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Electric Utility Supply: OverPresented in the following table are the sources of Consumers’ electric supply over the last five years, Consumers’ electric supply came from the following sources:years:

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

2                   Includes purchases from long-term purchase contracts.PPAs.

3                   Includes purchases from the MISO energy market and seasonal purchases.market.

During 2013,2015, 45 percent of the energy Consumers provided to customers was generated by its coal-fueled generating units, which burned nine million tons of coal and produced a combined total of 15,833 GWh of electricity.

In order to obtain the coal it needs, Consumers enters into physical coal supply contracts. At December 31, 2015, Consumers had contracts to purchase coal through 2018; payment obligations under these contracts totaled $118 million. Most of Consumers’ rail-supplied coal contracts have fixed prices, although some contain market-based pricing. Consumers’ vessel-supplied coal contracts have fixed base prices that are adjusted monthly to reflect changes to the fuel cost of vessel transportation. At December 31, 2015, Consumers had 79 percent of its 2016 expected coal requirements under contract, as well as a 34-day supply of coal on hand.

In conjunction with its coal supply contracts, Consumers leases a fleet of rail cars and has transportation contracts with various companies to provide rail and vessel services for delivery of purchased 49coal to Consumers’ generating facilities. Consumers’ coal transportation contracts expire through 2019; payment obligations under these contracts totaled $321 million at December 31, 2015.

During 2015, Consumers acquired 43 percent of the electricity it provided to customers through long-term PPAs seasonal purchases, and the MISO energy market. Consumers offers its generation into the MISO energy market on a day-ahead and real-time basis and bids for power in the market to serve the demand of its customers. Consumers is a net purchaser of power and supplements its generation capability with purchases from the MISO energy market to meet its customers’ needs during peak demand periods.

At December 31, 2013,2015, Consumers had unrecognized future commitments (amounts for which, liabilities, in accordance with GAAP, liabilities have not been recorded on its balance sheet) to purchase capacity and energy under long-term PPAs with various generating plants. These contracts require monthly capacity payments based on the plants’ availability or deliverability. The payments for 20142016 through 20322036 are

estimated to total $12.1$10 billion and, to range from $917 million to $1.1 billion annually for each of the next five years.years, $1.0 billion annually. These amounts may vary depending on plant availability and fuel costs. For further information about Consumers’ future capacity and energy purchase obligations, see Item 8. Financial Statements and Supplementary Data, Data—MD&A – &A—Capital Resources and Liquidity and Note 3,4, Contingencies and Commitments – Commitments—Contractual Commitments.

During 2013, 462015, ten percent of the energy Consumers provided to customers was generated by its four coal-fuelednatural gas-fueled generating sites,units, 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

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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 1225 bcf of natural gas and produced a combined total of 1,4153,601 GWh of electricity.

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

ThePresented in the following table is the cost per million Btu of all fuels consumed, shown in the following table,which fluctuates with the mix of fuel used.

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 enactedThe 2008 Energy Law allows electric customers in 2000 allows Consumers’ electric customersservice territory to buy electric generation service from Consumers or from alternative electric suppliers.  The 2008 Energy Law revised the statute by limiting alternative electric supplysuppliers in an aggregate amount up to ten percent of Consumers’ weather-adjusted retail sales for the preceding calendar year. At December 31, 2013, Consumers’2015, electric deliveries under the ROA program were at the ten-percent limit and alternative electric suppliers were providing 787751 MW of electric generation service to 310 ROA customers. Of Consumers’ 1.8 million electric customers, 304 customers, or 0.02 percent, purchased generation service under the ROA program.

In December 2013, a bill was introduced toearly 2015, members of the Michigan Senate and House of Representatives that, if enacted, would reviseintroduced various bills related to energy policy. Among other things, the 2008 Energy Law by removingbills propose a range of changes to ROA, including eliminating ROA, maintaining the ten-percent limitexisting ROA program but imposing conditions on a customer’s return to utility service, and allowing all of Consumers’ electric customers to take service from alternative electric suppliers.  Presently, the proportion of Consumers’ electric deliveries underraising 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.limit. 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.

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Table Presently, the Michigan Senate and House of ContentsRepresentatives are considering two separate but similar pieces of legislation to address energy policy, including ROA. Consumers is unable to predict the form and timing of any final legislation.

Consumers also hasfaces competition or potential competition from:associated with:

·                 industrial customers relocating all or a portion of their production capacity outside of Consumers’ service territory for economic reasons;reasons

·                 municipalities owning or operating competing electric delivery systems; andsystems

·                 customer self-generation.self-generation

Consumers addresses this competition by monitoring activity in adjacent geographical 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: Consumers’ gas utility operations, which include the purchase, transmission, storage, distribution, and sale of natural gas, generated operating revenue of $1.9 billion in 2015, $2.4 billion in 2014, and $2.1 billion in 2013, $2.0 billion in 2012, and $2.3 billion in 2011.2013. Consumers’ gas utility customer base consists of a mix of primarily residential, commercial, and diversified industrial customers in Michigan’s Lower Peninsula.

Presented in the following illustration is Consumers’ 20132015 gas utility operating revenue of $2.1$1.9 billion by customer class:

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

In 2013,2015, deliveries of natural gas, including off-system transportation deliveries, through Consumers’ pipeline and distribution network, totaled 352356 bcf, which included GCC deliveries of 6357 bcf. In 2012,2014, deliveries of natural gas, including off-system transportation deliveries, through Consumers’ pipeline and distribution network, totaled 329373 bcf, which included GCC deliveries of 4965 bcf. Consumers’ gas utility operations are seasonal. Consumers injects natural gas into storage during the summer months for use

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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 2013, 532015, 42 percent of the natural gas supplied to all customers during the winter months was supplied from storage.

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 20132015 and 2012:2014:

Gas Utility Properties: Consumers’ gas distributiontransmission, storage, and transmissiondistribution system consists of:

·                 26,8191,686 miles of distribution mains;transmission lines

·                 1,66115 gas storage fields with a total storage capacity of 309 bcf and a working gas volume of 151 bcf

·27,537 miles of transmission lines;distribution mains

·                 seven compressor stations with a total of 150,027157,939 installed and available horsepower; andhorsepower

·15 gas storage fields with an aggregate storage capacity of 309 bcf and a working storage capacity of 143 bcf.

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Gas Utility Supply: In 2013,2015, Consumers purchased 6669 percent of the gas it delivered from U.S. producers and 10five percent from Canadian producers. The remaining 2426 percent was purchased from authorized GCC suppliers and delivered by Consumers to customers in the GCC program. Presented in the following illustration are the supply arrangements for the gas Consumers delivered to GCC and GCR customers during 2013:2015:

Firm gas transportation or firm city-gate contracts are those that define a fixed amount, price, and delivery time frame. Consumers’ firm gas transportation contracts are with ANR Pipeline Company, Great Lakes Gas Transmission L.P.,Limited Partnership, Panhandle Eastern Pipe Line Company, and Trunkline.Trunkline Gas Company, LLC, each a non-affiliated company. Under these contracts, Consumers purchases and transports gas to Michigan for ultimate delivery to its customers. Consumers’ firm gas transportation contracts expire through 20172023 and provide for the delivery of 47 percent of Consumers’ total gas supply requirements.requirements in 2016. Consumers purchases the balance of its required gas supply under firm city-gate contracts and through authorized suppliers under the GCC program.

Gas Utility Competition:Competition exists in various aspects of Consumers’ gas utility business. Competition comes from GCC and from alternative fuels and energy sources, such as propane, oil, and electricity.

ENTERPRISES SEGMENT – NON-UTILITY OPERATIONS AND INVESTMENTSEnterprises Segment—Non-Utility Operations and Investments

CMS Energy’s enterprises segment, through various subsidiaries and certain equity investments, is engaged primarily in domestic independent power production and the marketing of independent power production. The enterprises segment’s operating revenue was $190 million in 2015, $299 million in 2014, and $181 million in 2013, $183 million in 2012, and $204 million in 2011.2013.

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Independent Power Production: At December 31, 2013,2015, CMS Energy had ownership interests in independent power plants totaling 1,135 gross1,177 MW or 1,0341,077 net MW. (Net MW reflects that portion of the gross capacity relating to CMS Energy’s ownership interests.) Presented in the following table are CMS Energy’s interests in independent power plants at December 31, 2013:2015:

1                   Represents the intended full-load sustained output of each plant.

2                   In December 2015, capital upgrades and modifications to the plant’s turbines increased gross capacity from 710 MW to 752 MW.

The operating revenue from independent power production was $17 million in 2013, $162015, $18 million in 2012,2014, and $17 million in 2011.2013. 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 and continues towith a focus on optimizing CMS Energy’s independent power production portfolio. In 2013,2015, CMS ERM marketed 11eight bcf of natural gas and 3,5964,579 GWh of electricity. Electricity marketed by CMS ERM was generated by independent power production of the enterprises segment and by unrelated third parties. CMS ERM’s operating revenue includedwas $173 million in income from continuing operations2015, $281 million in CMS Energy’s consolidated financial statements was2014, and $164 million in 2013, $167 million in 2012, and $187 million in 2011.2013.

Other Businesses

OEnerBank:THERBUSINESSES

EnerBank:  EnerBank is a Utah state-chartered, FDIC-insured industrial bank providing unsecured consumer installment loans for financing home improvements. EnerBank’s operating revenue includedwas $101 million in income from continuing operations2015, $80 million in CMS Energy’s consolidated financial statements was2014, and $64 million in 2013, $57 million in 2012, and $46 million in 2011.2013.

CMS ENERGY AND CONSUMERS REGULATION

CMS Energy, Consumers, and their subsidiaries are subject to regulation by various federal, state, local, and foreignlocal governmental agencies, including those described in the following sections.

FERC and NERC

FERC has exercised limited jurisdiction over several independent power plants and exempt wholesale generators in which CMS Enterprises has ownership interests, as well as over CMS ERM, CMS Gas Transmission, and DIG. AmongFERC’s jurisdiction includes, among other things, FERC has jurisdiction over acquisitions, operations, and disposals of certain assets and facilities, services provided and rates charged, and conduct among affiliates, andaffiliates. FERC also has limited jurisdiction over holding company matters with respect to CMS Energy. FERC, in connection with NERC and with regional reliability organizations, also regulates generation and

transmission owners and operators, load serving entities, purchase and sale entities, and others with regard to reliability of the bulk power system.

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

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

MPSC

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

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

Rate Proceedings: For information regarding open rate proceedings, see Item 8. Financial Statements and Supplementary Data, Data—MD&A — &A—Outlook and Notes to the Consolidated Financial Statements — Statements—Note 2,3, Regulatory Matters.

OTHER REGULATIONOther Regulation