a) | 5.85 | % | 6.50 | % | 6.40 | % | 6.00 | % | 6.50 | % | 6.50 | % | ||||||||||||
| Expected long-term rate of return on plan assets(b) | 8.00 | % | 8.25 | % | 8.25 | % | 7.50 | % | 7.75 | % | 7.75 | % | ||||||||||||
| Mortality table(c) | 2000 | 2000 | 2000 | 2000 | 2000 | 2000 | ||||||||||||||||||
| Rate of compensation increase: | ||||||||||||||||||||||||
| Pension | 4.00 | % | 4.00 | % | 4.00 | % | ||||||||||||||||||
| SERP | 5.50 | % | 5.50 | % | 5.50 | % | ||||||||||||||||||
134
| Pension and SERP | ||||||||||||
Years Ended December 31 | 2010 | 2009 | 2008 | |||||||||
| In Millions | ||||||||||||
CMS Energy, including Consumers | ||||||||||||
| Net periodic pension cost | ||||||||||||
| Service cost | $ | 45 | $ | 41 | $ | 43 | ||||||
| Interest expense | 104 | 102 | 101 | |||||||||
| Expected return on plan assets | (92 | ) | (86 | ) | (81 | ) | ||||||
| Amortization of: | ||||||||||||
| Net loss | 52 | 41 | 41 | |||||||||
| Prior service cost | 5 | 6 | 6 | |||||||||
| Net periodic pension cost | $ | 114 | $ | 104 | $ | 110 | ||||||
| Regulatory adjustment(a) | 30 | — | 4 | |||||||||
| Net periodic pension cost after regulatory adjustment | $ | 144 | $ | 104 | $ | 114 | ||||||
Consumers | ||||||||||||
| Net periodic pension cost | ||||||||||||
| Service cost | $ | 44 | $ | 40 | $ | 41 | ||||||
| Interest expense | 99 | 97 | 96 | |||||||||
| Expected return on plan assets | (89 | ) | (83 | ) | (78 | ) | ||||||
| Amortization of: | ||||||||||||
| Net loss | 50 | 40 | 40 | |||||||||
| Prior service cost | 5 | 5 | 6 | |||||||||
| Net periodic pension cost | $ | 109 | $ | 99 | $ | 105 | ||||||
| Regulatory adjustment(a) | 30 | — | 4 | |||||||||
| Net periodic pension cost after regulatory adjustment | $ | 139 | $ | 99 | $ | 109 | ||||||
135
| OPEB | ||||||||||||
Years Ended December 31 | 2010 | 2009 | 2008 | |||||||||
| In Millions | ||||||||||||
CMS Energy, including Consumers | ||||||||||||
| Net periodic OPEB cost | ||||||||||||
| Service cost | $ | 26 | $ | 24 | $ | 22 | ||||||
| Interest expense | 80 | 80 | 72 | |||||||||
| Expected return on plan assets | (60 | ) | (50 | ) | (66 | ) | ||||||
| Amortization of: | ||||||||||||
| Net loss | 32 | 33 | 9 | |||||||||
| Prior service credit | (17 | ) | (10 | ) | (10 | ) | ||||||
| Net periodic OPEB cost | $ | 61 | $ | 77 | $ | 27 | ||||||
| Regulatory adjustment(a) | 5 | — | 3 | |||||||||
| Net periodic OPEB cost after regulatory adjustment | $ | 66 | $ | 77 | $ | 30 | ||||||
Consumers | ||||||||||||
| Net periodic OPEB cost | ||||||||||||
| Service cost | $ | 25 | $ | 24 | $ | 21 | ||||||
| Interest expense | 77 | 77 | 69 | |||||||||
| Expected return on plan assets | (56 | ) | (46 | ) | (61 | ) | ||||||
| Amortization of: | ||||||||||||
| Net loss | 33 | 33 | 10 | |||||||||
| Prior service credit | (16 | ) | (10 | ) | (10 | ) | ||||||
| Net periodic OPEB cost | $ | 63 | $ | 78 | $ | 29 | ||||||
| Regulatory adjustment(a) | 5 | — | 3 | |||||||||
| Net periodic OPEB cost after regulatory adjustment | $ | 68 | $ | 78 | $ | 32 | ||||||
|
|
|
| In Millions |
| |||||
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
| |||
Other income |
|
|
|
|
|
|
| |||
CMS Energy, including Consumers |
|
|
|
|
|
|
| |||
Regulatory return on capital expenditures |
| $ | - |
| $ | 1 |
| $ | - |
|
Return on stranded costs |
| - |
| 1 |
| 3 |
| |||
Fee income |
| 7 |
| 7 |
| 8 |
| |||
All other |
| 3 |
| 2 |
| 5 |
| |||
Total other income |
| $ | 10 |
| $ | 11 |
| $ | 16 |
|
Consumers |
|
|
|
|
|
|
| |||
Regulatory return on capital expenditures |
| $ | - |
| $ | 1 |
| $ | - |
|
Gain on CMS Energy common stock |
| 4 |
| 5 |
| 4 |
| |||
Return on stranded costs |
| - |
| 1 |
| 3 |
| |||
Fee income |
| 7 |
| 7 |
| 8 |
| |||
All other |
| 3 |
| 2 |
| 4 |
| |||
Total other income |
| $ | 14 |
| $ | 16 |
| $ | 19 |
|
|
|
|
| In Millions |
| |||||
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
| |||
Other expense |
|
|
|
|
|
|
| |||
CMS Energy, including Consumers |
|
|
|
|
|
|
| |||
Loss on reacquired and extinguished debt |
| $ | (4 | ) | $ | - |
| $ | (1 | ) |
Donations |
| (4 | ) | (11 | ) | (11 | ) | |||
Civic and political expenditures |
| (5 | ) | (17 | ) | (3 | ) | |||
All other |
| (7 | ) | (5 | ) | (7 | ) | |||
Total other expense |
| $ | (20 | ) | $ | (33 | ) | $ | (22 | ) |
Consumers |
|
|
|
|
|
|
| |||
Donations |
| $ | (4 | ) | $ | (11 | ) | $ | (11 | ) |
Civic and political expenditures |
| (5 | ) | (17 | ) | (3 | ) | |||
All other |
| (7 | ) | (5 | ) | (6 | ) | |||
Total other expense |
| $ | (16 | ) | $ | (33 | ) | $ | (20 | ) |
136
16:REPORTABLE SEGMENTS
| Pension Plan | ||||||||
Years Ended December 31 | 2010 | 2009 | ||||||
| In Millions | ||||||||
| Benefit obligation at beginning of period | $ | 1,717 | $ | 1,524 | ||||
| Service cost | 44 | 40 | ||||||
| Interest cost | 98 | 96 | ||||||
| Actuarial loss | 150 | 145 | ||||||
| Benefits paid | (113 | ) | (88 | ) | ||||
| Benefit obligation at end of period(a) | $ | 1,896 | $ | 1,717 | ||||
| Plan assets at fair value at beginning of period | $ | 1,007 | $ | 724 | ||||
| Actual return on plan assets | 132 | 165 | ||||||
| Company contribution | 375 | 206 | ||||||
| Actual benefits paid(b) | (113 | ) | (88 | ) | ||||
| Plan assets at fair value at end of period | $ | 1,401 | $ | 1,007 | ||||
| Funded status at December 31(c)(d) | $ | (495 | ) | $ | (710 | ) | ||
| SERP | OPEB | |||||||||||||||
Years Ended December 31 | 2010 | 2009 | 2010 | 2009 | ||||||||||||
| In Millions | ||||||||||||||||
CMS Energy, including Consumers | ||||||||||||||||
| Benefit obligation at beginning of period | $ | 106 | $ | 95 | $ | 1,423 | $ | 1,266 | ||||||||
| Service cost | 1 | 1 | 26 | 24 | ||||||||||||
| Interest cost | 6 | 6 | 80 | 80 | ||||||||||||
| Plan amendments(e) | — | — | (101 | ) | — | |||||||||||
| Actuarial loss | 11 | 9 | 36 | 106 | ||||||||||||
| Benefits paid | (6 | ) | (5 | ) | (54 | ) | (53 | ) | ||||||||
| Benefit obligation at end of period(a) | $ | 118 | $ | 106 | $ | 1,410 | $ | 1,423 | ||||||||
| Plan assets at fair value at beginning of period | $ | — | $ | — | $ | 782 | $ | 662 | ||||||||
| Actual return on plan assets | — | — | 88 | 117 | ||||||||||||
| Company contribution | 6 | 5 | 71 | 56 | ||||||||||||
| Actual benefits paid(b) | (6 | ) | (5 | ) | (54 | ) | (53 | ) | ||||||||
| Plan assets at fair value at end of period | $ | — | $ | — | $ | 887 | $ | 782 | ||||||||
| Funded status at December 31(c) | $ | (118 | ) | $ | (106 | ) | $ | (523 | ) | $ | (641 | ) | ||||
137
| SERP | OPEB | |||||||||||||||
Years Ended December 31 | 2010 | 2009 | 2010 | 2009 | ||||||||||||
| In Millions | ||||||||||||||||
Consumers | ||||||||||||||||
| Benefit obligation at beginning of period | $ | 67 | $ | 62 | $ | 1,373 | $ | 1,219 | ||||||||
| Service cost | 1 | 1 | 25 | 24 | ||||||||||||
| Interest cost | 4 | 4 | 77 | 77 | ||||||||||||
| Plan amendments(e) | — | — | (100 | ) | — | |||||||||||
| Actuarial loss | 8 | 6 | 34 | 104 | ||||||||||||
| Transfer | — | (4 | ) | — | — | |||||||||||
| Benefits paid | (3 | ) | (2 | ) | (51 | ) | (51 | ) | ||||||||
| Benefit obligation at end of period(a) | $ | 77 | $ | 67 | $ | 1,358 | $ | 1,373 | ||||||||
| Plan assets at fair value at beginning of period | $ | — | $ | — | $ | 725 | $ | 612 | ||||||||
| Actual return on plan assets | — | — | 81 | 108 | ||||||||||||
| Company contribution | 3 | 2 | 70 | 55 | ||||||||||||
| Actual benefits paid(b) | (3 | ) | (2 | ) | (51 | ) | (50 | ) | ||||||||
| Plan assets at fair value at end of period | $ | — | $ | — | $ | 825 | $ | 725 | ||||||||
| Funded status at December 31(c) | $ | (77 | ) | $ | (67 | ) | $ | (533 | ) | $ | (648 | ) | ||||
138
Years Ended December 31 | 2010 | 2009 | ||||||
| In Millions | ||||||||
CMS Energy, including Consumers | ||||||||
| Pension PBO | $ | 1,896 | $ | 1,717 | ||||
| Pension ABO | 1,517 | 1,393 | ||||||
| Fair value of Pension Plan assets | 1,401 | 1,007 | ||||||
| Pension and | ||||||||||||||||
| SERP | OPEB | |||||||||||||||
Years Ended December 31 | 2010 | 2009 | 2010 | 2009 | ||||||||||||
| In Millions | ||||||||||||||||
CMS Energy, including Consumers | ||||||||||||||||
| Regulatory assets | ||||||||||||||||
| Net loss | $ | 914 | $ | 860 | $ | 579 | $ | 604 | ||||||||
| Prior service cost (credit) | 23 | 27 | (152 | ) | (68 | ) | ||||||||||
| AOCI | ||||||||||||||||
| Net loss (gain) | 72 | 58 | (9 | ) | (11 | ) | ||||||||||
| Prior service cost (credit) | 2 | 3 | (4 | ) | (3 | ) | ||||||||||
| Total amounts recognized in regulatory assets and AOCI | $ | 1,011 | $ | 948 | $ | 414 | $ | 522 | ||||||||
Consumers | ||||||||||||||||
| Regulatory assets | ||||||||||||||||
| Net loss | $ | 914 | $ | 860 | $ | 579 | $ | 604 | ||||||||
| Prior service cost (credit) | 23 | 27 | (152 | ) | (68 | ) | ||||||||||
| AOCI | ||||||||||||||||
| Net loss | 22 | 14 | — | — | ||||||||||||
| Prior service cost | 1 | 1 | — | — | ||||||||||||
| Total amounts recognized in regulatory assets and AOCI | $ | 960 | $ | 902 | $ | 427 | $ | 536 | ||||||||
139
| Pension Plan | ||||||||||||
Year Ended December 31, 2010 | Total | Level 1 | Level 2 | |||||||||
| In Millions | ||||||||||||
CMS Energy, including Consumers | ||||||||||||
| Asset Category: | ||||||||||||
| Cash and short-term investments(a) | $ | 248 | $ | 248 | $ | — | ||||||
| U.S. government and agencies securities(b) | 57 | — | 57 | |||||||||
| Corporate debt(c) | 161 | — | 161 | |||||||||
| State and municipal bonds(e) | 8 | — | 8 | |||||||||
| Foreign corporate debt(f) | 17 | — | 17 | |||||||||
| Mutual funds(h) | 183 | 183 | — | |||||||||
| Pooled funds(i) | 727 | — | 727 | |||||||||
| Total | $ | 1,401 | $ | 431 | $ | 970 | ||||||
| Pension Plan | ||||||||||||
Year Ended December 31, 2009 | Total | Level 1 | Level 2 | |||||||||
| In Millions | ||||||||||||
CMS Energy, including Consumers | ||||||||||||
| Asset Category: | ||||||||||||
| Cash and short-term investments(a) | $ | 65 | $ | 65 | $ | — | ||||||
| U.S. government and agencies securities(b) | 40 | — | 40 | |||||||||
| Corporate debt(c) | 145 | — | 145 | |||||||||
| State and municipal bonds(e) | 4 | — | 4 | |||||||||
| Foreign corporate debt(f) | 17 | — | 17 | |||||||||
| Mutual funds(h) | 117 | 117 | — | |||||||||
| Pooled funds(i) | 619 | — | 619 | |||||||||
| Total | $ | 1,007 | $ | 182 | $ | 825 | ||||||
140
| OPEB Plan | ||||||||||||
Year Ended December 31, 2010 | Total | Level 1 | Level 2 | |||||||||
| In Millions | ||||||||||||
CMS Energy, including Consumers | ||||||||||||
| Asset Category: | ||||||||||||
| Cash and short-term investments(a) | $ | 56 | $ | 56 | $ | — | ||||||
| U.S. government and agencies securities(b) | 181 | — | 181 | |||||||||
| Corporate debt(d) | 20 | — | 20 | |||||||||
| State and municipal bonds(e) | 36 | — | 36 | |||||||||
| Foreign corporate debt(f) | 2 | — | 2 | |||||||||
| Common stocks(g) | 154 | 154 | — | |||||||||
| Mutual funds(h) | 23 | 23 | — | |||||||||
| Pooled funds(j) | 415 | — | 415 | |||||||||
| Total | $ | 887 | $ | 233 | $ | 654 | ||||||
| OPEB Plan | ||||||||||||
Year Ended December 31, 2009 | Total | Level 1 | Level 2 | |||||||||
| In Millions | ||||||||||||
CMS Energy, including Consumers | ||||||||||||
| Asset Category: | ||||||||||||
| Cash and short-term investments(a) | $ | 29 | $ | 29 | $ | — | ||||||
| U.S. government and agencies securities(b) | 157 | — | 157 | |||||||||
| Corporate debt(d) | 21 | — | 21 | |||||||||
| State and municipal bonds(e) | 51 | — | 51 | |||||||||
| Foreign corporate debt(f) | 2 | — | 2 | |||||||||
| Common stocks(g) | 134 | 134 | — | |||||||||
| Mutual funds(h) | 17 | 17 | — | |||||||||
| Pooled funds(j) | 371 | — | 371 | |||||||||
| Total | $ | 782 | $ | 180 | $ | 602 | ||||||
141
142
Years Ended December 31 | 2010 | 2009 | ||||||
| In Millions | ||||||||
CMS Energy, including Consumers | ||||||||
OPEB:(a) | ||||||||
| VEBA trust | $ | 57 | $ | 40 | ||||
| 401(h) component | 14 | 16 | ||||||
| $ | 71 | $ | 56 | |||||
| Pension(b) | $ | 375 | $ | 206 | ||||
Consumers | ||||||||
OPEB:(a) | ||||||||
| VEBA trust | $ | 57 | $ | 39 | ||||
| 401(h) component | 13 | 16 | ||||||
| $ | 70 | $ | 55 | |||||
| Pension(b) | $ | 366 | $ | 199 | ||||
143
| Pension | SERP | OPEB(a) | ||||||||||
| In Millions | ||||||||||||
CMS Energy, including Consumers | ||||||||||||
| 2011 | $ | 86 | $ | 7 | $ | 62 | ||||||
| 2012 | 96 | 7 | 64 | |||||||||
| 2013 | 106 | 6 | 67 | |||||||||
| 2014 | 115 | 7 | 71 | |||||||||
| 2015 | 126 | 8 | 74 | |||||||||
| 2016-2020 | 764 | 42 | 428 | |||||||||
Consumers | ||||||||||||
| 2011 | $ | 83 | $ | 4 | $ | 59 | ||||||
| 2012 | 93 | 4 | 61 | |||||||||
| 2013 | 103 | 3 | 64 | |||||||||
| 2014 | 112 | 4 | 67 | |||||||||
| 2015 | 122 | 4 | 71 | |||||||||
| 2016-2020 | 741 | 22 | 407 | |||||||||
144
Years Ended December 31 | 2010 | 2009 | 2008 | |||||||||
| In Millions | ||||||||||||
CMS Energy, including Consumers | ||||||||||||
| Income from continuing operations before income taxes | $ | 587 | $ | 324 | $ | 433 | ||||||
| Income tax expense at statutory rate | 205 | 114 | 152 | |||||||||
| Increase (decrease) in income taxes from: | ||||||||||||
| State and local income taxes, net of federal benefit | 26 | 21 | 3 | |||||||||
| Income tax credit amortization | (4 | ) | (4 | ) | (4 | ) | ||||||
| Medicare Part D exempt income(a) | (6 | ) | (6 | ) | (9 | ) | ||||||
| Property differences | 2 | 1 | 3 | |||||||||
| Research and development credit, net | (3 | ) | (9 | ) | — | |||||||
| Valuation allowance | 1 | 2 | (6 | ) | ||||||||
| Other, net | 3 | (4 | ) | — | ||||||||
| Income tax expense | $ | 224 | $ | 115 | $ | 139 | ||||||
| Effective tax rate | 38.2 | % | 35.5 | % | 32.1 | % | ||||||
Consumers | ||||||||||||
| Income from continuing operations before income taxes | $ | 688 | $ | 456 | $ | 562 | ||||||
| Income tax expense at statutory rate | 241 | 160 | 197 | |||||||||
| Increase (decrease) in income taxes from: | ||||||||||||
| State and local income taxes, net of federal benefit | 26 | 19 | 8 | |||||||||
| Income tax credit amortization | (4 | ) | (4 | ) | (4 | ) | ||||||
| Medicare Part D exempt income(a) | (9 | ) | (6 | ) | (8 | ) | ||||||
| Property differences | 2 | 1 | 3 | |||||||||
| Research and development credit, net | (3 | ) | (7 | ) | — | |||||||
| Other, net | 1 | — | 2 | |||||||||
| Income tax expense | $ | 254 | $ | 163 | $ | 198 | ||||||
| Effective tax rate | 36.9 | % | 35.7 | % | 35.2 | % | ||||||
145
Years Ended December 31 | 2010 | 2009 | 2008 | |||||||||
| In Millions | ||||||||||||
CMS Energy, including Consumers | ||||||||||||
| Current income taxes: | ||||||||||||
| Federal | $ | (21 | ) | $ | (12 | ) | $ | 4 | ||||
| State and local | 26 | 17 | 9 | |||||||||
| $ | 5 | $ | 5 | $ | 13 | |||||||
| Deferred income taxes: | ||||||||||||
| Federal | $ | 210 | $ | 86 | $ | 134 | ||||||
| State and local | 13 | 28 | (4 | ) | ||||||||
| $ | 223 | $ | 114 | $ | 130 | |||||||
| Deferred income tax credit, net | (4 | ) | (4 | ) | (4 | ) | ||||||
| Tax expense | $ | 224 | $ | 115 | $ | 139 | ||||||
Consumers | ||||||||||||
| Current income taxes: | ||||||||||||
| Federal | $ | (17 | ) | $ | 72 | $ | (10 | ) | ||||
| State and local | 25 | 24 | 12 | |||||||||
| $ | 8 | $ | 96 | $ | 2 | |||||||
| Deferred income taxes: | ||||||||||||
| Federal | $ | 236 | $ | 66 | $ | 200 | ||||||
| State and local | 14 | 5 | — | |||||||||
| $ | 250 | $ | 71 | $ | 200 | |||||||
| Deferred income tax credit, net | (4 | ) | (4 | ) | (4 | ) | ||||||
| Tax expense | $ | 254 | $ | 163 | $ | 198 | ||||||
146
December 31 | 2010 | 2009 | ||||||
| In Millions | ||||||||
CMS Energy, including Consumers | ||||||||
| Employee benefits | $ | (76 | ) | $ | 65 | |||
| Gas inventory | (177 | ) | (201 | ) | ||||
| Plant, property, and equipment | (1,382 | ) | (1,145 | ) | ||||
| Regulatory tax liability | 162 | 209 | ||||||
| Reserves and accruals | 101 | 83 | ||||||
| Securitized costs | (120 | ) | (141 | ) | ||||
| Tax loss and credit carryforwards | 996 | 919 | ||||||
| Other | (103 | ) | (29 | ) | ||||
| $ | (599 | ) | $ | (240 | ) | |||
| Less: valuation allowance | (19 | ) | (34 | ) | ||||
| Total net deferred income tax liabilities | $ | (618 | ) | $ | (274 | ) | ||
| Deferred tax assets, net of valuation reserves | $ | 1,240 | $ | 1,242 | ||||
| Deferred tax liabilities | (1,858 | ) | (1,516 | ) | ||||
| Total net deferred income tax liabilities | $ | (618 | ) | $ | (274 | ) | ||
Consumers | ||||||||
| Employee benefits | $ | (110 | ) | $ | 28 | |||
| Gas inventory | (177 | ) | (201 | ) | ||||
| Plant, property, and equipment | (1,464 | ) | (1,237 | ) | ||||
| Regulatory tax liability | 162 | 209 | ||||||
| Reserves and accruals | 45 | 29 | ||||||
| Securitized costs | (120 | ) | (141 | ) | ||||
| Tax loss and credit carryforwards | 281 | 232 | ||||||
| Other | (115 | ) | (51 | ) | ||||
| Total net deferred income tax liabilities | $ | (1,498 | ) | $ | (1,132 | ) | ||
| Deferred tax assets, net of valuation reserves | $ | 488 | $ | 498 | ||||
| Deferred tax liabilities | (1,986 | ) | (1,630 | ) | ||||
| Total net deferred income tax liabilities | $ | (1,498 | ) | $ | (1,132 | ) | ||
147
| Gross Amount | Tax Attribute | Expiration | ||||||||
| In Millions | ||||||||||
CMS Energy, including Consumers | ||||||||||
| Federal net operating loss carryforward | $1,466 | $ | 513 | 2023 - 2030 | ||||||
| State and local net operating loss carryforwards(a) | 450 | 5 | 2023 - 2030 | |||||||
| Future state tax deductions(b) | — | 170 | No expiration | |||||||
| Alternative minimum tax credits | 269 | 269 | No expiration | |||||||
| General business credits(a) | 39 | 39 | 2011 - 2030 | |||||||
| Total tax attributes | $ | 996 | ||||||||
Consumers | ||||||||||
| Federal net operating loss carryforward | $184 | $ | 64 | 2023 - 2030 | ||||||
| State capital loss carryforward | 10 | 1 | 2014 | |||||||
| Future state tax deductions(b) | — | 203 | No expiration | |||||||
| General business credits | 13 | 13 | 2011 - 2030 | |||||||
| Total tax attributes | $ | 281 | ||||||||
Years Ended December 31 | 2010 | 2009 | 2008 | |||||||||
| In Millions | ||||||||||||
CMS Energy, including Consumers | ||||||||||||
| Balance at beginning of period | $ | 62 | $ | 65 | $ | 51 | ||||||
| Reductions for prior year tax positions | (58 | ) | (6 | ) | — | |||||||
| Additions for prior year tax positions | — | 2 | 12 | |||||||||
| Additions for current year tax positions | — | 1 | 2 | |||||||||
| Balance at end of period | $ | 4 | $ | 62 | $ | 65 | ||||||
Consumers | ||||||||||||
| Balance at beginning of period | $ | 57 | $ | 55 | $ | 41 | ||||||
| Reductions for prior year tax positions | (54 | ) | (1 | ) | — | |||||||
| Additions for prior year tax positions | — | 2 | 12 | |||||||||
| Additions for current year tax positions | — | 1 | 2 | |||||||||
| Balance at end of period | $ | 3 | $ | 57 | $ | 55 | ||||||
148
149
| Weighted-Average Grant | ||||||||
Restricted Stock | Number of Shares | Date Fair Value per Share | ||||||
CMS Energy, including Consumers | ||||||||
| Nonvested at December 31, 2009 | 2,019,777 | $ | 12.52 | |||||
| Granted(a) | 636,273 | 16.22 | ||||||
| Vested | (457,430 | ) | 14.41 | |||||
| Forfeited(b) | (205,155 | ) | 12.62 | |||||
| Nonvested at December 31, 2010 | 1,993,465 | 13.26 | ||||||
Consumers | ||||||||
| Nonvested at December 31, 2009 | 1,809,987 | $ | 12.50 | |||||
| Granted(a) | 575,895 | 16.27 | ||||||
| Vested | (396,760 | ) | 14.38 | |||||
| Forfeited(b) | (184,099 | ) | 12.62 | |||||
| Nonvested at December 31, 2010 | 1,805,023 | 13.28 | ||||||
150
| 2010 | 2009 | 2008 | ||||||||||
| Expected volatility | 30.1 | % | 29.8 | % | 19.7 | % | ||||||
| Expected dividend yield | 2.4 | % | 2.0 | % | 2.7 | % | ||||||
| Risk-free rate | 0.9 | % | 1.8 | % | 2.8 | % | ||||||
| 2010 | 2009 | 2008 | ||||||||||
| In Millions | ||||||||||||
CMS Energy, including Consumers | ||||||||||||
| Fair value of shares that vested during the year | $ | 7 | $ | 4 | $ | 2 | ||||||
| Compensation expense recognized | 9 | 9 | 8 | |||||||||
| Income tax benefit recognized | 4 | 3 | 3 | |||||||||
Consumers | ||||||||||||
| Fair value of shares that vested during the year | $ | 6 | $ | 4 | $ | 2 | ||||||
| Compensation expense recognized | 9 | 8 | 7 | |||||||||
| Income tax benefit recognized | 3 | 3 | 2 | |||||||||
151
| Options | Weighted- | Weighted- | ||||||||||||||
| Outstanding, | Average | Average | Aggregate | |||||||||||||
| Fully Vested, | Exercise | Remaining | Intrinsic | |||||||||||||
| and | Price per | Contractual | Value | |||||||||||||
Stock Options | Exercisable | Share | Term | (in millions) | ||||||||||||
CMS Energy, including Consumers | ||||||||||||||||
| Outstanding at December 31, 2009 | 581,040 | $ | 19.79 | 2.0 years | $(2) | |||||||||||
| Granted | — | — | ||||||||||||||
| Exercised | (74,000 | ) | $ | 6.59 | ||||||||||||
| Cancelled or Expired | (69,960 | ) | $ | 17.86 | ||||||||||||
| Outstanding at December 31, 2010 | 437,080 | $ | 22.34 | 1.1 years | $(2) | |||||||||||
Consumers | ||||||||||||||||
| Outstanding at December 31, 2009 | 378,786 | $ | 17.74 | 2.3 years | $(1) | |||||||||||
| Granted | — | — | ||||||||||||||
| Exercised | (68,818 | ) | $ | 6.61 | ||||||||||||
| Cancelled or Expired | (42,500 | ) | $ | 17.52 | ||||||||||||
| Outstanding at December 31, 2010 | 267,468 | $ | 20.64 | 1.2 years | $(1) | |||||||||||
Years Ended December 31 | 2010 | 2009 | 2008 | |||||||||
CMS Energy, including Consumers | ||||||||||||
| Weighted-average grant-date fair value per share | ||||||||||||
| Restricted stock granted | $ | 16.22 | $ | 13.49 | $ | 10.38 | ||||||
Consumers | ||||||||||||
| Weighted-average grant-date fair value per share | ||||||||||||
| Restricted stock granted | $ | 16.27 | $ | 13.44 | $ | 10.43 | ||||||
152
Years Ended December 31 | 2010 | 2009 | 2008 | |||||||||
| In Millions | ||||||||||||
CMS Energy, including Consumers | ||||||||||||
| Operating lease expense | $ | 28 | $ | 34 | $ | 28 | ||||||
| Income from subleases | — | — | (1 | ) | ||||||||
Consumers | ||||||||||||
| Operating lease expense | $ | 28 | $ | 34 | $ | 27 | ||||||
| Capital | Finance | Operating | ||||||||||
| Leases | Lease(a) | Leases | ||||||||||
| In Millions | ||||||||||||
Consumers | ||||||||||||
| 2011 | $ | 17 | $ | 21 | $ | 29 | ||||||
| 2012 | 20 | 20 | 30 | |||||||||
| 2013 | 12 | 20 | 27 | |||||||||
| 2014 | 11 | 19 | 26 | |||||||||
| 2015 | 12 | 18 | 25 | |||||||||
| 2016 and thereafter | 44 | 96 | 123 | |||||||||
| Total minimum lease payments | $ | 116 | $ | 194 | $ | 260 | ||||||
| Less imputed interest | 52 | 46 | ||||||||||
| Present value of net minimum lease payments | $ | 64 | $ | 148 | ||||||||
| Less current portion | 11 | 13 | ||||||||||
| Non-current portion | $ | 53 | $ | 135 | ||||||||
153
| Estimated | ||||||||||||
| Depreciable | ||||||||||||
Years Ended December 31 | Life in Years | 2010 | 2009 | |||||||||
| In Millions | ||||||||||||
CMS Energy, including Consumers | ||||||||||||
| Electric: | ||||||||||||
| Generation | 18-85 | $ | 3,812 | $ | 3,671 | |||||||
| Distribution | 12-75 | 5,250 | 4,991 | |||||||||
| Other | 7-40 | 609 | 574 | |||||||||
| Capital and finance leases(a) | 273 | 289 | ||||||||||
| Gas: | ||||||||||||
| Underground storage facilities(b) | 30-65 | 311 | 299 | |||||||||
| Transmission | 13-75 | 713 | 573 | |||||||||
| Distribution | 30-80 | 2,654 | 2,557 | |||||||||
| Other | 5-50 | 380 | 366 | |||||||||
| Capital leases(a) | 5 | 17 | ||||||||||
| Enterprises: | ||||||||||||
| IPP | 5-30 | 85 | 329 | |||||||||
| Other | 3-40 | 17 | 16 | |||||||||
| Other: | 1-71 | 36 | 34 | |||||||||
| Construction work in progress | 570 | 506 | ||||||||||
| Less accumulated depreciation, depletion, and amortization(c) | 4,646 | 4,540 | ||||||||||
| Net plant, property, and equipment(d) | $ | 10,069 | $ | 9,682 | ||||||||
154
| Estimated | ||||||||||||
| Depreciable | ||||||||||||
Years Ended December 31 | Life in Years | 2010 | 2009 | |||||||||
| In Millions | ||||||||||||
Consumers | ||||||||||||
| Electric: | ||||||||||||
| Generation | 18-85 | $ | 3,812 | $ | 3,671 | |||||||
| Distribution | 12-75 | 5,250 | 4,991 | |||||||||
| Other | 7-40 | 609 | 574 | |||||||||
| Capital and finance leases(a) | 273 | 289 | ||||||||||
| Gas: | ||||||||||||
| Underground storage facilities(b) | 30-65 | 311 | 299 | |||||||||
| Transmission | 13-75 | 713 | 573 | |||||||||
| Distribution | 30-80 | 2,654 | 2,557 | |||||||||
| Other | 5-50 | 380 | 366 | |||||||||
| Capital leases(a) | 5 | 17 | ||||||||||
| Other non-utility property | 7-71 | 15 | 15 | |||||||||
| Construction work in progress | 566 | 505 | ||||||||||
| Less accumulated depreciation, depletion, and amortization(c) | 4,593 | 4,386 | ||||||||||
| Net plant, property, and equipment(d) | $ | 9,995 | $ | 9,471 | ||||||||
Years Ended December 31 | 2010 | 2009 | ||||||
| In Millions | ||||||||
Consumers | ||||||||
| Balance at beginning of period | $ | 306 | $ | 312 | ||||
| Additions | 15 | 16 | ||||||
| Net retirements and other adjustments | (43 | ) | (22 | ) | ||||
| Balance at end of period | $ | 278 | $ | 306 | ||||
Years Ended December 31 | 2010 | 2009 | ||||||
| In Millions | ||||||||
CMS Energy, including Consumers | ||||||||
| Utility plant assets | $ | 4,592 | $ | 4,385 | ||||
| Non-utility plant assets | 54 | 155 | ||||||
Consumers | ||||||||
| Utility plant assets | $ | 4,592 | $ | 4,385 | ||||
| Non-utility plant assets | 1 | 1 | ||||||
155
Years Ended December 31 | ||||||||||||||||||||
| Amortization | 2010 | 2009 | ||||||||||||||||||
| Life | Accumulated | Accumulated | ||||||||||||||||||
Description | in years | Gross Cost(a) | Amortization | Gross Cost(a) | Amortization | |||||||||||||||
| In Millions | ||||||||||||||||||||
CMS Energy, including Consumers | ||||||||||||||||||||
| Software development | 3-15 | $ | 323 | $ | 125 | $ | 303 | $ | 105 | |||||||||||
| Plant acquisition adjustments | 40 | 213 | 16 | 214 | 11 | |||||||||||||||
| Rights of way | 50-75 | 140 | 37 | 134 | 35 | |||||||||||||||
| Leasehold improvements | various | (b) | 13 | 9 | 13 | 9 | ||||||||||||||
| Franchises and consents | 5-30 | 15 | 6 | 15 | 6 | |||||||||||||||
| Other intangibles(c) | various | 20 | 14 | 28 | 21 | |||||||||||||||
| Total | $ | 724 | $ | 207 | $ | 707 | $ | 187 | ||||||||||||
Consumers | ||||||||||||||||||||
| Software development | 3-15 | $ | 323 | $ | 125 | $ | 303 | $ | 105 | |||||||||||
| Plant acquisition adjustments | 40 | 213 | 16 | 214 | 11 | |||||||||||||||
| Rights of way | 50-75 | 140 | 37 | 134 | 35 | |||||||||||||||
| Leasehold improvements | various | (b) | 13 | 9 | 13 | 9 | ||||||||||||||
| Franchises and consents | 5-30 | 15 | 6 | 15 | 6 | |||||||||||||||
| Other intangibles | various | 18 | 14 | 18 | 13 | |||||||||||||||
| Total | $ | 722 | $ | 207 | $ | 697 | $ | 179 | ||||||||||||
| CMS Energy | ||||||||||||||||
| (including Consumers) | Consumers | |||||||||||||||
| Total | Software | Total | Software | |||||||||||||
| Amortization | Amortization | Amortization | Amortization | |||||||||||||
Years Ended December 31 | Expense | Expense | Expense | Expense | ||||||||||||
| In Millions | ||||||||||||||||
| 2010 | $ | 28 | $ | 19 | $ | 27 | $ | 19 | ||||||||
| 2009 | 30 | 22 | 30 | 22 | ||||||||||||
| 2008 | 32 | 27 | 32 | 23 | ||||||||||||
156
157
| ARO | ARO | |||||||||||||||||||||||
| Liability | Cash flow | Liability | ||||||||||||||||||||||
Company and ARO Description | 12/31/09 | Incurred | Settled(a) | Accretion | Revisions | 12/31/10 | ||||||||||||||||||
| In Millions | ||||||||||||||||||||||||
CMS Energy, Including Consumers | ||||||||||||||||||||||||
| Close gas treating plant and gas wells | $ | 1 | $ | — | $ | — | $ | — | $ | — | $ | 1 | ||||||||||||
Consumers | 228 | 6 | (7 | ) | 17 | — | 244 | |||||||||||||||||
| Total CMS Energy | $ | 229 | $ | 6 | $ | (7 | ) | $ | 17 | $ | — | $ | 245 | |||||||||||
Consumers | ||||||||||||||||||||||||
| Coal ash disposal areas | $ | 64 | $ | — | $ | (4 | ) | $ | 6 | $ | — | $ | 66 | |||||||||||
| Wells at gas storage fields | 1 | — | — | — | — | 1 | ||||||||||||||||||
| Indoor gas services relocations | 1 | — | — | — | — | 1 | ||||||||||||||||||
| Asbestos abatement | 38 | — | (1 | ) | 3 | — | 40 | |||||||||||||||||
| Gas distribution cut, purge, cap | 124 | 6 | (2 | ) | 8 | — | 136 | |||||||||||||||||
| Total Consumers | $ | 228 | $ | 6 | $ | (7 | ) | $ | 17 | $ | — | $ | 244 | |||||||||||
| ARO | ARO | |||||||||||||||||||||||
| Liability | Cash flow | Liability | ||||||||||||||||||||||
Company and ARO Description | 12/31/08 | Incurred | Settled(a) | Accretion | Revisions | 12/31/09 | ||||||||||||||||||
| In Millions | ||||||||||||||||||||||||
CMS Energy, Including Consumers | ||||||||||||||||||||||||
| Close gas treating plant and gas wells | $ | 1 | $ | — | $ | — | $ | — | $ | — | $ | 1 | ||||||||||||
Consumers | 205 | 15 | (8 | ) | 16 | — | 228 | |||||||||||||||||
| Total CMS Energy | $ | 206 | $ | 15 | $ | (8 | ) | $ | 16 | $ | — | $ | 229 | |||||||||||
Consumers | ||||||||||||||||||||||||
| Coal ash disposal areas | $ | 62 | $ | — | $ | (4 | ) | $ | 6 | $ | — | $ | 64 | |||||||||||
| Wells at gas storage fields | 1 | — | — | — | — | 1 | ||||||||||||||||||
| Indoor gas services relocations | 1 | — | — | — | — | 1 | ||||||||||||||||||
| Asbestos abatement | 36 | — | (1 | ) | 3 | — | 38 | |||||||||||||||||
| Gas distribution cut, purge, cap | 105 | 15 | (3 | ) | 7 | — | 124 | |||||||||||||||||
| Total Consumers | $ | 205 | $ | 15 | $ | (8 | ) | $ | 16 | $ | — | $ | 228 | |||||||||||
158
| Ownership | Accumulated | Construction | ||||||||||||||||||||||||||
| Share | Net Investment(a) | Depreciation | Work in Progress | |||||||||||||||||||||||||
December 31 | (%) | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||
| In Millions | ||||||||||||||||||||||||||||
| Campbell Unit 3 | 93.3 | $ | 653 | $ | 662 | $ | 404 | $ | 387 | $ | 23 | $ | 14 | |||||||||||||||
| Ludington | 51.0 | 60 | 62 | 114 | 111 | 11 | 5 | |||||||||||||||||||||
| Distribution | Various | 115 | 105 | 44 | 43 | 7 | 7 | |||||||||||||||||||||
159
Description | Related Party | 2010 | 2009 | 2008 | ||||||||||
| In Millions | ||||||||||||||
| Purchases of capacity and energy | Affiliates of CMS Enterprises | $ | (84 | ) | $ | (81 | ) | $ | (75 | ) | ||||
| Dividend income | CMS Energy | 1 | 1 | 1 | ||||||||||
160
161
Years Ended December 31 | 2010 | 2009 | 2008 | |||||||||
| In Millions | ||||||||||||
| Revenues | $ | 10 | $ | 7 | $ | 14 | ||||||
| Discontinued operations: | ||||||||||||
| Pretax income (loss) from discontinued operations | $ | (21 | ) | $ | 33 | $ | 2 | |||||
| Income tax expense | 2 | 13 | 1 | |||||||||
| Income (Loss) From Discontinued Operations, Net of Tax Expense | $ | (23 | )(a) | $ | 20 | (b) | $ | 1 | ||||
162
Years Ended December 31 | 2010 | 2009 | ||||||
| In Millions | ||||||||
| Assets: | ||||||||
Current Assets: | ||||||||
| Cash | $ | 1 | $ | 1 | ||||
| Accounts receivable, net | 1 | 1 | ||||||
Non-Current Assets: | ||||||||
| Plant, property, and equipment, net | 3 | 8 | ||||||
| Other | 1 | 1 | ||||||
| Total assets | $ | 6 | $ | 11 | ||||
| Liabilities: | ||||||||
| Current Liabilities | $ | 1 | $ | — | ||||
| Total liabilities | $ | 1 | $ | — | ||||
CMS Energy:
163
·electric utility, consisting of regulated activities associated with the generation and distribution of electricity in Michigan;
·enterprises, consisting of various subsidiaries engaging primarily in domestic independent power production; and
·other, including EnerBank, corporate interest and other expenses, and discontinued operations.
Consumers:
·electric utility, consisting of regulated activities associated with the generation and distribution of electricity in Michigan;
·gas utility, consisting of regulated activities associated with the transportation, storage, and distribution of natural gas in Michigan; and
·other, including a consolidated special-purpose entity for the sale of accounts receivable.
Accounting policies for CMS Energy’s and Consumers’ segments are as described in Note 1, Significant Accounting Policies. The Consolidated Financial Statementsconsolidated 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 operation 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 Availablenet income available to Common Stockholderscommon stockholders by segment.
Presented in the following tables is financial information by reportable segment:
Years Ended December 31 | 2010 | 2009 | 2008 | |||||||||
| In Millions | ||||||||||||
CMS Energy, including Consumers | ||||||||||||
| Operating Revenue: | ||||||||||||
| Electric utility | $ | 3,802 | $ | 3,407 | $ | 3,594 | ||||||
| Gas utility | 2,354 | 2,556 | 2,827 | |||||||||
| Enterprises | 238 | 216 | 365 | |||||||||
| Other | 38 | 26 | 21 | |||||||||
| Total Operating Revenue — CMS Energy | $ | 6,432 | $ | 6,205 | $ | 6,807 | ||||||
Consumers | ||||||||||||
| Operating Revenue: | ||||||||||||
| Electric utility | $ | 3,802 | $ | 3,407 | $ | 3,594 | ||||||
| Gas utility | 2,354 | 2,556 | 2,827 | |||||||||
| Total Operating Revenue — Consumers | $ | 6,156 | $ | 5,963 | $ | 6,421 | ||||||
CMS Energy, including Consumers | ||||||||||||
| Income (Loss) from Equity Method Investees:(a) | ||||||||||||
| Enterprises | $ | 11 | $ | (2 | ) | $ | 5 | |||||
| Total Income (Loss) from Equity Method Investees — CMS Energy | $ | 11 | $ | (2 | ) | $ | 5 | |||||
164
|
|
|
| In Millions |
| |||||
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
| |||
CMS Energy, including Consumers |
|
|
|
|
|
|
| |||
Operating revenue |
|
|
|
|
|
|
| |||
Electric utility |
| $ | 4,173 |
| $ | 4,031 |
| $ | 3,913 |
|
Gas utility |
| 2,148 |
| 1,982 |
| 2,340 |
| |||
Enterprises |
| 181 |
| 183 |
| 204 |
| |||
Other |
| 64 |
| 57 |
| 46 |
| |||
Total operating revenue – CMS Energy |
| $ | 6,566 |
| $ | 6,253 |
| $ | 6,503 |
|
Consumers |
|
|
|
|
|
|
| |||
Operating revenue |
|
|
|
|
|
|
| |||
Electric utility |
| $ | 4,173 |
| $ | 4,031 |
| $ | 3,913 |
|
Gas utility |
| 2,148 |
| 1,982 |
| 2,340 |
| |||
Total operating revenue – Consumers |
| $ | 6,321 |
| $ | 6,013 |
| $ | 6,253 |
|
CMS Energy, including Consumers |
|
|
|
|
|
|
| |||
Depreciation and amortization |
|
|
|
|
|
|
| |||
Electric utility |
| $ | 484 |
| $ | 459 |
| $ | 412 |
|
Gas utility |
| 138 |
| 133 |
| 130 |
| |||
Enterprises |
| 3 |
| 4 |
| 3 |
| |||
Other |
| 3 |
| 2 |
| 1 |
| |||
Total depreciation and amortization – CMS Energy |
| $ | 628 |
| $ | 598 |
| $ | 546 |
|
Consumers |
|
|
|
|
|
|
| |||
Depreciation and amortization |
|
|
|
|
|
|
| |||
Electric utility |
| $ | 484 |
| $ | 459 |
| $ | 412 |
|
Gas utility |
| 138 |
| 133 |
| 130 |
| |||
Total depreciation and amortization – Consumers |
| $ | 622 |
| $ | 592 |
| $ | 542 |
|
CMS Energy, including Consumers |
|
|
|
|
|
|
| |||
Income from equity method investees1 |
|
|
|
|
|
|
| |||
Enterprises |
| $ | 13 |
| $ | 17 |
| $ | 9 |
|
Total income from equity method investees – CMS Energy |
| $ | 13 |
| $ | 17 |
| $ | 9 |
|
CMS Energy, including Consumers |
|
|
|
|
|
|
| |||
Interest charges |
|
|
|
|
|
|
| |||
Electric utility |
| $ | 179 |
| $ | 179 |
| $ | 192 |
|
Gas utility |
| 64 |
| 63 |
| 71 |
| |||
Other |
| 155 |
| 147 |
| 152 |
| |||
Total interest charges – CMS Energy |
| $ | 398 |
| $ | 389 |
| $ | 415 |
|
Consumers |
|
|
|
|
|
|
| |||
Interest charges |
|
|
|
|
|
|
| |||
Electric utility |
| $ | 179 |
| $ | 179 |
| $ | 192 |
|
Gas utility |
| 64 |
| 63 |
| 71 |
| |||
Other |
| 2 |
| 2 |
| 2 |
| |||
Total interest charges – Consumers |
| $ | 245 |
| $ | 244 |
| $ | 265 |
|
|
|
|
| In Millions |
| |||||
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
| |||
CMS Energy, including Consumers |
|
|
|
|
|
|
| |||
Income tax expense (benefit) |
|
|
|
|
|
|
| |||
Electric utility |
| $ | 242 |
| $ | 227 |
| $ | 190 |
|
Gas utility |
| 104 |
| 70 |
| 77 |
| |||
Enterprises |
| (4 | ) | (1 | ) | (24 | ) | |||
Other |
| (40 | ) | (51 | ) | (52 | ) | |||
Total income tax expense – CMS Energy |
| $ | 302 |
| $ | 245 |
| $ | 191 |
|
Consumers |
|
|
|
|
|
|
| |||
Income tax expense |
|
|
|
|
|
|
| |||
Electric utility |
| $ | 242 |
| $ | 227 |
| $ | 190 |
|
Gas utility |
| 104 |
| 70 |
| 77 |
| |||
Total income tax expense – Consumers |
| $ | 346 |
| $ | 297 |
| $ | 267 |
|
CMS Energy, including Consumers |
|
|
|
|
|
|
| |||
Net income (loss) available to common stockholders |
|
|
|
|
|
|
| |||
Electric utility |
| $ | 363 |
| $ | 325 |
| $ | 333 |
|
Gas utility |
| 168 |
| 110 |
| 130 |
| |||
Enterprises |
| 2 |
| 16 |
| 32 |
| |||
Other |
| (81 | ) | (69 | ) | (80 | ) | |||
Total net income available to common stockholders – CMS Energy |
| $ | 452 |
| $ | 382 |
| $ | 415 |
|
Consumers |
|
|
|
|
|
|
| |||
Net income available to common stockholder |
|
|
|
|
|
|
| |||
Electric utility |
| $ | 363 |
| $ | 325 |
| $ | 333 |
|
Gas utility |
| 168 |
| 110 |
| 130 |
| |||
Other |
| 1 |
| 2 |
| 2 |
| |||
Total net income available to common stockholder – Consumers |
| $ | 532 |
| $ | 437 |
| $ | 465 |
|
CMS Energy, including Consumers |
|
|
|
|
|
|
| |||
Plant, property, and equipment, gross |
|
|
|
|
|
|
| |||
Electric utility |
| $ | 11,186 |
| $ | 11,041 |
| $ | 10,400 |
|
Gas utility |
| 4,843 |
| 4,400 |
| 4,206 |
| |||
Enterprises |
| 115 |
| 113 |
| 109 |
| |||
Other |
| 40 |
| 38 |
| 36 |
| |||
Total plant, property, and equipment – CMS Energy |
| $ | 16,184 |
| $ | 15,592 |
| $ | 14,751 |
|
Consumers |
|
|
|
|
|
|
| |||
Plant, property, and equipment, gross |
|
|
|
|
|
|
| |||
Electric utility |
| $ | 11,186 |
| $ | 11,041 |
| $ | 10,400 |
|
Gas utility |
| 4,843 |
| 4,400 |
| 4,206 |
| |||
Other |
| 15 |
| 15 |
| 15 |
| |||
Total plant, property, and equipment – Consumers |
| $ | 16,044 |
| $ | 15,456 |
| $ | 14,621 |
|
CMS Energy, including Consumers |
|
|
|
|
|
|
| |||
Investments in equity method investees1 |
|
|
|
|
|
|
| |||
Enterprises |
| $ | 57 |
| $ | 55 |
| $ | 49 |
|
Other |
| 2 |
| 2 |
| 1 |
| |||
Total investments in equity method investees – CMS Energy |
| $ | 59 |
| $ | 57 |
| $ | 50 |
|
|
|
|
| In Millions |
| |||||
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
| |||
CMS Energy, including Consumers |
|
|
|
|
|
|
| |||
Total assets |
|
|
|
|
|
|
| |||
Electric utility2 |
| $ | 10,487 |
| $ | 10,423 |
| $ | 9,938 |
|
Gas utility2 |
| 4,784 |
| 5,016 |
| 4,956 |
| |||
Enterprises |
| 332 |
| 181 |
| 242 |
| |||
Other |
| 1,813 |
| 1,511 |
| 1,316 |
| |||
Total assets – CMS Energy |
| $ | 17,416 |
| $ | 17,131 |
| $ | 16,452 |
|
Consumers |
|
|
|
|
|
|
| |||
Total assets |
|
|
|
|
|
|
| |||
Electric utility2 |
| $ | 10,487 |
| $ | 10,423 |
| $ | 9,938 |
|
Gas utility2 |
| 4,784 |
| 5,016 |
| 4,956 |
| |||
Other |
| 908 |
| 836 |
| 768 |
| |||
Total assets – Consumers |
| $ | 16,179 |
| $ | 16,275 |
| $ | 15,662 |
|
CMS Energy, including Consumers |
|
|
|
|
|
|
| |||
Capital expenditures3 |
|
|
|
|
|
|
| |||
Electric utility |
| $ | 996 |
| $ | 921 |
| $ | 661 |
|
Gas utility |
| 407 |
| 340 |
| 261 |
| |||
Enterprises |
| 1 |
| 1 |
| 5 |
| |||
Other |
| 4 |
| 4 |
| 1 |
| |||
Total capital expenditures – CMS Energy |
| $ | 1,408 |
| $ | 1,266 |
| $ | 928 |
|
Consumers |
|
|
|
|
|
|
| |||
Capital expenditures3 |
|
|
|
|
|
|
| |||
Electric utility |
| $ | 996 |
| $ | 921 |
| $ | 661 |
|
Gas utility |
| 407 |
| 340 |
| 261 |
| |||
Total capital expenditures – Consumers |
| $ | 1,403 |
| $ | 1,261 |
| $ | 922 |
|
1Consumers had no significant equity method investments.
2Amounts include a portion of Consumers’ other common assets attributable to both the electric and gas utility businesses.
3Amounts include purchase of capital lease additions. Amounts also include a portion of Consumers’ capital expenditures for plant and equipment attributable to both the electric and gas utility businesses.
17:RELATED-PARTY TRANSACTIONS – CONSUMERS
Consumers enters into a number of significant transactions with related parties. These transactions include:
·purchase and sale of electricity from and to affiliates of CMS Enterprises;
·payment of parent company overhead costs to CMS Energy; and
·investment in CMS Energy Corporationcommon stock.
Transactions involving power supply purchases from certain affiliates of CMS Enterprises are based on avoided costs under the Public Utility Regulatory Policies Act of 1978, 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 are Consumers’ recorded income and expense from related parties as of December 31:
|
|
|
|
|
| In Millions |
| ||
Description |
| Related Party |
| 2013 |
| 2012 |
| 2011 |
|
Purchases of capacity and energy |
| Affiliates of CMS Enterprises |
| $ 89 |
| $ 86 |
| $ 81 |
|
Amounts payable to related parties for purchased power and other services were $13 million at December 31, 2013 and $11 million at December 31, 2012.
Consumers Energy Company
Years Ended December 31 | 2010 | 2009 | 2008 | |||||||||
| In Millions | ||||||||||||
CMS Energy, including Consumers | ||||||||||||
| Depreciation and Amortization: | ||||||||||||
| Electric utility | $ | 450 | $ | 441 | $ | 438 | ||||||
| Gas utility | 122 | 118 | 136 | |||||||||
| Enterprises | 3 | 10 | 10 | |||||||||
| Other | 1 | 1 | 4 | |||||||||
| Total Depreciation and Amortization — CMS Energy | $ | 576 | $ | 570 | $ | 588 | ||||||
Consumers | ||||||||||||
| Depreciation and Amortization: | ||||||||||||
| Electric utility | $ | 450 | $ | 441 | $ | 438 | ||||||
| Gas utility | 122 | 118 | 136 | |||||||||
| Total Depreciation and Amortization — Consumers | $ | 572 | $ | 559 | $ | 574 | ||||||
CMS Energy, including Consumers | ||||||||||||
| Interest Charges: | ||||||||||||
| Electric utility | $ | 202 | $ | 225 | $ | 185 | ||||||
| Gas utility | 73 | 66 | 60 | |||||||||
| Enterprises | — | 5 | 6 | |||||||||
| Other | 156 | 139 | 149 | |||||||||
| Total Interest Charges — CMS Energy | $ | 431 | $ | 435 | $ | 400 | ||||||
Consumers | ||||||||||||
| Interest Charges: | ||||||||||||
| Electric utility | $ | 202 | $ | 225 | $ | 185 | ||||||
| Gas utility | 73 | 66 | 60 | |||||||||
| Other | 2 | 1 | 2 | |||||||||
| Total Interest Charges — Consumers | $ | 277 | $ | 292 | $ | 247 | ||||||
CMS Energy, including Consumers | ||||||||||||
| Income Tax Expense (Benefit): | ||||||||||||
| Electric utility | $ | 187 | $ | 107 | $ | 153 | ||||||
| Gas utility | 67 | 56 | 45 | |||||||||
| Enterprises | 14 | 4 | (10 | ) | ||||||||
| Other | (44 | ) | (52 | ) | (49 | ) | ||||||
| Total Income Tax Expense — CMS Energy | $ | 224 | $ | 115 | $ | 139 | ||||||
165
Years Ended December 31 | 2010 | 2009 | 2008 | |||||||||
| In Millions | ||||||||||||
Consumers | ||||||||||||
| Income Tax Expense: | ||||||||||||
| Electric utility | $ | 187 | $ | 107 | $ | 153 | ||||||
| Gas utility | 67 | 56 | 45 | |||||||||
| Total Income Tax Expense — Consumers | $ | 254 | $ | 163 | $ | 198 | ||||||
CMS Energy, including Consumers | ||||||||||||
| Net Income (Loss) Available to Common Stockholders: | ||||||||||||
| Electric utility | $ | 303 | $ | 194 | $ | 271 | ||||||
| Gas utility | 127 | 96 | 89 | |||||||||
| Enterprises | 36 | (7 | ) | 13 | ||||||||
| Discontinued operations | (23 | ) | 20 | 1 | ||||||||
| Other | (119 | ) | (85 | ) | (90 | ) | ||||||
| Total Net Income Available to Common Stockholders — CMS Energy | $ | 324 | $ | 218 | $ | 284 | ||||||
Consumers | ||||||||||||
| Net Income Available to Common Stockholder: | ||||||||||||
| Electric utility | $ | 303 | $ | 194 | $ | 271 | ||||||
| Gas utility | 127 | 96 | 89 | |||||||||
| Other | 2 | 1 | 2 | |||||||||
| Total Net Income Available to Common Stockholder — Consumers | $ | 432 | $ | 291 | $ | 362 | ||||||
CMS Energy, including Consumers | ||||||||||||
| Investments in Equity Method Investees:(a) | ||||||||||||
| Enterprises | $ | 48 | $ | 3 | $ | 5 | ||||||
| Other | 1 | 6 | 6 | |||||||||
| Total Investments in Equity Method Investees — CMS Energy | $ | 49 | $ | 9 | $ | 11 | ||||||
CMS Energy, including Consumers | ||||||||||||
| Plant, Property, and Equipment, Gross | ||||||||||||
| Electric utility | $ | 9,944 | $ | 9,525 | $ | 8,965 | ||||||
| Gas utility | 4,063 | 3,812 | 3,622 | |||||||||
| Enterprises | 102 | 345 | 340 | |||||||||
| Other | 36 | 34 | 33 | |||||||||
| Total Plant, Property, and Equipment — CMS Energy | $ | 14,145 | $ | 13,716 | $ | 12,960 | ||||||
166
In January 2014, Consumers Energy Company
Years Ended December 31 | 2010 | 2009 | 2008 | |||||||||
| In Millions | ||||||||||||
Consumers | ||||||||||||
| Plant, Property, and Equipment, Gross | ||||||||||||
| Electric utility | $ | 9,944 | $ | 9,525 | $ | 8,965 | ||||||
| Gas utility | 4,063 | 3,812 | 3,622 | |||||||||
| Other | 15 | 15 | 15 | |||||||||
| Total Plant, Property, and Equipment — Consumers | $ | 14,022 | $ | 13,352 | $ | 12,602 | ||||||
CMS Energy, including Consumers | ||||||||||||
| Total Assets: | ||||||||||||
| Electric utility(b) | $ | 9,321 | $ | 9,157 | $ | 8,904 | ||||||
| Gas utility(b) | 4,614 | 4,594 | 4,565 | |||||||||
| Enterprises | 191 | 303 | 313 | |||||||||
| Other | 1,490 | 1,202 | 1,119 | |||||||||
| Total Assets — CMS Energy | $ | 15,616 | $ | 15,256 | $ | 14,901 | ||||||
Consumers | ||||||||||||
| Total Assets: | ||||||||||||
| Electric utility(b) | $ | 9,321 | $ | 9,157 | $ | 8,904 | ||||||
| Gas utility(b) | 4,614 | 4,594 | 4,565 | |||||||||
| Other | 904 | 871 | 777 | |||||||||
| Total Assets — Consumers | $ | 14,839 | $ | 14,622 | $ | 14,246 | ||||||
CMS Energy, including Consumers | ||||||||||||
| Capital Expenditures:(c) | ||||||||||||
| Electric utility | $ | 642 | $ | 557 | $ | 553 | ||||||
| Gas utility | 235 | 270 | 241 | |||||||||
| Enterprises | 4 | 7 | 3 | |||||||||
| Other | 2 | — | — | |||||||||
| Total Capital Expenditures — CMS Energy | $ | 883 | $ | 834 | $ | 797 | ||||||
Consumers | ||||||||||||
| Capital Expenditures:(c) | ||||||||||||
| Electric utility | $ | 642 | $ | 557 | $ | 553 | ||||||
| Gas utility | 235 | 270 | 241 | |||||||||
| Total Capital Expenditures — Consumers | $ | 877 | $ | 827 | $ | 794 | ||||||
167
18:VARIABLE INTEREST ENTITIES
Variable interests are contractual, ownership, or other interests in an entity that change as the fair value of the VIE’s net assets, excluding variable interests, changes. An entity is considered to be a VIE when its capital is insufficient to permit it to finance its activities without additional subordinated financial support or its equity investors, as a group, lack the characteristics of having a controlling financial interest.
Entities that are VIEs must be consolidated if the reporting entity determines that it has a controlling financial interest. The entity that is required to consolidate the VIE is called the primary beneficiary. The primary beneficiary is the entity that has both (1) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses of the VIE that could potentially be significant to the VIE.
CMS Energy Company
Years Ended December 31 | 2010 | 2009 | 2008 | |||||||||
| In Millions | ||||||||||||
CMS Energy, including Consumers(d) | ||||||||||||
| United States | ||||||||||||
| Operating revenue(e) | $ | 6,432 | $ | 6,205 | $ | 6,807 | ||||||
| Operating income | $ | 978 | $ | 698 | $ | 793 | ||||||
| Total Assets | $ | 15,613 | $ | 15,253 | $ | 14,898 | ||||||
| International | ||||||||||||
| Operating revenue(e) | $ | — | $ | — | $ | — | ||||||
| Operating income | $ | — | $ | — | $ | 1 | ||||||
| Total Assets | $ | 3 | $ | 3 | $ | 3 | ||||||
Presented in the following table is information about these partnerships:
Name (Ownership Interest) | Nature of the Entity | Financing of Partnership | |||
T.E.S. Filer City (50%) | Coal-fueled power generator | Non-recourse long-term debt that matured in December 2007. | |||
Grayling (50%) | Wood waste-fueled power generator | Sale of | |||
Genesee (50%) | Wood waste-fueled power generator | Sale of | |||
168
| 2010 | ||||||||||||||||
Quarters Ended | March 31 | June 30 | Sept. 30 | Dec. 31 | ||||||||||||
| In Millions, Except Per Share Amounts and Stock Prices | ||||||||||||||||
CMS Energy, including Consumers | ||||||||||||||||
| Operating Revenue | $ | 1,967 | $ | 1,340 | $ | 1,443 | $ | 1,682 | ||||||||
| Operating Income | 239 | 262 | 319 | 158 | ||||||||||||
| Income From Continuing Operations | 89 | 100 | 146 | 31 | ||||||||||||
| Loss From Discontinued Operations | (1 | ) | (16 | ) | — | (6 | ) | |||||||||
| Net Income | 88 | 84 | 146 | 25 | ||||||||||||
| Income Attributable to Noncontrolling Interests | — | 2 | 1 | — | ||||||||||||
| Net Income Attributable to CMS Energy | 88 | 82 | 145 | 25 | ||||||||||||
| Charge for Deferred Issuance Cost on Preferred Stock | — | — | 8 | — | ||||||||||||
| Preferred Stock Dividends | 3 | 2 | 3 | — | ||||||||||||
| Net income Available to Common Stockholders | 85 | 80 | 134 | 25 | ||||||||||||
| Earnings From Continuing Operations Per Average Common Share — Basic(a) | 0.38 | 0.42 | 0.58 | 0.13 | ||||||||||||
| Earnings From Continuing Operations Per Average Common Share — Diluted(a) | 0.35 | 0.39 | 0.53 | 0.11 | ||||||||||||
| Basic Earnings Per Average Common Share(a) | 0.37 | 0.35 | 0.58 | 0.11 | ||||||||||||
| Diluted Earnings Per Average Common Share(a) | 0.34 | 0.32 | 0.53 | 0.09 | ||||||||||||
| Common stock prices(b) | ||||||||||||||||
| High | 15.90 | 16.55 | 18.15 | 19.16 | ||||||||||||
| Low | 14.57 | 14.26 | 14.68 | 17.72 | ||||||||||||
Consumers | ||||||||||||||||
| Operating Revenue | $ | 1,890 | $ | 1,276 | $ | 1,370 | $ | 1,620 | ||||||||
| Operating Income | 224 | 207 | 304 | 191 | ||||||||||||
| Net Income | 107 | 88 | 160 | 79 | ||||||||||||
| Preferred Stock Dividends | — | 1 | 1 | — | ||||||||||||
| Net Income Available to Common Stockholder | 107 | 87 | 159 | 79 | ||||||||||||
169
19:ASSET SALES AND DISCONTINUED OPERATIONS
ASSET SALES
The impacts of asset sales are included in income from discontinued operations on CMS Energy’s consolidated statements of income. CMS Energy had no significant asset sales during the years ended December 31, 2013 or 2012. In 2011, CMS Energy sold its interest in Exeter Energy Limited Partnership, which had been written down to fair value in 2010. Consumers had no significant asset sales during the years ended December 31, 2013, 2012, or 2011.
DISCONTINUED OPERATIONS
CMS Energy included the following amounts in income from discontinued operations:
|
| In Millions |
| ||
Years Ended December 31 |
| 2012 |
| 2011 |
|
Discontinued operations |
|
|
|
|
|
Pretax income from discontinued operations |
| $ 11 |
| $ 2 |
|
Income tax expense |
| 4 |
| - |
|
Income from discontinued operations, net of tax expense |
| $ 7 | 1 | $ 2 | 2 |
1Includes an $11 million ($7 million net of tax) reversal of a loss on disposal due to the elimination of a liability associated with the 2003 sale of Panhandle.
2Includes an operating gain of $3 million related to a litigation settlement at CMS Viron.
Discontinued operations include a provision for closing costs and a portion of CMS Energy’s parent company interest expense. CMS Energy allocated no interest expense in 2013 or 2012 and allocated less than $1 million of interest expense in 2011. CMS Energy allocates its interest expense by applying its total interest expense to the net carrying amount of the asset sold divided by CMS Energy’s total capitalization.
| 2009 | ||||||||||||||||
Quarters Ended | March 31 | June 30 | Sept. 30 | Dec. 31 | ||||||||||||
| In Millions, Except Per Share Amounts and Stock Prices | ||||||||||||||||
CMS Energy, including Consumers | ||||||||||||||||
| Operating Revenue | $ | 2,104 | $ | 1,225 | $ | 1,263 | $ | 1,613 | ||||||||
| Operating Income | 210 | 150 | 230 | 108 | ||||||||||||
| Income From Continuing Operations | 75 | 55 | 76 | 14 | ||||||||||||
| Income (Loss) From Discontinued Operations | (1 | ) | 25 | (1 | ) | (3 | ) | |||||||||
| Net Income | 74 | 80 | 75 | 11 | ||||||||||||
| Income Attributable to Noncontrolling Interests | 1 | 2 | 6 | 2 | ||||||||||||
| Net Income Attributable to CMS Energy | 73 | 78 | 69 | 9 | ||||||||||||
| Preferred Stock Dividends | 3 | 3 | 2 | 3 | ||||||||||||
| Net Income Available to Common Stockholders | 70 | 75 | 67 | 6 | ||||||||||||
| Earnings From Continuing Operations Per Average Common Share — Basic(a) | 0.32 | 0.22 | 0.30 | 0.04 | ||||||||||||
| Earnings From Continuing Operations Per Average Common Share — Diluted(a) | 0.31 | 0.21 | 0.29 | 0.03 | ||||||||||||
| Basic Earnings Per Average Common Share(a) | 0.31 | 0.33 | 0.29 | 0.03 | ||||||||||||
| Diluted Earnings Per Average Common Share(a) | 0.30 | 0.32 | 0.28 | 0.02 | ||||||||||||
| Common stock prices(b) | ||||||||||||||||
| High | 12.20 | 12.30 | 13.64 | 16.04 | ||||||||||||
| Low | 10.09 | 10.98 | 11.78 | 13.05 | ||||||||||||
Consumers | ||||||||||||||||
| Operating Revenue | $ | 2,034 | $ | 1,182 | $ | 1,204 | $ | 1,543 | ||||||||
| Operating Income | 203 | 174 | 218 | 94 | ||||||||||||
| Net Income | 99 | 72 | 101 | 21 | ||||||||||||
| Preferred Stock Dividends | 1 | — | 1 | — | ||||||||||||
| Net Income Available to Common Stockholder | 98 | 72 | 100 | 21 | ||||||||||||
170
|
| In Millions, Except Per Share Amounts and Stock Prices |
| ||||||
|
| 2013 |
| ||||||
Quarters Ended |
| March 31 |
| June 30 |
| Sept 30 |
| Dec 31 |
|
CMS Energy, including Consumers |
|
|
|
|
|
|
|
|
|
Operating revenue |
| $ 1,979 |
| $ 1,406 |
| $ 1,445 |
| $ 1,736 |
|
Operating income |
| 329 |
| 232 |
| 317 |
| 264 |
|
Income from continuing operations |
| 144 |
| 81 |
| 127 |
| 102 |
|
Net income |
| 144 |
| 81 |
| 127 |
| 102 |
|
Income attributable to noncontrolling interests |
| - |
| 1 |
| 1 |
| - |
|
Net income available to common stockholders |
| 144 |
| 80 |
| 126 |
| 102 |
|
Earnings from continuing operations per average common share-basic1 |
| 0.55 |
| 0.30 |
| 0.48 |
| 0.38 |
|
Earnings from continuing operations per average common share-diluted1 |
| 0.53 |
| 0.29 |
| 0.46 |
| 0.37 |
|
Basic earnings per average common share1 |
| 0.55 |
| 0.30 |
| 0.48 |
| 0.38 |
|
Diluted earnings per average common share1 |
| 0.53 |
| 0.29 |
| 0.46 |
| 0.37 |
|
Common stock prices2 |
|
|
|
|
|
|
|
|
|
High |
| 27.94 |
| 29.94 |
| 28.52 |
| 28.05 |
|
Low |
| 24.76 |
| 25.95 |
| 25.86 |
| 25.90 |
|
Consumers |
|
|
|
|
|
|
|
|
|
Operating revenue |
| $ 1,919 |
| $ 1,342 |
| $ 1,386 |
| $ 1,674 |
|
Operating income |
| 319 |
| 227 |
| 314 |
| 258 |
|
Net income |
| 162 |
| 100 |
| 153 |
| 119 |
|
Preferred stock dividends and distribution |
| - |
| 1 |
| 1 |
| - |
|
Net income available to common stockholder |
| 162 |
| 99 |
| 152 |
| 119 |
|
|
| In Millions, Except Per Share Amounts and Stock Prices |
| ||||||
|
| 2012 |
| ||||||
Quarters Ended |
| March 31 |
| June 30 |
| Sept 30 |
| Dec 31 |
|
CMS Energy, including Consumers |
|
|
|
|
|
|
|
|
|
Operating revenue |
| $ 1,743 |
| $ 1,333 |
| $ 1,507 |
| $ 1,670 |
|
Operating income |
| 188 |
| 260 |
| 343 |
| 212 |
|
Income from continuing operations |
| 60 |
| 101 |
| 149 |
| 67 |
|
Income from discontinued operations |
| 7 |
| - |
| - |
| - |
|
Net income |
| 67 |
| 101 |
| 149 |
| 67 |
|
Income attributable to noncontrolling interests |
| - |
| 1 |
| 1 |
| - |
|
Net income available to common stockholders |
| 67 |
| 100 |
| 148 |
| 67 |
|
Earnings from continuing operations per average common share-basic1 |
| 0.23 |
| 0.38 |
| 0.56 |
| 0.26 |
|
Earnings from continuing operations per average common share-diluted1 |
| 0.22 |
| 0.37 |
| 0.55 |
| 0.25 |
|
Basic earnings per average common share1 |
| 0.26 |
| 0.38 |
| 0.56 |
| 0.26 |
|
Diluted earnings per average common share1 |
| 0.25 |
| 0.37 |
| 0.55 |
| 0.25 |
|
Common stock prices2 |
|
|
|
|
|
|
|
|
|
High |
| 22.31 |
| 23.87 |
| 24.81 |
| 24.70 |
|
Low |
| 21.33 |
| 21.52 |
| 22.70 |
| 22.79 |
|
Consumers |
|
|
|
|
|
|
|
|
|
Operating revenue |
| $ 1,675 |
| $ 1,282 |
| $ 1,448 |
| $ 1,608 |
|
Operating income |
| 183 |
| 260 |
| 334 |
| 207 |
|
Net income |
| 76 |
| 122 |
| 163 |
| 78 |
|
Preferred stock dividends |
| - |
| 1 |
| 1 |
| - |
|
Net income available to common stockholder |
| 76 |
| 121 |
| 162 |
| 78 |
|
171
Report of Independent Registered Public Accounting Firm
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, of comprehensive income, of cash flows, and of changes in equity present fairly, in all material respects, the financial position of CMS Energy Corporation and its subsidiaries at December 31, 20102013 and December 31, 2009,2012 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 20102013 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the index appearing under Item 15(a)(2) present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010,2013 based on criteria established inInternal Control —– Integrated Framework (1992)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedules, 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 these financial statements, on the financial statement schedules, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. 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.
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 LLP
Detroit, Michigan
February 24, 2011
172
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholder of
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, of comprehensive income, of cash flows, and of changes in equity present fairly, in all material respects, the financial position of Consumers Energy Company and its subsidiaries at December 31, 20102013 and December 31, 2009,2012 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 20102013 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010,2013 based on criteria established inInternal Control —– Integrated Framework (1992)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and the financial statement schedules,schedule, 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 these financial statements, on the financial statement schedules,schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. 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.
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 LLP
Detroit, Michigan
February 24, 2011
173
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures:Under the supervision and with the participation of management, including its CEO and CFO, CMS Energy conducted an evaluation of its disclosure controls and procedures (as such term is defined inRules 13a-15(e) and15d-15(e) under the Exchange Act). Based on such evaluation, CMS Energy’s CEO and CFO have concluded that its disclosure controls and procedures were effective as of December 31, 2010.
Management’s Annual Report on Internal Control Over Financial Reporting:CMS Energy’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange ActRule Rules 13a-15(f) and 15d-15(f). CMS Energy’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes policies and procedures that:
·pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of CMS Energy;
·provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of CMS Energy are being made only in accordance with authorizations of management and directors of CMS Energy; and
·provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of CMS Energy’s assets that could have a material effect on its financial statements.
Management, including its CEO and CFO, does not expect that its internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. In addition, any evaluation of the effectiveness of controls is subject to risks that those internal controls may become inadequate in future periods because of changes in business conditions, or that the degree of compliance with the policies or procedures deteriorates.
Under the supervision and with the participation of management, including its CEO and CFO, CMS Energy conducted an evaluation of the effectiveness of its internal control over financial reporting as of December 31, 2010.2013. In making this evaluation, management used the criteria set forth in the framework in Internal Control —– Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on such evaluation, CMS Energy’s management concluded that its internal control over financial reporting was effective as of December 31, 2010.2013. The effectiveness of CMS Energy’s internal control over financial reporting as of December 31, 20102013 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears under Item 8. Financial Statements and Supplementary Data.
Changes in Internal Control over Financial Reporting: There have been no changes in CMS Energy’s internal control over financial reporting during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
174
CONSUMERS
Consumers
Management’s Annual Report on Internal Control Over Financial Reporting:Consumers’ management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange ActRule Rules 13a-15(f) and 15d-15(f). Consumers’ internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes policies and procedures that:
·pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Consumers;
·provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of Consumers are being made only in accordance with authorizations of management and directors of Consumers; and
·provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of Consumers’ assets that could have a material effect on its financial statements.
Management, including its CEO and CFO, does not expect that its internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. In addition, any evaluation of the effectiveness of controls is subject to risks that those internal controls may become inadequate in future periods because of changes in business conditions, or that the degree of compliance with the policies or procedures deteriorates.
Under the supervision and with the participation of management, including its CEO and CFO, Consumers conducted an evaluation of the effectiveness of its internal control over financial reporting as of December 31, 2010.2013. In making this evaluation, management used the criteria set forth in the framework in Internal Control —– Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on such evaluation, Consumers’ management concluded that its internal control over financial reporting was effective as of December 31, 2010.2013. The effectiveness of Consumers’ internal control over financial reporting as of December 31, 20102013 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears under Item 8. Financial Statements and Supplementary Data.
Changes in Internal Control over Financial Reporting: There have been no changes in Consumers’ internal control over financial reporting during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
175
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information that is required in Item 10 regarding executive officers is included in the Item 1. Business, CMS Energy Executive Officers section, which is incorporated by reference herein.
Information that is required in Item 10 regarding directors, executive officers, and corporate governance is included in CMS Energy’s definitive proxy statement, which is incorporated by reference herein.
CODE OF ETHICSCode of Ethics
CMS Energy adopted a code of ethics that applies to its CEO, CFO, and CAO, as well as all other officers and employees of CMS Energy and its affiliates, including Consumers. This code of ethics, entitled “Code of Conduct and Guide to Ethical Business Behavior 2010”2014,” is posted on CMS Energy’s website at www.cmsenergy.com, under “Compliance and Ethics”.Ethics.” CMS Energy’s Code of Conduct and Guide to Ethical Business Behavior 20102014 is administered by the Chief Compliance Officer of CMS Energy, who reports directly to the Audit Committee of the Board of Directors of CMS Energy. Any amendment to, or waiver of, a provision of CMS Energy’s code of ethics that applies to CMS Energy’s CEO, CFO, CAO, or persons performing similar functions will be disclosed on CMS Energy’s website at www.cmsenergy.com under “Compliance and Ethics.”
CMS Energy has also adopted a code of conduct that applies to its directors, entitled “Board of Directors Code of Conduct”.Conduct.” This Board of Directors Code of Conduct can also be found on CMS Energy’s website at www.cmsenergy.com.www.cmsenergy.com, under “Compliance and Ethics.” CMS Energy’s Board of Directors Code of Conduct is administered by the Audit Committee of the Board of Directors of CMS Energy. Any alleged violation of this Board of Directors Code of Conduct by a director will be investigated by disinterested members of the Audit Committee of the Board of Directors of CMS Energy, or if none, by disinterested members of the entire Board of Directors of CMS Energy.
ConsumersC
Information that is required in Item 10 regarding executive officers is included in the Item 1. Business, Consumers Executive Officers section, which is incorporated by reference herein.
Information that is required in Item 10 regarding Consumers’ directors, executive officers, and corporate governance is included in CMS Energy’s definitive proxy statement, which is incorporated by reference herein.
CODE OF ETHICSCode of Ethics
Consumers adopted a code of ethics that applies to its CEO, CFO, and CAO, as well as all other officers and employees of Consumers and its affiliates. This code of ethics, entitled “Code of Conduct and Guide to Ethical Business Behavior 2010”2014,” is posted on Consumers’ website at www.consumersenergy.com, under “Our Company,” “Compliance and Ethics”.Ethics.” Consumers’ Code of Conduct and Guide to Ethical Business Behavior 20102014 is administered by the Chief Compliance Officer of Consumers, who reports directly to the Audit Committee of the Board of Directors of Consumers. Any amendment to, or waiver of, a provision of Consumers’ code of ethics that applies to Consumers’ CEO, CFO, CAO, or persons performing similar functions will be disclosed on Consumers’ website at www.consumersenergy.com under “Our Company,” “Compliance and Ethics.”
Consumers has also adopted a code of conduct that applies to its directors, entitled “Board of Directors Code of Conduct”.Conduct.” This Board of Directors Code of Conduct can also be found on Consumers’ website at www.consumersenergy.com. Thewww.consumersenergy.com, under “Our Company,” “Compliance and Ethics.” Consumers’ Board of Directors Code of Conduct is administered by the Audit Committee of the Board of Directors of Consumers. Any alleged violation of this Board of Directors Code of Conduct by a director will be investigated by disinterested members of the Audit Committee of the Board of Directors of Consumers, or if none, by disinterested members of the entire Board of Directors of Consumers.
176
Information that is required in Item 11 regarding executive compensation of CMS Energy’s and Consumers’ executive officers is included in CMS Energy’s definitive proxy statement, which is incorporated by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information that is required in Item 12 regarding securities authorized for issuance under equity compensation plans and security ownership of certain beneficial owners and management of CMS Energy and Consumers is included in CMS Energy’s definitive proxy statement, which is incorporated by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
Information that is required in Item 13 regarding certain relationships and related transactions, and director independence regarding CMS Energy and Consumers is included in CMS Energy’s definitive proxy statement, which is incorporated by reference herein.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information that is required in Item 14 regarding principal accountant fees and services relating to CMS Energy and Consumers is included in CMS Energy’s definitive proxy statement, which is incorporated by reference herein.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1)Financial Statements and Reports of Independent Public Accountants for CMS Energy and Consumers are included in Item 8. Financial Statements and Supplementary Data and are incorporated by reference herein.
(a)(2)Index to Financial Statement Schedules.
Page | ||
177
Condensed Financial Information of Registrant CMS | ||||||
168 | ||||||
169 | ||||||
170 | ||||||
172 | ||||||
173 | ||||||
173 | ||||||
160 | ||||||
161 | ||||||
Schedules other than those listed above are omitted because they are either not required, not applicable, or the required information is shown in the financial statements or notes thereto. Columns omitted from schedules filed have been omitted because the information is not applicable.
(a)(3) Exhibits for and (b)See CMS Energy’s and Consumers’ Exhibit Index included as the last part of this report, which is incorporated herein by reference.
CMS ENERGY CORPORATION
Schedule I – Condensed Financial Information of Registrant
CMS Energy – Parent Company
Condensed Statements of Income
|
| In Millions |
| |||||||
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
| |||
|
|
|
|
|
|
|
| |||
Operating Expenses |
|
|
|
|
|
|
| |||
Other operating expenses |
| $ | (6 | ) | $ | (8 | ) | $ | (9 | ) |
General taxes |
| - |
| - |
| 6 |
| |||
Total operating expenses |
| (6 | ) | (8 | ) | (3 | ) | |||
|
|
|
|
|
|
|
| |||
Operating Loss |
| (6 | ) | (8 | ) | (3 | ) | |||
|
|
|
|
|
|
|
| |||
Other Income (Expense) |
|
|
|
|
|
|
| |||
Equity earnings of subsidiaries |
| 566 |
| 477 |
| 510 |
| |||
Interest income |
| 1 |
| 1 |
| 1 |
| |||
Other expense |
| (8 | ) | (5 | ) | (5 | ) | |||
Total other income |
| 559 |
| 473 |
| 506 |
| |||
|
|
|
|
|
|
|
| |||
Interest Charges |
|
|
|
|
|
|
| |||
Interest on long-term debt |
| 148 |
| 140 |
| 143 |
| |||
Intercompany interest expense and other |
| 3 |
| 5 |
| 6 |
| |||
Total interest charges |
| 151 |
| 145 |
| 149 |
| |||
|
|
|
|
|
|
|
| |||
Income Before Income Taxes |
| 402 |
| 320 |
| 354 |
| |||
Income Tax Benefit |
| (50 | ) | (62 | ) | (61 | ) | |||
|
|
|
|
|
|
|
| |||
Income From Continuing Operations |
| 452 |
| 382 |
| 415 |
| |||
|
|
|
|
|
|
|
| |||
Net Income Available to Common Stockholders |
| $ | 452 |
| $ | 382 |
| $ | 415 |
|
The accompanying notes are an integral part of these statements.
CMS ENERGY CORPORATION
Schedule I – Condensed Financial Information of Registrant
CMS Energy – Parent Company
Condensed Statements of Cash Flows
|
|
|
|
|
| In Millions |
| |||
Years Ended December 31 |
| 2013 |
| 2012 |
| 2011 |
| |||
|
|
|
|
|
|
|
| |||
Cash Flows from Operating Activities |
|
|
|
|
|
|
| |||
Net income |
| $ | 452 |
| $ | 382 |
| $ | 415 |
|
Adjustments to reconcile net income to net cash provided by operating activities |
|
|
|
|
|
|
| |||
Equity earnings of subsidiaries |
| (566 | ) | (477 | ) | (510 | ) | |||
Dividends received from subsidiaries |
| 435 |
| 401 |
| 474 |
| |||
Deferred income taxes |
| 48 |
| (25 | ) | 14 |
| |||
Cash provided by (used in) changes in assets and liabilities |
|
|
|
|
|
|
| |||
Accounts and notes receivable |
| (3 | ) | 2 |
| (1 | ) | |||
Accounts payable |
| 2 |
| - |
| - |
| |||
Accrued taxes |
| 48 |
| 9 |
| (97 | ) | |||
Other current and non-current assets and liabilities |
| 18 |
| (14 | ) | 12 |
| |||
Net cash provided by operating activities |
| 434 |
| 278 |
| 307 |
| |||
|
|
|
|
|
|
|
| |||
Cash Flows from Investing Activities |
|
|
|
|
|
|
| |||
Investment in subsidiaries |
| (150 | ) | (151 | ) | (125 | ) | |||
Net cash used in investing activities |
| (150 | ) | (151 | ) | (125 | ) | |||
|
|
|
|
|
|
|
| |||
Cash Flows from Financing Activities |
|
|
|
|
|
|
| |||
Proceeds from issuance of long-term debt |
| 275 |
| 575 |
| 375 |
| |||
Issuance of common stock |
| 36 |
| 30 |
| 29 |
| |||
Retirement of long-term debt |
| (275 | ) | (463 | ) | (376 | ) | |||
Payment of common stock dividends |
| (271 | ) | (252 | ) | (211 | ) | |||
Debt issuance costs and financing fees |
| (4 | ) | (4 | ) | (6 | ) | |||
Increase (decrease) in notes payable |
| (47 | ) | (11 | ) | 7 |
| |||
Net cash used in financing activities |
| (286 | ) | (125 | ) | (182 | ) | |||
|
|
|
|
|
|
|
| |||
Net Increase (Decrease) in Cash and Cash Equivalents |
| (2 | ) | 2 |
| - |
| |||
Cash and Cash Equivalents, Beginning of Period |
| 2 |
| - |
| - |
| |||
|
|
|
|
|
|
|
| |||
Cash and Cash Equivalents, End of Period |
| $ | - |
| $ | 2 |
| $ | - |
|
The accompanying notes are an integral part of these statements.
CMS ENERGY CORPORATION
Schedule I – Condensed Financial Information of Registrant
CMS Energy – Parent Company
ASSETS
|
|
|
| In Millions |
| ||
December 31 |
| 2013 |
| 2012 |
| ||
|
|
|
|
|
| ||
Current Assets |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | - |
| $ | 2 |
|
Notes and accrued interest receivable |
| 1 |
| 1 |
| ||
Accounts receivable, including intercompany and related parties |
| 7 |
| 4 |
| ||
Accrued taxes |
| - |
| 7 |
| ||
Deferred income taxes |
| 2 |
| 3 |
| ||
Total current assets |
| 10 |
| 17 |
| ||
|
|
|
|
|
| ||
Plant, Property, and Equipment |
|
|
|
|
| ||
Plant, property, and equipment, gross |
| 16 |
| 16 |
| ||
Less accumulated depreciation and amortization |
| 16 |
| 16 |
| ||
Total plant, property, and equipment |
| - |
| - |
| ||
|
|
|
|
|
| ||
Other Non-current Assets |
|
|
|
|
| ||
Deferred income taxes |
| 345 |
| 392 |
| ||
Investments in subsidiaries |
| 5,626 |
| 5,312 |
| ||
Other investments – DB SERP |
| 23 |
| 24 |
| ||
Other |
| 23 |
| 26 |
| ||
Total other non-current assets |
| 6,017 |
| 5,754 |
| ||
|
|
|
|
|
| ||
Total Assets |
| $ | 6,027 |
| $ | 5,771 |
|
LIABILITIES AND EQUITY
|
|
|
| In Millions |
| ||
December 31 |
| 2013 |
| 2012 |
| ||
|
|
|
|
|
| ||
Current Liabilities |
|
|
|
|
| ||
Current portion of long-term debt |
| $ | 172 |
| $ | 172 |
|
Accounts and notes payable, including intercompany and related parties |
| 107 |
| 152 |
| ||
Accrued interest, including intercompany |
| 32 |
| 30 |
| ||
Accrued taxes |
| 41 |
| - |
| ||
Other current liabilities |
| 4 |
| 5 |
| ||
Total current liabilities |
| 356 |
| 359 |
| ||
|
|
|
|
|
| ||
Non-current Liabilities |
|
|
|
|
| ||
Long-term debt |
| 2,205 |
| 2,205 |
| ||
Unamortized discount |
| (9 | ) | (13 | ) | ||
Postretirement benefits |
| 19 |
| 24 |
| ||
Other non-current liabilities |
| 2 |
| 2 |
| ||
Total non-current liabilities |
| 2,217 |
| 2,218 |
| ||
|
|
|
|
|
| ||
Equity |
|
|
|
|
| ||
Common stockholders equity |
| 3,454 |
| 3,194 |
| ||
|
|
|
|
|
| ||
Total Liabilities and Equity |
| $ | 6,027 |
| $ | 5,771 |
|
The accompanying notes are an integral part of these statements.
CMS ENERGY CORPORATION
Schedule I – Condensed Financial Information of Registrant
CMS Energy – Parent Company
Notes to the Condensed Financial Statements
1:BASIS OF PRESENTATION
CMS Energy’s condensed financial statements have been prepared on a parent-only basis. In accordance with Rule 12-04 of Regulation S-X, these parent-only financial statements do not include all of the information and notes required by GAAP for annual financial statements, and therefore these parent-only financial statements and other information included should be read in conjunction with CMS Energy’s audited consolidated financial statements contained within Item 8. Financial Statements and Supplementary Data.
2:GUARANTEES
CMS Energy has issued guarantees with a maximum potential obligation of $187 million on behalf of some of its wholly owned subsidiaries and related parties. CMS Energy’s maximum potential obligation consists primarily of potential payments:
·to third parties under certain commodity purchase and swap agreements entered into with CMS ERM;
·to third parties in support of non-recourse revenue bonds issued by Genesee;
·to the MDEQ on behalf of CMS Land and CMS Capital, for environmental remediation obligations at Bay Harbor; and
·to the DOE on behalf of Consumers, in relation to Consumers’ 2011 settlement agreement with the DOE regarding damages resulting from the DOE’s failure to accept spent nuclear fuel from Palisades and Big Rock.
The expiry dates of these guarantees vary, depending upon contractual provisions or upon the statute of limitations under the relevant governing law.
Schedule II – Valuation and Qualifying Accounts and Reserves
Years Ended December 31, 2013, 2012, and 2011
|
|
|
|
|
|
|
|
|
| In Millions |
| |||||
Description |
| Balance at |
| Charged to |
| Charged to |
| Deductions |
| Balance at |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Allowance for uncollectible accounts1 |
|
|
|
|
|
|
|
|
|
|
| |||||
2013 |
| $ | 32 |
| $ | 63 |
| $ | - |
| $ | 62 |
| $ | 33 |
|
2012 |
| 35 |
| 53 |
| - |
| 56 |
| 32 |
| |||||
2011 |
| 25 |
| 70 |
| - |
| 60 |
| 35 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Deferred tax valuation allowance |
|
|
|
|
|
|
|
|
|
|
| |||||
2013 |
| $ | 3 |
| $ | - |
| $ | - |
| $ | 1 |
| $ | 2 |
|
2012 |
| 20 |
| - |
| (15 | ) | 2 |
| 3 |
| |||||
2011 |
| 19 |
| 1 |
| - |
| - |
| 20 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Allowance for notes receivable1 |
|
|
|
|
|
|
|
|
|
|
| |||||
2013 |
| $ | 5 |
| $ | 4 |
| $ | - |
| $ | 4 |
| $ | 5 |
|
2012 |
| 5 |
| 4 |
| - |
| 4 |
| 5 |
| |||||
2011 |
| 5 |
| 4 |
| - |
| 4 |
| 5 |
| |||||
1 Deductions are listed after Item 15(b)write-offs of uncollectible accounts, net of recoveries.
Schedule II – Valuation and Qualifying Accounts and Reserves
Years Ended December 31, 2013, 2012, and 2011
|
|
|
|
|
|
|
|
|
| In Millions |
| |||||
Description |
| Balance at |
| Charged to |
| Charged to |
| Deductions |
| Balance at |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Allowance for uncollectible accounts1 |
|
|
|
|
|
|
|
|
|
|
| |||||
2013 |
| $ | 30 |
| $ | 63 |
| $ | - |
| $ | 62 |
| $ | 31 |
|
2012 |
| 33 |
| 53 |
| - |
| 56 |
| 30 |
| |||||
2011 |
| 23 |
| 70 |
| - |
| 60 |
| 33 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Deferred tax valuation allowance |
|
|
|
|
|
|
|
|
|
|
| |||||
2013 |
| $ | 1 |
| $ | - |
| $ | - |
| $ | - |
| $ | 1 |
|
2012 |
| 1 |
| - |
| - |
| - |
| 1 |
| |||||
2011 |
| - |
| 1 |
| - |
| - |
| 1 |
| |||||
1 Deductions are write-offs of uncollectible accounts, net of recoveries.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, CMS Energy Corporation has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 6th day of February 2014.
CMS ENERGY CORPORATION | ||
By: | /s/ John Russell | |
John G. Russell | ||
President and Chief Executive Officer | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of CMS Energy Corporation and are incorporatedin the capacities indicated and on the 6th day of February 2014.
(i) Principal executive officer:
/s/ John Russell | |
John G. Russell | |
President and Chief Executive Officer |
(ii) Principal financial officer:
/s/ Thomas J. Webb | |
Thomas J. Webb | |
Executive Vice President and Chief Financial Officer |
(iii) Controller or principal accounting officer:
/s/ Glenn P. Barba | |
Glenn P. Barba | |
Vice President, Controller, and Chief Accounting Officer |
(iv) The Directors:
Jon E. Barfield*
Kurt L. Darrow*
Stephen E. Ewing*
Richard M. Gabrys*
William D. Harvey*
David W. Joos*
Philip R. Lochner, Jr.*
Michael T. Monahan*
John G. Russell*
Kenneth L. Way*
Laura H. Wright*
John B. Yasinsky*
*By: | /s/ Thomas J. Webb | |
Thomas J. Webb, Attorney-in-Fact |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Consumers Energy Company has duly caused this Annual Report to be signed on its behalf by reference herein.
CONSUMERS ENERGY COMPANY | ||
By: | /s/ John Russell | |
John G. Russell | ||
President and Chief Executive Officer | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by reference.
178
(i) Principal executive officer:
/s/ John Russell | |
John G. Russell | |
President and Chief Executive Officer |
(ii) Principal financial officer:
/s/ Thomas J. Webb | |
Thomas J. Webb | |
Executive Vice President and Chief Financial Officer |
(iii) Controller or principal accounting officer:
/s/ Glenn P. Barba | |
Glenn P. Barba | |
Vice President, Controller, and Chief Accounting Officer |
(iv) The Directors:
Jon E. Barfield*
Kurt L. Darrow*
Stephen E. Ewing*
Richard M. Gabrys*
William D. Harvey*
David W. Joos*
Philip R. Lochner, Jr.*
Michael T. Monahan*
John G. Russell*
Kenneth L. Way*
Laura H. Wright*
John B. Yasinsky*
*By: | /s/ Thomas J. Webb | |
Thomas J. Webb, Attorney-in-Fact |
CMS ENERGY’S AND CONSUMERS’ EXHIBITS
The agreements included as exhibits to thisForm 10-K filing are included solely to provide information regarding the terms of the agreements and are not intended to provide any other factual or disclosure information about CMS Energy, Consumers, or other parties to the agreements. The agreements may contain representations and warranties made by each of the parties to each of the agreements that were made exclusively for the benefit of the parties involved in each of the agreements and should not be treated as statements of fact. The representations and warranties were made as a way to allocate risk if one or more of those statements prove to be incorrect. The statements were qualified by disclosures toof the parties to each of the agreements andthat may not be reflected in each of the agreements. The agreements may apply standards of materiality that are different than standards applied to other investors. Additionally, the statements were made as of the date of the agreements or as specified in the agreements and have not been updated.
The representations and warranties may not describe the actual state of affairs of the parties to each agreement. Additional information about CMS Energy and Consumers may be found in this filing, at www.cmsenergy.com, at www.consumersenergy.com, and through the SEC’s website at www.sec.gov.
| Previously Filed | ||||||||
| With File | As Exhibit | |||||||
Exhibits | Number | Number | Description | |||||
| 3.1 | 1-9513 | (3)(a)* | — | Restated Articles of Incorporation of CMS Energy effective June 1, 2004, as amended May 22, 2009 (2nd qtr. 2009 Form 10-Q) | ||||
| 3.2 | 1-9513 | 3.1* | — | CMS Energy Corporation Bylaws, amended and restated as of January 27, 2011 (Form 8-K filed February 1, 2011) | ||||
| 3.3 | 1-5611 | 3(c) | — | Restated Articles of Incorporation of Consumers effective June 7, 2000 (2000 Form 10-K) | ||||
| 3.4 | 1-5611 | 3.2 | — | Consumers Energy Company Bylaws, amended and restated as of January 27, 2011 (Form 8-K filed February 1, 2011) | ||||
| 4.1 | 2-65973 | (b)(1)-4 | — | Indenture dated as of September 1, 1945 between Consumers and Chemical Bank (successor to Manufacturers Hanover Trust Company), as Trustee, including therein indentures supplemental thereto through the Forty-third Supplemental Indenture dated as of May 1, 1979 (Form S-16 filed November 13, 1979) | ||||
| Indentures Supplemental thereto: | ||||||||
| 4.1.a | 1-5611 | (4)(a) | — | 71st dated as of 3/06/98 (1997 Form 10-K) | ||||
| 4.1.b | 1-5611 | (4)(d) | — | 90th dated as of 4/30/03 (1st qtr. 2003 Form 10-Q) | ||||
| 4.1.c | 1-5611 | (4)(b) | — | 92nd dated as of 8/26/03 (3rd qtr. 2003 Form 10-Q) | ||||
| 4.1.d | 1-5611 | (4)(a) | — | 96th dated as of 8/17/04 (Form 8-K filed August 20, 2004) | ||||
| 4.1.e | 1-5611 | 4.4 | — | 98th dated as of 12/13/04 (Form 8-K filed December 13, 2004) | ||||
| 4.1.f | 1-5611 | (4)(a)(i) | — | 99th dated as of 1/20/05 (2004 Form 10-K) | ||||
| 4.1.g | 1-5611 | 4.2 | — | 100th dated as of 3/24/05 (Form 8-K filed March 30, 2005) | ||||
| 4.1.h | 1-5611 | 4.2 | — | 104th dated as of 8/11/05 (Form 8-K filed August 11, 2005) | ||||
| 4.1.i | 1-5611 | 4(b) | — | 105th dated as of 3/30/07 (2007 Form 10-K) | ||||
| 4.1.j | 1-5611 | 4(a) | — | 106th dated as of 11/30/07 (2007 Form 10-K) | ||||
| 4.1.k | 1-5611 | 4.1 | — | 108th dated as of 3/14/08 (Form 8-K filed March 14, 2008) | ||||
| 4.1.l | 1-5611 | 4.1 | — | 109th dated as of 9/11/08 (Form 8-K filed September 16, 2008) | ||||
| 4.1.m | 1-5611 | 4.1 | — | 110th dated as of 9/12/08 (Form 8-K filed September 12, 2008) | ||||
| 4.1.n | 1-5611 | 4.1 | — | 111th dated as of 3/6/09 (Form 8-K filed March 6, 2009) | ||||
| 4.1.o | 1-5611 | 4.1 | — | 112th dated as of 9/1/10 (Form 8-K filed September 7, 2010) | ||||
| 4.1.p | 1-5611 | 4.1 | — | 113th dated as of 10/15/10 (Form 8-K filed October 20, 2010) | ||||
| 4.2 | 1-5611 | (4)(b) | — | Indenture dated as of January 1, 1996 between Consumers and The Bank of New York Mellon, as Trustee (1995 Form 10-K) | ||||
| 4.3 | 1-5611 | (4)(c) | — | Indenture dated as of February 1, 1998 between Consumers and The Bank of New York Mellon (formerly The Chase Manhattan Bank), as Trustee (1997 Form 10-K) | ||||
179
|
| Previously Filed |
|
|
|
| ||
Exhibits |
| With File |
| As |
|
| Description | |
3.11 |
| 1-9513 |
| (3)(a) | — |
| Restated Articles of Incorporation of CMS Energy, effective June 1, 2004, as amended May 22, 2009 (Form 10-Q for the quarterly period ended June 30, 2009) | |
3.21 |
| 1-9513 |
| 3.1 | — |
| CMS Energy Bylaws, amended and restated as of January 24, 2013 (Form 8-K filed January 29, 2013) | |
3.3 |
| 1-5611 |
| 3(c) | — |
| Restated Articles of Incorporation of Consumers effective June 7, 2000 (Form 10-K for the fiscal year ended December 31, 2000) | |
3.4 |
| 1-5611 |
| 3.2 | — |
| Consumers Bylaws, amended and restated as of January 24, 2013 (Form 8-K filed January 29, 2013) | |
4.1 |
| 2-65973 |
| (b)(1) – 4 | — |
| Indenture dated as of September 1, 1945 between Consumers and Chemical Bank (successor to Manufacturers Hanover Trust Company), as Trustee, including therein indentures supplemental thereto through the Forty-third Supplemental Indenture dated as of May 1, 1979 (Form S-16 filed November 13, 1979) | |
|
|
|
|
|
|
| Indentures Supplemental thereto: | |
4.1.a |
| 1-5611 |
| (4)(a) | — |
| 71st dated as of 3/06/98 (Form 10-K for the fiscal year ended December 31, 1997) | |
4.1.b |
| 1-5611 |
| (4)(a) | — |
| 96th dated as of 8/17/04 (Form 8-K filed August 20, 2004) | |
4.1.c |
| 1-5611 |
| (4)(a)(i) | — |
| 99th dated as of 1/20/05 (Form 10-K for the fiscal year ended December 31, 2004) | |
4.1.d |
| 1-5611 |
| 4.2 | — |
| 100th dated as of 3/24/05 (Form 8-K filed March 30, 2005) | |
4.1.e |
| 1-5611 |
| 4.2 | — |
| 104th dated as of 8/11/05 (Form 8-K filed August 11, 2005) | |
4.1.f |
| 1-5611 |
| 4.1 | — |
| 108th dated as of 3/14/08 (Form 8-K filed March 14, 2008) | |
4.1.g |
| 1-5611 |
| 4.1 | — |
| 110th dated as of 9/12/08 (Form 8-K filed September 12, 2008) | |
4.1.h |
| 1-5611 |
| 4.1 | — |
| 111th dated as of 3/6/09 (Form 8-K filed March 6, 2009) | |
4.1.i |
| 1-5611 |
| 4.1 | — |
| 112th dated as of 9/1/10 (Form 8-K filed September 7, 2010) | |
4.1.j |
| 1-5611 |
| 4.1 | — |
| 113th dated as of 10/15/10 (Form 8-K filed October 20, 2010) | |
4.1.k |
| 1-5611 |
| 4.1 | — |
| 114th dated as of 3/31/11 (Form 8-K filed April 6, 2011) | |
4.1.l |
| 1-5611 |
| 4.1 | — |
| 116th dated as of 9/1/11 (Form 10-Q for the quarterly period ended September 30, 2011) | |
4.1.m |
| 1-5611 |
| 4.1 | — |
| 117th dated as of 5/8/12 (Form 8-K filed May 8, 2012) | |
4.1.n |
| 1-5611 |
| 4.1 | — |
| 119th dated as of 8/3/12 (Form 10-Q for the quarterly period ended September 30, 2012) | |
| Previously Filed | ||||||||
| With File | As Exhibit | |||||||
Exhibits | Number | Number | Description | |||||
| 4.4 | 33-47629 | (4)(a)* | — | Indenture dated as of September 15, 1992 between CMS Energy and NBD Bank, as Trustee (Form S-3 filed May 1, 1992) | ||||
| Indentures Supplemental thereto: | ||||||||
| 4.4.a | 333-58686 | (4)(a)* | — | 11th dated as of 3/29/01 (Form S-8 filed April 11, 2001) | ||||
| 4.4.b | 1-9513 | (4)(d)(ii)* | — | 16th dated as of 12/16/04 (2004 Form 10-K) | ||||
| 4.4.c | 1-9513 | 4.2* | — | 17th dated as of 12/13/04 (Form 8-K filed December 13, 2004) | ||||
| 4.4.d | 1-9513 | 4.2* | — | 18th dated as of 1/19/05 (Form 8-K filed January 20, 2005) | ||||
| 4.4.e | 1-9513 | 4.2* | — | 19th dated as of 12/13/05 (Form 8-K filed December 15, 2005) | ||||
| 4.4.f | 1-9513 | 4.2* | — | 20th dated as of 7/3/07 (Form 8-K filed July 5, 2007) | ||||
| 4.4.g | 1-9513 | 4.3* | — | 21st dated as of 7/3/07 (Form 8-K filed July 5, 2007) | ||||
| 4.4.h | 1-9513 | 4.1* | — | 22nd dated as of 6/15/09 (Form 8-K filed June 15, 2009) | ||||
| 4.4.i | 1-9513 | 4.3* | — | 23rd dated as of 6/15/09 (Form 8-K filed June 15, 2009) | ||||
| 4.4.j | 1-9513 | 4.1* | — | 24th dated as of 1/14/10 (Form 8-K filed January 14, 2010) | ||||
| 4.4.k | 1-9513 | 4.1* | — | 25th dated as of 9/23/10 (Form 8-K filed September 23, 2010) | ||||
| 4.4.l | 1-9513 | 4.1* | — | 26th dated as of 11/19/10 (Form 8-K filed November 19, 2010) | ||||
| 4.5 | 1-9513 | (4a)* | — | Indenture dated as of June 1, 1997 between CMS Energy and The Bank of New York Mellon, as Trustee (Form 8-K filed July 1, 1997) | ||||
| Indentures Supplemental thereto: | ||||||||
| 4.5.a | 1-9513 | (4)(b)* | — | 1st dated as of 6/20/97 (Form 8-K filed July 1, 1997) | ||||
| 10.1 | 1-9513 | (10)(d)* | — | $300 million Seventh Amended and Restated Credit Agreement dated as of April 2, 2007 among CMS Energy Corporation, the Banks, the Administrative Agent, Collateral Agent, Syndication Agent and Documentation Agents, all defined therein and Amendment No. 1 dated as of December 19, 2007 (3rd qtr. 2009 Form 10-Q) | ||||
| 10.2 | 1-9513 | (10)(b)* | — | Amendment No. 2 dated as of January 23, 2009 to the $300 million Seventh Amended and Restated Credit Agreement (2008 Form 10-K) | ||||
| 10.3 | 1-9513 | (10)(e)* | — | Assumption and Acceptance dated January 8, 2008 to the $300 million Seventh Amended and Restated Credit Agreement (3rd qtr. 2009 Form 10-Q) | ||||
| 10.4 | 1-9513 | 10(b)* | — | Fourth Amended and Restated Pledge and Security Agreement dated as of April 2, 2007 among CMS Energy and Collateral Agent, as defined therein (2007 Form 10-K) | ||||
| 10.5 | 1-9513 | 10(c)* | — | Amended and Restated Cash Collateral Agreement dated as of April 2, 2007, made by CMS Energy to the Administrative Agent for the lenders and Collateral Agent, as defined therein (2007 Form 10-K) | ||||
| 10.6 | 1-5611 | (10)(f) | — | $500 million Fourth Amended and Restated Credit Agreement dated as of March 30, 2007 among Consumers Energy Company, the Banks, the Administrative Agent, the Collateral Agent, the Syndication Agent and the Documentation Agents, all as defined therein (3rd qtr. 2009 Form 10-Q) | ||||
| 10.7 | 1-9513 | (10)(g) | — | 2004 Form of Executive Severance Agreement (3rd qtr. 2009 Form 10-Q) | ||||
| 10.8 | 1-9513 | (10)(h) | — | 2004 Form of Officer Severance Agreement (3rd qtr. 2009 Form 10-Q) | ||||
| 10.9 | 1-9513 | (10)(g) | — | 2004 Form of Change-in-Control Agreement (2007 Form 10-K) | ||||
| 10.10 | 1-9513 | 10.1 | — | CMS Energy’s Performance Incentive Stock Plan, effective February 3, 1988, amended and restated effective August 1, 2010 (2nd qtr. 2010 Form 10-Q) | ||||
180
Previously Filed | ||||||||||
Exhibits | With File | As | Description | |||||||
4.1.o | 1-5611 | 4.1 | — | 120th dated as of 12/17/12 (Form 8-K filed December 20, 2012) | ||||||
4.1p | 1-5611 | 4.1 | — | 121st dated as of 5/17/13 (Form 8-K filed May 17, 2013) | ||||||
4.1q | 1-5611 | 4.1 | — | 122nd dated as of 8/9/13 (Form 8-K filed August 9, 2013) | ||||||
4.1r | 1-5611 | 4.1 | — | 123rd dated as of 12/20/13 (Form 8-K filed December 27, 2013) | ||||||
4.2 | 1-5611 | (4)(b) | — | Indenture dated as of January 1, 1996 between Consumers and The Bank of New York Mellon, as Trustee (Form 10-K for the fiscal year ended December 31, 1995) | ||||||
4.3 | 1-5611 | (4)(c) | — | Indenture dated as of February 1, 1998 between Consumers and The Bank of New York Mellon (formerly The Chase Manhattan Bank), as Trustee (Form 10-K for the fiscal year ended December 31, 1997) | ||||||
4.41 | 33-47629 | (4)(a) | — | Indenture dated as of September 15, 1992 between CMS Energy and NBD Bank, as Trustee (Form S-3 filed May 1, 1992) | ||||||
Indentures Supplemental thereto: | ||||||||||
4.4.a1 | 1-9513 | 4.2 | — | 19th dated as of 12/13/05 (Form 8-K filed December 15, 2005) | ||||||
4.4.b1 | 1-9513 | 4.2 | — | 20th dated as of 7/3/07 (Form 8-K filed July 5, 2007) | ||||||
4.4.c1 | 1-9513 | 4.1 | — | 22nd dated as of 6/15/09 (Form 8-K filed June 15, 2009) | ||||||
4.4.d1 | 1-9513 | 4.3 | — | 23rd dated as of 6/15/09 (Form 8-K filed June 15, 2009) | ||||||
4.4.e1 | 1-9513 | 4.1 | — | 24th dated as of 1/14/10 (Form 8-K filed January 14, 2010) | ||||||
4.4.f1 | 1-9513 | 4.1 | — | 25th dated as of 9/23/10 (Form 8-K filed September 23, 2010) | ||||||
4.4.g1 | 1-9513 | 4.1 | — | 26th dated as of 11/19/10 (Form 8-K filed November 19, 2010) | ||||||
4.4.h1 | 1-9513 | 4.1 | — | 28th dated as of 3/12/12 (Form 8-K filed March 12, 2012) | ||||||
4.4.i1 | 1-9513 | 4.1 | — | 29th dated as of 3/22/13 (Form 8-K filed March 22, 2013) | ||||||
4.51 | 1-9513 | (4a) | — | Indenture dated as of June 1, 1997 between CMS Energy and The Bank of New York Mellon, as Trustee (Form 8-K filed July 1, 1997) | ||||||
10.12 | 1-9513 | (10)(g) | — | 2004 Form of Executive Severance Agreement (Form 10-Q for the quarterly period ended September 30, 2009) | ||||||
10.22 | 1-9513 | (10)(h) | — | 2004 Form of Officer Severance Agreement (Form 10-Q for the quarterly period ended September 30, 2009) | ||||||
10.32 | — | CMS Energy’s Performance Incentive Stock Plan, as amended and restated, effective November 15, 2013 | ||||||||
10.42 | 1-9513 | (10)(i) | — | CMS Deferred Salary Savings Plan effective December 1, 1989 and as further amended effective December 1, 2007 | ||||||
10.52 | 1-9513 | (10)(l) | — | Amendment to the Deferred Salary Savings Plan dated December 21, 2008 | ||||||
10.62 | 1-9513 | 10.6 | — | Supplemental Executive Retirement Plan for Employees of CMS Energy/Consumers | ||||||
10.72 | 1-9513 | 10.5 | — | |||||||
Defined Contribution Supplemental Executive Retirement Plan effective April 1, 2006 and as | ||||||||||
10.82 | — | |||||||||
Form of Officer Separation Agreement | ||||||||||
10.91 | 1-9513 | (10)(v) | — | Amended and Restated Investor Partner Tax Indemnification Agreement dated as of June 1, 1990 among Investor Partners, CMS Midland as Indemnitor and CMS Energy as Guarantor | ||||||
|
| Previously Filed |
|
|
|
| ||
Exhibits |
| With File |
| As |
|
| Description | |
10.101 |
| 1-9513 |
| (10)(y) | — |
| Environmental Agreement dated as of June 1, 1990 made by CMS Energy to The Connecticut National Bank and Others (Form 10-K for the fiscal year ended December 31, 1990) | |
10.11 |
| 1-5611 |
| (10)(y) | — |
| Unwind Agreement dated as of December 10, 1991 by and among CMS Energy, Midland Group, Ltd., Consumers, CMS Midland, Inc., MEC Development Corp. and CMS Midland Holdings Company (Form 10-K for the fiscal year ended December 31, 1991) | |
10.121 |
| 1-9513 |
| (10)(aa) | — |
| Parent Guaranty dated as of June 14, 1990 from CMS Energy to MCV, each of the Owner Trustees, the Indenture Trustees, the Owner Participants and the Initial Purchasers of Senior Bonds in the MCV Sale Leaseback transaction, and MEC Development (Form 10-K for the fiscal year ended December 31, 1991) | |
10.13 |
| 1-5611 |
| (10)(j) | — |
| Palisades Nuclear Power Plant Power Purchase Agreement dated as of July 11, 2006 between Entergy Nuclear Palisades, LLC and Consumers (Form 10-Q for the quarterly period ended September 30, 2009) | |
10.141,2 |
| 1-9513 |
| (10)(a) | — |
| Form of Indemnification Agreement between CMS Energy and its Directors, effective as of November 1, 2007 (Form 10-Q for the quarterly period ended September 30, 2007) | |
10.152 |
| 1-5611 |
| (10)(b) | — |
| Form of Indemnification Agreement between Consumers and its Directors, effective as of November 1, 2007 (Form 10-Q for the quarterly period ended September 30, 2007) | |
10.16 |
| 1-5611 |
| 10.1 | — |
| $150 million Third Amended and Restated Revolving Credit Agreement dated as of April 18, 2012 among Consumers, the Banks, Agent, Co-Syndication Agents, and Documentation Agent all as defined therein (Form 8-K filed April 24, 2012) | |
10.17 |
| 1-5611 |
| (10)(t) | — |
| Settlement Agreement and Amended and Restated Power Purchase Agreement between Consumers and Midland Cogeneration Venture Limited Partnership (Form 10-Q for the quarterly period ended September 30, 2009) | |
10.18 |
| 1-5611 |
| 10.4 | — |
| 1st Amendment to the Amended and Restated Power Purchase Agreement between Consumers and MCV Partnership, dated as of March 1, 2010 (Form 10-Q for the quarterly period ended September 30, 2010) | |
10.19 |
| 1-5611 |
| 10.34 | — |
| Amended and Restated Receivables Purchase Agreement dated as of November 23, 2010 among Consumers Receivables Funding II, LLC, Consumers, The Conduits from time to time party thereto, The Financial Institutions from time to time party thereto, The Managing Agents from time to time party thereto, and JPMorgan Chase Bank, NA, as Administrative Agent (Form 10-K for the fiscal year ended December 31, 2010) | |
10.20 |
| 1-5611 |
| 10.1 | — |
| Amendment No. 1 to Amended and Restated Receivables Purchase Agreement dated as of November 18, 2011 (Form 8-K filed November 25, 2011) | |
10.21 |
| 1-5611 |
| 10.24 | — |
| Amendment No. 2 to Amended and Restated Receivables Purchase Agreement dated as of December 15, 2011 (Form 10-K for the fiscal year ended December 31, 2011) | |
10.22 |
| 1-5611 |
| 10.1 | — |
| Amendment No. 3 to Amended and Restated Receivables Purchase Agreement dated as of November 9, 2012 (Form 8-K filed November 14, 2012) | |
10.23 |
| 1-5611 |
| 10.1 | — |
| Amendment No. 4 to Amended and Restated Receivables Purchase Agreement dated as of November 30, 2012 (Form 8-K filed December 6, 2012) | |
|
| Previously Filed |
|
|
|
| ||
Exhibits |
| With File |
| As |
|
| Description | |
10.24 |
| 1-5611 |
| 10.1 | — |
| Amendment No. 5 to Amended and Restated Receivables Purchase Agreement dated as of November 20, 2013 (Form 8-K filed November 25, 2013) | |
10.25 |
| 1-5611 |
| (10)(v) | — |
| Receivables Sale Agreement, dated as of May 22, 2003, between Consumers, as Originator and Consumers Receivables Funding II, LLC, as Buyer, as amended by Amendment No. 1 dated as of May 20, 2004 and as amended by Amendment No. 2 dated as of August 15, 2006 (Form 10-Q for the quarterly period ended September 30, 2009) | |
10.26 |
| 1-5611 |
| (10)(rr) | — |
| Amendment No. 3 to the Receivables Sale Agreement dated as of September 3, 2009 (Form 10-K for the fiscal year ended December 31, 2009) | |
10.27 |
| 1-5611 |
| (10)(ss) | — |
| Amendment No. 4 to the Receivables Sale Agreement dated as of February 12, 2010 (Form 10-K for the fiscal year ended December 31, 2009) | |
10.28 |
| 1-5611 |
| (10)(b) | — |
| Amendment No. 5 to the Receivables Sale Agreement, dated as of March 17, 2010 (Form 10-Q for the quarterly period ended March 31, 2010) | |
10.29 |
| 1-5611 |
| (10)(d) | — |
| Amendment No. 6 to the Receivables Sale Agreement, dated as of April 20, 2010 (Form 10-Q for the quarterly period ended March 31, 2010) | |
10.30 |
| 1-5611 |
| 10.40 | — |
| Amendment No. 7 to the Receivables Sale Agreement dated as of November 23, 2010 (Form 10-K for the fiscal year ended December 31, 2010) | |
10.31 |
| 1-5611 |
| 10.2 | — |
| Amendment No. 8 to the Receivables Sale Agreement dated as of November 30, 2012 (Form 8-K filed December 6, 2012) | |
10.322 |
| 1-9513 |
| 10.1 | — |
| CMS Incentive Compensation Plan for CMS Energy and Consumers Officers, amended and restated effective as of January 1, 2014 (Form 10-Q for the quarterly period ended September 30, 2013) | |
10.332 |
|
|
|
| — |
| Form of Change in Control Agreement as of January 2014 | |
10.342 |
|
|
|
| — |
| Annual Employee Incentive Compensation Plan for Consumers as amended, effective as of January 1, 2014 | |
10.351 |
| 1-9513 |
| 10.1 | — |
| $550 million Second Amended and Restated Revolving Credit Agreement dated as of December 20, 2013 among CMS Energy, the Banks, as defined therein, and Barclays, as Agent (Form 8-K filed December 27, 2013) | |
10.36 |
| 1-5611 |
| 10.2 | — |
| $650 million Third Amended and Restated Revolving Credit Agreement dated as of December 20, 2013 among Consumers, the Banks, as defined therein, and JPMorgan Chase Bank, N.A., as Agent (Form 8-K filed December 27, 2013) | |
10.371 |
| 1-9513 |
| 10.3 | — |
| Pledge and Security Agreement dated as of March 31, 2011, made by CMS Energy to Barclays Bank PLC, as Administrative Agent for the Banks, as defined therein (Form 8-K filed April 6, 2011) | |
10.382 |
| 1-9513 |
| 10.1 | — |
| Consumers and other CMS Energy Companies Retired Executives Survivor Benefit Plan for Management/ Executive Employees, distributed July 1, 2011 (Form 10-Q for the quarterly period ended September 30, 2011) | |
10.391 |
| 1-9513 |
| 10.1 | — |
| $180,000,000 Term Loan Credit Agreement dated as of December 15, 2011 among CMS Energy, the financial institutions named therein and JPMorgan Chase Bank, N.A. as Agent (Form 8-K filed December 20, 2011) | |
| Previously Filed | ||||||||
| With File | As Exhibit | |||||||
Exhibits | Number | Number | Description | |||||
| 10.27 | 1-9513 | (10)(m)* | — | Agreement of Purchase and Sale dated March 12, 2007 by and among CMS Enterprises Company, CMS Generation Holdings Company, CMS International Ventures, LLC, and Lucid Energy, LLC, and New Argentine Generation Company, LLC (3rd qtr. 2009 Form 10-Q) | ||||
| 10.28 | 1-9513 | (10)(a)* | — | Form of Indemnification Agreement between CMS Energy Corporation and its Directors effective as of November 1, 2007 (3rd qtr. 2007 Form 10-Q) | ||||
| 10.29 | 1-5611 | (10)(b) | — | Form of Indemnification Agreement between Consumers Energy Company and its Directors effective as of November 1, 2007 (3rd qtr. 2007 Form 10-Q) | ||||
| 10.30 | 1-5611 | 10.3 | — | Amended and Restated Letter of Credit Reimbursement Agreement between Consumers and U.S. Bank National Association dated as of September 21, 2010 (3rd qtr. 2010 Form 10-Q) | ||||
| 10.31 | 1-5611 | 10.1 | — | $150,000,000 Second Amended and Restated Revolving Credit Agreement dated as of August 11, 2010 among Consumers Energy Company, the Banks, Agent, Co-Syndication Agents and Documentation Agent, all as defined therein (Form 8-K filed August 16, 2010) | ||||
| 10.32 | 1-5611 | (10)(t) | — | Settlement Agreement and Amended and Restated Power Purchase Agreement between Consumers Energy Company and Midland Cogeneration Venture Limited Partnership dated as of June 9, 2008 (3rd qtr. 2009 Form 10-Q) | ||||
| 10.33 | 1-5611 | 10.4 | — | 1st Amendment to the Amended and Restated Power Purchase Agreement between Consumers and MCV Partnership dated as of March 1, 2010 (3rd qtr. 2010 Form 10-Q) | ||||
| 10.34 | — | Amended and Restated Receivables Purchase Agreement dated as of November 23, 2010 among Consumers Receivables Funding II, LLC, Consumers Energy Company, The Conduits from time to time party thereto, The Financial Institutions from time to time party thereto, The Managing Agents from time to time party thereto, and JPMorgan Chase Bank, NA, as Administrative Agent | ||||||
| 10.35 | 1-5611 | (10)(v) | — | Receivables Sale Agreement dated as of May 22, 2003 between Consumers Energy Company as Originator and Consumers Receivables Funding II, LLC as Buyer, as amended by Amendment No. 1 dated as of May 20, 2004 and as amended by Amendment No. 2 dated as of August 15, 2006 (3rd qtr. 2009 Form 10-Q) | ||||
| 10.36 | 1-5611 | (10)(rr) | — | Amendment No. 3 to the Receivables Sale Agreement dated as of September 3, 2009 (2009 Form 10-K) | ||||
| 10.37 | 1-5611 | (10)(ss) | — | Amendment No. 4 to the Receivables Sale Agreement dated as of February 12, 2010 (2009 Form 10-K) | ||||
| 10.38 | 1-5611 | (10)(b) | — | Amendment No. 5 to the Receivables Sale Agreement dated as of March 17, 2010 (1st qtr. 2010 Form 10-Q) | ||||
| 10.39 | 1-5611 | (10)(d) | — | Amendment No. 6 to the Receivables Sale Agreement dated as of April 20, 2010 (1st qtr. 2010 Form 10-Q) | ||||
| 10.40 | — | Amendment No. 7 to the Receivables Sale Agreement dated as of November 23, 2010 | ||||||
| 10.41 | 1-9513 | (10)(e) | — | CMS Incentive Compensation Plan for CMS Energy and its Subsidiaries effective January 1, 2004, amended and restated effective as of January 1, 2010 (1st qtr. 2010 Form 10-Q) | ||||
|
| Previously Filed |
|
|
|
| ||
Exhibits |
| With File |
| As |
|
| Description | |
10.401 |
| 1-9513 |
| 10.1 | — |
| Amendment No. 1 dated as of February 8, 2013 to $180,000,000 Term Loan Credit Agreement dated as of December 15, 2011 (Form 8-K filed February 14, 2013) | |
10.41 |
| 1-5611 |
| 10.1 | — |
| $375,000,000 Term Loan Credit Agreement dated as of June 13, 2012 among Consumers, the financial institutions named therein and JPMorgan Chase Bank, N.A., as Agent (Form 8-K filed June 19, 2012) | |
10.42 |
| 1-5611 |
| 10.1 | — |
| Bond Purchase Agreement between Consumers and each of the Purchasers named therein, dated as of July 10, 2012 (Form 8-K filed July 13, 2012) | |
12.1 |
|
|
|
| — |
| Statement regarding computation of CMS Energy’s Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Dividends | |
12.2 |
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|
| — |
| Statement regarding computation of Consumers’ Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Dividends | |
21.1 |
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|
| — |
| Subsidiaries of CMS Energy and Consumers | |
23.1 |
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|
|
| — |
| Consent of PricewaterhouseCoopers LLP for CMS Energy | |
23.2 |
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|
| — |
| Consent of PricewaterhouseCoopers LLP for Consumers | |
24.1 |
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|
|
| — |
| Power of Attorney for CMS Energy | |
24.2 |
|
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|
| — |
| Power of Attorney for Consumers | |
31.1 |
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| — |
| CMS Energy’s certification of the CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2 |
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|
| — |
| CMS Energy’s certification of the CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.3 |
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|
| — |
| Consumers’ certification of the CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.4 |
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|
| — |
| Consumers’ certification of the CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1 |
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|
| — |
| CMS Energy’s certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2 |
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|
| — |
| Consumers’ certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
99.11 |
| 333-177886 |
| 99.1 | — |
| CMS Energy Stock Purchase Plan, as amended and restated November 10, 2011 (Form S-3ASR filed November 10, 2011) | |
101.INS3 |
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|
| — |
| XBRL Instance Document | |
101.SCH3 |
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| — |
| XBRL Taxonomy Extension Schema | |
101.CAL3 |
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| — |
| XBRL Taxonomy Extension Calculation Linkbase | |
101.DEF3 |
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| — |
| XBRL Taxonomy Extension Definition Linkbase | |
101.LAB3 |
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| — |
| XBRL Taxonomy Extension Labels Linkbase | |
101.PRE3 |
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| — |
| XBRL Taxonomy Extension Presentation Linkbase | |
182
| Previously Filed | ||||||||
| With File | As Exhibit | |||||||
Exhibits | Number | Number | Description | |||||
| 10.42 | 1-9513 | (10)(f) | — | Form of Change in Control Agreement as of March 2010 (1st qtr. 2010 Form 10-Q) | ||||
| 10.43 | 1-9513 | (10)(g)* | — | Agreement between David W. Joos and CMS Energy Board of Directors (1st qtr. 2010 Form 10-Q) | ||||
| 10.44 | 1-5611 | (10)(h) | — | Bond Purchase Agreement between Consumers and each of the Purchasers named therein dated as of April 19, 2010 (1st qtr. 2010 Form 10-Q) | ||||
| 10.45 | 1-5611 | 10.1 | — | Bond Purchase Agreement between Consumers and each of the Purchasers named therein dated as of September 27, 2010 (Form 8-K filed September 30, 2010) | ||||
| 12.1 | — | Statement regarding computation of CMS Energy’s Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Dividends | ||||||
| 12.2 | — | Statement regarding computation of Consumers’ Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Dividends | ||||||
| 21.1 | — | Subsidiaries of CMS Energy and Consumers | ||||||
| 23.1 | — | Consent of PricewaterhouseCoopers LLP for CMS Energy | ||||||
| 23.2 | — | Consent of PricewaterhouseCoopers LLP for Consumers | ||||||
| 24.1 | — | Power of Attorney for CMS Energy | ||||||
| 24.2 | — | Power of Attorney for Consumers | ||||||
| 31.1 | — | CMS Energy’s certification of the CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||||
| 31.2 | — | CMS Energy’s certification of the CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||||
| 31.3 | — | Consumers’ certification of the CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||||
| 31.4 | — | Consumers’ certification of the CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||||
| 32.1 | — | CMS Energy’s certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||||
| 32.2 | — | Consumers’ certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||||
| 99.1 | — | CMS Energy Corporation Stock Purchase Plan, amended and restated as of December 1, 2010 | ||||||
| 101.INS** | — | XBRL Instance Document | ||||||
| 101.SCH** | — | XBRL Taxonomy Extension Schema | ||||||
| 101.CAL** | — | XBRL Taxonomy Extension Calculation Linkbase | ||||||
| 101.DEF** | — | XBRL Taxonomy Extension Definition Linkbase | ||||||
| 101.LAB** | — | XBRL Taxonomy Extension Labels Linkbase | ||||||
| 101.PRE** | — | XBRL Taxonomy Extension Presentation Linkbase | ||||||
3 The financial information contained in the XBRL-related information is “unaudited” and “unreviewed.”
Exhibits listed above that have heretofore been filed with the SEC pursuant to various acts administered by the SEC, and which were designated as noted above, are hereby incorporated herein by reference and made a part hereof with the same effect as if filed herewith.
183
Years Ended December 31 | 2010 | 2009 | 2008 | |||||||||
| In Millions | ||||||||||||
| Operating Expenses | ||||||||||||
| Depreciation and amortization | $ | — | $ | — | $ | 3 | ||||||
| Other operating expense | 6 | 10 | 5 | |||||||||
| Total Operating Expenses | 6 | 10 | 8 | |||||||||
| Operating Loss | (6 | ) | (10 | ) | (8 | ) | ||||||
| Other Income | ||||||||||||
| Equity earnings of subsidiaries | 464 | 310 | 433 | |||||||||
| Interest income | 1 | — | 1 | |||||||||
| Other income (expense) | (8 | ) | 12 | (4 | ) | |||||||
| Total Other Income | 457 | 322 | 430 | |||||||||
| Interest Charges | ||||||||||||
| Interest on long-term debt | 147 | 124 | 127 | |||||||||
| Interest on preferred securities | — | 8 | 14 | |||||||||
| Intercompany interest expense and other | 4 | 8 | 48 | |||||||||
| Total Interest Charges | 151 | 140 | 189 | |||||||||
| Income Before Income Taxes | 300 | 172 | 233 | |||||||||
| Income Tax Benefit | (50 | ) | (57 | ) | (62 | ) | ||||||
| Income From Continuing Operations | 350 | 229 | 295 | |||||||||
| Loss From Discontinued Operations | (10 | ) | — | — | ||||||||
| Net Income | 340 | 229 | 295 | |||||||||
| Preferred Dividends | 8 | 11 | 11 | |||||||||
| Redemption Premium on Preferred Stock | 8 | — | — | |||||||||
| Net Income Available to Common Stockholders | $ | 324 | $ | 218 | $ | 284 | ||||||
184
Years Ended December 31 | 2010 | 2009 | 2008 | |||||||||
| In Millions | ||||||||||||
| Cash Flows From Operating Activities | ||||||||||||
| Net income | $ | 340 | $ | 229 | $ | 295 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
| Equity earnings of subsidiaries | (464 | ) | (310 | ) | (433 | ) | ||||||
| Dividends received from subsidiaries | 358 | 340 | 1,247 | |||||||||
| Depreciation and amortization | — | — | 3 | |||||||||
| Increase in accounts receivable | — | (2 | ) | — | ||||||||
| Increase (decrease) in accounts payable | (16 | ) | 16 | (2 | ) | |||||||
| Change in other assets and liabilities | 117 | 7 | (55 | ) | ||||||||
| Net cash provided by operating activities | 335 | 280 | 1,055 | |||||||||
| Cash Flows From Investing Activities | ||||||||||||
| Investment in subsidiaries | (250 | ) | (100 | ) | (22 | ) | ||||||
| Net cash used in investing activities | (250 | ) | (100 | ) | (22 | ) | ||||||
| Cash Flows From Financing Activities | ||||||||||||
| Proceeds from bank loans and notes | 800 | 718 | 665 | |||||||||
| Proceeds from issuance of common stock | 8 | 9 | 9 | |||||||||
| Retirement of bank loans and notes | (396 | ) | (788 | ) | (570 | ) | ||||||
| Payment of common stock dividends | (154 | ) | (114 | ) | (82 | ) | ||||||
| Payment of preferred stock dividends | (8 | ) | (11 | ) | (11 | ) | ||||||
| Redemption of preferred stock | (239 | ) | (4 | ) | (1 | ) | ||||||
| Debt issuance costs and financing fees | (11 | ) | (5 | ) | — | |||||||
| Increase (decrease) in notes payable, net | (85 | ) | 15 | (1,043 | ) | |||||||
| Net cash used in financing activities | (85 | ) | (180 | ) | (1,033 | ) | ||||||
| Net Change in Cash and Temporary Cash Investments | $ | — | $ | — | $ | — | ||||||
| Cash and Temporary Cash Investments, Beginning of Period | $ | — | $ | — | $ | — | ||||||
| Cash and Temporary Cash Investments, End of Period | $ | — | $ | — | $ | — | ||||||
185
December 31 | 2010 | 2009 | ||||||
| In Millions | ||||||||
Assets | ||||||||
| Current Assets | ||||||||
| Notes and accrued interest receivable | $ | 1 | $ | 1 | ||||
| Accounts receivable, including intercompany and related parties | 5 | 6 | ||||||
| Deferred income taxes | 13 | 7 | ||||||
| Total current assets | 19 | 14 | ||||||
| Plant, Property, and Equipment, at cost | 16 | 16 | ||||||
| Less accumulated depreciation | (16 | ) | (15 | ) | ||||
| Total plant, property, and equipment | — | 1 | ||||||
| Non-current Assets | ||||||||
| Deferred income taxes | 372 | 371 | ||||||
| Investment in Subsidiaries | 4,942 | 4,591 | ||||||
| Other investment — SERP | 19 | 17 | ||||||
| Other | 26 | 46 | ||||||
| Total non-current assets | 5,359 | 5,025 | ||||||
Total Assets | $ | 5,378 | $ | 5,040 | ||||
186
December 31 | 2010 | 2009 | ||||||
| In Millions | ||||||||
Liabilities and Equity | ||||||||
| Current Liabilities | ||||||||
| Current portion of long-term debt | $ | 437 | $ | 207 | ||||
| Accounts and notes payable, including intercompany and related parties | 156 | 258 | ||||||
| Accrued interest, including intercompany | 27 | 24 | ||||||
| Accrued taxes | 81 | 13 | ||||||
| Other | 5 | 5 | ||||||
| Total current liabilities | 706 | 507 | ||||||
| Non-Current Liabilities | ||||||||
| Long-term debt | ||||||||
| Senior notes | 1,848 | 1,673 | ||||||
| Intercompany notes | 34 | — | ||||||
| Related party | — | 34 | ||||||
| Unamortized discount | (28 | ) | (37 | ) | ||||
| Postretirement benefits | 23 | 22 | ||||||
| Other non-current liabilities | 2 | — | ||||||
| Total non-current liabilities | 1,879 | 1,692 | ||||||
| Equity | ||||||||
| Common stockholders’ equity | 2,793 | 2,602 | ||||||
| Nonredeemable preferred stock | — | 239 | ||||||
| Total equity | 2,793 | 2,841 | ||||||
Total Liabilities and Equity | $ | 5,378 | $ | 5,040 | ||||
187
188
| Balance at | Charged | Charged to | Balance | |||||||||||||||||
| Beginning | to | Other | at End | |||||||||||||||||
Description | of Period | Expense | Accounts | Deductions | of Period | |||||||||||||||
| (In Millions) | ||||||||||||||||||||
| Allowance for uncollectible accounts(a) | ||||||||||||||||||||
| 2010 | $ | 23 | $ | 53 | $ | — | $ | 51 | $ | 25 | ||||||||||
| 2009 | $ | 26 | $ | 47 | $ | — | $ | 50 | $ | 23 | ||||||||||
| 2008 | $ | 21 | $ | 47 | $ | — | $ | 42 | $ | 26 | ||||||||||
| Deferred tax valuation allowance | ||||||||||||||||||||
| 2010 | $ | 34 | $ | 1 | $ | (15 | ) | $ | 1 | $ | 19 | |||||||||
| 2009 | $ | 32 | $ | 2 | $ | — | $ | — | $ | 34 | ||||||||||
| 2008 | $ | 32 | $ | — | $ | 7 | $ | 7 | $ | 32 | ||||||||||
| Allowance for notes receivable(a) | ||||||||||||||||||||
| 2010 | $ | 6 | $ | 4 | $ | — | $ | 5 | $ | 5 | ||||||||||
| 2009 | $ | 34 | $ | 7 | $ | — | $ | 35 | $ | 6 | ||||||||||
| 2008 | $ | 33 | $ | 4 | $ | — | $ | 3 | $ | 34 | ||||||||||
| Balance at | Charged | Charged to | Balance at | |||||||||||||||||
| Beginning | to | Other | End of | |||||||||||||||||
Description | of Period | Expense | Accounts | Deductions | Period | |||||||||||||||
| (In Millions) | ||||||||||||||||||||
| Allowance for uncollectible accounts(a) | ||||||||||||||||||||
| 2010 | $ | 21 | $ | 53 | $ | — | $ | 51 | $ | 23 | ||||||||||
| 2009 | $ | 24 | $ | 47 | $ | — | $ | 50 | $ | 21 | ||||||||||
| 2008 | $ | 16 | $ | 47 | $ | — | $ | 39 | $ | 24 | ||||||||||
189
190
191
192
193
194
195
Exhibits | Description | |||||
| 10 | .34 | — | Amended and Restated Receivables Purchase Agreement dated as of November 23, 2010 among Consumers Receivables Funding II, LLC, Consumers Energy Company, The Conduits from time to time party thereto, The Financial Institutions from time to time party thereto, The Managing Agents from time to time party thereto, and JPMorgan Chase Bank, NA, as Administrative Agent | |||
| 10 | .40 | — | Amendment No. 7 to the Receivables Sale Agreement dated as of November 23, 2010 | |||
| 99 | .1 | — | CMS Energy Corporation Stock Purchase Plan, amended and restated as of December 1, 2010 | |||
| 12 | .1 | — | Statement regarding computation of CMS Energy’s Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Dividends | |||
| 12 | .2 | — | Statement regarding computation of Consumers’ Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Dividends | |||
| 21 | .1 | — | Subsidiaries of CMS Energy and Consumers | |||
| 23 | .1 | — | Consent of PricewaterhouseCoopers LLP for CMS Energy | |||
| 23 | .2 | — | Consent of PricewaterhouseCoopers LLP for Consumers | |||
| 24 | .1 | — | Power of Attorney for CMS Energy | |||
| 24 | .2 | — | Power of Attorney for Consumers | |||
| 31 | .1 | — | CMS Energy’s certification of the CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||
| 31 | .2 | — | CMS Energy’s certification of the CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||
| 31 | .3 | — | Consumers’ certification of the CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||
| 31 | .4 | — | Consumers’ certification of the CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||
| 32 | .1 | — | CMS Energy’s certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||
| 32 | .2 | — | Consumers’ certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||
| 101 | .INS* | — | XBRL Instance Document | |||
| 101 | .SCH* | — | XBRL Taxonomy Extension Schema | |||
| 101 | .CAL* | — | XBRL Taxonomy Extension Calculation Linkbase | |||
| 101 | .DEF* | — | XBRL Taxonomy Extension Definition Linkbase | |||
| 101 | .LAB* | — | XBRL Taxonomy Extension Labels Linkbase | |||
| 101 | .PRE* | — | XBRL Taxonomy Extension Presentation Linkbase | |||
196