Item 8. Financial Statements and Supplementary Data

Index to Financial Statements

CMS Energy Consolidated Financial Statements		86
Consolidated Statements of Income		86
Consolidated Statements of Comprehensive Income		87
Consolidated Statements of Cash Flows		88
Consolidated Balance Sheets		90
Consolidated Statements of Changes in Equity		92
Consumers Consolidated Financial Statements		94
Consolidated Statements of Income		94
Consolidated Statements of Comprehensive Income		95
Consolidated Statements of Cash Flows		96
Consolidated Balance Sheets		98
Consolidated Statements of Changes in Equity		100
Notes to the Consolidated Financial Statements		101
1:	Significant Accounting Policies	101
2:	New Accounting Standards	103
3:	Regulatory Matters	105
4:	Contingencies and Commitments	111
5:	Financings and Capitalization	119
6:	Fair Value Measurements	126
7:	Financial Instruments	127
8:	Notes Receivable	130
9:	Plant, Property, and Equipment	132
10:	Leases and Palisades Financing	136
11:	Asset Retirement Obligations	141
12:	Retirement Benefits	143
13:	Stock-Based Compensation	153
14:	Income Taxes	157
15:	Earnings Per Share—CMS Energy	162
16:	Revenue	163
17:	Other Income and Other Expense	166
18:	Cash and Cash Equivalents	166
19:	Reportable Segments	167
20:	Related-Party Transactions—Consumers	171
21:	Variable Interest Entities	172
22:	Asset Sales and Exit Activities	173
23:	Quarterly Financial and Common Stock Information (Unaudited)	174
Reports of Independent Registered Public Accounting Firm		176
CMS Energy		176
Consumers		180

CMS Energy Corporation

Consolidated Statements of Income

In Millions, Except Per Share Amounts
Years Ended December 31	2019				2018				2017
Operating Revenue		$	6,845			$	6,873			$	6,583
Operating Expenses
Fuel for electric generation		493				528				505
Purchased and interchange power		1,496				1,613				1,503
Purchased power – related parties		75				81				86
Cost of gas sold		769				836				750
Maintenance and other operating expenses		1,448				1,417				1,236
Depreciation and amortization		992				933				881
General taxes		333				303				284
Total operating expenses		5,606				5,711				5,245
Operating Income		1,239				1,162				1,338
Other Income (Expense)
Interest income		7				11				12
Allowance for equity funds used during construction		10				6				5
Income from equity method investees		10				9				15
Nonoperating retirement benefits, net		91				90				24
Other income		4				2				6
Other expense		(13		)		(48		)		(76		)
Total other income (expense)		109				70				(14		)
Interest Charges
Interest on long-term debt		439				412				406
Interest expense – related parties		9				—				—
Other interest expense		75				49				34
Allowance for borrowed funds used during construction		(4		)		(3		)		(2		)
Total interest charges		519				458				438
Income Before Income Taxes		829				774				886
Income Tax Expense		147				115				424
Net Income		682				659				462
Income Attributable to Noncontrolling Interests		2				2				2
Net Income Available to Common Stockholders		$	680			$	657			$	460
Basic Earnings Per Average Common Share		$	2.40			$	2.33			$	1.64
Diluted Earnings Per Average Common Share		$	2.39			$	2.32			$	1.64

The accompanying notes are an integral part of these statements.

CMS Energy Corporation

Consolidated Statements of Comprehensive Income

In Millions
Years Ended December 31	2019				2018				2017
Net Income		$	682			$	659			$	462
Retirement Benefits Liability
Net loss arising during the period, net of tax of $(3), $(1), and $(4)		(7		)		(4		)		(5		)
Prior service credit adjustment, net of tax of $-, $-, and $3		—				(1		)		4
Amortization of net actuarial loss, net of tax of $1 for all periods		3				4				2
Amortization of prior service credit, net of tax of $-, $(1), and $-		(2		)		(1		)		(1		)
Derivatives
Unrealized loss on derivative instruments, net of tax of $(1), $-, and $-		(3		)		(2		)		—
Reclassification adjustments included in net income, net of tax of $- for all periods		1				—				—
Other Comprehensive Loss		(8		)		(4		)		—
Comprehensive Income		674				655				462
Comprehensive Income Attributable to Noncontrolling Interests		2				2				2
Comprehensive Income Attributable to CMS Energy		$	672			$	653			$	460

The accompanying notes are an integral part of these statements.

CMS Energy Corporation

Consolidated Statements of Cash Flows

In Millions
Years Ended December 31	2019				2018				2017
Cash Flows from Operating Activities
Net income		$	682			$	659			$	462
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		992				933				881
Deferred income taxes and investment tax credits		150				182				417
Bad debt expense		67				54				49
Other non‑cash operating activities and reconciling adjustments		(58		)		22				82
Postretirement benefits contributions		(10		)		(252		)		(12		)
Cash provided by (used in) changes in assets and liabilities
Accounts and notes receivable and accrued revenue		45				15				(66		)
Inventories		44				14				(46		)
Accounts payable and accrued rate refunds		(69		)		22				49
Other current and non*‑*current assets and liabilities		(53		)		54				(111		)
Net cash provided by operating activities		1,790				1,703				1,705
Cash Flows from Investing Activities
Capital expenditures (excludes assets placed under finance lease)		(2,104		)		(2,074		)		(1,665		)
Increase in EnerBank notes receivable		(401		)		(307		)		(138		)
Purchase of notes receivable by EnerBank		(343		)		(225		)		—
Proceeds from DB SERP investments		—				146				—
Proceeds from sale of EnerBank notes receivable		67				—				50
Proceeds from sale of transmission equipment		97				—				—
Cost to retire property and other investing activities		(132		)		(146		)		(115		)
Net cash used in investing activities		(2,816		)		(2,606		)		(1,868		)
Cash Flows from Financing Activities
Proceeds from issuance of debt		2,151				2,767				1,633
Retirement of debt		(1,285		)		(1,870		)		(980		)
Increase in EnerBank certificates of deposit		631				513				47
Decrease in notes payable		(7		)		(73		)		(228		)
Issuance of common stock		12				41				83
Payment of dividends on common and preferred stock		(436		)		(407		)		(377		)
Debt prepayment costs		(8		)		(36		)		(22		)
Other financing costs		(50		)		(61		)		(46		)
Net cash provided by financing activities		1,008				874				110
Net Decrease in Cash and Cash Equivalents, Including Restricted Amounts		(18		)		(29		)		(53		)
Cash and Cash Equivalents, Including Restricted Amounts, Beginning of Period		175				204				257
Cash and Cash Equivalents, Including Restricted Amounts, End of Period		$	157			$	175			$	204

In Millions
Years Ended December 31	2019				2018				2017
Other cash flow activities and non**‑**cash investing and financing activities
Cash transactions
Interest paid (net of amounts capitalized)		$	498			$	458			$	418
Income taxes paid (refunds received), net		(58		)		(123		)		5
Non**‑**cash transactions
Capital expenditures not paid		170				158				172
Other assets placed under finance lease		—				—				3

The accompanying notes are an integral part of these statements.

CMS Energy Corporation

Consolidated Balance Sheets

ASSETS
In Millions
December 31	2019				2018
Current Assets
Cash and cash equivalents		$	140			$	153
Restricted cash and cash equivalents		17				21
Accounts receivable and accrued revenue, less allowances of $20 in both periods		886				964
Notes receivable, less allowances of $33 in 2019 and $24 in 2018		223				233
Notes receivable held for sale		19				—
Accounts receivable – related parties		17				14
Accrued gas revenue		—				16
Inventories at average cost
Gas in underground storage		399				450
Materials and supplies		140				143
Generating plant fuel stock		66				57
Deferred property taxes		305				279
Regulatory assets		33				37
Prepayments and other current assets		86				101
Total current assets		2,331				2,468
Plant, Property, and Equipment
Plant, property, and equipment, gross		25,390				24,400
Less accumulated depreciation and amortization		7,360				7,037
Plant, property, and equipment, net		18,030				17,363
Construction work in progress		896				763
Total plant, property, and equipment		18,926				18,126
Other Non**‑**current Assets
Regulatory assets		2,489				1,743
Accounts and notes receivable		2,281				1,645
Investments		71				69
Other		739				478
Total other non*‑*current assets		5,580				3,935
Total Assets		$	26,837			$	24,529

LIABILITIES AND EQUITY
In Millions
December 31	2019				2018
Current Liabilities
Current portion of long-term debt, finance leases, and other financing		$	1,130			$	996
Notes payable		90				97
Accounts payable		622				723
Accounts payable – related parties		13				10
Accrued rate refunds		35				4
Accrued interest		104				94
Accrued taxes		437				398
Regulatory liabilities		87				155
Other current liabilities		186				147
Total current liabilities		2,704				2,624
Non**‑**current Liabilities
Long-term debt		11,951				10,615
Non-current portion of finance leases and other financing		76				69
Regulatory liabilities		3,742				3,681
Postretirement benefits		674				436
Asset retirement obligations		477				432
Deferred investment tax credit		120				99
Deferred income taxes		1,655				1,487
Other non*‑*current liabilities		383				294
Total non*‑*current liabilities		19,078				17,113
Commitments and Contingencies (Notes 3 and 4)
Equity
Common stockholders’ equity
Common stock, authorized 350.0 shares; outstanding 283.9 shares in 2019 and 283.4 shares in 2018		3				3
Other paid-in capital		5,113				5,088
Accumulated other comprehensive loss		(73		)		(65		)
Accumulated deficit		(25		)		(271		)
Total common stockholders’ equity		5,018				4,755
Noncontrolling interests		37				37
Total equity		5,055				4,792
Total Liabilities and Equity		$	26,837			$	24,529

The accompanying notes are an integral part of these statements.

CMS Energy Corporation

Consolidated Statements of Changes in Equity

In Millions, Except Number of Shares in Thousands and Per Share Amounts
	Number of Shares
Years Ended December 31	2019		2018		2017		2019				2018				2017
Total Equity at Beginning of Period								$	4,792			$	4,478			$	4,290
Common Stock
At beginning and end of period								3				3				3
Other Paid-in Capital
At beginning of period	283,374		281,647		279,206			5,088				5,019				4,916
Common stock issued	710		1,554		2,492			35				59				102
Common stock repurchased	(181	)	(224	)	(317	)		(10		)		(10		)		(14		)
Common stock reissued	8		423		360			—				20				15
Common stock reacquired	(47	)	(26	)	(94	)		—				—				—
At end of period	283,864		283,374		281,647			5,113				5,088				5,019
Accumulated Other Comprehensive Loss
At beginning of period								(65		)		(50		)		(50		)
Retirement benefits liability
At beginning of period								(63		)		(50		)		(50		)
Cumulative effect of change in accounting principle								—				(11		)		—
Net loss arising during the period								(7		)		(4		)		(5		)
Prior service credit adjustment								—				(1		)		4
Amortization of net actuarial loss								3				4				2
Amortization of prior service credit								(2		)		(1		)		(1		)
At end of period								(69		)		(63		)		(50		)
Derivative instruments
At beginning of period								(2		)		—				—
Unrealized loss on derivative instruments								(3		)		(2		)		—
Reclassification adjustments included in net income								1				—				—
At end of period								(4		)		(2		)		—
At end of period								(73		)		(65		)		(50		)

In Millions, Except Number of Shares in Thousands and Per Share Amounts
	Number of Shares
Years Ended December 31	2019		2018		2017		2019				2018				2017
Accumulated Deficit
At beginning of period								(271		)		(531		)		(616		)
Cumulative effect of change in accounting principle								—				8				—
Net income attributable to CMS Energy								680				657				460
Dividends declared on common stock								(434		)		(405		)		(375		)
At end of period								(25		)		(271		)		(531		)
Noncontrolling Interests
At beginning of period								37				37				37
Income attributable to noncontrolling interests								2				2				2
Distributions and other changes in noncontrolling interests								(2		)		(2		)		(2		)
At end of period								37				37				37
Total Equity at End of Period								$	5,055			$	4,792			$	4,478
Dividends declared per common share								$	1.53			$	1.43			$	1.33

The accompanying notes are an integral part of these statements.

Consumers Energy Company

Consolidated Statements of Income

In Millions
Years Ended December 31	2019				2018				2017
Operating Revenue		$	6,376			$	6,464			$	6,222
Operating Expenses
Fuel for electric generation		375				407				398
Purchased and interchange power		1,470				1,587				1,491
Purchased power – related parties		75				83				90
Cost of gas sold		754				819				730
Maintenance and other operating expenses		1,275				1,287				1,113
Depreciation and amortization		975				921				872
General taxes		322				295				276
Total operating expenses		5,246				5,399				4,970
Operating Income		1,130				1,065				1,252
Other Income (Expense)
Interest income		5				8				9
Interest and dividend income – related parties		5				2				1
Allowance for equity funds used during construction		10				6				5
Nonoperating retirement benefits, net		85				83				21
Other income		3				2				17
Other expense		(13		)		(30		)		(58		)
Total other income (expense)		95				71				(5		)
Interest Charges
Interest on long-term debt		277				276				263
Interest expense – related parties		9				—				—
Other interest expense		15				16				15
Allowance for borrowed funds used during construction		(4		)		(3		)		(2		)
Total interest charges		297				289				276
Income Before Income Taxes		928				847				971
Income Tax Expense		185				142				339
Net Income		743				705				632
Preferred Stock Dividends		2				2				2
Net Income Available to Common Stockholder		$	741			$	703			$	630

The accompanying notes are an integral part of these statements.

Consumers Energy Company

Consolidated Statements of Comprehensive Income

In Millions
Years Ended December 31	2019				2018				2017
Net Income		$	743			$	705			$	632
Retirement Benefits Liability
Net gain (loss) arising during the period, net of tax of $(3), $2, and $(1)		(8		)		6				(4		)
Amortization of net actuarial loss, net of tax of $- for all periods		1				2				1
Investments
Unrealized gain (loss) on investments, net of tax of $-, $-, and $1		—				(1		)		3
Reclassification adjustments included in net income, net of tax of $-, $-, and $(6)		—				1				(9		)
Other Comprehensive Income (Loss)		(7		)		8				(9		)
Comprehensive Income		$	736			$	713			$	623

The accompanying notes are an integral part of these statements.

Consumers Energy Company

Consolidated Statements of Cash Flows

In Millions
Years Ended December 31	2019				2018				2017
Cash Flows from Operating Activities
Net income		$	743			$	705			$	632
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		975				921				872
Deferred income taxes and investment tax credits		37				123				163
Bad debt expense		29				29				29
Other non*‑*cash operating activities and reconciling adjustments		(32		)		13				59
Postretirement benefits contributions		(7		)		(242		)		(8		)
Cash provided by (used in) changes in assets and liabilities
Accounts and notes receivable and accrued revenue		8				(26		)		(63		)
Inventories		40				15				(45		)
Accounts payable and accrued rate refunds		(63		)		12				43
Other current and non*-*current assets and liabilities		(129		)		(101		)		33
Net cash provided by operating activities		1,601				1,449				1,715
Cash Flows from Investing Activities
Capital expenditures (excludes assets placed under finance lease)		(2,085		)		(1,822		)		(1,632		)
Proceeds from DB SERP investments		—				106				—
DB SERP investment in note receivable – related party		—				(106		)		—
Proceeds from sale of transmission equipment		77				—				—
Cost to retire property and other investing activities		(129		)		(149		)		(119		)
Net cash used in investing activities		(2,137		)		(1,971		)		(1,751		)
Cash Flows from Financing Activities
Proceeds from issuance of debt		993				2,106				834
Retirement of debt		(541		)		(1,193		)		(555		)
Decrease in notes payable		(7		)		(73		)		(228		)
Stockholder contribution		675				250				450
Payment of dividends on common and preferred stock		(594		)		(533		)		(524		)
Debt prepayment costs		(8		)		(20		)		(4		)
Other financing costs		(10		)		(24		)		(24		)
Net cash provided by (used in) financing activities		508				513				(51		)
Net Decrease in Cash and Cash Equivalents, Including Restricted Amounts		(28		)		(9		)		(87		)
Cash and Cash Equivalents, Including Restricted Amounts, Beginning of Period		56				65				152
Cash and Cash Equivalents, Including Restricted Amounts, End of Period		$	28			$	56			$	65

In Millions
Years Ended December 31	2019				2018				2017
Other cash flow activities and non*‑*cash investing and financing activities
Cash transactions
Interest paid (net of amounts capitalized)		$	279			$	287			$	266
Income taxes paid (refunds received), net		132				156				(1		)
Non*‑*cash transactions
Capital expenditures not paid		160				143				160
Other assets placed under finance lease		—				—				3

The accompanying notes are an integral part of these statements.

Consumers Energy Company

Consolidated Balance Sheets

ASSETS
In Millions
December 31	2019				2018
Current Assets
Cash and cash equivalents		$	11			$	39
Restricted cash and cash equivalents		17				17
Accounts receivable and accrued revenue, less allowances of $20 in both periods		827				855
Accounts and notes receivable – related parties		9				15
Accrued gas revenue		—				16
Inventories at average cost
Gas in underground storage		399				450
Materials and supplies		135				137
Generating plant fuel stock		63				52
Deferred property taxes		305				279
Regulatory assets		33				37
Prepayments and other current assets		73				83
Total current assets		1,872				1,980
Plant, Property, and Equipment
Plant, property, and equipment, gross		24,963				23,963
Less accumulated depreciation and amortization		7,272				6,958
Plant, property, and equipment, net		17,691				17,005
Construction work in progress		879				756
Total plant, property, and equipment		18,570				17,761
Other Non*-*current Assets
Regulatory assets		2,489				1,743
Accounts receivable		29				27
Accounts and notes receivable – related parties		102				104
Other		637				410
Total other non*-*current assets		3,257				2,284
Total Assets		$	23,699			$	22,025

LIABILITIES AND EQUITY
In Millions
December 31	2019				2018
Current Liabilities
Current portion of long-term debt, finance leases, and other financing		$	221			$	48
Notes payable		90				97
Accounts payable		593				685
Accounts payable – related parties		20				14
Accrued rate refunds		35				4
Accrued interest		67				59
Accrued taxes		481				436
Regulatory liabilities		87				155
Other current liabilities		118				120
Total current liabilities		1,712				1,618
Non*-*current Liabilities
Long-term debt		7,048				6,779
Non*-*current portion of finance leases and other financing		76				69
Regulatory liabilities		3,742				3,681
Postretirement benefits		622				392
Asset retirement obligations		474				428
Deferred investment tax credit		120				99
Deferred income taxes		1,864				1,809
Other non*-*current liabilities		304				230
Total non*-*current liabilities		14,250				13,487
Commitments and Contingencies (Notes 3 and 4)
Equity
Common stockholder’s equity
Common stock, authorized 125.0 shares; outstanding 84.1 shares in both periods		841				841
Other paid-in capital		5,374				4,699
Accumulated other comprehensive loss		(28		)		(21		)
Retained earnings		1,513				1,364
Total common stockholder’s equity		7,700				6,883
Cumulative preferred stock, $4.50 series		37				37
Total equity		7,737				6,920
Total Liabilities and Equity		$	23,699			$	22,025

The accompanying notes are an integral part of these statements.

Consumers Energy Company

Consolidated Statements of Changes in Equity

In Millions
Years Ended December 31	2019				2018				2017
Total Equity at Beginning of Period		$	6,920			$	6,488			$	5,939
Common Stock
At beginning and end of period		841				841				841
Other Paid-in Capital
At beginning of period		4,699				4,449				3,999
Stockholder contribution		675				250				450
At end of period		5,374				4,699				4,449
Accumulated Other Comprehensive Loss
At beginning of period		(21		)		(12		)		(3		)
Retirement benefits liability
At beginning of period		(21		)		(24		)		(21		)
Cumulative effect of change in accounting principle		—				(5		)		—
Net gain (loss) arising during the period		(8		)		6				(4		)
Amortization of net actuarial loss		1				2				1
At end of period		(28		)		(21		)		(24		)
Investments
At beginning of period		—				12				18
Cumulative effect of change in accounting principle		—				(12		)		—
Unrealized gain (loss) on investments		—				(1		)		3
Reclassification adjustments included in net income		—				1				(9		)
At end of period		—				—				12
At end of period		(28		)		(21		)		(12		)
Retained Earnings
At beginning of period		1,364				1,173				1,065
Cumulative effect of change in accounting principle		—				19				—
Net income		743				705				632
Dividends declared on common stock		(592		)		(531		)		(522		)
Dividends declared on preferred stock		(2		)		(2		)		(2		)
At end of period		1,513				1,364				1,173
Cumulative Preferred Stock
At beginning and end of period		37				37				37
Total Equity at End of Period		$	7,737			$	6,920			$	6,488

The accompanying notes are an integral part of these statements.

CMS Energy Corporation

Consumers Energy Company

Notes to the Consolidated Financial Statements

1**:**	Significant Accounting Policies

Principles of Consolidation: CMS Energy and Consumers prepare their consolidated financial statements in conformity with GAAP. CMS Energy’s consolidated financial statements comprise CMS Energy, Consumers, CMS Enterprises, EnerBank, and all other entities in which CMS Energy has a controlling financial interest or is the primary beneficiary. Consumers’ consolidated financial statements comprise Consumers and all other entities in which it has a controlling financial interest or is the primary beneficiary. CMS Energy uses the equity method of accounting for investments in companies and partnerships that are not consolidated, where they have significant influence over operations and financial policies but are not the primary beneficiary. CMS Energy and Consumers eliminate intercompany transactions and balances.

Use of Estimates: CMS Energy and Consumers are required to make estimates using assumptions that may affect reported amounts and disclosures. Actual results could differ from those estimates.

Contingencies: CMS Energy and Consumers record estimated liabilities for contingencies on their consolidated financial statements when it is probable that a liability has been incurred and when the amount of loss can be reasonably estimated. For environmental remediation projects in which the timing of estimated expenditures is considered reliably determinable, CMS Energy and Consumers record the liability at its net present value, using a discount rate equal to the interest rate on monetary assets that are essentially risk-free and have maturities comparable to that of the environmental liability. CMS Energy and Consumers expense legal fees as incurred; fees incurred but not yet billed are accrued based on estimates of work performed.

Debt Issuance Costs, Discounts, Premiums, and Refinancing Costs: Upon the issuance of long-term debt, CMS Energy and Consumers defer issuance costs, discounts, and premiums and amortize those amounts over the terms of the associated debt. Debt issuance costs are presented as a direct deduction from the carrying amount of long-term debt on the balance sheet. Upon the refinancing of long-term debt, Consumers, as a regulated entity, defers any remaining unamortized issuance costs, discounts, and premiums associated with the refinanced debt and amortizes those amounts over the term of the newly issued debt. For the non‑regulated portions of CMS Energy’s business, any remaining unamortized issuance costs, discounts, and premiums associated with extinguished debt are charged to earnings.

Derivative Instruments: In order to support ongoing operations, CMS Energy and Consumers enter into contracts for the future purchase and sale of various commodities, such as electricity, natural gas, and coal. These forward contracts are generally long-term in nature and result in physical delivery of the commodity at a contracted price. Most of these contracts are not subject to derivative accounting for one or more of the following reasons:

•	they do not have a notional amount (that is, a number of units specified in a derivative instrument, such as MWh of electricity or bcf of natural gas)

•	they qualify for the normal purchases and sales exception

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

Consumers also uses FTRs to manage price risk related to electricity transmission congestion. An FTR is a financial instrument that entitles its holder to receive compensation or requires its holder to remit payment for congestion-related transmission charges. Consumers accounts for FTRs as derivatives.

Additionally, CMS Energy uses interest rate swaps to manage its interest rate risk on certain long-term debt and notes receivable transactions.

CMS Energy and Consumers record derivative contracts that do not qualify for the normal purchases and sales exception at fair value on their consolidated balance sheets. At CMS Energy, if the derivative is accounted for as a cash flow hedge, unrealized gains and losses from changes in the fair value of the derivative are recognized in AOCI and subsequently recognized in earnings when the hedged transactions impact earnings. If the derivative is accounted for as a fair value hedge, changes in the fair value of the derivative and changes in the fair value of the hedged item due to the hedged risk are recognized in earnings. For the FTRs at Consumers, changes in fair value are deferred as regulatory assets or liabilities. For details regarding CMS Energy’s and Consumers’ derivative instruments recorded at fair value, see Note 6, Fair Value Measurements.

EPS: CMS Energy calculates basic and diluted EPS using the weighted-average number of shares of common stock and dilutive potential common stock outstanding during the period. Potential common stock, for purposes of determining diluted EPS, includes the effects of nonvested stock awards and forward equity sales. CMS Energy computes the effect on potential common stock using the treasury stock method. Diluted EPS excludes the impact of antidilutive securities, which are those securities resulting in an increase in EPS or a decrease in loss per share. For EPS computations, see Note 15, Earnings Per Share—CMS Energy.

Impairment of Long-Lived Assets and Equity Method Investments: CMS Energy and Consumers perform tests of impairment if certain triggering events occur or if there has been a decline in value that may be other than temporary.

CMS Energy and Consumers evaluate long-lived assets held in use for impairment by calculating the undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. If the undiscounted future cash flows are less than the carrying amount, CMS Energy and Consumers recognize an impairment loss equal to the amount by which the carrying amount exceeds the fair value. CMS Energy and Consumers estimate the fair value of the asset using quoted market prices, market prices of similar assets, or discounted future cash flow analyses.

CMS Energy also assesses equity method investments for impairment whenever there has been a decline in value that is other than temporary. This assessment requires CMS Energy to determine the fair value of the equity method investment. CMS Energy determines fair value using valuation methodologies, including discounted cash flows, and assesses the ability of the investee to sustain an earnings capacity that justifies the carrying amount of the investment. CMS Energy records an impairment if the fair value is less than the carrying amount and the decline in value is considered to be other than temporary.

Investment Tax Credits: Consumers amortizes its investment tax credits over the life of the related property in accordance with regulatory treatment. CMS Energy’s non‑regulated businesses use the deferral method of accounting for investment tax credits. Under the deferral method, the book basis of the associated assets is reduced by the amount of the credit, resulting in lower depreciation expense over the life of the assets. Furthermore, the tax basis of the assets is reduced by 50 percent of the related credit, resulting in a net deferred tax asset. CMS Energy recognizes the tax benefit of this basis difference as a reduction to income tax expense in the year in which the plant reaches commercial operation.

Inventory: CMS Energy and Consumers use the weighted-average cost method for valuing working gas, recoverable base gas in underground storage facilities, and materials and supplies inventory. CMS Energy and Consumers also use this method for valuing coal inventory, and they classify these amounts as generating plant fuel stock on their consolidated balance sheets.

CMS Energy and Consumers account for RECs and emission allowances as inventory and use the weighted-average cost method to remove amounts from inventory. RECs and emission allowances are used to satisfy compliance obligations related to the generation of power. CMS Energy and Consumers classify these amounts within other assets on their consolidated balance sheets.

CMS Energy and Consumers evaluate inventory for impairment as required to ensure that its carrying value does not exceed the lower of cost or net realizable value.

MISO Transactions: MISO requires the submission of hourly day-ahead and real-time bids and offers for energy at locations across the MISO region. CMS Energy and Consumers account for MISO transactions on a net hourly basis in each of the real-time and day-ahead markets, netted across all MISO energy market locations. CMS Energy and Consumers record net hourly purchases in purchased and interchange power and net hourly sales in operating revenue on their consolidated statements of income. They record net billing adjustments upon receipt of settlement statements, record accruals for future net purchases and sales adjustments based on historical experience, and reconcile accruals to actual expenses and sales upon receipt of settlement statements.

Property Taxes: Property taxes are based on the taxable value of Consumers’ real and personal property assessed by local taxing authorities. Consumers records property tax expense over the fiscal year of the taxing authority for which the taxes are levied. The deferred property tax balance represents the amount of Consumers’ accrued property tax that will be recognized over future governmental fiscal periods.

Renewable Energy Grant: In 2013, Consumers received a renewable energy cash grant for Lake Winds® Energy Park under Section 1603 of the American Recovery and Reinvestment Tax Act of 2009. Upon receipt of the grant, Consumers recorded a regulatory liability, which Consumers is amortizing over the life of Lake Winds® Energy Park. Consumers presents the amortization as a reduction to maintenance and other operating expenses on its consolidated statements of income. Consumers recorded the deferred income taxes related to the grant as a reduction of the book basis of Lake Winds® Energy Park.

Other: For additional accounting policies, see:

•	Note 8, Notes Receivable

•	Note 9, Plant, Property, and Equipment

•	Note 11, Asset Retirement Obligations

•	Note 12, Retirement Benefits

•	Note 14, Income Taxes

•	Note 15, Earnings Per Share—CMS Energy

•	Note 16, Revenue

•	Note 18, Cash and Cash Equivalents

2**:**	New Accounting Standards

Implementation of New Accounting Standards

ASU 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 10, Leases and Palisades Financing. The standard did not have any impact on CMS Energy’s and Consumers’ consolidated net income or cash flows, and there was no cumulative-effect adjustment recorded to beginning retained earnings.

New Accounting Standards Not Yet Effective

ASU 2016‑13, Measurement of Credit Losses on Financial Instruments: This standard, effective January 1, 2020 for CMS Energy and Consumers, provides new guidance for measuring and recognizing credit losses on financial instruments. The standard applies to financial assets that are not measured at fair value through net income as well as to certain off-balance sheet credit exposures. Entities will apply the standard using a modified retrospective approach, with a cumulative‑effect adjustment recorded to beginning retained earnings on the effective date.

The standard will require an increase to the allowance for loan losses at EnerBank. At December 31, 2019, the allowance reflected expected credit losses over a 12‑month period, but the new standard will require the allowance to reflect expected credit losses over the entire life of the loans. EnerBank expects to record a $65 million increase to its expected credit loss reserves on January 1, 2020, with the offsetting adjustment recorded to retained earnings, net of taxes. The standard will also require an increase in the initial provision for loan losses recognized in net income for new loans originated in 2020 and beyond. At Consumers, the new guidance will apply to the allowance for uncollectible accounts; however, Consumers does not expect material impacts from the standard.

3**:**	Regulatory Matters

Regulatory matters are critical to Consumers. The Michigan Attorney General, ABATE, the MPSC Staff, and certain other parties typically participate in MPSC proceedings concerning Consumers, such as Consumers’ rate cases and PSCR and GCR processes. These parties often challenge various aspects of those proceedings, including the prudence of Consumers’ policies and practices, and seek cost disallowances and other relief. The parties also have appealed significant MPSC orders. Depending upon the specific issues, the outcomes of rate cases and proceedings, including judicial proceedings challenging MPSC orders or other actions, could negatively affect CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. Consumers cannot predict the outcome of these proceedings.

There are multiple appeals pending that involve various issues concerning cost recovery from customers, the adequacy of the record of evidence supporting the recovery of Smart Energy investments, and other matters. Consumers is unable to predict the outcome of these appeals.

Regulatory Assets and Liabilities

Consumers is subject to the actions of the MPSC and FERC and therefore prepares its consolidated financial statements in accordance with the provisions of regulatory accounting. A utility must apply regulatory accounting when its rates are designed to recover specific costs of providing regulated services. Under regulatory accounting, Consumers records regulatory assets or liabilities for certain transactions that would have been treated as expense or revenue by non‑regulated businesses.

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

In Millions
December 31	End of Recovery or Refund Period		2019				2018
Regulatory assets
Current
Energy waste reduction plan incentive1		2020		$	33			$	32
Other		2019		—				5
Total current regulatory assets				$	33			$	37
Non-current
Postretirement benefits2		various		$	1,130			$	1,028
Costs of coal-fueled electric generating units to be retired3		various		667				—
Securitized costs3		2029		247				273
ARO4		various		191				175
MGP sites4		various		130				133
Unamortized loss on reacquired debt4		various		70				68
Energy waste reduction plan incentive1		2021		34				34
Energy waste reduction plan4		various		10				26
Deferred capital spending4		various		3				—
Gas storage inventory adjustments4		various		3				4
Other		various		4				2
Total non*-*current regulatory assets				$	2,489			$	1,743
Total regulatory assets				$	2,522			$	1,780
Regulatory liabilities
Current
Income taxes, net		2020		$	65			$	18
Gain to be shared with customers		2020		17				—
Reserve for customer refunds		2019		2				36
TCJA reserve for refund		2019		—				98
Other		2020		3				3
Total current regulatory liabilities				$	87			$	155
Non-current
Cost of removal		various		$	2,126			$	1,966
Income taxes, net		various		1,510				1,537
Renewable energy grant		2043		52				54
ARO		various		26				38
Renewable energy plan		2028		17				42
TCJA reserve for refund		various		—				35
Other		various		11				9
Total non-current regulatory liabilities				$	3,742			$	3,681
Total regulatory liabilities				$	3,829			$	3,836

1	These regulatory assets have arisen from an alternative revenue program and are not associated with incurred costs or capital investments. Therefore, the MPSC has provided for recovery without a return.

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

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

4	These regulatory assets represent incurred costs for which the MPSC has provided, or Consumers expects, recovery without a return on investment.

Regulatory Assets

Energy Waste Reduction Plan Incentive: In December 2019, the MPSC approved a settlement agreement authorizing Consumers to collect $34 million during 2020 as an incentive for exceeding its statutory savings targets in 2018. Consumers recognized incentive revenue under this program of $34 million in 2018.

Consumers also exceeded its statutory savings targets in 2019, achieved certain other goals, and will request the MPSC’s approval to collect $34 million, the maximum performance incentive, in the energy waste reduction reconciliation to be filed in 2020. Consumers recognized incentive revenue under this program of $34 million in 2019.

Postretirement Benefits: As part of the ratemaking process, the MPSC allows Consumers to recover the costs of postretirement benefits. Accordingly, Consumers defers the net impact of actuarial losses and gains as well as prior service costs and credits associated with postretirement benefits as a regulatory asset or liability. The asset or liability will decrease as the deferred items are amortized and recognized as components of net periodic benefit cost. For details about the amortization periods, see Note 12, Retirement Benefits.

Costs of Coal-fueled Electric Generating Units to be Retired: In June 2019, the MPSC approved the settlement agreement reached in Consumers’ IRP, under which Consumers plans to retire the D.E. Karn 1 & 2 coal-fueled electric generating units in 2023. Under Michigan law, electric utilities have been permitted to use highly rated, low-cost securitization bonds to finance the recovery of qualified costs. Consumers will file for securitization financing by May 2023, requesting the MPSC’s approval to securitize the remaining book value of the two coal-fueled electric generating units upon their retirement.

In 2019, Consumers removed from total plant, property, and equipment an amount representing the remaining book value of the two coal-fueled electric generating units upon their retirement, and recorded it as a regulatory asset. Until securitization, the book value of the generating units will remain in rate base and receive full regulatory returns in general rate cases.

Securitized Costs: In 2013, the MPSC issued a securitization financing order authorizing Consumers to issue securitization bonds in order to finance the recovery of the remaining book value of seven smaller coal-fueled electric generating units that Consumers retired in 2016 and three smaller natural gas-fueled electric generating units that Consumers retired in 2015. Upon receipt of the MPSC’s order, Consumers removed the book value of the ten units from plant, property, and equipment and recorded this amount as a regulatory asset. Consumers is amortizing the regulatory asset over the life of the related securitization bonds, which it issued through a subsidiary in 2014. For additional details regarding the securitization bonds, see Note 5, Financings and Capitalization.

ARO: The recovery of the underlying asset investments and related removal and monitoring costs of recorded AROs is approved by the MPSC in depreciation rate cases. Consumers records a regulatory asset and a regulatory liability for timing differences between the recognition of AROs for financial reporting purposes and the recovery of these costs from customers. The recovery period approximates the useful life of the assets to be removed.

MGP Sites: Consumers is incurring environmental remediation and other response activity costs at 23 former MGP facilities. The MPSC allows Consumers to recover from its natural gas customers over a ten-year period the costs incurred to remediate the MGP sites.

Unamortized Loss on Reacquired Debt: Under regulatory accounting, any unamortized discount, premium, or expense related to debt redeemed with the proceeds of new debt is capitalized and amortized over the life of the new debt.

Energy Waste Reduction Plan: The MPSC allows Consumers to collect surcharges from customers to fund its energy waste reduction plan. The amount of spending incurred in excess of surcharges collected is recorded as a regulatory asset and amortized as surcharges are collected from customers over the plan period. The amount of surcharges collected in excess of spending incurred is recorded as a regulatory liability and amortized as costs are incurred.

Deferred Capital Spending: In January 2019, the MPSC approved a settlement agreement in Consumers’ 2018 electric rate case, which provided deferred accounting treatment for distribution-related capital investments exceeding certain threshold amounts. Thus, for actual capital spending above the threshold amounts detailed in the settlement agreement, Consumers has deferred as a regulatory asset the associated depreciation and property tax expense as well as the debt component of the overall rate of return on such spending.

Gas Storage Inventory Adjustments: Consumers incurs inventory expenses related to the loss of gas from its natural gas storage fields. The MPSC allows Consumers to recover these costs from its natural gas customers over a five-year period.

Regulatory Liabilities

Income Taxes, Net: Consumers records regulatory assets and liabilities to reflect the difference between deferred income taxes recognized for financial reporting purposes and amounts previously reflected in Consumers’ rates. This net balance will decrease over the remaining life of the related temporary differences and flow through current income tax benefit. For additional details on deferred income taxes, see the Consumers Electric Utility and Gas Utility—Tax Cuts and Jobs Act section below and Note 14, Income Taxes.

Gain to be Shared with Customers: In December 2019, Consumers filed an application with the MPSC requesting approval to share voluntarily with electric utility customers half of the gain recognized on a sale of a portion of its substation transmission equipment to METC. Consumers proposed the gain sharing take place through an offset to additional spending in 2020 or through a bill credit to customers in 2021.

Reserve for Customer Refunds: At December 31, 2018, Consumers had recorded a provision for revenue subject to refund associated with electric rates it self-implemented in 2017. In August 2019, the MPSC approved Consumers’ reconciliation of total revenues collected from rates it self-implemented to those that would have been collected under the final rates approved in June 2018 and Consumers refunded the resulting amount in September 2019. The 2016 Energy Law eliminated utilities’ self-implementation of rates under general rate cases, but provided for more timely processing of general rate cases.

TCJA Reserve for Refund: In early 2018, the MPSC ordered Consumers to file various proceedings to determine the reduction in its electric and gas revenue requirements as a result of the TCJA. For further information on the various TCJA proceedings, see the Consumers Electric Utility and Gas Utility—Tax Cuts and Jobs Act section below.

Cost of Removal: The MPSC allows Consumers to collect amounts from customers to fund future asset removal activities. This regulatory liability is reduced as costs of removal are incurred. The refund period of this regulatory liability approximates the useful life of the assets to be removed.

Renewable Energy Grant: In 2013, Consumers received a $69 million renewable energy grant for Lake Winds® Energy Park, which began operations in 2012. This grant reduces Consumers’ cost of complying with Michigan’s renewable portfolio standard and, accordingly, reduces the overall renewable energy surcharge to be collected from customers. The regulatory liability recorded for the grant will be amortized over the life of Lake Winds® Energy Park.

Renewable Energy Plan: Consumers has collected surcharges to fund its renewable energy plan. Amounts not yet spent under the plan are recorded as a regulatory liability, which is amortized as incremental costs are incurred to operate and depreciate Consumers’ renewable generation facilities and to purchase RECs under renewable energy purchase agreements. Incremental costs represent costs incurred in excess of amounts recovered through the PSCR process.

Consumers Electric Utility and Gas Utility

Tax Cuts and Jobs Act: The TCJA, which changed existing federal tax law and included numerous provisions that affect businesses, was signed into law in December 2017.

In early 2018, the MPSC ordered Consumers to file various proceedings to determine the reduction in its electric and gas revenue requirements as a result of the reduction in the corporate income tax rate, and to implement bill credits to reflect that reduction until customer rates could be adjusted through Consumers’ general rate cases. Consumers filed, and the MPSC approved, such proceedings throughout 2018, resulting in credits to customer bills during 2018 to reflect reductions in Consumers’ electric and gas revenue requirements.

Consumers filed additional proceedings to address amounts collected from customers during 2018 prior to the implementation of bill credits. In late 2018, the MPSC approved the refund of $31 million to gas customers over six months beginning in December 2018 and the refund of $70 million to electric customers over six months beginning in January 2019.

In October 2018, Consumers filed an application to address the December 31, 2017 remeasurement of its deferred income taxes and other base rate impacts of the TCJA on customers. In September 2019, the MPSC authorized Consumers to begin returning net regulatory tax liabilities of $0.4 billion to gas customers through rates approved in the 2018 gas rate case and $1.2 billion to electric customers through rates to be determined in Consumers’ next electric rate case. Until then, the MPSC authorized Consumers to refund $32 million to electric customers through a temporary bill credit. Consumers’ total $1.6 billion of net regulatory tax liabilities comprises:

•	A regulatory tax liability of $1.7 billion associated with plant assets that are subject to normalization, which is governed by the Internal Revenue Code; this regulatory tax liability will be returned over the remaining book life of the related plant assets, the average of which is 44 years for gas plant assets and 27 years for electric plant assets.

•	A regulatory tax asset of $0.3 billion associated with plant assets that are not subject to normalization; this regulatory tax asset will be collected over 44 years from gas customers and over 27 years from electric customers.

•	A regulatory tax liability of $0.2 billion, which is primarily related to employee benefits; this regulatory tax liability will be refunded to customers over ten years.

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. As a result of an order received in September 2019, Consumers began refunding these excess deferred taxes to customers and will no longer reserve for their refund. At the date of the order, this reserve for refund of these excess deferred taxes totaled $62 million. For additional details on the remeasurement, see Note 14, Income Taxes.

Consumers Electric Utility

2018 Electric Rate Case: In May 2018, Consumers filed an application with the MPSC seeking an annual rate increase of $58 million, based on a 10.75 percent authorized return on equity. In October 2018, Consumers reduced its requested annual rate increase to $44 million. In January 2019, the MPSC approved a settlement agreement authorizing an annual rate decrease of $24 million, based on a 10.0 percent authorized return on equity. With the elimination of the $113 million TCJA credit to customer bills, the approved settlement agreement resulted in an $89 million net increase in annual rates. The settlement agreement also provided for deferred accounting treatment for distribution-related capital investments exceeding certain amounts. Consumers also agreed to not file a new electric rate case prior to January 2020.

Consumers Gas Utility

2018 Gas Rate Case: In November 2018, Consumers filed an application with the MPSC seeking an annual rate increase of $229 million, based on a 10.75 percent authorized return on equity. In April 2019, Consumers reduced its requested annual rate increase to $204 million. In September 2019, the MPSC approved an annual rate increase of $144 million, based on a 9.90 percent authorized return on equity. This increase includes a $13 million adjustment to begin returning net regulatory tax liabilities associated with the TCJA to customers. The MPSC also approved the continuation of a revenue decoupling mechanism, which annually reconciles Consumers’ actual weather-normalized, non‑fuel revenues with the revenues approved by the MPSC.

Power Supply Cost Recovery and Gas Cost Recovery

The PSCR and GCR ratemaking processes are designed to allow Consumers to recover all of its power supply and purchased natural gas costs if incurred under reasonable and prudent policies and practices. The MPSC reviews these costs, policies, and practices in annual plan and reconciliation proceedings. Consumers adjusts its PSCR and GCR billing charges monthly in order to minimize the underrecovery or overrecovery amount in the annual reconciliations. Underrecoveries represent probable future revenues that will be recovered from customers; overrecoveries represent previously collected revenues that will be refunded to customers.

Presented in the following table are the assets and liabilities for PSCR and GCR underrecoveries and overrecoveries reflected on Consumers’ consolidated balance sheets:

In Millions
December 31	2019				2018
Assets
GCR underrecoveries		$	—			$	16
Accrued gas revenue		$	—			$	16
Liabilities
PSCR overrecoveries		$	33			$	4
GCR overrecoveries		2				—
Accrued rate refunds		$	35			$	4

PSCR Plans and Reconciliations: In October 2019, the MPSC issued an order in Consumers’ 2017 PSCR reconciliation, authorizing recovery of $1.9 billion of power costs and authorizing Consumers to reflect in its 2018 PSCR reconciliation the overrecovery of $32 million.

In November 2019, the MPSC issued an order in Consumers’ 2018 PSCR plan authorizing the 2018 PSCR charge that Consumers self-implemented beginning in January 2018. In March 2019, Consumers filed its 2018 PSCR reconciliation, requesting full recovery of $2.0 billion of power costs and authorization to reflect in its 2019 PSCR reconciliation the underrecovery of $31 million.

Consumers submitted its 2019 PSCR plan to the MPSC in September 2018 and, in accordance with its proposed plan, self-implemented the 2019 PSCR charge beginning in January 2019.

GCR Plans and Reconciliations: In September 2019, the MPSC issued an order in Consumers’ 2017-2018 GCR reconciliation, authorizing full recovery of $0.6 billion of gas costs and authorizing Consumers to reflect in its 2018-2019 GCR reconciliation the overrecovery of $1 million.

In June 2019, Consumers filed its 2018-2019 GCR reconciliation, requesting full recovery of $0.6 billion of gas costs and authorization to reflect in its 2019-2020 GCR reconciliation the underrecovery of $18 million.

In January 2020, the MPSC issued an order in Consumers’ 2019-2020 GCR plan authorizing the 2019-2020 GCR charge that Consumers self-implemented beginning in April 2019.

4**:**	Contingencies and Commitments

CMS Energy and Consumers are involved in various matters that give rise to contingent liabilities. Depending on the specific issues, the resolution of these contingencies could negatively affect CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. In their disclosures of these matters, CMS Energy and Consumers provide an estimate of the possible loss or range of loss when such an estimate can be made. Disclosures that state that CMS Energy or Consumers cannot predict the outcome of a matter indicate that they are unable to estimate a possible loss or range of loss for the matter.

CMS Energy Contingencies

Gas Index Price Reporting Litigation**:** CMS Energy, along with CMS MST, CMS Field Services, Cantera Natural Gas, Inc., and Cantera Gas Company, were named as defendants in four class action lawsuits and one individual lawsuit arising as a result of alleged inaccurate natural gas price reporting to

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

•

In 2006, a class action complaint, Arandell Corp., et al. v. XCEL Energy Inc., et al., was filed in Wisconsin state court on behalf of Wisconsin commercial entities that purchased natural gas between January 2000 and October 2002. The defendants, including CMS Energy, CMS ERM, and Cantera Gas Company, are alleged to have violated Wisconsin’s antitrust statute. The plaintiffs are seeking full consideration damages, treble damages, costs, interest, and attorneys’ fees.

•	In 2009, a class action complaint, Newpage Wisconsin System v. CMS ERM, et al., was filed in circuit court in Wood County, Wisconsin, against CMS Energy, CMS ERM, Cantera Gas Company, and others. The plaintiff is seeking full consideration damages, treble damages, costs, interest, and attorneys’ fees.

•

In 2005, J.P. Morgan Trust Company, N.A., in its capacity as trustee of the FLI Liquidating Trust, filed an action in Kansas state court against CMS Energy, CMS MST, CMS Field Services, and others. The complaint alleges various claims under the Kansas Restraint of Trade Act. The plaintiff is seeking statutory full consideration damages for its purchases of natural gas in 2000 and 2001, costs, and attorneys’ fees.

After removal to federal court, all of the cases were transferred to a single federal district court pursuant to the multidistrict litigation process. In 2010 and 2011, all claims against CMS Energy defendants were dismissed by the district court based on FERC preemption.

In 2013, the U.S. Court of Appeals for the Ninth Circuit reversed the district court decision. The appellate court found that FERC preemption does not apply under the facts of these cases. The appellate court affirmed the district court’s denial of leave to amend to add federal antitrust claims. The matter was appealed to the U.S. Supreme Court, which in 2015 upheld the Ninth Circuit’s decision. The cases were remanded back to the federal district court.

In 2016, the federal district court granted the defendants’ motion for summary judgment in the individual lawsuit filed in Kansas based on a release in a prior settlement involving similar allegations; the order of summary judgment was subsequently appealed. In March 2018, the U.S. Court of Appeals for the Ninth Circuit reversed the lower court’s ruling and remanded the case back to the federal district court.

In 2017, the federal district court denied plaintiffs’ motion for class certification in the two pending class action cases in Wisconsin. The plaintiffs appealed that decision to the U.S. Court of Appeals for the Ninth Circuit and in August 2018, the Ninth Circuit Court of Appeals reversed and remanded the matter back to the federal district court for further consideration.

In January 2019, the judge in the multidistrict litigation granted motions filed by plaintiffs for Suggestion of Remand of the actions back to the respective transferor courts in Wisconsin and Kansas for further handling. In the Kansas action, the Judicial Panel on Multidistrict Litigation ordered the remand and the case has been transferred. In the Wisconsin actions, oppositions to the remand were filed, but the Judicial Panel on Multidistrict Litigation granted the remand in June 2019.

CMS Energy and the plaintiffs in each of the Kansas and the Wisconsin actions engaged in settlement discussions and CMS Energy has recorded a $30 million liability at December 31, 2019 as a probable estimate to settle these two cases. CMS Energy can give no assurances that it can reach a final settlement with the plaintiffs in these two cases, of the actual amount CMS Energy would have to pay in any settlement, or, in the Wisconsin case, that the Wisconsin court would approve any such settlement. If settlement does not occur and the outcome after appeals is unfavorable to CMS Energy, these cases could negatively affect CMS Energy’s liquidity, financial condition, and results of operations.

Bay Harbor: CMS Land retained environmental remediation obligations for the collection and treatment of leachate at Bay Harbor after selling its interests in the development in 2002. Leachate is produced when water enters into cement kiln dust piles left over from former cement plant operations at the site. In 2012, CMS Land and EGLE finalized an agreement that established the final remedies and the future water quality criteria at the site. CMS Land completed all construction necessary to implement the remedies required by the agreement and will continue to maintain and operate a system to discharge treated leachate into Little Traverse Bay under an NPDES permit issued in 2010 and renewed in 2016. The renewed NPDES permit is valid through September 2020.

At December 31, 2019, CMS Energy had a recorded liability of $46 million for its remaining obligations for environmental remediation. CMS Energy calculated this liability based on discounted projected costs, using a discount rate of 4.34 percent and an inflation rate of one percent on annual operating and maintenance costs. The undiscounted amount of the remaining obligation is $58 million. CMS Energy expects to pay the following amounts for long-term leachate disposal and operating and maintenance costs in each of the next five years:

In Millions
	2020				2021				2022				2023				2024
CMS Energy
Long-term leachate disposal and operating and maintenance costs		$	5			$	4			$	4			$	4			$	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.

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 December 31, 2019, Consumers had a recorded liability of $3 million, the minimum amount in the range of its estimated probable NREPA liability, as no amount in the range was considered a better estimate than any other amount.

Consumers is a potentially responsible party at a number of contaminated sites administered under CERCLA. CERCLA liability is joint and several. In 2010, Consumers received official notification from the EPA that identified Consumers as a potentially responsible party for cleanup of PCBs at the Kalamazoo River CERCLA site. The notification claimed that the EPA has reason to believe that Consumers disposed of PCBs and arranged for the disposal and treatment of PCB-containing materials at portions of the site. In 2011, Consumers received a follow-up letter from the EPA requesting that Consumers agree to participate in a removal action plan along with several other companies for an area of lower Portage Creek, which is connected to the Kalamazoo River. All parties, including Consumers, that were asked to participate in the removal action plan declined to accept liability. Until further information is received from the EPA, Consumers is unable to estimate a range of potential liability for cleanup of the river.

Based on its experience, Consumers estimates that its share of the total liability for known CERCLA sites will be between $3 million and $8 million. Various factors, including the number and creditworthiness of potentially responsible parties involved with each site, affect Consumers’ share of the total liability. At December 31, 2019, Consumers had a recorded liability of $3 million for its share of the total liability at these sites, the minimum amount in the range of its estimated probable CERCLA liability, as no amount in the range was considered a better estimate than any other amount.

The timing of payments related to Consumers’ remediation and other response activities at its CERCLA and NREPA sites is uncertain. Consumers periodically reviews these cost estimates. A change in the underlying assumptions, such as an increase in the number of sites, different remediation techniques, the nature and extent of contamination, and legal and regulatory requirements, could affect its estimates of NREPA and CERCLA liability.

Ludington PCB: In 1998, during routine maintenance activities, Consumers identified PCB as a component in certain paint, grout, and sealant materials at Ludington. Consumers removed part of the PCB material and replaced it with 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 2017, the MCV Partnership initiated arbitration against Consumers, asserting a breach of contract associated with the MCV PPA. Under this PPA, Consumers pays the MCV Partnership a fixed energy charge based on Consumers’ annual average baseload coal generating plant operating and maintenance cost, fuel inventory, and administrative and general expenses. The MCV Partnership asserts that, under the Clean Air Act, Consumers should have installed pollution control equipment on coal-fueled electric generating units years before they were retired. The MCV Partnership also asserts that Consumers should have installed pollution control equipment earlier on its remaining coal-fueled electric generating units. Additionally, the MCV Partnership claims that Consumers improperly characterized certain costs included in the calculation of the fixed energy charge.

In January 2019, an arbitration panel issued an order concluding that the MCV Partnership is not entitled to any damages associated with its claim against Consumers related to the Clean Air Act; the majority of the MCV Partnership’s claim, which estimated damages and interest in excess of $270 million, was related to this dismissed claim. Consumers believes that the MCV Partnership’s remaining claims are without merit, but cannot predict the financial impact or outcome of the matter.

Underwater Cables in Straits of Mackinac: Consumers owns certain underwater electric cables in the Straits of Mackinac, which were de-energized and retired in 1990. Consumers was notified that some of these cables were damaged as a result of vessel activity in April 2018. Following the notification, Consumers located, inspected, sampled, capped, and returned the damaged retired cables to their original location on the lake bottom, and did not find any substantive evidence of environmental contamination. After collaborating with the State of Michigan, local Native American tribes, and other stakeholders, Consumers submitted a permit application and removal work plan with EGLE and the U.S. Army Corps of Engineers in December 2019 for partial removal of all Consumers-owned cables. Upon EGLE’s issuance of a permit or certificate of coverage, which is expected in early 2020, Consumers will record an ARO for the cost to remove partially its cables, estimated to be up to $5 million. If Consumers were required to remove all the cables, it could incur costs of up to $10 million. Consumers filed suit against the companies that own the vessels that allegedly caused the damage and settled that matter. Consumers will seek recovery from customers of any costs incurred.

Consumers Gas Utility Contingencies

Gas Environmental Matters**:** Consumers expects to incur remediation and other response activity costs at a number of sites under the NREPA. These sites include 23 former MGP facilities. Consumers operated the facilities on these sites for some part of their operating lives. For some of these sites, Consumers has no present ownership interest or may own only a portion of the original site.

At December 31, 2019, Consumers had a recorded liability of $68 million for its remaining obligations for these sites. This amount represents the present value of long-term projected costs, using a discount rate of 2.57 percent and an inflation rate of 2.5 percent. The undiscounted amount of the remaining obligation is $73 million. Consumers expects to pay the following amounts for remediation and other response activity costs in each of the next five years:

In Millions
	2020				2021				2022				2023				2024
Consumers
Remediation and other response activity costs		$	12			$	8			$	20			$	11			$	2

Consumers periodically reviews these cost estimates. Any significant change in the underlying assumptions, such as an increase in the number of sites, changes in remediation techniques, or legal and regulatory requirements, could affect Consumers’ estimates of annual response activity costs and the MGP liability.

Pursuant to orders issued by the MPSC, Consumers defers its MGP-related remediation costs and recovers them from its customers over a ten-year period. At December 31, 2019, Consumers had a regulatory asset of $130 million related to the MGP sites.

Consumers estimates that its liability to perform remediation and other response activities at NREPA sites other than the MGP sites could reach $3 million. At December 31, 2019, Consumers had a recorded liability of less than $1 million, the minimum amount in the range of its estimated probable liability, as no amount in the range was considered a better estimate than any other amount.

Ray Compressor Station: On January 30, 2019, Consumers experienced a fire at the Ray Compressor Station, which resulted in the Ray Storage Field being 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 result of the fire and the resulting curtailment, Consumers could be subject to disallowances of gas purchased and costs associated with the repairs to the Ray Compressor Station. Consumers’ incremental cost of gas purchased during the incident was $7 million. Additionally, at December 31, 2019, Consumers had incurred capital expenditures of $12 million to restore the compressor station.Consumers may also be subject to various claims from impacted customers, claims for damages, or regulatory penalties. At this time, Consumers cannot predict the outcome of these matters or other gas-related incidents and a reasonable estimate of a total loss cannot be made, but they could have a material adverse effect on Consumers’ results of operations, financial condition, or liquidity, and could subject Consumers’ gas utility to increased regulatory scrutiny.

Consumers Electric and Gas Utility Contingencies

Electric and Gas Staking: In June 2019, the MPSC ordered Consumers to show cause as to why it should not be found in violation of the MISS DIG Act. The MPSC alleges that Consumers violated the law by failing to respond in a timely manner to over 20,000 requests to mark the location of underground facilities in April and May 2019 and only partially responding to others. The law provides the MPSC with discretion in setting fines for violations, if any; however, the fines cannot exceed $5,000 per violation. Consumers resolved the backlog of staking requests, and Consumers, the MPSC Staff, and the Michigan Attorney General filed an agreement with the MPSC settling this matter for an amount of less than $1 million. The MPSC approved the settlement agreement in January 2020.

Guarantees

Presented in the following table are CMS Energy’s and Consumers’ guarantees at December 31, 2019:

In Millions
Guarantee Description	Issue Date	Expiration Date	Maximum Obligation				Carrying Amount
CMS Energy, including Consumers
Indemnity obligations from stock and asset sale agreements1	various	indefinite		$	153			$	2
Guarantees2	various	indefinite		36				—
Consumers
Guarantee2	July 2011	indefinite		$	30			$	—

1

These obligations arose from stock and asset sale agreements under which CMS Energy or a subsidiary of CMS Energy indemnified the purchaser for losses resulting from various matters, primarily claims related to taxes. The maximum obligation amount is mostly related to the Equatorial Guinea tax claim discussed in the CMS Energy Contingencies section of this Note. CMS Energy believes the likelihood of material loss to be remote for the indemnity obligations not recorded as liabilities.

2	At Consumers, this obligation comprises a guarantee provided to the U.S. Department of Energy in connection with a settlement agreement regarding damages resulting from the department’s failure to accept spent nuclear fuel from nuclear power plants formerly owned by Consumers. At CMS Energy, the

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. For additional details on this guarantee, see Note 21, Variable Interest Entities.

Additionally, in the normal course of business, CMS Energy, Consumers, and certain other subsidiaries of CMS Energy have entered into various agreements containing tax and other indemnity provisions for which they are unable to estimate the maximum potential obligation. The carrying value of these indemnity obligations is $1 million. CMS Energy and Consumers consider the likelihood that they would be required to perform or incur substantial losses related to these indemnities to be remote.

Other Contingencies

In addition to the matters disclosed in this Note and Note 3, Regulatory Matters, there are certain other lawsuits and administrative proceedings before various courts and governmental agencies, as well as unasserted claims that may result in such proceedings, arising in the ordinary course of business to which CMS Energy, Consumers, and certain other subsidiaries of CMS Energy are parties. These other lawsuits, proceedings, and unasserted claims may involve personal injury, property damage, contracts, environmental matters, federal and state taxes, rates, licensing, employment, and other matters. Further, CMS Energy and Consumers occasionally self-report certain regulatory non‑compliance matters that may or may not eventually result in administrative proceedings. CMS Energy and Consumers believe that the outcome of any one of these proceedings and potential claims will not have a material negative effect on their consolidated results of operations, financial condition, or liquidity.

Contractual Commitments

Purchase Obligations: Purchase obligations arise from long-term contracts for the purchase of commodities and related services, and construction and service agreements. The commodities and related services include long-term PPAs, natural gas and associated transportation, and coal and associated transportation. Related-party PPAs are between Consumers and certain affiliates of CMS Enterprises. Presented in the following table are CMS Energy’s and Consumers’ contractual purchase obligations at December 31, 2019 for each of the periods shown:

In Millions
	Payments Due
	Total				2020				2021				2022				2023				2024				Beyond 2024
CMS Energy, including Consumers
Total PPAs		$	9,336			$	1,030			$	1,035			$	750			$	608			$	605			$	5,308
Other		3,244				1,685				520				451				210				199				179
Consumers
PPAs
MCV PPA		$	3,295			$	313			$	287			$	272			$	225			$	201			$	1,997
Palisades PPA		899				388				398				113				—				—				—
Related-party PPAs		472				71				72				74				74				75				106
Other PPAs		4,670				258				278				291				309				329				3,205
Total PPAs		$	9,336			$	1,030			$	1,035			$	750			$	608			$	605			$	5,308
Other		2,865				1,638				477				413				174				162				1

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

•	a capacity charge of $10.14 per MWh of available capacity

•	a fixed energy charge based on Consumers’ annual average baseload coal generating plant operating and maintenance cost, fuel inventory, and administrative and general expenses

•	a variable energy charge based on the MCV Partnership’s cost of production when the plant is dispatched

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

•	an option for Consumers to extend the MCV PPA for five years or purchase the MCV Facility at the conclusion of the MCV PPA’s term in March 2025; although Consumers is not obligated to exercise either of these options, the table above presents the impact on future cash flows of extending the MCV PPA through 2030

Capacity and energy charges under the MCV PPA were $318 million in 2019, $353 million in 2018, and $321 million in 2017.

Palisades PPA: Consumers has a PPA expiring in 2022 with Entergy to purchase virtually all of the capacity and energy produced by Palisades, up to the annual average capacity of 798 MW. For all delivered energy, the Palisades PPA has escalating capacity and variable energy charges. Total capacity and energy charges under the Palisades PPA were $395 million in 2019, $375 million in 2018, and $366 million in 2017. For further details about Palisades, see Note 10, Leases and Palisades Financing.

Other PPAs: Consumers has PPAs expiring through 2040 with various counterparties. The majority of the PPAs have capacity and energy charges for delivered energy. In addition, CMS Energy and Consumers account for several of their PPAs as leases. Capacity and energy charges under these PPAs were $336 million in 2019, $350 million in 2018, and $349 million in 2017. See Note 10, Leases and Palisades Financing for more information about CMS Energy’s and Consumers’ lease obligations.

5**:**	Financings and Capitalization

Presented in the following table is CMS Energy’s long-term debt at December 31:

In Millions
	Interest Rate (%)		Maturity		2019				2018
CMS Energy, including Consumers
CMS Energy, parent only
Senior notes	5.050		2022			$	300			$	300
	3.875		2024			250				250
	3.600		2025			250				250
	3.000		2026			300				300
	2.950		2027			275				275
	3.450		2027			350				350
	4.700		2043			250				250
	4.875		2044			300				300
Total senior notes						$	2,275			$	2,275
Term loans and revolving credit agreements	variable		2019			—				180
	variable		2023			—				30
						$	—			$	210
Junior subordinated notes¹	5.625		2078			200				200
	5.875		2078			280				280
	5.875		2079			630				—
						$	1,110			$	480
Total CMS Energy, parent only						$	3,385			$	2,965
CMS Energy subsidiaries
CMS Enterprises, including subsidiaries
Term loan facility	variable	2	2025			$	92			$	98
EnerBank
Certificates of deposit	2.445	3	2020-2027			2,389				1,758
Consumers						7,322				6,862
Total principal amount outstanding						$	13,188			$	11,683
Current amounts						(1,111		)		(974		)
Unamortized discounts						(27		)		(21		)
Unamortized issuance costs						(99		)		(73		)
Total long-term debt						$	11,951			$	10,615

1	These unsecured obligations rank subordinate and junior in right of payment to all of CMS Energy’s existing and future senior indebtedness.

2

A subsidiary of CMS Enterprises issued non‑recourse debt to finance the acquisition of a wind generation project in Northwest Ohio. The debt bears interest at an annual interest rate of LIBOR plus 1.500 percent through October 2022 (3.445 percent at December 31, 2019 and 4.303 percent at December 31, 2018). Beginning in October 2022, the debt will bear interest at an annual interest rate of LIBOR plus 1.750 percent. The same subsidiary of CMS Enterprises entered into interest rate swaps with the lending banks to fix the interest charges associated with the debt, at a rate of 4.702 percent through October 2022 and 4.952 percent beginning in October 2022. Principal and interest payments are made quarterly. For information about the interest rate swaps, see Note 6, Fair Value Measurements.

3	The weighted-average interest rate for EnerBank’s certificates of deposit was 2.445 percent at December 31, 2019 and 2.440 percent at December 31, 2018. EnerBank’s primary deposit product consists of brokered certificates of deposit with varying maturities and having a face value of $1,000.

Presented in the following table is Consumers’ long-term debt at December 31:

In Millions
	Interest Rate (%)			Maturity		2019				2018
Consumers
First mortgage bonds	5.650			2020			$	—			$	300
	3.770			2020			100				100
	2.850			2022			375				375
	5.300			2022			250				250
	3.375			2023			325				325
	3.125			2024			250				250
	3.190			2024			52				52
	3.680			2027			100				100
	3.390			2027			35				35
	3.800			2028			300				300
	3.180			2032			100				100
	5.800			2035			175				175
	3.520			2037			335				335
	4.010			2038			215				215
	6.170			2040			50				50
	4.970			2040			50				50
	4.310			2042			263				263
	3.950			2043			425				425
	4.100			2045			250				250
	3.250			2046			450				450
	3.950			2047			350				350
	4.050			2048			550				550
	4.350			2049			550				550
	3.750			2050			300				—
	3.100			2050			550				—
	3.860			2052			50				50
	4.280			2057			185				185
	4.350			2064			250				250
	variable		1	2069			76				—
Total first mortgage bonds							$	6,961			$	6,335
Tax-exempt revenue bonds	variable		2	2035			35				35
	1.800		3	2049			75				—
							$	110			$	35
Securitization bonds	3.220		4	2025-2029	5		251				277
Revolving credit agreements	variable			2020-2023			—				215
Total principal amount outstanding							$	7,322			$	6,862
Current amounts							(202		)		(26		)
Unamortized discounts							(23		)		(16		)
Unamortized issuance costs							(49		)		(41		)
Total long-term debt							$	7,048			$	6,779

1	The variable-rate bonds bear interest quarterly at a rate of three-month LIBOR minus 0.300 percent (1.594 percent at December 31, 2019).

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

3	The interest rate on these tax‑exempt revenue bonds will reset on October 1, 2024.

4	The weighted-average interest rate for Consumers’ securitization bonds issued through its subsidiary, Consumers 2014 Securitization Funding, was 3.220 percent at December 31, 2019 and 3.057 percent at December 31, 2018.

5	Principal and interest payments are made semiannually.

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

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

1	These unsecured obligations rank subordinate and junior in right of payment to all of CMS Energy’s existing and future senior indebtedness.

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

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

Term Loan Credit Agreement: In January 2020, Consumers entered into a $300 million unsecured term loan credit agreement. The term loan matures in January 2021.

First Mortgage Bonds: Consumers secures its first mortgage bonds by a mortgage and lien on substantially all of its property. Consumers’ ability to issue first mortgage bonds is restricted by certain provisions in the First Mortgage Bond Indenture and the need for regulatory approvals under federal law. Restrictive issuance provisions in the First Mortgage Bond Indenture include achieving a two-times interest coverage ratio and having sufficient unfunded net property additions.

Regulatory Authorization for Financings: Consumers is required to maintain FERC authorization for financings. Its current authorization terminates on August 31, 2021. Any long-term issuances during the authorization period are exempt from FERC’s competitive bidding and negotiated placement requirements.

Securitization Bonds: Certain regulatory assets held by Consumers’ subsidiary, Consumers 2014 Securitization Funding, collateralize Consumers’ securitization bonds. The bondholders have no recourse to Consumers’ assets except for those held by the subsidiary that issued the bonds. Consumers collects securitization surcharges to cover the principal and interest on the bonds as well as certain other qualified costs. The surcharges collected are remitted to a trustee and are not available to creditors of Consumers or creditors of Consumers’ affiliates other than the subsidiary that issued the bonds.

Debt Maturities: At December 31, 2019, the aggregate annual contractual maturities for long-term debt for the next five years were:

In Millions
	2020				2021				2022				2023				2024
CMS Energy, including Consumers
Long-term debt		$	1,111			$	538			$	1,354			$	669			$	808
Consumers
Long-term debt		$	202			$	27			$	653			$	354			$	332

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

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

1	During the year ended December 31, 2019, CMS Energy’s average borrowings totaled $5 million with a weighted-average interest rate of 3.859 percent.

2	Under this facility, $8 million is available solely for the purpose of issuing letters of credit. Obligations under this facility are secured by the collateral accounts with the lending bank. There were no borrowings under this facility during the year ended December 31, 2019.

3	Obligations under these facilities are secured by first mortgage bonds of Consumers. During the year ended December 31, 2019, Consumers’ average borrowings totaled $2 million with a weighted-average interest rate of 3.225 percent.

Short-term Borrowings: Under Consumers’ commercial paper program, Consumers may issue, in one or more placements, investment-grade commercial paper notes with maturities of up to 365 days at market interest rates. These issuances are supported by Consumers’ revolving credit facilities and may have an aggregate principal amount outstanding of up to $500 million. While the amount of outstanding commercial paper does not reduce the available capacity of the revolving credit facilities, Consumers does not intend to issue commercial paper in an amount exceeding the available capacity of the facilities. At December 31, 2019, there were $90 million commercial paper notes outstanding under this program at an annual interest rate of 2.050 percent, recorded as current notes payable on the consolidated balance sheets of CMS Energy and Consumers.

Dividend Restrictions**:** At December 31, 2019, payment of dividends by CMS Energy on its common stock was limited to $5.0 billion under provisions of the Michigan Business Corporation Act of 1972.

Under the provisions of its articles of incorporation, at December 31, 2019, Consumers had $1.4 billion of unrestricted retained earnings available to pay dividends on its common stock to CMS Energy. Provisions of the Federal Power Act and the Natural Gas Act appear to restrict dividends payable by Consumers to the amount of Consumers’ retained earnings. Several decisions from FERC suggest that, under a variety of circumstances, dividends from Consumers on its common stock would not be limited to amounts in Consumers’ retained earnings. Any decision by Consumers to pay dividends on its common stock in excess of retained earnings would be based on specific facts and circumstances and would be subject to a formal regulatory filing process.

For the year ended December 31, 2019, Consumers paid $592 million in dividends on its common stock to CMS Energy.

Capitalization: The authorized capital stock of CMS Energy consists of:

•	350 million shares of CMS Energy Common Stock, par value $0.01 per share

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

Issuance of Common Stock**:** In 2018, CMS Energy entered into an equity offering program under which it may sell, from time to time, shares of CMS Energy common stock having an aggregate sales price of up to $250 million. Under this program, CMS Energy may sell its common stock in privately negotiated transactions, in “at the market” offerings, through forward sales transactions or otherwise. CMS Energy has entered into forward sales contracts having an aggregate sales price of $250 million. Presented in the following table are details of these contracts:

Contract Date	Maturity Date	Number of Shares		Initial Forward Price Per Share
November 16, 2018	May 16, 2020	2,017,783			$	49.06
November 20, 2018	May 20, 2020	777,899			50.91
February 21, 2019	August 21, 2020	2,083,340			52.27

These contracts allow CMS Energy to either physically settle the contracts by issuing shares of its common stock at the then-applicable forward sale price specified by the agreement or net settle the contracts through the delivery or receipt of cash or shares. CMS Energy may settle the contracts at any time through their maturity dates, and presently intends to physically settle the contracts by delivering shares of its common stock.

The initial forward price in the forward equity sale contracts includes a deduction for commissions and will be adjusted on a daily basis over the term based on an interest rate factor and decreased on certain dates by certain predetermined amounts to reflect expected dividend payments.

No amounts have or will be recorded on CMS Energy’s consolidated balance sheets until settlements of the forward equity sale contracts occur. If CMS Energy had elected to net share settle the contracts as of December 31, 2019, CMS Energy would have been required to deliver 992,596 shares.

Preferred Stock of Subsidiary: Consumers’ preferred stock is traded on the New York Stock Exchange under the symbol CMS-PB. Presented in the following table are details of Consumers’ preferred stock at December 31, 2019 and 2018:

	Par Value				Optional Redemption Price				Number of Shares Authorized		Number of Shares Outstanding
Cumulative, with no mandatory redemption		$	100			$	110		7,500,000		373,148

6**:**	Fair Value Measurements

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

•	Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

•	Level 2 inputs are observable, market-based inputs, other than Level 1 prices. Level 2 inputs may include quoted prices for similar assets or liabilities in active markets, quoted prices in inactive markets, and inputs derived from or corroborated by observable market data.

•	Level 3 inputs are unobservable inputs that reflect CMS Energy’s or Consumers’ own assumptions about how market participants would value their assets and liabilities.

CMS Energy and Consumers classify fair value measurements within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement in its entirety.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Presented in the following table are CMS Energy’s and Consumers’ assets and liabilities recorded at fair value on a recurring basis:

In Millions
	CMS Energy, including Consumers									Consumers
December 31	2019				2018					2019				2018
Assets1
Cash equivalents		$	—			$	27				$	—			$	—
Restricted cash and cash equivalents		17				21					17				17
CMS Energy common stock		—				—					1				1
Nonqualified deferred compensation plan assets		18				14					14				10
Other non-current assets		—				1					—				—
Derivative instruments		1				1					1				1
Total		$	36			$	64				$	33			$	29
Liabilities1
Nonqualified deferred compensation plan liabilities		$	18			$	14				$	14			$	10
Derivative instruments		8				3					—				—
Total		$	26			$	17				$	14			$	10

1	All assets and liabilities were classified as Level 1 with the exception of derivative contracts, which were classified as Level 2 or Level 3.

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

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.

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.

In 2018, a subsidiary of CMS Enterprises entered into floating-to-fixed interest rate swaps to reduce the impact of interest rate fluctuations associated with future interest payments on certain 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 $92 million at December 31, 2019. Gains or losses on these swaps are initially reported in AOCI and then, as interest payments are made on the hedged debt, are recognized in earnings within other interest expense on CMS Energy’s consolidated statements of income. CMS Energy recorded losses in AOCI of $4 million for the year ended December 31, 2019 and $2 million for the year ended December 31, 2018. There were no material impacts on other interest expense associated with these swaps during the years presented. The fair value of these swaps recorded in other liabilities on CMS Energy’s consolidated balance sheets totaled $5 million at December 31, 2019 and $2 million at December 31, 2018. CMS Energy also has other interest rate swaps that economically hedge interest rate risk on debt, but that do not qualify for cash flow hedge accounting; the amounts associated with these swaps were not material for the years presented.

In 2019, EnerBank entered into fixed-to-floating interest rate swaps to manage interest rate risk exposure associated with changes in the fair value of certain long‑term fixed‑rate loans. The interest rate swaps qualify as fair value hedges of long‑term, fixed‑rate notes receivable with a notional amount of $134 million at December 31, 2019. The fair value of these interest rate swaps recorded in other liabilities was $1 million at December 31, 2019. CMS Energy is adjusting the carrying value of the hedged notes receivable for the change in their fair value due to the hedged risk. Both gains and losses on the swaps and the changes to the carrying value of the hedged notes receivable are recorded within operating revenue on CMS Energy’s consolidated statements of income. There were no material amounts recognized in operating revenue associated with these swaps for the year ended December 31, 2019.

The majority of derivatives classified as Level 3 are FTRs held by Consumers. Due to the lack of quoted pricing information, Consumers determines the fair value of its FTRs based on Consumers’ average historical settlements. There was no material activity within the Level 3 categories of assets and liabilities during the years presented.

7**:**	Financial Instruments

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

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

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

1	Includes current portion of long-term accounts receivable of $13 million at December 31, 2019 and $14 million at December 31, 2018.

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

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

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

5	Includes current portion of notes receivable – related party of $7 million at December 31, 2019 and December 31, 2018. For further details on this note receivable, see the DB SERP discussion below.

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

The effects of third-party credit enhancements were excluded from the fair value measurements of long-term debt. The principal amount of CMS Energy’s long-term debt supported by third-party credit enhancements was $35 million at December 31, 2019 and December 31, 2018. The entirety of these amounts was at Consumers.

DB SERP Securities: Presented in the following table is a summary of the sales activity for investment securities held within the DB SERP and classified as available for sale:

In Millions
Years Ended December 31	2019				2018				2017
CMS Energy, including Consumers
Proceeds from sales of investment securities		$	—			$	142			$	145
Consumers
Proceeds from sales of investment securities		$	—			$	103			$	105

In 2018, CMS Energy and Consumers sold the DB SERP debt securities and CMS Energy issued a $146 million demand note payable to the DB SERP rabbi trust. The demand note bears interest at an annual rate of 4.10 percent and has a maturity date of 2028. The demand note payable and associated DB SERP investment were eliminated on CMS Energy’s consolidated balance sheets. The portion of the demand note attributable to Consumers was recorded as a note receivable – related party on Consumers’ consolidated balance sheets.

During 2017, CMS Energy and Consumers sold mutual fund securities held within the DB SERP and used the proceeds to purchase the debt securities, which were later sold in 2018. CMS Energy reclassified gains of $2 million ($1 million, net of tax) from AOCI and included this amount in other income on the consolidated statements of income. This amount included Consumers’ gains of $2 million ($1 million, net of tax).

Debt securities classified as held to maturity consisted primarily of mortgage-backed securities and Utah Housing Corporation bonds held by EnerBank. Presented in the following table are these investment securities:

In Millions
	December 31, 2019																	December 31, 2018
	Cost				Unrealized Gains				Unrealized Losses				Fair Value					Cost				Unrealized Gains				Unrealized Losses				Fair Value
CMS Energy
Debt securities		$	26			$	—			$	—			$	26				$	22			$	—			$	1			$	21

8**:**	Notes Receivable

Presented in the following table are details of CMS Energy’s and Consumers’ current and non‑current notes receivable:

In Millions
December 31	2019				2018
CMS Energy, including Consumers
Current
EnerBank notes receivable, net of allowance for loan losses		$	223			$	233
EnerBank notes receivable held for sale		19				—
Non‑current
EnerBank notes receivable		2,258				1,624
Total notes receivable		$	2,500			$	1,857
Consumers
Current
DB SERP note receivable – related party		$	7			$	7
Non‑current
DB SERP note receivable – related party		96				99
Total notes receivable		$	103			$	106

EnerBank Notes Receivable

EnerBank notes receivable are primarily unsecured consumer installment loans, largely for financing home improvements. EnerBank records its notes receivable at cost, less an allowance for loan losses. During 2019, EnerBank completed sales of notes receivable, receiving proceeds of $67 million and recording immaterial gains. At December 31, 2019, $19 million of notes receivable were classified as held for sale; the fair value of notes receivable held for sale exceeded their carrying value. These notes are expected to be sold in 2020.

During 2019, EnerBank purchased a portfolio of secured and unsecured consumer installment loans with a principal value of $373 million.

Authorized contractors pay fees to EnerBank to provide borrowers with same-as-cash, zero interest, or reduced interest loans. Unearned income associated with the loan fees, which is recorded as a reduction to notes receivable on CMS Energy’s consolidated balance sheets, was $134 million at December 31, 2019 and $102 million at December 31, 2018. Unearned income associated with loan fees for notes receivable held for sale was $2 million at December 31, 2019.

The allowance for loan losses is a valuation allowance to reflect estimated credit losses. The allowance is increased by the provision for loan losses and decreased by loan charge-offs net of recoveries. Management estimates the allowance balance required by taking into consideration historical loan loss experience, the nature and volume of the portfolio, economic conditions, and other factors. Loan losses are charged against the allowance when the loss is confirmed, but no later than the point at which a loan becomes 120 days past due.

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

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

Loans that are 30 days or more past due are considered delinquent. The balance of EnerBank’s delinquent consumer loans was $33 million at December 31, 2019 and $21 million at December 31, 2018. At December 31, 2019 and December 31, 2018, EnerBank’s loans that had been modified as troubled debt restructurings were immaterial.

EnerBank has entered into interest rate swaps on $134 million of its loans (notes receivable). For information about interest rate swaps, see Note 6, Fair Value Measurements.

DB SERP Note Receivable – Related Party

The DB SERP note receivable – related party is Consumers’ portion of a demand note payable issued by CMS Energy to the DB SERP rabbi trust. The demand note bears interest at an annual rate of 4.10 percent and has a maturity date of 2028.

9**:**	Plant, Property, and Equipment

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

In Millions
December 31	Estimated Depreciable Life in Years			2019				2018
CMS Energy, including Consumers
Plant, property, and equipment, gross
Consumers	3	—	125		$	24,963			$	23,963
Enterprises
Independent power production1	3	—	40		403				410
Other	3	—	5		2				2
EnerBank	1	—	7		22				25
Plant, property, and equipment, gross					$	25,390			$	24,400
Construction work in progress					896				763
Accumulated depreciation and amortization					(7,360		)		(7,037		)
Total plant, property, and equipment					$	18,926			$	18,126
Consumers
Plant, property, and equipment, gross
Electric
Generation	22	—	125		$	5,942			$	6,305
Distribution	20	—	75		8,519				7,957
Transmission	46	—	75		113				154
Other	5	—	50		1,258				1,316
Assets under finance leases and other financing2					326				295
Gas
Distribution	20	—	85		5,235				4,651
Transmission	17	—	75		1,752				1,521
Underground storage facilities3	27	—	75		987				910
Other	5	—	50		797				823
Assets under finance leases2					14				14
Other non‑utility property	3	—	51		20				17
Plant, property, and equipment, gross					$	24,963			$	23,963
Construction work in progress					879				756
Accumulated depreciation and amortization					(7,272		)		(6,958		)
Total plant, property, and equipment4					$	18,570			$	17,761

1	The majority of independent power production assets are leased to others under operating leases. For information regarding CMS Energy’s operating leases of owned assets, see Note 10, Leases and Palisades Financing.

2	For information regarding the amortization terms of Consumers’ assets under finance leases and other financing, see Note 10, Leases and Palisades Financing.

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

4

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

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

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

1	For the year ended December 31, 2019, Consumers’ intangible asset additions were $67 million and intangible asset retirements were $193 million. For the year ended December 31, 2018, Consumers’ intangible asset additions were $90 million and intangible asset retirements were $7 million.

2	Leasehold improvements are amortized over the life of the lease, which may change whenever the lease is renewed or extended.

Capitalization: CMS Energy and Consumers record plant, property, and equipment at original cost when placed into service. The cost includes labor, material, applicable taxes, overhead such as pension and other benefits, and AFUDC, if applicable. Consumers’ plant, property, and equipment is generally recoverable through its general ratemaking process.

With the exception of utility property for which the remaining book value has been securitized, mothballed utility property stays in rate base and continues to be depreciated at the same rate as before the mothball period. When utility property is retired or otherwise disposed of in the ordinary course of business, Consumers records the original cost to accumulated depreciation, along with associated cost of removal, net of salvage. CMS Energy and Consumers recognize gains or losses on the retirement or disposal of non‑regulated assets in income. Consumers records cost of removal collected from customers, but not spent, as a regulatory liability.

Software: CMS Energy and Consumers capitalize the costs to purchase and develop internal-use computer software. These costs are expensed evenly over the estimated useful life of the internal-use computer software. If computer software is integral to computer hardware, then its cost is capitalized and depreciated with the hardware.

AFUDC: Consumers capitalizes AFUDC on regulated major construction projects, except pollution control facilities on its fossil-fuel-fired power plants. AFUDC represents the estimated cost of debt and authorized return-on-equity funds used to finance construction additions. Consumers records the offsetting credit as a reduction of interest for the amount representing the borrowed funds component and as other income for the equity funds component on the consolidated statements of income. When construction is completed and the property is placed in service, Consumers depreciates and recovers the capitalized AFUDC from customers over the life of the related asset. Presented in the following table are Consumers’ average AFUDC capitalization rates:

Years Ended December 31	2019		2018		2017
Electric	6.4	%	6.9	%	6.8	%
Gas	5.8		5.9		6.0

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

In Millions
Years Ended December 31	2019				2018
Consumers
Balance at beginning of period		$	309			$	312
Additions		26				—
Net retirements and other adjustments		5				(3		)
Balance at end of period		$	340			$	309

Assets under finance leases and other financing are presented as gross amounts. Accumulated amortization of assets under finance leases and other financing was $239 million at December 31, 2019 and $212 million at December 31, 2018 for Consumers.

Depreciation and Amortization: Presented in the following table are further details about CMS Energy’s and Consumers’ accumulated depreciation and amortization:

In Millions
December 31	2019				2018
CMS Energy, including Consumers
Utility plant assets		$	7,269			$	6,956
Non*‑*utility plant assets		91				81
Consumers
Utility plant assets		$	7,269			$	6,956
Non*‑*utility plant assets		3				2

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

gas segments. Consumers performs depreciation studies periodically to determine appropriate group lives. Presented in the following table are the composite depreciation rates for Consumers’ segment properties:

Years Ended December 31	2019			2018			2017
Electric utility property		3.9	%		3.9	%		3.9	%
Gas utility property		2.9			2.9			2.9
Other property		10.0			10.1			10.0

CMS Energy and Consumers record property repairs and minor property replacement as maintenance expense. CMS Energy and Consumers record planned major maintenance activities as operating expense unless the cost represents the acquisition of additional long-lived assets or the replacement of an existing long-lived asset.

Presented in the following table are the components of CMS Energy’s and Consumers’ depreciation and amortization expense:

In Millions
Years Ended December 31	2019				2018				2017
CMS Energy, including Consumers
Depreciation expense – plant, property, and equipment		$	842			$	778			$	739
Amortization expense
Software		121				127				114
Other intangible assets		3				3				3
Securitized regulatory assets		26				25				25
Total depreciation and amortization expense		$	992			$	933			$	881
Consumers
Depreciation expense – plant, property, and equipment		$	827			$	768			$	732
Amortization expense
Software		119				125				112
Other intangible assets		3				3				3
Securitized regulatory assets		26				25				25
Total depreciation and amortization expense		$	975			$	921			$	872

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

In Millions
	2020				2021				2022				2023				2024
CMS Energy, including Consumers
Intangible asset amortization expense		$	118			$	112			$	107			$	87			$	70
Consumers
Intangible asset amortization expense		$	116			$	110			$	106			$	87			$	70

Jointly Owned Regulated Utility Facilities

Presented in the following table are Consumers’ investments in jointly owned regulated utility facilities at December 31, 2019:

In Millions, Except Ownership Share
J.H. Campbell Unit 3					Ludington					Other
Ownership share		93.3		%		51.0		%		various
Utility plant in service		$	1,731			$	486			$	233
Accumulated depreciation		(753		)		(166		)		(68		)
Construction work in progress		16				64				15
Net investment		$	994			$	384			$	180

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

10**:**	Leases and Palisades Financing

Lessee

CMS Energy and Consumers lease various assets from third parties, including coal-carrying railcars, real estate, service vehicles, and gas pipeline capacity. In addition, CMS Energy and Consumers account for several of their PPAs as leases.

CMS Energy and Consumers do not record right-of-use assets or lease liabilities on their consolidated balance sheets for rentals with lease terms of 12 months or less, most of which are for the lease of real estate and service vehicles. Lease expense for these rentals is recognized on a straight-line basis over the lease term.

CMS Energy and Consumers include future payments for all renewal options, fair market value extensions, and buyout provisions reasonably certain of exercise in their measurement of lease right-of-use assets and lease liabilities. In addition, certain leases for service vehicles contain end-of-lease adjustment clauses based on proceeds received from the sale or disposition of the vehicles. CMS Energy and Consumers also include executory costs in the measurement of their right-of-use assets and lease liabilities, except for maintenance costs related to their coal-carrying railcar leases.

Most of Consumers’ PPAs contain provisions at the end of the initial contract terms to renew the agreements annually under mutually agreed‑upon terms at the time of renewal. Energy and capacity payments that vary depending on quantities delivered are recognized as variable lease costs when incurred. Consumers accounts for a PPA with one of CMS Energy’s equity method subsidiaries as a finance lease.

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

1	CMS Energy’s and Consumers’ operating right-of-use lease assets are reported as other 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.

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
Year Ended December 31, 2019	CMS Energy, including Consumers				Consumers
Operating lease costs		$	11			$	9
Finance lease costs
Amortization of right-of-use assets		6				6
Interest on lease liabilities		18				18
Variable lease costs		95				95
Total lease costs		$	130			$	128

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

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

Presented in the following table are the minimum rental commitments under CMS Energy’s and Consumers’ non‑cancelable leases:

In Millions
					Finance Leases
December 31, 2019	Operating Leases				Pipelines and PPAs				Other				Total
CMS Energy, including Consumers
2020		$	11			$	17			$	6			$	23
2021		11				17				6				23
2022		5				14				5				19
2023		3				13				5				18
2024		2				13				3				16
2025 and thereafter		35				78				12				90
Total minimum lease payments		$	67			$	152			$	37			$	189
Less discount		21				119				4				123
Present value of minimum lease payments		$	46			$	33			$	33			$	66
Consumers
2020		$	9			$	17			$	6			$	23
2021		9				17				6				23
2022		4				14				5				19
2023		3				13				5				18
2024		2				13				3				16
2025 and thereafter		29				78				12				90
Total minimum lease payments		$	56			$	152			$	37			$	189
Less discount		16				119				4				123
Present value of minimum lease payments		$	40			$	33			$	33			$	66

Lessor

CMS Energy and Consumers are the lessor under power sales and natural gas delivery agreements that are accounted for as leases.

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

Presented in the following table are the minimum rental payments to be received under CMS Energy’s non‑cancelable operating leases:

In Millions
December 31, 2019
2020		$	55
2021		55
2022		48
2023		43
2024		43
2025 and thereafter		62
Total minimum lease payments		$	306

Consumers has an agreement to build, own, operate, and maintain a compressed natural gas fueling station through December 2038. This agreement is accounted for as a direct finance lease, under which the lessee has the option to purchase the natural gas fueling station at the end of the lease term. Fixed monthly payments escalate annually with inflation.

Beginning in December 2018, Consumers and a subsidiary of CMS Energy executed a 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.

Minimum rental payments to be received under Consumers’ direct financing leases are $1 million for each of the next five years and $19 million for the years thereafter. The lease receivable was $10 million as of December 31, 2019, which does not include unearned income of $14 million.

Minimum rental payments to be received under CMS Energy’s direct finance lease are less than $1 million for each of the next five years and $10 million for the years thereafter. The lease receivable was $5 million as of December 31, 2019, which does not include unearned income of $5 million.

Palisades Financing

In 2007, Consumers sold Palisades to Entergy and entered into a 15-year PPA to purchase virtually all of the capacity and energy produced by Palisades, up to the annual average capacity of 798 MW. Consumers accounted for this transaction as a financing because of its continuing involvement with Palisades through security provided to Entergy for the PPA obligation and other arrangements. Palisades has therefore remained on Consumers’ consolidated balance sheets and Consumers has continued to depreciate it. At the time of the sale, Consumers recorded the sales proceeds as a financing obligation, and has subsequently recorded a portion of the payments under the PPA as interest expense and as a reduction of the financing obligation.

Total amortization and interest charges under the financing were $15 million for the year ended December 31, 2019, $16 million for the year ended December 31, 2018, and $17 million for the year ended December 31, 2017. At December 31, 2019, the Palisades asset and financing obligation both had a balance of $29 million.

Presented in the following table are the minimum Palisades PPA payments included in the financing obligation:

In Millions
December 31, 2019
2020		$	14
2021		14
2022		3
Total minimum payments		$	31
Less discount		2
Financing obligation		$	29
Less current portion		13
Non-current portion		$	16

11**:**	Asset Retirement Obligations

CMS Energy and Consumers record the fair value of the cost to remove assets at the end of their useful lives, if there is a legal obligation to remove them. If a reasonable estimate of fair value cannot be made in the period in which the ARO is incurred, such as for assets with indeterminate lives, the liability is recognized when a reasonable estimate of fair value can be made. CMS Energy and Consumers have not recorded liabilities for assets that have immaterial cumulative disposal costs, such as substation batteries.

CMS Energy and Consumers calculate the fair value of ARO liabilities using an expected present-value technique that reflects assumptions about costs and inflation, and uses a credit-adjusted risk-free rate to discount the expected cash flows. CMS Energy’s ARO liabilities are primarily at Consumers.

Presented below are the categories of assets that CMS Energy and Consumers have legal obligations to remove at the end of their useful lives and for which they have an ARO liability recorded:

Company and ARO Description	In-Service Date	Long-Lived Assets
CMS Energy, including Consumers
Closure of gas treating plant and gas wells	various	Gas transmission and storage
Closure of coal ash disposal areas	various	Generating plants coal ash areas
Gas distribution cut, purge, and cap	various	Gas distribution mains and services
Asbestos abatement	1973	Electric and gas utility plant
Closure of renewable generation assets	various	Wind and solar generation facilities
Gas wells plug and abandon	various	Gas transmission and storage
Consumers
Closure of coal ash disposal areas	various	Generating plants coal ash areas
Gas distribution cut, purge, and cap	various	Gas distribution mains and services
Asbestos abatement	1973	Electric and gas utility plant
Closure of renewable generation assets	various	Wind and solar generation facilities
Gas wells plug and abandon	various	Gas transmission and storage

No assets have been restricted for purposes of settling AROs.

Presented in the following tables are the changes in CMS Energy’s and Consumers’ ARO liabilities:

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

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

12**:**	Retirement Benefits

Benefit Plans: CMS Energy and Consumers provide pension, OPEB, and other retirement benefits to employees under a number of different plans. These plans include:

•	non‑contributory, qualified DB Pension Plans (closed to new non‑union participants as of July 1, 2003 and closed to new union participants as of September 1, 2005)

•	a non‑contributory, qualified DCCP for employees hired on or after July 1, 2003

•	benefits to certain management employees under a non‑contributory, nonqualified DB SERP (closed to new participants as of March 31, 2006)

•	a non‑contributory, nonqualified DC SERP for certain management employees hired or promoted on or after April 1, 2006

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

•	health care and life insurance benefits under an OPEB Plan

DB Pension Plans: Participants in the pension plans include present and former employees of CMS Energy and Consumers, including certain present and former affiliates and subsidiaries. Pension plan trust assets are not distinguishable by company. Effective December 31, 2017, CMS Energy’s and Consumers’ then-existing pension plan was amended to include only retired and former employees already covered; this amended plan is referred to as DB Pension Plan B. Also effective December 31, 2017, active employees were moved to a newly created pension plan, referred to as DB Pension Plan A, whose benefits mirror those provided under DB Pension Plan B. Maintaining separate plans for the two groups allows CMS Energy and Consumers to employ a more targeted investment strategy and provides additional opportunities to mitigate risk and volatility.

DCCP: CMS Energy and Consumers provide an employer contribution to the DCCP 401(k) plan for employees hired on or after July 1, 2003. The contribution ranges from five to seven percent of base pay, depending on years of service. Employees are not required to contribute in order to receive the plan’s employer contribution. DCCP expense for CMS Energy, including Consumers, was $30 million for the year ended December 31, 2019, $26 million for the year ended December 31, 2018, and $23 million for the year ended December 31, 2017. DCCP expense for Consumers was $28 million for the year ended December 31, 2019, $25 million for the year ended December 31, 2018, and $22 million for the year ended December 31, 2017.

DB SERP: The DB SERP is a nonqualified plan as defined by the Internal Revenue Code. DB SERP benefits are paid from a rabbi trust established in 1988. The trust assets are not considered plan assets under ASC 715. DB SERP rabbi trust earnings are taxable. Presented in the following table are the fair values of trust assets, ABO, and contributions for CMS Energy’s and Consumers’ DB SERP:

In Millions
Years Ended December 31	2019				2018
CMS Energy, including Consumers
Trust assets		$	143			$	147
ABO		149				137
Contributions		—				8
Consumers
Trust assets		$	104			$	106
ABO		107				98
Contributions		—				5

DC SERP: On April 1, 2006, CMS Energy and Consumers implemented a DC SERP and froze further new participation in the DB SERP. The DC SERP provides participants benefits ranging from 5 percent to 15 percent of total compensation. The DC SERP requires a minimum of five years of participation before vesting. CMS Energy’s and Consumers’ contributions to the plan, if any, are placed in a grantor trust. For CMS Energy and Consumers, trust assets were $8 million at December 31, 2019 and $5 million at December 31, 2018. DC SERP assets are included in other non‑current assets on CMS Energy’s and Consumers’ consolidated balance sheets. CMS Energy’s and Consumers’ DC SERP expense was $2 million for the year ended December 31, 2019, and $1 million for each of the years ended December 31, 2018 and 2017.

401(k) Plan: The 401(k) plan employer match equals 100 percent of eligible contributions up to the first three percent of an employee’s wages and 50 percent of eligible contributions up to the next two percent of an employee’s wages. The total 401(k) plan cost for CMS Energy, including Consumers, was $28 million for the year ended December 31, 2019, $27 million for the year ended December 31, 2018, and $26 million for the year ended December 31, 2017. The total 401(k) plan cost for Consumers was $27 million for the year ended December 31, 2019, $26 million for the year ended December 31, 2018, and $25 million for the year ended December 31, 2017.

OPEB Plan: Participants in the OPEB Plan include all regular full-time employees covered by the employee health care plan on the day before retirement from either CMS Energy or Consumers at age 55 or older with at least ten full years of applicable continuous service. Regular full-time employees who qualify for disability retirement under the DB Pension Plans or are disabled and covered by the DCCP and who have 15 years of applicable continuous service may also participate in the OPEB Plan. Retiree health care costs were based on the assumption that costs would increase 6.75 percent in 2020 and 7.00 percent in 2019 for those under 65 and would increase 7.25 percent in 2020 and 7.75 percent in 2019 for those over 65. The rate of increase was assumed to decline to 4.75 percent by 2027 and thereafter for all retirees.

In 2017, CMS Energy and Consumers approved certain amendments to the OPEB Plan. Under these amendments, effective January 1, 2019, certain Medicare-eligible retirees will purchase health care plans from private Medicare exchanges. CMS Energy and Consumers performed a remeasurement of the OPEB Plan as of October 31, 2017, resulting in a significant reduction in the benefit obligation. In July 2018, CMS Energy and Consumers approved an amendment to the OPEB Plan to improve survivor benefits for certain Medicare-eligible retirees, effective January 1, 2019, resulting in a $26 million increase in the benefit obligation.

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

December 31	2019		2018		2017
CMS Energy, including Consumers
Weighted average for benefit obligations1
Discount rate2
DB Pension Plan A	3.37	%	4.48	%	3.78	%
DB Pension Plan B	3.17		4.32		3.64
DB SERP	3.15		4.32		3.65
OPEB Plan	3.32		4.42		3.74
Rate of compensation increase
DB Pension Plan A	3.50		3.50		3.50
DB SERP	5.50		5.50		5.50
Weighted average for net periodic benefit cost1
Service cost discount rate2,3
DB Pension Plan A4	4.55		3.85
DB SERP	4.58		3.83		4.51
OPEB Plan	4.63		3.93		4.89
Interest cost discount rate2,3
DB Pension Plan A4	4.08		3.39
DB Pension Plan B4	3.93		3.24
DB SERP	3.94		3.26		3.51
OPEB Plan	4.03		3.35		3.79
Expected long-term rate of return on plan assets5
DB Pension Plans	7.00		7.00		7.25
OPEB Plan	7.00		7.00		7.25
Rate of compensation increase
DB Pension Plan A4	3.50		3.50
DB SERP	5.50		5.50		5.50

1

The mortality assumption for benefit obligations was based on the Pri-2012 mortality table for 2019 and on the RP-2014 mortality table for 2018 and 2017, with projection scales MP-2019 for 2019, MP-2018 for 2018, and MP-2017 for 2017. The mortality assumption for net periodic benefit cost for 2019, 2018, and 2017 was based on the RP-2014 mortality table, with projection scales MP-2018 for 2019, MP-2017 for 2018, and MP-2016 for 2017.

2	The discount rate reflects the rate at which benefits could be effectively settled and is equal to the equivalent single rate resulting from a yield-curve analysis. This analysis incorporated the projected benefit payments specific to CMS Energy’s and Consumers’ DB Pension Plans and OPEB Plan and the yields on high-quality corporate bonds rated Aa or better.

3	CMS Energy and Consumers have elected to use a full-yield-curve approach in the estimation of service cost and interest cost; this approach applies individual spot rates along the yield curve to future projected benefit payments based on the time of payment.

4	Effective December 31, 2017, CMS Energy’s and Consumers’ existing defined benefit pension plan was amended to include only retired or inactive employees; this amended plan is referred to as DB Pension Plan B. Active employees were moved to a newly created pension plan, referred to as DB Pension Plan A.

The assumptions used to measure the plan cost of the previous defined benefit pension plan at December 31, 2017 were:

•	service cost discount rate of 4.53 percent

•	interest cost discount rate of 3.56 percent

•	weighted-average rate of compensation increase of 3.60 percent

5

CMS Energy and Consumers determined the long-term rate of return using historical market returns, the present and expected future economic environment, the capital market principles of risk and return, and the expert opinions of individuals and firms with financial market knowledge. CMS Energy and Consumers considered the asset allocation of the portfolio in forecasting the future expected total return of the portfolio. The goal was to determine a long-term rate of return that could be incorporated into the planning of future cash flow requirements in conjunction with the change in the liability. Annually, CMS Energy and Consumers review for reasonableness and appropriateness the forecasted returns for various classes of assets used to construct an expected return model. CMS Energy’s and Consumers’ expected long-term rate of return on the assets of the DB Pension Plans was 7.00 percent in 2019. The actual return (loss) on the assets of the DB Pension Plans was 21.0 percent in 2019, (6.7) percent in 2018, and 18.0 percent in 2017.

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

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

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

For DB Pension Plan A, the estimated period of amortization of gains and losses was nine years for the years ended December 31, 2019 and 2018. For DB Pension Plan B, the estimated period of amortization of gains and losses was 20 years for the years ended December 31, 2019 and 2018. The estimated period of amortization for gains and losses for CMS Energy and Consumers was ten years for the DB Pension Plans for the year ended December 31, 2017. For the OPEB Plan, the estimated amortization period was ten years for the year ended December 31, 2019 and 2018 and 11 years for the year ended December 31, 2017.

Prior service cost (credit) amortization is established in the year in which the prior service cost (credit) first occurred, and is based on the same amortization period for all future years until the prior service cost (credit) is fully amortized. CMS Energy and Consumers had new prior service costs (credits) for OPEB in 2018 and 2017. The estimated period of amortization of these new prior service costs (credits) for CMS Energy and Consumers is nine years.

CMS Energy and Consumers determine the MRV for the assets of the DB Pension Plans as the fair value of plan assets on the measurement date, adjusted by the gains or losses that will not be admitted into the MRV until future years. CMS Energy and Consumers reflect each year’s gain or loss in the MRV in equal amounts over a five-year period beginning on the date the original amount was determined. CMS Energy and Consumers determine the MRV for OPEB Plan assets as the fair value of assets on the measurement date.

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

In Millions
	DB Pension Plans									DB SERP									OPEB Plan
Years Ended December 31	2019				2018					2019				2018					2019				2018
CMS Energy, including Consumers
Benefit obligation at beginning of period		$	2,512			$	2,780				$	140			$	154				$	1,045			$	1,097
Service cost		41				48					—				—					14				17
Interest cost		98				90					5				5					41				34
Plan amendments		—				—					—				—					—				26
Actuarial loss (gain)		476			1	(258		)	1		15				(10		)			110			1	(74		)	1
Benefits paid		(154		)		(148		)			(10		)		(9		)			(45		)		(55		)
Benefit obligation at end of period		$	2,973			$	2,512				$	150			$	140				$	1,165			$	1,045
Plan assets at fair value at beginning of period		$	2,247			$	2,305				$	—			$	—				$	1,280			$	1,420
Actual return on plan assets		453				(150		)			—				—					273				(86		)
Company contribution		—				240					10				9					—				—
Actual benefits paid		(154		)		(148		)			(10		)		(9		)			(44		)		(54		)
Plan assets at fair value at end of period		$	2,546			$	2,247				$	—			$	—				$	1,509			$	1,280
Funded status		$	(427	)	2	$	(265	)	2		$	(150	)		$	(140	)			$	344			$	235
Consumers
Benefit obligation at beginning of period											$	101			$	112				$	1,004			$	1,053
Service cost											—				—					13				16
Interest cost											4				4					40				33
Plan amendments											—				—					—				25
Actuarial loss (gain)											11				(8		)			106			1	(70		)	1
Benefits paid											(7		)		(7		)			(43		)		(53		)
Benefit obligation at end of period											$	109			$	101				$	1,120			$	1,004
Plan assets at fair value at beginning of period											$	—			$	—				$	1,197			$	1,329
Actual return on plan assets											—				—					255				(80		)
Company contribution											7				7					—				—
Actual benefits paid											(7		)		(7		)			(42		)		(52		)
Plan assets at fair value at end of period											$	—			$	—				$	1,410			$	1,197
Funded status											$	(109	)		$	(101	)			$	290			$	193

1

The actuarial loss for 2019 for the DB Pension Plans was primarily the result of lower discount rates and lower interest rates used to calculate the value of lump-sum payments. The actuarial gain for 2018 was primarily the result of higher discount rates. The actuarial loss for 2019 for the OPEB Plan was primarily the result of lower discount rates. The actuarial gain for 2018 was primarily the result of higher discount rates.

2	The total funded status of the DB Pension Plans attributable to Consumers, based on an allocation of expenses, was $408 million at December 31, 2019 and $246 million at December 31, 2018.

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

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

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

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

Items Not Yet Recognized as a Component of Net Periodic Benefit Cost: Presented in the following table are the amounts recognized in regulatory assets and AOCI that have not been recognized as components of net periodic benefit cost. For additional details on regulatory assets, see Note 3, Regulatory Matters.

In Millions
	DB Pension Plans and DB SERP									OPEB Plan
Years Ended December 31	2019				2018					2019				2018
CMS Energy, including Consumers
Regulatory assets
Net loss		$	1,114			$	978				$	308			$	402
Prior service cost (credit)		8				9					(300		)		(361		)
Regulatory assets		$	1,122			$	987				$	8			$	41
AOCI
Net loss (gain)		105				90					(6		)		2
Prior service credit		—				—					(8		)		(9		)
Total amounts recognized in regulatory assets and AOCI		$	1,227			$	1,077				$	(6	)		$	34
Consumers
Regulatory assets
Net loss		$	1,114			$	978				$	308			$	402
Prior service cost (credit)		8				9					(300		)		(361		)
Regulatory assets		$	1,122			$	987				$	8			$	41
AOCI
Net loss		36				27					—				—
Total amounts recognized in regulatory assets and AOCI		$	1,158			$	1,014				$	8			$	41

Plan Assets: Presented in the following tables are the fair values of the assets of CMS Energy’s DB Pension Plans and OPEB Plan, by asset category and by level within the fair value hierarchy. For additional details regarding the fair value hierarchy, see Note 6, Fair Value Measurements.

In Millions
	DB Pension Plans
	December 31, 2019													December 31, 2018
	Total				Level 1				Level 2					Total				Level 1				Level 2
CMS Energy, including Consumers
Cash and short-term investments		$	44			$	44			$	—				$	242			$	242			$	—
U.S. government and agencies securities		66				—				66					11				—				11
Corporate debt		493				—				493					400				—				400
State and municipal bonds		17				—				17					6				—				6
Foreign corporate bonds		33				—				33					35				—				35
Mutual funds		640				640				—					552				552				—
		$	1,293			$	684			$	609				$	1,246			$	794			$	452
Pooled funds		1,253													1,001
Total		$	2,546												$	2,247

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

Cash and Short-Term Investments: Cash and short-term investments consist of money market funds with daily liquidity.

U.S. Government and Agencies Securities: U.S. government and agencies securities consist of U.S. Treasury notes and other debt securities backed by the U.S. government and related agencies. These securities are valued based on quoted market prices.

Corporate Debt: Corporate debt investments consist of investment grade bonds of U.S. issuers from diverse industries. These securities are valued based on quoted market prices, when available, or yields available on comparable securities of issuers with similar credit ratings.

State and Municipal Bonds: State and municipal bonds are valued using a matrix-pricing model that incorporates Level 2 market-based information. The fair value of the bonds is derived from various observable inputs, including benchmark yields, reported securities trades, broker/dealer quotes, bond ratings, and general information on market movements for investment grade state and municipal securities normally considered by market participants when pricing such debt securities.

Foreign Corporate Bonds: Foreign corporate debt securities are valued based on quoted market prices, when available, or on yields available on comparable securities of issuers with similar credit ratings.

Common Stocks: Common stocks in the OPEB Plan consist of equity securities that are actively managed and tracked to the S&P 500 Index. These securities are valued at their quoted closing prices.

Mutual Funds: Mutual funds represent shares in registered investment companies that are priced based on the daily quoted net asset values that are publicly available and are the basis for transactions to buy or sell shares in the funds.

Pooled Funds: Pooled funds include both common and collective trust funds as well as special funds that contain only employee benefit plan assets from two or more unrelated benefit plans. These funds primarily consist of U.S. and foreign equity securities, but also include U.S. and foreign fixed-income securities and multi-asset investments. Since these investments are valued at their net asset value as a practical expedient, they are not classified in the fair value hierarchy.

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

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

CMS Energy’s target asset allocation for the assets of the DB Pension Plans is 53 percent equity, 35 percent fixed income, and 12 percent multi-asset investments. This target asset allocation is expected to continue to maximize the long-term return on plan assets, while maintaining a prudent level of risk. The level of acceptable risk is a function of the liabilities of the plan. Equity investments are diversified mostly across the S&P 500 Index, with lesser allocations to the S&P MidCap and SmallCap Indexes and Foreign Equity Funds. Fixed-income investments are diversified across investment grade instruments of government and corporate issuers as well as high-yield and global bond funds. Multi-assets are diversified across absolute return investment approaches and global tactical asset allocation, such as inflation protected securities, real estate investment trusts, commodities, currency, and preferred stock. CMS Energy uses annual liability measurements, quarterly portfolio reviews, and periodic asset/liability studies to evaluate the need for adjustments to the portfolio allocation.

CMS Energy established union and non‑union VEBA trusts to fund future retiree health and life insurance benefits. These trusts are funded through the ratemaking process for Consumers and through direct contributions from the non‑utility subsidiaries. CMS Energy’s target asset allocation for the health trusts is 50 percent equity, 30 percent fixed income, and 20 percent multi-asset investments. CMS Energy’s target asset allocation for the life trusts is 42 percent equity, 28 percent fixed income, and 30 percent multi-asset investments. These target allocations are expected to continue to maximize the long-term return on plan assets, while maintaining a prudent level of risk. The level of acceptable risk is a function of the liabilities of the plans. Equity investments are diversified mostly across the S&P 500 Index, with lesser allocations to the S&P SmallCap Index and Foreign Equity Funds. Fixed-income investments are diversified across investment grade instruments of government and corporate issuers. Multi-assets are diversified across absolute return investment approaches and global tactical asset allocation, such as inflation protected securities, real estate investment trusts, commodities, currency and preferred stock. CMS Energy uses annual liability measurements, quarterly portfolio reviews, and periodic asset/liability studies to evaluate the need for adjustments to the portfolio allocation.

Contributions: Presented in the following table are the contributions to CMS Energy’s and Consumers’ DB Pension Plans:

In Millions
Years Ended December 31	2019				2018
CMS Energy, including Consumers
DB Pension Plans		$	—			$	240
Consumers
DB Pension Plans		$	—			$	234

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

to the DB Pension Plans in January 2020. Neither CMS Energy nor Consumers plans to contribute to the OPEB Plan in 2020. Actual future contributions will depend on future investment performance, discount rates, and various factors related to the participants of the DB Pension Plans and OPEB Plan. CMS Energy and Consumers will, at a minimum, contribute to the plans as needed to comply with federal funding requirements.

Benefit Payments: Presented in the following table are the expected benefit payments for each of the next five years and the five-year period thereafter:

In Millions
	DB Pension Plans				DB SERP				OPEB Plan
CMS Energy, including Consumers
2020		$	174			$	10			$	58
2021		176				10				60
2022		177				10				62
2023		177				10				63
2024		175				10				64
2025-2029		870				46				319
Consumers
2020		$	165			$	7			$	56
2021		166				7				58
2022		167				7				59
2023		167				7				60
2024		166				7				61
2025-2029		825				32				305

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

13**:**	Stock-Based Compensation

CMS Energy and Consumers provide a PISP to officers, employees, and non‑employee directors based on their contributions to the successful management of the company. The PISP has a ten-year term, expiring in May 2024.

In 2019, all awards were in the form of restricted stock or restricted stock units. The PISP also allows for unrestricted common stock, stock options, stock appreciation rights, phantom shares, performance units, and incentive options, none of which was granted in 2019, 2018, or 2017.

Shares awarded or subject to stock options, phantom shares, or performance units may not exceed 6.5 million shares from June 2014 through May 2024, nor may such awards to any recipient exceed 500,000 shares in any calendar year. CMS Energy and Consumers may issue awards of up to 3,258,000 shares of common stock under the PISP as of December 31, 2019. Shares for which payment or exercise is in cash, as well as shares that expire, terminate, or are canceled or forfeited, may be awarded or granted again under the PISP.

All awards under the PISP vest fully upon death. Upon a change of control of CMS Energy or termination under an officer separation agreement, the awards will vest in accordance with specific officer agreements. If stated in the award, for restricted stock recipients who terminate employment due to retirement or disability, a pro-rata portion of the award will vest upon termination, with any market-based award also contingent upon the outcome of the market condition and any performance-based award contingent upon the outcome of the performance condition. The pro-rata portion is equal to the portion of the service period served between the award grant date and the employee’s termination date. The remaining portion of the awards will be forfeited. All awards for directors vest fully upon retirement. Restricted shares may be forfeited if employment terminates for any other reason or if the minimum service requirements are not met, as described in the award document.

Restricted Stock Awards: Restricted stock awards for employees under the PISP are in the form of performance-based, market-based, and time-lapse restricted stock. Award recipients receive shares of CMS Energy common stock that have dividend and voting rights. The dividends on time-lapse restricted stock are paid in cash or in CMS Energy common stock. The dividends on performance-based and market-based restricted stock are paid in restricted shares equal to the value of the dividends. These additional restricted shares are subject to the same vesting conditions as the underlying restricted stock shares.

Performance-based restricted stock vesting is contingent on meeting at least a 36-month service requirement and a performance condition. The performance condition is based on an adjusted measure of CMS Energy’s EPS growth relative to a peer group over a three-year period. The awards granted in 2019, 2018, and 2017 require a 38-month service period. Market-based restricted stock vesting is generally contingent on meeting a three-year service requirement and a market condition. The market condition is based on a comparison of CMS Energy’s total shareholder return with the median total shareholder return of a peer group over the same three-year period. Depending on the outcome of the performance condition or the market condition, a recipient may earn a total award ranging from zero to 200 percent of the initial grant. Time-lapse restricted stock generally vests after a service period of three years.

Restricted Stock Units: In 2019, 2018, and 2017, CMS Energy and Consumers granted restricted stock units to certain non‑employee directors who elected to defer their restricted stock awards. The restricted stock units generally vest after a service period of one year or, if earlier, at the next annual meeting. The restricted stock units will be distributed to the recipients as shares in accordance with the directors’ deferral agreements. Restricted stock units do not have voting rights, but do have dividend rights. In lieu of cash dividend payments, the dividends on restricted stock units are paid in additional units equal to the value of the dividends. These additional restricted stock units are subject to the same vesting and distribution conditions as the underlying restricted stock units. No restricted stock units were forfeited during 2019.

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

	CMS Energy, including Consumers								Consumers
Year Ended December 31, 2019		Number of Shares		Weighted-Average Grant Date Fair Value per Share					Number of Shares		Weighted-Average Grant Date Fair Value per Share
Nonvested at beginning of period		1,211,229			$	39.70			1,158,836			$	39.71
Granted
Restricted stock		488,594			43.57				464,485			43.57
Restricted stock units		14,899			50.35				14,050			51.15
Vested
Restricted stock		(468,308	)		31.09				(447,214	)		31.11
Restricted stock units		(12,503	)		41.59				(11,836	)		42.35
Forfeited – restricted stock		(46,949	)		45.81				(40,139	)		45.69
Nonvested at end of period		1,186,962			$	44.56			1,138,182			$	44.57

Year Ended December 31, 2019	CMS Energy, including Consumers		Consumers
Granted
Time-lapse awards	119,167		113,627
Market-based awards	144,963		137,636
Performance-based awards	144,963		137,636
Director restricted stock units	13,575		13,005
Dividend equivalents on market-based awards	12,779		12,176
Dividend equivalents on performance-based awards	15,899		15,145
Dividend equivalents on restricted stock units	1,324		1,045
Additional market-based shares based on achievement of condition	15,320		14,550
Additional performance-based shares based on achievement of condition	35,503		33,715
Total granted	503,493		478,535

CMS Energy and Consumers charge the fair value of the restricted stock awards to expense over the required service period and charge the fair value of the restricted stock units to expense immediately. For performance-based awards, CMS Energy and Consumers estimate the number of shares expected to vest at the end of the performance period based on the probable achievement of the performance objective. Performance-based and market-based restricted stock awards have graded vesting features for retirement-eligible employees, and CMS Energy and Consumers recognize expense for those awards on a graded vesting schedule over the required service period. Expense for performance-based and market-based restricted stock awards for non‑retirement-eligible employees and time-lapse awards is recognized on a straight-line basis over the required service period.

The fair value of performance-based and time-lapse restricted stock and restricted stock units is based on the price of CMS Energy’s common stock on the grant date. The fair value of market-based restricted stock awards is calculated on the grant date using a Monte Carlo simulation. CMS Energy and Consumers base expected volatilities on the historical volatility of the price of CMS Energy common stock. The risk-free rate for valuation of the market-based restricted stock awards was based on the three-year U.S. Treasury yield at the award grant date.

Presented in the following table are the most important assumptions used to estimate the fair value of the market-based restricted stock awards:

Years Ended December 31	2019		2018		2017
Expected volatility	14.9	%	16.7	%	18.0	%
Expected dividend yield	2.8		2.8		3.0
Risk-free rate	2.5		2.1		1.5

Presented in the following table is the weighted-average grant-date fair value of all awards under the PISP:

Years Ended December 31	2019				2018				2017
CMS Energy, including Consumers
Weighted-average grant-date fair value per share
Restricted stock granted		$	43.57			$	26.49			$	28.61
Restricted stock units granted		50.35				41.77				41.98
Consumers
Weighted-average grant-date fair value per share
Restricted stock granted		$	43.57			$	26.51			$	28.67
Restricted stock units granted		51.15				42.01				41.97

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

In Millions
Years Ended December 31		2019				2018				2017
CMS Energy, including Consumers
Fair value of shares that vested during the year		$	26			$	27			$	37
Compensation expense recognized		22				17				17
Income tax benefit recognized		1				1				7
Consumers
Fair value of shares that vested during the year		$	25			$	26			$	35
Compensation expense recognized		21				16				16
Income tax benefit recognized		1				1				7

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

14**:**	Income Taxes

CMS Energy and its subsidiaries file a consolidated U.S. federal income tax return as well as a Michigan Corporate Income Tax return for the unitary business group and various other state unitary group combined income tax returns. Income taxes are allocated based on each company’s separate taxable income in accordance with the CMS Energy tax sharing agreement.

In December 2017, the TCJA was enacted, which changed existing federal tax law and included numerous provisions that affect businesses, with the primary impact being a reduction of the corporate tax rate from 35 percent to 21 percent.

Presented in the following table is the difference between actual income tax expense on continuing operations and income tax expense computed by applying the statutory U.S. federal income tax rate:

In Millions, Except Tax Rate
Years Ended December 31	2019				2018				2017
CMS Energy, including Consumers
Income from continuing operations before income taxes		$	829			$	774			$	886
Income tax expense at statutory rate		174				163				310
Increase (decrease) in income taxes from:
State and local income taxes, net of federal effect1		48				46				26
TCJA excess deferred taxes2		(31		)		(26		)		—
Production tax credits		(20		)		(14		)		(8		)
Accelerated flow-through of regulatory tax benefits3		(13		)		(39		)		(39		)
Research and development tax credits, net4		(2		)		(11		)		(1		)
Impact of the TCJA5		—				(4		)		148
Other, net		(9		)		—				(12		)
Income tax expense		$	147			$	115			$	424
Effective tax rate		17.7		%		14.9		%		47.9		%
Consumers
Income from continuing operations before income taxes		$	928			$	847			$	971
Income tax expense at statutory rate		195				178				340
Increase (decrease) in income taxes from:
State and local income taxes, net of federal effect1		53				51				30
TCJA excess deferred taxes2		(31		)		(26		)		—
Accelerated flow-through of regulatory tax benefits3		(13		)		(39		)		(39		)
Production tax credits		(12		)		(12		)		(8		)
Research and development tax credits, net4		(2		)		(11		)		(1		)
Impact of the TCJA5		—				1				33
Other, net		(5		)		—				(16		)
Income tax expense		$	185			$	142			$	339
Effective tax rate		19.9		%		16.8		%		34.9		%

1

In 2017, CMS Energy completed the evaluation of its methodology for the state apportionment of Consumers’ electricity sales to MISO, taking into account recent state tax law developments in the electric utility sector. To recognize the anticipated refund and the impact of the expected lower effective tax rate on their deferred state tax liabilities, CMS Energy, including Consumers, recorded a $14 million income tax benefit in 2017. These tax benefits were net of reserves for uncertain tax positions and primarily

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

2	In December 2017, Consumers remeasured its deferred tax assets and liabilities at the new federal tax rate enacted by the TCJA and recorded a net $1.6 billion regulatory liability. As a result of an order received in September 2019, Consumers began refunding these excess deferred taxes to customers. For additional details on the order received, see Note 3, Regulatory Matters.

3	In 2013, the MPSC issued an order authorizing Consumers to accelerate the flow-through to electric and gas customers of certain income tax benefits associated primarily with the cost of removal of plant placed in service before 1993. Consumers implemented this regulatory treatment beginning in 2014, with the electric portion ending in 2018 and the gas portion continuing through 2025.

4	In March 2018, Consumers finalized a study of research and development tax credits for the tax years 2012 through 2016. As a result, Consumers recognized an $8 million increase in the credit, net of reserves for uncertain tax positions, at that time.

5	In December 2017, CMS Energy and Consumers recorded a reasonable estimate to measure and account for the impact of the TCJA. In December 2018, CMS Energy recorded a true-up of their estimate and eliminated the $9 million valuation allowance on the sequestration of alternative minimum tax credits.

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

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

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

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

In Millions
December 31	2019				2018
CMS Energy, including Consumers
Deferred income tax assets
Tax loss and credit carryforwards		$	239			$	385
Net regulatory tax liability		385				395
Reserves and accruals		43				39
Total deferred income tax assets		$	667			$	819
Valuation allowance		(2		)		(8		)
Total deferred income tax assets, net of valuation allowance		$	665			$	811
Deferred income tax liabilities
Plant, property, and equipment		$	(2,033	)		$	(1,955	)
Employee benefits		(172		)		(165		)
Securitized costs		(59		)		(65		)
Gas inventory		(32		)		(35		)
Other		(24		)		(78		)
Total deferred income tax liabilities		$	(2,320	)		$	(2,298	)
Total net deferred income tax liabilities		$	(1,655	)		$	(1,487	)
Consumers
Deferred income tax assets
Net regulatory tax liability		$	385			$	395
Tax loss and credit carryforwards		20				64
Reserves and accruals		24				21
Total deferred income tax assets		$	429			$	480
Deferred income tax liabilities
Plant, property, and equipment		$	(1,995	)		$	(1,943	)
Employee benefits		(178		)		(172		)
Securitized costs		(59		)		(65		)
Gas inventory		(32		)		(35		)
Other		(29		)		(74		)
Total deferred income tax liabilities		$	(2,293	)		$	(2,289	)
Total net deferred income tax liabilities		$	(1,864	)		$	(1,809	)

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

Presented in the following table are the tax loss and credit carryforwards at December 31, 2019:

In Millions
	Gross Amount				Tax Attribute				Expiration
CMS Energy, including Consumers
Local net operating loss carryforwards		$	389			$	4		2023 – 2036
General business credits		206				206			2026 – 2039
Alternative minimum tax credits		29				29			Not applicable
Total tax attributes						$	239
Consumers
General business credits		$	20			$	20		2027 – 2039
Total tax attributes						$	20

CMS Energy has provided a valuation allowance of $2 million for the local tax loss carryforward. The TCJA repealed the corporate alternative minimum tax and requires companies to recover (through offsets of regular tax and through cash refunds) all alternative minimum tax credits over the four-year period ending in 2021. Therefore, for the year ended December 31, 2019, CMS Energy reclassified $31 million of alternative minimum tax credits to a current receivable.

CMS Energy and Consumers expect to utilize fully their tax loss and credit carryforwards for which no valuation allowance has been provided. It is reasonably possible that further adjustments will be made to the valuation allowances within one year.

Presented in the following table is a reconciliation of the beginning and ending amount of uncertain tax benefits:

In Millions
Years Ended December 31	2019				2018				2017
CMS Energy, including Consumers
Balance at beginning of period		$	19			$	14			$	5
Additions for current-year tax positions		1				1				10
Additions for prior-year tax positions		3				4				—
Reductions for prior-year tax positions		—				—				(1		)
Balance at end of period		$	23			$	19			$	14
Consumers
Balance at beginning of period		$	28			$	21			$	5
Additions for current-year tax positions		1				2				17
Additions for prior-year tax positions		5				5				—
Reductions for prior-year tax positions		—				—				(1		)
Balance at end of period		$	34			$	28			$	21

If recognized, all of these uncertain tax benefits would affect CMS Energy’s and Consumers’ annual effective tax rates in future years.

CMS Energy and Consumers recognize accrued interest and penalties, where applicable, as part of income tax expense. CMS Energy, including Consumers, recognized no interest or penalties for the years ended December 31, 2019, 2018, or 2017.

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

15**:**	Earnings Per Share—CMS Energy

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

In Millions, Except Per Share Amounts
Years Ended December 31	2019				2018				2017
Income available to common stockholders
Net income		$	682			$	659			$	462
Less income attributable to noncontrolling interests		2				2				2
Net income available to common stockholders – basic and diluted		$	680			$	657			$	460
Average common shares outstanding
Weighted-average shares – basic		283.0				282.2				280.0
Add dilutive nonvested stock awards		0.7				0.7				0.8
Add dilutive forward equity sale contracts		0.6				—				—
Weighted-average shares – diluted		284.3				282.9				280.8
Net income per average common share available to common stockholders
Basic		$	2.40			$	2.33			$	1.64
Diluted		2.39				2.32				1.64

Nonvested Stock Awards

CMS Energy’s nonvested stock awards are composed of participating and 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 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 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 5, Financings and Capitalization.

16**:**	Revenue

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

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

1	Amounts represent the enterprises segment’s operating revenue from independent power production and CMS ERM’s sales of energy commodities in support of the independent power production portfolio.

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

1	Amounts represent the enterprises segment’s operating revenue from independent power production and CMS ERM’s sales of energy commodities in support of the independent power production portfolio.

Electric and Gas Utilities

Consumers Utility Revenue: Consumers recognizes revenue primarily from the sale of electric and gas utility services at tariff-based rates regulated by the MPSC. Consumers’ customer base consists of a mix of residential, commercial, and diversified industrial customers. Consumers’ tariff-based sales performance obligations are described below.

•

Consumers has performance obligations for the service of standing ready to deliver electricity or natural gas to customers, and it satisfies these performance obligations over time. Consumers recognizes revenue at a fixed rate as it provides these services. These arrangements generally do not have fixed terms and remain in effect as long as the customer consumes the utility service. The rates are set by the MPSC through the rate-making process and represent the stand-alone selling price of Consumers’ service to stand ready to deliver.

•

Consumers has performance obligations for the service of delivering the commodity of electricity or natural gas to customers, and it satisfies these performance obligations upon delivery. Consumers recognizes revenue at a price per unit of electricity or natural gas delivered, based on the tariffs established by the MPSC. These arrangements generally do not have fixed terms and remain in effect as long as the customer consumes the utility service. The rates are set by the MPSC through the rate-making process and represent the stand-alone selling price of a bundled product comprising the commodity, electricity or natural gas, and the service of delivering such commodity.

In some instances, Consumers has specific fixed-term contracts with large commercial and industrial customers to provide electricity or gas at certain tariff rates or to provide gas transportation services at contracted rates. The amount of electricity and gas to be delivered under these contracts and the associated future revenue to be received are generally dependent on the customers’ needs. Accordingly, Consumers recognizes revenues at the tariff or contracted rate as electricity or gas is delivered to the customer. Consumers also has other miscellaneous contracts with customers related to pole and other property rentals, appliance service plans, and utility contract work. Generally, these contracts are short term or evergreen in nature.

Accounts Receivable and Unbilled Revenues: Accounts receivable comprise trade receivables and unbilled receivables. CMS Energy and Consumers record their accounts receivable at cost, which approximates fair value. CMS Energy and Consumers establish an allowance for uncollectible accounts based on historical losses, management’s assessment of existing economic conditions, customer payment trends, and other factors. CMS Energy and Consumers assess late payment fees on trade receivables based on contractual past-due terms established with customers. CMS Energy and Consumers charge off accounts deemed uncollectible to operating expense. Uncollectible expense for CMS Energy and Consumers was $29 million for the year ended December 31, 2019 and $29 million for the year ended December 31, 2018.

Consumers’ customers are billed monthly in cycles having billing dates that do not generally coincide with the end of a calendar month. This results in customers having received electricity or natural gas that they have not been billed for as of the month-end. Consumers estimates its unbilled revenues by applying an average billed rate to total unbilled deliveries for each customer class. Unbilled revenues, which are recorded as accounts receivable on CMS Energy’s and Consumers’ consolidated balance sheets, were $426 million at December 31, 2019 and $409 million at December 31, 2018.

Alternative‑Revenue Programs: The energy waste reduction incentive mechanism provides a financial incentive if the energy savings of Consumers’ customers exceed annual targets established by the MPSC. Consumers accounts for this program as an alternative-revenue program that meets the criteria for recognizing revenue related to the incentive as soon as energy savings exceed the annual targets established by the MPSC.

Under a gas revenue decoupling mechanism authorized by the MPSC, Consumers is allowed to adjust future gas rates for differences between Consumers’ actual 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.

17**:**	Other Income and Other Expense

Other income was not significant for any of the periods presented except for a $14 million gain on the sale of CMS Energy common stock by Consumers in 2017. This gain was eliminated on CMS Energy’s consolidated statements of income.

Presented in the following table are the components of other expense at CMS Energy and Consumers:

In Millions
Years Ended December 31	2019				2018				2017
CMS Energy, including Consumers
Donations		$	(3	)		$	(13	)		$	(31	)
Civic and political expenditures		(6		)		(6		)		(27		)
Loss on reacquired and extinguished debt		—				(16		)		(18		)
All other		(4		)		(13		)		—
Total other expense – CMS Energy		$	(13	)		$	(48	)		$	(76	)
Consumers
Donations		$	(3	)		$	(13	)		$	(31	)
Civic and political expenditures		(6		)		(6		)		(27		)
All other		(4		)		(11		)		—
Total other expense – Consumers		$	(13	)		$	(30	)		$	(58	)

18**:**	Cash and Cash Equivalents

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

In Millions
December 31	2019				2018
CMS Energy, including Consumers
Cash and cash equivalents		$	140			$	153
Restricted cash and cash equivalents		17				21
Other non‑current assets		—				1
Cash and cash equivalents, including restricted amounts		$	157			$	175
Consumers
Cash and cash equivalents		$	11			$	39
Restricted cash and cash equivalents		17				17
Cash and cash equivalents, including restricted amounts		$	28			$	56

Cash and Cash Equivalents: Cash and cash equivalents include short-term, highly liquid investments with original maturities of three months or less.

Restricted Cash and Cash Equivalents: Restricted cash and cash equivalents are held primarily for the repayment of securitization bonds and funds held in escrow. Cash and cash equivalents may also be restricted to pay other contractual obligations such as leasing of coal railcars. These amounts are classified as current assets since they relate to payments that could or will occur within one year.

19**:**	Reportable Segments

Reportable segments consist of business units defined by the products and services they offer. CMS Energy and Consumers evaluate the performance of each segment based on its contribution to net income available to CMS Energy’s common stockholders.

Accounting policies for CMS Energy’s and Consumers’ segments are as described in Note 1, Significant Accounting Policies. The consolidated financial statements reflect the assets, liabilities, revenues, and expenses of the individual segments when appropriate. Accounts are allocated among the segments when common accounts are attributable to more than one segment. The allocations are based on certain measures of business activities, such as revenue, labor dollars, customers, other operating and maintenance expense, construction expense, leased property, taxes, or functional surveys. For example, customer receivables are allocated based on revenue, and pension provisions are allocated based on labor dollars.

Inter-segment sales and transfers are accounted for at current market prices and are eliminated in consolidated net income available to common stockholders by segment.

CMS Energy

The segments reported for CMS Energy are:

•	electric utility, consisting of regulated activities associated with the generation, purchase, transmission, distribution, and sale of electricity in Michigan

•	gas utility, consisting of regulated activities associated with the purchase, transmission, storage, distribution, and sale of natural gas in Michigan

•	enterprises, consisting of various subsidiaries engaging in domestic independent power production, including the development and operation of renewable generation, and the marketing of independent power production

•	EnerBank, a Utah state-chartered, FDIC-insured industrial bank providing unsecured consumer installment loans, largely for financing home improvements

CMS Energy presents corporate interest and other expenses and Consumers’ other consolidated entities within other reconciling items. In 2019, EnerBank’s assets exceeded ten percent of CMS Energy’s consolidated assets.

Consumers

The segments reported for Consumers are:

•	electric utility, consisting of regulated activities associated with the generation, purchase, transmission, distribution, and sale of electricity in Michigan

•	gas utility, consisting of regulated activities associated with the purchase, transmission, storage, distribution, and sale of natural gas in Michigan

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

Presented in the following tables is financial information by segment:

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

In Millions
Years Ended December 31	2019				2018				2017
Consumers
Interest charges
Electric utility		$	213			$	209			$	201
Gas utility		83				79				74
Other reconciling items		1				1				1
Total interest charges – Consumers		$	297			$	289			$	276
CMS Energy, including Consumers
Income tax expense (benefit)
Electric utility		$	134			$	109			$	245
Gas utility		51				33				96
Enterprises		2				2				72
EnerBank		16				12				22
Other reconciling items		(56		)		(41		)		(11		)
Total income tax expense – CMS Energy		$	147			$	115			$	424
Consumers
Income tax expense (benefit)
Electric utility		$	134			$	109			$	245
Gas utility		51				33				96
Other reconciling items		—				—				(2		)
Total income tax expense – Consumers		$	185			$	142			$	339
CMS Energy, including Consumers
Net income (loss) available to common stockholders
Electric utility		$	509			$	535			$	455
Gas utility		233				169				173
Enterprises		33				34				(27		)
EnerBank		49				38				28
Other reconciling items		(144		)		(119		)		(169		)
Total net income available to common stockholders – CMS Energy		$	680			$	657			$	460
Consumers
Net income (loss) available to common stoc**kholder
Electric utility		$	509			$	535			$	455
Gas utility		233				169				173
Other reconciling items		(1		)		(1		)		2
Total net income available to common stockholder – Consumers		$	741			$	703			$	630
CMS Energy, including Consumers
Plant, property, and equipment, gross
Electric utility2,3		$	16,158			$	16,027			$	15,221
Gas utility²		8,785				7,919				7,080
Enterprises		405				412				167
EnerBank		22				25				21
Other reconciling items		20				17				17
Total plant, property, and equipment, gross – CMS Energy		$	25,390			$	24,400			$	22,506

In Millions
Years Ended December 31	2019				2018				2017
Consumers
Plant, property, and equipment, gross
Electric utility2,3		$	16,158			$	16,027			$	15,221
Gas utility²		8,785				7,919				7,080
Other reconciling items		20				17				17
Total plant, property, and equipment, gross – Consumers		$	24,963			$	23,963			$	22,318
CMS Energy, including Consumers
Investments in equity method investees¹
Enterprises		$	71			$	69			$	64
Total investments in equity method investees – CMS Energy		$	71			$	69			$	64
CMS Energy, including Consumers
Total assets
Electric utility²		$	14,911			$	14,079			$	13,906
Gas utility²		8,659				7,806				7,139
Enterprises		527				540				342
EnerBank		2,692				2,006				1,453
Other reconciling items		48				98				210
Total assets – CMS Energy		$	26,837			$	24,529			$	23,050
Consumers
Total assets
Electric utility²		$	14,973			$	14,143			$	13,907
Gas utility²		8,706				7,853				7,139
Other reconciling items		20				29				53
Total assets – Consumers		$	23,699			$	22,025			$	21,099
CMS Energy, including Consumers
Capital expenditures**4
Electric utility5		$	1,162			$	865			$	882
Gas utility5		971				958				800
Enterprises		5				246				33
EnerBank		8				10				6
Other reconciling items		1				2				1
Total capital expenditures – CMS Energy		$	2,147			$	2,081			$	1,722
Consumers
Capital expenditures**4
Electric utility5		$	1,162			$	865			$	882
Gas utility5		971				958				800
Other reconciling items		1				2				1
Total capital expenditures – Consumers		$	2,134			$	1,825			$	1,683

1	Consumers had no significant equity method investments.

2	Amounts include a portion of Consumers’ other common assets attributable to both the electric and gas utility businesses.

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

4	Amounts include finance lease additions.

5	Amounts include a portion of Consumers’ capital expenditures for plant and equipment attributable to both the electric and gas utility businesses.

20**:**	Related-Party Transactions—Consumers

Consumers enters into a number of transactions with related parties in the normal course of business. These transactions include:

•	purchases of electricity from affiliates of CMS Enterprises

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

Transactions involving power supply purchases from certain affiliates of CMS Enterprises are based on avoided costs under PURPA, state law, and competitive bidding. The payment of parent company overhead costs is based on the use of accepted industry allocation methodologies. These payments are for costs that occur in the normal course of business.

Presented in the following table is Consumers’ expense recorded from related-party transactions for the years ended December 31:

In Millions
Description	Related Party	2019				2018				2017
Purchases of capacity and energy	Affiliates of CMS Enterprises		$	75			$	83			$	90

Amounts payable to related parties for purchased power and other services were $26 million at December 31, 2019 and $20 million at December 31, 2018. Accounts receivable from related parties were $8 million at December 31, 2019 and $13 million at December 31, 2018.

In 2018, CMS Energy and Consumers sold the DB SERP debt securities and CMS Energy issued a demand note payable to the DB SERP rabbi trust. The portion of the demand note attributable to Consumers was recorded as a note receivable – related party on Consumers’ consolidated balance sheets at December 31, 2019 and December 31, 2018. For additional details about the note receivable – related party, see Note 7, Financial Instruments and Note 8, Notes Receivable.

Beginning in December 2018, Consumers and a subsidiary of CMS Energy executed a 20‑year natural gas transportation agreement, related to a pipeline owned by Consumers. For additional details about the agreement, see Note 10, Leases and Palisades Financing.

Consumers owned shares of CMS Energy common stock with a fair value of $1 million at December 31, 2019 and December 31, 2018.

In January 2020, Consumers renewed a short-term credit agreement with CMS Energy, permitting Consumers to borrow up to $300 million. At December 31, 2019, there were no outstanding loans under the agreement.

21**:**	Variable Interest Entities

CMS Energy has variable interests in T.E.S. Filer City, Grayling, Genesee, and Craven. While CMS Energy owns 50 percent of each partnership, it is not the primary beneficiary of any of these partnerships because decision making is shared among unrelated parties, and no one party has the ability to direct the activities that most significantly impact the entities’ economic performance, such as operations and maintenance, plant dispatch, and fuel strategy. The partners must agree on all major decisions for each of the partnerships.

Presented in the following table is information about these partnerships:

Name	Nature of the Entity	Nature of CMS Energy’s Involvement
T.E.S. Filer City	Coal-fueled power generator	Long-term PPA between partnership and Consumers
Employee assignment agreement
Grayling	Wood waste-fueled power generator	Long-term PPA between partnership and Consumers
Reduced dispatch agreement with Consumers¹
Operating and management contract
Genesee	Wood waste-fueled power generator	Long-term PPA between partnership and Consumers
Reduced dispatch agreement with Consumers¹
Operating and management contract
Guarantee of fixed rate debt²
Deferred collection of certain receivables³
Craven	Wood waste-fueled power generator	Operating and management contract

1	Reduced dispatch agreements allow the facilities to be dispatched based on the market price of power compared with the cost of production of the plants. This results in fuel cost savings that each partnership shares with Consumers’ customers.

2	CMS Energy’s guarantee is capped at $3 million annually through 2021. For additional details on this guarantee, see Note 4, Contingencies and Commitments—Guarantees.

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

The creditors of these partnerships do not have recourse to the general credit of CMS Energy or Consumers, except as noted in the table above. Consumers has not provided any financial or other support during the periods presented that was not previously contractually required.

CMS Energy’s investment in these partnerships is included in investments on its consolidated balance sheets in the amount of $71 million as of December 31, 2019 and $69 million as of December 31, 2018.

22**:**	Asset Sales and Exit Activities

Enterprises

In April 2019, DIG completed a sale of transmission equipment to ITC and recognized a pre-tax gain of $16 million within maintenance and other operating expenses on CMS Energy’s consolidated statements of income.

Consumers

Asset Sale: In September 2019, Consumers completed a sale of a portion of its electric utility’s substation transmission equipment to METC. In December 2019, Consumers filed an application with the MPSC requesting approval to share voluntarily half of the gain from the sale with customers. As a result, during 2019, Consumers recorded a regulatory liability of $17 million and recognized a pre-tax gain of $17 million within maintenance and other operating expenses on its consolidated statements of income. For additional details on the sharing of the gain with customers, see Note 3, Regulatory Matters.

Exit Activities: Under its Clean Energy Plan, Consumers plans to retire the D.E. Karn 1 & 2 coal-fueled electric generating units in 2023. For additional details on Consumers’ plans to request recovery of the remaining book value of the two units upon their retirement, see Note 3, Regulatory Matters.

In October 2019, Consumers announced a retention incentive program to ensure necessary staffing at the D.E. Karn generating complex through the anticipated retirement of the coal-fueled electric generating units. Based on the number of employees that have chosen to participate, the aggregate cost of the program through 2023 is estimated to be $35 million. Consumers will seek recovery of these costs from customers.

In 2019, Consumers’ electric utility recognized $6 million related to retention and severance benefits within maintenance and other operating expenses on Consumers’ consolidated statements of income. The amount was reported as other liabilities on its consolidated balance sheets at December 31, 2019, which included $2 million of current liabilities.

23**:**	Quarterly Financial and Common Stock Information (Unaudited)

In Millions, Except Per Share Amounts
	2019
Quarters Ended	March 31				June 30				Sept 30				Dec 31
CMS Energy, including Consumers
Operating revenue		$	2,059			$	1,445			$	1,546			$	1,795
Operating income		359				218				351				311
Net income		213				94				207				168
Income attributable to noncontrolling interests		—				1				—				1
Net income available to common stockholders		213				93				207				167
Basic earnings per average common share¹		0.75				0.33				0.73				0.59
Diluted earnings per average common share¹		0.75				0.33				0.73				0.58
Consumers
Operating revenue		$	1,943			$	1,334			$	1,429			$	1,670
Operating income		328				175				319				308
Net income		226				98				213				206
Preferred stock dividends		—				1				—				1
Net income available to common stockholder		226				97				213				205

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

In Millions, Except Per Share Amounts
	2018
Quarters Ended	March 31				June 30				Sept 30				Dec 31
CMS Energy, including Consumers
Operating revenue		$	1,953			$	1,492			$	1,599			$	1,829
Operating income		363				255				294				250
Net income		241				140				169				109
Income attributable to noncontrolling interests		—				1				—				1
Net income available to common stockholders		241				139				169				108
Basic earnings per average common share¹		0.86				0.49				0.60				0.38
Diluted earnings per average common share¹		0.86				0.49				0.59				0.38
Consumers
Operating revenue		$	1,855			$	1,395			$	1,502			$	1,712
Operating income		334				229				271				231
Net income		242				152				180				131
Preferred stock dividends		—				1				—				1
Net income available to common stockholder		242				151				180				130

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

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of CMS Energy Corporation

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of CMS Energy Corporation and its subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2019, including the related notes and financial statement schedules of CMS Energy Corporation listed in the index appearing under Item 15 (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control — Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accounting for the Effects of New Regulatory Matters

As described in Note 3 to the consolidated financial statements, the Company is a utility and must apply regulatory accounting when its rates are designed to recover specific costs of providing regulated services. Under regulatory accounting, the Company records regulatory assets or liabilities for certain transactions that would have been treated as expense or revenue by a non*-*regulated business. As of December 31, 2019, the Company has recognized a total of $2,522 million of regulatory assets and $3,829 million of regulatory liabilities. As described by management, there are multiple participants to rate case proceedings who often challenge various aspects of those proceedings, including the prudence of the Company’s policies and practices. These participants often seek cost disallowances and other relief and have appealed significant decisions reached by the regulators. The recovery of regulatory assets and the settlement of regulatory liabilities are contingent upon the outcomes of rate cases and regulatory proceedings.

The principal considerations for our determination that performing procedures relating to management’s accounting for the effects of new regulatory matters is a critical audit matter are (i) there was a high degree of auditor judgment and subjectivity applied to evaluate management’s assessment of the potential outcomes and related accounting impacts associated with pending rate case proceedings, (ii) in some cases, there was significant audit effort necessary to assess contrary evidence from various parties involved in rate case proceedings, and (iii) there was significant audit effort necessary to evaluate audit evidence related to the recovery of regulatory assets and the settlement of regulatory liabilities.

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

/s/ PricewaterhouseCoopers LLP

Detroit, Michigan

February 6, 2020

We have served as the Company’s auditor since 2007.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholder of Consumers Energy Company

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Consumers Energy Company and its subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2019, including the related notes and financial statement schedule of Consumers Energy Company listed in the index appearing under Item 15 (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control — Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Detroit, Michigan

February 6, 2020

We have served as the Company’s auditor since 2007.