Item 8. Financial Statements and Supplementary Data

370K characters. Original on sec.gov · Markdown

Item 8. Financial Statements and Supplementary Data

Index to Financial Statements


CMS Energy Consolidated Financial Statements		92
Consolidated Statements of Income		92
Consolidated Statements of Comprehensive Income		94
Consolidated Statements of Cash Flows		95
Consolidated Balance Sheets		98
Consolidated Statements of Changes in Equity		100
Consumers Consolidated Financial Statements		102
Consolidated Statements of Income		102
Consolidated Statements of Comprehensive Income		103
Consolidated Statements of Cash Flows		104
Consolidated Balance Sheets		106
Consolidated Statements of Changes in Equity		108
Notes to the Consolidated Financial Statements		109
1:	Significant Accounting Policies	109

2:	Regulatory Matters	112
3:	Contingencies and Commitments	118
4:	Financings and Capitalization	124
5:	Fair Value Measurements	132
6:	Financial Instruments	134

7:	Plant, Property, and Equipment	135
8:	Leases	140
9:	Asset Retirement Obligations	144
10:	Retirement Benefits	146
11:	Stock-based Compensation	157
12:	Income Taxes	160
13:	Earnings Per Share—CMS Energy	164
14:	Revenue	165
15:	Other Income and Other Expense	169
16:	Reportable Segments	170
17:	Related-party Transactions—Consumers	175
18:	Variable Interest Entities	176
19:	Exit Activities and Discontinued Operations	178

Reports of Independent Registered Public Accounting Firm (PCAOB ID 238)		180
CMS Energy		180
Consumers		184

CMS Energy Corporation

Consolidated Statements of Income


In Millions, Except Per Share Amounts

Years Ended December 31	2023	2022			2021
Operating Revenue			$	7,462		$	8,596	$	7,329
Operating Expenses
Fuel for electric generation			561			905		593
Purchased and interchange power			1,375			1,928		1,665
Purchased power – related parties			75			76		77
Cost of gas sold			902			1,256		735
Maintenance and other operating expenses			1,687			1,669		1,610
Depreciation and amortization			1,180			1,126		1,114
General taxes			447			412		389
Total operating expenses			6,227			7,372		6,183
Operating Income			1,235			1,224		1,146
Other Income (Expense)




Non-operating retirement benefits, net			180			205		165
Other income			195			19		30
Other expense			(13)			(27)		(18)
Total other income			362			197		177
Interest Charges
Interest on long-term debt			616			509		481
Interest expense – related parties			12			12		12
Other interest expense			18			—		10
Allowance for borrowed funds used during construction			(3)			(2)		(3)
Total interest charges			643			519		500
Income Before Income Taxes			954			902		823
Income Tax Expense			147			93		95
Income From Continuing Operations			807			809		728
Income From Discontinued Operations, Net of Tax of $—, $1, and $170			1			4		602
Net Income			808			813		1,330
Loss Attributable to Noncontrolling Interests			(79)			(24)		(23)
Net Income Attributable to CMS Energy			887			837		1,353
Preferred Stock Dividends			10			10		5
Net Income Available to Common Stockholders			$	877		$	827	$	1,348

Table of Contents


In Millions, Except Per Share Amounts

Years Ended December 31	2023	2022			2021
Basic Earnings Per Average Common Share
Income from continuing operations per average common share available to common stockholders			$	3.01		$	2.84	$	2.58
Income from discontinued operations per average common share available to common stockholders			—			0.01		2.08
Basic earnings per average common share			$	3.01		$	2.85	$	4.66
Diluted Earnings Per Average Common Share
Income from continuing operations per average common share available to common stockholders			$	3.01		$	2.84	$	2.58
Income from discontinued operations per average common share available to common stockholders			—			0.01		2.08
Diluted earnings per average common share			$	3.01		$	2.85	$	4.66

The accompanying notes are an integral part of these statements.

Table of Contents

CMS Energy Corporation

Consolidated Statements of Comprehensive Income


In Millions

Years Ended December 31	2023	2022			2021
Net Income			$	808		$	813	$	1,330
Retirement Benefits Liability
Net gain arising during the period, net of tax of $2, $—, and $6			5			1		19
Settlement arising during the period, net of tax of $— for all periods			—			—		1

Amortization of net actuarial loss, net of tax of $—, $1, and $2			2			4		5
Amortization of prior service credit, net of tax of $— for all periods			(1)			(1)		(1)




Derivatives
Unrealized gain on derivative instruments, net of tax of $—, $1, and $—			—			2		2
Reclassification adjustments included in net income, net of tax of $—, $—, and $1			—			1		1
Other Comprehensive Income			6			7		27
Comprehensive Income			814			820		1,357
Comprehensive Loss Attributable to Noncontrolling Interests			(79)			(24)		(23)
Comprehensive Income Attributable to CMS Energy			$	893		$	844	$	1,380

The accompanying notes are an integral part of these statements.

CMS Energy Corporation

Consolidated Statements of Cash Flows


In Millions
Years Ended December 31	2023			2022			2021
Cash Flows from Operating Activities
Net income		$	808		$	813		$	1,330
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		1,180			1,126			1,114
Deferred income taxes and investment tax credits		157			89			249
Bad debt expense		34			50			22
Postretirement benefits contributions		(12)			(12)			(12)

Gain from sale of EnerBank		—			(5)			(657)
Other non‑cash operating activities and reconciling adjustments		(274)			(93)			(70)
Net cash used in discontinued operations		—			—			(111)
Changes in assets and liabilities
Accounts receivable and accrued revenue		241			(677)			(103)
Inventories		185			(450)			(93)
Accounts payable and accrued rate refunds		(136)			4			153
Other current assets and liabilities		(21)			14			13
Other non‑current assets and liabilities		147			(4)			(16)
Net cash provided by operating activities		2,309			855			1,819
Cash Flows from Investing Activities
Capital expenditures (excludes assets placed under finance lease)		(2,407)			(2,374)			(2,076)
Covert Generating Station acquisition		(812)			—			—




Net proceeds from sale of EnerBank		—			5			898

Net cash provided by discontinued operations		—			—			78
Cost to retire property and other investing activities		(167)			(107)			(133)
Net cash used in investing activities		(3,386)			(2,476)			(1,233)
Cash Flows from Financing Activities
Proceeds from issuance of debt		3,551			1,899			335
Retirement of debt		(2,132)			(106)			(235)

Increase in notes payable		73			20			—
Issuance of common stock		192			69			26
Issuance of preferred stock, net of issuance costs		—			—			224
Payment of dividends on common and preferred stock		(579)			(544)			(508)

Proceeds from the sale of membership interest in VIE to tax equity investor		86			49			—
Contribution from noncontrolling interest		6			2			1
Net cash used in discontinued operations		—			—			(84)
Other financing costs		(54)			(62)			(54)
Net cash provided by (used in) financing activities		1,143			1,327			(295)

Table of Contents


In Millions
Years Ended December 31	2023			2022			2021
Net Increase (Decrease) in Cash and Cash Equivalents, Including Restricted Amounts		66			(294)			291
Cash and Cash Equivalents, Including Restricted Amounts, Beginning of Period		182			476			185
Cash and Cash Equivalents, Including Restricted Amounts, End of Period		$	248		$	182		$	476
Other Cash Flow Activities and Non‑cash Investing and Financing Activities
Cash transactions
Interest paid (net of amounts capitalized)		$	607		$	490		$	489
Income taxes paid		15			1			16
Non‑cash transactions
Capital expenditures not paid		$	265		$	228		$	196

The accompanying notes are an integral part of these statements.

Table of Contents

(This page intentionally left blank)

Table of Contents

CMS Energy Corporation

Consolidated Balance Sheets


ASSETS
In Millions
December 31	2023			2022
Current Assets
Cash and cash equivalents		$	227		$	164
Restricted cash and cash equivalents		21			18
Accounts receivable and accrued revenue, less allowance of $21 in 2023 and $27 in 2022		933			1,564


Accounts receivable – related parties		11			16

Inventories at average cost
Gas in underground storage		587			840
Materials and supplies		267			212
Generating plant fuel stock		84			65
Deferred property taxes		426			384
Regulatory assets		203			57

Prepayments and other current assets		80			113
Total current assets		2,839			3,433
Plant, Property, and Equipment
Plant, property, and equipment, gross		33,135			30,491
Less accumulated depreciation and amortization		9,007			8,960
Plant, property, and equipment, net		24,128			21,531
Construction work in progress		944			1,182
Total plant, property, and equipment		25,072			22,713
Other Non‑current Assets
Regulatory assets		3,683			3,595
Accounts receivable		22			23
Investments		76			71
Postretirement benefits		1,468			1,208

Other		357			310
Total other non‑current assets		5,606			5,207
Total Assets		$	33,517		$	31,353

Table of Contents


LIABILITIES AND EQUITY
In Millions
December 31	2023			2022
Current Liabilities
Current portion of long-term debt and finance leases		$	980		$	1,099
Notes payable		93			20
Accounts payable		802			928
Accounts payable – related parties		7			8
Accrued rate refunds		54			—
Accrued interest		142			122
Accrued taxes		612			538
Regulatory liabilities		56			104

Other current liabilities		149			166
Total current liabilities		2,895			2,985
Non‑current Liabilities
Long-term debt		14,508			13,122
Non-current portion of finance leases		62			68
Regulatory liabilities		3,894			3,796
Postretirement benefits		106			108
Asset retirement obligations		771			746
Deferred investment tax credit		126			129
Deferred income taxes		2,615			2,407

Other non‑current liabilities		415			397
Total non‑current liabilities		22,497			20,773
Commitments and Contingencies (Notes 2 and 3)
Equity
Common stockholders’ equity
Common stock, authorized 350.0 shares in both periods; outstanding 294.4 shares in 2023 and 291.3 shares in 2022		3			3
Other paid-in capital		5,705			5,490
Accumulated other comprehensive loss		(46)			(52)
Retained earnings		1,658			1,350
Total common stockholders’ equity		7,320			6,791
Cumulative redeemable perpetual preferred stock, Series C, authorized 9.2 depositary shares; outstanding 9.2 depositary shares in both periods		224			224
Total stockholders’ equity		7,544			7,015
Noncontrolling interests		581			580
Total equity		8,125			7,595
Total Liabilities and Equity		$	33,517		$	31,353

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	2023	2022	2021	2023	2022			2021
Total Equity at Beginning of Period						$	7,595		$	7,188	$	6,077
Common Stock


At beginning and end of period						3			3		3
Other Paid-in Capital
At beginning of period	291,268	289,758	288,940			5,490			5,406		5,365
Common stock issued	3,355	1,704	997			222			93		50
Common stock repurchased	(119)	(151)	(157)			(7)			(9)		(9)

Common stock reacquired	(64)	(43)	(22)			—			—		—
At end of period	294,440	291,268	289,758			5,705			5,490		5,406
Accumulated Other Comprehensive Loss
At beginning of period						(52)			(59)		(86)
Retirement benefits liability
At beginning of period						(52)			(56)		(80)

Net gain arising during the period						5			1		19
Settlement arising during the period						—			—		1

Amortization of net actuarial loss						2			4		5
Amortization of prior service credit						(1)			(1)		(1)
At end of period						(46)			(52)		(56)







Derivative instruments
At beginning of period						—			(3)		(6)

Unrealized gain on derivative instruments						—			2		2
Reclassification adjustments included in net income						—			1		1
At end of period						—			—		(3)
At end of period						(46)			(52)		(59)
Retained Earnings
At beginning of period						1,350			1,057		214

Net income attributable to CMS Energy						887			837		1,353
Dividends declared on common stock						(569)			(534)		(505)
Dividends declared on preferred stock						(10)			(10)		(5)
At end of period						1,658			1,350		1,057
Cumulative Redeemable Perpetual Preferred Stock, Series C
At beginning of period						224			224		—
Preferred stock issued, net of issuance costs						—			—		224
At end of period						224			224		224


In Millions, Except Number of Shares in Thousands and Per Share Amounts

	Number of Shares
Years Ended December 31	2023	2022	2021	2023	2022			2021
Noncontrolling Interests
At beginning of period						580			557		581

Sale of membership interest in VIE to tax equity investor						86			49		—
Contribution from noncontrolling interest						6			2		1
Loss attributable to noncontrolling interests						(79)			(24)		(23)
Distributions and other changes in noncontrolling interests						(12)			(4)		(2)
At end of period						581			580		557
Total Equity at End of Period						$	8,125		$	7,595	$	7,188
Dividends declared per common share						$	1.9500		$	1.8400	$	1.7400
Dividends declared per preferred stock Series C depositary share						$	1.0500		$	1.0500	$	0.5688

The accompanying notes are an integral part of these statements.

Table of Contents

Consumers Energy Company

Consolidated Statements of Income


In Millions

Years Ended December 31	2023	2022			2021
Operating Revenue			$	7,166		$	8,151	$	7,021
Operating Expenses
Fuel for electric generation			435			662		463
Purchased and interchange power			1,331			1,867		1,599
Purchased power – related parties			75			76		77
Cost of gas sold			897			1,243		726
Maintenance and other operating expenses			1,586			1,582		1,531
Depreciation and amortization			1,137			1,088		1,077
General taxes			437			400		373
Total operating expenses			5,898			6,918		5,846
Operating Income			1,268			1,233		1,175
Other Income (Expense)



Non-operating retirement benefits, net			171			195		155
Other income			49			17		23
Other expense			(12)			(25)		(18)
Total other income			208			187		160
Interest Charges
Interest on long-term debt			415			325		294
Interest expense – related parties			20			12		12
Other interest expense			16			—		8
Allowance for borrowed funds used during construction			(3)			(2)		(3)
Total interest charges			448			335		311
Income Before Income Taxes			1,028			1,085		1,024
Income Tax Expense			161			140		156
Net Income			867			945		868
Preferred Stock Dividends			2			2		2
Net Income Available to Common Stockholder			$	865		$	943	$	866

The accompanying notes are an integral part of these statements.

Table of Contents

Consumers Energy Company

Consolidated Statements of Comprehensive Income


In Millions

Years Ended December 31	2023	2022			2021
Net Income			$	867		$	945	$	868
Retirement Benefits Liability
Net gain (loss) arising during the period, net of tax of $—, $5, and $1			(1)			15		2
Amortization of net actuarial loss, net of tax of $—, $—, and $1			1			2		2




Other Comprehensive Income			—			17		4
Comprehensive Income			$	867		$	962	$	872

The accompanying notes are an integral part of these statements.

Consumers Energy Company

Consolidated Statements of Cash Flows


In Millions
Years Ended December 31	2023			2022			2021
Cash Flows from Operating Activities
Net income		$	867		$	945		$	868
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		1,137			1,088			1,077
Deferred income taxes and investment tax credits		156			134			154
Bad debt expense		34			50			22
Postretirement benefits contributions		(9)			(9)			(9)
Other non‑cash operating activities and reconciling adjustments		(123)			(87)			(64)
Changes in assets and liabilities
Accounts and notes receivable and accrued revenue		219			(660)			(103)
Inventories		186			(447)			(90)
Accounts payable and accrued rate refunds		(127)			(9)			140
Other current assets and liabilities		(35)			18			27
Other non-current assets and liabilities		125			(29)			(40)
Net cash provided by operating activities		2,430			994			1,982
Cash Flows from Investing Activities
Capital expenditures (excludes assets placed under finance lease)		(2,248)			(2,239)			(2,052)
Covert Generating Station acquisition		(812)			—			—



Cost to retire property and other investing activities		(141)			(105)			(133)
Net cash used in investing activities		(3,201)			(2,344)			(2,185)
Cash Flows from Financing Activities
Proceeds from issuance of debt		2,666			1,799			335
Retirement of debt		(1,654)			(28)			(27)
Increase in notes payable		73			20			—
Increase (decrease) in notes payable – related parties		(75)			(317)			85
Stockholder contribution		475			685			575
Payment of dividends on common and preferred stock		(697)			(771)			(724)

Other financing costs		(21)			(22)			(32)
Net cash provided by financing activities		767			1,366			212
Net Increase (Decrease) in Cash and Cash Equivalents, Including Restricted Amounts		(4)			16			9
Cash and Cash Equivalents, Including Restricted Amounts, Beginning of Period		60			44			35
Cash and Cash Equivalents, Including Restricted Amounts, End of Period		$	56		$	60		$	44


In Millions
Years Ended December 31	2023			2022			2021
Other Cash Flow Activities and Non‑cash Investing and Financing Activities
Cash transactions
Interest paid (net of amounts capitalized)		$	417		$	309		$	298
Income taxes paid (refunds received), net		31			(2)			(10)
Non‑cash transactions
Capital expenditures not paid		$	264		$	210		$	192

The accompanying notes are an integral part of these statements.

Table of Contents

Consumers Energy Company

Consolidated Balance Sheets


ASSETS
In Millions
December 31	2023			2022
Current Assets
Cash and cash equivalents		$	35		$	43
Restricted cash and cash equivalents		21			17
Accounts receivable and accrued revenue, less allowance of $21 in 2023 and $27 in 2022		909			1,524


Accounts and notes receivable – related parties		11			10

Inventories at average cost
Gas in underground storage		587			840
Materials and supplies		257			206
Generating plant fuel stock		80			59
Deferred property taxes		426			384
Regulatory assets		203			57
Prepayments and other current assets		65			96
Total current assets		2,594			3,236
Plant, Property, and Equipment
Plant, property, and equipment, gross		31,723			29,342
Less accumulated depreciation and amortization		8,796			8,791
Plant, property, and equipment, net		22,927			20,551
Construction work in progress		845			994
Total plant, property, and equipment		23,772			21,545
Other Non-current Assets
Regulatory assets		3,683			3,595
Accounts receivable		28			29
Accounts and notes receivable – related parties		95			99
Postretirement benefits		1,367			1,126
Other		313			286
Total other non-current assets		5,486			5,135
Total Assets		$	31,852		$	29,916

Table of Contents


LIABILITIES AND EQUITY
In Millions
December 31	2023			2022
Current Liabilities
Current portion of long-term debt and finance leases		$	731		$	1,000
Notes payable		93			20
Notes payable – related parties		—			75
Accounts payable		764			864
Accounts payable – related parties		13			15
Accrued rate refunds		54			—
Accrued interest		110			90
Accrued taxes		614			556
Regulatory liabilities		56			104
Other current liabilities		128			147
Total current liabilities		2,563			2,871
Non-current Liabilities
Long-term debt		10,037			9,192
Long-term debt – related parties		424			—
Non-current portion of finance leases		39			45
Regulatory liabilities		3,894			3,796
Postretirement benefits		77			79
Asset retirement obligations		739			722
Deferred investment tax credit		126			129
Deferred income taxes		2,789			2,585
Other non-current liabilities		364			342
Total non-current liabilities		18,489			16,890
Commitments and Contingencies (Notes 2 and 3)
Equity
Common stockholder’s equity
Common stock, authorized 125.0 shares; outstanding 84.1 shares in both periods		841			841
Other paid-in capital		7,759			7,284
Accumulated other comprehensive loss		(15)			(15)
Retained earnings		2,178			2,008
Total common stockholder’s equity		10,763			10,118
Cumulative preferred stock, $4.50 series, authorized 7.5 shares; outstanding 0.4 shares in both periods		37			37
Total equity		10,800			10,155
Total Liabilities and Equity		$	31,852		$	29,916

The accompanying notes are an integral part of these statements.

Table of Contents

Consumers Energy Company

Consolidated Statements of Changes in Equity


In Millions

Years Ended December 31	2023	2022			2021
Total Equity at Beginning of Period			$	10,155		$	9,279	$	8,556
Common Stock


At beginning and end of period			841			841		841
Other Paid-in Capital
At beginning of period			7,284			6,599		6,024
Stockholder contribution			475			685		575

At end of period			7,759			7,284		6,599
Accumulated Other Comprehensive Loss

Retirement benefits liability
At beginning of period			(15)			(32)		(36)

Net gain (loss) arising during the period			(1)			15		2
Amortization of net actuarial loss			1			2		2










At end of period			(15)			(15)		(32)
Retained Earnings
At beginning of period			2,008			1,834		1,690

Net income			867			945		868
Dividends declared on common stock			(695)			(769)		(722)
Dividends declared on preferred stock			(2)			(2)		(2)
At end of period			2,178			2,008		1,834
Cumulative Preferred Stock


At beginning and end of period			37			37		37
Total Equity at End of Period			$	10,800		$	10,155	$	9,279

The accompanying notes are an integral part of these statements.

Table of Contents

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, NorthStar Clean Energy, 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. 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.

Cash and Cash Equivalents and Restricted 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 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.

Contingencies: CMS Energy and Consumers record estimated loss contingencies on their consolidated financial statements when it is probable that a loss 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. Unless regulatory accounting applies, 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 may 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

Table of Contents

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 and changes in the fair value of FTRs are deferred as regulatory assets or liabilities. For details regarding CMS Energy’s and Consumers’ derivative instruments recorded at fair value, see Note 5, 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, forward equity sales, and convertible securities. CMS Energy computes the effect on potential common stock using the treasury stock method. Potentially dilutive common shares issuable upon conversion of the convertible senior notes are determined using the if-converted method for calculating diluted EPS. 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 13, 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 that indicate the carrying amount of an asset may not be recoverable or that 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: CMS Energy and its subsidiaries use the flow-through method of accounting for investment tax credits. Under the flow-through method, the credit is recognized as a reduction to income tax expense when the related plant, property, and equipment is placed into service. For its regulated utility assets, Consumers amortizes its investment tax credits over the life of the related property in accordance with regulatory treatment.

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

Table of Contents

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 CMS Energy’s and Consumers’ real and personal property assessed by local taxing authorities. CMS Energy and Consumers record 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 CMS Energy’s and Consumers’ accrued property tax that will be recognized over future governmental fiscal periods.

Other: For additional accounting policies, see:

Note 2, Regulatory Matters
Note 7, Plant, Property, and Equipment
Note 8, Leases
Note 9, Asset Retirement Obligations
Note 10, Retirement Benefits
Note 12, Income Taxes
Note 13, Earnings Per Share—CMS Energy
Note 14, Revenue
Note 18, Variable Interest Entities

Table of Contents

2: Regulatory Matters

Regulatory matters are critical to Consumers. The Michigan Attorney General, ABATE, the MPSC Staff, residential customer advocacy groups, environmental organizations, and certain other parties typically participate in MPSC proceedings concerning Consumers, such as Consumers’ rate cases and PSCR and GCR processes. Intervenors also participate in certain FERC matters, including FERC’s regulation of certain wholesale rates that affect Consumers’ power supply costs. 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 and FERC 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 MPSC’s authority to approve voluntary revenue refunds, 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.

Table of Contents

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


In Millions
December 31	2023			2022
Regulatory assets
Current
2022 PSCR underrecovery1		$	126		$	—
Energy waste reduction plan incentive2		54			47
Retention incentive program3		12			2
Other		11			8
Total current regulatory assets		$	203		$	57
Non-current
Costs of coal-fueled electric generating units to be retired1		$	1,265		$	1,258
Securitized costs1		778			843
Postretirement benefits4		741			856
ARO3		328			281
2022 PSCR underrecovery1		126			—
MGP sites1		99			108
Unamortized loss on reacquired debt1		96			100
Decommissioning costs3		83			24
Energy waste reduction plan incentive2		58			55
Retention incentive program3		27			31
Postretirement benefits expense deferral mechanism3		24			—
Energy waste reduction plan3		19			10
Ludington overhaul contract dispute3		13			—
Other		26			29
Total non-current regulatory assets		$	3,683		$	3,595
Total regulatory assets		$	3,886		$	3,652
Regulatory liabilities
Current
Income taxes, net		$	49		$	48
Reserve for customer refunds		2			47
Other		5			9
Total current regulatory liabilities		$	56		$	104
Non-current
Cost of removal		$	2,545		$	2,426
Income taxes, net		1,220			1,267
Renewable energy grant		43			45
Renewable energy plan		29			32
Energy waste reduction plan		25			6

Postretirement benefits expense deferral mechanism		12			—


Other		20			20
Total non-current regulatory liabilities		$	3,894		$	3,796
Total regulatory liabilities		$	3,950		$	3,900

Table of Contents

1The MPSC has provided a specific return on these regulatory assets.

2These 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.

3These regulatory assets represent incurred costs for which the MPSC has provided recovery without a return on investment.

4This regulatory asset is included in rate base, thereby providing a return.

Regulatory Assets

2022 PSCR Underrecovery: As a result of rising fuel prices during 2022, Consumers’ power supply costs for 2022 were significantly higher than those projected in its 2022 PSCR plan. At the end of 2022, Consumers had recorded $401 million of under-recovered power supply costs. In February 2023, the MPSC authorized Consumers to recover the 2022 underrecovery amount over three years, providing immediate relief to electric customers.

Energy Waste Reduction Plan Incentive: 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.

In November 2023, the MPSC approved a settlement agreement authorizing Consumers to collect $55 million during 2024 as an incentive for exceeding its statutory savings targets in 2022. Consumers recognized incentive revenue under this program of $55 million in 2022.

Consumers also exceeded its statutory savings targets in 2023, achieved certain other goals, and will request the MPSC’s approval to collect $58 million, the maximum performance incentive, in the energy waste reduction reconciliation to be filed in May 2024. Consumers recognized incentive revenue under this program of $58 million in 2023.

Retention Incentive Program: To ensure necessary staffing at the D.E. Karn and J.H. Campbell coal-fueled generating units through their retirement, Consumers established retention incentive programs. The MPSC has approved deferred accounting treatment for the retention and severance costs incurred under these programs and has allowed for recovery over three years. For additional details regarding the retention incentive program, see Note 19, Exit Activities and Discontinued Operations.

Costs of Coal-fueled Electric Generating Units to be Retired: In June 2022, the MPSC approved Consumers’ Clean Energy Plan, under which Consumers plans to retire the J.H. Campbell coal-fueled generating units in 2025. Upon the units’ retirement, Consumers will receive regulatory asset treatment to recover their remaining book value, as well as a 9.0‑percent return on equity, through 2040, the units’ original retirement date. Until retirement, the book value of the generating units will remain in rate base and receive full regulatory returns in general rate cases.

In June 2022, Consumers removed from total plant, property, and equipment an amount of $1.3 billion, representing the projected remaining book value of the electric generating units upon their retirement, and recorded it as a non‑current regulatory asset on its consolidated balance sheets.

Securitized Costs: The MPSC has issued securitization financing orders authorizing Consumers to issue securitization bonds in order to finance the recovery of the remaining book value of three smaller natural gas-fueled electric generating units that Consumers retired in 2015, seven smaller coal-fueled electric

Table of Contents

generating units that Consumers retired in 2016, and the D.E. Karn coal-fueled electric generating units that Consumers retired in June 2023. Consumers has removed from plant, property, and equipment and recorded as a regulatory asset the book value of these units. Consumers is amortizing the regulatory asset over the life of the related securitization bonds, which it issued through subsidiaries in 2014 and 2023. For additional details regarding the securitization bonds, see Note 4, Financings and Capitalization—Securitization Bonds.

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, prior service costs and credits, and settlements 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 settlements and the amortization periods, see Note 10, Retirement Benefits.

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. For additional information, see Note 3, Contingencies and Commitments—Consumers Gas Utility Contingencies—Gas Environmental Matters.

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.

Decommissioning Costs: In Consumers’ electric depreciation and general rate cases, the MPSC has authorized Consumers to remove from depreciation rates the costs of decommissioning the D.E. Karn coal-fueled electric generating units, and instead defer those costs as a regulatory asset to be recovered through 2031. Additionally, ash disposal costs related to Consumers’ retired coal-fueled generating units may be deferred as a regulatory asset and collected over a ten-year period. In its 2022 order approving Consumers’ Clean Energy Plan, the MPSC authorized similar treatment for the decommissioning and ash disposal costs associated with the J.H. Campbell coal-fueled generating units that will be retired in 2025.

Postretirement Benefits Expense Deferral Mechanism: In Consumers’ general rate cases, the MPSC approved a mechanism allowing Consumers to defer the future recovery or refund of pension and OPEB expenses above or below the amounts used to set existing rates, respectively, beginning in January 2023 for the electric utility and October 2023 for the gas utility.

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.

Ludington Overhaul Contract Dispute: The MPSC has authorized Consumers to defer as a regulatory asset costs associated with repairing or replacing defective work performed by TAES during a major overhaul and upgrade of Ludington. Consumers will defer such costs while litigation with TAES and Toshiba moves forward; such costs will be offset by potential future litigation proceeds received from

Table of Contents

TAES or Toshiba. Consumers will have the opportunity to seek appropriate recovery and ratemaking treatment for amounts recorded as a regulatory asset following resolution of the litigation. For additional details on the contract dispute, see Note 3, Contingencies and Commitments—Consumers Electric Utility Contingencies.

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 income tax expense. The majority of the net regulatory liability recorded related to income taxes is associated with plant assets that are subject to normalization, which is governed by the Internal Revenue Code, and will be returned to customers over the remaining book life of the related plant assets. For additional details on deferred income taxes, see Note 12, Income Taxes.

Reserve for Customer Refunds: In December 2022, the MPSC issued an order authorizing Consumers to refund $22 million voluntarily to utility customers. During 2023, the MPSC approved Consumers’ requests that the refund take the form of contributions to programs that assist vulnerable electric and gas customers and incremental vegetation management. Additionally, in the settlement of its 2022 electric rate case, Consumers agreed to refund voluntarily $15 million of 2022 revenues to utility customers through a one‑time bill credit and to fund $10 million in contributions to programs that directly assist vulnerable customers with utility bills.

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 are incurred to remove the assets at the end of their useful lives.

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. Consumers presents the amortization as a reduction to maintenance and other operating expenses on its consolidated statements of income.

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 and Gas Utility

Meter Investigation: In July 2023, the MPSC issued an order initiating an investigation into Consumers’ handling of malfunctioning meters and meters requiring transition from 3G to 4G technology, estimated billing, and new service installations. The order directed Consumers to provide information on such meters and their replacement, meter-reading performance, communications with customers and the MPSC regarding these issues, and other information; Consumers provided this information in August 2023. As directed in the order, the MPSC Staff analyzed this information and made recommendations, including continued monitoring of Consumers’ performance in these areas and penalties for failure to comply with MPSC service rules.

Table of Contents

In October 2023, the MPSC issued a show-cause order directing Consumers to provide further information on consecutive estimated billings, the provision of actual meter readings, and new service installation issues. Consumers cannot predict the outcome of this matter, but it could be subject to regulatory penalties that are not expected to have a material effect on Consumers’ results of operations and Consumers could be subject to increased regulatory scrutiny.

Consumers Electric Utility

2022 Electric Rate Case: In January 2023, the MPSC approved a settlement agreement authorizing an annual rate increase of $155 million, based on a 9.9‑percent authorized return on equity. The MPSC also approved a surcharge for the recovery of $6 million of depreciation, property tax, and interest expense related to distribution investments made in 2021 that exceeded what was authorized in rates in accordance with the December 2020 electric rate order. The new rates became effective January 20, 2023.

Consumers Gas Utility

2022 Gas Rate Case: In December 2022, Consumers filed an application with the MPSC seeking an annual rate increase of $212 million, based on a 10.25‑percent authorized return on equity for the projected 12‑month period ending September 30, 2024. In August 2023, the MPSC approved a settlement agreement authorizing an annual rate increase of $95 million, based on a 9.9‑percent authorized return on equity, effective October 1, 2023. The MPSC also authorized the use of a cost deferral mechanism that will allow Consumers to defer for future recovery or refund pension and OPEB expense above or below the amounts used to set existing rates.

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, subject to ceiling factor limitations, in order to minimize the underrecovery or overrecovery amount in the annual reconciliations. Underrecoveries represent power supply and purchased natural gas costs 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	2023			2022
Assets
PSCR underrecoveries		$	—		$	401
GCR underrecoveries		—			8
Accounts receivable and accrued revenue		$	—		$	409
Liabilities
PSCR overrecoveries		$	10		$	—
GCR overrecoveries		44			—
Accrued rate refunds		$	54		$	—

Table of Contents

PSCR Plans and Reconciliations: In September 2023, the MPSC issued an order in Consumers’ 2021 PSCR reconciliation, authorizing recovery of $2.1 billion of power costs and authorizing Consumers to reflect in its 2022 PSCR reconciliation the overrecovery of $7 million.

In March 2023, Consumers filed its 2022 PSCR reconciliation, requesting full recovery of $2.5 billion of power costs and authorization to reflect in its 2023 PSCR reconciliation the underrecovery of $404 million. In November 2023, Consumers revised its reconciliation, requesting authorization to reflect in its 2023 PSCR reconciliation the underrecovery of $401 million.

Consumers submitted its 2023 PSCR plan to the MPSC in September 2022 and self-implemented a 2023 PSCR charge in accordance with that plan in January 2023. As a result of significantly higher-than-projected power costs during 2022, Consumers subsequently filed a motion for a temporary order in its 2023 PSCR plan, requesting that the MPSC approve only a third of the 2022 underrecovery amount for recovery in 2023, with the remaining amount to be recovered equally during 2024 and 2025. The MPSC approved Consumers’ motion in February 2023, providing immediate relief to electric customers. The MPSC approved Consumers’ 2023 PSCR plan in August 2023.

GCR Plans and Reconciliations: In March 2023, the MPSC approved a settlement agreement in Consumers’ 2021-2022 GCR reconciliation, authorizing recovery of $0.7 billion of gas costs and authorizing Consumers to reflect in its 2022-2023 GCR reconciliation the underrecovery of $9 million.

In June 2023, Consumers filed its 2022-2023 GCR reconciliation, requesting full recovery of $1.1 billion of gas costs and authorization to reflect in its 2023-2024 GCR reconciliation the underrecovery of $15 million.

Consumers submitted its 2023-2024 GCR plan to the MPSC in December 2022 and self-implemented its proposed 2023-2024 GCR charge in April 2023.

3: Contingencies and Commitments

CMS Energy and Consumers are involved in various matters that give rise to contingent liabilities. Depending on the specific issues, the resolution of these contingencies could negatively affect CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. In their disclosures of these matters, CMS Energy and Consumers provide an estimate of the possible loss or range of loss when such an estimate can be made. Disclosures stating 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

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 establishing 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, which is valid through 2025.

At December 31, 2023, CMS Energy had a recorded liability of $45 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

Table of Contents

maintenance costs. The undiscounted amount of the remaining obligation is $57 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
	2024			2025			2026			2027			2028
CMS Energy
Long-term leachate disposal and operating and maintenance costs		$	4		$	4		$	4		$	4		$	4

CMS Energy’s estimate of response activity costs and the timing of expenditures could change if there are changes in circumstances or assumptions used in calculating the liability. Although a liability for its present estimate of remaining response activity costs has been recorded, CMS Energy cannot predict the ultimate financial impact or outcome of this matter.

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 NREPA. Consumers believes that these costs should be recoverable in rates, but cannot guarantee that outcome. Consumers estimates its liability for NREPA sites for which it can estimate a range of loss to be between $2 million and $4 million. At December 31, 2023, Consumers had a recorded liability of $2 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 had 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 asked to participate in the removal action plan, including Consumers, 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 its share of the total liability for known CERCLA sites to 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, 2023, 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

Table of Contents

nature and extent of contamination, and legal and regulatory requirements, could affect its estimates of NREPA and CERCLA liability.

Ludington Overhaul Contract Dispute: Consumers and DTE Electric, co-owners of Ludington, are parties to a 2010 engineering, procurement, and construction agreement with TAES, under which TAES contracted to perform a major overhaul and upgrade of Ludington. The overhauled Ludington units are operational, but TAES’ work has been defective and non‑conforming. Consumers and DTE Electric have demanded that TAES provide a comprehensive plan to resolve those matters, including adherence to its warranty commitments and other contractual obligations. Consumers and DTE Electric have taken extensive efforts to resolve these issues with TAES, including a formal demand to TAES’ parent, Toshiba, under a parent guaranty it provided. TAES has not provided a comprehensive plan or otherwise met its performance obligations.

In order to enforce the contract, Consumers and DTE Electric filed a complaint against TAES and Toshiba in the U.S. District Court for the Eastern District of Michigan in April 2022. In June 2022, TAES and Toshiba filed a motion to dismiss the complaint, along with an answer and counterclaims seeking approximately $15 million in damages related to payments allegedly owed under the parties’ contract. As a co-owner of Ludington, Consumers would be liable for 51 percent of any such damages, if liability and damages were proven. In September 2022, the court denied the motion to dismiss filed by TAES and Toshiba. The parties are engaged in ongoing litigation, including discovery, pursuant to a court-ordered schedule. Consumers believes the counterclaims filed by TAES and Toshiba are without merit, but cannot predict the financial impact or outcome of this matter. An unfavorable outcome could have a material adverse effect on CMS Energy’s and Consumers’ financial condition, results of operations, or liquidity.

Toshiba has announced that, through a common stock purchase, TBJH became the majority shareholder and new parent company of Toshiba. TBJH is a subsidiary of a Japanese private equity firm. Consumers and DTE Electric continue to monitor this development, but do not believe that this affects their rights under the parent guaranty provided by Toshiba.

In May 2023, the MPSC approved Consumers’ and DTE Electric’s jointly-filed request for authority to defer as a regulatory asset the costs associated with repairing or replacing the defective work performed by TAES while the litigation with TAES and Toshiba moves forward; such costs will be offset by potential future litigation proceeds received from TAES or Toshiba. Consumers and DTE Electric will have the opportunity to seek appropriate recovery and ratemaking treatment for amounts recorded as a regulatory asset following resolution of the litigation, but cannot predict the financial impact or outcome of such proceedings.

J.H. Campbell 3 Plant Retirement Contract Dispute: In May 2022, Consumers filed a complaint against Wolverine Power in the Ottawa County Circuit Court and requested a ruling that Consumers has sole authority to decide to retire the J.H. Campbell 3 coal-fueled generating unit under the unit’s Joint Ownership and Operating Agreement. In July 2022, Wolverine Power filed an answer, affirmative defenses, and a counterclaim seeking approximately $37 million in damages allegedly caused by Consumers’ decision to retire the unit before the end of its useful life. In October 2022, the state circuit court judge found that Consumers may, in its sole discretion, retire the J.H. Campbell 3 coal-fueled generating unit, provided that Consumers continues to operate and make necessary improvements to the unit while the litigation concerning Wolverine Power’s claim for damages is pending. In May 2023, the circuit court judge issued an order granting Consumers’ Motion for Clarification confirming that Consumers may continue to operate and invest in J.H. Campbell 3 consistent with the May 2025 retirement date. Consumers believes Wolverine Power’s claim has no merit, but cannot predict the final impact or outcome on this matter. An unfavorable outcome could have a material adverse effect on CMS Energy’s and Consumers’ financial condition, results of operations, or liquidity.

Table of Contents

Consumers Gas Utility Contingencies

Gas Environmental Matters: Consumers expects to incur remediation and other response activity costs at a number of sites under 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, 2023, Consumers had a recorded liability of $62 million for its remaining obligations for these sites. Consumers expects to pay the following amounts for remediation and other response activity costs in each of the next five years:


In Millions
	2024			2025			2026			2027			2028
Consumers
Remediation and other response activity costs		$	2		$	1		$	7		$	10		$	25

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, 2023, Consumers had a regulatory asset of $99 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 $1 million. At December 31, 2023, 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.

Guarantees

Presented in the following table are CMS Energy’s and Consumers’ guarantees at December 31, 2023:


In Millions
Guarantee Description	Issue Date	Expiration Date	Maximum Obligation			Carrying Amount
CMS Energy, including Consumers
Indemnity obligations from sale of membership interests in VIEs1	various	indefinite		$	304		$	—
Indemnity obligations from stock and asset sale agreements2	various	indefinite		153			1
Guarantee3	2011	indefinite		30			—
Consumers
Guarantee3	2011	indefinite		$	30		$	—

1These obligations arose from the sale of membership interests in NWO Holdco, Aviator Wind, and Newport Solar Holdings to tax equity investors. NorthStar Clean Energy provided certain indemnity obligations that protect the tax equity investors against losses incurred as a result of breaches of representations and warranties under the associated limited liability company agreements. These

Table of Contents

obligations are generally capped at an amount equal to the tax equity investor’s capital contributions plus a specified return, less any distributions and tax benefits it receives, in connection with its membership interest. For any indemnity obligations related to Aviator Wind, NorthStar Clean Energy would recover 49 percent of any amounts paid to the tax equity investor from the other owner of Aviator Wind Equity Holdings. Additionally, Aviator Wind holds insurance coverage that would partially protect against losses incurred as a result of certain failures to qualify for production tax credits. For further details on NorthStar Clean Energy’s ownership interest in NWO Holdco, Aviator Wind, and Newport Solar Holdings, see Note 18, Variable Interest Entities.

2These 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, including claims related to taxes. The maximum obligation amount is mostly related to an Equatorial Guinea tax claim.

3This obligation comprises a guarantee provided by Consumers to the U.S. Department of Energy in connection with a settlement agreement regarding damages resulting from the department’s failure to accept spent nuclear fuel from nuclear power plants formerly owned by Consumers.

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. CMS Energy and Consumers consider the likelihood that they would be required to perform or incur substantial losses related to these indemnities and those disclosed in the table to be remote.

Other Contingencies

In addition to the matters disclosed in this Note and Note 2, Regulatory Matters, there are certain other lawsuits and administrative proceedings before various courts and governmental agencies, as well as unasserted claims that may result in such proceedings, arising in the ordinary course of business to which CMS Energy, Consumers, and certain other subsidiaries of CMS Energy are parties. These other lawsuits, proceedings, and unasserted claims may involve personal injury, property damage, contracts, environmental matters, federal and state taxes, rates, licensing, employment, and other matters. Further, CMS Energy and Consumers occasionally self-report certain regulatory non‑compliance matters that may or may not eventually result in administrative proceedings. CMS Energy and Consumers believe that the 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 NorthStar Clean

Table of Contents

Energy. Presented in the following table are CMS Energy’s and Consumers’ contractual purchase obligations at December 31, 2023 for each of the periods shown:


In Millions
	Payments Due
	Total			2024			2025			2026			2027			2028			Beyond 2028
CMS Energy, including Consumers
Total PPAs		$	7,204		$	711		$	792		$	783		$	787		$	702		$	3,429
Other		3,491			1,720			885			301			207			150			228
Total purchase obligations		$	10,695		$	2,431		$	1,677		$	1,084		$	994		$	852		$	3,657
Consumers
PPAs
MCV PPA		$	2,506		$	342		$	402		$	416		$	410		$	371		$	565
Related-party PPAs		206			60			44			30			31			14			27
Other PPAs		4,492			309			346			337			346			317			2,837
Total PPAs		$	7,204		$	711		$	792		$	783		$	787		$	702		$	3,429
Other		2,802			1,615			648			266			168			82			23
Total purchase obligations		$	10,006		$	2,326		$	1,440		$	1,049		$	955		$	784		$	3,452

MCV PPA: Consumers has a PPA with the MCV Partnership giving Consumers the right to purchase up to 1,240 MW of capacity and energy produced by the MCV Facility through May 2030. The MCV PPA provides for:

a capacity charge of $10.14 per MWh of available capacity through March 2025 and $5.00 per MWh of available capacity from March 2025 through the termination date of the PPA
a fixed energy charge of $6.30 per MWh for on-peak hours and $6.00 for off-peak hours
a variable energy charge based on the MCV Partnership’s cost of production for energy delivered to Consumers
a $5 million annual contribution by the MCV Partnership to a renewable resources program through March 2025

Capacity and energy charges under the MCV PPA were $340 million in 2023, $519 million in 2022, and $348 million in 2021.

Other PPAs: Consumers has PPAs expiring through 2048 with various counterparties. The majority of the PPAs have capacity and energy charges for delivered energy. Capacity and energy charges under these PPAs were $498 million in 2023, $510 million in 2022, and $338 million in 2021. In addition, CMS Energy and Consumers account for several of their PPAs as leases. See Note 8, Leases for more information about CMS Energy’s and Consumers’ lease obligations.

Table of Contents

4: Financings and Capitalization

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


In Millions
	Interest Rate (%)		Maturity	2023			2022
CMS Energy, including Consumers
CMS Energy, parent only
Senior notes	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



					$	1,975		$	1,975

Convertible senior notes	3.375		2028		800			—


					$	800		$	—

Junior subordinated notes1	4.750	2	2050		500			500
	3.750	3	2050		400			400
	5.625		2078		200			200
	5.875		2078		280			280
	5.875		2079		630			630


					$	2,010		$	2,010
Total CMS Energy, parent only					$	4,785		$	3,985
CMS Energy subsidiaries
Consumers					10,863			$	10,277
NorthStar Clean Energy, including subsidiaries

Term loan facility	variable		2023		—			100
Total principal amount outstanding					$	15,648		$	14,362
Current amounts					(975)			(1,090)
Unamortized discounts					(30)			(30)
Unamortized issuance costs					(135)			(120)
Total long-term debt					$	14,508		$	13,122

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

2On June 1, 2030, and every five years thereafter, the notes will reset to an interest rate equal to the five-year treasury rate plus 4.116 percent.

3On December 1, 2030, and every five years thereafter, the notes will reset to an interest rate equal to the five‑year treasury rate plus 2.900 percent.

Table of Contents

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


In Millions
	Interest Rate (%)		Maturity		2023			2022
Consumers
First mortgage bonds
		0.350		2023		$	—		$	300
		3.375		2023		—			325
		3.125		2024		250			250
		3.190		2024		52			52
		5.240		2026		115			—
		3.680		2027		100			100
		3.390		2027		35			35
		4.650		2028		425			—
		3.800		2028		300			300
		4.900		2029		500			—
		5.070		2029		50			—
		5.170		2032		95			—
		3.600		2032		350			350
		3.180		2032		100			100
		4.625		2033		700			—
		5.800		2035		175			175
		5.380		2037		140			—
		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			300
		3.100		2050		550			550
		3.500		2051		575			575
		2.650		2052		300			300
		4.200		2052		450			450
		3.860		2052		50			50
		4.280		2057		185			185
		2.500		2060		525			525
		4.350		2064		250			250
		variable	1	2069		76			76
		variable	1	2070		134			134
		variable	1	2070		127			127

Table of Contents


In Millions
	Interest Rate (%)		Maturity			2023			2022
							$	10,397		$	8,997

Tax-exempt revenue bonds		0.875	2	2035			35			35
		1.800	3	2049			75			75
							$	110		$	110

2014 Securitization bonds		3.421	4	2025-2029	5		$	141		$	170

2023 Securitization bonds		5.342	6	2028-2031	5		646			—
							$	787		$	170


Term loan facility		variable		2024			—			1,000
Total principal amount outstanding							$	11,294		$	10,277
Current amounts							(725)			(991)
Long-term debt – related parties7 principal amount outstanding				2050-2060			(431)			—
Unamortized discounts							(28)			(27)
Unamortized issuance costs							(73)			(67)
Total long-term debt							$	10,037		$	9,192

1The variable-rate bonds bear interest quarterly at a rate of three-month SOFR minus 0.038 percent, subject to a zero-percent floor. At December 31, 2023, the interest rates were 5.346 percent for bonds due September 2069, 5.329 percent for bonds due May 2070, and 5.368 percent for bonds due October 2070. The interest rate for all variable-rate bonds at December 31, 2022 was zero percent. The holders of these variable-rate bonds may put them to Consumers for redemption on certain dates prior to their stated maturity, including dates within one year of December 31, 2023.

2The interest rate on these tax-exempt revenue bonds will reset on October 8, 2026.

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

4The weighted-average interest rate for Consumers’ securitization bonds issued through its subsidiary, Consumers 2014 Securitization Funding, was 3.421 percent at December 31, 2023 and 3.343 percent at December 31, 2022.

5Principal and interest payments are made semiannually.

6The weighted-average interest rate for Consumers’ securitization bonds issued through its subsidiary, Consumers 2023 Securitization Funding, was 5.342 percent at December 31, 2023.

7Long-term debt – related parties reflects Consumers’ outstanding debt held by its parent as a result of CMS Energy’s repurchase of Consumers’ first mortgage bonds.

Table of Contents

CMS Energy’s Purchase of Consumers’ First Mortgage Bonds: Presented in the following table is Consumers’ long-term debt—related parties at December 31, 2023:


	Principal (In Millions)			Interest Rate (%)
First mortgage bonds due 2060		$	163		2.500
First mortgage bonds due 2052		106			2.650
First mortgage bonds due 2050		23			3.750
First mortgage bonds due 2050		52			3.100
First mortgage bonds due 2051		27			3.500
First mortgage bonds due 2048		60			4.050
Total principal amount outstanding		$	431
Unamortized discounts		(3)
Unamortized issuance costs		(4)
Total long-term debt — related parties		$	424

During 2023, CMS Energy purchased these Consumers’ first mortgage bonds for $293 million. On a consolidated basis, CMS Energy’s repurchase of Consumers’ first mortgage bonds was accounted for as a debt extinguishment and resulted in a pre-tax gain of $131 million. Interest expense related to the repurchased bonds was $5 million for the year ended December 31, 2023.

Table of Contents

Financings: Presented in the following table is a summary of major long-term debt issuances during 2023:


	Principal (In Millions)			Interest Rate (%)	Issuance Date	Maturity Date
CMS Energy, parent only
Convertible senior notes		$	800	3.375	May 2023	May 2028
Total CMS Energy, parent only		$	800
NorthStar Clean Energy, including subsidiaries
Term loan facility1		$	85	variable	February 2023	November 2023


Total NorthStar Clean Energy, including subsidiaries		$	85
Consumers
First mortgage bonds		$	425	4.650	January 2023	March 2028
First mortgage bonds		700		4.625	February 2023	May 2033
First mortgage bonds		115		5.240	May 2023	May 2026
First mortgage bonds		50		5.070	May 2023	May 2029
First mortgage bonds		95		5.170	May 2023	May 2032
First mortgage bonds		140		5.380	May 2023	May 2037
First mortgage bonds		500		4.900	August 2023	February 2029
2023 Securitization bonds2		250		5.550	December 2023	March 2028
2023 Securitization bonds2		396		5.210	December 2023	September 2031

Total Consumers		$	2,671
Total CMS Energy		$	3,556

1 In December 2022, a subsidiary of NorthStar Clean Energy entered into a $185 million unsecured term loan credit agreement. Under this credit agreement, a subsidiary of NorthStar Clean Energy borrowed $85 million in 2023.

2 For additional details on the securitization, see Note 2, Regulatory Matters— Securitized Costs.

In January 2024, Consumers issued $600 million of first mortgage bonds that mature in May 2029 and bear interest at a rate of 4.600 percent. The proceeds of the bonds will be used for general corporate purposes.

Issuance of Convertible Senior Notes: In May 2023, CMS Energy issued an aggregate principal amount of $800 million convertible senior notes that bear an interest rate of 3.375 percent and mature in May 2028 unless redeemed, repurchased, or converted earlier. Unamortized debt costs associated with this issuance were $12 million at December 31, 2023. The convertible senior notes rank equal in right of payment to any of CMS Energy’s unsecured indebtedness that is not subordinated. There are no sinking fund requirements for the notes.

Holders of the convertible senior notes may convert their notes at their option in accordance with the conditions outlined in the related indenture. CMS Energy will settle conversions of the notes by paying cash up to the aggregate principal amount of the notes to be converted and paying or delivering, as the case may be, cash, shares of CMS Energy common stock, or a combination of cash and shares of CMS Energy common stock, at its election, in respect of the remainder, if any, of its conversion obligation in excess of the aggregate principal amount of the notes being converted. The conversion rate will be subject to adjustment for anti-dilutive events and fundamental change and redemption provisions

Table of Contents

as described in the related indenture. At December 31, 2023, the conversion price for the notes was $73.97 per share of common stock.

CMS Energy may redeem for cash all or any portion of the notes, at its option, on or after May 6, 2026 if the last reported sale price of its common stock has been at least 130 percent of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period. Holders of the convertible senior notes may require CMS Energy to repurchase for cash all or any portion of their notes if a fundamental change, as outlined in the related indenture, occurs. In both cases, CMS Energy will redeem or repurchase the notes at a price equal to 100 percent of the principal amount of the notes to be redeemed or repurchased, plus accrued and unpaid interest.

Retirements: Presented in the following table is a summary of major long-term debt retirements during 2023:


	Principal (In Millions)			Interest Rate (%)	Retirement Date	Maturity Date
NorthStar Clean Energy, including subsidiaries
Term loan facility		$	185	variable	November 2023	November 2023
Total NorthStar Clean Energy, including subsidiaries		$	185
Consumers
Term loan facility		$	1,000	variable	February 2023	January 2024
First mortgage bonds		300		0.350	June 2023	June 2023
First mortgage bonds		325		3.375	August 2023	August 2023
Total Consumers		$	1,625

In January 2024, CMS Energy retired $250 million of its senior notes bearing an interest rate of 3.875 percent and an original maturity date of March 2024.

Regulatory Authorization for Financings: Consumers is required to maintain FERC authorization for financings. Its current authorization ends on March 31, 2025. Any long-term issuances during the authorization period are exempt from FERC’s competitive bidding and negotiated placement requirements.

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.

Securitization Bonds: Certain regulatory assets held by Consumers’ subsidiaries, Consumers 2014 Securitization Funding and Consumers 2023 Securitization Funding, collateralize Consumers’ securitization bonds. Consumers 2014 Securitization Funding and Consumers 2023 Securitization Funding are distinct subsidiaries. The bondholders of each entity have no recourse to the other’s assets or the assets of Consumers. Consumers collects securitization surcharges to cover the principal and interest on the bonds as well as certain other qualified costs. The surcharges collected by Consumers on behalf of each entity are remitted to that subsidiary’s account and are not available to creditors of Consumers or creditors of Consumers’ affiliates other than the subsidiary that issued the bonds.

Table of Contents

Debt Maturities: At December 31, 2023, the aggregate annual maturities for long-term debt for the next five years, based on stated maturities or earlier put dates, were:


In Millions
	2024			2025			2026			2027			2028
CMS Energy, including Consumers
Long-term debt
CMS Energy, parent only		$	250		$	250		$	300		$	625		$	800
Consumers		725			116			237			263			843


Total CMS Energy1		$	975		$	366		$	537		$	888		$	1,643
Consumers
Long-term debt		$	725		$	116		$	237		$	263		$	843

Credit Facilities: The following credit facilities with banks were available at December 31, 2023:


In Millions
Expiration Date	Amount of Facility			Amount Borrowed			Letters of Credit Outstanding			Amount Available
CMS Energy, parent only
December 14, 20271		$	550		$	—		$	24		$	526
September 22, 2024		50			—			50			—
NorthStar Clean Energy, including subsidiaries
September 25, 20252		$	37		$	—		$	37		$	—
Consumers3
December 14, 2027		$	1,100		$	—		$	27		$	1,073
November 18, 2025		250			—			48			202

1There were no borrowings under this facility during the year ended December 31, 2023.

2This letter of credit facility is available to Aviator Wind Equity Holdings. For more information regarding Aviator Wind Equity Holdings, see Note 18, Variable Interest Entities.

3Obligations under these facilities are secured by first mortgage bonds of Consumers. There were no borrowings under these facilities during the year ended December 31, 2023.

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, 2023, there were $93 million of commercial paper notes outstanding under this program with a weighted-average annual interest rate of 5.609 percent, recorded as current notes payable on the consolidated balance sheets of CMS Energy and Consumers.

In December 2023, Consumers renewed a short-term credit agreement with CMS Energy, permitting Consumers to borrow up to $500 million at an interest rate of the prior month’s average one-month Term SOFR minus 0.100 percent. At December 31, 2023, there were no outstanding borrowings under the agreement.

Table of Contents

Consumers’ Supplier Financing Program: Under a supplier financing program, Consumers agrees to pay a bank, acting as its payment agent, the stated amount of confirmed invoices from participating suppliers on the original maturity dates of the invoices. The supplier invoices that have been confirmed as valid under the program require payment in full within 60 days of the invoice date. Consumers does not provide collateral or a guarantee to the bank in support of its payment obligations under the agreement, nor does it pay a fee for the service. Consumers or the bank may terminate the supplier financing program agreement upon 30 days prior written notice to the other party. There were no trade payables outstanding under the program in accounts payable on CMS Energy’s and Consumers’ consolidated balance sheets at December 31, 2023, and less than $1 million at December 31, 2022.

Dividend Restrictions: At December 31, 2023, payment of dividends by CMS Energy on its common stock was limited to $7.3 billion under provisions of the Michigan Business Corporation Act of 1972.

Under the provisions of its articles of incorporation, at December 31, 2023, Consumers had $2.1 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.

During the year ended December 31, 2023, Consumers paid $695 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 2023, CMS Energy entered into an equity offering program under which it may sell shares of its common stock having an aggregate sales price of up to $1 billion in privately negotiated transactions, in “at the market” offerings, or through forward sales transactions. There have been no sales of securities under this program.

In November 2023, CMS Energy partially settled a forward contract, issued under its previous equity offering program, by issuing shares of its common stock at a weighted-average price of $68.05 per share, resulting in net proceeds of $178 million.

Presented in the following table are details of CMS Energy’s forward sales contracts under its equity offering program at December 31, 2023:


			Forward Price Per Share
Contract Date	Maturity Date	Number of Shares	Initial			December 31, 2023
August 3, 2022	December 31, 2024	328,207		$	67.59		$	68.37
August 24, 2022	December 31, 2024	1,677,938		69.46			70.91
August 29, 2022	December 31, 2024	1,783,388		68.18			69.54

Under these contracts, CMS Energy may either settle physically by issuing shares of its common stock at the then-applicable forward sale price specified by the agreement or settle net by delivering or receiving

Table of Contents

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 are 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 or net cash settle the contracts as of December 31, 2023, CMS Energy would not have been required to deliver shares or pay cash. In January 2024, CMS Energy settled the remaining forward sale contracts issued under its previous equity offering program by issuing shares at a weighted average price of $70.31 per share, resulting in net proceeds of $266 million.

Preferred Stock: CMS Energy’s Series C preferred stock is traded on the New York Stock Exchange under the symbol CMS PRC. Depositary shares represent a 1/1000th interest in a share of its Series C preferred stock. The Series C preferred stock has no maturity or mandatory redemption date and is not redeemable at the option of the holders. CMS Energy may, at its option, redeem the Series C preferred stock, in whole or in part, at any time on or after July 15, 2026. The Series C preferred stock ranks senior to CMS Energy’s common stock with respect to dividend rights and distribution rights upon liquidation. Presented in the following table are details of CMS Energy’s Series C preferred stock at December 31, 2023 and 2022:


			Depositary Share Par Value						Depositary Share Optional Redemption Price						Number of Depositary Shares Authorized			Number of Depositary Shares Outstanding
Cumulative, redeemable perpetual						$	25					$	25		9,200,000			9,200,000

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, 2023 and 2022:


			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

5: Fair Value Measurements

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

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

Table of Contents

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	2023			2022			2023			2022
Assets1
Cash equivalents		$	18		$	—		$	—		$	—
Restricted cash equivalents		21			18			21			17
Nonqualified deferred compensation plan assets		30			24			22			18
Derivative instruments		2			2			2			2
Total assets		$	71		$	44		$	45		$	37
Liabilities1
Nonqualified deferred compensation plan liabilities		$	30		$	24		$	22		$	18

Total liabilities		$	30		$	24		$	22		$	18

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

Cash Equivalents: Cash equivalents and restricted cash equivalents consist of money market funds with daily liquidity.

Nonqualified Deferred Compensation Plan Assets and Liabilities: The nonqualified deferred compensation plan assets consist of mutual funds, which are bought and sold only at the discretion of plan participants.The assets 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 3.

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 periods presented.

Table of Contents

6: Financial Instruments

Presented in the following table are the carrying amounts and fair values, by level within the fair value hierarchy, of CMS Energy’s and Consumers’ financial instruments that are not recorded at fair value. The table excludes cash, cash equivalents, short-term financial instruments, and trade accounts receivable and payable whose carrying amounts approximate their fair values. For information about assets and liabilities recorded at fair value and for additional details regarding the fair value hierarchy, see Note 5, Fair Value Measurements.


In Millions
	December 31, 2023													December 31, 2022
	Carrying Amount			Fair Value										Carrying Amount			Fair Value
	Total			Level								Total		Level
	1			2			3			1		2		3
CMS Energy, including Consumers
Assets
Long-term receivables1		$	11		$	11		$	—	$	—	$	11		$	14		$	14	$	—	$	—	$	14

Liabilities
Long-term debt2		15,483			14,305			1,103		11,186		2,016			14,212			12,384		987		8,741		2,656
Long-term payables3		11			11			—		—		11			9			7		—		—		7
Consumers
Assets
Long-term receivables1		$	11		$	11		$	—	$	—	$	11		$	14		$	14	$	—	$	—	$	14

Notes receivable – related party4		97			97			—		—		97			101			101		—		—		101
Liabilities
Long-term debt5		10,762			9,757			—		7,741		2,016			10,183			8,728		—		6,172		2,556
Long-term debt – related party		424			303			—		303		—			—			—		—		—		—
Long-term payables		5			5			—		—		5			—			—		—		—		—

1Includes current portion of long-term accounts receivable and notes receivable of $6 million at December 31, 2023 and $7 million at December 31, 2022.

2Includes current portion of long-term debt of $975 million at December 31, 2023 and $1,090 million at December 31, 2022.

3Includes current portion of long-term payables of $2 million at December 31, 2022.

4Includes current portion of notes receivable – related party of $7 million at December 31, 2023 and 2022.

5Includes current portion of long-term debt of $725 million at December 31, 2023 and $991 million at December 31, 2022.

Table of Contents

Notes receivable – related party represents Consumers’ portion of the DB SERP 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.

7: 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	2023			2022
CMS Energy, including Consumers
Plant, property, and equipment, gross
Consumers	3 – 125		$	31,723		$	29,342
NorthStar Clean Energy
Independent power production1	3 – 40		1,387			1,124
Assets under finance leases2			24			24
Other	3 – 5		1			1
Plant, property, and equipment, gross			$	33,135		$	30,491
Construction work in progress			944			1,182
Accumulated depreciation and amortization			(9,007)			(8,960)
Total plant, property, and equipment3			$	25,072		$	22,713
Consumers
Plant, property, and equipment, gross
Electric
Generation	15 – 125		$	6,511		$	5,780
Distribution	15 – 75		11,339			10,590
Other	5 – 55		1,355			1,374
Assets under finance leases2			97			126
Gas
Distribution	20 – 85		7,452			6,951
Transmission	17 – 75		2,806			2,440
Underground storage facilities4	27 – 75		1,295			1,197
Other	5 – 55		815			835
Assets under finance leases2			15			20
Other non-utility property	3 – 51		38			29
Plant, property, and equipment, gross			$	31,723		$	29,342
Construction work in progress			845			994
Accumulated depreciation and amortization			(8,796)			(8,791)
Total plant, property, and equipment2			$	23,772		$	21,545

1A portion 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 8, Leases.

2For information regarding the amortization terms of CMS Energy’s and Consumers’ assets under finance leases, see Note 8, Leases.

Table of Contents

3Consumers’ plant additions were $3.1 billion for the year ended December 31, 2023 and $2.3 billion for the year ended December 31, 2022. Consumers’ plant retirements, which include the impact of transfers to held for sale, were $856 million for the year ended December 31, 2023 and $290 million for the year ended December 31, 2022. Consumers plans to retire the J.H. Campbell coal-fueled generating units in 2025. Accordingly, in 2022, Consumers removed from total plant, property, and equipment an amount of $1.3 billion, representing the projected remaining book value of the electric generating units upon their retirement, and recorded it as a regulatory asset. For additional details, see Note 2, Regulatory Matters.

4Underground storage includes base natural gas of $26 million at December 31, 2023 and 2022. Base natural gas is not subject to depreciation.

Asset Acquisition: In May 2023, Consumers purchased the Covert Generating Station, a natural gas-fueled generating facility with 1,200 MW of nameplate capacity in Van Buren County, Michigan for $810 million. In August 2023, Consumers paid an additional $2 million as a result of a post-closing adjustment required under the purchase agreement.

Consumers accounted for the purchase as an asset acquisition, allocating the purchase price to the assets acquired and liabilities assumed based on their relative fair value. The original cost of the plant was $665 million and the seller had recognized $225 million of accumulated depreciation. Upon acquisition, Consumers recorded the net book value of $440 million and a plant acquisition adjustment of $370 million, resulting in an increase to plant, property, and equipment of $810 million. The remainder of the purchase price was allocated among various working capital accounts.

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


In Millions
Description	Amortization Life in Years	December 31, 2023					December 31, 2022
Gross Cost1		Accumulated Amortization			Gross Cost1		Accumulated Amortization







Consumers
Software development	3 – 15		$	772	$	543		$	846	$	593
Rights of way	50 – 85		229		64			218		61
Franchises and consents	5 – 50		16		11			16		10
Leasehold improvements	various2		11		7			9		6
Other intangibles	various		24		15			25		16
Total			$	1,052	$	640		$	1,114	$	686

1Consumers’ intangible asset additions were $80 million for the year ended December 31, 2023 and $116 million for the year ended December 31, 2022. Consumers’ intangible asset retirements were $142 million for the year ended December 31, 2023 and $104 million for the year ended December 31, 2022.

2Leasehold 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.

Table of Contents

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. 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	2023		2022		2021
Electric	6.5	%	6.2	%	6.2	%
Gas	5.8		5.6		5.6

Assets Under Finance Leases: Presented in the following table are further details about changes in CMS Energy’s and Consumers’ assets under finance leases:


In Millions
Years Ended December 31	2023			2022
CMS Energy, including Consumers
Balance at beginning of period		$	170		$	332
Additions		—			44
Net retirements and other adjustments		(34)			(206)
Balance at end of period		$	136		$	170
Consumers
Balance at beginning of period		$	146		$	332
Additions		—			20
Net retirements and other adjustments		(34)			(206)
Balance at end of period		$	112		$	146

Assets under finance leases are presented as gross amounts. CMS Energy and Consumers’ accumulated amortization of assets under finance leases was $64 million at December 31, 2023 and $88 million at December 31, 2022.

Table of Contents

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


In Millions
Years Ended December 31	2023			2022
CMS Energy, including Consumers
Utility plant assets		$	8,790		$	8,785
Non-utility plant assets		217			175
Consumers
Utility plant assets		$	8,790		$	8,785
Non-utility plant assets		6			6

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	2023		2022		2021
Electric utility property	3.8	%	3.7	%	3.9	%
Gas utility property	2.8		2.9		2.9
Other property	7.8		8.9		9.4

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	2023			2022			2021
CMS Energy, including Consumers
Depreciation expense – plant, property, and equipment		$	1,050		$	990		$	975
Amortization expense
Software		92			103			108
Other intangible assets		5			5			4
Securitized regulatory assets		33			28			27
Total depreciation and amortization expense		$	1,180		$	1,126		$	1,114
Consumers
Depreciation expense – plant, property, and equipment		$	1,007		$	952		$	938
Amortization expense
Software		92			103			108
Other intangible assets		5			5			4
Securitized regulatory assets		33			28			27
Total depreciation and amortization expense		$	1,137		$	1,088		$	1,077

Table of Contents

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


In Millions
	2024			2025			2026			2027			2028


Consumers
Intangible asset amortization expense		$	89		$	88		$	87		$	81		$	73

Jointly Owned Regulated Utility Facilities

Presented in the following table are Consumers’ investments in jointly owned regulated utility facilities at December 31, 2023:


In Millions, Except Ownership Share
	J.H. Campbell Unit 3				Ludington				Other
Ownership share		93.3		%		51.0		%		various
Utility plant in service		$	1,752			$	619			$	443
Accumulated provision for depreciation		(812)				(227)				(97)
Plant under construction		1				5				11
Net investment		$	941			$	397			$	357

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.

Consumers plans to retire the J.H. Campbell coal-fueled generating units and, in 2022, removed an amount representing the projected remaining book value of the electric generating units upon their retirement from total plant, property, and equipment and recorded it as a regulatory asset on its consolidated balance sheets. For additional details, see Note 2, Regulatory Matters.

Consumers is engaged in ongoing litigation with Wolverine Power related to Consumers’ authority to decide to retire the J.H. Campbell 3 coal-fueled generating unit under the unit’s Joint Ownership and Operating Agreement. For additional details on this dispute, see Note 3, Contingencies and Commitments—J.H. Campbell 3 Plant Retirement Contract Dispute.

Consumers and DTE Electric are engaged in ongoing litigation with TAES and Toshiba related to the 2010 engineering, procurement, and construction agreement with TAES, under which TAES contracted to perform a major overhaul and upgrade of Ludington. For additional details on this dispute, see Note 3, Contingencies and Commitments—Ludington Overhaul Contract Dispute.

Table of Contents

8: Leases

Lessee

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

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

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

Most of Consumers’ PPAs contain provisions at the end of the initial contract terms to renew the agreements annually under mutually agreed‑upon terms at the time of renewal. Energy and capacity 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.

Table of Contents

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
	CMS Energy, including Consumers								Consumers
December 31	2023				2022				2023				2022
Operating leases
Right-of-use assets1		$	26			$	31			$	23			$	27
Lease liabilities
Current lease liabilities2		4				4				4				4
Non-current lease liabilities3		22				27				19				23
Finance leases
Right-of-use assets		71				82				48				58
Lease liabilities4
Current lease liabilities		5				9				5				9
Non-current lease liabilities		62				68				39				45
Weighted-average remaining lease term (in years)
Operating leases		19				20				18				18
Finance leases		19				18				11				10
Weighted-average discount rate
Operating leases		5.2		%		4.0		%		5.3		%		3.9		%
Finance leases5		5.3				5.2				1.5				1.6

1CMS Energy’s and Consumers’ operating right-of-use lease assets are reported as other non‑current assets on their consolidated balance sheets.

2The current portion of CMS Energy’s and Consumers’ operating lease liabilities are reported as other current liabilities on their consolidated balance sheets.

3The non‑current portion of CMS Energy’s and Consumers’ operating lease liabilities are reported as other non‑current liabilities on their consolidated balance sheets.

4Includes related-party lease liabilities of $24 million, of which less than $1 million was current, at December 31, 2023 and 2022.

5This 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.

Table of Contents

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
Years Ended December 31	2023			2022
CMS Energy, including Consumers
Operating lease costs		$	6		$	6
Finance lease costs
Amortization of right-of-use assets		9			12
Interest on lease liabilities		15			14
Variable lease costs		107			93
Short-term lease costs		14			23
Total lease costs		$	151		$	148
Consumers
Operating lease costs		$	5		$	6
Finance lease costs
Amortization of right-of-use assets		8			12
Interest on lease liabilities		13			14
Variable lease costs		107			93
Short-term lease costs		14			22
Total lease costs		$	147		$	147

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


In Millions
Years Ended December 31	2023			2022
CMS Energy, including Consumers
Cash paid for amounts included in the measurement of lease liabilities
Cash used in operating activities for operating leases		$	6		$	6
Cash used in operating activities for finance leases		15			14
Cash used in financing activities for finance leases		8			13
Lease liabilities arising from obtaining right-of-use assets
Operating leases		1			10
Finance leases		—			36
Consumers
Cash paid for amounts included in the measurement of lease liabilities
Cash used in operating activities for operating leases		$	6		$	6
Cash used in operating activities for finance leases		13			14
Cash used in financing activities for finance leases		8			12
Lease liabilities arising from obtaining right-of-use assets
Operating leases		1			10
Finance leases		—			12

Table of Contents

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, 2023	Operating Leases			Pipelines and PPAs			Other			Total
CMS Energy, including Consumers
2024		$	5		$	13		$	6		$	19
2025		4			13			3			16
2026		3			13			4			17
2027		2			13			1			14
2028		1			13			1			14
2029 and thereafter		30			26			66			92
Total minimum lease payments		$	45		$	91		$	81		$	172
Less discount		19			62			43			105
Present value of minimum lease payments		$	26		$	29		$	38		$	67
Consumers
2024		$	5		$	13		$	5		$	18
2025		4			13			2			15
2026		2			13			2			15
2027		2			13			—			13
2028		1			13			—			13
2029 and thereafter		24			26			8			34
Total minimum lease payments		$	38		$	91		$	17		$	108
Less discount		15			62			2			64
Present value of minimum lease payments		$	23		$	29		$	15		$	44

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, 2023, lease revenue from these power sales agreements was $116 million, which included variable lease payments of $74 million. For the year ended December 31, 2022, lease revenue from these power sales agreements was $240 million, which included variable lease payments of $191 million.

Table of Contents

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, 2023
2024	$	43
2025	44
2026	18



Total minimum lease payments	$	105

Consumers has a natural gas transportation agreement with a subsidiary of CMS Energy that extends through 2038, 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 lease are less than $1 million for each of the next five years and $6 million for the years thereafter. The lease receivable was $6 million as of December 31, 2023, which does not include unearned income of $5 million.

9: 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 associated with the closure of certain gas wells that have an indeterminate life. 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:


ARO Description	In-Service Date	Long-Lived Assets

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

Table of Contents

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


In Millions
Company and ARO Description	ARO Liability 12/31/2022			Incurred			Settled			Accretion			Cash Flow Revisions			ARO Liability 12/31/2023
CMS Energy, including Consumers
Consumers		$	722		$	4		$	(28)		$	32		$	9		$	739
Renewable generation assets		24			7			—			1			—			32
Total CMS Energy		$	746		$	11		$	(28)		$	33		$	9		$	771
Consumers
Coal ash disposal areas		$	272		$	—		$	(15)		$	11		$	—		$	268
Gas distribution cut, purge, and cap		287			—			(10)			14			(1)			290
Asbestos abatement		39			—			(1)			3			10			51
Renewable generation assets		95			4			—			3			—			102
Gas wells plug and abandon		29			—			(2)			1			—			28
Total Consumers		$	722		$	4		$	(28)		$	32		$	9		$	739


In Millions
Company and ARO Description	ARO Liability 12/31/2021			Incurred			Settled			Accretion			Cash Flow Revisions1			ARO Liability 12/31/2022
CMS Energy, including Consumers
Consumers		$	605		$	1		$	(39)		$	27		$	128		$	722
Renewable generation assets		23			—			—			1			—			24
Total CMS Energy		$	628		$	1		$	(39)		$	28		$	128		$	746
Consumers
Coal ash disposal areas		$	157		$	—		$	(20)		$	7		$	128		$	272
Gas distribution cut, purge, and cap		282			1			(11)			15			—			287
Asbestos abatement		38			—			(1)			2			—			39
Renewable generation assets		93			—			—			2			—			95
Gas wells plug and abandon		35			—			(7)			1			—			29
Total Consumers		$	605		$	1		$	(39)		$	27		$	128		$	722

1Increase was attributable to a proposed change for closure work at the J.H. Campbell 3 ash disposal landfill and an updated cost estimate for other coal ash disposal areas.

Table of Contents

10: 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 percent to ten percent of base pay, depending on years of service and employee class. Employees are not required to contribute in order to receive the plan’s employer contribution. DCCP expense for CMS Energy, including Consumers, was $51 million for the year ended December 31, 2023, $48 million for the year ended December 31, 2022, and $41 million for the year ended December 31, 2021. DCCP expense for Consumers was $50 million for the year ended December 31, 2023, $48 million for the year ended December 31, 2022, and $41 million for the year ended December 31, 2021.

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 and ABO for CMS Energy’s and Consumers’ DB SERP:


In Millions
Years Ended December 31	2023			2022
CMS Energy, including Consumers
Trust assets		$	132		$	137
ABO		115			118

Consumers
Trust assets		$	98		$	101
ABO		83			85

Table of Contents

Neither CMS Energy nor Consumers made any contributions to the DB SERP in 2023 or 2022.

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 five 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 $14 million at December 31, 2023 and $12 million at December 31, 2022. 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 $1 million for the years ended December 31, 2023 and 2022, and $2 million for the year ended December 31, 2021.

401(k) Plan: The 401(k) plan employer match equals four to six percent of employee eligible contributions based on an employee’s wages and class. The total 401(k) plan cost for CMS Energy, including Consumers, was $41 million for the year ended December 31, 2023, $44 million for the year ended December 31, 2022, and $31 million for the year ended December 31, 2021. The total 401(k) plan cost for Consumers was $40 million for the year ended December 31, 2023, $43 million for the year ended December 31, 2022, and $31 million for the year ended December 31, 2021.

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 10 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 8.00 percent in 2024 and 6.50 percent in 2023 for those under 65 and would increase 8.50 percent in 2024 and 6.75 percent in 2023 for those over 65. The rate of increase was assumed to decline to 4.75 percent by 2032 and thereafter for all retirees.

Table of Contents

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


December 31	2023		2022		2021
CMS Energy, including Consumers
Weighted average for benefit obligations1
Discount rate2
DB Pension Plan A	5.05	%	5.24	%	3.02	%
DB Pension Plan B	4.95		5.14		2.79
DB SERP	4.94		5.13		2.78
OPEB Plan	5.02		5.21		2.99
Rate of compensation increase
DB Pension Plan A	3.60		3.60		3.60
DB SERP3	—		5.50		5.50
Weighted average for net periodic benefit cost1
Service cost discount rate2,4
DB Pension Plan A	5.27	%	3.09	%	2.83	%
DB SERP	5.18		3.09		2.84
OPEB Plan	5.31		3.23		3.03
Interest cost discount rate2,4
DB Pension Plan A	5.12		2.44		1.97
DB Pension Plan B	5.06		2.21		1.70
DB SERP	5.06		2.21		1.72
OPEB Plan	5.10		2.45		1.99
Expected long-term rate of return on plan assets5
DB Pension Plans	7.20		6.50		6.75
OPEB Plan	7.20		6.50		6.75
Rate of compensation increase
DB Pension Plan A	3.60		3.60		3.50
DB SERP	5.50		5.50		5.50

1The mortality assumption for benefit obligations was based on the Pri-2012 Mortality Table, with improvement scale MP-2021. The mortality assumption for net periodic benefit cost was based on the Pri-2012 Mortality Table, with improvement scale MP-2021 for 2023 and 2022 and improvement scale MP-2020 for 2021.

2The 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.

3The DB SERP no longer requires rate of compensation increase as the last active participant retired in 2023.

4CMS 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.

Table of Contents

5CMS 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 7.20 percent in 2023. The actual return (loss) on the assets of the DB Pension Plans was 12.6 percent in 2023, (15.9) percent in 2022, and 12.0 percent in 2021.

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 benefit plans:


In Millions
		DB Pension Plans and DB SERP										OPEB Plan

Years Ended December 31	2023	2022			2021					2023	2022	2021
CMS Energy, including Consumers
Net periodic cost (credit)
Service cost			$	29		$	41	$	53				$	12	$	17	$	18
Interest cost			112			84		63					44		28		23
Settlement loss			—			1		1					—		—		—
Expected return on plan assets			(220)			(206)		(208)					(103)		(115)		(109)
Amortization of:
Net loss			12			40		100					12		1		8
Prior service cost (credit)			4			4		4					(41)		(51)		(53)
Settlement loss			11			9		6					—		—		—

Net periodic cost (credit)			$	(52)		$	(27)	$	19				$	(76)	$	(120)	$	(113)
Consumers
Net periodic credit
Service cost			$	28		$	39	$	51				$	11	$	17	$	17
Interest cost			105			79		59					42		27		23
Expected return on plan assets			(208)			(194)		(197)					(95)		(107)		(102)
Amortization of:
Net loss			11			37		96					12		—		8
Prior service cost (credit)			4			4		4					(40)		(50)		(51)
Settlement loss			11			9		6					—		—		—

Net periodic credit			$	(49)		$	(26)	$	19				$	(70)	$	(113)	$	(105)

In Consumers’ 2022 electric and gas rate cases, the MPSC approved a mechanism allowing Consumers to defer the future recovery or refund of pension and OPEB expenses above or below the amounts used to set existing rates, respectively, beginning in January 2023 for the electric utility and October 2023 for the gas utility. At December 31, 2023, CMS Energy, including Consumers, had deferred $11 million of pension credits and $23 million of OPEB costs under this mechanism.

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 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 eight years for the years ended

Table of Contents

December 31, 2023, 2022, and 2021. For DB Pension Plan B, the estimated period of amortization of gains and losses was 17 years for the year ended December 31, 2023, and 18 years for the years ended December 31, 2022 and 2021. For the OPEB Plan, the estimated amortization period was nine years for the years ended December 31, 2023, 2022, and 2021.

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 for OPEB in 2020. The estimated period of amortization of these new prior service costs is eight 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.

Table of Contents

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


In Millions
	DB Pension Plans							DB SERP						OPEB Plan
Years Ended December 31	2023			2022				2023			2022			2023			2022
CMS Energy, including Consumers
Benefit obligation at beginning of period		$	2,169		$	3,070			$	117		$	149		$	889		$	1,166
Service cost		29			41				—			—			12			17
Interest cost		106			81				6			3			44			28
Plan amendments		—			—				—			—			—			—
Actuarial loss (gain)		52		1	(811)		1		1			(25)			9		1	(274)		1
Benefits paid		(161)			(212)				(10)			(10)			(54)			(48)
Benefit obligation at end of period		$	2,195		$	2,169			$	114		$	117		$	900		$	889
Plan assets at fair value at beginning of period		$	2,820		$	3,599			$	—		$	—		$	1,446		$	1,787
Actual return on plan assets		345			(567)				—			—			165			(294)
Company contribution		—			—				10			10			—			—
Actual benefits paid		(161)			(212)				(10)			(10)			(52)			(47)
Plan assets at fair value at end of period		$	3,004		$	2,820			$	—		$	—		$	1,559		$	1,446
Funded status		$	809	2	$	651	2		$	(114)		$	(117)		$	659		$	557
Consumers
Benefit obligation at beginning of period									$	85		$	109		$	856		$	1,122
Service cost									—			—			11			17
Interest cost									4			2			42			27
Plan amendments									—			—			—			—
Actuarial loss (gain)									1			(19)			10		1	(265)		1
Benefits paid									(7)			(7)			(52)			(45)
Benefit obligation at end of period									$	83		$	85		$	867		$	856
Plan assets at fair value at beginning of period									$	—		$	—		$	1,350		$	1,668
Actual return on plan assets									—			—			154			(273)
Company contribution									7			7			—			—
Actual benefits paid									(7)			(7)			(51)			(45)
Plan assets at fair value at end of period									$	—		$	—		$	1,453		$	1,350
Funded status									$	(83)		$	(85)		$	586		$	494

1The actuarial losses for 2023 for the DB Pension Plans and OPEB Plan were primarily the result of lower discount rates. The actuarial gains for 2022 for the DB Pension Plans and OPEB Plan were primarily the result of higher discount rates.

2The total funded status of the DB Pension Plans attributable to Consumers, based on an allocation of expenses, was $781 million at December 31, 2023 and $632 million at December 31, 2022.

Table of Contents

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


In Millions
December 31	2023			2022
CMS Energy, including Consumers
Non-current assets
DB Pension Plans		$	809		$	651
OPEB Plan		659			557
Current liabilities
DB SERP		10			10
Non-current liabilities

DB SERP		104			107

Consumers
Non-current assets
DB Pension Plans		$	781		$	632
OPEB Plan		586			494
Current liabilities
DB SERP		7			7
Non-current liabilities

DB SERP		76			78

The ABO for the DB Pension Plans was $2.0 billion at December 31, 2023 and 2022. At December 31, 2023 and 2022, the PBO and ABO did not exceed plan assets for any of the defined benefit pension plans.

Table of Contents

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 2, Regulatory Matters.


In Millions
	DB Pension Plans and DB SERP						OPEB Plan
December 31	2023			2022			2023			2022
CMS Energy, including Consumers
Regulatory assets
Net loss		$	634		$	724		$	191		$	251
Prior service cost (credit)		16			21			(100)			(140)
Regulatory assets		$	650		$	745		$	91		$	111
AOCI
Net loss (gain)		65			69			(3)			2
Prior service cost (credit)		1			1			(2)			(3)
Total amounts recognized in regulatory assets and AOCI		$	716		$	815		$	86		$	110
Consumers
Regulatory assets
Net loss		$	634		$	724		$	191		$	251
Prior service cost (credit)		16			21			(100)			(140)
Regulatory assets		$	650		$	745		$	91		$	111
AOCI
Net loss		20			20			—			—
Total amounts recognized in regulatory assets and AOCI		$	670		$	765		$	91		$	111

Table of Contents

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 5, Fair Value Measurements.


In Millions
	DB Pension Plans
	December 31, 2023									December 31, 2022
	Total			Level 1			Level 2			Total			Level 1
CMS Energy, including Consumers
Cash and short-term investments		$	178		$	178		$	—		$	122		$	122




Mutual funds		47			47			—			263			263
		$	225		$	225		$	—		$	385		$	385
Pooled funds		2,779									2,435
Total		$	3,004								$	2,820


In Millions
	OPEB Plan
	December 31, 2023									December 31, 2022
	Total			Level 1			Level 2			Total			Level 1
CMS Energy, including Consumers
Cash and short-term investments		$	82		$	82		$	—		$	28		$	28
U.S. government and agencies securities		16			—			16			—			—
Corporate debt		67			—			67			—			—
State and municipal bonds		1			—			1			—			—
Foreign corporate bonds		15			—			15			—			—
Common stocks		161			161			—			69			69
Mutual funds		60			60			—			754			754
		$	402		$	303		$	99		$	851		$	851
Pooled funds		1,157									595
Total		$	1,559								$	1,446

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.

Table of Contents

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 and MSCI All Country World ex-US. 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, 2023:


	DB Pension Plans			OPEB Plan
Fixed-income securities		42.0	%		40.0	%
Equity securities		38.0			42.0
Real asset investments		9.0			8.0
Return-seeking fixed income		6.0			5.0
Liquid alternative investments		4.0			4.0
Cash and cash equivalents		1.0			1.0
		100.0	%		100.0	%

CMS Energy’s target 2023 asset allocation for the assets of the DB Pension Plans was 40‑percent fixed income, 38‑percent equity, 11‑percent real assets, 7‑percent return-seeking fixed income, and 4‑percent liquid alternatives.

CMS Energy established union and non‑union VEBA trusts to fund future retiree health and life insurance benefits known as OPEB. These trusts are funded through the ratemaking process for Consumers and through direct contributions from the non‑utility subsidiaries. CMS Energy’s target 2023 asset allocation for OPEB trusts was 40‑percent fixed income, 38‑percent equity, 11‑percent real assets, 7‑percent return-seeking fixed income, and 4‑percent liquid alternatives.

The goal of these target allocations was 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 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. Return-seeking fixed-income investments are diversified exposure to high-yield bonds, emerging market debt, and bank loans. Real asset investments are diversified across core real estate and real estate investment trusts. Liquid alternatives are investments in private funds comprised of different and independent hedge funds with various investment strategies. CMS Energy uses annual liability measurements, quarterly portfolio reviews, and periodic asset/liability studies to evaluate the need for adjustments to the portfolio allocations.

Table of Contents

Contributions: Contributions comprise required amounts and discretionary contributions. Neither CMS Energy nor Consumers made any contributions in 2023 or 2022, or plans to contribute to the DB Pension Plans or OPEB Plan in 2024. 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
2024		$	158		$	10		$	55
2025		160			10			57
2026		159			10			58
2027		159			10			60
2028		159			9			61
2029-2033		785			43			315
Consumers
2024		$	148		$	7		$	53
2025		151			7			54
2026		150			7			56
2027		150			7			57
2028		150			6			59
2029-2033		741			29			301

Collective Bargaining Agreements: At December 31, 2023, unions represented 44 percent of CMS Energy’s employees and 45 percent of Consumers’ employees. The UWUA represents Consumers’ operating, maintenance, construction, and customer contact center employees. The USW represents Zeeland plant employees. The UWUA and USW agreements expire in 2025.

Table of Contents

11: 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 2030.

In 2023, 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 2023, 2022, or 2021.

Shares awarded or subject to stock options, phantom shares, or performance units may not exceed 6.5 million shares from June 2020 through May 2030. CMS Energy and Consumers may issue awards of up to 4,960,465 shares of common stock under the PISP as of December 31, 2023. 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 2023, 2022, and 2021 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 2023, 2022, and 2021, 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

Table of Contents

distribution conditions as the underlying restricted stock units. No restricted stock units were forfeited during 2023.

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, 2023	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	1,029,523		$	60.13	978,146		$	60.15
Granted
Restricted stock	502,039		52.62		474,917		52.42
Restricted stock units	19,082		50.32		18,315		50.34
Vested
Restricted stock	(313,344)		51.54		(302,177)		51.48
Restricted stock units	(15,211)		52.60		(14,523)		52.55
Forfeited – restricted stock	(63,987)		53.57		(60,312)		53.45
Nonvested at end of period	1,158,102		$	59.50	1,094,366		$	59.50


Year Ended December 31, 2023	CMS Energy, including Consumers	Consumers
Granted
Time-lapse awards	115,591	108,216
Market-based awards	147,453	139,255
Performance-based awards	153,383	145,008
Restricted stock units	15,545	14,925
Dividends on market-based awards	14,825	14,038
Dividends on performance-based awards	15,608	14,787
Dividends on restricted stock units	3,537	3,390

Additional performance-based shares based on achievement of condition	55,179	53,613
Total granted	521,121	493,232

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-

Table of Contents

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 significant assumptions used to estimate the fair value of the market-based restricted stock awards:


Years Ended December 31	2023		2022		2021
Expected volatility	30.3	%	27.3	%	27.6	%
Expected dividend yield	2.9		2.8		2.8
Risk-free rate	3.9		1.4		0.2

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


In Millions
Years Ended December 31	2023			2022			2021
CMS Energy, including Consumers
Weighted-average grant-date fair value per share
Restricted stock granted		$	52.62		$	48.69		$	43.52
Restricted stock units granted		50.32			56.13			54.11
Consumers
Weighted-average grant-date fair value per share
Restricted stock granted		$	52.42		$	48.57		$	42.85
Restricted stock units granted		50.34			56.07			53.93

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


In Millions
Years Ended December 31	2023			2022			2021
CMS Energy, including Consumers
Fair value of shares that vested during the year		$	20		$	27		$	25
Compensation expense recognized		28			26			22
Income tax benefit recognized		3			—			1
Consumers
Fair value of shares that vested during the year		$	19		$	25		$	24
Compensation expense recognized		26			25			21
Income tax benefit recognized		2			—			1

At December 31, 2023, $29 million of total unrecognized compensation cost was related to restricted stock for CMS Energy, including Consumers, and $27 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.

Table of Contents

12: 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.

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	2023				2022	2021
CMS Energy, including Consumers
Income from continuing operations before income taxes		$	954				$	902		$	823

Income tax expense at statutory rate		200					189			173
Increase (decrease) in income taxes from:
State and local income taxes, net of federal effect1		31					51			39
Renewable energy tax credits		(58)					(51)			(44)
TCJA excess deferred taxes2		(40)					(65)			(50)
Taxes attributable to noncontrolling interests		17					5			5
Accelerated flow-through of regulatory tax benefits3		—					(39)			(28)


Other, net		(3)					3			—
Income tax expense		$	147				$	93		$	95
Effective tax rate		15.4		%			10.3		%	11.5		%
Consumers
Income from continuing operations before income taxes		$	1,028				$	1,085		$	1,024

Income tax expense at statutory rate		216					228			215
Increase (decrease) in income taxes from:
State and local income taxes, net of federal effect1		36					59			54
Renewable energy tax credits		(46)					(46)			(37)
TCJA excess deferred taxes2		(40)					(65)			(50)

Accelerated flow-through of regulatory tax benefits3		—					(39)			(28)


Other, net		(5)					3			2
Income tax expense		$	161				$	140		$	156
Effective tax rate		15.7		%			12.9		%	15.2		%

1CMS Energy initiated a plan to divest immaterial business activities in a non‑Michigan jurisdiction and will no longer have a taxable presence within that jurisdiction after 2023. As a result of these actions, CMS Energy reversed a $13 million non‑Michigan reserve, all of which was recognized at Consumers.

2In 2020, the MPSC authorized Consumers to accelerate the amortization of the gas portion of its regulatory liability associated with unprotected, non-property-related excess deferred income taxes resulting from the TCJA. This portion of the regulatory liability was fully amortized in 2022.

3In 2020, the MPSC authorized Consumers to accelerate the amortization of income tax benefits associated with the cost to remove gas plant assets. These tax benefits were fully amortized in 2022.

Table of Contents

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


In Millions
Years Ended December 31	2023			2022			2021
CMS Energy, including Consumers
Current income taxes
Federal		$	5		$	6		$	(1)
State and local		1			—			1
		$	6		$	6		$	—
Deferred income taxes
Federal		107			4			49
State and local		38			65			49
		$	145		$	69		$	98
Deferred income tax credit		(4)			18			(3)
Tax expense		$	147		$	93		$	95
Consumers
Current income taxes
Federal		$	3		$	(2)		$	(13)
State and local		2			8			15
		$	5		$	6		$	2
Deferred income taxes
Federal		117			50			103
State and local		43			66			54
		$	160		$	116		$	157
Deferred income tax credit		(4)			18			(3)
Tax expense		$	161		$	140		$	156

Table of Contents

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


In Millions
December 31	2023			2022
CMS Energy, including Consumers
Deferred income tax assets
Tax loss and credit carryforwards		$	428		$	385
Net regulatory tax liability		305			318
Reserves and accruals		28			35
Total deferred income tax assets		$	761		$	738
Valuation allowance		(2)			(2)
Total deferred income tax assets, net of valuation allowance		$	759		$	736
Deferred income tax liabilities
Plant, property, and equipment		$	(2,520)		$	(2,515)
Employee benefits		(473)			(433)
Gas inventory		(66)			(53)
Securitized costs		(194)			(39)
Other		(121)			(103)
Total deferred income tax liabilities		$	(3,374)		$	(3,143)
Total net deferred income tax liabilities		$	(2,615)		$	(2,407)
Consumers
Deferred income tax assets
Net regulatory tax liability		$	305		$	318
Tax loss and credit carryforwards		175			145
Reserves and accruals		27			28


Total deferred income tax assets		$	507		$	491
Deferred income tax liabilities
Plant, property, and equipment		$	(2,498)		$	(2,458)
Employee benefits		(459)			(423)
Gas inventory		(66)			(53)
Securitized costs		(194)			(39)
Other		(79)			(103)
Total deferred income tax liabilities		$	(3,296)		$	(3,076)
Total net deferred income tax liabilities		$	(2,789)		$	(2,585)

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.

Table of Contents

Presented in the following table are the tax loss and credit carryforwards at December 31, 2023:


In Millions
	Tax Attribute	Expiration
CMS Energy, including Consumers

State net operating loss carryforwards		$	69	2030 – 2033
Local net operating loss carryforwards		3		2024 – 2040
General business credits		356		2035 – 2043



Total tax attributes		$	428
Consumers

State net operating loss carryforwards		$	53	2030 – 2033

General business credits		122		2035 – 2043


Total tax attributes		$	175

CMS Energy has provided a valuation allowance of $2 million for the local tax loss carryforward. 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	2023			2022			2021
CMS Energy, including Consumers
Balance at beginning of period		$	28		$	27		$	25
Additions for current-year tax positions		1			1			2
Additions for prior-year tax positions		—			1			—
Reductions for prior-year tax positions		(3)			(1)			—

Balance at end of period		$	26		$	28		$	27
Consumers
Balance at beginning of period		$	36		$	34		$	31
Additions for current-year tax positions		1			3			3
Additions for prior-year tax positions		2			1			—
Reductions for prior-year tax positions		(3)			(2)			—

Balance at end of period		$	36		$	36		$	34

If recognized, all of these uncertain tax benefits would affect CMS Energy’s and Consumers’ annual effective tax rates in future years. One uncertain tax benefit relates to the methodology of state apportionment for Consumers’ electricity sales to MISO. The Michigan Tax Tribunal heard oral arguments on this methodology during 2022. A final conclusion is not anticipated in the next 12 months.

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 each of the years ended December 31, 2023, 2022, or 2021.

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 2020

Table of Contents

and subsequent years remain subject to examination by the IRS. CMS Energy’s Michigan Corporate Income Tax returns for 2013-2016 and 2019 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, 2023 were adequate for all years.

13: Earnings Per Share—CMS Energy

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


In Millions, Except Per Share Amounts

Years Ended December 31	2023	2022			2021
Income available to common stockholders
Income from continuing operations			$	807		$	809	$	728
Less loss attributable to noncontrolling interests			(79)			(24)		(23)
Less preferred stock dividends			10			10		5
Income from continuing operations available to common stockholders – basic and diluted			$	876		$	823	$	746
Average common shares outstanding
Weighted-average shares – basic			291.2			289.5		289.0
Add dilutive nonvested stock awards			0.5			0.3		0.5
Add dilutive forward equity sale contracts			—			0.2		—

Weighted-average shares – diluted			291.7			290.0		289.5
Income from continuing operations per average common share available to common stockholders
Basic			$	3.01		$	2.84	$	2.58
Diluted			3.01			2.84		2.58

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

CMS Energy has entered into forward equity sale contracts. These forward equity sale contracts are non‑participating securities. While the forward sale price in the forward equity sale contract is decreased on certain dates by certain predetermined amounts to reflect expected dividend payments, these price adjustments were set upon inception of the agreement and the forward contract does not give the owner the right to participate in undistributed earnings. Accordingly, the forward equity sale contracts were

Table of Contents

included in the computation of diluted EPS, but not in the computation of basic EPS. For further details on the forward equity sale contracts, see Note 4, Financings and Capitalization.

Convertible Securities

In May 2023, CMS Energy issued an aggregate principal amount of $800 million convertible senior notes. Potentially dilutive common shares issuable upon conversion of the convertible senior notes are determined using the if-converted method for calculating diluted EPS. Upon conversion, the convertible senior notes are required to be paid in cash with only amounts exceeding the principal permitted to be settled in shares. The convertible senior notes were anti-dilutive for the year ended December 31, 2023. For further details on CMS Energy’s convertible senior notes, see Note 4, Financings and Capitalization.

14: Revenue

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


In Millions
Year Ended December 31, 2023	Electric Utility			Gas Utility			NorthStar Clean Energy1			Consolidated
CMS Energy, including Consumers
Consumers utility revenue		$	4,686		$	2,394		$	—		$	7,080
Other		—			—			181			181
Revenue recognized from contracts with customers		$	4,686		$	2,394		$	181		$	7,261
Leasing income		—			—			116			116
Financing income		10			6			—			16
Consumers alternative-revenue programs		49			20			—			69

Total operating revenue – CMS Energy		$	4,745		$	2,420		$	297		$	7,462
Consumers
Consumers utility revenue
Residential		$	2,236		$	1,619					$	3,855
Commercial		1,550			489						2,039
Industrial		660			60						720
Other		240			226						466
Revenue recognized from contracts with customers		$	4,686		$	2,394					$	7,080

Financing income		10			6						16
Alternative-revenue programs		49			20						69

Other non-segment revenue		—			—						1
Total operating revenue – Consumers		$	4,745		$	2,420					$	7,166

1Amounts represent NorthStar Clean Energy’s operating revenue from independent power production and its sales of energy commodities.

Table of Contents


In Millions
Year Ended December 31, 2022	Electric Utility			Gas Utility			NorthStar Clean Energy1			Consolidated
CMS Energy, including Consumers
Consumers utility revenue		$	5,395		$	2,720		$	—		$	8,115
Other		—			—			205			205
Revenue recognized from contracts with customers		$	5,395		$	2,720		$	205		$	8,320
Leasing income		—			—			240			240
Financing income		10			6			—			16
Consumers alternative-revenue programs		43			14			—			57
Consumers revenues to be refunded		(29)			(8)			—			(37)
Total operating revenue – CMS Energy		$	5,419		$	2,732		$	445		$	8,596
Consumers
Consumers utility revenue
Residential		$	2,523		$	1,879					$	4,402
Commercial		1,733			559						2,292
Industrial		792			75						867
Other		347			207						554
Revenue recognized from contracts with customers		$	5,395		$	2,720					$	8,115

Financing income		10			6						16
Alternative-revenue programs		43			14						57
Revenues to be refunded		(29)			(8)						(37)
Total operating revenue – Consumers		$	5,419		$	2,732					$	8,151

1Amounts represent NorthStar Clean Energy’s operating revenue from independent power production and its sales of energy commodities.

Table of Contents


In Millions
Year Ended December 31, 2021	Electric Utility			Gas Utility			NorthStar Clean Energy1			Consolidated
CMS Energy, including Consumers
Consumers utility revenue		$	4,915		$	2,046		$	—		$	6,961
Other		—			—			114			114
Revenue recognized from contracts with customers		$	4,915		$	2,046		$	114		$	7,075
Leasing income		—			—			194			194
Financing income		10			5			—			15
Consumers alternative-revenue programs		33			12			—			45

Total operating revenue – CMS Energy		$	4,958		$	2,063		$	308		$	7,329
Consumers
Consumers utility revenue
Residential		$	2,402		$	1,396					$	3,798
Commercial		1,573			396						1,969
Industrial		624			54						678
Other		316			200						516
Revenue recognized from contracts with customers		$	4,915		$	2,046					$	6,961

Financing income		10			5						15
Alternative-revenue programs		33			12						45

Total operating revenue – Consumers		$	4,958		$	2,063					$	7,021

1Amounts represent NorthStar Clean Energy’s operating revenue from independent power production and its sales of energy commodities.

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.

Table of Contents

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 less an allowance for uncollectible accounts. The allowance is increased for uncollectible accounts expense and decreased for account write-offs net of recoveries. CMS Energy and Consumers establish the allowance based on historical losses, management’s assessment of existing economic conditions, customer payment trends, and reasonable and supported forecast information. CMS Energy and Consumers assess late payment fees on trade receivables based on contractual past-due terms established with customers. Accounts are written off when deemed uncollectible, which is generally when they become six months past due.

CMS Energy and Consumers recorded uncollectible accounts expense of $34 million for the year ended December 31, 2023, $50 million for the year ended December 31, 2022, and $22 million for the year ended December 31, 2021. Uncollectible accounts expense for the year ended December 31, 2022 included a commitment to contribute $10 million to directly assist vulnerable customers with utility bills.

Consumers’ customers are billed monthly in cycles having billing dates that do not generally coincide with the end of a calendar month. This results in customers having received electricity or natural gas that they have not been billed for as of the month-end. Consumers estimates its unbilled revenues by applying an average billed rate to total unbilled deliveries for each customer class. Unbilled revenues, which are recorded as accounts receivable and accrued revenue on CMS Energy’s and Consumers’ consolidated balance sheets, were $494 million at December 31, 2023 and $663 million at December 31, 2022.

Alternative‑revenue Programs: Consumers accounts for its energy waste reduction incentive mechanism and financial compensation mechanism as alternative-revenue programs. Consumers recognizes revenue related to the energy waste reduction incentive as soon as energy savings exceed the annual targets established by the MPSC and recognizes revenue related to the financial compensation mechanism as payments are made on MPSC-approved PPAs. For additional information on these mechanisms, see Note 2, Regulatory Matters.

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.

Revenues to Be Refunded: In December 2022, the MPSC issued an order authorizing Consumers to refund $22 million voluntarily to utility customers. Additionally, in the settlement of its 2022 electric rate case, Consumers agreed to refund voluntarily $15 million of 2022 revenues to utility customers through a one‑time bill credit. For additional information, see Note 2, Regulatory Matters.

Table of Contents

15: Other Income and Other Expense

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


In Millions
Years Ended December 31	2023			2022			2021
CMS Energy, including Consumers
Other income

Gain on extinguishment of debt1		$	131		$	—	$	—
Interest income		37			5		3

Allowance for equity funds used during construction		7			6		8
Income from equity method investees		7			3		10

All other		13			5		9
Total other income – CMS Energy		$	195		$	19	$	30
Consumers
Other income

Interest income		$	25		$	2	$	2
Interest income - related parties		5			5		5
Allowance for equity funds used during construction		7			6		8

All other		12			4		8
Total other income – Consumers		$	49		$	17	$	23
CMS Energy, including Consumers
Other expense
Donations		$	(1)		$	(9)	$	(6)
Civic and political expenditures		(5)			(6)		(5)


All other		(7)			(12)		(7)
Total other expense – CMS Energy		$	(13)		$	(27)	$	(18)
Consumers
Other expense
Donations		$	(1)		$	(9)	$	(6)
Civic and political expenditures		(5)			(6)		(5)

All other		(6)			(10)		(7)
Total other expense – Consumers		$	(12)		$	(25)	$	(18)

1For information regarding the gain on extinguishment of debt, see Note 4, Financings and Capitalization—CMS Energy’s Purchase of Consumers’ First Mortgage Bonds.

Table of Contents

16: 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. Inter-segment sales and transfers were immaterial for all periods presented.

CMS Energy

The segments reported for CMS Energy are:

electric utility, consisting of regulated activities associated with the generation, purchase, 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
NorthStar Clean Energy, 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

CMS Energy presents corporate interest and other expenses, discontinued operations, and Consumers’ other consolidated entities within other reconciling items.

Consumers

The segments reported for Consumers are:

electric utility, consisting of regulated activities associated with the generation, purchase, 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.

Table of Contents

Presented in the following tables is financial information by segment:


In Millions
Years Ended December 31	2023			2022			2021
CMS Energy, including Consumers
Operating revenue
Electric utility		$	4,745		$	5,419		$	4,958
Gas utility		2,420			2,732			2,063
NorthStar Clean Energy		297			445			308


Total operating revenue – CMS Energy		$	7,462		$	8,596		$	7,329
Consumers
Operating revenue
Electric utility		$	4,745		$	5,419		$	4,958
Gas utility		2,420			2,732			2,063
Other reconciling items		1			—			—
Total operating revenue – Consumers		$	7,166		$	8,151		$	7,021
CMS Energy, including Consumers
Depreciation and amortization
Electric utility		$	797		$	757		$	772
Gas utility		338			330			304
NorthStar Clean Energy		43			38			37

Other reconciling items		2			1			1
Total depreciation and amortization – CMS Energy		$	1,180		$	1,126		$	1,114
Consumers
Depreciation and amortization
Electric utility		$	797		$	757		$	772
Gas utility		338			330			304
Other reconciling items		2			1			1
Total depreciation and amortization – Consumers		$	1,137		$	1,088		$	1,077

Table of Contents


In Millions
Years Ended December 31	2023			2022			2021
CMS Energy, including Consumers
Income from equity method investees1
NorthStar Clean Energy		$	7		$	3		$	10

Total income from equity method investees – CMS Energy		$	7		$	3		$	10
CMS Energy, including Consumers
Interest charges
Electric utility		$	281		$	218		$	207
Gas utility		158			116			104
NorthStar Clean Energy		2			3			6

Other reconciling items		202			182			183
Total interest charges – CMS Energy		$	643		$	519		$	500
Consumers
Interest charges
Electric utility		$	285		$	218		$	207
Gas utility		161			116			104
Other reconciling items		2			1			—
Total interest charges – Consumers		$	448		$	335		$	311
CMS Energy, including Consumers
Income tax expense (benefit)
Electric utility		$	67		$	109		$	117
Gas utility		98			32			39
NorthStar Clean Energy		4			3			(2)

Other reconciling items		(22)			(51)			(59)
Total income tax expense – CMS Energy		$	147		$	93		$	95
Consumers
Income tax expense (benefit)
Electric utility		$	67		$	109		$	117
Gas utility		98			32			39
Other reconciling items		(4)			(1)			—
Total income tax expense – Consumers		$	161		$	140		$	156

Table of Contents


In Millions
Years Ended December 31	2023			2022			2021
CMS Energy, including Consumers
Net income (loss) available to common stockholders
Electric utility		$	550		$	567		$	565
Gas utility		315			378			302
NorthStar Clean Energy		67			34			23

Other reconciling items		(55)			(152)			458
Total net income available to common stockholders – CMS Energy		$	877		$	827		$	1,348
Consumers
Net income (loss) available to common stockholder
Electric utility		$	550		$	567		$	565
Gas utility		315			378			302
Other reconciling items		—			(2)			(1)
Total net income available to common stockholder – Consumers		$	865		$	943		$	866
CMS Energy, including Consumers
Plant, property, and equipment, gross
Electric utility2		$	19,302		$	17,870		$	18,147
Gas utility2		12,383			11,443			10,601
NorthStar Clean Energy		1,420			1,148			1,122

Other reconciling items		30			30			23
Total plant, property, and equipment, gross – CMS Energy		$	33,135		$	30,491		$	29,893
Consumers
Plant, property, and equipment, gross
Electric utility2		$	19,302		$	17,870		$	18,147
Gas utility2		12,383			11,443			10,601
Other reconciling items		38			29			23
Total plant, property, and equipment, gross – Consumers		$	31,723		$	29,342		$	28,771
CMS Energy, including Consumers
Investments in equity method investees1
NorthStar Clean Energy		$	76		$	71		$	71

Total investments in equity method investees – CMS Energy		$	76		$	71		$	71

Table of Contents


In Millions
Years Ended December 31	2023			2022			2021
CMS Energy, including Consumers
Total assets
Electric utility2		$	19,358		$	17,907		$	16,493
Gas utility2		12,353			11,873			10,517
NorthStar Clean Energy		1,604			1,464			1,312

Other reconciling items		202			109			431
Total assets – CMS Energy		$	33,517		$	31,353		$	28,753
Consumers
Total assets
Electric utility2		$	19,417		$	17,968		$	16,555
Gas utility2		12,397			11,918			10,564
Other reconciling items		38			30			21
Total assets – Consumers		$	31,852		$	29,916		$	27,140
CMS Energy, including Consumers
Capital expenditures3
Electric utility4		$	2,081		$	1,265		$	1,153
Gas utility4		1,041			1,008			989
NorthStar Clean Energy		156			113			17

Other reconciling items		2			7			2
Total capital expenditures – CMS Energy		$	3,280		$	2,393		$	2,161
Consumers
Capital expenditures3
Electric utility4		$	2,081		$	1,265		$	1,153
Gas utility4		1,041			1,008			989
Other reconciling items		23			7			2
Total capital expenditures – Consumers		$	3,145		$	2,280		$	2,144

1Consumers had no equity method investments.

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

3Amounts include assets placed under finance lease.

4Amounts include a portion of Consumers’ capital expenditures for plant and equipment attributable to both the electric and gas utility businesses.

Table of Contents

17: Related-party Transactions—Consumers

Consumers enters into a number of transactions with related parties in the normal course of business. These transactions include but are not limited to:

purchases of electricity from affiliates of NorthStar Clean Energy
payments to and from CMS Energy related to parent company overhead costs
payments of principal and interest when due to CMS Energy related to borrowings under certain credit agreements and CMS Energy’s repurchase of Consumers’ first mortgage bonds

Transactions involving power supply purchases from certain affiliates of NorthStar Clean Energy 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	2023			2022			2021
Purchases of capacity and energy	Affiliates of NorthStar Clean Energy		$	75		$	76		$	77

Amounts payable to related parties for purchased power and other services were $19 million at December 31, 2023 and $20 million at December 31, 2022. Accounts receivable from related parties were $9 million at December 31, 2023 and $8 million at December 31, 2022.

CMS Energy has a 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 portion of the demand note attributable to Consumers was recorded as a note receivable – related party on Consumers’ consolidated balance sheets at December 31, 2023 and 2022.

Consumers has a natural gas transportation agreement with a subsidiary of CMS Energy that extends through 2038, related to a pipeline owned by Consumers. For additional details about the agreement, see Note 8, Leases.

During 2023, CMS Energy repurchased certain of Consumers’ first mortgage bonds. For more information about these repurchases, see Note 4, Financings and Capitalization—CMS Energy’s Purchase of Consumers’ First Mortgage Bonds.

In November 2023, an unregulated subsidiary of Consumers sold certain non-utility renewable development projects to NorthStar Clean Energy for $20 million, the projects’ net book value; there was no gain or loss recognized on this sale.

In December 2023, Consumers renewed a short-term credit agreement with CMS Energy, permitting Consumers to borrow up to $500 million. For additional details about the agreement, see Note 4, Financings and Capitalization—Short-term Borrowings.

Table of Contents

18: Variable Interest Entities

Consolidated VIEs: During 2023, NorthStar Clean Energy sold a Class A membership interest in Newport Solar Holdings to tax equity investors for $86 million. Newport Solar Holdings wholly owns Newport Solar, a 180‑MW solar generation project located in Jackson County, Arkansas; the project began commercial operation in October 2023.

NorthStar Clean Energy holds a Class B membership interest in NWO Holdco, which wholly owns Northwest Ohio Wind, LLC, a 100‑MW wind generation project in Paulding County, Ohio. The Class A membership interest in NWO Holdco is held by a tax equity investor.

NorthStar Clean Energy has a 51-percent ownership interest in Aviator Wind Equity Holdings, which holds a Class B membership interest in Aviator Wind, the holding company of a 525‑MW wind generation project in Coke County, Texas. The Class A membership interest in Aviator Wind is held by a tax equity investor.

Earnings, tax attributes, and cash flows generated by Newport Solar Holdings, NWO Holdco, and Aviator Wind are allocated among and distributed to the membership classes in accordance with the ratios specified in the associated limited liability company agreements; these ratios change over time and are not representative of the ownership interest percentages of each membership class. Since these entities’ income and cash flows are not distributed among their investors based on ownership interest percentages, NorthStar Clean Energy allocates the entities’ income (loss) among the investors by applying the hypothetical liquidation at book value method. This method calculates each investor’s earnings based on a hypothetical liquidation of the entities at the net book value of underlying assets as of the balance sheet date. The liquidation tax gain (loss) is allocated to each investor’s capital account, resulting in income (loss) equal to the period change in the investor’s capital account balance.

Newport Solar Holdings, NWO Holdco, Aviator Wind Equity Holdings, and Aviator Wind are VIEs. In accordance with the associated limited liability company agreements, the tax equity investors are guaranteed preferred returns from these entities. However, NorthStar Clean Energy manages and controls the entities’ operating activities. As a result, NorthStar Clean Energy is the primary beneficiary, as it has the power to direct the activities that most significantly impact the economic performance of the companies, as well as the obligation to absorb losses or the right to receive benefits from the companies. NorthStar Clean Energy consolidates Newport Solar Holdings, NWO Holdco, Aviator Wind Equity Holdings, and Aviator Wind and presents the Class A membership interests and 49 percent of Aviator Wind Equity Holdings as noncontrolling interests.

Table of Contents

Presented in the following table are the carrying values of the VIEs’ assets and liabilities included on CMS Energy’s consolidated balance sheets:


In Millions
December 31	2023			2022
Current
Cash and cash equivalents		$	28		$	43

Accounts receivable		3			7
Prepayments and other current assets		4			7
Non-current
Plant, property, and equipment, net		1,064			850
Construction work in progress		—			156
Other non-current assets		3			—
Total assets1		$	1,102		$	1,063
Current
Current portion of long-term debt		$	—		$	100

Accounts payable		12			33

Non-current
Non-current portion of finance leases		23			23
Asset retirement obligations		32			24

Total liabilities		$	67		$	180

1Assets may be used only to meet VIEs’ obligations and commitments.

NorthStar Clean Energy is obligated under certain indemnities that protect the tax equity investors against losses incurred as a result of breaches of representations and warranties under the associated limited liability company agreements. For additional details on these indemnity obligations, see Note 3, Contingencies and Commitments—Guarantees.

Consumers’ wholly-owned subsidiaries, Consumers 2014 Securitization Funding and Consumers 2023 Securitization Funding, are VIEs designed to collateralize Consumers’ securitization bonds. These entities are considered VIEs primarily because their equity capitalization is insufficient to support their operations. Consumers is the primary beneficiary of and consolidates these VIEs, as it has the power to direct the activities that most significantly impact the economic performance of the companies, as well as the obligation to absorb losses or the right to receive benefits from the companies. The VIEs’ primary assets and liabilities comprise regulatory assets and long-term debt. For more information on these assets and liabilities, see Note 2, Regulatory Matters— Securitized Costs and Note 4, Financings and Capitalization—Securitization Bonds.

Non-consolidated VIEs: 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.

Table of Contents

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

Craven	Wood waste-fueled power generator	Operating and management contract

1Reduced 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.

The creditors of these partnerships do not have recourse to the general credit of CMS Energy or Consumers. CMS Energy’s maximum risk exposure to these partnerships is generally limited to its investment in the partnerships, which is included in investments on its consolidated balance sheets in the amount of $74 million at December 31, 2023 and $71 million at December 31, 2022.

19: Exit Activities and Discontinued Operations

Exit Activities: In accordance with its Clean Energy Plan, Consumers retired the D.E. Karn coal-fueled electric generating units in June 2023 and plans to retire the J.H. Campbell coal-fueled generating units in 2025. In order to ensure necessary staffing at both D.E. Karn and J.H. Campbell through retirement, Consumers has implemented retention incentive programs. The aggregate cost of the D.E. Karn program, which is now complete, was $32 million. The aggregate cost of the J.H. Campbell program through 2025 is estimated to be $50 million. The MPSC has approved deferred accounting treatment for these costs; these expenses are deferred as a regulatory asset.

As of December 31, 2023, the cumulative cost incurred and charged to maintenance and other operating expenses related to the D.E. Karn retention incentive program was $16 million. Additionally, an amount of $4 million was capitalized as a cost of plant, property, and equipment and an amount of $12 million was deferred as a regulatory asset. The cumulative cost incurred and deferred as a regulatory asset related to the J.H. Campbell retention incentive program was $35 million. The regulatory assets for both programs will be collected from customers over three years.

Table of Contents

Presented in the following table is a reconciliation of the retention benefit liability recorded in other liabilities on Consumers’ consolidated balance sheets:


In Millions

Years Ended December 31	2023	2022
Retention benefit liability at beginning of period			$	21	$	14

Costs deferred as a regulatory asset			16		24

Costs paid or settled			(21)		(17)
Retention benefit liability at the end of the period1			$	16	$	21

1Includes current portion of other liabilities of $7 million at December 31, 2023 and $13 million at December 31, 2022.

Discontinued Operations: In 2021, EnerBank was acquired by a non-affiliated company. CMS Energy received proceeds of over $1.0 billion from the transaction and recognized a pre-tax gain of $657 million in 2021. In March 2022, CMS Energy received $6 million of additional proceeds as the result of a post-closing adjustment. Net of related transaction costs, CMS Energy recognized a pre-tax gain of $5 million during 2022.

EnerBank’s results of operations through the date of the sale are presented as income from discontinued operations on CMS Energy’s consolidated statements of income for the year ended December 31, 2021. The table below presents the financial results of EnerBank included in income from discontinued operations:


In Millions

Years Ended December 31	2022	2021
Operating revenue			$	—	$	209
Expenses
Operating expenses			—		60

Interest expense			—		34
Income before income taxes			$	—	$	115
Gain on sale			5		657
Income from discontinued operations before income taxes			$	5	$	772
Income tax expense			1		170
Income from discontinued operations, net of tax			$	4	$	602

Table of Contents

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, 2023 and 2022, and the related consolidated statements of income, of comprehensive income, of changes in equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes and financial statement schedules 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, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 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, 2023, 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 the accompanying 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.

Table of Contents

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 2 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, 2023, the Company has recognized a total of $3,886 million of regulatory assets, $3,950 million of regulatory liabilities, and $54 million of accrued rate refunds. 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 accounting for the effects of new regulatory matters is a critical audit matter are (i) the 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, the significant audit effort necessary to assess contrary evidence from various parties involved in rate case proceedings; and (iii) the 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

Table of Contents

regulatory proceedings, including the probability of recovering incurred costs and the related accounting and disclosure impacts. These procedures also included, among others, (i) evaluating the Company’s correspondence with regulators; (ii) evaluating the reasonableness of management’s assessment regarding whether recovery of regulatory assets and settlement of regulatory liabilities is probable; (iii) evaluating the sufficiency of the disclosures in the consolidated financial statements; and (iv) testing, on a sample basis, the regulatory assets and liabilities, including those subject to pending rate cases and regulatory proceedings, based on (a) provisions and formulas outlined in rate orders; (b) other regulatory correspondence; and (c) application of relevant regulatory precedents.

/s/ PricewaterhouseCoopers LLP

Detroit, Michigan

February 8, 2024

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

Table of Contents

(This page intentionally left blank)

Table of Contents

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, 2023 and 2022, and the related consolidated statements of income, of comprehensive income, of changes in equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes and financial statement schedule 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, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Basis for Opinions

Table of Contents

Definition and Limitations of Internal Control over Financial Reporting

Critical Audit Matters

Accounting for the Effects of New Regulatory Matters

Table of Contents

/s/ PricewaterhouseCoopers LLP

Detroit, Michigan

February 8, 2024

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

Table of Contents

Previous: Item 7A. Quantitative and Qualitative Disclosures About Market Risk · Next: Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure