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Cover and table of contents
10-K 1 a18-1030_110k.htm 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____to_____
| Commission | Registrant; State of Incorporation; | IRS Employer | ||
|---|---|---|---|---|
| File Number | Address; and Telephone Number | Identification No. | ||
| 1-9513 | CMS ENERGY CORPORATION | 38-2726431 | ||
| (A Michigan Corporation) | ||||
| One Energy Plaza, Jackson, Michigan 49201 | ||||
| (517) 788-0550 | ||||
| 1-5611 | CONSUMERS ENERGY COMPANY | 38-0442310 | ||
| (A Michigan Corporation) | ||||
| One Energy Plaza, Jackson, Michigan 49201 | ||||
| (517) 788-0550 |
Securities registered pursuant to Section 12(b) of the Act:
| Name of Each Exchange | ||||
|---|---|---|---|---|
| Registrant | Title of Class | on Which Registered | ||
| CMS Energy Corporation | Common Stock, $0.01 par value | New York Stock Exchange | ||
| Consumers Energy Company | Cumulative Preferred Stock, $100 par value: $4.50 Series | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
| CMS Energy Corporation: Yes x No o | Consumers Energy Company: Yes x No o |
|---|
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
| CMS Energy Corporation: Yes o No x | Consumers Energy Company: Yes o No x |
|---|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
| CMS Energy Corporation: Yes x No o | Consumers Energy Company: Yes x No o |
|---|
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data file required to be submitted and posted 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 and post such files).
| CMS Energy Corporation: Yes x No o | Consumers Energy Company: Yes x No o |
|---|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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: | |
|---|---|
| Large accelerated filer x | Accelerated filer o |
| Non-Accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
| Emerging growth company o | |
| Consumers Energy Company: | |
| Large accelerated filer o | Accelerated filer o |
| Non-Accelerated filer x (Do not check if a smaller reporting company) | Smaller reporting company o |
| Emerging growth company o |
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: o | Consumers Energy Company: o |
|---|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| CMS Energy Corporation: Yes o No x | Consumers Energy Company: Yes o No x |
|---|
The aggregate market value of CMS Energy voting and non-voting common equity held by non-affiliates was $12.948 billion for the 279,964,146 CMS Energy Common Stock shares outstanding on June 30, 2017 based on the closing sale price of $46.25 for CMS Energy Common Stock, as reported by the New York Stock Exchange on such date. There were no shares of Consumers common equity held by non-affiliates as of June 30, 2017.
There were 282,420,406 shares of CMS Energy Common Stock outstanding on January 31, 2018, including 20,316 shares owned by Consumers Energy Company. On January 31, 2018, CMS Energy held all 84,108,789 outstanding shares of common equity of Consumers.
Documents incorporated by reference in Part III: CMS Energy’s and Consumers’ proxy statement relating to their 2018 Annual Meetings of Shareholders to be held May 4, 2018.
CMS Energy Corporation
Consumers Energy Company
Annual Reports on Form 10-K to the Securities and Exchange Commission for the Year Ended December 31, 2017
TABLE OF CONTENTS
GLOSSARY
Certain terms used in the text and financial statements are defined below.
**2016 Energy Law **Comprehensive energy reform package enacted in Michigan in 2016
**ABATE **Association of Businesses Advocating Tariff Equity
**ABO **Accumulated benefit obligation; the liabilities of a pension plan based on service and pay to date, which differs from the PBO in that it does not reflect expected future salary increases
**AFUDC **Allowance for borrowed and equity funds used during construction
**AOCI **Accumulated other comprehensive income (loss)
**ARO **Asset retirement obligation
**ASC 715 **Financial Accounting Standards Board Accounting Standards Codification Topic 715, Retirement Benefits
**ASC 740 **Financial Accounting Standards Board Accounting Standards Codification Topic 740, Income Taxes
**ASU **Financial Accounting Standards Board Accounting Standards Update
**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
**CAO **Chief Accounting Officer
**CCR **Coal combustion residual
**CEO **Chief Executive Officer
**CERCLA **Comprehensive Environmental Response, Compensation, and Liability Act of 1980
**CFO **Chief Financial Officer
**city-gate contract **An arrangement made for the point at which a local distribution company physically receives gas from a supplier or pipeline
**Clean Air Act **Federal Clean Air Act of 1963, as amended
**Clean Water Act **Federal Water Pollution Control Act of 1972, as amended
**CMS Capital **CMS Capital, L.L.C., a wholly owned subsidiary of CMS Energy
**CMS Energy **CMS Energy Corporation and its consolidated subsidiaries, unless otherwise noted; the parent of Consumers and CMS Enterprises
**CMS Enterprises **CMS Enterprises Company, a wholly owned subsidiary of CMS Energy
**CMS ERM **CMS Energy Resource Management Company, formerly known as CMS MST, a wholly owned subsidiary of CMS Enterprises
**CMS Field Services **CMS Field Services, Inc., a former wholly owned subsidiary of CMS Gas Transmission
**CMS Gas Transmission **CMS Gas Transmission Company, a wholly owned subsidiary of CMS Enterprises
**CMS Land **CMS Land Company, a wholly owned subsidiary of CMS Capital
**CMS MST **CMS Marketing, Services and Trading Company, a wholly owned subsidiary of CMS Enterprises, whose name was changed to CMS ERM in 2004
**Consumers **Consumers Energy Company and its consolidated subsidiaries, unless otherwise noted; a wholly owned subsidiary of CMS Energy
**Consumers 2014 Securitization Funding **Consumers 2014 Securitization Funding LLC, a wholly owned consolidated bankruptcy-remote subsidiary of Consumers and special-purpose entity organized for the sole purpose of purchasing and owning securitization property, issuing securitization bonds, and pledging its interest in securitization property to a trustee to collateralize the securitization bonds
**Craven **Craven County Wood Energy Limited Partnership, a variable interest entity in which HYDRA-CO Enterprises, Inc., a wholly owned subsidiary of CMS Enterprises, has a 50-percent interest
**CSAPR **The Cross-State Air Pollution Rule
**DB Pension Plan A **Defined benefit pension plan of CMS Energy and Consumers, including certain present and former affiliates and subsidiaries, created as of December 31, 2017 for active employees who were covered under the defined benefit pension plan that closed in 2005
**DB Pension Plan B **Defined benefit pension plan of CMS Energy and Consumers, including certain present and former affiliates and subsidiaries, amended as of December 31, 2017 to include only retired and former employees who were covered under the defined benefit pension plan that closed in 2005
**DB Pension Plans **Defined benefit pension plans of CMS Energy and Consumers, comprising DB Pension Plan A and DB Pension Plan B
**DB SERP **Defined Benefit Supplemental Executive Retirement Plan
**DCCP **Defined Company Contribution Plan
**DC SERP **Defined Contribution Supplemental Executive Retirement Plan
**DIG **Dearborn Industrial Generation, L.L.C., a wholly owned subsidiary of Dearborn Industrial Energy, L.L.C., a wholly owned subsidiary of CMS Energy
**Dodd-Frank Act **Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
**DTE Electric **DTE Electric Company, a non-affiliated company
**DTE Gas **DTE Gas Company, a non-affiliated company
**EBITDA **Earnings before interest, taxes, depreciation, and amortization
**EEI **Edison Electric Institute, an association representing all U.S. investor-owned electric companies
**EnerBank **EnerBank USA, a wholly owned subsidiary of CMS Capital
**energy waste reduction **The reduction of energy consumption through energy efficiency and demand-side energy conservation, as established under the 2016 Energy Law
**Entergy **Entergy Corporation, a non-affiliated company
**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
**First Mortgage Bond Indenture **The indenture dated as of September 1, 1945 between Consumers and The Bank of New York Mellon, as Trustee, as amended and supplemented
**FLI Liquidating Trust **Trust formed in Missouri bankruptcy court to accomplish the liquidation of Farmland Industries, Inc., a non-affiliated entity
**Forsite **Forsite Development, Inc. and its subsidiaries, each a non-affiliated company
**FTR **Financial transmission right
**GAAP **U.S. Generally Accepted Accounting Principles
**Gas AMR **Consumers’ gas automated meter reading project, which involves the installation of communication modules to allow drive-by meter reading
**GCC **Gas Customer Choice, which allows gas customers to purchase gas from alternative suppliers
**GCR **Gas cost recovery
**Genesee **Genesee Power Station Limited Partnership, a variable interest entity in which HYDRA-CO Enterprises, Inc., a wholly owned subsidiary of CMS Enterprises, has a 50-percent interest
**Grayling **Grayling Generating Station Limited Partnership, a variable interest entity in which HYDRA-CO Enterprises, Inc., a wholly owned subsidiary of CMS Enterprises, has a 50-percent interest
**GWh **Gigawatt-hour, a unit of energy equal to one billion watt-hours
**IRS **Internal Revenue Service
**kilovolts **Thousand volts, a unit used to measure the difference in electrical pressure along a current
**kVA **Thousand volt-amperes, a unit used to reflect the electrical power capacity rating of equipment or a system
**kWh **Kilowatt-hour, a unit of energy equal to one thousand watt-hours
**LIBOR **The London Interbank Offered Rate
**Ludington **Ludington pumped-storage plant, jointly owned by Consumers and DTE Electric
**MATS **Mercury and Air Toxics Standards, which limit mercury, acid gases, and other toxic pollution from coal-fueled and oil-fueled power plants
**mcf **Thousand cubic feet
**MCV Facility **A 1,647 MW natural gas-fueled, combined-cycle cogeneration facility operated by the MCV Partnership
**MCV Partnership **Midland Cogeneration Venture Limited Partnership
**MCV PPA **PPA between Consumers and the MCV Partnership
**MDEQ **Michigan Department of Environmental Quality
**METC **Michigan Electric Transmission Company, LLC, a non-affiliated company
**MGP **Manufactured gas plant
**Michigan Mercury Rule **Michigan Air Pollution Control Rules, Part 15, Emission Limitations and Prohibitions — Mercury, addressing mercury emissions from coal-fueled electric generating units
**MISO **Midcontinent Independent System Operator, Inc.
**mothball **To place a generating unit into a state of extended reserve shutdown in which the unit is inactive and unavailable for service for a specified period, during which the unit can be brought back into service after receiving appropriate notification and completing any necessary maintenance or other work; generation owners in MISO must request approval to mothball a unit, and MISO then evaluates the request for reliability impacts
**MPSC **Michigan Public Service Commission
**MRV **Market-related value of plan assets
**MW **Megawatt, a unit of power equal to one million watts
**MWh **Megawatt-hour, a unit of energy equal to one million watt-hours
**NAAQS **National Ambient Air Quality Standards
**NERC **The North American Electric Reliability Corporation, a non-affiliated company responsible for developing and enforcing reliability standards, monitoring the bulk power system, and educating and certifying industry personnel
**NPDES **National Pollutant Discharge Elimination System, a permit system for regulating point sources of pollution under the Clean Water Act
**NREPA **Part 201 of the Michigan Natural Resources and Environmental Protection Act, a statute that covers environmental activities including remediation
**NSR **New Source Review, a construction-permitting program under the Clean Air Act
**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
**Palisades **Palisades nuclear power plant, sold by Consumers to Entergy in 2007
**PBO **Projected benefit obligation
**PCB **Polychlorinated biphenyl
**PHMSA **The U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration
**PISP **Performance Incentive Stock Plan
**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
**ROA **Retail Open Access, which allows electric generation customers to choose alternative electric suppliers pursuant to a Michigan statute enacted in 2000, as amended
**S&P **Standard & Poor’s Financial Services LLC
**SEC **U.S. Securities and Exchange Commission
**securitization **A financing method authorized by statute and approved by the MPSC which allows a utility to sell its right to receive a portion of the rate payments received from its customers for the repayment of securitization bonds issued by a special-purpose entity affiliated with such utility
**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
**TCJA **P.L. 115-97, commonly referred to as the Tax Cuts and Jobs Act
**T.E.S. Filer City **T.E.S. Filer City 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
**USW **United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO-CLC
**UWUA **Utility Workers Union of America, AFL-CIO
**VEBA trust **Voluntary employees’ beneficiary association trusts accounts established specifically to set aside employer-contributed assets to pay for future expenses of the OPEB Plan
FILING FORMAT
This combined Form 10-K is separately filed by CMS Energy and Consumers. Information in this combined Form 10-K relating to each individual registrant is filed by such registrant on its own behalf. Consumers makes no representation regarding information relating to any other companies affiliated with CMS Energy other than its own subsidiaries. None of CMS Energy, CMS Enterprises, nor any of CMS Energy’s other subsidiaries (other than Consumers) has any obligation in respect of Consumers’ debt securities and holders of such debt securities should not consider the financial resources or results of operations of CMS Energy, CMS Enterprises, nor any of CMS Energy’s other subsidiaries (other than Consumers and its own subsidiaries (in relevant circumstances)) in making a decision with respect to Consumers’ debt securities. Similarly, neither Consumers nor any other subsidiary of CMS Energy has any obligation in respect of debt securities of CMS Energy.
FORWARD-LOOKING STATEMENTS AND INFORMATION
This Form 10-K and other CMS Energy and Consumers disclosures may contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. The use of “might,” “may,” “could,” “should,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “projects,” “forecasts,” “predicts,” “assumes,” and other similar words is intended to identify forward-looking statements that involve risk and uncertainty. This discussion of potential risks and uncertainties is designed to highlight important factors that may impact CMS Energy’s and Consumers’ businesses and financial outlook. CMS Energy and Consumers have no obligation to update or revise forward-looking statements regardless of whether new information, future events, or any other factors affect the information contained in the statements. These forward-looking statements are subject to various factors that could cause CMS Energy’s and Consumers’ actual results to differ materially from the results anticipated in these statements. These factors include, but are not limited to, the following, all of which are potentially significant:
· the impact of new regulation by the MPSC, FERC, and other applicable governmental proceedings and regulations, including any associated impact on electric or gas rates or rate structures
· potentially adverse regulatory treatment or failure to receive timely regulatory orders affecting Consumers that are or could come before the MPSC, FERC, or other governmental authorities
· changes in the performance of or regulations applicable to MISO, METC, pipelines, railroads, vessels, or other service providers that CMS Energy, Consumers, or any of their affiliates rely on to serve their customers
· 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 and ROA, 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; and electric transmission and distribution or gas pipeline system constraints
· 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 the MDEQ, EPA, and/or U.S. Army Corps of Engineers, and potential environmental remediation costs associated with these interpretations or decisions, including those that may affect Bay Harbor or Consumers’ 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 investment performance of the assets of CMS Energy’s and Consumers’ pension and benefit plans, the discount rates used in calculating the plans’ obligations, and the resulting impact on future funding requirements
· the impact of the economy, particularly in Michigan, and potential future volatility in the financial and credit markets on CMS Energy’s, Consumers’, or any of their affiliates’ revenues, ability to collect accounts receivable from customers, or cost and availability of capital
· changes in the economic and financial viability of CMS Energy’s and Consumers’ suppliers, customers, and other counterparties and the continued ability of these third parties, including those in bankruptcy, to meet their obligations to CMS Energy and Consumers
· population changes in the geographic areas where CMS Energy and Consumers conduct business
· national, regional, and local economic, competitive, and regulatory policies, conditions, and developments
· loss of customer demand for electric generation supply to alternative electric suppliers, increased use of distributed generation, or energy waste reduction
· 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, 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 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, cyber incidents, vandalism, war, or terrorism, and the ability to obtain or maintain insurance coverage for these events
· changes or disruption in fuel supply, including but not limited to supplier bankruptcy and delivery disruptions
· potential costs, lost revenues, or other consequences resulting from misappropriation of assets or sensitive information, corruption of data, or operational disruption in connection with a cyber attack or other cyber incident
· potential disruption to, interruption or failure of, or other impacts on information technology backup or disaster recovery systems
· technological developments in energy production, storage, delivery, usage, and metering
· the ability to implement technology successfully
· the impact of CMS Energy’s and Consumers’ integrated business software system and its effects on their operations, including utility customer billing and collections
· adverse consequences resulting from any past, present, or future assertion of indemnity or warranty claims associated with assets and businesses previously owned by CMS Energy or Consumers, including claims resulting from attempts by foreign or domestic governments to assess taxes on or to impose environmental liability associated with past operations or transactions
· the outcome, cost, and other effects of any legal or administrative claims, proceedings, investigations, or settlements
· the reputational impact on CMS Energy and Consumers of operational incidents, violations of corporate policies, regulatory violations, inappropriate use of social media, and other events
· restrictions imposed by various financing arrangements and regulatory requirements on the ability of Consumers and other subsidiaries of CMS Energy to transfer funds to CMS Energy in the form of cash dividends, loans, or advances
· earnings volatility resulting from the application of fair value accounting to certain energy commodity contracts or interest rate contracts
· changes in financial or regulatory accounting principles or policies
· other matters that may be disclosed from time to time in CMS Energy’s and Consumers’ SEC filings, or in other public documents
All forward-looking statements should be considered in the context of the risk and other factors described above and as detailed from time to time in CMS Energy’s and Consumers’ SEC filings. For additional details regarding these and other uncertainties, see Item 1A. Risk Factors; Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook; and Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 3, Regulatory Matters and Note 4, Contingencies and Commitments.
Part I