UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20192020
OR
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____to_____
Commission File Number
Registrant; State of Incorporation;
Address; and Telephone Number
IRS Employer Identification No.
1-9513CMS ENERGY CORPORATION38-2726431
(A Michigan Corporation)
One Energy Plaza, Jackson, Michigan 49201
(517) 788‑0550
1-5611CONSUMERS ENERGY COMPANY38-0442310
(A Michigan Corporation)
One Energy Plaza, Jackson, Michigan 49201
(517) 788‑0550
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
CMS Energy Corporation Common Stock, $0.01 par value CMS New York Stock Exchange
CMS Energy Corporation 5.625% Junior Subordinated Notes due 2078 CMSA New York Stock Exchange
CMS Energy Corporation 5.875% Junior Subordinated Notes due 2078 CMSC New York Stock Exchange
CMS Energy Corporation 5.875% Junior Subordinated Notes due 2079 CMSD New York Stock Exchange
Consumers Energy Company Cumulative Preferred Stock, $100 par value: $4.50 Series CMS-PB New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
CMS Energy Corporation:YesNo Consumers Energy Company:YesNo 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
CMS Energy Corporation:YesNo Consumers Energy Company:YesNo 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.
CMS Energy Corporation:     Consumers Energy Company:     
Large accelerated filer    Large accelerated filer    
Non‑accelerated filer    Non‑accelerated filer    
Accelerated filer    Accelerated filer    
Smaller reporting company    Smaller reporting company    
Emerging growth company    Emerging growth company    
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
CMS Energy Corporation:    Consumers Energy Company:    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act).
CMS Energy Corporation:YesNo Consumers Energy Company:YesNo 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock at October 7, 2019:8, 2020:
CMS Energy Corporation: 
CMS Energy Common Stock, $0.01 par value (including 20,31612,322 shares owned by Consumers Energy)283,842,478286,334,466
Consumers Energy Company: 
Consumers Common Stock, $10 par value, privately held by CMS Energy Corporation84,108,789











CMS Energy Corporation
Consumers Energy Company
Quarterly Reports on Form 10‑Q to the Securities and Exchange Commission for the Period Ended September 30, 20192020
Table of Contents


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Glossary
Certain terms used in the text and financial statements are defined below.
2016 Energy Law
Michigan’s Public Acts 341 and 342 of 2016, which became effective in April 2017
20182019 Form 10‑K
Each of CMS Energy’s and Consumers’ Annual Report on Form 10‑K for the year ended December 31, 20182019
ABATE
The Association of Businesses Advocating Tariff Equity
AOCI
Accumulated other comprehensive income (loss)
ARO
Asset retirement obligation
ASU
Financial Accounting Standards Board Accounting Standards Update
Aviator Wind
Aviator Wind, LLC, a VIE in which Aviator Wind Equity Holdings holds a Class B membership interest
Aviator Wind Equity Holdings
Aviator Wind Equity Holdings, LLC, a VIE in which Grand River Wind, LLC, a wholly owned subsidiary of CMS Enterprises, has a 51‑percent interest
Bay Harbor
A residential/commercial real estate area located near Petoskey, Michigan, in which CMS Energy sold its interest in 2002
bcf
Billion cubic feet
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
CARES Act
Coronavirus Aid, Relief, and Economic Security Act of 2020
CCR
Coal combustion residual
CDC
U.S. Centers for Disease Control and Prevention


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CEO
Chief Executive Officer
CERCLA
The Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended
CFO
Chief Financial Officer
Clean Air Act
Federal Clean Air Act of 1963, as amended
Clean Energy Plan
Consumers’ long‑term strategy for delivering clean, reliable, and affordable energy to its customers through the increased use of energy efficiency and customer demand management programs, additional renewable energy generation, and conservation voltage reduction
Clean Water Act
Federal Water Pollution Control Act of 1972, as amended
CMS Capital
CMS Capital, L.L.C., a wholly owned subsidiary of CMS Energy


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CMS Energy
CMS Energy Corporation and its consolidated subsidiaries, unless otherwise noted; the parent of Consumers, and CMS Enterprises, and EnerBank
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 Company, a wholly owned subsidiary of CMS Enterprises
CMS Land
CMS Land Company, a wholly owned subsidiary of CMS Capital, L.L.C., a wholly owned subsidiary of CMS Energy
CMS MST
CMS Marketing, Services and Trading Company, a wholly owned subsidiary of CMS Enterprises, whose name was changed to CMS ERMEnergy Resource Management Company in 2004
Consumers
Consumers Energy Company and its consolidated subsidiaries, unless otherwise noted; a wholly owned subsidiary of CMS Energy
COVID‑19
Coronavirus disease 2019, a respiratory illness that was declared a pandemic in March 2020 and to which public and private agencies have responded by instituting social-distancing and other measures designed to slow the spread of the disease
CSAPR
The Cross‑State Air Pollution Rule of 2011, as amended


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DB Pension Plan A
Defined benefit pension plan of CMS Energy and Consumers, including certain present and former affiliates and subsidiaries, created as of December 31, 2017 for active employees who were covered under the defined benefit pension plan that closed in 2005
DB Pension Plans
Defined benefit pension plans of CMS Energy and Consumers, including certain present and former affiliates and subsidiaries
DB SERP
Defined Benefit Supplemental Executive Retirement Plan
DIG
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 of 2010
EBITDA
Earnings before interest, taxes, depreciation, and amortization
EGLE
The Michigan Department of Environment, Great Lakes, and Energy, formerly known as the Michigan Department of Environmental Quality
EnerBank
EnerBank USA, a wholly owned subsidiary of CMS Capital,


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CMS Energy
energy waste reduction
The reduction of energy consumption through energy efficiency and demand‑side energy conservation, as established under the 2016 Energy Law
EPA
U.S. Environmental Protection Agency
EPS
Earnings per share
Exchange Act
Securities Exchange Act of 1934
FDIC
Federal Deposit Insurance Corporation
FERC
The Federal Energy Regulatory Commission
FICO
Fair Isaac Corporation, a non-affiliated company providing data analytic services, with a focus on credit scoring services
FTR
Financial transmission right


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GAAP
U.S. Generally Accepted Accounting Principles
GCR
Gas cost recovery
Genesee
Genesee Power Station Limited Partnership, a variable interest entity in which HYDRA‑CO Enterprises, Inc., a wholly owned subsidiary of CMS Enterprises, has a 50‑percent interest
Internal Revenue Code
Internal Revenue Code of 1986, as amended
IRP
Integrated resource plan
ITCIRS
International Transmission Company, wholly owned by ITC Holdings Corp., a non‑affiliated companyInternal Revenue Service
kWh
Kilowatt‑hour, a unit of energy equal to one thousand watt‑hours
LIBOR
The London Interbank Offered Rate
Ludington
Ludington pumped‑storagepumped-storage plant, jointly owned by Consumers and DTE Electric Company, a non‑affiliated company


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MATS
Mercury and Air Toxics Standards, which limit mercury, acid gases, and other toxic pollution from coal‑fueled and oil‑fueled power plants
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
METC
Michigan Electric Transmission Company, LLC, a non‑affiliated company
MGP
Manufactured gas plant
Michigan Mercury Rule
Michigan Air Pollution Control Rules of 2009, as amended, Part 15: Emission Limitations and Prohibitions – Prohibitions—Mercury
MISO
Midcontinent Independent System Operator, Inc.
MISS DIG Act
MISS DIG Underground Facility Damage Prevention and Safety Act of 2013
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


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owners in MISO must request approval to mothball a unit, and MISO then evaluates the request for reliability impacts
MPSC
Michigan Public Service Commission
MSF
Michigan Strategic Fund
MW
Megawatt, a unit of power equal to one million watts
NAAQS
National Ambient Air Quality Standards
NPDES
National Pollutant Discharge Elimination System, a permit system for regulating point sources of pollution under the Clean Water Act


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NREPA
Part 201 of Michigan’s Natural Resources and Environmental Protection Act of 1994, as amended
NSR
New Source Review, a construction‑permitting program under the Clean Air Act
OPEB
Other Post‑Employment Benefits
OPEB Plan
Postretirement health care and life insurance plans of CMS Energy and Consumers, including certain present and former affiliates and subsidiaries
OSHA
Occupational Safety and Health Administration
PCB
Polychlorinated biphenyl
PHMSA
The U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration
PPA
Power purchase agreement
PSCR
Power supply cost recovery
PURPA
The Public Utility Regulatory Policies Act of 1978
RCRA
The Federal Resource Conservation and Recovery Act of 1976
REC
Renewable energy credit


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ROA
Retail Open Access, which allows electric generation customers to choose alternative electric suppliers pursuant to Michigan’s Public Acts 141 and 142 of 2000, as amended
SEC
U.S. Securities and Exchange Commission
securitization
A financing method authorized by statute and approved by the MPSC which allows a utility to sell its right to receive a portion of the rate payments received from its customers for the repayment of securitization bonds issued by a special‑purpose entity affiliated with such utility
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 Consumers’ existing information technology system to manage the data and enable changes to key business processes


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TCJA
Tax Cuts and Jobs Act of 2017
T.E.S. Filer CityUWUA
T.E.S. Filer City Station Limited Partnership, a variableUtility Workers Union of America, AFL-CIO
VIE
Variable interest entity in which HYDRA‑CO Enterprises, Inc., a wholly owned subsidiary of CMS Enterprises, has a 50‑percent interest


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Filing Format
This combined Form 10‑Q is separately filed by CMS Energy and Consumers. Information in this combined Form 10‑Q relating to each individual registrant is filed by such registrant on its own behalf. Consumers makes no representation regarding information relating to any other companies affiliated with CMS Energy other than its own subsidiaries. None of CMS Energy, CMS Enterprises, EnerBank, 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, EnerBank, 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, neither Consumers nor any other subsidiary of CMS Energy has any obligation in respect of debt securities of CMS Energy.
This report should be read in its entirety. No one section of this report deals with all aspects of the subject matter of this report. This report should be read in conjunction with the consolidated financial statements and related notes and with MD&A included in the 20182019 Form 10‑K.
Available Information
CMS Energy’s internet address is www.cmsenergy.com. CMS Energy routinely posts important information on its website and considers the Investor Relations section, www.cmsenergy.com/investor‑relations, a channel of distribution. Information contained on CMS Energy’s website is not incorporated herein.
Forward‑Looking Statements and Information
This Form 10‑Q and other CMS Energy and Consumers disclosures may contain forward‑looking statements as defined by the Private Securities Litigation Reform Act of 1995. The use of “might,” “may,” “could,” “should,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “projects,” “forecasts,” “predicts,” “assumes,” and other similar words is intended to identify forward‑looking statements that involve risk and uncertainty. This discussion of potential risks and uncertainties is designed to highlight important factors that may impact CMS Energy’s and Consumers’ businesses and financial outlook. CMS Energy and Consumers have no obligation to update or revise forward‑looking statements regardless of whether new information, future events, or any other factors affect the information contained in the statements. These forward‑looking statements are subject to various factors that could cause CMS Energy’s and Consumers’ actual results to differ materially from the results anticipated in these statements. These factors include, but are not limited to, the following, all of which are potentially significant:
the impact of the COVID‑19 pandemic and the related economic disruption on CMS Energy’s and Consumers’ revenues, expenses, uncollectible accounts, energy efficiency programs, pension funding, PSCR and GCR costs, capital investment programs, cash flows, liquidity, maintenance of existing assets, and other operating expenses
the impact of new regulation by the MPSC, FERC, and other applicable governmental proceedings and regulations, including any associated impact on electric or gas rates or rate structures
potentially adverse regulatory treatment or failure to receive timely regulatory orders affecting Consumers that are or could come before the MPSC, FERC, or other governmental authorities


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


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the adoption of federal or state laws or regulations or challenges to federal or state laws or regulations or changes in applicable laws, rules, regulations, principles, or practices, or in their interpretation, such as those related to energy policy, ROA, and PURPA, infrastructure integrity or security, gas pipeline safety, gas pipeline capacity, energy waste reduction, the environment, regulation or deregulation, reliability, health care reforms (including comprehensive health care reform enacted in 2010), taxes, accounting matters, climate change, air emissions, renewable energy, potential effects of the Dodd‑Frank Act, and other business issues that could have an impact on CMS Energy’s, Consumers’, or any of their affiliates’ businesses or financial results
factors affecting operations, such as costs and availability of personnel, equipment, and materials; weather conditions; natural disasters; catastrophic weather‑related damage; scheduled or unscheduled equipment outages; maintenance or repairs; environmental incidents; failures of equipment or materials; electric transmission and distribution or gas pipeline system constraints; interconnection requirements; political and social unrest; general strikes; the government and/or paramilitary response to political or social events; and changes in trade policies or regulations
increases in demand for renewable energy by customers seeking to meet sustainability goals
the ability of Consumers to execute its cost‑reduction strategies
potentially adverse regulatory or legal interpretations or decisions regarding environmental matters, or delayed regulatory treatment or permitting decisions that are or could come before EGLE, the EPA, and/or the U.S. Army Corps of Engineers, and potential environmental remediation costs associated with these interpretations or decisions, including those that may affect Bay Harbor or Consumers’ routine maintenance, repair, and replacement 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 and deliverability 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 potential effects of a future transition from LIBOR to an alternative reference interest rate in the credit and capital markets
the investment performance of the assets of CMS Energy’s and Consumers’ pension and benefit plans, the discount rates, mortality assumptions, and future medical costs used in calculating the plans’ obligations, and the resulting impact on future funding requirements
the impact of the economy, particularly in Michigan, and potential future volatility in the financial and credit markets on CMS Energy’s, Consumers’, or any of their affiliates’ revenues, ability to collect accounts receivable from customers, or cost and availability of capital
changes in the economic and financial viability of CMS Energy’s and Consumers’ suppliers, customers, and other counterparties and the continued ability of these third parties, including those in bankruptcy, to meet their obligations to CMS Energy and Consumers


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


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national, regional, and local economic, competitive, and regulatory policies, conditions, and developments
loss of customer demand for electric generation supply to alternative electric suppliers, increased use of distributed generation, or energy waste reduction and storage
increases in demand for renewable energy by customers seeking to meet sustainability goals
adverse consequences of employee, director, or third‑party fraud or non‑compliance with codes of conduct or with laws or regulations
federal regulation of electric sales and transmission of electricity, including periodic re‑examination by federal regulators of CMS Energy’s and Consumers’ market‑based sales authorizations
the impact of credit markets, economic conditions, increased competition, and any new banking and consumer protection 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 interest rates and future prices of electricity, natural gas, and other energy‑related commodities
factors affecting development of electric generation projects and gas and electric transmission and distribution infrastructure replacement, conversion, and expansion projects, including factors related to project site identification, construction material pricing, schedule delays, availability of qualified construction personnel, permitting, acquisition of property rights, and government approvals
potential disruption to, interruption of, or other impacts on facilities, utility infrastructure, operations, or backup systems due to accidents, explosions, physical disasters, global pandemics, cyber incidents, vandalism, civil unrest, war, or terrorism, and the ability to obtain or maintain insurance coverage for these events
changes or disruption in fuel supply, including but not limited to supplier bankruptcy and delivery disruptions
potential costs, lost revenues, reputational harm, or other consequences resulting from misappropriation of assets or sensitive information, corruption of data, or operational disruption in connection with a cyber attack or other cyber incident
potential disruption to, interruption or failure of, or other impacts on information technology backup or disaster recovery systems
technological developments in energy production, storage, delivery, usage, and metering
the ability to implement technology successfully


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the impact of CMS Energy’s and Consumers’ integrated business software system and its effects on their operations, including utility customer billing and collections
adverse consequences resulting from any past, present, or future assertion of indemnity or warranty claims associated with assets and businesses previously owned by CMS Energy or


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Consumers, including claims resulting from attempts by foreign or domestic governments to assess taxes on or to impose environmental liability associated with past operations or transactions
the outcome, cost, and other effects of any legal or administrative claims, proceedings, investigations, or settlements
the reputational impact on CMS Energy and Consumers of operational incidents, violations of corporate policies, regulatory violations, inappropriate use of social media, and other events
restrictions imposed by various financing arrangements and regulatory requirements on the ability of Consumers and other subsidiaries of CMS Energy to transfer funds to CMS Energy in the form of cash dividends, loans, or advances
earnings volatility resulting from the application of fair value accounting to certain energy commodity contracts or interest rate contracts
changes in financial or regulatory accounting principles or policies (e.g., the adoption of the hypothetical liquidation at book value method of accounting for certain non‑regulated renewable energy projects)
other matters that may be disclosed from time to time in CMS Energy’s and Consumers’ SEC filings, or in other public documents
All forward‑looking statements should be considered in the context of the risk and other factors described above and as detailed from time to time in CMS Energy’s and Consumers’ SEC filings. For additional details regarding these and other uncertainties, see Part I—Item 1. Financial Statements—MD&A—Outlook and Notes to the Unaudited Consolidated Financial Statements—Note 2, Regulatory Matters and Note 3, Contingencies and Commitments; and Part II—Item 1A. Risk Factors.


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Part I—Financial Information
Item 1.    Financial Statements
Index to Financial Statements


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CMS Energy Corporation
Consumers Energy Company
Management’s Discussion and Analysis of Financial Condition and Results of Operations
This MD&A is a combined report of CMS Energy and Consumers.
Executive Overview
CMS Energy is an energy company operating primarily in Michigan. It is the parent holding company of several subsidiaries, including Consumers, an electric and gas utility, andutility; CMS Enterprises, primarily a domestic independent power producer and marketer.marketer; and EnerBank, an industrial bank located in Utah. Consumers’ electric utility operations include the generation, purchase, transmission, distribution, and sale of electricity, and Consumers’ gas utility operations include the purchase, transmission, storage, distribution, and sale of natural gas. Consumers’ customer base consists of a mix of residential, commercial, and diversified industrial customers. CMS Enterprises, through its subsidiaries and equity investments, is engaged in domestic independent power production, including the development and operation of renewable generation, and the marketing of independent power production. EnerBank provides primarily unsecured, fixed-rate installment loans throughout the U.S. to finance home improvements.
CMS Energy and Consumers manage their businesses by the nature of services each provides. CMS Energy operates principally in threefour business segments: electric utility; gas utility; and enterprises, its non‑utility operations and investments.investments; and EnerBank. Consumers operates principally in two business segments: electric utility and gas utility. CMS Energy’s and Consumers’ businesses are affected primarily by:
regulation and regulatory matters
state and federal legislation
economic conditions
weather
energy commodity prices
interest rates
their securities’ credit ratings
COVID‑19 Pandemic
CMS Energy and Consumers continue to respond to the public health emergency caused by the COVID‑19 pandemic by instituting and maintaining measures consistent with guidance provided by local, state, and federal agencies. CMS Energy and Consumers maintain over 60 departmental business continuity plans; these plans were reviewed and enhanced in early 2020 to ensure readiness for the COVID-19 pandemic. CMS Energy and Consumers continue to take steps to protect the safety of employees, customers, and contractors, and have executed their business continuity plans to ensure the continued delivery of critical energy services. Additionally, CMS Energy and Consumers have mitigated the potential impact of the pandemic on their liquidity by completing financing transactions and reducing the need for additional external funding.
The COVID‑19 pandemic is a continually evolving situation. As a result of the pandemic, Consumers has experienced a decline in electric deliveries to commercial and industrial customers, offset partially by an


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increase in deliveries to residential customers. It has also experienced increased uncollectible accounts and workforce-related expenses, among other cost increases directly attributable to the pandemic. Consumers anticipates that these trends will continue in the near term. In April 2020, the MPSC issued an order authorizing Consumers to defer incremental uncollectible accounts expense associated with the pandemic.
Additionally, EnerBank anticipates it could experience slower lending growth, higher loan write-offs, and increased loan modifications in the future as a result of the pandemic. The companies cannot predict the long-term impact of the pandemic on their business, results of operations, financial condition, capital investment program, liquidity, and cash flows. More detailed discussion of the near-term impacts of and future uncertainties related to the COVID‑19 pandemic can be found throughout this MD&A and in Part II—Item 1A. Risk Factors.
The Triple Bottom Line
CMS Energy’s and Consumers’ purpose is to achieve world class performance while delivering hometown service. In support of this purpose, the companies employ the “Consumers Energy Way,” a lean operating model designed to improve safety, quality, cost, delivery, and employee morale.


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CMS Energy and Consumers measure their progress toward the purpose by considering their impact on the “triple bottom line” of people, planet, and profit, which is underpinned by performance; this consideration takes into account not only the economic value that the companies create for customers and investors, but also their responsibility to social and environmental goals. The triple bottom line balances the interests of the companies’ employees, customers, suppliers, regulators, creditors, Michigan’s residents, the investment community, and other stakeholders, and it reflects the broader societal impacts of the companies’ activities.
cms10q20200930_graphic-ppp.jpg
Consumers’ Sustainability Report, which is available to the public, describes the company’s progress toward world class performance measured in the areas of people, planet, and profit.
People: The people element of the triple bottom line represents CMS Energy’s and Consumers’ commitment to their employees, their customers, the residents of local communities in which the companies do business, and other stakeholders.
The safety of employees, customers, and the general public is a priority of CMS Energy and Consumers. Accordingly, CMS Energy and Consumers have worked to integrate a set of safety principles into their business operations and culture. These principles include complying with applicable safety, health, and security regulations and implementing programs and processes aimed at continually improving safety and security conditions. Over the last ten years, Consumers’ OSHA recordable incident rate has decreased by over 7063 percent.
In response to the COVID‑19 pandemic, CMS Energy and Consumers have issued a response plan that is focused on the health and safety of their co-workers, customers, and communities. CMS Energy and Consumers have aligned with safety and health guidelines from the CDC, OSHA, and the Michigan Department of Health and Human Services in order to protect their employees, customers, and contractors


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to ensure the continued delivery of critical energy services. To align with, and in addition to, these guidelines, CMS Energy and Consumers have:
secured the supply chain necessary to provide front-line workers with appropriate personal protective equipment and cleaning supplies
when necessary, sequestered employees with critical roles at generating plants, gas compression facilities, and electric control rooms
implemented a 14‑day paid self-quarantine requirement for employees who are exhibiting symptoms of COVID-19 or who have come into contact with a person suspected to have COVID‑19
prohibited business-related international travel and instituted a mandatory ten‑day work remote period for employees who return from personal travel to heavily impacted areas
required employees to work remotely when possible
when necessary, reduced service at 13 direct payment offices to drop box and drive-through services only
initially adjusted work to focus on emergent and critical activities such as electric outages, gas leaks, and other public safety and reliability work; as work restrictions have gradually lifted in Michigan, the companies have resumed normal work with safety measures in place
contracted a chief medical officer to guide the companies’ response and provide rapid support and supplies for the workforce
limited access to company facilities, enhanced cleaning protocols, and established a mask-wearing policy
offered additional paid leave to employees to alleviate child care-related burdens and implemented other interim workforce policies to offer flexibility and reduce employee concerns
In response to the pandemic, CMS Energy and Consumers initially suspended shut-offs of service for non-payment and extended payment protection plans for low-income and senior customers. CMS Energy and Consumers slowly began resuming shut-offs of service for non-payment in late July 2020 for commercial and industrial customers and in October 2020 for residential customers. CMS Energy and Consumers remain committed to assisting customers impacted by the pandemic. In September 2020, Consumers announced that it will provide $12 million to help Michigan residents and small businesses who are experiencing difficulty paying their energy bill due to the pandemic.
CMS Energy and Consumers also place a high priority on customer value and on providing a hometown customer experience. Consumers’ customer-driven investment program is aimed at improving safety and increasing electric and gas reliability, which has resulted in measurable improvements in customer satisfaction.
Central to Consumers’ commitment to its customers are the initiatives it has undertaken to keep electricity and natural gas affordable, including:
replacement of coal-fueled generation and PPAs with a cost-efficient mix of renewable energy and energy waste reduction and demand response programs
targeted infrastructure investment to reduce maintenance costs and improve reliability and safety and to reduce maintenance costs
supply chain optimization
information and control system efficiencies
employee and retiree health care cost sharing
workforce productivity enhancements
In addition, Consumers’ gas commodity costs declined by 6062 percent from 20082009 through 2018,2019, due not only to a decrease in market prices but also to Consumers’ improvements to its gas infrastructure and


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optimization of its gas purchasing and storage strategy. These gas commodity savings are passed on to customers.
Planet: The planet element of the triple bottom line represents CMS Energy’s and Consumers’ commitment to protect the environment; thisenvironment. This commitment extends beyond complyingcompliance with the various


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state and federal environmental, and health, and safety laws and regulations to which CMS Energy and Consumers are subject.regulations. Management considers climate change and other environmental risks in the companies’ strategy development, business planning, and enterprise risk management processes.
CMS Energy and Consumers continue to focus on opportunities to protect the environment and to reduce their carbon footprint. As a result of actions already taken by CMS Energy and Consumers, including the retirement of seven of Consumers’ coal-fueled electric generating units in 2016, the companies have:
decreased their combined percentage of electric supply (self-generated and purchased) from coal by 18 percentage points since 2015
reduced carbon dioxide emissions by over 35 percent since 2005
reduced the amount of water used to generate electricity by over 3035 percent since 2012
reduced landfill waste disposal by over one1.3 million cubic yardstons since 1992
reduced methane emissions by 1712 percent since 2012
Additionally, over the last 20 years, Consumers has reduced its sulfur dioxide, nitrogen oxide, particulate matter, and mercury emissions by over 90 percent.
The 2016 Energy Law:
raised the renewable energy standard from the previous ten‑percent requirement to 12.5 percent in 2019 and 15 percent in 20212021; Consumers met the 12.5-percent requirement in 2019 with a combination of newly generated RECs and previously generated RECs carried over from prior years
established a goal of 35 percent combined renewable energy and energy waste reduction by 20252025; Consumers has achieved 22 percent of the combined renewable energy and energy waste reduction goal through 2019
authorized incentives for demand response programs and expanded existing incentives for energy efficiency programs, referring to the combined initiatives as energy waste reduction programs
established an integrated planning process for new generation resources
Consumers filed an IRP with the MPSC in June 2018, detailing its “Clean Energy Plan,” its long‑term strategy for delivering reliable and affordable energy to its customers through the increased use of energy efficiency and customer demand management programs and additional renewable energy. In March 2019, Consumers and a broad coalition of key stakeholders, including business customers, environmental groups, the MPSC Staff, and the Michigan Attorney General, filed an agreement settling the IRP with the MPSC and the MPSC approved itthe IRP that Consumers filed in June 2019.
2018, which details its Clean Energy Plan. Under its Clean Energy Plan, Consumers will meet the requirements of the 2016 Energy Law using its clean and lean strategy, which focuses on increasing the generation of renewable energy, helping customers use less energy, and offering demand response programs to reduce demand during critical peak times. Further, Consumers plans to replace all of its coal-fueled generation predominantly with investment in renewable energy, which will enable Consumers to meet and exceed the 2016 Energy Law renewable energy requirements and fulfill increasing customer demand for renewable energy. Through its Clean Energy Plan, Consumers expects to reduce carbon emissions of its owned generation by more than 90 percent from its 2005 levels by 2040. Additionally, the planClean Energy Plan will allow Consumers to achieve a breakthrough goal of at least 50 percent combined renewable energy and energy waste reduction by 2030.


1617




Presented in the following illustration is Consumers’ 2019 generationcapacity portfolio and its future capacity portfolio as projected in the IRP. This illustration includes the effects of purchased capacity and projected futureenergy waste reduction and uses the nameplate capacity of renewable energy sources:
cms10q20200930_chart-capmix.jpg
In September 2020, Michigan’s Governor signed an executive order creating the Michigan Healthy Climate Plan, which outlines goals for Michigan to achieve economy-wide net-zero greenhouse gas emissions and to be carbon neutral by 2050. The executive order aims for a 28-percent reduction below 2005 levels of greenhouse gas emissions by 2025. Consumers has already surpassed the 28-percent reduction milestone in its electric business and previously announced, in February 2020, a goal of achieving net‑zero carbon emissions by 2040. As part of this net-zero goal, Consumers will significantly reduce its carbon emissions from its electric business and offset any remaining emissions through strategies including, but not limited to, carbon sequestration, landfill methane capture, and large-scale tree planting. The goal includes not only emissions from Consumers’ owned generation, capacity in 2030but also emissions from the generation of power purchased through long-term PPAs and 2040, including purchased capacity, based on a variety of fuel sources:
chart-bd8f11da5e1d5cdd90d.jpgfrom the MISO energy market.
In addition to Consumers’ efforts to reduce the electric utility’s carbon footprint, it is also making efforts to reduce the gas utility’s methane footprint. In October 2019, Consumers set a goal of net-zeronet‑zero methane emissions from its natural gas delivery system by 2030. ToConsumers’ Methane Reduction Plan, released in November 2019, outlines its plan to reach this goal,net-zero emissions goal. Consumers plans to reduce methane emissions from its system by about 80 percent by accelerating the replacement of aging pipe,


18




rehabilitating or retiring outdated infrastructure, and to offset itsadopting new technologies and practices. The remaining emissions will be eliminated by purchasing and/or producing renewable natural gas. Consumers plans to release its Methane Reduction Plan, which will outline its plan to reach this net-zero emissions goal, in November 2019.
Additionally, in an effort to advance its environmental stewardship in Michigan and to minimize the impact of future regulations, Consumers announced the following five‑year targets during 2018:
to reduce its water use by one billion gallons; induring 2018 and 2019, Consumers reduced its water usage by 180over 400 million gallons
to reduce the amount of waste taken to landfills by 35 percent; induring 2018 and 2019, Consumers reduced its waste to landfills by 12ten percent
to enhance, restore, or protect 5,000 acres of land; induring 2018 and 2019, Consumers enhanced, restored, or protected nearly 800over 2,200 acres of land
CMS Energy, through its non‑utility businesses,CMS Enterprises, continues to pursue further opportunities for the development of renewable generation projects. In July 2020, CMS Enterprises has completed the development of and


17



operatespurchased an ownership interest in Aviator Wind, a 105‑525‑MW wind generation project in northwest OhioCoke County, Texas. The project was completed and three solar generation projectsbecame operational in Michigan and Wisconsin totaling 27 MW. Renewable energy produced by these projects is committed to customers under long-term PPAs.September 2020.
CMS Energy and Consumers are monitoring numerous legislative, policy, and regulatory initiatives, including those to regulate greenhouse gases, and related litigation. While CMS Energy and Consumers cannot predict the outcome of these matters, which could have a material effect on the companies, they intend to continue to move forward with their clean and lean strategy.
Profit: The profit element of the triple bottom line represents CMS Energy’s and Consumers’ commitment to meeting their financial objectives and providing economic development opportunities and benefits in the communities in which they do business. CMS Energy’s and Consumers’ financial strength allows them to maintain solid investment-grade credit ratings and thereby reduce funding costs for the benefit of customers and investors, to preserve and create jobs, and to reinvest in the communities they serve.
For the nine months ended September 30, 2019,2020, CMS Energy’s net income available to common stockholders was $513$597 million, and diluted EPS were $1.81.$2.09. This compares with net income available to common stockholders of $549$513 million and diluted EPS of $1.94$1.81 for the nine months ended September 30, 2018.2019. In 2019,2020, the benefits from electric and gas rate increases, higher gaselectric sales due primarily to colderfavorable weather, and the gain on the sale of transmission equipmentlower operating and maintenance expenses were more than offset partially by lower electricgas sales due primarily to unfavorable weather lower earnings atin the enterprises segment,first quarter, higher depreciation and amortization, and higher service restoration costs fromthe absence of a 2019 storms.gain on sale of transmission assets. A more detailed discussion of the factors affecting CMS Energy’s and Consumers’ performance can be found in the Results of Operations section that follows this Executive Overview.
Consumers projects that itshas experienced and anticipates it will continue to experience a decline in electric deliveries to commercial and industrial customers in the near term as a result of the COVID‑19 pandemic. Over the next five years, Consumers expects weather-normalized electric deliveries willto decrease slightly and weather‑normalized gas deliveries to remain stable and gas weather-normalized deliveries will increase slightly through 2023.stable. This outlook reflects modest growth in electric demand offset by the effects of energy waste reduction programs andoffset largely by modest growth in electric and gas demand offset partially by energy efficiency and conservation.demand.


19




Performance: Impacting the Triple Bottom Line
CMS Energy and Consumers remain committed to achieving world class performance while delivering hometown service. Leveragingservice and positively impacting the triple bottom line of people, planet, and profit. During 2020, CMS Energy and Consumers:
realized over $100 million in cost reductions by leveraging the Consumers Energy Way CMS Energy and Consumers have accomplished the following during 2019:through other initiatives
received approval of Consumers’ IRP, which supportsnamed a Chief Diversity Officer responsible for setting and monitoring the companies’ cleandiversity, equity, and inclusion strategy
announced a new parental leave policy for employees, allowing six months of paid leave to mothers and four months of paid leave to a nonbirthing parent
pledged to join five other energy goals
launchedcompanies in facilitating the construction of a three-yearMidwest electric vehicle pilot program
committed to invest $7.5 billion in Michigan businesses over the next five years; of that amount,$1.5 billion will be invested in diverse suppliers
completed the deployment of automated gas meters in areas where Consumers provides only natural gas to customers, allowing for drive-by meter reading
ranked the highest in customer satisfaction among large natural gas providers in the Midwest, according to a residential customer satisfaction study conducted by J.D. Power, a global marketing information companycharging network
CMS Energy and Consumers will continue to utilize the Consumers Energy Way to enable them to achieve world class performance and positively impact the triple bottom line. Consumers’ investment plan and the regulatory environment in which it operates also drive its ability to impact the triple bottom line.


18



Investment Plan: Consumers expects to make capital investments of $25 billion from 2019 through 2028.over the next ten years. Over the next five years, Consumers expects to make significant expenditures on infrastructure upgrades and replacements and electric supply projects. While it has a large number of potential investment opportunities that would add customer value, Consumers has prioritized its spending based on the criteria of enhancing public safety, increasing reliability, maintaining affordability for its customers, and advancing its environmental stewardship. Consumers’ investment program is expected to result in annual rate-base growth of six to eight percent. This rate-base growth, together with cost-control measures, should allow Consumers to maintain affordable customer prices.


20




Presented in the following illustration are planned capital expenditures of $11.8$12.2 billion that Consumers expects to make from 20192020 through 2023:2024:
chart-fdc0183cda6b595ba8b.jpgcms10q20200930_chart-plncpex.jpg
Of this amount, Consumers plans to spend $9.3$9.4 billion over the next five years to maintain and upgrade its gas infrastructure and electric distribution systems in order to enhance safety and reliability, improve customer satisfaction, and reduce energy waste on those systems. The gas infrastructure projects comprise $5.1$5.0 billion to sustain deliverability and enhance pipeline integrity and safety. These projects, which involve replacement of mains and services and enhancement of transmission and storage systems, should reduce the minor quantity of methane emissions released as gas is transported. The electric distribution projects comprise $4.2$4.4 billion to strengthen circuits and substations and replace poles. Consumers also expects to spend $2.5$2.8 billion on electric supply projects, primarily new renewable generation, and environmental investments neededgeneration. In response to comply with state and federal laws and regulations.the COVID‑19 pandemic, Consumers has rescheduled some capital investment projects, but has not made any changes to its long-term capital investment program at this time.
Regulation: Regulatory matters are a key aspect of Consumers’ business, particularly rate cases and regulatory proceedings before the MPSC, which permit recovery of new investments while helping to ensure that customer rates are fair and affordable. Important regulatory events and developments not already discussed are summarized below.
2018 Electric2019 Gas Rate Case: In May 2018,December 2019, Consumers filed an application with the MPSC seeking an annual rate increase of $58$245 million, based on a 10.7510.5 percent authorized return on equity. The filing requested authority to recover new investment in system reliability, environmental


19



compliance, and technology enhancements. In October 2018, Consumers reduced its requested annual rate increase to $44 million. In January 2019, the MPSC approved a settlement agreement authorizing an annual rate decrease of $24 million, based on a 10.0 percent authorized return on equity. With the elimination of the $113 million TCJA credit to customer bills, the approved settlement agreement resulted in an $89 million net increase in annual rates. The settlement agreement also provided for deferred accounting treatment for distribution‑related capital investments exceeding certain amounts. Consumers also agreed to not file a new electric rate case prior to January 2020.
2018 Gas Rate Case:In November 2018, Consumers filed an application with the MPSC seeking an annual rate increase of $229 million, based on a 10.75 percent authorized return on equity.In April 2019,May 2020, Consumers reduced its requested annual rate increase to $204$229 million. In September 2019,2020, the MPSC approved a settlement agreement authorizing an annual rate increase of $144 million, based on a 9.909.9 percent authorized return on equity. This increase includesequity, effective October 1, 2020. As part of that agreement, Consumers agreed not to file a $13 million adjustmentnew gas rate case prior to begin returning net regulatory tax liabilities associated with the TCJA to customers.December 2021. The MPSC also approved the continuation of a revenue decoupling mechanism, which annually reconciles Consumers’ actual weather‑normalized, non‑fuelweather-normalized non-fuel revenues with the revenues approved by the MPSC.


21




Tax Cuts and Jobs Act:2020 Electric Rate Case: The TCJA, which changed existing federal tax law and included numerous provisions that affect businesses, was signed into law in December 2017. In early 2018, the MPSC ordered Consumers to file various proceedings to determine the reduction in its electric and gas revenue requirements as a result of the reduction in the corporate income tax rate, and to implement bill credits to reflect that reduction until customer rates could be adjusted through Consumers’ general rate cases. Consumers filed, and the MPSC approved, such proceedings throughout 2018, resulting in credits to customer bills during 2018 to reflect reductions in Consumers’ electric and gas revenue requirements. Additionally,February 2020, Consumers filed an application to address the December 31, 2017 remeasurement of its deferred income taxes and other base rate impacts of the TCJA on customers. In September 2019,with the MPSC seeking an annual rate increase of $244 million, based on a 10.5 percent authorized return on equity. In July 2020, Consumers reduced its requested annual rate increase to $230 million. The filing also seeks approval to recover $13 million associated with Consumers’ deferral of depreciation and property tax expense and the overall rate of return on distribution-related capital investments exceeding certain threshold amounts. Additionally, the filing seeks approval of a method of recovering amounts earned under the financial compensation mechanism approved by the MPSC in Consumers’ IRP. This mechanism allows Consumers to begin returning net regulatory tax liabilities of $0.4 billion to gas customers through ratesearn a financial incentive on PPAs approved by the MPSC after January 1, 2019. Consumers also proposes in the 2018 gas rate case and $1.2 billionfiling a new distributed generation tariff to electric customers through ratesreplace the current net metering tariff, pursuant to be determined in Consumers’ next electric rate case. Until then, the MPSC authorized Consumers to refund $32 million to electric customers through a temporary bill credit. For details on these proceedings, see Note 2, Regulatory Matters.2016 Energy Law.
Looking Forward
CMS Energy and Consumers will continue to consider the impact on the triple bottom line of people, planet, and profit in their daily operations as well as in their long-term strategic decisions. Consumers will continue to seek fair and timely regulatory treatment that will support its customer-driven investment plan, while pursuing cost-control measures that will allow it to maintain sustainable customer base rates. The Consumers Energy Way is an important means of realizing CMS Energy’s and Consumers’ purpose of achieving world class performance while delivering hometown service.


2022




Results of Operations
CMS Energy Consolidated Results of Operations
In Millions, Except Per Share AmountsIn Millions, Except Per Share Amounts In Millions, Except Per Share Amounts 
Three Months Ended Nine Months EndedThree Months Ended Nine Months Ended
September 302019 2018 Change  2019 2018 Change 2020 2019 Change  2020 2019 Change 
Net Income Available to Common Stockholders $207
 $169
 $38
 $513
 $549
 $(36) $218
 $207
 $11
 $597
 $513
 $84
Basic Earnings Per Average Common Share $0.73
 $0.60
 $0.13
 $1.81
 $1.95
 $(0.14) $0.76
 $0.73
 $0.03
 $2.10
 $1.81
 $0.29
Diluted Earnings Per Average Common Share $0.73
 $0.59
 $0.14
 $1.81
 $1.94
 $(0.13) $0.76
 $0.73
 $0.03
 $2.09
 $1.81
 $0.28
            
In MillionsIn Millions In Millions 
Three Months Ended Nine Months EndedThree Months Ended Nine Months Ended
September 302019 2018 Change  2019 2018 Change 2020 2019 Change  2020 2019 Change 
Electric utility $223
 $199
 $24
 $418
 $468
 $(50) $226
 $223
 $3
 $463
 $418
 $45
Gas utility (10) (19) 9
 119
 105
 14
 4
 (10) 14
 162
 119
 43
Enterprises 7
 4
 3
 18
 33
 (15)
Corporate interest and other (13) (15) 2
 (42) (57) 15
Enterprises¹ 13
 7
 6
 34
 30
 4
EnerBank¹ 12
 11
 1
 34
 32
 2
Corporate interest and other¹ (37) (24) (13) (96) (86) (10)
Net Income Available to Common Stockholders $207
 $169
 $38
 $513
 $549
 $(36) $218
 $207
 $11
 $597
 $513
 $84
1
Prior period amounts have been reclassified to reflect changes in segment reporting.


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Presented in the following table are specific after-tax changes to CMS Energy’s net income available to common stockholders for the three and nine months ended September 30, 20192020 versus 2018:2019:
In Millions 
 Three Months Ended Nine Months Ended
September 30, 2018   $169
    $549
Reasons for the change         
Consumers electric utility and gas utility         
Electric sales $(19)    $(42)  
Gas sales (3)    15
  
Electric rate increase 16
    40
  
Gas rate increase 2
    30
  
Gain on sale of transmission equipment1
 25
    25
  
Depreciation and amortization (4)    (25)  
Lower (higher) service restoration costs 2
    (23)  
Absence of 2018 income tax benefit associated with electric cost of removal2
 (8)    (23)  
Higher property tax, reflecting higher capital spending (2)    (11)  
Absence of 2018 research and development tax credits2
 
    (9)  
Absence of 2018 settlement of a property tax appeal related to the J.H. Campbell plant 
    (7)  
Lower distribution and transmission expenses 10
    
  
Other 14
 

  (6) 

    $33
    $(36)
Enterprises         
Lower earnings due primarily to lower capacity revenue and higher operating and maintenance costs 
    (27)  
Absence of 2018 expiration of indemnity obligation 
    (3)  
Gain on sale of transmission equipment1
 
 

  12
 

Absence of 2018 write off of capital costs related to T.E.S. Filer City plant conversion 3
    3
  
    3
    (15)
Corporate interest and other         
Increased income tax benefit due primarily to production tax credits 3
    14
  
Higher earnings at EnerBank 1
    6
  
2019 tax deductions primarily attributable to asset sales 4
    4
  
Absence of 2018 loss on early extinguishment of debt 
    4
  
Higher fixed charges due to higher debt (6) 

  (13) 

    2
    15
September 30, 2019   $207
    $513
In Millions 
 Three Months Ended Nine Months Ended
September 30, 2019   $207
    $513
Reasons for the change         
Consumers electric utility and gas utility         
Electric sales $6
    $14
  
Gas sales 4
    (30)  
Electric rate increase, including return on higher renewable capital spending 5
    14
  
Gas rate increase 8
    72
  
Lower distribution, transmission, generation, and compression expenses 12
    38
  
Lower OPEB expenses 4
    15
  
Lower service restoration costs 4
    13
  
Research and development tax credits¹ 
    8
  
Higher mutual insurance distribution 
    5
  
Depreciation and amortization (10)    (27)  
Absence of 2019 gain on sale of electric transmission assets (25)    (25)  
Higher property tax, reflecting higher capital spending (5)    (14)  
Retention benefits related to D.E. Karn² (3)    (9)  
Voluntary separation plan expenses 
    (8)  
Disallowance of incremental gas purchased during the Ray Compressor Station fire³ (5)    (5)  
Other 22
    27
  
    $17
    $88
Enterprises         
Higher earnings due primarily to improved receivables management 
    6
  
Higher earnings from the Aviator Wind project4
 6
    6
  
Increased income tax benefit due to restoring previously sequestered alternative minimum tax credits1
 
    4
  
Absence of 2019 gain on sale of transmission equipment 
    (12)  
    6
    4
EnerBank         
Higher earnings due primarily to growth in consumer lending 5
    13
  
Implementation of new credit losses standard5
 (4)    (11)  
    1
    2
Corporate interest and other         
Higher (lower) income tax benefit (4)    5
  
Higher fixed charges due to higher debt (5)    (10)  
Absence of 2019 tax benefits recognized as a result of asset sales (4)    (4)  
Other income tax and expenses 
    (1)  
    (13)    (10)
September 30, 2020   $218
    $597
1 
See Note 15,9, Income Taxes.


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Table of Contents


2
See Note 14, Asset SalesSale and Exit Activities.
23 
See Note 3, Contingencies and Commitments.
See Note 10, Income Taxes.4
See Note 15, Purchase of Variable Interest Entity.


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Table of Contents
5


See Note 1, New Accounting Standards.
Consumers Electric Utility Results of Operations
Presented in the following table are the detailed changes to the electric utility’s net income available to common stockholders for the three months ended September 30, 20192020 versus 20182019 (amounts are presented pre-tax,pre‑tax, with the exception of income tax changes):
In Millions 
Three Months Ended September 30, 2018   $199
Three Months Ended September 30, 2019   $223
Reasons for the change        
Electric deliveries1 and rate increases
        
Rate increase, including the impacts of the January 2019 order $26
  
Lower sales due primarily to unfavorable weather (28)  
Lower energy waste reduction program revenues (8)  
Other revenues 2
 $(8)
Higher sales due primarily to favorable weather and sales mix, offset partially by lower deliveries to commercial and industrial customers $6
  
Rate increase associated with return on higher renewable capital spending 6
  
Higher energy waste reduction program revenues 4
  
Higher other revenues 2
  
   $18
Maintenance and other operating expenses        
Gain on sale of transmission equipment2
 34
  
Lower energy waste reduction program costs 8
  
Lower service restoration costs 6
  
Lower distribution and transmission expenses 5
   6
  
Absence of 2019 gain on sale of transmission assets (34)  
Higher energy waste reduction program costs (4)  
Retention benefits related to D.E. Karn² (4)  
Lower maintenance and other operating expenses 7
 54
 22
  
   (8)
Depreciation and amortization        
Increased plant in service, reflecting higher capital spending   (6)   (10)
General taxes   (2)   (3)
Other income, net of expenses        
Higher other income, net of expenses   3
Lower OPEB expenses   3
Interest charges   (2)   (1)
Income taxes        
Higher electric utility pre-tax earnings (11)  
Absence of 2018 income tax benefit associated with cost of removal3
 (9)  
Lower electric utility pre-tax earnings 3
  
Lower other income taxes 5
 (15) 1
  
Three Months Ended September 30, 2019   $223
   4
Three Months Ended September 30, 2020   $226
1 
Deliveries to end-use customers were 10.1 billion kWh in 20192020 and 10.6 billion kWh in 2018.2019.
2 
See Note 15,14, Asset SalesSale and Exit Activities.
3
See Note 10, Income Taxes.






Presented in the following table are the detailed changes to the electric utility’s net income available to common stockholders for the nine months ended September 30, 20192020 versus 20182019 (amounts are presented pre-tax,pre‑tax, with the exception of income tax changes):
In Millions 
Nine Months Ended September 30, 2018   $468
Reasons for the change    
Electric deliveries1 and rate increases
    
Rate increase, including the impacts of the January 2019 order $61
  
Lower sales due primarily to unfavorable weather (68)  
Lower energy waste reduction program revenues (7)  
Effect of new leases accounting standard2
 8
  
Other revenues 3
 $(3)
Maintenance and other operating expenses    
Gain on sale of transmission equipment3
 34
  
Litigation settlement 8
  
Lower energy waste reduction program costs 7
  
Higher service restoration costs from 2019 winter storms (31)  
Lower mutual insurance distribution (4)  
Higher maintenance and other operating expenses (5) 9
Depreciation and amortization    
Increased plant in service, reflecting higher capital spending   (21)
General taxes    
Absence of 2018 settlement of a property tax appeal related to the J.H. Campbell plant (9)  
Higher property tax, reflecting higher capital spending (5) (14)
Other income, net of expenses    
Higher other income, net of expenses   2
Interest charges    
Effect of new leases accounting standard2
 (8)  
Lower PSCR interest expense 3
  
Lower other interest charges 2
 (3)
Income taxes    
Absence of 2018 income tax benefit associated with cost of removal4
 (23)  
Absence of 2018 research and development tax credits4
 (8)  
Lower electric utility pre-tax earnings 7
  
Lower other income taxes 4
 (20)
Nine Months Ended September 30, 2019   $418
In Millions 
Nine Months Ended September 30, 2019   $418
Reasons for the change    
Electric deliveries1 and rate increases
    
Higher sales due primarily to favorable weather and sales mix, offset partially by lower deliveries to commercial and industrial customers $22
  
Rate increase, including return on higher renewable capital spending 18
  
Lower other revenues (6)  
    $34
Maintenance and other operating expenses    
Lower distribution, transmission, and generation expenses 29
  
Lower service restoration costs 18
  
Higher mutual insurance distribution 7
  
Absence of 2019 gain on sale of transmission assets (34)  
Retention benefits related to D.E. Karn² (11)  
Absence of favorable 2019 litigation settlement (8)  
Voluntary separation plan expenses (6)  
Lower maintenance and other operating expenses 29
  
    24
Depreciation and amortization    
Increased plant in service, reflecting higher capital spending   (21)
General taxes    
Higher property tax, reflecting higher capital spending   (8)
Other income, net of expenses    
Lower OPEB expenses 11
  
Higher other income, net of expenses 1
  
    12
Interest charges   (7)
Income taxes    
Lower tax expense due primarily to research and development tax credits3
 7
  
Higher electric utility pre-tax earnings (4)  
Lower other income taxes 8
  
    11
Nine Months Ended September 30, 2020   $463
1 
Deliveries to end-use customers were 26.9 billion kWh in 2020 and 27.9 billion kWh in 2019 and 29.1 billion kWh in 2018.2019.
2 
Under the provisions of ASU 2016‑02, Leases, fixed energy and capacity costs associated with Consumers’ PPAs that are accounted for as finance leases are presented as amortization and interest expense, rather than purchased power expense. See Note 8, Leases for more information about Consumers’ leases.
14, Asset Sale and Exit Activities.
3 
See Note 15, Asset Sales and Exit Activities.
4
See Note 10,9, Income Taxes.


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Consumers Gas Utility Results of Operations
Presented in the following table are the detailed changes to the gas utility’s net income available to common stockholders for the three months ended September 30, 20192020 versus 20182019 (amounts are presented pre-tax,pre‑tax, with the exception of income tax changes):
In MillionsIn Millions In Millions 
Three Months Ended September 30, 2018   $(19)
Three Months Ended September 30, 2019   $(10)
Reasons for the change        
Gas deliveries1 and rate increases
        
Rate increase, including the impacts of the September 2018 order $3
  
Lower sales (5)  
Rate increase $11
  
Higher energy waste reduction program revenues 3
   5
  
Higher sales due primarily to favorable weather 3
  
Disallowance of incremental gas purchased during the Ray Compressor Station fire² (7)  
Other revenues 2
 $3
 1
  
   $13
Maintenance and other operating expenses        
Lower distribution and transmission expenses 7
  
Lower pipeline integrity expenses 6
  
Higher leak repair and survey expenses (3)  
Lower distribution, transmission, and compression expenses 7
  
Higher energy waste reduction program costs (3)   (5)  
Lower maintenance and other operating expenses 1
 8
 11
  
   13
Depreciation and amortization    
Increased plant in service, reflecting higher capital spending   (3)
General taxes       (2)
Higher property tax, reflecting higher capital spending   (1)
Other income, net of expenses       1
Higher other income, net of expenses   2
Interest charges   (1)   (5)
Income taxes        
Higher gas utility pre-tax earnings (3)   (5)  
Lower other income taxes 1
 (2) 2
  
Three Months Ended September 30, 2019   $(10)
   (3)
Three Months Ended September 30, 2020   $4
1 
Deliveries to end-use customers were 27 bcf in 2020 and 26 bcf in 20192019.
2
See Note 3, Contingencies and 27 bcf in 2018.Commitments.


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Presented in the following table are the detailed changes to the gas utility’s net income available to common stockholders for the nine months ended September 30, 20192020 versus 20182019 (amounts are presented pre-tax,pre‑tax, with the exception of income tax changes):
In MillionsIn Millions In Millions 
Nine Months Ended September 30, 2018   $105
Nine Months Ended September 30, 2019   $119
Reasons for the change        
Gas deliveries1 and rate increases
        
Rate increase, including the impacts of the September 2018 order $32
  
Higher sales, due primarily to colder weather 19
  
Rate increase $97
  
Lower sales due primarily to unfavorable weather (52)  
Disallowance of incremental gas purchased during the Ray Compressor Station fire² (7)  
Lower energy waste reduction program revenues (5)   (4)  
Other revenues 1
 $47
 11
  
   $45
Maintenance and other operating expenses        
Higher leak repair and survey expenses (7)  
Lower distribution, transmission, and compression expenses 23
  
Lower energy waste reduction program costs 5
   4
  
Lower pipeline integrity expenses 2
  
Higher maintenance and other operating expenses (5) (5)
Voluntary separation plan expenses (4)  
Lower maintenance and other operating expenses 17
  
   40
Depreciation and amortization        
Increased plant in service, reflecting higher capital spending   (13)   (15)
General taxes        
Higher property tax, reflecting higher capital spending   (10)   (9)
Other income, net of expenses        
Higher other income, net of expenses   4
Lower OPEB expenses 10
  
Lower other income, net of expenses (4)  
   6
Interest charges   (3)   (15)
Income taxes        
Higher gas utility pre-tax earnings (5)   (13)  
Higher other income taxes (1) (6)
Nine Months Ended September 30, 2019   $119
Lower tax expense due primarily to research and development tax credits³ 1
  
Lower other income taxes 3
  
   (9)
Nine Months Ended September 30, 2020   $162
1 
Deliveries to end-use customers were 194 bcf in 2020 and 217 bcf in 20192019.
2
See Note 3, Contingencies and 211 bcf in 2018.Commitments.
3
See Note 9, Income Taxes.


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Enterprises Results of Operations
Presented in the following table are the detailed after-tax changes to the enterprises segment’s net income available to common stockholders for the three months ended September 30, 20192020 versus 2018:2019:
In MillionsIn Millions In Millions 
Three Months Ended September 30, 2018 $4
Three Months Ended September 30, 2019 $7
Reason for the change    
Absence of 2018 write off of capital costs related to T.E.S. Filer City plant conversion $3
Three Months Ended September 30, 2019 $7
Higher earnings from the Aviator Wind project¹ $6
Three Months Ended September 30, 2020 $13


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1


See Note 15, Purchase of Variable Interest Entity.
Presented in the following table are the detailed after-tax changes to the enterprises segment’s net income available to common stockholders for the nine months ended September 30, 20192020 versus 2018:2019:
In Millions 
Nine Months Ended September 30, 2018   $33
Reason for the change    
Lower earnings due primarily to lower capacity revenue and higher operating and maintenance costs   $(27)
Absence of 2018 expiration of indemnity obligation   (3)
Gain on sale of transmission equipment1
   12
Absence of 2018 write off of capital costs related to T.E.S. Filer City plant conversion   3
Nine Months Ended September 30, 2019   $18
In Millions 
Nine Months Ended September 30, 2019   $30
Reasons for the change    
Higher earnings due primarily to improved receivables management   $6
Higher earnings from the Aviator Wind project¹   6
Increased income tax benefit due to restoring previously sequestered alternative minimum tax credits²   4
Absence of 2019 gain on sale of transmission equipment   (12)
Nine Months Ended September 30, 2020   $34
1 
See Note 15, Asset Sales and Exit Activities.Purchase of Variable Interest Entity.
2
See Note 9, Income Taxes.
EnerBank Results of Operations
Presented in the following table are the detailed after-tax changes to EnerBank’s net income available to common stockholders for the three months ended September 30, 2020 versus 2019:
In Millions 
Three Months Ended September 30, 2019   $11
Reason for the change    
Higher earnings due primarily to growth in consumer lending   $5
Implementation of new credit losses standard¹   (4)
Three Months Ended September 30, 2020   $12
1
See Note 1, New Accounting Standards.


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Presented in the following table are the detailed after-tax changes to EnerBank’s net income available to common stockholders for the nine months ended September 30, 2020 versus 2019:
In Millions 
Nine Months Ended September 30, 2019   $32
Reasons for the change    
Higher earnings due primarily to growth in consumer lending   $13
Implementation of new credit losses standard¹   (11)
Nine Months Ended September 30, 2020   $34
1
See Note 1, New Accounting Standards.
Corporate Interest and Other Results of Operations
Presented in the following table are the detailed after-tax changes to corporate interest and other results for the three months ended September 30, 20192020 versus 2018:2019:
In MillionsIn Millions In Millions 
Three Months Ended September 30, 2018 $(15)
Three Months Ended September 30, 2019 $(24)
Reasons for the change  
  
Increased income tax benefit due primarily to production tax credits $3
Higher earnings at EnerBank 1
2019 tax deductions primarily attributable to asset sales 4
Higher fixed charges due to higher debt (6) $(5)
Three Months Ended September 30, 2019 $(13)
Absence of 2019 tax benefits recognized as a result of asset sales (4)
Lower income tax benefit due primarily to lower production tax credits (4)
Three Months Ended September 30, 2020 $(37)
Presented in the following table are the detailed after-tax changes to corporate interest and other results for the nine months ended September 30, 20192020 versus 2018:2019:
In Millions 
Nine Months Ended September 30, 2018   $(57)
Reasons for the change    
Increased income tax benefit due primarily to production tax credits   $14
Higher earnings at EnerBank   6
2019 tax deductions primarily attributable to asset sales   4
Absence of 2018 loss on early extinguishment of debt   4
Higher fixed charges due to higher debt   (13)
Nine Months Ended September 30, 2019   $(42)
In Millions 
Nine Months Ended September 30, 2019   $(86)
Reasons for the change    
Higher income tax benefit due to restoring previously sequestered alternative minimum tax credits¹   $5
Higher fixed charges due to higher debt   (10)
Absence of 2019 tax benefits recognized as a result of asset sales   (4)
Other income tax and expenses   (1)
Nine Months Ended September 30, 2020   $(96)
1
See Note 9, Income Taxes.


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Cash Position, Investing, and Financing
At September 30, 2019,2020, CMS Energy had $433$558 million of consolidated cash and cash equivalents, which included $30$39 million of restricted cash and cash equivalents. At September 30, 2019,2020, Consumers had $284$223 million of consolidated cash and cash equivalents, which included $25$24 million of restricted cash and cash equivalents. For additional details, see Note 13, Cash and Cash Equivalents.
Operating Activities
Presented in the following table are specific components of the changes to net cash provided by operating activities for the nine months ended September 30, 20192020 versus 2018:2019:
In MillionsIn Millions In Millions 
CMS Energy, including Consumers    
Nine Months Ended September 30, 2018 $1,565
Nine Months Ended September 30, 2019 $1,395
Reasons for the change    
Lower net income $(36)
Higher net income $76
Non‑cash transactions1
 (19) 124
Unfavorable impact of changes in core working capital,2 due primarily to lower alternative minimum tax credit refunds received in 2019, offset partially by the timing of collections on lower electric deliveries in 2019
 (11)
Unfavorable impact of changes in other assets and liabilities, due primarily to refunds to customers related to the TCJA and self-implemented electric rates (104)
Higher pension contributions (531)
Favorable impact of changes in core working capital,2 due primarily to lower vendor payments, offset partially by lower customer receipts
 47
Favorable impact of changes in other assets and liabilities, due primarily to the absence of 2019 refunds to customers related to the TCJA and self-implemented electric rates, offset partially by a payment to settle litigation, higher property tax payments, and higher deposits with MISO 33
Nine Months Ended September 30, 2020 $1,144
Consumers  
Nine Months Ended September 30, 2019 $1,395
 $1,251
Consumers  
Nine Months Ended September 30, 2018 $1,255
Reasons for the change    
Lower net income $(37)
Higher net income $88
Non-cash transactions1
 (25) 139
Favorable impact of changes in core working capital,2 due primarily to the timing of collections on lower electric deliveries in 2019
 47
Favorable impact of changes in other assets and liabilities, due primarily to lower income taxes payments to CMS Energy, offset partially by refunds to customers related to the TCJA and self-implemented electric rates 11
Nine Months Ended September 30, 2019 $1,251
Higher pension contributions (518)
Favorable impact of changes in core working capital,2 due primarily to lower vendor payments, offset partially by lower customer receipts
 83
Favorable impact of changes in other assets and liabilities, due primarily to the absence of 2019 refunds to customers related to the TCJA and self-implemented electric rates and lower income taxes payments to CMS Energy, offset partially by higher property tax payments and higher deposits with MISO 42
Nine Months Ended September 30, 2020 $1,085
1 
Non‑cash transactions comprise depreciation and amortization, changes in deferred income taxes and investment tax credits, and other non‑cash operating activities and reconciling adjustments.
2 
Core working capital comprises accounts receivable, notes receivable, accrued revenue, inventories, accounts payable, and accrued rate refunds.


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Investing Activities
Presented in the following table are specific components of the changes to net cash used in investing activities for the nine months ended September 30, 20192020 versus 2018:2019:
In MillionsIn Millions In Millions 
CMS Energy, including Consumers    
Nine Months Ended September 30, 2018 $(1,815)
Reasons for the change  
Lower capital expenditures, primarily due to the absence of the 2018 purchase of a wind generation project offset largely by higher capital expenditures at Consumers $2
Changes in EnerBank notes receivable, reflecting growth in consumer lending (128)
Higher purchases of notes receivable by EnerBank (220)
Absence of 2018 proceeds from DB SERP investments (146)
Proceeds from sale of transmission equipment in 2019 96
Other investing activities, primarily higher costs to retire property (1)
Nine Months Ended September 30, 2019 $(2,212) $(2,212)
Consumers  
Nine Months Ended September 30, 2018 $(1,435)
Reasons for the change    
Higher capital expenditures $(220) $(127)
Proceeds from sale of transmission equipment in 2019 76
Changes in EnerBank notes receivable, reflecting growth in consumer lending (152)
Lower purchases of notes receivable by EnerBank 290
Absence of 2019 proceeds from sale of transmission equipment (96)
Other investing activities, primarily higher costs to retire property (4) (1)
Nine Months Ended September 30, 2020 $(2,298)
Consumers  
Nine Months Ended September 30, 2019 $(1,583) $(1,583)
Reasons for the change  
Higher capital expenditures $(36)
Absence of 2019 proceeds from sale of transmission equipment (76)
Other investing activities, primarily higher costs to retire property (5)
Nine Months Ended September 30, 2020 $(1,700)


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Financing Activities
Presented in the following table are specific components of net cash provided by financing activities for the nine months ended September 30, 2019 and 2018:2020 versus 2019:
In MillionsIn Millions In Millions 
CMS Energy, including Consumers    
Nine Months Ended September 30, 2018 $412
Nine Months Ended September 30, 2019 $1,075
Reasons for the change    
Higher debt issuances $1,032
 $277
Higher debt retirements (465) (124)
Changes in EnerBank certificates of deposit, reflecting higher borrowings 334
Higher repayments under Consumers’ commercial paper program (207)
Lower issuances of common stock under the continuous equity offering program (30)
Changes in EnerBank certificates of deposit, reflecting lower borrowings (166)
Lower repayments under Consumers’ commercial paper program 7
Higher issuances of common stock, primarily the settlement of an equity forward sale contract 98
Higher payments of dividends on common stock (21) (25)
Other financing activities, primarily higher customer advances for construction, offset partially by higher debt issuance costs 20
Proceeds from the sale of membership interest in VIE to tax equity investor 417
Contribution from noncontrolling interest 31
Other financing activities, primarily higher debt prepayment costs and lower customer advances for construction, offset partially by lower debt issuance costs (35)
Nine Months Ended September 30, 2020 $1,555
Consumers  
Nine Months Ended September 30, 2019 $1,075
 $560
Consumers  
Nine Months Ended September 30, 2018 $153
Reasons for the change    
Higher debt issuances $374
 $610
Higher debt retirements (198) (245)
Higher repayments under Consumers’ commercial paper program (207)
Higher stockholder contribution from CMS Energy 425
Lower repayments under Consumers’ commercial paper program 7
Lower stockholder contribution from CMS Energy (25)
Higher payments of dividends on common stock (4) (53)
Other financing activities, primarily higher customer advances for construction 17
Nine Months Ended September 30, 2019 $560
Other financing activities, primarily higher debt prepayment costs and lower customer advances for construction (44)
Nine Months Ended September 30, 2020 $810
Capital Resources and Liquidity
CMS Energy uses dividends and tax‑sharing payments from its subsidiaries and external financing and capital transactions to invest in its utility and 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 and potentially by FERC requirements and provisions under the Federal Power Act and the Natural Gas Act. For additional details on Consumers’ dividend restrictions, see Note 4, Financings and Capitalization—Dividend Restrictions. For the nine months ended September 30, 2019,2020, Consumers paid $396$449 million in dividends on its common stock to CMS Energy.
As a result of a provision in the TCJA, CMS Energy is required to recover all alternative minimum tax credits over four years through offsets of regular taxConsumers uses cash flows generated from operations and through cash refunds. CMS Energy expects to be able to offset regular tax through the use of federal net operating loss carryforwards and, accordingly, receive alternative minimum tax credit refunds through 2021. Another provision in the TCJA excludes rate‑regulated utilitiesexternal financing transactions, as well as stockholder contributions from 100 percent cost expensing of certain property. This provision will cause Consumers to make higher tax‑sharing payments to CMS Energy, which in turn might permit CMS Energy, to maintain lower levels offund capital expenditures, retire debt, in order to invest in its businesses, pay dividends, and fund its other obligations. Consumers also uses these sources of funding to contribute to its employee benefit plans.


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its general obligations.CMS Energy and Consumers expectsexpect to have sufficient funding sources availableliquidity to issue credits to customers for all impactsfund their commitments despite potential material uncertainties that may impact their cash management and financing strategies as a result of the TCJA.COVID‑19 pandemic. CMS Energy and Consumers rely on the capital markets to fund their robust capital plan and those markets have faced significant strain. CMS Energy and Consumers have mitigated the potential impact of the pandemic on their liquidity by completing financing transactions and reducing the need for additional external funding. For more information on CMS Energy’s and Consumers’ financing transactions, see Note 4, Financings and Capitalization.
Barring any sustained market dislocations or disruptions, CMS Energy and Consumers expect to continue to have ready access to the financial and capital markets and will continue to explore possibilities to take advantage of market opportunities as they arise with respect to future funding needs. If access to these markets were to diminish or otherwise become restricted, CMS Energy and Consumers would implement contingency plans to address debt maturities, which could include reduced capital spending. The COVID‑19 pandemic is a continually evolving situation and CMS Energy and Consumers cannot predict the ultimate impact it will have on their debt covenants, business, results of operations, financial condition, capital investment program, liquidity, and cash flows.
As a result of a provision in the TCJA, as amended by the CARES Act, CMS Energy recovered all of its remaining alternative minimum tax credits in 2020. CMS Energy utilized $7 million of these credits on its 2019 consolidated tax return, and received the remaining $69 million through a cash refund. The CARES Act also provides for the deferral of payroll taxes, which will allow CMS Energy and Consumers to defer remittance of $40 million of payroll taxes in 2020; half of the deferred amount will be due at the end of 2021 and the other half will be due at the end of 2022.
In 2018 and 2020, CMS Energy entered into an equity offering programprograms under which it may sell, from time to time, shares of CMS Energy common stock having an aggregate sales price of up to $250 million.stock. Under this program,both programs, CMS Energy may sell its common stock in privately negotiated transactions, in “at the market” offerings, through forward sales transactions or otherwise. During 2018 and 2019, CMS Energy has entered into forward sales contracts having an aggregate sales price of $250 million, the maximum allowed under the 2018 program. Under the 2020 program, CMS Energy may sell shares of its common stock having an aggregate sales price of up to $500 million. In September 2020, CMS Energy entered into a forward sales contract having an aggregate sale price of $52 million.
These contracts allow CMS Energy to either physically settle the contracts by issuing shares of its common stock at the then‑applicable forward sale price specified by the agreement or net settle the contracts through the delivery or receipt of cash or shares. CMS Energy may settle the contracts at any time through their maturity dates, and presently intends to physically settle the contracts by delivering shares of its common stock. For more information on the forward sale contracts, see Note 4, Financings and Capitalization.
In October 2019, Consumers entered into a $75 million loan agreement with the MSF that matures in October 2049. Concurrently, the MSF issued $75 million in tax-exempt variable rate limited obligation revenue bonds and loaned Consumers the proceeds. For more information on the tax-exempt variable rate limited obligation revenue bonds, see Note 4, Financings and Capitalization—Tax-exempt Variable Rate Limited Obligation Revenue Bonds.
Consumers uses cash flows generated from operations and external financing transactions, as well as stockholder contributions from CMS Energy, to fund capital expenditures, retire debt, pay dividends, contribute to its employee benefit plans, and fund its other obligations. Accelerated pension funding in prior years and several initiatives to reduce costs have helped improve cash flows from operating activities. Consumers anticipates continued strong cash flows from operating activities for 2019 and beyond.
Access to the financial and capital markets depends on CMS Energy’s and Consumers’ credit ratings and on market conditions. As evidenced by past financing transactions, CMS Energy and Consumers have had ready access to these markets. Barring major market dislocations or disruptions, CMS Energy and Consumers expect to continue to have ready access to the financial and capital markets. If access to these markets were to diminish or otherwise become restricted, CMS Energy and Consumers would implement contingency plans to address debt maturities, which could include reduced capital spending.Issuance of Common Stock.
At September 30, 2019,2020, CMS Energy had $547$545 million of its revolving credit facility available and Consumers had $1,068 million$1.1 billion available under its revolving credit facilities. CMS Energy and Consumers use these credit facilities for general working capital purposes and to issue letters of credit. An additional source of liquidity is Consumers’ commercial paper program, which allows Consumers to issue, in one or more placements, up to $500 million in the aggregate in commercial paper notes with maturities of up to 365 days and that bearat market interest at fixed or floating rates. These issuances are supported by Consumers’ revolving credit facilities. While the amount of outstanding commercial paper does not reduce the available capacity of the revolving credit facilities, Consumers does not intend to issue commercial paper in an amount exceeding the available capacity of the facilities. At September 30, 2019,2020, there were no commercial paper notes outstanding under this program. For additional details on CMS Energy’s and Consumers’ revolving credit facilities and commercial paper program, see Note 4, Financings and Capitalization.


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Certain of CMS Energy’s and Consumers’ credit agreements, debt indentures, and other facilities contain covenants that require CMS Energy and Consumers to maintain certain financial ratios, as defined therein. At September 30, 2019,2020, no default had occurred with respect to any financial covenants contained in CMS Energy’s and Consumers’ credit agreements, debt indentures, or other facilities. CMS Energy and


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Consumers were each in compliance with these covenants as of September 30, 2019,2020, as presented in the following table:
 September 30, 20192020
Credit Agreement, Indenture, or FacilityLimitActual
CMS Energy, parent only   
Debt to EBITDA1
Capital¹
<6.250.70 to 1.04.70.60 to 1.0
Consumers   
Debt to Capital2
<0.65 to 1.00.47 to 1.0
Debt to Capital3
Capital²
<0.65 to 1.00.48 to 1.0
1 
Applies to CMSEnergy’s $550 million revolving credit agreement and $165$300 million term loan credit agreement. In April2020, amendments to these agreements changed the required financial covenant from a leverage ratio to a capitalization ratio.
2 
Applies to Consumers’ $850 million and $250 million revolving credit agreements, and its $30 million reimbursement agreement.
3
Applies to Consumers’ $35letter of credit agreement, and its $300 million reimbursementterm loan credit agreement.
Components of CMS Energy’s and Consumers’ cash management plan include controlling operating expenses and capital expenditures and evaluating market conditions for financing and refinancing opportunities. CMS Energy’s and Consumers’ present level of cash and expected cash flows from operating activities, together with access to sources of liquidity, are anticipated to be sufficient to fund the companies’ contractual obligations for 20192020 and beyond.
Off-Balance-Sheet Arrangements
CMS Energy, Consumers, and certain of their subsidiaries enter into various arrangements in the normal course of business to facilitate commercial transactions with third parties. These arrangements include indemnities, surety bonds, letters of credit, and financial and performance guarantees. Indemnities are usually agreementsAdditionally, CMS Energy has entered into forward sales contracts to reimburse a counterparty that may incur losses duesell its common stock in order to outside claims or breachinvest in its utility and non-utility businesses; as of contract terms. The maximum payment that could be required under a number of these indemnity obligations is not estimable; the maximum obligation under indemnities for which such amounts were estimable was $153 million at September 30, 2019. While CMS Energy2020, these contracts have an aggregate sales price of $195 million 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.mature in 2021. For additional details on thesethe companies’ indemnity and other guarantee arrangements, see Note 3, Contingencies and Commitments—Guarantees. For additional details on letters of credit and CMS Energy’s forward sales contracts, see Note 4, Financings and Capitalization.
Outlook
Several business trends and uncertainties may affect CMS Energy’s and Consumers’ financial condition and results of operations. These trends and uncertainties could have a material impact on CMS Energy’s and Consumers’ consolidated income, cash flows, or financial position. For additional details regarding these and other uncertainties, see Forward-Looking Statements and Information; Note 2, Regulatory Matters; Note 3, Contingencies and Commitments; and Part II—Item 1A. Risk Factors.


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Consumers Electric Utility Outlook and Uncertainties
Clean Energy Plan: While Consumers continues to experience modest growth in demand for electricity due to Michigan’s growing economy and increased use of air conditioning, consumer electronics, and other electric devices, it expects that increase in demand to be offset by the effects of energy efficiency and conservation.
In June 2018, Consumers filed an IRP with the MPSC detailing its “Clean Energy Plan,” its long‑term strategy for delivering reliable and affordable energy to its customers through the increased use of energy efficiency and customer demand management programs and additional renewable energy. In March 2019, Consumers and a broad coalition of key stakeholders, including business customers, environmental groups, the MPSC Staff, and the Michigan Attorney General, filed an agreement settling the IRP with the MPSC and the MPSC approved itthe IRP that Consumers filed in June 2019.
2018, which details its Clean Energy Plan. Through its Clean Energy Plan, Consumers expects to reduce carbon emissions of its


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owned generation by more than 90 percent from its 2005 levels by 2040 and eliminate the use of coal to generate electricity by 2040. The Clean Energy Plan also provides the foundation for Consumers’ goal to achieve net‑zero carbon emissions by 2040. Under this net-zero goal, Consumers plans to eliminate the impact of carbon emissions created by the electricity it generates or purchases for customers.
Specifically, the Clean Energy Plan provides for:
the retirement of the D.E. Karn 1 & 2 coal‑fueled generating units, totaling 515
the retirement of the D.E. Karn 1 & 2 coal-fueled generating units, totaling 503 MW, in 2023
the continued assessment in future IRP filings concerning the retirement of the J.H. Campbell 1 & 2 coal‑fueledcoal-fueled generating units, totaling 608609 MW, in 2025 or earlier
Under the Clean Energy Plan, Consumers will replace the capacity to be retired with:
increased demand response programs
increased energy efficiency
increased renewable energy generation
conservation voltage reduction
increased pumped storage
Consumers will competitively bid new capacity and at least 50 percent of the new capacity will be built and owned by third parties; the remainder will be owned and operated by Consumers. In support of its Clean Energy Plan, Consumers issued a requestrequests for proposals in September 2019 and July 2020, each to acquire up to 300 MW of new capacity from projects to be operational in Michigan’s Lower Peninsula by May 2022.2023. Specifically, Consumers is solicitingsolicited offers to enter into PPAs with or purchase solar generation projects ranging in size from 20 MW to 150 MW and to enter into PPAs with PURPA qualifying facilities up to 20 MW. Any contracts entered into as a result of the request for proposals would be subject to MPSC approval.
As approved by the MPSC, the IRP allows Consumers to earn a financial incentive on PPAs approved by the MPSC after January 1, 2019. Additionally, the IRP allows for recovery of significant increases in demand response costs. The MPSC separately approved an associated financial incentive for exceeding certain demand response targets. Consumers is required to file a new IRP by June 2021.
PURPA: PURPA requires Consumers to purchase power from qualifying cogeneration and small power production facilities at a price approved by the MPSC that is meant to represent Consumers’ “avoided cost” of generating power or purchasing power from another source. In November 2017, the MPSC issued an order establishing a new avoided‑cost methodology for determining the price that Consumers must pay to purchase power under PURPA. Among other things, the MPSC’s order changed the basis of Consumers’ avoided cost from the cost of coal-fueled generating units to that of natural gas-fueled generating units. The MPSC order also assigned more capacity value to qualifying facilities that are consistently able to generate electricity during peak times.


33



Based on concerns that the November 2017 order could have resulted in mandated purchases of generation, potentially at above-market prices, Consumers filed a petition with the MPSC in December 2017, requesting corrections to the pricing calculations and capacity purchase model set in the order. Subsequently, the MPSC suspended the implementation of the order and reopened the proceeding. In February 2018, the MPSC issued an order limiting Consumers’ obligation to pay the full avoided capacity cost, which was based on the cost of a natural gas combustion turbine under the November 2017 avoided‑cost formula, to existing qualifying facilities upon the expiration of outstanding contracts and to the first 150 MW of new generation projects that qualified under PURPA. In October 2018, the MPSC issued an order lifting the suspension on the November 2017 order, thereby making effective the avoided‑cost formula set at that time. According to the October 2018 order, the use of the full avoided‑cost formula was still limited to outstanding contracts that expired and the first 150 MW of new qualifying generation projects. The October 2018 order also provided that all other qualifying generation projects that established a legally enforceable obligation were eligible to receive a capacity payment equal to the MISO planning resource auction price and a designated energy price approved in the MPSC’s October order. The MPSC also ruled that the determination of Consumers’ future capacity needs would take place in Consumers’ IRP proceeding.
In November 2018, Consumers made a filing in support of another party’s request that the MPSC stay the effectiveness of its October 2018 order. In February 2019, Consumers filed a petition with the MPSC challenging the rates approved in the October 2018 order, and it separately filed a request to withdraw a tariff provision incorporating those rates. In June 2019, the MPSC denied both of these requests, as well as the prior request for a stay of the October 2018 order. Five PURPA developers filed complaints with the MPSC claiming that their projects had legally enforceable obligations making them eligible for the avoided cost rates approved in the October 2018 order. One of those developers challenged aspects of the MPSC’s October 2018 order in the Michigan Court of Appeals.
In August 2019, Consumers and various PURPA developers filed a settlement agreement that resolves or will resolve five outstanding complaints with the MPSC as well as the challenge before the Michigan Court of Appeals. Under the settlement agreement, which the MPSC approved in September 2019, Consumers will enter into contracts to purchase 584 MW of power from qualifying solar generation projects by September 2023. Of this amount, 170 MW will be purchased at the full avoided-cost rates approved in the October 2018 order. The remaining 414 MW will be purchased at a capacity payment equal to the MISO planning resource auction price and the designated energy price approved in the October 2018 order.
In the approved IRP settlement agreement, Consumers agreed to a new method of calculating avoided cost, based on a competitive bidding process that will enable Consumers to purchase energy from new generation at the lowest cost and mitigate the risk of forced purchases of unneeded renewable generation.
In September 2019, FERC issued a notice of proposed rulemaking that could result in modifications to the current federal regulations implementing PURPA. Among other things, the proposal would change the rules for measuring the size of qualifying facilities and determining whether certain PURPA projects have access to wholesale markets. The proposal would also provide states with more flexibility to set the prices paid to PURPA projects. Consumers does not anticipate the proposed rulemaking will affect the PURPA projects with which it has agreements. Consumers cannot predict the outcome of this proposed rulemaking.
Renewable Energy Plan: The 2016 Energy Law raised the renewable energy standard from the previous ten‑percent requirement to 15 percent in 2021, with an interim target of 12.5 percent in 2019. Consumers met the interim target for 2019 and demonstrated its compliance in the 2019 renewable energy cost reconciliation filed with the MPSC in July 2020. Consumers is required to submit RECs, which represent proof that the associated electricity was generated from a renewable energy resource, in an amount equal to at least the required percentage of Consumers’ electric sales volume each year. Under its renewable energy plan, Consumers expects to meet its renewable


34



energy requirement each year with a combination of newly generated RECs and previously generated RECs carried over from prior years.
In conjunction with itsUnder Consumers’ renewable energy plan, Consumers began construction in 2017 of Cross Winds®Energy Park Phase III, with a planned nameplate capacity of 76 MW, and expects it to be operational in 2020. This project is expected to qualify for certain federal production tax credits, generating cost savings that will be passed on to customers.
In February 2019, the MPSC issued an order ruling on amendments Consumers had requested to its renewable energy plan, andhas approved the acquisition of up to 525 MW of new wind generation projects. Under the renewable energy plan,projects and authorized Consumers is authorized to earn a 10.7 percent return on equity on any projects approved by the MPSC. Also in February 2019,Specifically, the MPSC has approved an agreement under which Consumers purchasedthe following:
purchase of a wind generation project under development, with capacity of up to 150 MW, in Gratiot County, Michigan. Consumers expects to beginMichigan; on-site construction of this projectbegan during the fourth quarter of 2019 and that it willthe project is slated to be complete and operational in 2020.2020
In June 2019, Consumers entered into an agreement to purchase of a wind generation project under development, in Hillsdale, Michigan, with capacity of up to 166 MW. Under the agreement, which the MPSC conditionally approvedMW, in October 2019,Hillsdale, Michigan; Consumers expectsis slated to take full ownership and begin commercial operation of the project in 2020. Additionally, in September 2019, the MPSC approved2020
execution of a 20‑year agreement20-year PPA under which Consumers will purchase 100 MW of renewable capacity, energy, and RECs from a 149‑MW149-MW solar generating facility to be constructed in Calhoun County, Michigan. TheMichigan; the facility is expected to be operational in 2021. These agreements resulted2022


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Consumers has received force majeure notifications from a requestthe turbine supplier for proposals that Consumers issued in June 2018 to acquire up to 400 MW ofthe 150-MW wind generation projectsproject and upfrom the seller of the 166-MW wind generation project. These notifications cited the COVID-19 pandemic as a force majeure event. At this time, construction activities continue and Consumers does not anticipate any changes to 100 MWthe projects’ expected commercial operation dates, overall costs, or ability to qualify for production tax credits, but Consumers cannot predict the ultimate impact of solar generation projects in Michigan.the force majeure notifications.
Electric Customer Deliveries and Revenue: Consumers’ electric customer deliveries are seasonal and largely dependent on Michigan’s economy. The consumption of electric energy typically increases in the summer months, due primarily to the use of air conditioners and other cooling equipment. In addition, Consumers’ electric rates, which follow a seasonal rate design, are higher in the summer months than in the remaining months of the year.
As a result of the COVID-19 pandemic, Consumers expects weather‑normalizedhas delayed implementation of a summer peak time-of-use rate for electric residential customers, originally planned to begin in June 2020. The summer peak time-of-use rate will allow customers to take advantage of lower-cost energy during off-peak times during the summer months. Customers could reduce their electric bills by shifting their consumption from on‑peak to off‑peak times. The MPSC approved delaying implementation of the summer peak time-of-use rate to 2021, recognizing that more customers may be at home during the pandemic and may not have the same opportunities to manage peak power consumption.
In response to the COVID‑19 pandemic, Michigan’s Governor issued various executive orders requiring all non-essential businesses to close temporarily and Michigan residents to stay home during the period from March 23, 2020 to June 8, 2020. Subsequent executive orders gradually eased restrictions. In October 2020, the Michigan Supreme Court issued an opinion that limits the governor’s authority to issue executive orders relating to the COVID-19 pandemic. Subsequently, the Michigan Department of Health and Human Services and other governmental entities issued replacement orders and Michigan’s Governor has been working with the State Legislature to pass bills covering previous executive orders. Presently, most businesses are now open at limited capacity and with safety measures in place.
During the period from April 1, 2020 through September 30, 2020, a period covering the majority of the pandemic to date, weather-normalized electric deliveries overwere approximately seven percent lower than deliveries during the same period in 2019, due mainly to a decline in deliveries to commercial and industrial customers of approximately 14 percent. This decline, however, was offset partially by an increase of approximately eight percent in deliveries to residential customers. Consumers cannot predict the long-term impact of the COVID-19 pandemic, but anticipates a decline of less than ten percent in deliveries to commercial and industrial customers for the full-year 2020 compared to 2019.
In response to the pandemic, Consumers initially suspended shut-offs of service for non-payment and extended payment protection plans for low-income and senior customers. Consumers slowly began resuming shut-offs of service for non-payment in late July 2020 for commercial and industrial customers and in October 2020 for residential customers. Consumers has experienced and anticipates it will continue to experience increased uncollectible accounts in the near term, but cannot predict the long-term impact of the pandemic on Michigan’s economy or its customers.


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Over the next five years, Consumers expects weather-normalized electric deliveries to remain stable relative to 2018.decrease slightly. This outlook reflects modest growth in electric demand offset by the effects of energy waste reduction programs and appliance efficiency standards.standards offset largely by modest growth in electric demand. Actual delivery levels will depend on:
energy conservation measures and results of energy waste reduction programs
weather fluctuations
Michigan’s economic conditions, including utilization, expansion, or contraction of manufacturing facilities, population trends, and housing activity
Electric ROA: Michigan law allows electric customers in Consumers’ service territory to buy electric generation service from alternative electric suppliers in an aggregate amount capped at ten percent, with certain exceptions, of Consumers’ weather‑normalized retail sales of the preceding calendar year.exceptions. At September 30, 2019,2020, electric deliveries under the ROA program were at the ten‑percent limit. Of Consumers’ 1.8 million electric customers, 284 customers,fewer than 300, or 0.02 percent, purchased electric generation service under the ROA program.
The 2016 Energy Law established a path to ensure that forward capacity is secured for all electric customers in Michigan, including customers served by alternative electric suppliers under ROA. The new law also authorized the MPSC to ensure that alternative electric suppliers have procured enough capacity to cover their anticipated capacity requirements for the four‑yearfour-year forward period. In 2017, the MPSC


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issued an order establishing a state reliability mechanism for Consumers. Under this mechanism, beginning June 1, 2018, if an alternative electric supplier does not demonstrate that it has procured its capacity requirements for the four‑yearfour-year forward period, its customers will pay a set charge to the utility for capacity that is not provided by the alternative electric supplier. All alternative electric suppliers have demonstrated that they have procured their capacity requirements through the MISO planning year beginning June 1, 2022.2023.
In June 2018,During 2017, the MPSC issued an order requiringorders finding that it has statutory authority to determine and implement a local clearing requirement, which requires all electric suppliers to demonstrate that a portion of the capacity procured to serve customers during peak demand times is located in the MISO footprint in Michigan’s Lower Peninsula. In July 2018, the Michigan Court of Appeals issued a decision that the MPSC does not have statutory authority to implement such a requirement for individual alternative electric suppliers. Consumers believesIn April 2020, the 2016 Energy Law does give such authorization to the MPSC. The MPSC and Consumers have filed applications for leave to appealMichigan Supreme Court issued a unanimous opinion reversing the Court of Appeals’ decision and determined that the 2016 Energy Law authorizes the MPSC to implement a local clearing requirement on individual alternative electric suppliers. The Michigan Supreme Court remanded the case to the Court of Appeals to consider a procedural challenge previously undecided by the Court of Appeals; this challenge concerns the process that the MPSC used in 2017 to consider a local clearing requirement and does not affect the substance of the MPSC’s authority to implement a local clearing requirement for future planning periods. In April 2020, ABATE filed a motion for rehearing of the Michigan Supreme Court. In June 2019,Court’s decision; the Michigan Supreme Court denied ABATE’s motion in May 2020. In June 2020, the Michigan Court of Appeals issued orders directinga letter resubmitting the filingcase for its consideration of supplemental briefsthe Michigan Supreme Court’s remand of the procedural issue.
In September 2020, ABATE and another intervenor filed a complaint against the scheduling of oral argumentsMPSC in the case,U.S. District Court for the Eastern District of Michigan challenging the constitutionality of a local clearing requirement. The complaint requests the federal court to issue a permanent injunction prohibiting the MPSC from implementing a local clearing requirement on individual electric providers. Consumers plans to file a motion to intervene and will ultimately decide whether to consider and rule ondefend the appeals. Oral arguments have been scheduled for November 2019.local clearing requirement in that federal litigation.
Electric Rate Matters: Rate matters are critical to Consumers’ electric utility business. For additional details on rate matters, see Note 2, Regulatory Matters.Matters and Note 3, Contingencies and Commitments.


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2020 Electric Rate Case: In February 2020, Consumers filed an application with the MPSC seeking an annual rate increase of $244 million, based on a 10.5 percent authorized return on equity and a projected twelve-month period ending December 31, 2021. The filing requests authority to recover new investment in distribution system reliability and technology enhancements. In July 2020, Consumers reduced its requested annual rate increase to $230 million. Presented in the following table are the components of the revised requested increase in revenue:
In Millions 
Projected Twelve-Month Period Ending December 31 2021
Components of the requested rate increase  
Investment in rate base $179
Operating and maintenance costs 97
Cost of capital 20
Sales (30)
TCJA deferred federal income taxes amortization (36)
Total $230
The filing also seeks approval to recover $13 million associated with Consumers’ deferral of depreciation and property tax expense and the overall rate of return on distribution-related capital investments exceeding certain threshold amounts. This deferred accounting treatment was approved by the MPSC in January 2019.
Additionally, the filing seeks approval of a method of recovering amounts earned under the financial compensation mechanism approved by the MPSC in Consumers’ IRP. This mechanism allows Consumers to earn a financial incentive on PPAs approved by the MPSC after January 1, 2019. In the filing, Consumers requests recovery of $3 million, beginning in January 2021, for incentives earned and to be earned on PPA payments during 2019 through 2021.
Consumers also proposes in the filing a new distributed generation tariff to replace the current net metering tariff, pursuant to the 2016 Energy Law. The proposed distributed generation tariff is consistent with other distributed generation tariffs already approved by the MPSC and would substantially reduce the subsidies paid by non-distributed generation customers under the current net metering program.
Depreciation Rate Case: In July 2020, Consumers filed a depreciation case related to Ludington, requesting to increase depreciation expense, and its recovery of that expense, by $17 million annually.
Electric Environmental Outlook: Consumers’ operations are subject to various state and federal environmental laws and regulations. Consumers estimates that it will incur capital expenditures of $0.3 billion$275 million from 20192020 through 20232024 to continue to comply with RCRA, the Clean Water Act, the Clean Air Act, and numerous state and federal environmental regulations. Consumers expects to recover these costs in customer rates, but cannot guarantee this result. Consumers’ primary environmental compliance focus includes, but is not limited to, the following matters.
Air Quality: Multiple air quality regulations apply, or may apply, to Consumers.
CSAPR, which became effective in 2015, requires Michigan and many other states to improve air quality by reducing power plant emissions that, according to EPA computer models, contribute to ground‑level ozone and fine particle pollution in other downwind states. In 2016, the EPA finalized new ozone season standards for CSAPR, which became effective in 2017. AnyIn October 2020, in response to a court-ordered remand due to litigation, or remand to the EPA proposed a revised CSAPR rule to reflect updated emission reductions from electric generating units in 12 states, including Michigan. The EPA intends to finalize the rule by


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March 2021, and has made provisions for program implementation by May 2021, with continued emission reductions through 2024. Consumers is not expected to impact Consumers’evaluating its emission compliance strategy as Consumers expects its emissionsfor existing units based on the proposed number of allowances allocated to be within the CSAPR allowance allocations.Michigan for 2021 through 2024.
In 2012, the EPA published emission standards for electric generating units, known as MATS, based on Section 112 of the Clean Air Act, known as MATS.Act. Under MATS, all of Consumers’ existing coal‑fueled electric generating units were required to add additional controls for hazardous air pollutants. Consumers met the extended deadline of April 2016 for five coal‑fueled units and two oil/gas‑fueled units it continues to operate and retired its seven remaining coal‑fueled units. MATS is presently being litigated. In addition, in December 2018, the EPA proposedrecently finalized changes to the supporting analysis used to justifyenact MATS, but did not proposemake any changes to the MATS regulations. AnyThese changes resulting from that litigation or rulemaking aredo not expected to impact Consumers’ MATS compliance strategy because, if the MATS regulations were repealed, Consumers is stillwould then be required to comply with the Michigan Mercury Rule, which has similar requirements to MATS. In addition, Consumers must comply with emission limits in its settlement agreement with the EPA entered into in 2014renewable operating permits concerning opacity and NSR.NSR, which has similar emission requirements to MATS.
In 2015, the EPA lowered the NAAQS for ozone. The new2015 ozone NAAQS will makemade it more difficult to construct or modify power plants and other emission sources in areas of the country that have not met the new2015 ozone standard. In April 2018, the EPA designated certain areas of Michigan as not meeting the new standard with an August 2018 effective date.ozone standard. None of Consumers’ fossil‑fuel‑fired generating units are located in these


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areas. Some of Consumers’ compressor stations are located in areas impacted by the rule, but Consumers expects only minor permitting impacts if those units are modified in the future. In August 2020, the EPA proposed to retain the 2015 NAAQS for ozone, but has not finalized this proposal. Consumers does not expect that any litigation involving NAAQS for ozone will have a material adverse impact on its generating assets.
Consumers’ strategy to comply with air quality regulations, including CSAPR, NAAQS, and MATS, as well as its legal obligations, involved the installation and operation of emission control equipment at some facilities and the suspension of operations at others; however, Consumers continues to evaluate these rules in conjunction with other EPA and EGLE rulemakings, litigation, and congressional action. This evaluation could result in:
a change in Consumers’ fuel mix
changes in the types of generating units Consumers may purchase or build in the future
changes in how certain units are used
the retirement, mothballing, or repowering with an alternative fuel of some of Consumers’ generating units
changes in Consumers’ environmental compliance costs
Greenhouse Gases: There have been numerous legislative and regulatory initiatives at the state, regional, national, and international levels that involve the potential regulation of greenhouse gases. Consumers continues to monitor and comment on these initiatives and to follow litigation involving greenhouse gases.
In 2015, the EPA finalized new rules pursuant to Section 111(b) of the Clean Air Act to limit carbon dioxide emissions from new electric generating units, as well as modified or reconstructed electric 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. These rules are being litigated.
In December 2018, the EPA proposed a revised Section 111(b) regulation to replace the 2015 standard rule limiting carbon dioxide emissions from new electric generating units, citing limited availability and high costs of carbon capture and sequestration equipment as reasons to change the 2015 rule. The revised Section 111(b) regulation requireswould require new coal‑fueled generating units to meet a highly efficient steam


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cycle performance standard. If finalized, Consumers does not expect this proposal to change its existing environmental strategy.
Also in 2015, the EPA published final rules pursuant to Section 111(d) of the Clean Air Act to limit carbon dioxide emissions from existing electric generating units, calling the rules the “Clean Power Plan.” Certain states, corporations, and industry groups initiated litigation opposing the proposed Clean Power Plan, and in 2016, the U.S. Supreme Court stayed the Clean Power Plan while the litigation proceeded. In June 2019, the EPA released a final rule repealing the Clean Power Plan.
In August 2018, the EPA proposed the “Affordable Clean Energy” rule as a replacement for the EPA’s Clean Power Plan. The EPA finalized the Affordable Clean Energy rule in June 2019.rule. The rule requires individual states to evaluate coal‑fueledcoal-fueled power plants for heat‑rate improvements that could increase overall plant efficiency. The evaluations to be performed by the State of Michigan under the final rule may require Consumers to make heat-rate improvements at its remaining coal-fueled unitsJ.H. Campbell plant beginning in the mid-2020s.mid‑2020s. This rule is presently being litigated. Consumers cannot evaluate the potential impact of the rule until the State of Michigan completes its evaluations.
In 2015, a group of 195 countries, including the U.S., finalized the Paris Agreement, which governs carbon dioxide reduction measures beginning in 2020. Although the U.S. subsequently withdrewhas begun the process of withdrawing from the


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Paris Agreement, it has stated a desire to renegotiate a new agreement in the future. At this time, Consumers does not expect any adverse changes to its environmental strategy as a result of these events.
In September 2020, Michigan’s Governor signed an executive order creating the Michigan Healthy Climate Plan, which outlines goals for Michigan to achieve economy-wide net-zero greenhouse gas emissions and to be carbon neutral by 2050. The executive order aims for a 28-percent reduction below 2005 levels of greenhouse gas emissions by 2025. Consumers has already surpassed the 28-percent reduction milestone in its electric business and previously announced, in February 2020, a goal of achieving net‑zero carbon emissions by 2040. The order directs EGLE to develop and oversee an action plan for achieving these goals. In addition, the Governor established the Council on Climate Solutions, an advisory group of key stakeholders to be appointed by the Governor that will assist EGLE in implementing the plan. These goals are aspirational in nature and any changes in law or regulation to achieve these goals would need to be approved by Michigan Legislature or the relevant regulatory agency. The MPSC has requested comments from utilities and other stakeholders on how the Governor’s goal should be incorporated into future IRP filings. Consumers does not expect any adverse changes to its environmental strategy as a result of these events.
While Consumers cannot predict the outcome of changes in U.S. policy or of other legislative or regulatory initiatives involving the potential regulation of greenhouse gases, it intends to continue to move forward with its Clean Energy Plan, its present net-zero carbon reduction goal, and its emphasis on supply diversity. Consumers will continue to monitor regulatory and legislative activity and related litigation regarding greenhouse gas emissions standards that may affect electric generating units.
SevereIncreased frequency of severe weather events, andincluding those due to climate change, associated with increasing levels of greenhouse gases could affectmaterially impact Consumers’ facilities, and energy sales, and could have a material impact on its future results of operations. Consumers is unable to predict these events or their financial impact; however, Consumers plans for adverse weatherevaluates the potential physical impacts of climate change on its operations, including increased storm activity, increased rainfall, and takeshigher lake and river levels. Consumers is taking steps to reduce its potential impact.mitigate these risks as appropriate.
Litigation, international treaties, federal laws and regulations (including regulations by the EPA), and state laws and regulations, if enacted or ratified, could ultimately require Consumers to replace equipment, install additional emission control equipment, purchase emission allowances or credits, curtail operations, arrange for alternative sources of supply, mothball or retire facilities that generate certain emissions, pursue energy efficiency or demand response measures more swiftly, or take other steps to manage or lower the emission of greenhouse gases. Although associated capital or operating costs relating to greenhouse gas regulation or legislation could be material and cost recovery cannot be assured, Consumers expects to recover these costs and capital expenditures in rates consistent with the recovery of other reasonable costs of complying with environmental laws and regulations.


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CCRs: In 2015, the EPA published a final rule regulating CCRs such as coal ash, under RCRA. The final rule adopts minimum standards for beneficially reusing and disposing of non‑hazardous CCRs. The rule establishes new minimum requirements for site location, groundwater monitoring, flood protection, storm water design, fugitive dust control, and public disclosure of information, including any groundwater protection standard exceedances. The rule also sets out conditions under which CCR units would be forced to cease receiving CCR and non‑CCR wastewater and initiate closure based on the inability to achieve minimum safety standards, meet a location standard, or meet minimum groundwater standards. Consumers has aligned with EGLE on closure plans for each of its unlined ash ponds to ensure coordination between federal and state requirements. The unlined ash ponds have ceased operation and, where applicable, have been replaced with double-lined ash ponds or concrete tanks. Significant closure work has been completed at the remaining ash ponds.
Due to litigation, many aspects of the 2015 CCR rule have been remanded to the EPA, which has resulted in various new rulemakings. These new rulemakings are now in litigation. Continued litigation will add uncertainty around requirements for compliance and state permit programs.
Separately, Congress passed legislation in 2016 allowing participating states to develop permitting programs for CCRs under RCRA. In December 2018, the Michigan Legislature adopted a permitting program, which requires the EPA’s authorization. This program should reduce costly, duplicative oversight over CCRs and provide local oversight to CCR issues unique to Michigan. In April 2020, EGLE submitted the state CCRa regulatory package for Michigan’s permit program application to Michigan’s Attorney General in June 2019the EPA for review and signature. The Attorney General’s office is engaged in a detailed review of the program and application with EGLE.its review. Federal rulemaking challenges may delay EPA approval of the Michigan permitting program.
Consumers has aligned with EGLE on closure plans for all of its coal ash disposal sites, including those subject to the EPA’s 2015 CCR rule, and adjusted its recorded ARO accordingly. Consumers has historically been authorized to recover in electric rates costs related to coal ash disposal sites.

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

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Water:The EPA’s rule to regulate theEPA regulates cooling water intake systems of existing electric generating plants under Section 316(b) of the Clean Water Act became effectiveand the corresponding rules that were revised in 2014. The rule isrules are aimed at reducing alleged harmful impacts on fish and shellfish.aquatic organisms, such as fish. In April 2018, Consumers submitted to EGLE for review and approval all required studies and recommended plans to comply with Section 316(b), but has not yet received final approval.
In 2015, the EPA released its final effluent limitation guidelines.guidelines for steam electric generating plants. These guidelines, which are presently being litigated, set stringent new requirements for the discharge from electric generating units into wastewater streams. In August 2017,The EPA published a final rule in October 2020, with an effective date of December 2020, relaxing the EPA announced that it will undertake a rulemaking2015 guidelines related to replace specific portionsthe discharge of the rule. In September 2017, the EPA proposed delayingwastewater streams from electric generating units. The rule also extends the compliance start dates for two years, but maintaineddeadline from the compliance end dates. Consumers expects that additional rulemaking will begin in 2019 and likely conclude in 2020.of 2023 to the end of 2025, which would need to be agreed upon by EGLE through the NPDES permitting process. Consumers does not expect any adverse changes to its environmental strategy as a result of anythese revisions to the rule.
In recent years, the EPA and the U.S. Army Corps of Engineers have proposed rules redefining “waters“Waters of the United States,” which defines the scope of the EPA’sfederal jurisdiction under the Clean Water Act, and proposing other changes to the Clean Water Act regulations. For example, the EPA recently finalized a rule repealing the 2015 definition of “waters of the United States.” In addition, the EPA has stated that it expects to finalize its new definition of “waters“Waters of the United States” and, in late 2019 or early 2020. These rules are presently being, or are likely to be, litigated.
A finalJanuary 2020, released a rule with its new definition. The new definition would changenarrows the scope of waterfederal jurisdiction and wetlands regulations forreduces the EPA under the Clean Water Act. The EPA has delegatedfrequency of dual jurisdiction in states with authority to manageregulate the same waters; Michigan wetlands program to EGLE. As a result, regardless of the ultimate outcome of the EPA’s rules, Consumers expects to continue to operate under Michigan’s wetlands regulations, and under the applicable state and federal water jurisdictional regulations. Thus,is one such state. Consumers does not expect any adverse changes to its environmental strategy as a result of these events.the new definition, which is presently being litigated in multiple jurisdictions.


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Many of Consumers’ facilities maintain NPDES permits, which are renewed every five years and are vital to the facilities’ operations. Failure of EGLE to renew any NPDES permit, a successful appeal against a permit, a change in the interpretation or scope of NPDES permitting, or onerous terms contained in a permit could have a significant detrimental effect on the operations of a facility.
Other Matters: Other electric environmental matters could have a material impact on Consumers’ outlook. For additional details on other electric environmental matters, see Note 3, Contingencies and Commitments—Consumers Electric Utility Contingencies—Electric Environmental Matters.
Retention Incentive Program: In October 2019, Consumers announced a retention incentive program to ensure necessary staffing at the D.E. Karn generating complex through the anticipated 2023 retirement of the coal-fueled electric generating units. Based on the number of employees that have chosen to participate, the aggregate cost of the program through 2023 is estimated to be $35 million. Consumers expects to recognize $6up to $15 million of expense related to retention and severance benefits in late 2019.2020. Consumers will seekis seeking recovery of these costs from customers.customers in its 2020 electric rate case. For additional details on this program, see Note 15,14, Asset SalesSale and Exit Activities.
Consumers Gas Utility Outlook and Uncertainties
Gas Deliveries: Consumers’ gas customer deliveries are seasonal. The peak demand for natural gas typically occurs in the winter due to colder temperatures and the resulting use of natural gas as heating fuel.
Consumers does not anticipate that the COVID‑19 pandemic will have a material impact on near-term gas deliveries, but cannot predict the impact on full-year 2020 deliveries at this time. Consumers has experienced and anticipates it will continue to experience increased uncollectible accounts in the near term, but cannot predict the long-term impact of the pandemic on Michigan’s economy or its customers.
Over the next five years, Consumers expects weather‑normalized gas deliveries over the next five years to increase slightlyremain stable relative to 2018.2019. This outlook reflects modest growth in gas demand offset partially by the predicted


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effects of energy efficiency and conservation. Actual delivery levels from year to year may vary from this expectation as a result of:
weather fluctuations
use by power producers
availability and development of renewable energy sources
gas price changes
Michigan economic conditions, including population trends and housing activity
the price of competing energy sources or fuels
energy efficiency and conservation impacts
Gas Rate Matters: Rate matters are critical to Consumers’ gas utility business. For additional details on rate matters, see Note 2, Regulatory Matters.Matters and Note 3, Contingencies and Commitments.
2019 Gas Rate Case: In December 2019, Consumers filed an application with the MPSC seeking an annual rate increase of $245 million, based on a 10.5 percent authorized return on equity and a projected twelve-month period ending September 30, 2021. In May 2020, Consumers reduced its requested annual rate increase to $229 million. In September 2020, the MPSC approved a settlement agreement authorizing an annual rate increase of $144 million, based on a 9.9 percent authorized return on equity, effective October 1, 2020. As part of that agreement, Consumers agreed not to file a new gas rate case prior to December 2021. The MPSC also approved the continuation of a revenue decoupling mechanism, which annually reconciles Consumers’ actual weather-normalized non-fuel revenues with the revenues approved


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by the MPSC. This reconciliation would start in October 2021 and continue until the MPSC resets rates in a subsequent rate case.
Additionally, the MPSC authorized Consumers to accelerate:
the refund of a regulatory liability associated with the unprotected, non-property-related excess deferred income taxes resulting from the TCJA; Consumers was previously authorized to refund this through 2029
the flow-through of certain income tax benefits associated primarily with the cost of removal of gas plant assets placed in service before 1993; Consumers was previously authorized to pass these benefits to customers through 2025
Under the settlement agreement approved by the MPSC, these benefits, which total $84 million, will now be passed through to customers by September 2022. For additional details, see Note 9, Income Taxes.
Gas Pipeline and Storage Integrity and Safety: In October 2019, PHMSA published a final rule that expands federal safety standards for gas transmission pipelines. To comply with the rule, Consumers will incur increased capital costs to install and remediate pipelines as well as increased operating and maintenance costs to expand inspections, maintenance, and monitoring of its existing pipelines. The requirements in the regulation taketook effect July 1, 2020, with various implementation phases over numerous years.
In 2016,February 2020, PHMSA publishedfinalized an interim final rule thatit had published in 2016; this rule established minimum federal safety standards for underground natural gas storage facilities. To comply with the interim rule, Consumers incurred increased capital and operating and maintenance costs to expand inspections, maintenance, and monitoring of its underground gas storage facilities. PHMSA expects to finalize additional requirements by the end of 2019.
Although associated capital or operating and maintenance costs relating to these regulations could be material and cost recovery cannot be assured, Consumers expects to recover such costs and capital expenditures in rates consistent with the recovery of other reasonable costs of complying with laws and regulations. Consumers will continue to monitor gas safety regulations and is implementingcontinue implementation of the American Petroleum Institute’s Recommended Practice 1173, Pipeline Safety Management Systems. This program ensuresminimizes gas system asset- and performance-related risks by ensuring that there are policies, procedures, work instructions, forms, and records in place to streamline adoption and deployment of any existing or future regulations.
Gas Environmental Outlook: Consumers expects to incur response activity costs at a number of sites, including 23 former MGP sites. For additional details, see Note 3, Contingencies and Commitments—Consumers Gas Utility Contingencies—Gas Environmental Matters.
Greenhouse Gases: Consumers is making voluntary efforts to reduce its gas utility’s methane emissions. In October 2019, Consumers set a goal of net‑zero methane emissions from its natural gas delivery system by 2030. Under its Methane Reduction Plan, Consumers plans to reduce methane emissions from its system by about 80 percent by accelerating the replacement of aging pipe, rehabilitating or retiring outdated infrastructure, and adopting new technologies and practices. The remaining emissions will be eliminated by purchasing and/or producing renewable natural gas.
In September 2020, Michigan’s Governor signed an executive order creating the Michigan Healthy Climate Plan, which outlines goals for Michigan to achieve economy-wide net-zero greenhouse gas emissions and to be carbon neutral by 2050. The executive order aims for a 28-percent reduction below 2005 levels of greenhouse gas emissions by 2025. These new goals could have an impact on Consumers’ gas business over the long term. For additional details on the executive order, see Consumers Electric Utility Outlook and Uncertainties—Electric Environmental Outlook.


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There is increasing interest at the federal, state, and local levels involving potential regulation of greenhouse gases or its sources. Such regulation, if adopted, may involve requirements to reduce methane emissions from Consumers’ gas utility operations and carbon dioxide emissions from natural gas customer use. No such measures apply to Consumers at this time. Consumers continues to monitor these initiatives and comment as appropriate. Consumers cannot predict the impact of any potential future legislation or regulation on its gas utility.
Consumers Electric Utility and Gas Utility Outlook and Uncertainties
Energy Waste Reduction Plan: The 2016 Energy Law authorized incentives for demand response programs and expanded existing incentives for energy efficiency programs, referring to the combined initiatives as energy waste reduction programs. The 2016 Energy Law:
extended the requirement to achieve annual reductions of 1.0 percent in customers’ electricity use through 2021 and 0.75 percent in customers’ natural gas use indefinitely
removed limits on investments under the program and provided for a higher return on those investments; together, these provisions effectively doubled the financial incentives Consumers may earn for exceeding the statutory targets
established a goal of 35 percent combined renewable energy and energy waste reduction by 2025

established a goal of 35 percent combined renewable energy and energy waste reduction by 2025; Consumers has achieved 22 percent of the combined renewable energy and energy waste reduction goal through 2019

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demand response costs and an associated financial incentive based on demand response target performance.
Under its energy waste reduction plan, Consumers provides its customers with incentives to reduce usage by offering energy audits, rebates and discounts on purchases of highly efficient appliances, and other incentives and programs. The COVID‑19 pandemic may impact Consumers’ ability to execute energy efficiency programs effectively and, accordingly, could affect Consumers’ ability to exceed its statutory savings targets and earn the maximum energy waste reduction incentive for 2020. Consumers cannot predict the ultimate financial impact of the pandemic on its 2020 energy waste reduction incentive.
Enterprises Outlook and Uncertainties
CMS Energy’s primary focus with respect to its enterprises businesses is to maximize the value of generating assets, its share of which represents 1,2341,502 MW of capacity, and to pursue opportunities for the development of renewable generation projects.
In July 2020, CMS Enterprises purchased an ownership interest in Aviator Wind, a 525‑MW wind generation project in Coke County, Texas. The project was completed and became operational in September 2020. Of the project’s 525‑MW nameplate capacity, 420 MW has been committed under long-term PPAs. For additional details, see Note 15, Purchase of Variable Interest Entity.
The enterprises segment’s assets may be affected by environmental laws and regulations. The new2015 ozone NAAQS will makemade it more difficult to construct or modify power plants and other emission sources in areas of the country that have not met the new2015 ozone standard. In April 2018, the EPA designated certain areas of Michigan as not meeting the new standard with an August 2018 effective date.ozone standard. The enterprises segment’s DIG plant located in Dearborn, Michigan is in one such area and, as a result, would be subject to additional permitting restrictions in the event of any future modifications. For additional details regarding the new ozone NAAQS, see Consumers Electric Utility Outlook and Uncertainties—Electric Environmental Outlook.


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Trends, uncertainties, and other matters related to the enterprises segment that could have a material impact on CMS Energy’s consolidated income, cash flows, or financial position include:
investment in and financial benefits received from renewable energy and energy storage projects
changes in energy and capacity prices
severe weather events and climate change associated with increasing levels of greenhouse gases
changes in commodity prices and interest rates on certain derivative contracts that do not qualify for hedge accounting and must be marked to market through earnings
changes in various environmental laws, regulations, principles, or practices, or in their interpretation
the outcome of certain legal proceedings, including gas price reporting litigation
indemnity and environmental remediation obligations at Bay Harbor, including an inability to renew an NPDES permit in 2020
obligations related to a tax claim from the government of Equatorial Guinea
representations, warranties, and indemnities provided by CMS Energy in connection with previous sales of assets
For additional details regarding the enterprises segment’s uncertainties, see Note 3, Contingencies and Commitments.
Other
EnerBank Outlook and Uncertainties
EnerBank:EnerBank is a Utah state‑chartered, FDIC‑insuredstate-chartered, FDIC-insured industrial bank providing primarily unsecured, consumerfixed-rate installment loans for financingthroughout the U.S. to finance home improvements. EnerBank represented five percent of CMS Energy’s net assets at September 30, 2019 and six percent of CMS Energy’s net income available to common stockholders for the nine months ended September 30, 2019.improvements. The carrying value of EnerBank’s loan portfolio was $2.5$2.9 billion at September 30, 2019. Its loan portfolio was funded primarily by certificates of deposit of $2.4 billion.2020. The 12‑month rolling average net default rate on loans held by EnerBank was 1.2 percent at September 30, 2019.2020. For additional details regarding EnerBank’s loan portfolio, see Note 7, Notes Receivable.
EnerBank’s loan portfolio was funded primarily by certificates of deposit of $2.8 billion at September 30, 2020. 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‑fundingself-funding plan, EnerBank has exceeded these requirements historically and exceeded them as of September 30, 2019.2020.
With its loan portfolio funded by certificates of deposit, EnerBank has not had to rely on access to the financial and capital markets in order to fund loan growth during the COVID-19 pandemic. As a result, EnerBank has experienced market share gains as new customers have transitioned from less financially stable competitors. Accordingly, EnerBank has experienced increased lending growth in recent months and expects this trend to continue during the remainder of 2020. Over the next five years, EnerBank expects lending growth to average approximately seven percent annually.
In response to the COVID‑19 pandemic, and consistent with FDIC guidance, EnerBank offered new payment accommodations for current qualifying customers. EnerBank cannot predict the longer-term impacts of the pandemic, but could experience slower lending growth, higher loan write-offs, and increased loan modifications.
Other Outlook and Uncertainties
Employee Separation Program: In December 2019, CMS Energy and Consumers announced a voluntary separation program for non‑union employees. For the nine months ended September 30, 2020, CMS Energy and Consumers recorded an after-tax charge of $8 million related to the program, under which 140 employees accepted and were approved for early separation. As a result of the program, CMS Energy and Consumers expect to benefit from future cost savings, as employee staffing levels will


4146




be better matched to workload demand, which reflects the companies’ ongoing workforce productivity improvements.
Union Contract: The present UWUA agreement for operating, maintenance, and construction employees expired in June 2020. A new agreement was reached and ratified by UWUA members in October 2020. This agreement provides a three-percent pay increase to operating, maintenance, and construction employees effective on June 1, 2020.
Litigation: CMS Energy, Consumers, and certain of their subsidiaries are named as parties in various litigation matters, as well as in administrative proceedings before various courts and governmental agencies, arising in the ordinary course of business. For additional details regarding these and other legal matters, see Note 2, Regulatory Matters and Note 3, Contingencies and Commitments.
New Accounting StandardsRetirement Benefits
CMS Energy and Consumers provide retirement pension benefits to certain employees under non‑contributory DB Pension Plans, and they provide postretirement health and life benefits to qualifying retired employees under an OPEB Plan.
In September 2020, CMS Energy and Consumers determined it was probable that 2020 lump-sum payments to retired employees under DB Pension Plan A would exceed the plan’s service cost and interest cost components of net periodic cost for the year. These lump-sum payments constitute pension plan liability settlements; once such settlements meet the service and interest cost threshold, recognition in earnings is required. As a result, in accordance with GAAP, CMS Energy, including Consumers, performed a remeasurement of DB Pension Plan A as of August 31, 2020. For additional details regarding new accounting standards issued but not yet effective,on the pension settlement, see Note 1, New Accounting Standards.8, Retirement Benefits.
Presented in the following table are estimates of costs and cash contributions through 2022 for the DB Pension Plans and OPEB Plan. Projected pension costs increased, and OPEB credits decreased, from December 31, 2019 mainly due to lower discount rate assumptions as of August 31, 2020. Actual future costs and contributions will depend on future investment performance, discount rates, and various factors related to the participants of the DB Pension Plans and OPEB Plan. CMS Energy and Consumers will, at a minimum, contribute to the plans as needed to comply with federal funding requirements.
In Millions 
 DB Pension Plans OPEB Plan
 Cost Contribution¹  Credit Contribution 
CMS Energy, including Consumers         
2020 $34
 $531
  $(92) $
2021 40
 
  (83) 
2022 32
 
  (84) 
Consumers²         
2020 $34
 $518
  $(86) $
2021 42
 
  (77) 
2022 34
 
  (78) 
1
Contribution occurred in January 2020.
2
Consumers’ pension and OPEB costs are recoverable through its general ratemaking process.


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CMS Energy Corporation
Consolidated Statements of Income (Unaudited)
In Millions, Except Per Share AmountsIn Millions, Except Per Share Amounts In Millions, Except Per Share Amounts 
Three Months Ended Nine Months EndedThree Months Ended Nine Months Ended
September 302019 2018  2019 2018 2020 2019  2020 2019 
Operating Revenue $1,546
 $1,599
 $5,050
 $5,044
 $1,575
 $1,546
 $4,882
 $5,050
                
Operating Expenses                
Fuel for electric generation 130
 150
 391
 397
 108
 130
 274
 391
Purchased and interchange power 413
 447
 1,147
 1,222
 430
 413
 1,149
 1,147
Purchased power – related parties 19
 21
 53
 59
 13
 19
 45
 53
Cost of gas sold 35
 48
 545
 541
 35
 35
 390
 545
Maintenance and other operating expenses 313
 366
 1,010
 1,002
 317
 313
 983
 1,010
Depreciation and amortization 215
 206
 729
 689
 228
 215
 767
 729
General taxes 70
 67
 247
 222
 75
 70
 264
 247
Total operating expenses 1,195
 1,305
 4,122
 4,132
 1,206
 1,195
 3,872
 4,122
                
Operating Income 351
 294
 928
 912
 369
 351
 1,010
 928
                
Other Income (Expense)                
Interest income 2
 2
 5
 8
 1
 2
 3
 5
Interest income – related parties 0
 0
 7
 0
Allowance for equity funds used during construction 2
 2
 7
 4
 1
 2
 4
 7
Income (loss) from equity method investees 5
 (1) 6
 6
Income from equity method investees 0
 5
 1
 6
Nonoperating retirement benefits, net 22
 22
 68
 68
 29
 22
 90
 68
Other income 
 1
 3
 2
 1
 0
 3
 3
Other expense 
 (4) (8) (15) (4) 0
 (9) (8)
Total other income 31
 22
 81
 73
 28
 31
 99
 81
                
Interest Charges                
Interest on long-term debt 111
 101
 327
 304
 124
 111
 361
 327
Interest expense – related parties 3
 
 6
 
 3
 3
 9
 6
Other interest expense 20
 14
 55
 35
 17
 20
 53
 55
Allowance for borrowed funds used during construction (1) (1) (3) (2) (1) (1) (2) (3)
Total interest charges 133
 114
 385
 337
 143
 133
 421
 385
                
Income Before Income Taxes 249
 202
 624
 648
 254
 249
 688
 624
Income Tax Expense 42
 33
 110
 98
 44
 42
 98
 110
                
Net Income 207
 169
 514
 550
 210
 207
 590
 514
Income Attributable to Noncontrolling Interests 
 
 1
 1
Income (Loss) Attributable to Noncontrolling Interests (8) 0
 (7) 1
                
Net Income Available to Common Stockholders $207
 $169
 $513
 $549
 $218
 $207
 $597
 $513
                
Basic Earnings Per Average Common Share $0.73
 $0.60
 $1.81
 $1.95
 $0.76
 $0.73
 $2.10
 $1.81
Diluted Earnings Per Average Common Share $0.73
 $0.59
 $1.81
 $1.94
 $0.76
 $0.73
 $2.09
 $1.81
The accompanying notes are an integral part of these statements.


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CMS Energy Corporation
Consolidated Statements of Comprehensive Income (Unaudited)
In MillionsIn Millions In Millions 
Three Months Ended Nine Months EndedThree Months Ended Nine Months Ended
September 302019 2018  2019 2018 2020 2019  2020 2019 
Net Income $207
 $169
 $514
 $550
 $210
 $207
 $590
 $514
                
Retirement Benefits Liability                
Amortization of net actuarial loss, net of tax of $- for all periods 
 1
 2
 3
Net loss arising during the period, net of tax of $(2), $-, $(2), and $- (5) 0
 (5) 0
Settlement arising during the period, net of tax of $- for all periods 1
 0
 1
 0
Amortization of net actuarial loss, net of tax of $-, $-, $1, and $- 1
 0
 3
 2
Amortization of prior service credit, net of tax of $- for all periods 
 
 (1) (1) 0
 0
 (1) (1)
                
Investments        
Unrealized loss on investments, net of tax of $- for all periods 
 
 
 (1)
Derivatives        
Unrealized loss on derivative instruments, net of tax of $-, $-, $(1), and $(1) (1) 0
 (5) (3)
Reclassification adjustments included in net income, net of tax of $- for all periods 
 1
 
 1
 1
 0
 1
 0
                
Derivatives        
Unrealized loss on derivative instruments, net of tax of $-, $-, $(1), and $- 
 
 (3) 
        
Other Comprehensive Income (Loss) 
 2
 (2) 2
Other Comprehensive Loss (3) 0
 (6) (2)
                
Comprehensive Income 207
 171
 512
 552
 207
 207
 584
 512
                
Comprehensive Income Attributable to Noncontrolling Interests 
 
 1
 1
Comprehensive Income (Loss) Attributable to Noncontrolling Interests (8) 0
 (7) 1
                
Comprehensive Income Attributable to CMS Energy $207
 $171
 $511
 $551
 $215
 $207
 $591
 $511
The accompanying notes are an integral part of these statements.


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CMS Energy Corporation
Consolidated Statements of Cash Flows (Unaudited)
In MillionsIn Millions In Millions 
Nine Months Ended September 302019 2018 2020 2019 
Cash Flows from Operating Activities        
Net income $514
 $550
 $590
 $514
Adjustments to reconcile net income to net cash provided by operating activities        
Depreciation and amortization 729
 689
 767
 729
Deferred income taxes and investment tax credits 89
 90
 140
 89
Pension contributions (531) 0
Other non-cash operating activities and reconciling adjustments (11) 47
 24
 (11)
Cash provided by (used in) changes in assets and liabilities        
Accounts and notes receivable and accrued revenue 297
 299
 218
 297
Inventories (49) (76) (34) (49)
Accounts payable and accrued rate refunds (82) (46) 29
 (82)
Other current and non-current assets and liabilities (92) 12
 (59) (92)
Net cash provided by operating activities 1,395
 1,565
 1,144
 1,395
        
Cash Flows from Investing Activities        
Capital expenditures (excludes assets placed under finance lease) (1,570) (1,572) (1,697) (1,570)
Increase in EnerBank notes receivable (328) (200) (480) (328)
Purchase of notes receivable by EnerBank (307) (87) (17) (307)
Proceeds from DB SERP investments 
 146
Proceeds from sale of transmission equipment 96
 
 0
 96
Cost to retire property and other investing activities (103) (102) (104) (103)
Net cash used in investing activities (2,212) (1,815) (2,298) (2,212)
        
Cash Flows from Financing Activities        
Proceeds from issuance of debt 2,076
 1,044
 2,353
 2,076
Retirement of debt (1,170) (705) (1,294) (1,170)
Increase in EnerBank certificates of deposit 622
 288
 456
 622
Increase (decrease) in notes payable (97) 110
Issuance of common stock 9
 39
Decrease in notes payable (90) (97)
Issuance of common stock, net of issuance costs 107
 9
Payment of dividends on common and preferred stock (326) (305) (351) (326)
Proceeds from the sale of membership interest in VIE to tax equity investor 417
 0
Contribution from noncontrolling interest 31
 0
Other financing costs (39) (59) (74) (39)
Net cash provided by financing activities 1,075
 412
 1,555
 1,075
        
Net Increase in Cash and Cash Equivalents, Including Restricted Amounts 258
 162
 401
 258
Cash and Cash Equivalents, Including Restricted Amounts, Beginning of Period 175
 204
 157
 175
        
Cash and Cash Equivalents, Including Restricted Amounts, End of Period $433
 $366
 $558
 $433
        
Other Non-cash Investing and Financing Activities        
Non-cash transactions        
Capital expenditures not paid $135
 $159
 $140
 $135
The accompanying notes are an integral part of these statements.


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CMS Energy Corporation
Consolidated Balance Sheets (Unaudited)
ASSETS
In MillionsIn Millions In Millions 
September 30
2019
 December 31
2018
 September 30
2020
 December 31
2019
 
Current Assets        
Cash and cash equivalents $403
 $153
 $519
 $140
Restricted cash and cash equivalents 29
 21
 39
 17
Accounts receivable and accrued revenue, less allowance of $21 in 2019 and $20 in 2018 641
 964
Notes receivable, less allowance of $33 in 2019 and $24 in 2018 234
 233
Accounts receivable – related parties 16
 14
Accrued gas revenue 6
 16
Accounts receivable and accrued revenue, less allowance of $30 in 2020 and $20 in 2019 648
 886
Notes receivable, less allowance of $35 in 2020 and $33 in 2019 272
 242
Accounts and notes receivable – related parties 21
 17
Inventories at average cost        
Gas in underground storage 505
 450
 420
 399
Materials and supplies 142
 143
 154
 140
Generating plant fuel stock 52
 57
 65
 66
Deferred property taxes 184
 279
 199
 305
Regulatory assets 7
 37
 9
 33
Prepayments and other current assets 86
 101
 148
 86
Total current assets 2,305
 2,468
 2,494
 2,331
        
Plant, Property, and Equipment        
Plant, property, and equipment, gross 24,645
 24,400
 27,036
 25,390
Less accumulated depreciation and amortization 7,264
 7,037
 7,845
 7,360
Plant, property, and equipment, net 17,381
 17,363
 19,191
 18,030
Construction work in progress 1,143
 763
 1,439
 896
Total plant, property, and equipment 18,524
 18,126
 20,630
 18,926
        
Other Non-current Assets        
Regulatory assets 2,367
 1,743
 2,745
 2,489
Accounts and notes receivable 2,253
 1,645
Accounts and notes receivable, less allowance of $81 in 2020 and $- in 2019 2,655
 2,281
Investments 68
 69
 68
 71
Other 492
 478
 688
 739
Total other non-current assets 5,180
 3,935
 6,156
 5,580
        
Total Assets $26,009
 $24,529
 $29,280
 $26,837


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LIABILITIES AND EQUITY
In MillionsIn Millions In Millions 
September 30
2019
 December 31
2018
 September 30
2020
 December 31
2019
 
Current Liabilities        
Current portion of long-term debt, finance leases, and other financing $1,074
 $996
 $1,799
 $1,130
Notes payable 
 97
 0
 90
Accounts payable 598
 723
 662
 622
Accounts payable – related parties 9
 10
 5
 13
Accrued rate refunds 18
 4
 28
 35
Accrued interest 99
 94
 108
 104
Accrued taxes 125
 398
 128
 437
Regulatory liabilities 72
 155
 69
 87
Other current liabilities 170
 147
 193
 186
Total current liabilities 2,165
 2,624
 2,992
 2,704
        
Non-current Liabilities        
Long-term debt 12,040
 10,615
 13,275
 11,951
Non-current portion of finance leases and other financing 81
 69
 61
 76
Regulatory liabilities 3,754
 3,681
 3,796
 3,742
Postretirement benefits 447
 436
 382
 674
Asset retirement obligations 451
 432
 510
 477
Deferred investment tax credit 116
 99
 116
 120
Deferred income taxes 1,588
 1,487
 1,821
 1,655
Other non-current liabilities 373
 294
 429
 383
Total non-current liabilities 18,850
 17,113
 20,390
 19,078
        
Commitments and Contingencies (Notes 2 and 3)
 


 


 


 


        
Equity        
Common stockholders’ equity 

 

 

 

Common stock, authorized 350.0 shares; outstanding 283.8 shares in 2019 and 283.4 shares in 2018 3
 3
Common stock, authorized 350.0 shares; outstanding 286.3 shares in 2020 and 283.9 shares in 2019 3
 3
Other paid-in capital 5,104
 5,088
 5,225
 5,113
Accumulated other comprehensive loss (67) (65) (79) (73)
Accumulated deficit (83) (271)
Retained earnings (accumulated deficit) 171
 (25)
Total common stockholders’ equity 4,957
 4,755
 5,320
 5,018
Noncontrolling interests 37
 37
 578
 37
Total equity 4,994
 4,792
 5,898
 5,055
        
Total Liabilities and Equity $26,009
 $24,529
 $29,280
 $26,837
The accompanying notes are an integral part of these statements.


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CMS Energy Corporation
Consolidated Statements of Changes in Equity (Unaudited)


In Millions, Except Per Share AmountsIn Millions, Except Per Share Amounts In Millions, Except Per Share Amounts 
Three Months Ended Nine Months EndedThree Months Ended Nine Months Ended
September 302019 2018  2019 2018 2020 2019  2020 2019 
Total Equity at Beginning of Period $4,888
 $4,709
 $4,792
 $4,478
 $5,251
 $4,888
 $5,055
 $4,792
                
Common Stock                
At beginning and end of period 3
 3
 3
 3
 3
 3
 3
 3
                
Other Paid-in Capital                
At beginning of period 5,097
 5,076
 5,088
 5,019
 5,217
 5,097
 5,113
 5,088
Common stock issued 8
 7
 25
 54
 8
 8
 125
 25
Common stock repurchased (1) 
 (9) (10) 0
 (1) (13) (9)
Common stock reissued 
 
 
 20
At end of period 5,104
 5,083
 5,104
 5,083
 5,225
 5,104
 5,225
 5,104
                
Accumulated Other Comprehensive Loss                
At beginning of period (67) (61) (65) (50) (76) (67) (73) (65)
Retirement benefits liability     

 

        
At beginning of period (62) (60) (63) (50) (68) (62) (69) (63)
Cumulative effect of change in accounting principle 
 
 
 (11)
Net loss arising during the period (5) 0
 (5) 0
Settlement arising during the period 1
 0
 1
 0
Amortization of net actuarial loss 
 1
 2
 3
 1
 0
 3
 2
Amortization of prior service credit 
 
 (1) (1) 0
 0
 (1) (1)
At end of period (62) (59) (62) (59)
Investments        
At beginning of period 
 (1) 
 
Unrealized loss on investments 
 
 
 (1)
Reclassification adjustments included in net income 
 1
  
 1
At end of period 
 
  
 
 (71) (62) (71) (62)
Derivative instruments  
  
            
At beginning of period (5) 
 (2) 
 (8) (5) (4) (2)
Unrealized loss on derivative instruments 
 
 (3) 
 (1) 0
 (5) (3)
Reclassification adjustments included in net income 1
 0
 1
 0
At end of period (5) 
 (5) 
 (8) (5) (8) (5)
At end of period (67) (59) (67) (59) (79) (67) (79) (67)
                
Accumulated Deficit        
Retained Earnings (Accumulated Deficit)        
At beginning of period (182) (346) (271) (531) 70
 (182) (25) (271)
Cumulative effect of change in accounting principle 
 
 
 8
 0
 0
 (51) 0
Net income attributable to CMS Energy 207
 169
 513
 549
 218
 207
 597
 513
Dividends declared on common stock (108) (101) (325) (304) (117) (108) (350) (325)
At end of period (83) (278) (83) (278) 171
 (83) 171
 (83)


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In Millions, Except Per Share AmountsIn Millions, Except Per Share Amounts In Millions, Except Per Share Amounts 
Three Months Ended Nine Months EndedThree Months Ended Nine Months Ended
September 302019 2018  2019 2018 2020 2019  2020 2019 
        
Noncontrolling Interests                
At beginning of period 37
 37
 37
 37
 37
 37
 37
 37
Income attributable to noncontrolling interests 
 
 1
 1
Impact of purchase and consolidation of VIE 101
 0
 101
 0
Sale of membership interest in VIE to tax equity investor 417
 0
 417
 0
Contribution from noncontrolling interest 31
 0
 31
 0
Income (loss) attributable to noncontrolling interests (8) 0
 (7) 1
Distributions and other changes in noncontrolling interests 
 
  (1) (1) 0
 0
 (1) (1)
At end of period 37
 37
 37
 37
 578
 37
  578
 37
                
Total Equity at End of Period $4,994
 $4,786
 $4,994
 $4,786
 $5,898
 $4,994
 $5,898
 $4,994
                
Dividends Declared Per Common Share $0.3825
 $0.3575
 $1.1475
 $1.0725
 $0.4075
 $0.3825
 $1.2225
 $1.1475
The accompanying notes are an integral part of these statements.


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Consumers Energy Company
Consolidated Statements of Income (Unaudited)
In MillionsIn Millions In Millions 
Three Months Ended Nine Months EndedThree Months Ended Nine Months Ended
September 302019 2018  2019 2018 2020 2019  2020 2019 
Operating Revenue $1,429
 $1,502
 $4,706
 $4,752
 $1,450
 $1,429
 $4,524
 $4,706
                
Operating Expenses                
Fuel for electric generation 101
 122
 295
 310
 85
 101
 207
 295
Purchased and interchange power 408
 440
 1,132
 1,206
 420
 408
 1,121
 1,132
Purchased power – related parties 19
 22
 53
 61
 13
 19
 45
 53
Cost of gas sold 32
 45
 537
 530
 33
 32
 383
 537
Maintenance and other operating expenses 272
 334
 911
 914
 266
 272
 846
 911
Depreciation and amortization 210
 203
 716
 681
 223
 210
 753
 716
General taxes 68
 65
 240
 216
 72
 68
 256
 240
Total operating expenses 1,110
 1,231
 3,884
 3,918
 1,112
 1,110
 3,611
 3,884
                
Operating Income 319
 271
 822
 834
 338
 319
 913
 822
                
Other Income (Expense)                
Interest income 2
 2
 4
 6
 1
 2
 3
 4
Interest and dividend income – related parties 1
 1
 3
 1
 2
 1
 4
 3
Allowance for equity funds used during construction 2
 2
 7
 4
 1
 2
 4
 7
Nonoperating retirement benefits, net 21
 21
 64
 63
 28
 21
 85
 64
Other income 
 
 2
 1
 1
 0
 3
 2
Other expense 
 (4) (8) (9) (4) 0
 (9) (8)
Total other income 26
 22
 72
 66
 29
 26
 90
 72
                
Interest Charges                
Interest on long-term debt 69
 69
 206
 203
 76
 69
 227
 206
Interest expense – related parties 3
 
 6
 
 3
 3
 9
 6
Other interest expense 4
 5
 11
 14
 4
 4
 9
 11
Allowance for borrowed funds used during construction (1) (1) (3) (2) (1) (1) (2) (3)
Total interest charges 75
 73
 220
 215
 82
 75
 243
 220
                
Income Before Income Taxes 270
 220
 674
 685
 285
 270
 760
 674
Income Tax Expense 57
 40
  137
 111
 55
 57
  135
 137
                  
Net Income 213
 180
 537
 574
 230
 213
 625
 537
Preferred Stock Dividends 
 
  1
 1
 0
 0
  1
 1
                  
Net Income Available to Common Stockholder $213
 $180
 $536
 $573
 $230
 $213
 $624
 $536
The accompanying notes are an integral part of these statements.


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Consumers Energy Company
Consolidated Statements of Comprehensive Income (Unaudited)
In MillionsIn Millions In Millions 
Three Months Ended Nine Months EndedThree Months Ended Nine Months Ended
September 302019 2018  2019 2018 2020 2019  2020 2019 
Net Income $213
 $180
 $537
 $574
 $230
 $213
 $625
 $537
                
Retirement Benefits Liability    
            
Amortization of net actuarial loss, net of tax of $- for all periods 
 1
 1
 2
        
Investments    
    
Unrealized loss on investments, net of tax of $- for all periods 
 
 
 (1)
Reclassification adjustments included in net income, net of tax of $- for all periods 
 1
  
 1
Amortization of net actuarial loss, net of tax of $-, $-, $1, and $- 1
 0
 1
 1
                 
Other Comprehensive Income 
 2
 1
 2
 1
 0
 1
 1
                
Comprehensive Income $213
 $182
 $538
 $576
 $231
 $213
 $626
 $538
The accompanying notes are an integral part of these statements.


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Consumers Energy Company
Consolidated Statements of Cash Flows (Unaudited)
In MillionsIn Millions In Millions 
Nine Months Ended September 30 2019
 2018
 2020
 2019
Cash Flows from Operating Activities  
  
    
Net income $537
 $574
 $625
 $537
Adjustments to reconcile net income to net cash provided by operating activities    
    
Depreciation and amortization 716
 681
 753
 716
Deferred income taxes and investment tax credits 37
 40
 136
 37
Pension contributions (518) 0
Other non-cash operating activities and reconciling adjustments (24) 33
 (21) (24)
Cash provided by (used in) changes in assets and liabilities    
    
Accounts and notes receivable and accrued revenue 230
 178
 190
 230
Inventories (52) (75) (34) (52)
Accounts payable and accrued rate refunds (76) (48) 29
 (76)
Other current and non-current assets and liabilities (117) (128) (75) (117)
Net cash provided by operating activities 1,251
 1,255
 1,085
 1,251
        
Cash Flows from Investing Activities  
  
    
Capital expenditures (excludes assets placed under finance lease) (1,559) (1,339) (1,595) (1,559)
Proceeds from DB SERP investments 
 106
DB SERP investment in note receivable – related party 
 (106)
Proceeds from sale of transmission equipment 76
 
 0
 76
Cost to retire property and other investing activities (100) (96) (105) (100)
Net cash used in investing activities (1,583) (1,435) (1,700) (1,583)
        
Cash Flows from Financing Activities  
  
    
Proceeds from issuance of debt 918
 544
 1,528
 918
Retirement of debt (528) (330) (773) (528)
Increase (decrease) in notes payable (97) 110
Decrease in notes payable (90) (97)
Stockholder contribution 675
 250
 650
 675
Payment of dividends on common and preferred stock (397) (393) (450) (397)
Other financing costs (11) (28) (55) (11)
Net cash provided by financing activities 560
 153
 810
 560
        
Net Increase (Decrease) in Cash and Cash Equivalents, Including Restricted Amounts 228
 (27)
Net Increase in Cash and Cash Equivalents, Including Restricted Amounts 195
 228
Cash and Cash Equivalents, Including Restricted Amounts, Beginning of Period 56
 65
 28
 56
        
Cash and Cash Equivalents, Including Restricted Amounts, End of Period $284
 $38
 $223
 $284
        
Other Non-cash Investing and Financing Activities  
  
    
Non-cash transactions  
  
    
Capital expenditures not paid $123
 $128
 $156
 $123
The accompanying notes are an integral part of these statements.


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Consumers Energy Company
Consolidated Balance Sheets (Unaudited)
ASSETS
In MillionsIn Millions In Millions 
September 30
2019
 December 31
2018
 September 30
2020
 December 31
2019
 
Current Assets        
Cash and cash equivalents $259
 $39
 $199
 $11
Restricted cash and cash equivalents 25
 17
 24
 17
Accounts receivable and accrued revenue, less allowance of $21 in 2019 and $20 in 2018 611
 855
Accounts receivable and accrued revenue, less allowance of $30 in 2020 and $20 in 2019 620
 827
Accounts and notes receivable – related parties 8
 15
 8
 9
Accrued gas revenue 6
 16
Inventories at average cost        
Gas in underground storage 505
 450
 420
 399
Materials and supplies 137
 137
 149
 135
Generating plant fuel stock 49
 52
 62
 63
Deferred property taxes 184
 279
 199
 305
Regulatory assets 7
 37
 9
 33
Prepayments and other current assets 74
 83
 126
 73
Total current assets 1,865
 1,980
 1,816
 1,872
        
Plant, Property, and Equipment        
Plant, property, and equipment, gross 24,214
 23,963
 25,893
 24,963
Less accumulated depreciation and amortization 7,175
 6,958
 7,747
 7,272
Plant, property, and equipment, net 17,039
 17,005
 18,146
 17,691
Construction work in progress 1,129
 756
 1,422
 879
Total plant, property, and equipment 18,168
 17,761
 19,568
 18,570
        
Other Non-current Assets        
Regulatory assets 2,367
 1,743
 2,745
 2,489
Accounts receivable 29
 27
 26
 29
Accounts and notes receivable – related parties 102
 104
 106
 102
Other 407
 410
 575
 637
Total other non-current assets 2,905
 2,284
 3,452
 3,257
        
Total Assets $22,938
 $22,025
 $24,836
 $23,699


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LIABILITIES AND EQUITY
In MillionsIn Millions In Millions 
September 30
2019
 December 31
2018
 September 30
2020
 December 31
2019
 
Current Liabilities        
Current portion of long-term debt, finance leases, and other financing $122
 $48
 $557
 $221
Notes payable 
 97
 0
 90
Accounts payable 569
 685
 626
 593
Accounts payable – related parties 14
 14
 10
 20
Accrued rate refunds 18
 4
 28
 35
Accrued interest 76
 59
 78
 67
Accrued taxes 158
 436
 134
 481
Regulatory liabilities 72
 155
 69
 87
Other current liabilities 127
 120
 124
 118
Total current liabilities 1,156
 1,618
 1,626
 1,712
        
Non-current Liabilities        
Long-term debt 7,087
 6,779
 7,458
 7,048
Non-current portion of finance leases and other financing 81
 69
 61
 76
Regulatory liabilities 3,754
 3,681
 3,796
 3,742
Postretirement benefits 404
 392
 339
 622
Asset retirement obligations 448
 428
 486
 474
Deferred investment tax credit 116
 99
 116
 120
Deferred income taxes 1,858
 1,809
 2,042
 1,864
Other non-current liabilities 298
 230
 349
 304
Total non-current liabilities 14,046
 13,487
 14,647
 14,250
        
Commitments and Contingencies (Notes 2 and 3)
 


 


 


 


        
Equity        
Common stockholder’s equity        
Common stock, authorized 125.0 shares; outstanding 84.1 shares in both periods 841
 841
 841
 841
Other paid-in capital 5,374
 4,699
 6,024
 5,374
Accumulated other comprehensive loss (20) (21) (27) (28)
Retained earnings 1,504
 1,364
 1,688
 1,513
Total common stockholder’s equity 7,699
 6,883
 8,526
 7,700
Cumulative preferred stock, $4.50 series 37
 37
 37
 37
Total equity 7,736
 6,920
 8,563
 7,737
        
Total Liabilities and Equity $22,938
 $22,025
 $24,836
 $23,699
The accompanying notes are an integral part of these statements.


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Consumers Energy Company
Consolidated Statements of Changes in Equity (Unaudited)
In MillionsIn Millions In Millions 
Three Months Ended Nine Months EndedThree Months Ended Nine Months Ended
September 302019 2018  2019 2018 2020 2019  2020 2019 
Total Equity at Beginning of Period $7,647
 $6,888
 $6,920
 $6,488
 $8,505
 $7,647
 $7,737
 $6,920
                
Common Stock    
            
At beginning and end of period 841
 841
 841
 841
 841
 841
 841
 841
                
Other Paid-in Capital                
At beginning of period 5,374
 4,699
 4,699
 4,449
 6,024
 5,374
 5,374
 4,699
Stockholder contribution 
 
 675
 250
 0
 0
 650
 675
At end of period 5,374
 4,699
 5,374
 4,699
 6,024
 5,374
 6,024
 5,374
                
Accumulated Other Comprehensive Loss  
  
            
At beginning of period (20) (29) (21) (12) (28) (20) (28) (21)
Retirement benefits liability                
At beginning of period (20) (28) (21) (24) (28) (20) (28) (21)
Cumulative effect of change in accounting principle 
 
 
 (5)
Amortization of net actuarial loss 
 1
 1
 2
 1
 0
 1
 1
At end of period (20) (27) (20) (27)
Investments  
  
    
At beginning of period 
 (1) 
 12
Cumulative effect of change in accounting principle 
 
 
 (12)
Unrealized loss on investments 
 
 
 (1)
Reclassification adjustments included in net income 
 1
 
 1
At end of period 
 
 
 
 (27) (20) (27) (20)
At end of period (20) (27) (20) (27) (27) (20) (27) (20)
                
Retained Earnings  
  
            
At beginning of period 1,415
 1,340
 1,364
 1,173
 1,631
 1,415
 1,513
 1,364
Cumulative effect of change in accounting principle 
 
 
 19
Net income 213
 180
 537
 574
 230
 213
 625
 537
Dividends declared on common stock (124) (147) (396) (392) (173) (124) (449) (396)
Dividends declared on preferred stock 
 
 (1) (1) 0
 0
 (1) (1)
At end of period 1,504
 1,373
 1,504
 1,373
 1,688
 1,504
 1,688
 1,504
                
Preferred Stock    
            
At beginning and end of period 37
 37
 37
 37
 37
 37
 37
 37
                
Total Equity at End of Period $7,736
 $6,923
 $7,736
 $6,923
 $8,563
 $7,736
 $8,563
 $7,736
The accompanying notes are an integral part of these statements.


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CMS Energy Corporation
Consumers Energy Company
Notes to the Unaudited Consolidated Financial Statements
These interim consolidated financial statements have been prepared by CMS Energy and Consumers in accordance with GAAP for interim financial information and with the instructions to Form 10‑Q and Article 10 of Regulation S‑X. As a result, CMS Energy and Consumers have condensed or omitted certain information and note disclosures normally included in consolidated financial statements prepared in accordance with GAAP. CMS Energy and Consumers may have reclassified certain prior period amounts to conform to the presentation in the present period and to reflect the implementation of new accounting standards. CMS Energy and Consumers are required to make estimates using assumptions that may affect reported amounts and disclosures; actual results could differ from these estimates. In management’s opinion, the unaudited information contained in this report reflects all adjustments of a normal recurring nature necessary to ensure that CMS Energy’s and Consumers’ financial position, results of operations, and cash flows for the periods presented are fairly stated. The notes to the unaudited consolidated financial statements and the related unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the 20182019 Form 10‑K. Due to the seasonal nature of CMS Energy’s and Consumers’ operations, the results presented for this interim period are not necessarily indicative of results to be achieved for the fiscal year.
1:    New Accounting Standards
Implementation of New Accounting Standards
ASU 2016‑02, Leases: This standard, which was effective on January 1, 2019 for CMS Energy and Consumers, establishes a new accounting model for leases. The standard requires lessees to recognize lease assets and liabilities on the balance sheet for all leases with a term of more than one year, including operating leases, which were not recorded on the balance sheet under previous standards. The new guidance also amends the definition of a lease to require that a lessee have the right to control the use of a specified asset, and not simply control or take the output of the asset. On the statement of income, operating leases are generally accounted for under a straight-line expense model, while finance leases, which were previously referred to as capital leases, are generally accounted for under a financing model. Consistent with the previous lease guidance, however, the standard allows rate-regulated utilities to recognize expense consistent with the timing of recovery in rates.
CMS Energy and Consumers elected to use certain practical expedients permitted by the standard, under which they were not required to perform lease assessments or reassessments for agreements existing on the effective date. They also elected a transition method under which they initially applied the standard on January 1, 2019, without adjusting amounts presented for prior periods. Under the standard, CMS Energy and Consumers recognized additional lease assets and liabilities on their consolidated balance sheets as of January 1, 2019 for their operating leases. In addition, in accordance with the standard, they have provided additional disclosures about their leases in Note 8, Leases. The standard did not have any impact on CMS Energy’s and Consumers’ consolidated net income or cash flows, and there was no cumulative-effect adjustment recorded to beginning retained earnings.
New Accounting Standards Not Yet Effective
ASU 2016‑13, Measurement of Credit Losses on Financial Instruments: This standard, which will bewas effective on January 1, 2020 for CMS Energy and Consumers, provides new guidance for measuring and


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recognizing credit losses on financial instruments. The standard applies to financial assets that are not measured at fair value through net income. Entities willincome as well as to certain off‑balance-sheet credit exposures. CMS Energy and Consumers were required to apply the standard using a modified retrospective approach, withunder which the initial impacts of the standard are recorded through a cumulative‑effect adjustment recorded to beginning retained earnings on the effective date.
The standard will requirerequired an increase to the allowance for loan losses at EnerBank. ThePrior to the standard, the allowance presently reflectsreflected expected credit losses over a 12-month12‑month period, but the new standard will requireguidance requires the allowance to reflect expected credit losses over the entire life of the loans. EnerBank will record the initialAs a result, CMS Energy recorded a $65 million increase to the allowanceits expected credit loss reserves on January 1, 2020, with the offsetting adjustment recorded to retained earnings.earnings, net of taxes of $14 million. The standard will also requirerequires an increase in the initial provision for loan losses recognized in net income for new loans originated in 2020 and beyond. The adoption of this standard resulted in a $15 million reduction to CMS Energy’s income before income taxes for the nine months ended September 30, 2020. For further information on EnerBank’s loans and the related allowance for loan losses, see Note 7, Notes Receivable. At Consumers, the new guidance will applystandard applies to the allowance for uncollectible accounts; however, Consumers doesaccounts, but did not expectresult in any significant changes to the allowance methodology and did not have a material impacts in this area.impact on Consumers’ consolidated financial statements.
ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting: This standard, which was effective as of March 12, 2020 for CMS Energy and Consumers, provides optional guidance intended to ease the potential burden in accounting for the expected discontinuation of LIBOR as a reference rate in the financial markets. The guidance can be applied to modifications made to certain


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contracts to replace LIBOR with a new reference rate. The guidance, if elected, will permit entities to treat such modifications as the continuation of the original contract, without any required accounting reassessments or remeasurements. The guidance will also facilitate the continuation of hedge accounting for derivatives that may have to be modified to incorporate a new rate. The guidance is effective through December 31, 2022. CMS Energy and Consumers presently have various contracts that reference LIBOR and they are continuingassessing how this standard may be applied to evaluate the standard.specific contract modifications.
2:    Regulatory Matters
Regulatory matters are critical to Consumers. The Michigan Attorney General, ABATE, the MPSC Staff, and certain other parties typically participate in MPSC proceedings concerning Consumers, such as Consumers’ rate cases and PSCR and GCR processes. These parties often challenge various aspects of those proceedings, including the prudence of Consumers’ policies and practices, and seek cost disallowances and other relief. The parties also have appealed significant MPSC orders. Depending upon the specific issues, the outcomes of rate cases and proceedings, including judicial proceedings challenging MPSC orders or other actions, could negatively affect CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. Consumers cannot predict the outcome of these proceedings.
There are multiple appeals pending that involve various issues concerning cost recovery from customers, the adequacy of the record of evidence supporting the recovery of Smart Energy investments, and other matters. Consumers is unable to predict the outcome of these appeals.
2017 Electric Rate Case:COVID‑19 Costs Accounting Deferral: In June 2018,April 2020, the MPSC issued an order authorizing an annual rate increaseConsumers to defer uncollectible accounts expense incurred beginning March 24, 2020 that are in excess of $72 million, based on a 10.0 percent authorized return on equity. In July 2018, Consumers filed a reconciliation of total revenues collected from rates it self‑implemented in October 2017the amount used to those that would have been collected under finalset existing rates. In August 2019, the MPSC approved a $34 million refund to customers, which was refunded inAt September 2019.30, 2020, Consumers had recorded this amount$5 million of incremental uncollectible accounts expense as a reserve for customer refunds at December 31, 2018.non‑current regulatory asset.
2018 Electric Rate Case:Voluntary Transmission Asset Sale Gain Share: In May 2018,September 2019, Consumers completed a sale of a portion of its electric utility’s substation transmission equipment to METC. In December 2019, Consumers filed an application with the MPSC seeking an annual rate increase of $58 million, based on a 10.75 percent authorized return on equity. The filing requested authorityrequesting approval to recover new investment in system reliability, environmental compliance, and technology enhancements. In October 2018, Consumers reduced its requested annual rate increase to $44 million. In January 2019, the MPSC approved a settlement agreement authorizing an annual rate decrease of $24 million, based on a 10.0 percent authorized return on equity. With the eliminationshare voluntarily half of the $113 million TCJA credit to customer bills,gain from the approved settlement agreement resulted in an $89 million net increase in annual rates. The settlement agreement also provided for deferred accounting treatment for distribution‑related capital investments exceeding certain amounts. Consumers also agreed to not file a new electric rate case prior to January 2020.
2018 Gas Rate Case: In November 2018, Consumers filed ansale with customers; this application with the MPSC seeking an annual rate increase of $229 million, based on a 10.75 percent authorized return on equity.In April 2019, Consumers reduced its requested annual rate increase to $204 million. In September 2019, the MPSC approved an annual rate increase of $144 million, based on a 9.90 percent authorized return on equity. This increase includes a $13 million adjustment to begin returning net regulatory tax liabilities associated


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with the TCJA to customers. The MPSC also approved the continuation of a revenue decoupling mechanism, which annually reconciles Consumers’ actual weather‑normalized, non‑fuel revenues with the revenueswas approved by the MPSC.
Tax Cuts and Jobs Act: The TCJA, which changed existing federal tax law and included numerous provisions that affect businesses, was signed into lawMPSC in December 2017.
In early 2018, the MPSC ordered Consumers to file various proceedings to determine the reduction in its electric and gas revenue requirements as a result of the reduction in the corporate income tax rate, and to implement bill credits to reflect that reduction until customer rates could be adjusted through Consumers’ general rate cases. Consumers filed, and the MPSC approved, such proceedings throughout 2018, resulting in credits to customer bills during 2018 to reflect reductions in Consumers’ electric and gas revenue requirements.
Consumers filed additional proceedings to address amounts collected from customers during 2018 prior to the implementation of bill credits. In late 2018, the MPSC approved the refund of $31 million to gas customers over six months beginning in December 2018 and the refund of $70 million to electric customers over six months beginning in January 2019.
In October 2018, Consumers filed an application to address the December 31, 2017 remeasurement of its deferred income taxes and other base rate impacts of the TCJA on customers. In September 2019, the MPSC authorized Consumers to begin returning net regulatory tax liabilities of $0.4 billion to gas customers through rates approved in the 2018 gas rate case and $1.2 billion to electric customers through rates to be determined in Consumers’ next electric rate case. Until then, the MPSC authorized Consumers to refund $32 million to electric customers through a temporary bill credit. Consumers’ total $1.6 billion of net regulatory tax liabilities comprises:
A regulatory tax liability of $1.7 billion associated with plant assets that are subject to normalization, which is governed by the Internal Revenue Code; this regulatory tax liability will be returned over the remaining book life of the related plant assets, the average of which is 44 years for gas plant assets and 27 years for electric plant assets.
A regulatory tax asset of $0.3 billion associated with plant assets that are not subject to normalization; this regulatory tax asset will be collected over 44 years from gas customers and over 27 years from electric customers.
A regulatory tax liability of $0.2 billion, which is primarily related to employee benefits; this regulatory tax liability will be refunded to customers over ten years.
In January 2018, Consumers began to reduce the regulatory liability subject to normalization by crediting income tax expense. Consumers fully reserved for the eventual refund of these excess deferred taxes that it credited to income tax expense in a separate non‑current regulatory liability established by reducing revenue.April 2020. As a result, of an order received in September 2019, Consumers began refunding these excess deferred taxes to customers and will no longer reserve for their refund. At the date$17 million of the order, this reserve for refund of these excess deferred taxes totaled $62 million. For additional details on the remeasurement, see Note 10, Income Taxes.
Costs of Coal-fueled Electric Generating Units to be Retired: In June 2019, the MPSC approved the settlement agreement reached in Consumers’ IRP, under which Consumers plans to retire the D.E. Karn 1 & 2 coal-fueled electric generating units in 2023. Under Michigan law, electric utilities have been permitted to use highly rated, low-cost securitization bonds to finance the recovery of qualified costs. Consumers will file for securitization financing by May 2023, requesting the MPSC’s approval to


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securitize qualified costs of $657 million, representing the remaining book value in 2023 of the 2 coal-fueled electric generating units upon their retirement. In June 2019, Consumers removed this amount from plant, property, and equipment and recorded itgain as a regulatory asset. Until securitization, the book value of the generating units will remainliability in rate baseDecember 2019 and receive full regulatory returnsshared that gain with customers in general rate cases.2020.
Energy Waste Reduction Plan Incentive: Consumers filed its 20182019 waste reduction reconciliation in May 2019,June 2020, requesting the MPSC’s approval to collect from customers the maximum performance incentive of $34 million for exceeding its statutory savings targets in 2018.2019. Consumers recognized incentive revenue under this program of $34 million in 2018.2019.
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 negatively affect CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. In their disclosures of these matters, CMS Energy and Consumers provide an estimate of the possible loss or range of loss when such an estimate can be made. Disclosures that state that CMS Energy or Consumers cannot predict the outcome of a matter indicate that they are unable to estimate a possible loss or range of loss for the matter.


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CMS Energy Contingencies
Gas Index Price Reporting Litigation: CMS Energy, along with CMS MST, CMS Field Services, Cantera Natural Gas, Inc., and Cantera Gas Company, were named as defendants in 4 class action lawsuits and 1 individual lawsuit arising as a result of alleged inaccurate natural gas price reporting to publications that report trade information. Allegations include price‑fixing conspiracies, restraint of trade, and artificial inflation of natural gas retail prices in Kansas, Missouri, and Wisconsin. In 2016, CMS Energy entities reached a settlement with the plaintiffs in the Kansas and Missouri class action cases for an amount that was not material to CMS Energy. In 2017, the federal district court approved the settlement. Plaintiffs are makingmade claims for the following: treble damages, full consideration damages, exemplary damages, costs, interest, and/or attorneys’ fees.
After removal to federal court, all of the cases were transferred to a single federal district court pursuant to the multidistrict litigation process. In 2010 and 2011, all claims against CMS Energy defendants were dismissed by the district court based on FERC preemption.
In 2013, the U.S. Court of Appeals for the Ninth Circuit reversed the district court decision. The appellate court found that FERC preemption does not apply under the facts of these cases. The appellate court affirmed the district court’s denial of leave to amend to add federal antitrust claims. The matter was appealed to the U.S. Supreme Court, which in 2015 upheld the Ninth Circuit’s decision. The cases were remanded back to the federal district court.
In 2016, the federal district court granted the defendants’ motion for summary judgment in the individual lawsuit filed in Kansas based on a release in a prior settlement involving similar allegations; the order of summary judgment was subsequently appealed. In March 2018, the U.S. Court of Appeals for the Ninth Circuit reversed the lower court’s ruling and remanded the case back to the federal district court.
In 2017, the federal district court denied plaintiffs’ motion for class certification in the two pending class action cases in Wisconsin. The plaintiffs appealed that decision to the U.S. Court of Appeals for the Ninth


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Circuit and in August 2018, the Ninth Circuit Court of Appeals reversed and remanded the matter back to the federal district court for further consideration.
In January 2019, the judge in the multidistrict litigation granted motions filed by plaintiffs for Suggestion of Remand of the actions back to the respective transferor courts in Wisconsin and Kansas for further handling. In the Kansas action, the Judicial Panel on Multidistrict Litigation ordered the remand and the case has been transferred. In the Wisconsin actions, oppositions to the remand were filed, but the Judicial Panel on Multidistrict Litigation granted the remand in June 2019.
These cases involve complex facts,In 2019, CMS Energy and the plaintiffs in each of the Kansas and the Wisconsin actions engaged in settlement discussions and CMS Energy recorded a large number of similarly situated defendants with different factual positions,$30 million liability at December 31, 2019 as the probable estimate to settle the 2 cases. The parties executed a settlement agreement in the Kansas case in February 2020, and multiple jurisdictions. Presently, any estimate of liability would be highly speculative;that case is now complete. In the amount of CMS Energy’s reasonably possible loss would be based on widely varying models previously untestedWisconsin case, a settlement agreement was approved in this context. If the outcome after appealsAugust 2020 and that case is unfavorable, these cases could negatively affect CMS Energy’s liquidity, financial condition, and results of operations.now complete.
Bay Harbor: CMS Land 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 in 2002. Leachate is produced when water enters into cement kiln dust piles left over from former cement plant operations at the site. In 2012, CMS Land and EGLE finalized an agreement that established the final remedies and the future water quality criteria at the site. CMS Land completed all construction necessary to implement the remedies required by the agreement and will continue to maintain and operate a system to discharge treated leachate into Little Traverse Bay under an NPDES permit, issued in 2010 and renewed in 2016. The renewed NPDES permitwhich is valid through September 2020.


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CMS Land submitted a renewal request for the permit in April 2020. CMS Land is allowed to continue operating under the previous NPDES permit until a response is received from EGLE.
At September 30, 2019,2020, CMS Energy had a recorded liability of $44 million for its remaining obligations for environmental remediation. CMS Energy calculated this liability based on discounted projected costs, using a discount rate of 4.34 percent and an inflation rate of 1 percent on annual operating and maintenance costs. The undiscounted amount of the remaining obligation is $56$55 million. CMS Energy expects to pay the following amounts for long‑term liquidleachate disposal and operating and maintenance costs during the remainder of 20192020 and in each of the next five years:
In MillionsIn Millions In Millions 
2019 2020 2021 2022 2023 2024 2020 2021 2022 2023 2024 2025 
CMS Energy                        
Long‑term liquid disposal and operating and maintenance costs $2
 $5
 $4
 $4
 $4
 $4
Long‑term leachate disposal and operating and maintenance costs $1
 $4
 $4
 $4
 $4
 $4

CMS Energy’s estimate of response activity costs and the timing of expenditures could change if there are changes in circumstances or assumptions used in calculating the liability. Although a liability for its present estimate of remaining response activity costs has been recorded, CMS Energy cannot predict the ultimate financial impact or outcome of this matter.
Equatorial Guinea Tax Claim: In 2002, CMS Energy sold its oil, gas, and methanol investments in Equatorial Guinea. The government of Equatorial Guinea claims that, in connection with the sale, CMS Energy owes $152 million in taxes, plus substantial penalties and interest that could be up to or exceed the amount of the taxes claimed. In 2015, the matter was proceeding to formal arbitration; however, since then, the government of Equatorial Guinea has stopped communicating. CMS Energy has concluded that the government’s tax claim is without merit and will continue to contest the claim, but cannot predict the financial impact or outcome of the matter. An unfavorable outcome could have a material adverse effect on CMS Energy’s liquidity, financial condition, and results of operations.


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Consumers Electric Utility Contingencies
Electric Environmental Matters: Consumers’ operations are subject to environmental laws and regulations. Historically, Consumers has generally been able to recover, in customer rates, the costs to operate its facilities in compliance with these laws and regulations.
Cleanup and Solid Waste: Consumers expects to incur remediation and other response activity costs at a number of sites under the NREPA. Consumers believes that these costs should be recoverable in rates, but cannot guarantee that outcome. Consumers estimates that its liability for NREPA sites for which it can estimate a range of loss will be between $3 million and $4 million. At September 30, 2019,2020, Consumers had a recorded liability of $3 million, the minimum amount in the range of its estimated probable NREPA liability, as no amount in the range was considered a better estimate than any other amount.
Consumers is a potentially responsible party at a number of contaminated sites administered under CERCLA. CERCLA liability is joint and several. In 2010, Consumers received official notification from the EPA that identified Consumers as a potentially responsible party for cleanup of PCBs at the Kalamazoo River CERCLA site. The notification claimed that the EPA has reason to believe that Consumers disposed of PCBs and arranged for the disposal and treatment of PCB‑containing materials at portions of the site. In 2011, Consumers received a follow‑up letter from the EPA requesting that Consumers agree to participate in a removal action plan along with several other companies for an area of lower Portage Creek, which is connected to the Kalamazoo River. All parties, including Consumers, that were asked to participate in the removal action plan declined to accept liability. Until further information


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is received from the EPA, Consumers is unable to estimate a range of potential liability for cleanup of the river.
Based on its experience, Consumers estimates that its share of the total liability for known CERCLA sites will be between $3 million and $8 million. Various factors, including the number and creditworthiness of potentially responsible parties involved with each site, affect Consumers’ share of the total liability. At September 30, 2019,2020, Consumers had a recorded liability of $3 million for its share of the total liability at these sites, the minimum amount in the range of its estimated probable CERCLA liability, as no amount in the range was considered a better estimate than any other amount.
The timing of payments related to Consumers’ remediation and other response activities at its CERCLA and NREPA sites is uncertain. Consumers periodically reviews these cost estimates. A change in the underlying assumptions, such as an increase in the number of sites, different remediation techniques, the nature and extent of contamination, and legal and regulatory requirements, could affect its estimates of NREPA and CERCLA liability.
Ludington PCB: In 1998, during routine maintenance activities, Consumers identified PCB as a component in certain paint, grout, and sealant materials at Ludington.the Ludington pumped-storage plant. Consumers removed part of the PCB material and replaced it with non‑PCB material. Consumers has had several communications with the EPA regarding this matter, but cannot predict the financial impact or outcome.
MCV PPA: In December 2017, the MCV Partnership initiated arbitration against Consumers, asserting a breach of contract associated with the MCV PPA. Under this PPA, Consumers pays the MCV Partnership a fixed energy charge based on Consumers’ annual average baseload coal generating plant operating and maintenance cost, fuel inventory, and administrative and general expenses. The MCV Partnership asserts that, under the Clean Air Act, Consumers should have installed pollution control equipment on coal‑fueled electric generating units years before they were retired. The MCV Partnership also asserts that Consumers should have installed pollution control equipment earlier on its remaining coal‑fueled electric generating units. Additionally, the MCV Partnership claims that Consumers improperly characterized certain costs included in the calculation of the fixed energy charge.


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In January 2019, an arbitration panel issued an order concluding that the MCV Partnership is not entitled to any damages associated with its claim against Consumers related to the Clean Air Act; the majority of the MCV Partnership’s claim, which estimated damages and interest in excess of $270 million, was related to this dismissed claim. In April 2020, the MCV Partnership and Consumers signed a term sheet outlining a settlement in principle of all outstanding disputes between the parties. The settlement and associated agreements will require MPSC approval. Once those are approved, the parties will dismiss this matter with prejudice. If settlement is not approved, the arbitration panel will issue an order. Consumers believes that the MCV Partnership’s remaining claims are without merit, but cannot predict the financial impact or outcome of the matter.
Underwater Cables in Straits of Mackinac: Consumers owns certain underwater electric cables in the Straits of Mackinac, which were de‑energized and retired in 1990. Consumers was notified that some of these cables were damaged as a result of vessel activity in April 2018. Following the notification, Consumers located, inspected, sampled, capped, and returned the damaged retired cables to their original location on the lake bottom, and did not find any substantive evidence of environmental contamination. Consumers isAfter collaborating with the State of Michigan, local Native American tribes, and other stakeholders, to evaluateConsumers submitted a permit application and removal work plan with EGLE and the statusU.S. Army Corps of Engineers in December 2019 for partial removal of all Consumers-owned cables. In March 2020, EGLE issued a permit for the cablesremoval work and, to determine if any additional action is advisable.as a result, Consumers cannot predictrecorded an ARO liability of


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$5 million for the outcome of this matter, but if Consumers is requiredcost to remove allpartially its cables. Removal work was completed in September 2020. Consumers recovers the cables, it could incur additional costscost of up to $10 million. Consumers filed suit against the companies that own the vessels that allegedly caused the damage and settled that matter. Consumers will seek recovery from customers of any costs incurred.recorded AROs through MPSC-approved depreciation rates.
Consumers Gas Utility Contingencies
Gas Environmental Matters: Consumers expects to incur remediation and other response activity costs at a number of sites under the NREPA. These sites include 23 former MGP facilities. Consumers operated the facilities on these sites for some part of their operating lives. For some of these sites, Consumers has no present ownership interest or may own only a portion of the original site.
At September 30, 2019,2020, Consumers had a recorded liability of $70$57 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 $72$62 million. Consumers expects to pay the following amounts for remediation and other response activity costs during the remainder of 20192020 and in each of the next five years:
In MillionsIn Millions In Millions 
2019 2020 2021 2022 2023 2024 2020 2021 2022 2023 2024 2025 
Consumers                        
Remediation and other response activity costs $3
 $13
 $12
 $20
 $11
 $2
 $1
 $2
 $8
 $23
 $10
 $1

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 September 30, 2019,2020, Consumers had a regulatory asset of $132$122 million related to the MGP sites.
Consumers estimates that its liability to perform remediation and other response activities at NREPA sites other than the MGP sites could reach $3 million. At September 30, 2019,2020, Consumers had a recorded liability of less than $1 million, the minimum amount in the range of its estimated probable liability, as no amount in the range was considered a better estimate than any other amount.


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Ray Compressor Station: On January 30, 2019, Consumers experienced a fire at the Ray Compressor Station, which resulted in the Ray Storage Field being off‑line or operating at significantly reduced capacity, which negatively affected Consumers’ natural gas supply and delivery capacity. This incident, which occurred during the extreme polar vortex weather condition, required Consumers to request voluntary reductions in customer load, to implement contingency gas supply purchases, and to implement a curtailment of natural gas deliveries for industrial and large commercial customers pursuant to Consumers’ MPSC curtailment tariff. The curtailment and request for voluntary reductions of customer loads were canceled as of midnight, February 1, 2019. Consumers investigated the cause of the incident, and filed a report on the incident with the MPSC in April 2019. In response, the MPSC issued an order in July 2019, directing Consumers to file additional reports regarding the incident and to include detail of the resulting costs in a future rate proceeding. The compressor station is presently operating at full capacity.
As a resultIn September 2020, the MPSC disallowed the recovery of $7 million in incremental gas purchases related to the fire. Consumers could be subject to disallowances of costs associated with the repair and


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modification of the fireRay Compressor Station. At September 30, 2020, Consumers had incurred capital expenditures of $17 million to restore and modify the compressor station.
In May 2020, the MPSC approved an administrative settlement agreement between Consumers and the resulting curtailment,MPSC Staff, which resulted in a $10,000 civil penalty in connection with the fire. Consumers couldmay also be subject to various claims from impacted customers orand claims for damages. Consumers may also be subject to regulatory penalties and disallowances of gas purchased, gas lost, and costs associated with the repairs to the Ray Compressor Station. At this time, Consumers cannot predict the outcome of these matters or other gas-related incidents and a reasonable estimate of anya total loss cannot be made, but they could have a material adverse effect on Consumers’ results of operations, financial condition, or liquidity, and could subject Consumers’ gas utility to increased regulatory scrutiny.
Consumers Electric and Gas Utility Contingencies
Electric and Gas Staking: In June 2019, the MPSC ordered Consumers to show cause as to why it should not be found in violation of the MISS DIG Act. The MPSC alleges that Consumers violated the law by failing to respond in a timely manner to over 20,000 requests to mark the location of underground facilities in April and May 2019 and only partially responding to others. The law provides the MPSC with discretion in setting fines for violations, if any; however, the fines cannot exceed $5,000 per violation. An order by the MPSC in this proceeding is not expected until mid-2020. Consumers has resolved the backlog of staking requests. Consumers cannot predict the outcome of this matter, but it could be subject to regulatory penalties that have a material adverse effect on Consumers’ results of operations, financial condition, or liquidity, and Consumers could be subject to increased regulatory scrutiny.
Guarantees
Presented in the following table are CMS Energy’s and Consumers’ guarantees at September 30, 2019:2020:
In MillionsIn Millions In Millions 
Guarantee DescriptionIssue DateExpiration DateMaximum Obligation Carrying Amount Issue DateExpiration DateMaximum Obligation Carrying Amount 
CMS Energy, including Consumers        
Indemnity obligations from stock and asset sale agreements1
 various indefinite $153
 $2
Guarantees2
 various indefinite 36
 
Indemnity obligations from stock and asset sale agreements¹variousindefinite $153
 $2
Guarantee²July 2011indefinite 30
 0
Consumers        
Guarantee2
 July 2011 indefinite $30
 $
Guarantee²July 2011indefinite $30
 $0
1 
These obligations arose from stock and asset sale agreements under which CMS Energy or a subsidiary of CMS Energy indemnified the purchaser for losses resulting from various matters, primarily claims related to taxes. The maximum obligation amount is mostly related to the Equatorial Guinea tax claim discussed in the CMS Energy Contingencies section of this Note. CMS Energy believes the likelihood of material loss to be remote for the indemnity obligations not recorded as liabilities.


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2 
At Consumers, thisThis obligation comprises a guarantee provided by Consumers to the U.S. Department of Energy in connection with a settlement agreement regarding damages resulting from the department’s failure to accept spent nuclear fuel from nuclear power plants formerly owned by Consumers. At CMS Energy, the guarantee obligations comprise Consumers’ guarantee to the U.S. Department of Energy and CMS Energy’s 1994 guarantee of non‑recourse revenue bonds issued by Genesee.
Additionally, in the normal course of business, CMS Energy, Consumers, and certain other subsidiaries of CMS Energy have entered into various agreements containing tax and other indemnity provisions for which they are unable to estimate the maximum potential obligation. The carrying value of these indemnity obligations is $1 million. CMS Energy and Consumers consider the likelihood that they would be required to perform or incur substantial losses related to these indemnities to be remote.
Other Contingencies
In addition to the matters disclosed in this Note and Note 2, Regulatory Matters, there are certain other lawsuits and administrative proceedings before various courts and governmental agencies, as well as unasserted claims that may result in such proceedings, arising in the ordinary course of business to which CMS Energy, Consumers, and certain other subsidiaries of CMS Energy are parties. These other lawsuits, proceedings, and unasserted claims may involve personal injury, property damage, contracts, environmental matters, federal and state taxes, rates, licensing, employment, and other matters. Further, CMS Energy and Consumers occasionally self‑report certain regulatory non‑compliance matters that may or may not eventually result in administrative proceedings. CMS Energy and Consumers believe that the


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outcome of any one of these proceedings and potential claims will not have a material negative effect on their consolidated results of operations, financial condition, or liquidity.


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4:    Financings and Capitalization
Financings: Presented in the following table is a summary of major long‑term debt transactionsissuances during the nine months ended September 30, 2019:2020:
 Principal (In Millions) Interest Rate
Issuance DateMaturity Date
CMS Energy, parent only     
Term loan facility¹ $300
variable
FebruaryFebruary 2021
Junior subordinated notes² 500
4.750%MayJune 2050
Total CMS Energy, parent only $800
   
Consumers     
Term loan facility³ $300
variable
JanuaryJanuary 2021
First mortgage bonds 575
3.500%MarchAugust 2051
First mortgage bonds 525
2.500%MayMay 2060
First mortgage bonds4
 134
variable
MayMay 2070
Total Consumers $1,534
   
Total CMS Energy $2,334
   
 Principal
 (In Millions)
 Interest Rate
Issue/Retirement
Date
Maturity Date
Debt issuances     
CMS Energy, parent only     
Term loan facility $300
variable
January 2019December 2019
Junior subordinated notes1

630
5.875%February 2019March 2079
Term loan facility2
 165
variable
June 2019June 2020
Total CMS Energy, parent only $1,095
   
Consumers     
First mortgage bonds $300
3.750%May 2019February 2050
First mortgage bonds 550
3.100%September 2019August 2050
First mortgage bonds3
 76
variable
September 2019September 2069
Total Consumers $926
   
Total CMS Energy $2,021
   
Debt retirements     
CMS Energy, parent only     
Term loan facility $300
variable
February 2019December 2019
Term loan facility 180
variable
February 2019April 2019
Term loan facility2
 65
variable
August 2019June 2020
Total CMS Energy, parent only $545
   
Consumers     
First mortgage bonds 
 $300
5.650%May 2019April 2020
Total Consumers $300
   
Total CMS Energy $845
   

1 
At September 30, 2020, the interest rate on the balance of this term loan facility was 0.606 percent, based on an interest rate of one-week LIBOR plus 0.500 percent.
2
These unsecured obligations rank subordinate and junior in right of payment to all of CMSEnergy’s existing and future senior indebtedness.
2
At September 30, 2019, On June 1, 2030, and every five years thereafter, the weighted-averagenotes will reset to an interest rate onequal to the remaining balance of this term loan facility was 2.552five-year treasury rate plus 4.116 percent based on a $95 million tranche bearing interest at a rate of one-month LIBOR plus 0.500 percent and a $5 million tranche bearing interest at a rate of one-week LIBOR plus 0.500 percent. In October 2019, CMS Energy repaid the $5 million tranche..
3 
These floatingAt September 30, 2020, the interest rate first mortgageon the balance of this term loan facility was 0.556 percent, based on an interest rate of one‑week LIBOR plus 0.450 percent.
4
The variable-rate bonds bear interest quarterly at a rate of three-month LIBOR minus 0.300 percent, (1.864subject to a 0‑percent floor (zero percent at September 30, 2019)2020).
Tax-exempt Variable Rate Limited Obligation Revenue Bonds: In October 2019,2020, Consumers entered into a $75issued $127 million loan agreement with the MSF that matures in October 2049. Concurrently, the MSF issued $75 million in tax-exempt variable rate limited obligation revenue bonds and loaned Consumers the proceeds. The proceeds from the bonds, which are collateralized by Consumers’variable-rate first mortgage bonds will reimburse or pay for the costthat mature in October 2070 and bear interest at a rate of construction, improvement, and installation of solid waste disposal facilities at certain generating units.three-month LIBOR minus 0.300 percent, subject to a 0‑percent floor.


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Presented in the following table is a summary of major long‑term debt retirements during the nine months ended September 30, 2020:
 Principal (In Millions) Interest Rate
Retirement DateMaturity Date
Consumers     
First mortgage bonds $100
3.770%AprilOctober 2020
First mortgage bonds 250
5.300%JuneSeptember 2022
First mortgage bonds 375
2.850%SeptemberMay 2022
Total Consumers $725
   
Total CMS Energy $725
   
Revolving
In July 2020, Consumers purchased, in lieu of redemption, $35 million of variable-rate tax-exempt revenue bonds due April 2035. At September 30, 2020, Consumers held the variable-rate tax-exempt revenue bonds and may remarket the bonds or replace them with debt instruments of an equivalent value.
Credit Facilities: The following revolving credit facilities with banks were available at September 30, 2019:2020:
In MillionsIn Millions In Millions 
Expiration DateAmount of Facility Amount Borrowed Letters of Credit Outstanding Amount Available Amount of Facility Amount Borrowed Letters of Credit Outstanding Amount Available 
CMS Energy, parent only                
June 5, 2023 $550
 $
 $3
 $547
 $550
 $0
 $5
 $545
CMS Enterprises, including subsidiaries
                
September 30, 20251
 $18
 $
 $8
 $10
Consumers2
        
September 25, 2025¹ $39
 $0
 $39
 $0
September 30, 2025² 18
 0
 8
 10
Consumers³        
June 5, 2023 $850
 $
 $7
 $843
 $850
 $0
 $7
 $843
November 23, 2020 250
 
 25
 225
November 19, 2021 250
 0
 1
 249
April 18, 2022 30
 
 30
 
 30
 0
 30
 0

1
This letter of credit facility is available to Aviator Wind Equity Holdings. For information regarding the acquisition of Aviator Wind Equity Holdings, see Note 15, Purchase of Variable Interest Entity.
2 
Under this facility, $8 million is available solely for the purpose of issuing letters of credit. Obligations under this facility are secured by the collateral accounts with the lending bank.
23 
Obligations under these facilities are secured by first mortgage bonds of Consumers.
Short‑term Borrowings: Under Consumers’ commercial paper program, Consumers may issue, in one or more placements, investment-grade commercial paper notes with maturities of up to 365 days and that bearat market interest at fixed or floating rates. These issuances are supported by Consumers’ revolving credit facilities and may have an aggregate principal amount outstanding of up to $500 million. While the amount of outstanding commercial paper does not reduce the available capacity of the revolving credit facilities, Consumers does not intend to issue commercial paper in an amount exceeding the available capacity of the facilities. At September 30, 2019,2020, there were 0 commercial paper notes outstanding under this program.


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Dividend Restrictions: At September 30, 2019,2020, payment of dividends by CMS Energy on its common stock was limited to $5.0$5.3 billion under provisions of the Michigan Business Corporation Act of 1972.
Under the provisions of its articles of incorporation, at September 30, 2019,2020, Consumers had $1.4$1.6 billion of unrestricted retained earnings available to pay dividends on its common stock to CMS Energy. Provisions of the Federal Power Act and the Natural Gas Act appear to restrict dividends payable by Consumers to the amount of Consumers’ retained earnings. Several decisions from FERC suggest that, under a variety of circumstances, dividends from Consumers on its common stock would not be limited to amounts in Consumers’ retained earnings. Any decision by Consumers to pay dividends on its common stock in excess of retained earnings would be based on specific facts and circumstances and would be subject to a formal regulatory filing process.
For the nine months ended September 30, 2019,2020, Consumers paid $396$449 million in dividends on its common stock to CMS Energy.


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Issuance of Common Stock: In 2018 and 2020, CMS Energy entered into an equity offering programprograms under which it may sell, from time to time, shares of CMS Energy common stock having an aggregate sales price of up to $250 million.stock. Under this program,both programs, CMS Energy may sell its common stock in privately negotiated transactions, in “at the market” offerings, through forward sales transactions or otherwise.
During 2018 and 2019, CMS Energy has entered into forward sales contracts having an aggregate sales price of $250 million, the maximum allowed under the 2018 program. In March 2020, CMS Energy settled one of these contracts by issuing 2,017,783 shares of common stock for $47.95 per share, resulting in net proceeds of $97 million.
Under the 2020 program, CMS Energy may sell shares of its common stock having an aggregate sales price of up to $500 million. In September 2020, CMS Energy entered into a forward sales contract having an aggregate sale price of $52 million.
Presented in the following table are details of CMS Energy’s remaining forward sales contracts under these contracts:programs at September 30, 2020:
  Forward Price Per Share
Contract DateMaturity DateNumber of Shares
Initial Forward Price Per Share Maturity DateNumber of Shares
Initial September 30, 2020 
November 16, 2018May 16, 20202,017,783
 $49.06
November 20, 2018May 20, 2020777,899
 50.91
March 31, 2021777,899
 $50.91
 $48.83
February 21, 2019August 21, 20202,083,340
 52.27
March 31, 20212,083,340
 52.27
 50.39
September 15, 2020December 31, 2021846,759
 $61.06
 $61.04

These contracts allow CMS Energy to either physically settle the contracts by issuing shares of its common stock at the then‑applicable forward sale price specified by the agreement or net settle the contracts through the delivery or receipt of cash or shares. CMS Energy may settle the contracts at any time through their maturity dates, and presently intends to physically settle the contracts by delivering shares of its common stock.
The initial forward price in the forward equity sale contracts includes a deduction for commissions and will be adjusted on a daily basis over the term based on an interest rate factor and decreased on certain dates by certain predetermined amounts to reflect expected dividend payments.
No amounts have or will beare recorded on CMS Energy’s consolidated balance sheets until settlements of the forward equity sale contracts occur. If CMS Energy had elected to net share settle the contracts as of September 30, 2019,2020, CMS Energy would have been required to deliver 1,039,414538,335 shares.


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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.
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.


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Assets and Liabilities Measured at Fair Value on a Recurring Basis
Presented in the following table are CMS Energy’s and Consumers’ assets and liabilities recorded at fair value on a recurring basis:
In MillionsIn Millions In Millions 
CMS Energy, including Consumers ConsumersCMS Energy, including Consumers Consumers
September 30
2019
 December 31
2018
  September 30
2019
 December 31
2018
 September 30
2020
 December 31
2019
  September 30
2020
 December 31
2019
 
Assets1
        
Cash equivalents $
 $27
 $
 $
Assets¹        
Restricted cash equivalents 29
 21
 25
 17
 $39
 $17
 $24
 $17
CMS Energy common stock 
 
 1
 1
 
 
 1
 1
Nonqualified deferred compensation plan assets 17
 14
 13
 10
 20
 18
 16
 14
DB SERP cash equivalents 1
 1
 
 
Derivative instruments 2
 1
 2
 1
 2
 1
 2
 1
Total $49
 $64
 $41
 $29
 $61
 $36
 $43
 $33
Liabilities1
        
Liabilities¹        
Nonqualified deferred compensation plan liabilities $17
 $14
 $13
 $10
 $20
 $18
 $16
 $14
Derivative instruments 11
 3
 1
 
 20
 8
 1
 0
Total $28
 $17
 $14
 $10
 $40
 $26
 $17
 $14
1 
All assets and liabilities were classified as Level 1 with the exception of derivative contracts, which were classified as Level 2 or Level 3.
Restricted Cash Equivalents: Cash equivalents and restrictedRestricted cash equivalents consist of money market funds with daily liquidity. For further details, see Note 12, Cash and Cash Equivalents.


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Nonqualified Deferred Compensation Plan Assets and Liabilities: The nonqualified deferred compensation plan assets consist of mutual funds, which are valued using the daily quoted net asset values. CMS Energy and Consumers value their nonqualified deferred compensation plan liabilities based on the fair values of the plan assets, as they reflect the amount owed to the plan participants in accordance with their investment elections. CMS Energy and Consumers report the assets in other non‑current assets and the liabilities in other non‑current liabilities on their consolidated balance sheets.
DB SERP Cash Equivalents: The DB SERP cash equivalents consist of a money market fund with daily liquidity and are reported in other non‑current assets on CMS Energy and Consumers’ consolidated balance sheets.
Derivative Instruments: CMS Energy and Consumers value their derivative instruments using either a market approach that incorporates information from market transactions, or an income approach that discounts future expected cash flows to a present value amount. CMS Energy’s and Consumers’ derivatives are classified as Level 2 or Level 3.
The derivatives classified as Level 2 are interest rate swaps at CMS Energy, which are valued using market‑based inputs. CMS Energy uses interest rate swaps to manage its interest rate risk on certain long‑term debt obligations and certain notes receivable at EnerBank.


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CertainCMS Enterprises uses floating-to-fixed interest rate swaps to reduce the impact of interest rate fluctuations associated with future interest payments on certain long‑term variable-rate debt. The interest rate swaps are accounted for as cash flow hedges of the future variability of interest payments on debt with a notional amount of $9488 million at September 30, 2019.2020. Gains or losses on these swaps are initially reported in other comprehensive income (loss) and then, as interest payments are made on the hedged debt, are recognized in earnings within other interest expense on CMS Energy’s consolidated statements of income. CMS EnergyThe amount of losses recorded 0 gains or losses in other comprehensive incomeloss was $1 million for the three months ended September 30, 20192020, and athere were 0 gains or losses recorded in other comprehensive loss for the three months ended September 30, 2019. The amount of losses recorded in other comprehensive loss was $6 million for the nine months ended September 30, 2020 and $4 million loss for the nine months ended September 30, 2019. There were no material impacts on other interest expense associated with these swaps forduring the three and nine months ended September 30, 2019.periods presented. The fair value of these swaps recorded in other liabilities on CMS Energy’s consolidated balance sheets totaled $6$9 million at September 30, 20192020 and $2$5 million at December 31, 2018.2019. CMS Energy also has other interest rate swaps that economically hedge interest rate risk on debt, but that do not qualify for cash flow hedge accounting; the amounts associated with these swaps were not material for the three and nine months ended September 30, 2020 and 2019.
EnerBank uses fixed-to-floating interest rate swaps to manage interest rate risk exposure associated with changes in the fair value of certain long‑term fixed-rate loans. The interest rate swaps at EnerBank qualify as fair value hedges of long‑term, fixed‑ratefixed-rate notes receivable with a notional amount of $61134 million at September 30, 2019.2020. The fair value of these interest rate swaps recorded in other liabilities was $2$7 million at September 30, 2020 and $1 million at December 31, 2019. CMS Energy is adjusting the carrying value of the hedged notes receivable for the change in their fair value due to the hedged risk. Both gains and losses on the swaps and the changes to the carrying value of the hedged notes receivable are recorded within operating revenue on CMS Energy’s consolidated statements of income. There were no material amounts recognized inThe net impact of these hedges on operating revenue associated with these swapswas not material for the three and nine months ended September 30, 2020 and 2019.
The majority of derivatives classified as Level 3 are FTRs held by Consumers. Consumers 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. Due to the lack of quoted pricing information, Consumers determines the fair value of its FTRs based on Consumers’ average historical settlements. There was no material activity within the Level 3 categories of assets and liabilities during the periods presented.


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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 excludes cash, cash equivalents, short‑term financial instruments, and trade accounts receivable and payable whose carrying amounts approximate their fair values. For information about assets and liabilities recorded at fair value and for additional details regarding the fair value hierarchy, see Note 5, Fair Value Measurements.
In MillionsIn Millions In Millions 
September 30, 2019 December 31, 2018September 30, 2020 December 31, 2019
  Fair Value  Fair Value  Fair Value  Fair Value
Carrying   Level Carrying   LevelCarrying   Level Carrying   Level
Amount Total  1 2 3  Amount Total  1 2 3 Amount Total 1 2 3  Amount Total 1 2 3 
CMS Energy, including ConsumersCMS Energy, including Consumers              CMS Energy, including Consumers              
Assets                                        
Long‑term receivables1
 $21
 $21
 $
 $
 $21
 $22
 $22
 $
 $
 $22
Notes receivable2
 2,464
 2,619
 
 
 2,619
 1,857
 1,967
 
 
 1,967
Long-term receivables¹ $18
 $18
 $0
 $0
 $18
 $20
 $20
 $0
 $0
 $20
Notes receivable² 2,907
 3,259
 0
 0
 3,259
 2,500
 2,652
 0
 0
 2,652
Securities held to maturity 24
 25
 
 25
 
 22
 21
 
 21
 
 30
 31
 0
 31
 0
 26
 26
 0
 26
 0
Liabilities                                        
Long-term debt3
 13,094
 14,371
 1,245
 11,163
 1,963
 11,589
 11,630
 459
 9,404
 1,767
Long-term debt³ 15,054
 17,104
 1,185
 13,992
 1,927
 13,062
 14,185
 1,197
 11,048
 1,940
Long-term payables4
 31
 32
 
 
 32
 27
 27
 
 
 27
 31
 33
 0
 0
 33
 30
 32
 0
 0
 32
Consumers                                        
Assets                                        
Long‑term receivables1
 $21
 $21
 $
 $
 $21
 $22
 $22
 $
 $
 $22
Long-term receivables¹ $18
 $18
 $0
 $0
 $18
 $20
 $20
 $0
 $0
 $20
Notes receivable – related party5
 104
 104
 
 
 104
 106
 106
 
 
 106
 108
 108
 0
 0
 108
 103
 103
 0
 0
 103
Liabilities                                        
Long‑term debt6
 7,189
 8,035
 
 6,072
 1,963
 6,805
 6,833
 
 5,066
 1,767
Long-term debt6
 7,995
 9,440
 0
 7,513
 1,927
 7,250
 8,010
 0
 6,070
 1,940
1 
Includes current portion of long-term accounts receivable of $14$12 million at September 30, 20192020 and $13 million at December 31, 2018.2019.
2 
Includes current portion of notes receivable of $234$272 million at September 30, 20192020 and $233$242 million at December 31, 2018.2019. For further details, see Note 7, Notes Receivable.
3 
Includes current portion of long‑term debt of $1.1$1.8 billion at September 30, 20192020 and $1.0$1.1 billion at December 31, 2018.2019.
4 
Includes current portion of long‑term payables of $3$6 million at September 30, 20192020 and $1 million at December 31, 2018.2019.


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5 
Includes current portion of notes receivablerelated party of $7 million at September 30, 20192020 and December 31, 2018.2019. For further details, see Note 7, Notes Receivable.
6 
Includes current portion of long‑term debt of $102$537 million at September 30, 20192020 and $26$202 million at December 31, 2018.2019.
The effects of third‑party credit enhancements were excluded from the fair value measurements of long‑term debt. The principal amount of CMS Energy’s long‑term debt supported by third‑party credit enhancements was $35 million at September 30, 2019 and December 31, 2018.2019. The entirety of these amountsthis amount was at Consumers.
Debt securities classified as held to maturity consisted primarily of mortgage‑backed securities and Utah Housing Corporation bonds held by EnerBank. Presented in the following table are these investment securities:
In MillionsIn Millions In Millions 
September 30, 2019 December 31, 2018September 30, 2020 December 31, 2019
Cost 
Unrealized
Gains
 
Unrealized
Losses
 
Fair
Value
  Cost 
Unrealized
Gains
 
Unrealized
Losses
 
Fair
Value
 Cost Unrealized Gains Unrealized Losses   Fair Value  Cost Unrealized Gains Unrealized Losses   Fair Value 
CMS Energy                                
Debt securities $24
 $1
 $
 $25
 $22
 $
 $1
 $21
 $30
 $1
 $0
 $31
 $26
 $0
 $0
 $26

7:    Notes Receivable
Presented in the following table are details of CMS Energy’s and Consumers’ current and non‑current notes receivable:
In MillionsIn Millions In Millions 
September 30, 2019 December 31, 2018 September 30, 2020 December 31, 2019 
CMS Energy, including Consumers        
Current        
EnerBank notes receivable, net of allowance for loan losses $234
 $233
 $272
 $242
Non‑current        
EnerBank notes receivable 2,230
 1,624
EnerBank notes receivable, net of allowance for loan losses 2,635
 2,258
Total notes receivable $2,464
 $1,857
 $2,907
 $2,500
Consumers        
Current        
DB SERP note receivable – related party $7
 $7
 $7
 $7
Non‑current        
DB SERP note receivable – related party 97
 99
 101
 96
Total notes receivable $104
 $106
 $108
 $103

EnerBank Notes Receivable
EnerBank notes receivable are primarily unsecured, consumerfixed-rate installment loans for financingprovided throughout the U.S. to finance home improvements. EnerBank records its notes receivable at cost, less an allowance for loan losses.


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During the nine months ended September 30, 2019, EnerBank purchased a portfolio of secured and unsecured consumer installment loans with a principal value of $333 million.
Authorized contractors pay fees to EnerBank to provide borrowers with same‑as‑cash, zero interest, or reduced interest loans. Unearned income associated with the loan fees, which is recorded as a


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reduction to notes receivable on CMS Energy’s consolidated balance sheets, was $133$137 million at September 30, 20192020 and $102$134 million at December 31, 2018.2019.
During the nine months ended September 30, 2020, EnerBank purchased portfolios of secured and unsecured consumer installment loans with a principal value of $20 million.
EnerBank utilizes FICO scores as a key credit quality indicator when underwriting new loans and in assessing the credit exposures in its loan portfolio. The score is determined at the time of a borrower’s application and is generally not updated since the average duration of loans is about two years. At September 30, 2020, 86 percent of EnerBank’s loans had a FICO score rating between good and excellent. At September 30, 2020, 97 percent of EnerBank’s loan portfolio was originated within the past five years.
The allowance for loan losses is a valuationat September 30, 2020 reflects expected credit losses over the entire lifetime of the loan portfolio. EnerBank estimates the allowance by using the “weighted-average remaining maturity” methodology for their term loans, and the “probability of default and loss given default” methodology for their same-as-cash loans. These methodologies consider historical loan loss experience, prepayment expectations, and credit quality indicators. EnerBank considers current and projected economic conditions, and other reasonable and supportable forecast information to reflect estimated credit losses.determine if adjustments to the allowance are necessary. 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 
September 30, 2020Three Months Ended  Nine Months Ended 
Balance at beginning of period $104
  $33
Effects of new accounting standard¹ 0
  62
Provisions for loan losses 19
  45
Charge-offs (9)  (29)
Recoveries 2
  5
Balance at end of period $116
  $116
1
The allowance for loan losses at December 31, 2019 reflected expected credit losses over a 12-month period. On January 1, 2020, in accordance with ASU 2016-13, Measurement of Credit Losses on Financial Instruments, the allowance for loan losses was adjusted to reflect expected credit losses over the life of the loan. Additionally, EnerBank recorded $3 million for expected credit losses related to unfunded loan commitments. For further details, see Note 1, New Accounting Standards.
Loans that are 30 days or more past due are considered delinquent. The balance of EnerBank’s delinquent consumer loans was $27$26 million at September 30, 20192020 and $21$33 million at December 31, 2018.2019. At September 30, 20192020 and December 31, 2018,2019, EnerBank’s loans that had been modified as troubled debt restructurings were immaterial.
In response to the COVID‑19 pandemic, and consistent with FDIC guidance, EnerBank offered new payment accommodations for current qualifying customers. At September 30, 2020, EnerBank had not experienced increased delinquent loans, charge-offs, or increased loan modifications due to the COVID‑19 pandemic. EnerBank did not make any material adjustments to their allowance for loan losses at September 30, 2020 due to the COVID‑19 pandemic. EnerBank cannot predict the longer-term impacts of the pandemic, but could experience slower lending growth, higher loan write-offs, and increased loan modifications.


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EnerBank issues loan commitments to meet customer-financing needs. These commitments are agreements to provide credit as long as certain conditions are met and expire after 120 days. EnerBank uses the same credit policies in making these commitments as it uses for loans. EnerBank had $473 million of off-balance-sheet unfunded loan commitments at September 30, 2020, and had recorded a liability of $9 million for expected credit losses on those commitments.
EnerBank has entered into interest rate swaps on $61$134 million of its loans (notes receivable). For information about interest rate swaps see Note 5, Fair Value Measurements.
DB SERP Note Receivable – Related Party
The DB SERP note receivable – related party is Consumers’ portion of a demand note payable issued by CMS Energy to the DB SERP rabbi trust. The demand note bears interest at an annual rate of 4.10 percent and has a maturity date of 2028.
8:Leases
Lessee
CMS Energy and Consumers lease various assets from third parties, including coal-carrying railcars, real estate, service vehicles, and gas pipeline capacity. In addition, CMS Energy and Consumers account for several of their PPAs as leases.
CMS Energy and Consumers do not record right-of-use assets or lease liabilities on their consolidated balance sheets for rentals with lease terms of 12 months or less, most of which are for the lease of real estate and service vehicles. Lease expense for these rentals is recognized on a straight-line basis over the lease term.
CMS Energy and Consumers include future payments for all renewal options, fair market value extensions, and buyout provisions reasonably certain of exercise in their measurement of lease right-of-use assets and lease liabilities. In addition, certain leases for service vehicles contain end-of-lease adjustment clauses based on proceeds received from the sale or disposition of the vehicles. CMS Energy and Consumers also include executory costs in the measurement of their right-of-use assets and lease liabilities, except for maintenance costs related to their coal-carrying railcar leases.
Most of Consumers’ PPAs contain provisions at the end of the initial contract terms to renew the agreements annually under mutually agreed‑upon terms at the time of renewal. Energy and capacity


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payments that vary depending on quantities delivered are recognized as variable lease costs when incurred. Consumers accounts for a PPA with one of CMS Energy’s equity method subsidiaries as a finance lease.
Presented in the following table is information about CMS Energy’s and Consumers’ lease right-of-use assets and lease liabilities:
In Millions, Except as Noted 
September 30, 2019CMS Energy, including Consumers  Consumers 
Operating leases     
Right-of-use assets1
 $49
  $41
Lease liabilities     
Current lease liabilities2
 9
  8
Non-current lease liabilities3
 39
  33
Finance leases     
Right-of-use assets $74
  $74
Lease liabilities4
     
Current lease liabilities 7
  7
Non-current lease liabilities 62
  62
Weighted-average remaining lease term (in years)     
Operating leases 16
  14
Finance leases 12
  12
Weighted-average discount rate     
Operating leases 3.7%  3.7%
Finance leases5
 1.9%  1.9%
1
CMS Energy’s and Consumers’ operating right-of-use lease assets are reported as other non‑current assets on their consolidated balance sheets.
2
The current portion of CMS Energy’s and Consumers’ operating lease liabilities are reported as other current liabilities on their consolidated balance sheets.
3
The non‑current portion of CMS Energy’s and Consumers’ operating lease liabilities are reported as other non‑current liabilities on their consolidated balance sheets.
4
This includes $25 million for leases with related parties, of which less than $1 million is current.
5
This rate excludes the impact of Consumers’ pipeline agreements and long-term PPAs accounted for as finance leases. The required capacity payments under these agreements, when compared to the underlying fair value of the leased assets, result in effective interest rates that exceed market rates for leases with similar terms.


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CMS Energy and Consumers report operating, variable, and short-term lease costs as operating expenses on their consolidated statements of income, except for certain amounts that may be capitalized to other assets. Presented in the following table is a summary of CMS Energy’s and Consumers’ total lease costs:
In Millions 
 CMS Energy, including Consumers Consumers
September 30, 2019Three Months Ended  Nine Months Ended  Three Months Ended  Nine Months Ended 
Operating lease costs $2
  $8
  $2
  $7
Finance lease costs           
Amortization of right-of-use assets 2
  6
  2
  6
Interest on lease liabilities 4
  13
  4
  13
Variable lease costs 20
  75
  20
  75
Total lease costs $28
  $102
  $28
  $101

Presented in the following table is cash flow information related to amounts paid on CMS Energy’s and Consumers’ lease liabilities:
In Millions 
Nine Months Ended September 30, 2019CMS Energy, including Consumers  Consumers 
Cash paid for amounts included in the measurement of lease liabilities     
Cash used in operating activities for operating leases $8
  $7
Cash used in operating activities for finance leases 13
  13
Cash used in financing activities for finance leases 5
  5



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Presented in the following table are the minimum rental commitments under CMS Energy’s and Consumers’ non‑cancelable leases:
In Millions 
   Finance Leases
September 30, 2019Operating Leases  Pipelines and PPAs Other Total 
CMS Energy, including Consumers         
Remainder of 2019 $2
  $4
 $3
 $7
2020 11
  17
 6
 23
2021 11
  17
 5
 22
2022 5
  14
 5
 19
2023 3
  13
 5
 18
2024 2
  13
 3
 16
2025 and thereafter 35
  79
 11
 90
Total minimum lease payments $69
  $157
 $38
 $195
Less discount 21
  123
 3
 126
Present value of minimum lease payments $48
  $34
 $35
 $69
Consumers         
Remainder of 2019 $2
  $4
 $3
 $7
2020 9
  17
 6
 23
2021 9
  17
 5
 22
2022 4
  14
 5
 19
2023 3
  13
 5
 18
2024 2
  13
 3
 16
2025 and thereafter 29
  79
 11
 90
Total minimum lease payments $58
  $157
 $38
 $195
Less discount 17
  123
 3
 126
Present value of minimum lease payments $41
  $34
 $35
 $69



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Presented in the following table are the minimum rental commitments under CMS Energy’s and Consumers’ non‑cancelable leases at December 31, 2018, prior to the adoption of ASU 2016‑02:
In Millions 
December 31, 2018Capital Leases Operating Leases 
CMS Energy, including Consumers    
2019 $14
 $16
2020 11
 15
2021 11
 15
2022 8
 8
2023 6
 5
2024 and thereafter 21
 38
Total minimum lease payments $71
 $97
Less discount 22
  
Present value of minimum lease payments $49
  
Less current portion 9
  
Non-current portion $40
  
Consumers    
2019 $14
 $14
2020 11
 14
2021 11
 13
2022 8
 7
2023 6
 5
2024 21
 32
Total minimum lease payments $71
 $85
Less discount 22
  
Present value of minimum lease payments $49
  
Less current portion 9
  
Non-current portion $40
  

Lessor
CMS Energy and Consumers are the lessor under power sales and natural gas delivery agreements that are accounted for as leases.
CMS Energy has power sales agreements that are accounted for as operating leases. In addition to fixed payments, these agreements have variable payments based on energy delivered. For the three months ended September 30, 2019, CMS Energy’s lease revenue from its power sales agreements was $42 million, which included variable lease payments of $28 million. For the nine months ended September 30, 2019, CMS Energy’s lease revenue from its power sales agreements was $132 million, which included variable lease payments of $91 million.
Consumers has an agreement to build, own, operate, and maintain a compressed natural gas fueling station through December 2038. This agreement is accounted for as a direct finance lease, under which the lessee has the option to purchase the natural gas fueling station at the end of the lease term. Fixed monthly payments escalate annually with inflation.


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Consumers and a subsidiary of CMS Energy executed a 20‑year natural gas transportation agreement, related to a pipeline owned by Consumers. This agreement is accounted for as a direct finance lease and will automatically extend annually unless terminated by either party. The effects of the lease are eliminated on CMS Energy’s consolidated financial statements.
Presented in the following table are the minimum rental payments to be received under CMS Energy’s non‑cancelable operating leases:
In Millions 
September 30, 2019
Remainder of 2019 $14
2020 55
2021 54
2022 48
2023 43
2024 43
2025 and thereafter 62
Total minimum lease payments $319

Presented in the following table are the minimum rental payments to be received under CMS Energy’s and Consumers’ non‑cancelable direct financing leases:
In Millions 
September 30, 2019CMS Energy, including Consumers  Consumers 
Remainder of 2019 $
  $
2020 
  1
2021 
  1
2022 
  1
2023 
  1
2024 
  1
2025 and thereafter 10
  19
Total minimum lease payments $10
  $24
Less unearned income 5
  14
Present value of lease payments recognized as lease receivables $5
  $10



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9:8:    Retirement Benefits
CMS Energy and Consumers provide pension, OPEB, and other retirement benefits to employees under a number of different plans.
In September 2020, CMS Energy and Consumers determined it was probable that 2020 lump-sum payments to retired employees under DB Pension Plan A would exceed the plan’s service cost and interest cost components of net periodic cost for the year. These lump-sum payments constitute pension plan liability settlements; once such settlements meet the service and interest cost threshold, recognition in earnings is required. As a result, in accordance with GAAP, CMS Energy, including Consumers, performed a remeasurement of DB Pension Plan A as of August 31, 2020 and recognized a settlement loss of $36 million; of this amount, $35 million was deferred as a regulatory asset. Consumers recognized a settlement loss of $35 million, all of which was deferred as a regulatory asset. CMS Energy and Consumers will amortize the regulatory asset over nine years.
As a result of the remeasurement, the liability for DB Pension Plan A increased by $252 million at CMS Energy, with an offsetting increase in the associated regulatory asset of $245 million and a $7 million loss to AOCI. At Consumers, the liability and associated regulatory asset increased by $245 million.


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Costs:Presented in the following table are the costs (credits) and other changes in plan assets and benefit obligations incurred in CMS Energy’s and Consumers’ retirement benefits plans:
In Millions 
 DB Pension Plans OPEB Plan
 Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended
September 302019 2018  2019 2018  2019 2018  2019 2018 
CMS Energy, including Consumers
Net periodic cost (credit)                   
Service cost $11
 $12
  $31
 $36
  $3
 $4
  $10
 $13
Interest cost 24
 22
  73
 67
  11
 9
  31
 27
Expected return on plan assets (40) (38)  (121) (112)  (22) (24)  (66) (73)
Amortization of:                   
Net loss 12
 19
  36
 56
  7
 3
  20
 11
Prior service cost (credit) 
 1
  1
 2
  (16) (16)  (47) (50)
Net periodic cost (credit) $7
 $16
  $20
 $49
  $(17) $(24)  $(52) $(72)
Consumers
Net periodic cost (credit)                   
Service cost $10
 $12
  $30
 $35
  $3
 $4
  $10
 $12
Interest cost 23
 22
  69
 64
  10
 8
  30
 25
Expected return on plan assets (38) (35)  (114) (104)  (21) (22)  (62) (68)
Amortization of:                   
Net loss 12
 17
  35
 53
  7
 4
  20
 12
Prior service cost (credit) 
 1
  1
 2
  (15) (17)  (46) (49)
Net periodic cost (credit) $7
 $17
  $21
 $50
  $(16) $(23)  $(48) $(68)
In Millions 
 DB Pension Plans OPEB Plan
 Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended
September 302020 2019  2020 2019  2020 2019  2020 2019 
CMS Energy, including Consumers
Net periodic cost (credit)                   
Service cost $12
 $11
  $37
 $31
  $4
 $3
  $12
 $10
Interest cost 20
 24
  61
 73
  8
 11
  25
 31
Expected return on plan assets (47) (40)  (143) (121)  (25) (22)  (75) (66)
Settlement loss 1
 0
  1
 0
  0
 0
  0
 0
Amortization of:                   
Net loss 23
 12
  67
 36
  4
 7
  11
 20
Prior service cost (credit) 0
 0
  1
 1
  (14) (16)  (42) (47)
Net periodic cost (credit) $9
 $7
  $24
 $20
  $(23) $(17)  $(69) $(52)
Consumers
Net periodic cost (credit)                   
Service cost $12
 $10
  $36
 $30
  $3
 $3
  $11
 $10
Interest cost 20
 23
  59
 69
  8
 10
  24
 30
Expected return on plan assets (45) (38)  (136) (114)  (23) (21)  (70) (62)
Amortization of:                   
Net loss 22
 12
  64
 35
  4
 7
  11
 20
Prior service cost (credit) 0
 0
  1
 1
  (13) (15)  (40) (46)
Net periodic cost (credit) $9
 $7
  $24
 $21
  $(21) $(16)  $(64) $(48)

Contributions:
In January 2020, CMS Energy, including Consumers, contributed $531 million and Consumers contributed $518 million to the DB Pension Plans.


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10:9:    Income Taxes
Presented in the following table is a reconciliation of the statutory U.S. federal income tax rate to the effective income tax rate from continuing operations:
Nine Months Ended September 30 2019
 2018
 2020
 2019
CMS Energy, including Consumers        
U.S. federal income tax rate 21.0 % 21.0 % 21.0 % 21.0 %
Increase (decrease) in income taxes from:        
State and local income taxes, net of federal effect 5.4
 5.9
 4.7
 5.4
TCJA excess deferred taxes1
 (3.4) (3.4)
TCJA excess deferred taxes¹ (4.0) (3.4)
Production tax credits (2.5) (2.0) (3.0) (2.5)
Accelerated flow-through of regulatory tax benefits2
 (1.5) (5.0)
Research and development tax credits, net3
 (0.2) (1.6)
Research and development tax credits, net² (1.5) (0.2)
Accelerated flow-through of regulatory tax benefits³ (1.5) (1.5)
Refund of alternative minimum tax sequestration4
 (1.3) 0
Other, net (1.2) 0.2
 (0.2) (1.2)
Effective tax rate 17.6 % 15.1 % 14.2 % 17.6 %
Consumers        
U.S. federal income tax rate 21.0 % 21.0 % 21.0 % 21.0 %
Increase (decrease) in income taxes from:        
State and local income taxes, net of federal effect 5.7
 6.1
 5.0
 5.7
TCJA excess deferred taxes1
 (3.2) (3.1)
TCJA excess deferred taxes¹ (3.6) (3.2)
Production tax credits (1.6) (1.6) (1.9) (1.6)
Accelerated flow-through of regulatory tax benefits2
 (1.0) (4.4)
Research and development tax credits, net3
 (0.2) (1.5)
Research and development tax credits, net² (1.3) (0.2)
Accelerated flow-through of regulatory tax benefits³ (1.1) (1.0)
Other, net (0.4) (0.3) (0.3) (0.4)
Effective tax rate 20.3 % 16.2 % 17.8 % 20.3 %
1 
In December 2017, Consumers remeasured its deferred tax assets and liabilities at the new federal tax rate enacted by the TCJA and recorded a $1.8net $1.6 billion regulatory liability. This regulatory liability relates to the excess deferred taxes arising from accelerated tax depreciation on assets in rate base that are governed by normalization provisions of the Internal Revenue Code. The normalization provisions require that the excess deferred taxes be refunded to customers over the remaining average service life of the associated assets. In January 2018, Consumers began to reduce this regulatory liability by crediting income tax expense. Consumers fully reserved for the eventual refund of these excess deferred taxes that it credited to income tax expense in a separate non‑current regulatory liability established by reducing revenue. As a result of an order received in September 2019, Consumers began refunding these excess deferred taxes to customers andcustomers. In September 2020, the MPSC approved a settlement agreement in Consumers’ 2019 gas rate case including Consumers request to accelerate the amortization of its regulatory liability associated with the unprotected, non-property-related excess deferred income taxes resulting from the TCJA. Consumers will no longer reserve for their refund. Atincrease its TCJA amortization to fully refund this regulatory liability during the dateperiod October 2021 through September 2022 instead of the order, this reserve for refund of these excess deferred taxes totaled $62 million. For additional details on the order received, see Note 2, Regulatory Matters.previous amortization schedule through 2029.
2
In March 2020, CMSEnergy finalized a study of research and development tax credits for tax years 2012 through 2018. As a result, for the nine months ended September 30, 2020, CMS Energy, including Consumers, recognized a $9 million increase in the credit, net of reserves for uncertain tax positions. Of this amount, $8 million was recognized at Consumers.
3 
In 2013, the MPSC issued an order authorizing Consumers to accelerate the flow‑through to electric and gas customers of certain income tax benefits associated primarily with the cost of removal of plant placed in service before 1993. Consumers implemented this regulatory treatment beginning in 2014, with the electric portion ending in 2018.2018 and the gas portion expected to continue through 2025. This change, which also accelerates Consumers’ recognition of the income tax benefits, reduced Consumers’ income tax expense by $8 million for the nine months ended September 30, 2020 and by $7 million for the nine months ended September 30, 2019. In September 2020, the MPSC approved a settlement agreement in Consumers’ 2019 and by $30 million forgas rate case including Consumers request to accelerate the nine months ended September 30, 2018.
3
In March 2018, Consumers finalized a studyamortization of research and development tax credits for the tax years 2012 through 2016. As a result, Consumers recognized an $8 million increase in the credit, net of reserves for uncertain tax positions, at that time.this income


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11:tax benefit to fully amortize the balance during the period October 2021 through September 2022 instead of the previous amortization schedule through 2025.
4
In January 2020, the IRS issued a decision restoring alternative minimum tax credit refunds sequestered in years prior to 2018. As a result, for the nine months ended September 30, 2020, CMS Energy recognized a $9 million income tax benefit for sequestered amounts related to its 2017 tax return. CMS Energy received the refund in April 2020.
10:    Earnings Per Share—CMS Energy
Presented in the following table are CMS Energy’s basic and diluted EPS computations based on net income:
In Millions, Except Per Share AmountsIn Millions, Except Per Share Amounts In Millions, Except Per Share Amounts 
Three Months Ended Nine Months EndedThree Months Ended Nine Months Ended
September 302019 2018  2019 2018 2020 2019  2020 2019 
Income available to common stockholders                
Net income $207
 $169
 $514
 $550
 $210
 $207
 $590
 $514
Less income attributable to noncontrolling interests 
 
 1
 1
Less income (loss) attributable to noncontrolling interests (8) 0
 (7) 1
Net income available to common stockholders – basic and diluted $207
 $169
 $513
 $549
 $218
 $207
 $597
 $513
Average common shares outstanding                
Weighted-average shares – basic 283.0
 282.5
 282.9
 282.1
 285.6
 283.0
 284.8
 282.9
Add dilutive nonvested stock awards 0.8
 0.7
 0.8
 0.7
 0.8
 0.8
 0.9
 0.8
Add dilutive forward equity sale contracts 0.8
 
 0.5
 
 0.5
 0.8
 0.6
 0.5
Weighted-average shares – diluted 284.6
 283.2
 284.2
 282.8
 286.9
 284.6
 286.3
 284.2
Net income per average common share available to common stockholders                
Basic $0.73
 $0.60
 $1.81
 $1.95
 $0.76
 $0.73
 $2.10
 $1.81
Diluted 0.73
 0.59
 1.81
 1.94
 0.76
 0.73
 2.09
 1.81

Nonvested Stock Awards
CMS Energy’s nonvested 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 nonvested stock awards are considered participating securities. As such, the participating nonvested 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 in the computation of basic EPS.
Forward Equity Sale Contracts
In November 2018 and February 2019, CMS Energy has entered into forward equity sale contracts. These forward equity sale contracts are non‑participating securities. While the forward sale price in the forward equity sale contract is decreased on certain dates by certain predetermined amounts to reflect expected dividend payments, these price adjustments were set upon inception of the agreement and the forward contract does not give the owner


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the right to participate in undistributed earnings. Accordingly, the forward equity sale contracts were included in the computation of diluted EPS, but not in the computation of basic EPS. For further details on the forward equity sale contracts, see Note 4, Financings and Capitalization.


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12:11:    Revenue
Presented in the following tables are the components of operating revenue:
In Millions 
Three Months Ended September 30, 2019Electric Utility Gas Utility 
Enterprises1
 
Other Reconciling2
 Consolidated 
CMS Energy, including Consumers
Consumers utility revenue $1,247
 $178
 $
 $
 $1,425
Other 
 
 17
 
 17
Revenue recognized from contracts with customers $1,247
 $178
 $17
 $
 $1,442
Leasing income 
 
 42
 
 42
Financing income 3
 1
 
 58
 62
Total operating revenue – CMS Energy $1,250
 $179
 $59
 $58
 $1,546
Consumers
Consumers utility revenue          
Residential $585
 $111
 $
 $
 $696
Commercial 427
 27
 
 
 454
Industrial 175
 3
 
 
 178
Other 60
 37
 
 
 97
Revenue recognized from contracts with customers $1,247
 $178
 $
 $
 $1,425
Financing income 3
 1
 
 
 4
Total operating revenue – Consumers $1,250
 $179
 $
 $
 $1,429


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In Millions 
Three Months Ended September 30, 2018Electric Utility Gas Utility 
Enterprises1
 
Other Reconciling2
 Consolidated 
CMS Energy, including Consumers
Consumers utility revenue $1,310
 $188
 $
 $
 $1,498
Other 
 
 21
 
 21
Revenue recognized from contracts with customers $1,310
 $188
 $21
 $
 $1,519
Leasing income 
 
 36
 
 36
Financing income 3
 
 
 40
 43
Consumers alternative-revenue programs 
 1
 
 
 1
Total operating revenue – CMS Energy $1,313
 $189
 $57
 $40
 $1,599
Consumers
Consumers utility revenue          
Residential $625
 $118
 $
 $
 $743
Commercial 434
 30
 
 
 464
Industrial 186
 4
 
 
 190
Other 65
 36
 
 
 101
Revenue recognized from contracts with customers $1,310
 $188
 $
 $
 $1,498
Financing income 3
 
 
 
 3
Alternative-revenue programs 
 1
 
 
 1
Total operating revenue – Consumers $1,313
 $189
 $
 $
 $1,502
In Millions 
Nine Months Ended September 30, 2019Electric Utility Gas Utility 
Enterprises1
 
Other Reconciling2
 Consolidated 
CMS Energy, including Consumers
Consumers utility revenue $3,373
 $1,321
 $
 $
 $4,694
Other 
 
 52
 
 52
Revenue recognized from contracts with customers $3,373
 $1,321
 $52
 $
 $4,746
Leasing income 
 
 132
 
 132
Financing income 7
 5
 
 160
 172
Total operating revenue – CMS Energy $3,380
 $1,326
 $184
 $160
 $5,050
Consumers
Consumers utility revenue          
Residential $1,531
 $898
 $
 $
 $2,429
Commercial 1,140
 259
 
 
 1,399
Industrial 511
 36
 
 
 547
Other 191
 128
 
 
 319
Revenue recognized from contracts with customers $3,373
 $1,321
 $
 $
 $4,694
Financing income 7
 5
 
 
 12
Total operating revenue – Consumers $3,380
 $1,326
 $
 $
 $4,706


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In MillionsIn Millions In Millions 
Nine Months Ended September 30, 2018Electric Utility Gas Utility 
Enterprises1
 
Other Reconciling2
 Consolidated 
Three Months Ended September 30, 2020Electric Utility Gas Utility Enterprises¹ EnerBank Consolidated 
CMS Energy, including Consumers
Consumers utility revenue $3,473
 $1,263
 $
 $
 $4,736
 $1,255
 $192
 $
 $
 $1,447
Other 
 
 69
 
 69
 
 
 21
 
 21
Revenue recognized from contracts with customers $3,473
 $1,263
 $69
 $
 $4,805
 $1,255
 $192
 $21
 $
 $1,468
Leasing income 
 
 112
 
 112
 
 
 36
 
 36
Financing income 7
 4
 
 111
 122
 2
 1
 
 68
 71
Consumers alternative-revenue programs 
 5
 
 
 5
Total operating revenue – CMS Energy $3,480
 $1,272
 $181
 $111
 $5,044
 $1,257
 $193
 $57
 $68
 $1,575
Consumers
Consumers utility revenue                    
Residential $1,601
 $849
 $
 $
 $2,450
 $624
 $120
     $744
Commercial 1,181
 250
 
 
 1,431
 413
 27
     440
Industrial 499
 37
 
 
 536
 161
 5
     166
Other 192
 127
 
 
 319
 57
 40
     97
Revenue recognized from contracts with customers $3,473
 $1,263
 $
 $
 $4,736
 $1,255
 $192
     $1,447
Financing income 7
 4
 
 
 11
 2
 1
     3
Alternative-revenue programs 
 5
 
 
 5
Total operating revenue – Consumers $3,480
 $1,272
 $
 $
 $4,752
 $1,257
 $193
     $1,450
1 
Amounts represent the enterprises segment’s operating revenue from independent power production and CMS ERM’sits sales of energy commodities. The enterprises segment’s sales of energy commodities in supportare accounted for as operating leases. In addition to fixed payments, these agreements have variable payments based on energy delivered. The enterprises segment’s leasing income included variable lease payments of $23 million for the independent power production portfolio.three months ended September 30, 2020.


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In Millions 
Three Months Ended September 30, 2019Electric Utility Gas Utility Enterprises¹ EnerBank Consolidated 
CMS Energy, including Consumers
Consumers utility revenue $1,247
 $178
 $
 $
 $1,425
Other 
 
 17
 
 17
Revenue recognized from contracts with customers $1,247
 $178
 $17
 $
 $1,442
Leasing income 
 
 42
 
 42
Financing income 3
 1
 
 58
 62
Total operating revenue – CMS Energy $1,250
 $179
 $59
 $58
 $1,546
Consumers
Consumers utility revenue          
Residential $585
 $111
     $696
Commercial 427
 27
     454
Industrial 175
 3
     178
Other 60
 37
     97
Revenue recognized from contracts with customers $1,247
 $178
     $1,425
Financing income 3
 1
     4
Total operating revenue – Consumers $1,250
 $179
     $1,429
21 
Amount represents EnerBank’sAmounts represent the enterprises segment’s operating revenue from providing primarily unsecured consumer installment loansindependent power production and its sales of energy commodities. The enterprises segment’s sales of energy commodities are accounted for financing home improvementsas operating leases. In addition to fixed payments, these agreements have variable payments based on energy delivered. The enterprises segment’s leasing income included variable lease payments of $28 million for the three months ended September 30, 2019.


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In Millions 
Nine Months Ended September 30, 2020Electric Utility Gas Utility Enterprises¹ EnerBank Consolidated 
CMS Energy, including Consumers
Consumers utility revenue $3,300
 $1,212
 $
 $
 $4,512
Other 
 
 57
 
 57
Revenue recognized from contracts with customers $3,300
 $1,212
 $57
 $
 $4,569
Leasing income 
 
 110
 
 110
Financing income 7
 5
 
 191
 203
Total operating revenue – CMS Energy $3,307
 $1,217
 $167
 $191
 $4,882
Consumers
Consumers utility revenue          
Residential $1,612
 $819
     $2,431
Commercial 1,093
 227
     1,320
Industrial 427
 32
     459
Other 168
 134
     302
Revenue recognized from contracts with customers $3,300
 $1,212
��    $4,512
Financing income 7
 5
     12
Total operating revenue – Consumers $3,307
 $1,217
     $4,524
.1
Amounts represent the enterprises segment’s operating revenue from independent power production and its sales of energy commodities. The enterprises segment’s sales of energy commodities are accounted for as operating leases. In addition to fixed payments, these agreements have variable payments based on energy delivered. The enterprises segment’s leasing income included variable lease payments of $69 million for the nine months ended September 30, 2020.


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In Millions 
Nine Months Ended September 30, 2019Electric Utility Gas Utility Enterprises¹ EnerBank Consolidated 
CMS Energy, including Consumers
Consumers utility revenue $3,373
 $1,321
 $
 $
 $4,694
Other 
 
 52
 
 52
Revenue recognized from contracts with customers $3,373
 $1,321
 $52
 $
 $4,746
Leasing income 
 
 132
 
 132
Financing income 7
 5
 
 160
 172
Total operating revenue – CMS Energy $3,380
 $1,326
 $184
 $160
 $5,050
Consumers
Consumers utility revenue          
Residential $1,531
 $898
     $2,429
Commercial 1,140
 259
     1,399
Industrial 511
 36
     547
Other 191
 128
     319
Revenue recognized from contracts with customers $3,373
 $1,321
     $4,694
Financing income 7
 5
     12
Total operating revenue – Consumers $3,380
 $1,326
     $4,706
1
Amounts represent the enterprises segment’s operating revenue from independent power production and its sales of energy commodities. The enterprises segment’s sales of energy commodities are accounted for as operating leases. In addition to fixed payments, these agreements have variable payments based on energy delivered. The enterprises segment’s leasing income included variable lease payments of $91 million for the nine months ended September 30, 2019.
Electric and Gas Utilities
Consumers Utility Revenue: Consumers recognizes revenue primarily from the sale of electric and gas utility services at tariff‑based rates regulated by the MPSC. Consumers’ customer base consists of a mix of residential, commercial, and diversified industrial customers. Consumers’ tariff‑based sales performance obligations are described below.
Consumers has performance obligations for the service of standing ready to deliver electricity or natural gas to customers, and it satisfies these performance obligations over time. Consumers recognizes revenue at a fixed rate as it provides these services. These arrangements generally do not have fixed terms and remain in effect as long as the customer consumes the utility service. The rates are set by the MPSC through the rate‑making process and represent the stand‑alone selling price of Consumers’ service to stand ready to deliver.
Consumers has performance obligations for the service of delivering the commodity of electricity or natural gas to customers, and it satisfies these performance obligations upon delivery. Consumers recognizes revenue at a price per unit of electricity or natural gas delivered, based on the tariffs established by the MPSC. These arrangements generally do not have fixed terms and remain in effect as long as the customer consumes the utility service. The rates are set by the


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MPSC through the rate‑making process and represent the stand‑alone selling price of a bundled


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product comprising the commodity, electricity or natural gas, and the service of delivering such commodity.
In some instances, Consumers has specific fixed‑term contracts with large commercial and industrial customers to provide electricity or gas at certain tariff rates or to provide gas transportation services at contracted rates. The amount of electricity and gas to be delivered under these contracts and the associated future revenue to be received are generally dependent on the customers’ needs. Accordingly, Consumers recognizes revenues at the tariff or contracted rate as electricity or gas is delivered to the customer. Consumers also has other miscellaneous contracts with customers related to pole and other property rentals, appliance service plans, and utility contract work. Generally, these contracts are short term or evergreen in nature.
Accounts Receivable and Unbilled Revenues: Accounts receivable comprise trade receivables and unbilled receivables. CMS Energy and Consumers record their accounts receivable at cost, which approximates fair value.less an allowance for uncollectible accounts. The allowance is increased for uncollectible accounts expense and decreased for account write-offs net of recoveries. CMS Energy and Consumers establish anthe allowance for uncollectible accounts based on historical losses, management’s assessment of existing economic conditions, customer payment trends, and other factors.reasonable and supported forecast information. CMS Energy and Consumers assess late payment fees on trade receivables based on contractual past‑due terms established with customers. Accounts are written off when deemed uncollectible, which is generally when they become six months past due.
CMS Energy and Consumers charge offrecorded uncollectible accounts deemed uncollectible to operating expense. Uncollectible expense of $5 million for CMS Energythe three months ended September 30, 2020 and Consumers was $9 million for the three months ended September 30, 20192019. CMS Energy and $8Consumers recorded uncollectible accounts expense of $18 million for the threenine months ended September 30, 2018. Uncollectible expense for CMS Energy2020 and Consumers was $21 million for the nine months ended September 30, 2019 and $22 million for the nine months ended2019. At September 30, 2018.2020, Consumers had deferred $5 million of incremental uncollectible accounts expense as a non‑current regulatory asset. For additional information see Note 2, Regulatory Matters.
Consumers’ customers are billed monthly in cycles having billing dates that do not generally coincide with the end of a calendar month. This results in customers having received electricity or natural gas that they have not been billed for as of the month‑end. Consumers estimates its unbilled revenues by applying an average billed rate to total unbilled deliveries for each customer class. Unbilled revenues, which are recorded as accounts receivable and accrued revenue on CMS Energy’s and Consumers’ consolidated balance sheets, were $249$267 million at September 30, 20192020 and $409$426 million at December 31, 2018.
Alternative‑Revenue Programs: Under a gas revenue decoupling mechanism authorized by the MPSC, Consumers is allowed to adjust future gas rates for differences between Consumers’ actual weather‑normalized, non‑fuel revenues and the revenues approved by the MPSC. Consumers accounts for this program as an alternative‑revenue program that meets the criteria for recognizing the effects of decoupling adjustments on revenue as gas is delivered.
Consumers does not reclassify revenue from its alternative-revenue program to revenue from contracts with customers at the time the amounts are collected from customers.2019.


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13:12:    Cash and Cash Equivalents
Presented in the following table are the components of total cash and cash equivalents, including restricted amounts, and their location on CMS Energy’s and Consumers’ consolidated balance sheets:
In MillionsIn Millions In Millions 
September 30, 2019 December 31, 2018 September 30, 2020 December 31, 2019 
CMS Energy, including Consumers        
Cash and cash equivalents $403
 $153
 $519
 $140
Restricted cash and cash equivalents 29
 21
 39
 17
Other non-current assets 1
 1
Cash and cash equivalents, including restricted amounts $433
 $175
 $558
 $157
Consumers        
Cash and cash equivalents $259
 $39
 $199
 $11
Restricted cash and cash equivalents 25
 17
 24
 17
Cash and cash equivalents, including restricted amounts $284
 $56
 $223
 $28

Cash and Cash Equivalents: Cash and cash equivalents include short‑term, highly liquid investments with original maturities of three months or less.
Restricted Cash and Cash Equivalents: Restricted cash and cash equivalents are held primarily for the repayment of securitization bonds and funds held in escrow. Cash and cash equivalents may also be restricted to pay other contractual obligations such as leasing of coal railcars. These amounts are classified as current assets since they relate to payments that could or will occur within one year.
Other Non‑current Assets: The cash equivalents classified as other non‑current assets represent an investment in a money market fund held in the DB SERP rabbi trust. See Note 5, Fair Value Measurements for more information regarding the DB SERP.


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14:13:    Reportable Segments
Reportable segments consist of business units defined by the products and services they offer. CMS Energy and Consumers evaluate the performance of each segment based on its contribution to net income available to CMS Energy’s common stockholders.
CMS Energy
The reportable segments reported for CMS Energy are:
electric utility, consisting of regulated activities associated with the generation, purchase, transmission, distribution, and sale of electricity in Michigan
gas utility, consisting of regulated activities associated with the purchase, transmission, storage, distribution, and sale of natural gas in Michigan
enterprises, consisting of various subsidiaries engaging in domestic independent power production, including the development and operation of renewable generation, and the marketing of independent power production
EnerBank, a Utah state-chartered, FDIC-insured industrial bank providing primarily unsecured, fixed-rate installment loans throughout the U.S. to finance home improvements
CMS Energy presents EnerBank, corporate interest and other expenses and Consumers’ other consolidated entities within other reconciling items.


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Consumers
The reportable segments reported for Consumers are:
electric utility, consisting of regulated activities associated with the generation, purchase, transmission, distribution, and sale of electricity in Michigan
gas utility, consisting of regulated activities associated with the purchase, transmission, storage, distribution, and sale of natural gas in Michigan
Consumers’ other consolidated entities are presented within other reconciling items.


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Presented in the following tables is financial information by reportable segment:
In MillionsIn Millions In Millions 
Three Months Ended Nine Months EndedThree Months Ended Nine Months Ended
September 302019 2018  2019 2018 2020 2019  2020 2019 
CMS Energy, including Consumers                  
Operating revenue                
Electric utility $1,250
 $1,313
 $3,380
 $3,480
 $1,257
 $1,250
 $3,307
 $3,380
Gas utility 179
 189
 1,326
 1,272
 193
 179
 1,217
 1,326
Enterprises 59
 57
 184
 181
 57
 59
 167
 184
Other reconciling items 58
 40
 160
 111
EnerBank 68
 58
 191
 160
Total operating revenue – CMS Energy $1,546
 $1,599
 $5,050
 $5,044
 $1,575
 $1,546
 $4,882
 $5,050
Consumers                
Operating revenue                
Electric utility $1,250
 $1,313
 $3,380
 $3,480
 $1,257
 $1,250
 $3,307
 $3,380
Gas utility 179
 189
 1,326
 1,272
 193
 179
 1,217
 1,326
Total operating revenue – Consumers $1,429
 $1,502
 $4,706
 $4,752
 $1,450
 $1,429
 $4,524
 $4,706
CMS Energy, including Consumers                
Net income (loss) available to common stockholders 

 

     

 

    
Electric utility $223
 $199
 $418
 $468
 $226
 $223
 $463
 $418
Gas utility (10) (19) 119
 105
 4
 (10) 162
 119
Enterprises 7
 4
 18
 33
Other reconciling items (13) (15) (42) (57)
Enterprises¹ 13
 7
 34
 30
EnerBank¹ 12
 11
 34
 32
Other reconciling items¹ (37) (24) (96) (86)
Total net income available to common stockholders – CMS Energy $207
 $169
 $513
 $549
 $218
 $207
 $597
 $513
Consumers                
Net income (loss) available to common stockholder                
Electric utility $223
 $199
 $418
 $468
 $226
 $223
 $463
 $418
Gas utility (10) (19) 119
 105
 4
 (10) 162
 119
Other reconciling items 
 
 (1) 
 0
 0
 (1) (1)
Total net income available to common stockholder – Consumers $213
 $180
 $536
 $573
 $230
 $213
 $624
 $536
1
Prior period amounts have been reclassified to reflect changes in segment reporting.


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In MillionsIn Millions In Millions 
September 30, 2019 December 31, 2018 September 30, 2020 December 31, 2019 
CMS Energy, including Consumers        
Plant, property, and equipment, gross        
Electric utility1, 2
 $15,812
 $16,027
Gas utility1
 8,382
 7,919
Electric utility¹ $16,668
 $16,158
Gas utility¹ 9,204
 8,785
Enterprises 406
 412
 1,109
 405
EnerBank 34
 22
Other reconciling items 45
 42
 21
 20
Total plant, property, and equipment, gross – CMS Energy $24,645
 $24,400
 $27,036
 $25,390
Consumers        
Plant, property, and equipment, gross        
Electric utility1, 2
 $15,812
 $16,027
Gas utility1
 8,382
 7,919
Electric utility¹ $16,668
 $16,158
Gas utility¹ 9,204
 8,785
Other reconciling items 20
 17
 21
 20
Total plant, property, and equipment, gross – Consumers $24,214
 $23,963
 $25,893
 $24,963
CMS Energy, including Consumers        
Total assets        
Electric utility1
 $14,495
 $14,079
Gas utility1
 8,312
 7,806
Electric utility¹ $15,556
 $14,911
Gas utility¹ 9,148
 8,659
Enterprises 500
 540
 1,250
 527
EnerBank 3,125
 2,692
Other reconciling items 2,702
 2,104
 201
 48
Total assets – CMS Energy $26,009
 $24,529
 $29,280
 $26,837
Consumers        
Total assets        
Electric utility1
 $14,557
 $14,143
Gas utility1
 8,359
 7,853
Electric utility¹ $15,621
 $14,973
Gas utility¹ 9,196
 8,706
Other reconciling items 22
 29
 19
 20
Total assets – Consumers $22,938
 $22,025
 $24,836
 $23,699
1 
Amounts include a portion of Consumers’ other common assets attributable to both the electric and gas utility businesses.
2
Costs related to coal-fueled electric generating units to be retired in 2023 were removed and recorded as a regulatory asset in June 2019. For additional details, see Note 2, Regulatory Matters.


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15:14:    Asset SalesSale and Exit Activities
Enterprises
In April 2019, DIG completed a sale of transmission equipment to ITC and recognized a pre-tax gain of $16 million within maintenance and other operating expenses on CMS Energy’s consolidated statements of income.
Consumers
Asset Sale:In September 2019,October 2020, Consumers completed a sale of electric transmission assets to METC. Consumers sold these assets at a portionprice above their book value and will recognize a gain in the fourth quarter of its electric utility’s substation transmission equipment to METC and recognized a pre-tax gain of $34 million within maintenance and other operating expenses on Consumers’ consolidated statements of income.2020.
Exit Activities: Under its Clean Energy Plan, Consumers plans to retire the D.E. Karn 1 & 2 coal-fueled electric generating units in 2023. For additional details on Consumers’ plans to request recovery of the remaining book value of the 2 units upon their retirement, see Note 2, Regulatory Matters.
In October 2019, Consumers announced a retention incentive program to ensure necessary staffing at the D.E. Karn generating complex through the anticipated retirement of the coal-fueled electric generating units. Based on the number of employees that have chosen to participate, the aggregate cost of the program through 2023 is estimated to be $35 million. Consumers expects to recognize $6 million of expense related to retention and severance benefits in late 2019. Consumers will seekis seeking recovery of these costs from customers.customers in its 2020 electric rate case.
As of September 30, 2020, the cumulative cost incurred and charged to expense related to this program was $14 million; an amount of $2 million has been capitalized as a cost of plant, property, and equipment. Presented in the following table is a reconciliation of the retention benefit liability recorded in other liabilities on Consumers’ consolidated balance sheets:
In Millions 
September 30, 2020Nine Months Ended
Retention benefit liability at beginning of period $4
Costs incurred and charged to maintenance and other operating expenses¹ 11
Costs incurred and capitalized 1
Retention benefit liability at the end of the period² $16
1
Includes $4 million for the three months ended September 30, 2020.
2
Includes current portion of other liabilities of $7 million.
15:    Purchase of Variable Interest Entity
In July 2020, CMS Enterprises purchased a 51‑percent ownership interest in Aviator Wind Equity Holdings. At that time, Aviator Wind Equity Holdings owned 100 percent of Aviator Wind, a 525‑MW wind generation project being developed and constructed in Coke County, Texas. Of Aviator Wind’s 525‑MW nameplate capacity, 420 MW has been committed under long-term PPAs.
Aviator Wind became operational in September 2020 and, at that time, Aviator Wind Equity Holdings sold a Class A membership interest in Aviator Wind to a tax equity investor, BHE Renewables, LLC, a subsidiary of Berkshire Hathaway Energy Company. Aviator Wind Equity Holdings retained a Class B membership interest in Aviator Wind. Earnings, tax attributes, and cash flows generated by Aviator Wind are allocated among and distributed to the membership classes in accordance with the ratios specified in the associated limited liability company operating agreement; these ratios change over time and are not representative of the ownership interest percentages of each membership class.
Since Aviator Wind’s income and cash flows are not distributed among its investors based on ownership interest percentages, CMS Enterprises allocates Aviator Wind’s income (loss) among its investors by applying the hypothetical liquidation at book value method. This method calculates each investor’s earnings based on a hypothetical liquidation of Aviator Wind at the net book value of its underlying assets as of the balance sheet date. The liquidation tax gain (loss) is allocated to each investor’s capital account, resulting in income (loss) equal to the period change in the investor’s capital account balance.


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CMS Enterprises then receives 51 percent of the earnings, tax attributes, and cash flows that were allocated to Aviator Wind Equity Holdings.
Aviator Wind Equity Holdings and Aviator Wind represent VIEs. In accordance with the associated limited liability company operating agreement, the tax equity investor is guaranteed preferred returns from Aviator Wind. However, CMS Enterprises manages and controls the operating activities of Aviator Wind Equity Holdings and, ultimately, Aviator Wind. As a result, CMS Enterprises is the primary beneficiary of Aviator Wind Equity Holdings and Aviator Wind, as it has the power to direct the activities that most significantly impact the economic performance of the companies, as well as the obligation to absorb losses or the right to receive benefits from the companies. CMS Enterprises consolidates Aviator Wind Equity Holdings and Aviator Wind and presents the Class A membership interest and 49 percent of the Class B membership interest in Aviator Wind as noncontrolling interests. NaN gain or loss was recognized upon initial consolidation of Aviator Wind Equity Holdings and Aviator Wind.
Presented in the following table are the carrying values of the VIEs’ assets and liabilities included in CMS Energy’s consolidated balance sheets:
In Millions 
 September 30, 2020 
Current  
Cash and cash equivalents $3
Restricted cash and cash equivalents 12
Accounts receivable 1
Non-current  
Plant, property, and equipment, net 696
Total assets¹ $712
Current  
Accounts payable $7
Non-current  
Asset retirement obligations 21
Total liabilities $28

1
Assets may be used only to meet VIEs’ obligations and commitments.
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s discussion and analysis of financial condition and results of operations for CMS Energy and Consumers is contained in Part I—Item 1. Financial Statements—MD&A, which is incorporated by reference herein.
Item 3.    Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes to market risk as previously disclosed in Part II—Item 7A. Quantitative and Qualitative Disclosures About Market Risk, in the 20182019 Form 10‑K.


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Item 4.    Controls and Procedures
CMS Energy
Disclosure Controls and Procedures: CMS Energy’s management, with the participation of its CEO and CFO, has evaluated the effectiveness of its disclosure controls and procedures (as such term is defined in Rules 13a‑15(e) and 15d‑15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, CMS Energy’s CEO and CFO have concluded that, as of the end of such period, its disclosure controls and procedures are effective.


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Internal Control Over Financial Reporting: There have not been any changes in CMS Energy’s internal control over financial reporting (as such term is defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act) during the last fiscal quarter that have materially affected, or are reasonably likely to affect materially, affect, its internal control over financial reporting.
Consumers
Disclosure Controls and Procedures: Consumers’ management, with the participation of its CEO and CFO, has evaluated the effectiveness of its disclosure controls and procedures (as such term is defined in Rules 13a‑15(e) and 15d‑15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, Consumers’ CEO and CFO have concluded that, as of the end of such period, its disclosure controls and procedures are effective.
Internal Control Over Financial Reporting: There have not been any changes in Consumers’ internal control over financial reporting (as such term is defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act) during the last fiscal quarter that have materially affected, or are reasonably likely to affect materially, affect, its internal control over financial reporting.
Part II—Other Information
Item 1.    Legal Proceedings
CMS Energy, Consumers, and certain of their affiliates are parties to various lawsuits and regulatory matters in the ordinary course of business. For information regarding material legal proceedings, including updates to information reported under Part I—Item 3. Legal Proceedings, of the 20182019 Form 10‑K, see Part I—Item 1. Financial Statements—Notes to the Unaudited Consolidated Financial Statements—Note 2, Regulatory Matters and Note 3, Contingencies and Commitments.
Item 1A.    Risk Factors
There have been no material changesThe following Risk Factor is in addition to theour Risk Factors as previously disclosedincluded in Part I—Item 1A. Risk Factors in the 20182019 Form 10‑K,K. 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 those discussed in the following sections and in Part I—Item 1A. Risk Factors in the 2019 Form 10‑K. 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 management believes to be immaterial may also adversely affect CMS Energy or Consumers. The Risk Factor, as well as the other information included in this report and in other


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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.
The COVID‑19 pandemic could materially and adversely affect each of CMSEnergy’s and Consumers’ business, results of operations, financial condition, capital investment program, liquidity, and cash flows.
The COVID‑19 pandemic has had widespread impacts on people, businesses, economies, and financial markets globally, in the U.S., and in markets where CMS Energy and Consumers conduct business. Future impacts of the pandemic could include a prolonged reduction in economic activity, extended disruption to supply chains and operations, and reduced availability of labor and productivity. CMS Energy and Consumers provide essential services, which means that CMS Energy and Consumers must keep employees, who operate facilities or interact with customers, safe and minimize unnecessary risk of exposure to COVID‑19. CMS Energy and Consumers have taken extra precautions in an effort to protect the health of employees working in the field and in CMS Energy’s and Consumers’ facilities. CMS Energy and Consumers have also implemented work-from-home policies where possible. In response to the pandemic, CMS Energy and Consumers initially suspended shut-offs of service for non-payment and extended payment protection plans for low-income and senior customers. CMS Energy and Consumers slowly began resuming shut-offs of service for non-payment in late July 2020 for commercial and industrial customers and in October 2020 for residential customers. This is a continually evolving situation; CMS Energy and Consumers will continue to monitor developments and will take additional necessary precautions in order to keep employees, customers, contractors, and communities safe.
The ultimate impact of the COVID‑19 pandemic depends on factors beyond CMS Energy’s and Consumers’ knowledge or control. In the near term, Consumers has experienced a decline in electric deliveries to commercial and industrial customers and increased uncollectible accounts. Over the long term, the pandemic could have numerous and significant adverse effects on CMS Energy and Consumers, including but not limited to adverse effects on their business, operations,sales, uncollectible accounts, capital expenditures, energy efficiency programs, pension expenses, and PSCR and GCR costs. The companies’ business and operations could also be adversely affected by an inability to obtain necessary approvals or authorizations from the MPSC, FERC, courts, or other governmental authorities in a timely manner and by the nature of any emergency or other actions taken by such agencies, courts, or authorities. Additionally, EnerBank could experience slower lending growth, higher loan write-offs, and increased loan modifications.
CMS Energy and Consumers cannot predict how or to what extent the COVID‑19 pandemic will negatively impact CMS Energy’s and Consumers’ business, results of operations, financial condition, capital investment program, liquidity, and cash flows. To the extent the COVID‑19 pandemic adversely affects CMS Energy’s and Consumers’ business, results of operations, financial condition, capital investment program, liquidity, and cash flows, it may also have the effect of heightening many of the other risks described in Part I—Item 1A. Risk Factors are incorporated herein in the 2019 Form 10‑K. The degree to which COVID‑19 will impact CMS Energy and Consumers will depend in part on future developments, including the severity and duration of the outbreak, actions or inactions that may be taken by reference.governmental authorities, and to what extent and when normal economic and operational conditions can resume.


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Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
None.


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Issuer Repurchases of Equity Securities
Presented in the following table are CMS Energy’s repurchases of equity securities for the three months ended September 30, 2019:2020:
Period
Total Number
of Shares
Purchased1
 
Average
Price Paid
per Share
 
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
 
Maximum Number of
Shares That May Yet Be
Purchased Under Publicly
Announced Plans or
Programs
 
July 1, 2019 to July 31, 2019 4,194
 $57.91
 
 
August 1, 2019 to August 31, 2019 376
 60.03
 
 
September 1, 2019 to September 30, 2019 213
 63.05
 
 
Total 4,783
 $58.31
 
 
PeriodTotal Number of Shares Purchased¹ Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares That May Yet Be Purchased Under Publicly Announced Plans or Programs 
July 1, 2020 to July 31, 2020 
 $
 
 
August 1, 2020 to August 31, 2020 992
 63.58
 
 
September 1, 2020 to September 30, 2020 
 
 
 
Total 992
 $63.58
 
 
1 
All of the common shares were repurchased to satisfy the minimum statutory income tax withholding obligation for common shares that have vested under the Performance Incentive Stock Plan. The value of shares repurchased is based on the market price on the vesting date.
Item 3.    Defaults Upon Senior Securities
None.
Item 4.    Mine Safety Disclosures
Not applicable.
Item 5.    Other Information
None.


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Item 6.    Exhibits
CMS Energy’s and Consumers’ Exhibit Index
The agreements included as exhibits to this Form 10‑Q 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 of the parties to each of the agreements that 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.
Exhibits Description
4.1
4.2
4.3
31.1
31.2
31.3
31.4
32.1
32.2
99.11
101.INSInline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCHInline XBRL Taxonomy Extension Schema
101.CALInline XBRL Taxonomy Extension Calculation Linkbase
101.DEFInline XBRL Taxonomy Extension Definition Linkbase
101.LABInline XBRL Taxonomy Extension Labels Linkbase
101.PREInline XBRL Taxonomy Extension Presentation Linkbase
104.1Included in the cover page, formatted in Inline XBRL
1
Obligation of CMS Energy or its subsidiaries, but not of Consumers.


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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature for each undersigned company shall be deemed to relate only to matters having reference to such company or its subsidiary.
  CMS ENERGY CORPORATION
   
Dated: October 24, 201929, 2020By:/s/ Rejji P. Hayes
  Rejji P. Hayes
  Executive Vice President and Chief Financial Officer
   
   
  CONSUMERS ENERGY COMPANY
   
Dated: October 24, 201929, 2020By:/s/ Rejji P. Hayes
  Rejji P. Hayes
  Executive Vice President and Chief Financial Officer


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