What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-10 compared with 2021-02-11 · 410 added, 507 removed, 2215 unchanged (29% of the section changed)

15 unchanged sentences

Significant Accounting Policies

New Accounting Standards

Regulatory Matters

3 unchanged sentences

Financial Instruments

Notes Receivable

Plant, Property, and Equipment

9 unchanged sentences

Variable Interest Entities

Asset Sale and Exit Activities

Exit Activities and Discontinued Operations

Quarterly Financial and Common Stock Information (Unaudited)

Reports of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm (PCAOB ID 238 )

CMS Energy Corporation

18 unchanged sentences

Income from equity method investees 10 5 10

Nonoperating retirement benefits, net 118 91 90

Non-operating retirement benefits, net 165 118 91

Other income 9 6 4

9 unchanged sentences

Income Tax Expense 95 115 131

Income From Continuing Operations 728 694 633

Income From Discontinued Operations, Net of Tax of $ 170 , $ 18 , and $ 16

Net Income 1,330 752 682

Income (Loss) Attributable to Noncontrolling Interests ( 23 ) ( 3 ) 2

Net Income Attributable to CMS Energy 1,353 755 680

Preferred Stock Dividends 5 — —

Net Income Available to Common Stockholders $ 1,348 $ 755 $ 680

In Millions, Except Per Share Amounts

Years Ended December 31 2021 2020 2019

Basic Earnings Per Average Common Share

Income from continuing operations per average common share available to common stockholders $ 2.58 $ 2.45 $ 2.23

Income from discontinued operations per average common share available to common stockholders 2.08 0.20 0.17

Basic earnings per average common share $ 4.66 $ 2.65 2.40

Diluted Earnings Per Average Common Share

Income from continuing operations per average common share available to common stockholders $ 2.58 $ 2.44 2.22

Income from discontinued operations per average common share available to common stockholders 2.08 0.20 0.17

Diluted earnings per average common share $ 4.66 $ 2.64 2.39

The accompanying notes are an integral part of these statements.

4 unchanged sentences

Retirement Benefits Liability

Net loss arising during the period, net of tax of $( 4 ), $( 3 ), and $( 1 )

Net gain (loss) arising during the period, net of tax of $ 6 , $( 4 ), and $( 3 )

19 ( 15 ) ( 7 )

1 unchanged sentence

Prior service credit adjustment, net of tax of $ — for all periods

( 1 ) — ( 1 )

Amortization of net actuarial loss, net of tax of $ 1 for all periods

Amortization of prior service credit, net of tax of $ — , $ — , and $( 1 )

Amortization of net actuarial loss, net of tax of $ 2 , $ 1 , and $ 1

Amortization of prior service credit, net of tax of $ — for all periods

( 1 ) ( 1 ) ( 2 )

Unrealized loss on derivative instruments, net of tax of $( 2 ), $( 1 ), and $ —

Unrealized gain (loss) on derivative instruments, net of tax of $ — , $( 2 ), and $( 1 )

2 ( 4 ) ( 3 )

Reclassification adjustments included in net income, net of tax of $ — for all periods

Other Comprehensive Loss ( 13 ) ( 8 ) ( 4 )

Reclassification adjustments included in net income, net of tax of $ 1 , $ — , and $ —

Other Comprehensive Income (Loss) 27 ( 13 ) ( 8 )

Comprehensive Income 1,357 739 674

2 unchanged sentences

The accompanying notes are an integral part of these statements.

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CMS Energy Corporation

7 unchanged sentences

Bad debt expense 22 30 30

Other non‑cash operating activities and reconciling adjustments ( 22 ) ( 58 ) 22

Postretirement benefits contributions ( 12 ) ( 712 ) ( 10 )

Cash provided by (used in) changes in assets and liabilities

Accounts and notes receivable and accrued revenue ( 12 ) 45 15

Gain from sale of EnerBank ( 657 ) — —

Other non‑cash operating activities and reconciling adjustments ( 70 ) ( 15 ) ( 55 )

Net cash provided by (used in) discontinued operations ( 111 ) 33 39

Changes in assets and liabilities

Accounts receivable and accrued revenue ( 103 ) ( 5 ) 48

Inventories ( 93 ) 28 44

Accounts payable and accrued rate refunds 153 56 ( 71 )

Other current and non‑current assets and liabilities ( 120 ) ( 53 ) 54

Other current assets and liabilities 13 ( 68 ) ( 93 )

Other non‑current assets and liabilities ( 16 ) ( 36 ) 37

Net cash provided by operating activities 1,819

1 unchanged sentence

Capital expenditures (excludes assets placed under finance lease) ( 2,076 ) ( 2,311 ) ( 2,097 )

Increase in EnerBank notes receivable ( 657 ) ( 401 ) ( 307 )

Purchase of notes receivable by EnerBank ( 17 ) ( 343 ) ( 225 )

Proceeds from DB SERP investments — — 146

Proceeds from sale of EnerBank notes receivable 197 67 —

Net proceeds from sale of EnerBank 898 — —

Proceeds from sale of transmission equipment — 58 97

Net cash provided by (used in) discontinued operations 78 ( 485 ) ( 689 )

Cost to retire property and other investing activities ( 133 ) ( 129 ) ( 127 )

3 unchanged sentences

Retirement of debt ( 235 ) ( 2,010 ) ( 1,285 )

Increase in EnerBank certificates of deposit 416 631 513

Decrease in notes payable — ( 90 ) ( 7 )

Issuance of common stock, net of issuance costs 26 253 12

Issuance of preferred stock, net of issuance costs 224 — —

Payment of dividends on common and preferred stock ( 509 ) ( 467 ) ( 436 )

2 unchanged sentences

Contribution from noncontrolling interest 1 31 —

Net cash provided by (used in) discontinued operations ( 84 ) 416 631

Other financing costs ( 53 ) ( 51 ) ( 50 )

Net cash provided by financing activities 1,619

Net cash provided by (used in) financing activities ( 295 )

Net Increase (Decrease) in Cash and Cash Equivalents, Including Restricted Amounts 291 28 ( 18 )

16 unchanged sentences

Accounts receivable and accrued revenue, less allowance of $ 20 in 2021 and $ 29 in 2020

Notes receivable, less allowance of $ 32 in 2020 and $ 33 in 2019

Accounts receivable – related parties 12 19

5 unchanged sentences

Regulatory assets 46 42

Assets held for sale 19 429

Prepayments and other current assets 120 104

8 unchanged sentences

Regulatory assets 2,259 2,653

Accounts and notes receivable, less allowance of $ 91 in 2020 and $ — in 2019

Accounts receivable 30 19

Investments 71 70

Assets held for sale — 2,680

Other 1,414 823

5 unchanged sentences

Current portion of long-term debt, finance leases, and other financing $ 382 $ 591

Notes payable — 90

Accounts payable 875 661

4 unchanged sentences

Regulatory liabilities 146 151

Liabilities held for sale — 953

Other current liabilities 156 133

8 unchanged sentences

Deferred income taxes 2,210 1,863

Liabilities held for sale — 1,894

Other non‑current liabilities 375 394

6 unchanged sentences

Accumulated other comprehensive loss ( 59 ) ( 86 )

Retained earnings (accumulated deficit) 214 ( 25 )

Retained earnings 1,057 214

Total common stockholders’ equity 6,407 5,496

Cumulative preferred stock, Series C, authorized 9.2 depositary shares in 2021;

outstanding 9.2 depositary shares in 2021

Total stockholders’ equity 6,631 5,496

Noncontrolling interests 557 581

20 unchanged sentences

At beginning of period ( 80 ) ( 69 ) ( 63 )

Cumulative effect of change in accounting principle — — ( 11 )

Net loss arising during the period ( 15 ) ( 7 ) ( 4 )

Net gain (loss) arising during the period 19 ( 15 ) ( 7 )

Settlement arising during the period 1 1 —

6 unchanged sentences

( 6 ) ( 4 ) ( 2 )

Unrealized loss on derivative instruments

Unrealized gain (loss) on derivative instruments

2 ( 4 ) ( 3 )

3 unchanged sentences

At end of period ( 59 ) ( 86 ) ( 73 )

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

Number of Shares

Years Ended December 31 2020 2019 2018 2020 2019 2018

Retained Earnings (Accumulated Deficit)

3 unchanged sentences

Dividends declared on common stock ( 505 ) ( 465 ) ( 434 )

Dividends declared on preferred stock ( 5 ) — —

At end of period 1,057 214 ( 25 )

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

Number of Shares

Years Ended December 31 2021 2020 2019 2021 2020 2019

Cumulative Preferred Stock

At beginning of period — — —

Preferred stock issued, net of issuance costs 224 — —

At end of period 224 — —

Noncontrolling Interests

8 unchanged sentences

Dividends declared per common share $ 1.7400 $ 1.6300 $ 1.5300

Dividends declared per preferred stock Series C depositary share $ 0.5688 $ — $ —

The accompanying notes are an integral part of these statements.

17 unchanged sentences

Allowance for equity funds used during construction 8 6 10

Nonoperating retirement benefits, net 112 85 83

Non-operating retirement benefits, net 155 112 85

Other income 8 5 3

21 unchanged sentences

Amortization of net actuarial loss, net of tax of $ 1 , $ 1 , and $ —

Unrealized loss on investments, net of tax of $ — for all periods

Reclassification adjustments included in net income, net of tax of $ — for all periods

Other Comprehensive Income (Loss) 4 ( 8 ) ( 7 )

10 unchanged sentences

Bad debt expense 22 33 29

Other non‑cash operating activities and reconciling adjustments ( 30 ) ( 32 ) 13

Postretirement benefits contributions ( 9 ) ( 690 ) ( 7 )

Cash provided by (used in) changes in assets and liabilities

Other non‑cash operating activities and reconciling adjustments ( 64 ) ( 30 ) ( 32 )

Changes in assets and liabilities

Accounts and notes receivable and accrued revenue ( 103 ) ( 46 ) 8

1 unchanged sentence

Accounts payable and accrued rate refunds 140 45 ( 63 )

Other current and non-current assets and liabilities ( 136 ) ( 129 ) ( 101 )

Other current assets and liabilities 27 ( 78 ) ( 136 )

Other non-current assets and liabilities ( 40 ) ( 58 ) 7

Net cash provided by operating activities 1,982

1 unchanged sentence

Capital expenditures (excludes assets placed under finance lease) ( 2,052 ) ( 2,170 ) ( 2,085 )

Proceeds from DB SERP investments — — 106

DB SERP investment in note receivable – related party — ( 5 ) —

19 unchanged sentences

Interest paid (net of amounts capitalized) $ 298 $ 305 $ 279

Income taxes paid 51 132 156

Income taxes paid (refunds received), net ( 10 ) 51 132

Non‑cash transactions

8 unchanged sentences

Accounts receivable and accrued revenue, less allowance of $ 20 in 2021 and $ 29 in 2020

Assets held for sale 19 —

Accounts and notes receivable – related parties 9 18

24 unchanged sentences

Current portion of long-term debt, finance leases, and other financing $ 374 $ 384

Notes payable — 90

Notes payable – related parties 392 307

25 unchanged sentences

Total common stockholder’s equity 9,242

Cumulative preferred stock, $4.50 series

Cumulative preferred stock, $4.50 series, authorized 7.5 shares;

outstanding 0.4 shares in both periods

Total equity 9,279

14 unchanged sentences

At beginning of period ( 36 ) ( 28 ) ( 21 )

Cumulative effect of change in accounting principle — — ( 5 )

Net gain (loss) arising during the period 2 ( 9 ) ( 8 )

1 unchanged sentence

At end of period ( 32 ) ( 36 ) ( 28 )

At beginning of period — — 12

Cumulative effect of change in accounting principle — — ( 12 )

Unrealized loss on investments — — ( 1 )

Reclassification adjustments included in net income — — 1

At end of period ( 32 ) ( 36 ) ( 28 )

At end of period ( 36 ) ( 28 ) ( 21 )

Retained Earnings

At beginning of period 1,690 1,513 1,364

Cumulative effect of change in accounting principle — — 19

Net income 868 816 743

12 unchanged sentences

CMS Energy and Consumers prepare their consolidated financial statements in conformity with GAAP.

CMS Energy’s consolidated financial statements comprise CMS Energy, Consumers, CMS Enterprises, EnerBank, and all other entities in which CMS Energy has a controlling financial interest or is the primary beneficiary.

Consumers’ consolidated financial statements comprise Consumers and all other entities in which it has a controlling financial interest or is the primary beneficiary.

CMS Energy’s consolidated financial statements comprise CMS Energy, Consumers, CMS Enterprises, 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.

4 unchanged sentences

Contingencies:

CMS Energy and Consumers record estimated liabilities for contingencies on their consolidated financial statements when it is probable that a liability has been incurred and when the amount of loss can be reasonably estimated.

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.

16 unchanged sentences

Consumers accounts for FTRs as derivatives.

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

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

CMS Energy and Consumers record derivative contracts that do not qualify for the normal purchases and sales exception at fair value on their consolidated balance sheets.

9 unchanged sentences

Impairment of Long-Lived Assets and Equity Method Investments:

CMS Energy and Consumers perform tests of impairment if certain triggering events occur or if there has been a decline in value that may be other than temporary.

CMS Energy and Consumers 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.

26 unchanged sentences

The deferred property tax balance represents the amount of Consumers’ accrued property tax that will be recognized over future governmental fiscal periods.

Reclassifications:

CMS Energy and Consumers have reclassified certain prior period amounts to conform to the presentation in the present period.

The most significant of these reclassifications is related to CMS Energy’s sale of EnerBank to Regions Bank in October 2021.

The assets and liabilities of EnerBank are presented as held for sale on CMS Energy’s consolidated balance sheets at December 31, 2020.

Additionally, 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 years ended December 31, 2021, 2020, and 2019.

For information regarding the sale of EnerBank, see Note 20, Exit Activities and Discontinued Operations.

Renewable Energy Grant:

4 unchanged sentences

For additional accounting policies, see:

• Note 8, Notes Receivable

• Note 7, Plant, Property, and Equipment

• Note 8, Leases and Palisades Financing

• Note 9, Asset Retirement Obligations

5 unchanged sentences

• Note 19, Variable Interest Entities

New Accounting Standards

Implementation of New Accounting Standards

ASU 2016‑13, Measurement of Credit Losses on Financial Instruments:

This standard, which was effective on January 1, 2020 for CMS Energy and Consumers, provides new guidance for measuring and recognizing credit losses on financial instruments.

The standard applies to financial assets that are not measured at fair value through net income as well as to certain off‑balance-sheet credit exposures.

CMS Energy and Consumers were required to apply the standard using a modified retrospective approach, under which the initial impacts of the standard are recorded through a cumulative-effect adjustment to beginning retained earnings on the effective date.

The standard required an increase to the allowance for loan losses at EnerBank.

Prior to the standard, the allowance reflected expected credit losses over a 12‑month period, but the new guidance requires the allowance to reflect expected credit losses over the entire life of the loans.

As a result, CMS Energy recorded a $ 65 million increase to its expected credit loss reserves on January 1, 2020, with the offsetting adjustment recorded to retained earnings, net of taxes of $ 14 million.

The standard also requires an increase in the initial provision for loan losses recognized in net income for new loans originated in 2020 and beyond.

The adoption of this standard resulted in a $ 21 million reduction to CMS Energy’s income before income taxes for the year ended December 31, 2020.

For further information on EnerBank’s loans and the related allowance for loan losses see Note 8, Notes Receivable.

At Consumers, the standard applies to the allowance for uncollectible accounts, but did not result in any significant changes to the allowance methodology and did not have a material impact on Consumers’ consolidated financial statements.

ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting:

This standard, which was effective as of March 12, 2020 for CMS Energy and Consumers, provides optional guidance intended to ease the potential burden in accounting for the expected discontinuation of LIBOR as a reference rate in the financial markets.

The guidance can be applied to modifications made to certain contracts to replace LIBOR with a new reference rate.

The guidance, if elected, will permit entities to treat such modifications as the continuation of the original contract, without any required accounting reassessments or remeasurements.

The guidance will also facilitate the continuation of hedge accounting for derivatives that may have to be modified to incorporate a new rate.

The guidance is effective through December 31, 2022.

CMS Energy and Consumers presently have various contracts that reference LIBOR and they are assessing how this standard may be applied to specific contract modifications.

Regulatory Matters

5 unchanged sentences

Consumers cannot predict the outcome of these proceedings.

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

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.

15 unchanged sentences

various 678 678

Securitized costs 2

various 247 216

Securitized costs 2

various 112 120

5 unchanged sentences

Demand response program 4

COVID-19 costs accounting deferral 4

various 10 10

Other various 19 11

9 unchanged sentences

Income taxes, net various 1,297 1,419

Postretirement benefits various 54 —

Renewable energy grant 2043 47 49

ARO various 11 26

Renewable energy plan 2028 13 9

ARO various — 11

Other various 16 11

3 unchanged sentences

Therefore, the MPSC has provided for recovery without a return.

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

2 The MPSC has provided, or Consumers expects, a specific return on these regulatory assets.

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

4 unchanged sentences

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 2020, the MPSC approved a settlement agreement authorizing Consumers to collect $ 34 million during 2021 as an incentive for exceeding its statutory savings targets in 2019.

In October 2021, the MPSC approved a settlement agreement authorizing Consumers to collect $ 42 million during 2022 as an incentive for exceeding its statutory savings targets in 2020.

Consumers recognized incentive revenue under this program of $ 42 million in 2020.

Consumers also exceeded its statutory savings targets in 2020, achieved certain other goals, and will request the MPSC’s approval to collect $ 42 million, the maximum performance incentive, in the energy waste reduction reconciliation to be filed in 2021.

Consumers also exceeded its statutory savings targets in 2021, achieved certain other goals, and will request the MPSC’s approval to collect $ 46 million, the maximum performance incentive, in the energy waste reduction reconciliation to be filed in May 2022.

Consumers recognized incentive revenue under this program of $ 46 million in 2021.

Deferred Capital Spending:

In January 2019, the MPSC approved a settlement agreement in Consumers’ 2018 electric rate case, which provided deferred accounting treatment for distribution-related capital investments exceeding certain threshold amounts.

Thus, for actual capital spending above the threshold amounts detailed in the settlement agreement, Consumers has deferred as a regulatory asset the associated depreciation and property tax expense as well as the debt component of the overall rate of return on such spending.

In 2019, the MPSC approved a settlement agreement in Consumers’ 2018 electric rate case, which provided deferred accounting treatment for distribution-related capital investments exceeding certain threshold amounts.

Thus, for actual capital spending above the threshold amounts detailed in the settlement agreement, Consumers had deferred as a regulatory asset the associated depreciation and property tax expense as well as the debt component of the overall rate of return on such spending.

Postretirement Benefits:

4 unchanged sentences

Costs of Coal-fueled Electric Generating Units to be Retired:

In June 2019, the MPSC approved the settlement agreement reached in Consumers’ IRP, under which Consumers plans to retire the D.E.

In 2019, the MPSC approved the settlement agreement reached in Consumers’ 2018 IRP, under which Consumers plans to retire the D.E.

Karn coal-fueled electric generating units in 2023.

3 unchanged sentences

In December 2020, the MPSC issued a securitization financing order authorizing Consumers to issue securitization bonds in order to finance the recovery of the remaining book value of the two coal-fueled electric generating units upon their retirement.

An intervenor has appealed the order, contending that it should not have to pay the securitization surcharge.

An intervenor appealed the order, contending that it should not have to pay the securitization surcharge.

In November 2021, the Michigan Court of Appeals affirmed the MPSC’s determination that the intervenor must pay the securitization charge.

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.

Securitized Costs:

In 2013, the MPSC issued a securitization financing order authorizing Consumers to issue securitization bonds in order to finance the recovery of the remaining book value of seven smaller

coal-fueled electric generating units that Consumers retired in 2016 and three smaller natural gas-fueled electric generating units that Consumers retired in 2015.

In 2013, the MPSC issued a securitization financing order authorizing Consumers to issue securitization bonds in order to finance the recovery of the remaining book value of seven smaller coal-fueled electric generating units that Consumers retired in 2016 and three smaller natural gas-fueled electric generating units that Consumers retired in 2015.

Upon receipt of the MPSC’s order, Consumers removed the book value of the ten units from plant, property, and equipment and recorded this amount as a regulatory asset.

1 unchanged sentence

For additional details regarding the securitization bonds, see Note 4, Financings and Capitalization.

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.

Consumers is incurring environmental remediation and other response activity costs at 23 former MGP facilities.

7 unchanged sentences

Demand Response Program:

In the IRP and in general electric rate cases, the MPSC has approved the recovery of demand response costs.

In Consumers’ 2018 IRP and general rate cases, the MPSC has approved the recovery of demand response costs.

Consumers annually files a reconciliation with the MPSC to review actual demand response costs against amounts approved.

The method of recovery of demand response costs will be determined in a future rate case.

COVID‑19 Costs Accounting Deferral:

In April 2020, the MPSC issued an order authorizing Consumers to defer uncollectible accounts expense incurred beginning March 24, 2020 that are in excess of the amount used to set existing rates.

Regulatory Liabilities

6 unchanged sentences

In December 2020, the MPSC issued an order authorizing Consumers to refund $ 28 million voluntarily to utility customers.

Consumers is required to submit another filing by the end of February 2021 proposing an appropriate method for making this refund.

In May 2021, the MPSC approved a filing submitted by Consumers that proposed the refund take the form of incremental spending in 2021 and 2022 above amounts included in rates on various programs, including electric service restoration and gas and electric technology expenses.

If Consumers does not achieve the incremental spending, the remaining balance will be provided to electric or gas utility customers through a bill credit.

Voluntary Transmission Asset Sale Gain Share:

In October 2020, Consumers completed a sale of the electric utility’s remaining transmission equipment to METC.

In December 2020, Consumers filed an application with the MPSC requesting approval to share voluntarily half of the gain from the sale with electric utility customers;

In December 2020, Consumers filed an application with the MPSC requesting approval to share voluntarily half of the gain from the sale with electric utility customers through incremental service restoration spending in 2021;

this application was approved by the MPSC in February 2021.

Consumers will share the gain through an offset to additional spending in 2021 or through a bill credit to electric utility customers in 2022.

As a result, Consumers deferred $ 14 million of the gain in December 2020.

In September 2019, Consumers completed a sale of a portion of its electric utility’s substation transmission equipment to METC.

In December 2019, Consumers filed an application with the MPSC requesting approval to share voluntarily half of the gain from the sale with customers;

this application was approved by the MPSC in April 2020.

As a result, Consumers deferred $ 17 million of the gain in December 2019 and shared that gain with customers in 2020.

As a result, the $ 14 million gain was recorded on Consumers’ consolidated balance sheets as a current regulatory liability at December 31, 2020 and was shared with customers in 2021.

Cost of Removal:

12 unchanged sentences

2021 Electric Rate Case:

In February 2020, Consumers filed an application with the MPSC seeking an annual rate increase of $ 244 million, based on a 10.5 percent authorized return on equity and a projected twelve-month period ending December 31, 2021.

In March 2021, Consumers filed an application with the MPSC seeking an annual rate increase of $ 225 million, based on a 10.5 percent authorized return on equity and a projected twelve-month period ending December 31, 2022.

In July 2021, Consumers reduced its requested annual rate increase to $ 201 million.

In December 2021, the MPSC approved an annual rate increase of $ 27 million, based on a 9.9 percent authorized return on equity.

This increase reflects a $ 36 million refund to customers of regulatory tax liabilities associated with the remeasurement of Consumers’ deferred income taxes as a result of the TCJA;

excluding the impacts of this refund, the order resulted in a $ 126 million increase in annual rates.

The order also approved the recovery of $ 13 million associated with Consumers’ deferral of depreciation and property tax expense and the overall rate of return on distribution-related capital investments exceeding certain threshold amounts.

Additionally, the order approved the method of recovering amounts earned under the financial compensation mechanism approved by the MPSC in Consumers’ IRP.

This mechanism allows Consumers to earn a return equal to Consumer’s weighted-average cost of capital on payments made under PPAs approved by the MPSC after January 1, 2019.

The order authorizes Consumers to recover $ 3 million, beginning in January 2021, for incentives earned and to be earned on PPA payments during 2019 through 2021.

Consumers accounts for this program as an alternative-revenue program that meets the criteria for recognizing revenue related to the mechanism as payments are made on MPSC-approved PPAs.

Consumers recognized revenue under this mechanism of $ 1 million in 2020.

Consumers is also authorized in the order to replace the current net metering tariff with a new distributed generation tariff, pursuant to the 2016 Energy Law.

The new distributed generation tariff is consistent with other distributed generation tariffs already approved by the MPSC and will reduce the subsidies paid by non-distributed generation customers under the current net metering program.

Consumers Gas Utility

2019 Gas Rate Case:

In December 2019, Consumers filed an application with the MPSC seeking an annual rate increase of $ 245 million, based on a 10.5 percent authorized return on equity and a projected twelve-month period ending September 30, 2021.

In May 2020, Consumers reduced its requested annual rate increase to $ 229 million.

In September 2020, the MPSC approved a settlement agreement authorizing an annual rate increase of $ 144 million, based on a 9.9 percent authorized return on equity, effective October 1, 2020.

As part of that agreement, Consumers agreed not to file a new gas rate case prior to December 2021.

The MPSC also approved the continuation of a revenue decoupling mechanism, which annually reconciles Consumers’ actual weather-normalized non-fuel revenues with the revenues approved by the MPSC.

This reconciliation would start in October 2021 and continue until the MPSC resets rates in a subsequent rate case.

Additionally, the MPSC authorized Consumers to accelerate:

• the refund of a regulatory liability associated with the unprotected, non‑property-related excess deferred income taxes resulting from the TCJA;

Consumers was previously authorized to refund this through 2029

• the flow-through of certain income tax benefits associated primarily with the cost of removal of gas plant assets placed in service before 1993;

Consumers was previously authorized to refund this through 2025

Under the settlement agreement approved by the MPSC, these benefits, which total $ 84 million, will now be passed through to customers by September 2022.

For additional details, see Note 14, Income Taxes.

This increase reflects the net impact of the approved settlement agreement in Consumers’ electric depreciation rate case, which reduced annual depreciation expense by $ 27 million.

In its final order, the MPSC disallowed cost recovery for fleet assets and certain other categories of recently completed capital expenditures incurred by Consumers.

As a result of this disallowance, Consumers recorded an impairment charge of $ 41 million within maintenance and other operating expenses on its consolidated statements of income for the year ended December 31, 2021.

This charge includes an assessment of probable loss of $ 11 million on similar categories of gas utility capital expenditures that are pending recovery in Consumers’ 2021 gas rate case.

Though Consumers plans to pursue full recovery of certain of these electric and gas capital expenditures, the position taken by the MPSC in this electric rate case provides significant uncertainty around whether Consumers will ultimately succeed.

In January 2022, Consumers filed a petition for rehearing requesting the MPSC reconsider its disallowance of $ 11 million in capital expenditures for which the MPSC had already approved recovery in a previous electric rate order;

this amount was not included in the impairment charge based on Consumers’ assessment of the merits of the petition for rehearing.

The order disallowed recovery of other categories of capital expenditures, requiring that Consumers provide additional cost/benefit analysis and other information in its next electric rate case to support cost recovery.

Consumers has incurred approximately $ 23 million related to these programs as of December 31, 2021 and, for certain ongoing projects, expects to incur additional capital expenditures in 2022 and beyond.

While Consumers intends to

support fully the prudency of such capital expenditures, it is reasonably possible that the MPSC will disallow some or all of these capital expenditures.

An additional material disallowance of incurred capital costs could negatively affect CMS Energy’s and Consumers’ future results of operations.

Consumers cannot predict the outcome of these proceedings.

Finally, the order disallowed various other categories of capital expenditures in the projected test year, primarily challenging the accuracy of Consumers’ projection of these expenditures through 2022.

While these are presently excluded from rate base, Consumers believes it will be successful in recovering the actual capital expenditures incurred for these programs in future rate cases.

As a result of the order, in December 2021, Consumers committed to a plan to sell fleet assets with a fair value of $ 15 million.

To reflect these held-for-sale assets at their fair value, less expected selling costs, Consumers recorded an additional impairment charge of $ 4 million within maintenance and other operating expenses on its consolidated statements of income for the year ended December 31, 2021.

Power Supply Cost Recovery and Gas Cost Recovery

4 unchanged sentences

overrecoveries represent previously collected revenues that will be refunded to customers.

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

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

December 31 2021 2020

GCR underrecoveries $ 25 $ —

Accounts receivable and accrued revenue $ 25 $ —

PSCR overrecoveries $ 12 $ 5

2 unchanged sentences

PSCR Plans and Reconciliations:

In October 2020, the MPSC issued an order in Consumers’ 2018 PSCR reconciliation, authorizing recovery of $ 2.0 billion of power costs and authorizing Consumers to reflect in its 2019 PSCR reconciliation the underrecovery of $ 28 million.

In October 2021, the MPSC issued an order in Consumers’ 2019 PSCR reconciliation, authorizing recovery of $ 1.9 billion of power costs and authorizing Consumers to reflect in its 2020 PSCR reconciliation the overrecovery of $ 18 million.

In April 2021, the MPSC issued an order in Consumers’ 2020 PSCR plan authorizing the 2020 PSCR charge that Consumers self-implemented beginning in January 2020.

In March 2020, Consumers filed its 2019 PSCR reconciliation, requesting full recovery of $ 1.9 billion of power costs and authorization to reflect in its 2020 PSCR reconciliation the overrecovery of $ 21 million.

Consumers submitted its 2020 PSCR plan to the MPSC in September 2019 and, in accordance with its proposed plan, self-implemented the 2020 PSCR charge beginning in January 2020.

In March 2021, Consumers filed its 2020 PSCR reconciliation, requesting full recovery of $ 1.8 billion of power costs and authorization to reflect in its 2021 PSCR reconciliation the underrecovery of $ 4 million.

In January 2022, the MPSC issued an order in Consumers’ amended 2021 PSCR plan authorizing the 2021 PSCR charge that Consumers self-implemented beginning in January 2021.

GCR Plans and Reconciliations:

In September 2020, the MPSC issued an order in Consumers’ 2018-2019 GCR reconciliation, authorizing recovery of $ 0.6 billion of gas costs and authorizing Consumers to reflect in its 2019-2020 GCR reconciliation the underrecovery of $ 11 million.

The MPSC disallowed the recovery of $ 7 million in incremental gas purchases related to the Ray Compressor Station fire.

For additional details, see Note 4, Contingencies and Commitments—Consumers Gas Utility Contingencies.

In June 2020, Consumers filed its 2019-2020 GCR reconciliation, requesting full recovery of $ 0.5 billion of gas costs and authorization to reflect in its 2020-2021 GCR reconciliation the underrecovery of $ 1 million.

In September 2020, the MPSC approved a settlement agreement in Consumers’ 2020-2021 GCR plan authorizing the 2020-2021 GCR charge that Consumers self-implemented beginning in April 2020.

In May 2021, the MPSC approved a settlement agreement in Consumers’ 2019-2020 GCR reconciliation, authorizing recovery of $ 0.5 billion of gas costs and authorizing Consumers to reflect in its 2020-2021 GCR reconciliation the overrecovery of $ 6 million.

In June 2021, Consumers filed its 2020-2021 GCR reconciliation, requesting full recovery of $ 0.4 billion of gas costs and authorization to reflect in its 2021-2022 GCR reconciliation the overrecovery of $ 1 million.

Consumers submitted its 2021-2022 GCR plan to the MPSC in December 2020 and self-implemented its proposed 2021-2022 GCR charge in April 2021.

The MPSC approved a settlement agreement in this proceeding in September 2021, authorizing the GCR charge that Consumers had self-implemented.

Contingencies and Commitments

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CMS Energy Contingencies

Gas Index Price Reporting Litigation:

CMS Energy, along with CMS MST, CMS Field Services, Cantera Natural Gas, Inc., and Cantera Gas Company, were named as defendants in four class action lawsuits filed in Kansas, Missouri, and Wisconsin and one individual lawsuit filed in Kansas;

these lawsuits arose as a result of alleged inaccurate natural gas price reporting to publications that report trade information.

Allegations included price-fixing conspiracies, restraint of trade, and artificial inflation of natural gas retail prices.

In 2016, CMS Energy entities reached a settlement with the plaintiffs in the Kansas and Missouri class action cases for an amount that was not material to CMS Energy.

In 2017, the federal district court approved the settlement.

In 2019, CMS Energy and the plaintiffs in the remaining Kansas individual lawsuit and the Wisconsin class action lawsuit engaged in settlement discussions and CMS Energy recorded a $ 30 million liability at December 31, 2019 as the probable estimate to settle the two cases.

The parties executed a settlement

agreement in the Kansas case in February 2020, and that case is now complete.

In the Wisconsin case, a settlement agreement was approved in August 2020 and that case is now complete.

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.

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In 2012, CMS Land and EGLE finalized an agreement that established the final remedies and the future water quality criteria at the site.

CMS Land completed all construction necessary to implement the remedies required by the agreement and will continue to maintain and operate a system to discharge treated leachate into Little Traverse Bay under an NPDES permit, which was valid through September 2020.

CMS Land submitted a renewal request for the permit in April 2020.

CMS Land is allowed to continue operating under the previous NPDES permit until a response is received from EGLE.

At December 31, 2021, CMS Energy had a recorded liability of $ 45 million for its remaining obligations for environmental remediation.

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In 2015, the matter was proceeding to formal arbitration;

however, since then, the government of Equatorial Guinea has stopped communicating.

CMS Energy has concluded that the government’s tax claim is without merit and will continue to contest the claim, but cannot predict the financial impact or outcome of the matter.

however, since then, the government of Equatorial Guinea has stopped communicating with CMS Energy.

CMS Energy has concluded that the government’s tax claim is without merit and believes the likelihood of material loss to be remote, but cannot predict the financial impact or outcome of the matter.

An unfavorable outcome could have a material adverse effect on CMS Energy’s liquidity, financial condition, and results of operations.

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In 2017, the MCV Partnership initiated arbitration against Consumers, asserting a breach of contract associated with the MCV PPA.

Under this PPA, Consumers pays the MCV Partnership a fixed energy charge based on Consumers’ annual average baseload coal generating plant operating and maintenance cost, fuel inventory, and administrative and general expenses.

The MCV Partnership asserts that, under the Clean Air Act, Consumers should have installed pollution control equipment on coal-fueled electric generating units years before they were retired.

The MCV Partnership also asserts that Consumers should have installed pollution control equipment earlier on its remaining coal-fueled electric generating units.

Additionally, the MCV Partnership claims that Consumers improperly characterized certain costs included in the calculation of the fixed energy charge.

In January 2019, an arbitration panel issued an order concluding that the MCV Partnership is not entitled to any damages associated with its claim against Consumers related to the Clean Air Act;

the majority of the MCV Partnership’s claim, which estimated damages and interest in excess of $ 270 million, was related to this dismissed claim.

In November 2020, the MCV Partnership and Consumers signed a settlement agreement resolving all outstanding disputes between the parties, and filed the settlement and associated agreements with the MPSC for approval.

Once those are approved, the parties will dismiss this matter with prejudice.

If settlement is not approved, the arbitration panel will issue an order.

Consumers believes that the MCV Partnership’s claims are without merit, but cannot predict the financial impact or outcome of the matter.

Underwater Cables in Straits of Mackinac:

Consumers owns certain underwater electric cables in the Straits of Mackinac, which were de-energized and retired in 1990.

Consumers was notified that some of

these cables were damaged as a result of vessel activity in 2018.

Following the notification, Consumers located, inspected, sampled, capped, and returned the damaged retired cables to their original location on the lake bottom, and did not find any substantive evidence of environmental contamination.

After collaborating with the State of Michigan, local Native American tribes, and other stakeholders, Consumers submitted a permit application and removal work plan with EGLE and the U.S.

Army Corps of Engineers in December 2019 for partial removal of all Consumers-owned cables.

In March 2020, EGLE issued a permit for the removal work and, as a result, Consumers recorded an ARO liability of $ 5 million for the cost to remove partially its cables.

Removal work was completed in September 2020.

Consumers recovers the cost of recorded AROs through MPSC-approved depreciation rates.

In 2019, an arbitration panel issued an order concluding that the MCV Partnership is not entitled to any damages associated with a claim against Consumers that was related to the Clean Air Act.

In November 2020, the MCV Partnership and Consumers signed a settlement agreement resolving all remaining disputes between the parties, and filed the settlement and associated agreements with the MPSC for approval.

In March 2021, the MPSC approved the settlement and associated agreements.

Consumers Gas Utility Contingencies

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Consumers investigated the cause of the incident, and filed a report on the incident with the MPSC in April 2019.

In response, the MPSC issued an order in

July 2019, directing Consumers to file additional reports regarding the incident and to include detail of the resulting costs in a future rate proceeding.

In response, the MPSC issued an order in July 2019, directing Consumers to file additional reports regarding the incident and to include detail of

the resulting costs in a future rate proceeding.

The compressor station is presently operating at full capacity.

In May 2020, the MPSC approved an administrative settlement agreement between Consumers and the MPSC Staff, which resulted in a $ 10,000 civil penalty in connection with the fire.

Consumers may also be subject to various claims from impacted customers and claims for damages.

In September 2020, the MPSC disallowed the recovery of $ 7 million in incremental gas purchases related to the fire.

In January 2021, the MPSC denied Consumers’ petition for a rehearing challenging this disallowance.

Consumers will file an appeal of the MPSC’s denial with the Michigan Court of Appeals.

In February 2021, Consumers filed an appeal of the MPSC’s denial with the Michigan Court of Appeals.

Consumers could also be subject to disallowances of costs associated with the repair and modification of the Ray Compressor Station.

At December 31, 2021, Consumers had incurred capital expenditures of $ 17 million to restore and modify the compressor station.

In May 2020, the MPSC approved an administrative settlement agreement between Consumers and the MPSC Staff, which resulted in a $ 10,000 civil penalty in connection with the fire.

Consumers may also be subject to various claims from impacted customers and claims for damages.

At this time, Consumers cannot predict the outcome of these matters or other gas-related incidents and a reasonable estimate of a total loss cannot be made, but they could have a material adverse effect on Consumers’ results of operations, financial condition, or liquidity, and could subject Consumers’ gas utility to increased regulatory scrutiny.

As of December 31, 2021, Consumers had recorded an insurance recovery of $ 13 million related to the compressor station.

During 2021, Consumers recognized $ 6 million of the insurance recovery as a reduction to plant, property, and equipment, $ 3 million as a reduction of maintenance and other operating expenses, and $ 4 million as operating revenue, which represented recovery of incremental gas purchases related to the fire.

At this time, Consumers cannot predict the outcome of these matters or other gas-related incidents and a reasonable estimate of a total loss cannot be made, but they could have a material adverse effect on CMS Energy’s and Consumers’ results of operations, financial condition, or liquidity, and could subject Consumers’ gas utility to increased regulatory scrutiny.

Presented in the following table are CMS Energy’s and Consumers’ guarantees at December 31, 2021:

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For further details on CMS Enterprises’ ownership interest in Aviator Wind Equity Holdings, see Note 19, Variable Interest Entities.

2 These obligations arose from stock and asset sale agreements under which CMS Energy or a subsidiary of CMS Energy indemnified the purchaser for losses resulting from various matters, primarily claims related to taxes.

The maximum obligation amount is mostly related to the Equatorial Guinea tax claim discussed in the CMS Energy Contingencies section of this Note.

The maximum obligation amount is mostly related to the Equatorial Guinea tax claim discussed in the CMS Energy Contingencies section of this Note and an indemnity provided in connection with the sale of EnerBank to Regions Bank.

For further details on the sale, see Note 20, Exit Activities and Discontinued Operations .

CMS Energy believes the likelihood of material loss to be remote for the indemnity obligations not recorded as liabilities.

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Additionally, in the normal course of business, CMS Energy, Consumers, and certain other subsidiaries of CMS Energy have entered into various agreements containing tax and other indemnity provisions for which they are unable to estimate the maximum potential obligation.

The carrying value of these indemnity obligations is $ 1 million.

At December 31, 2021, the carrying value of these indemnity obligations was $ 1 million.

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

Other Contingencies

In addition to the matters disclosed in this Note and Note 3, Regulatory Matters, there are certain other lawsuits and administrative proceedings before various courts and governmental agencies, as well as unasserted claims that may result in such proceedings, arising in the ordinary course of business to which CMS Energy, Consumers, and certain other subsidiaries of CMS Energy are parties.

In addition to the matters disclosed in this Note, Note 2, Regulatory Matters, and Note 20, Exit Activities and Discontinued Operations, 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.

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Purchase Obligations:

Purchase obligations arise from long-term contracts for the purchase of commodities and related services, and construction and service agreements.

Purchase obligations arise from long-term contracts for the purchase of commodities and related services, plant purchase commitments, and construction and service agreements.

The commodities and related services include long-term PPAs, natural gas and associated transportation, and coal and associated transportation.

Related-party PPAs are between Consumers and certain affiliates of CMS Enterprises.

Related-party PPAs are between Consumers and certain affiliates

of CMS Enterprises.

Presented in the following table are CMS Energy’s and Consumers’ contractual purchase obligations at December 31, 2021 for each of the periods shown:

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Other 4,445 1,489 1,657 412 639 36 212

Total purchase obligations $ 12,473 $ 2,317 $ 2,404 $ 1,174 $ 1,348 $ 642 $ 4,588

MCV PPA $ 2,204 $ 349 $ 348 $ 346 $ 306 $ 231 $ 624

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Other 3,950 1,381 1,596 364 594 12 3

Total purchase obligations $ 11,978 $ 2,209 $ 2,343 $ 1,126 $ 1,303 $ 618 $ 4,379

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.

The PPA was amended during 2020 and is pending MPSC approval.

The PPA was amended during 2020 and was approved by the MPSC in 2021.

The amended and restated MCV PPA provides for:

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Palisades PPA:

Consumers has a PPA expiring in 2022 with Entergy to purchase virtually all of the capacity and energy produced by Palisades, up to the annual average capacity of 798 MW.

Consumers has a PPA expiring in May 2022 with Entergy to purchase virtually all of the capacity and energy produced by Palisades, up to the annual average capacity of 798 MW.

For all delivered energy, the Palisades PPA has escalating capacity and variable energy charges.

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$ 1,975 $ 1,975

$ 1,975 $ 2,275

Term loan facility variable 2021 — 200

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$ 2,010 $ 2,010

5.875 2079 630 630

$ 2,010 $ 1,110

Total CMS Energy, parent only $ 3,985 $ 4,185

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Term loan facility variable 4

Certificates of deposit 1.621 4

2021-2028 2,805 2,389

Total principal amount outstanding $ 12,568 $ 12,467

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Total long-term debt $ 12,046 $ 11,744

1 At December 31, 2020, the interest rate on the balance of this term loan facility was 0.600 percent, based on an interest rate of one-week LIBOR plus 0.500 percent.

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

2 On 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.

3 On 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.

4 A subsidiary of CMS Enterprises issued non ‑ recourse debt to finance the acquisition of a wind generation project in Northwest Ohio.

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For information about the interest rate swaps, see Note 5, Fair Value Measurements.

4 The weighted-average interest rate for EnerBank’s certificates of deposit was 1.621 percent at December 31, 2020 and 2.445 percent at December 31, 2019.

EnerBank’s primary deposit product consists of brokered certificates of deposit with varying maturities and having a face value of $ 1,000 .

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

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$ 8,197 $ 7,897

$ 7,897 $ 6,961

Tax-exempt revenue bonds variable 2035 — 35

Tax-exempt revenue bonds 0.875 2

Securitization bonds 3.290 4

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Total long-term debt $ 8,050 $ 7,742

1 The variable-rate bonds bear interest quarterly at a rate of three-month LIBOR minus 0.300 percent, subject to a zero-percent floor ( zero percent at December 31, 2020).

1 The variable-rate bonds bear interest quarterly at a rate of three-month LIBOR minus 0.300 percent, subject to a zero-percent floor ( zero percent at December 31, 2021) and ( zero percent at December 31, 2020).

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, 2021.

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

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

4 The weighted-average interest rate for Consumers’ securitization bonds issued through its subsidiary, Consumers 2014 Securitization Funding, was 3.290 percent at December 31, 2021 and 3.250 percent at December 31, 2020.

5 Principal and interest payments are made semiannually.

Presented in the following table is a summary of major long-term debt issuances during the year ended December 31, 2020:

Presented in the following table is a summary of major long-term debt issuances during 2021:

(In Millions) Interest Rate Issuance Date Maturity Date

CMS Energy, parent only

Term loan facility 1

$ 300 variable February February 2021

Junior subordinated notes 2

500 4.750 % May June 2050

Junior subordinated notes 3

400 3.750 % November December 2050

Total CMS Energy, parent only $ 1,200

Term loan facility $ 300 variable January January 2021

First mortgage bonds 575 3.500 % March August 2051

First mortgage bonds 525 2.500 % May May 2060

First mortgage bonds 134 variable May May 2070

First mortgage bonds 127 variable October October 2070

First mortgage bonds 300 0.350 % December June 2023

Total Consumers $ 1,961

Total CMS Energy $ 3,161

1 In December 2020, CMS Energy repaid $ 100 million of this facility and, in February 2021, amended the facility by extending its maturity date to November 2021.

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

On 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.

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

On 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.

Presented in the following table is a summary of major long-term debt retirements during the year ended December 31, 2020:

First mortgage bonds $ 300 2.650 % August 2021 August 2052

Tax-exempt revenue bonds 1

35 0.875 % October 2021 April 2035

1 These bonds were repurchased, in lieu of redemption, in July 2020.

In October 2021, the bonds were remarketed to the public and the interest rate on the bonds will reset in October 2026.

Presented in the following table is a summary of major long-term debt retirements during year ended December 31, 2021:

(In Millions) Interest Rate Retirement Date Maturity Date

CMS Energy, parent only

Senior notes 1

$ 300 5.050 % December March 2022

Total CMS Energy, parent only $ 300

First mortgage bonds $ 100 3.770 % April October 2020

First mortgage bonds 250 5.300 % June September 2022

First mortgage bonds 375 2.850 % September May 2022

Term loan facility 300 variable December January 2021

Total Consumers $ 1,025

Total CMS Energy $ 1,325

1 CMS Energy retired these senior notes at a premium and recorded a loss on extinguishment of $ 16 million in other expense on its consolidated statements of income.

In July 2020, Consumers purchased, in lieu of redemption, $ 35 million of variable-rate tax-exempt revenue bonds due April 2035.

At December 31, 2020, Consumers held the variable-rate tax-exempt revenue bonds and may remarket the bonds or replace them with debt instruments of an equivalent value.

In September 2020, proceeds from the sale of a Class A membership interest in Aviator Wind to a tax equity investor and additional contributions from the Class B membership interest (of which CMS Enterprises owns 51 percent) were used to retire $ 492 million of debt assumed through the purchase of the VIE.

For more information, see Note 21, Variable Interest Entities.

Term Loan facility $ 200 variable October 2021 November 2021

First Mortgage Bonds:

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Any long-term issuances during the authorization period are exempt from FERC’s competitive bidding and negotiated placement requirements.

In December 2021, Consumers filed an application for authority to issue securities between April 1, 2022 and March 31, 2024, replacing the current authorization.

Securitization Bonds:

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CMS Enterprises, including subsidiaries 8 9 10 51 —

EnerBank 915 572 477 325 244

Total CMS Energy $ 373 $ 663 $ 592 $ 332 $ 332

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$ 550 $ — $ 24 $ 526

September 23, 2022 2

CMS Enterprises, including subsidiaries

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September 30, 2025 4

June 5, 2023 $ 850 $ — $ 7 $ 843

$ 850 $ — $ 12 $ 838

November 19, 2023

April 18, 2022

1 During the year ended December 31, 2020, CMS Energy’s average borrowings totaled $ 1 million with a weighted-average interest rate of 1.888 percent.

1 There were no borrowings under this facility during the year ended December 31, 2021.

2 The maximum aggregate of letters of credit that may be issued under this facility is $ 50 million.

The amount remaining under the facility is uncommitted.

3 This letter of credit facility is available to Aviator Wind Equity Holdings.

For more information regarding the acquisition of Aviator Wind Equity Holdings, see Note 21, Variable Interest Entities.

For more information regarding Aviator Wind Equity Holdings, see Note 19, Variable Interest Entities.

4 Under this facility, $ 8 million is available solely for the purpose of issuing letters of credit.

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5 Obligations under these facilities are secured by first mortgage bonds of Consumers.

During the year ended December 31, 2020, Consumers’ average borrowings totaled less than $ 1 million with a weighted-average interest rate of 1.425 percent.

There were no borrowings under these facilities during the year ended December 31, 2021.

Short-term Borrowings:

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At December 31, 2021, there were no commercial paper notes outstanding under this program.

In December 2020, Consumers renewed a short-term credit agreement with CMS Energy, permitting Consumers to borrow up to $ 350 million.

For more information on the intercompany credit agreement between CMS Energy and Consumers, see Note 20, Related-Party Transactions—Consumers.

In December 2021, Consumers renewed a short-term credit agreement with CMS Energy, permitting Consumers to borrow up to $ 500 million at an interest rate of one month LIBOR minus 0.100 percent.

At December 31, 2021, outstanding borrowings under the agreement were $ 392 million bearing an interest rate of zero percent .

In January 2022, Consumers repaid $ 392 million of its loan outstanding with CMS Energy.

Dividend Restrictions:

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Any decision by Consumers to pay dividends on its common stock in excess of retained earnings would be based on specific facts and circumstances and would be subject to a formal regulatory filing process.

For the year ended December 31, 2020, Consumers paid $ 637 million in dividends on its common stock to CMS Energy.

During the year ended December 31, 2021, Consumers paid $ 722 million in dividends on its common stock to CMS Energy.

Capitalization:

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Issuance of Common Stock:

In 2018 and 2020, CMS Energy entered into equity offering programs under which it may sell, from time to time, shares of CMS Energy common stock.

Under both programs, CMS Energy may sell its common stock in privately negotiated transactions, in “at the market” offerings, through forward sales transactions, or otherwise.

During 2018 and 2019, CMS Energy entered into forward sales contracts having an aggregate sales price of $ 250 million, the maximum allowed under the 2018 program.

In 2020, CMS Energy settled the forward contracts under this program by issuing 4,879,022 shares of common stock at a weighted-average price of $ 48.86 per share, resulting in net proceeds of $ 238 million.

Under the 2020 program, CMS Energy may sell shares of its common stock having an aggregate sales price of up to $ 500 million.

In 2020, CMS Energy entered into an equity offering program under which it may sell, from time to time, shares of CMS Energy common stock.

Under the program, CMS Energy may sell its common stock in privately negotiated transactions, in “at the market” offerings, through forward sales transactions, or otherwise.

CMS Energy may sell shares of its common stock having an aggregate sales price of up to $ 500 million.

Presented in the following table are details of CMS Energy’s forward sales contracts under this program at December 31, 2021:

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Contract Date Maturity Date Number of Shares Initial December 31, 2021

September 15, 2020 December 31, 2021 846,759 $ 61.04 $ 60.53

September 15, 2020 June 30, 2022 846,759 $ 61.04 $ 58.51

December 22, 2020 June 22, 2022 115,595 61.81 59.73

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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.

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 the contracts as of December 31, 2021, CMS Energy would have been required to deliver 94,588 shares.

Issuance of Preferred Stock:

In 2021, CMS Energy issued 9.2 million depositary shares, each representing a 1/1,000th interest in a share of its cumulative Series C preferred stock, traded on the New York Stock Exchange under the symbol CMS PRC , at a price of $ 25.00 per depositary share.

The transaction resulted in net proceeds of $ 224 million, which was used for general corporate purposes.

Dividends on the preferred stock accumulate at an annual rate of 4.200 percent and are payable quarterly.

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 a price equal to $ 25,000 per share (equivalent to $ 25.00 per depositary share), plus accumulated and unpaid dividends, 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.

Preferred Stock of Subsidiary:

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Restricted cash equivalents $ 24 $ 17 $ 22 $ 15

CMS Energy common stock — — — 1

Nonqualified deferred compensation plan assets 27 23 21 18

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The derivatives classified as Level 2 are interest rate swaps at CMS Energy, which are valued using market-based inputs.

CMS Energy uses interest rate swaps to manage its interest rate risk on certain long‑term debt obligations and certain notes receivable at EnerBank.

CMS Energy uses interest rate swaps to manage its interest rate risk on certain long‑term debt obligations.

A subsidiary of CMS Enterprises uses floating-to-fixed interest rate swaps to reduce the impact of interest rate fluctuations associated with future interest payments on certain long‑term variable-rate debt.

The interest rate swaps are accounted for as cash flow hedges of the future variability of interest payments on debt with a notional amount of $ 85 million at December 31, 2020.

Gains or losses on these swaps are initially reported in other comprehensive income (loss) and then, as interest payments are made on the hedged debt, are recognized in earnings within other interest expense on CMS Energy’s consolidated statements of income.

The amount of losses recorded in other comprehensive loss was $ 6 million for the

year ended December 31, 2020, $ 4 million for the year ended December 31, 2019 and $ 2 million for the year ended December 31, 2018.

There were no material impacts on other interest expense associated with these swaps during the years presented.

The interest rate swaps are accounted for as cash flow hedges of the future variability of interest payments on debt with a notional amount of $ 78 million at December 31, 2021 and $ 85 million at December 31, 2020.

Gains or losses on these swaps are initially reported in other comprehensive income (loss) and then, as interest payments are made on the hedged debt, are recognized in earnings within interest on long-term debt on CMS Energy’s consolidated statements of income.

CMS Energy recorded gains (losses) of $ 2 million in 2021, $( 6 ) million in 2020, and $( 4 ) million in 2019.

There were no material impacts on

interest on long-term debt associated with these swaps during the periods presented.

The fair value of these swaps recorded in other liabilities on CMS Energy’s consolidated balance sheets totaled $ 4 million at December 31, 2021 and $ 9 million at December 31, 2020.

CMS Energy also has other interest rate swaps that economically hedge interest rate risk on debt, but that do not qualify for cash flow hedge accounting;

the amounts associated with these swaps were not material for the years presented.

EnerBank uses fixed-to-floating interest rate swaps to manage interest rate risk exposure associated with changes in the fair value of certain long‑term fixed‑rate loans.

The interest rate swaps qualify as fair value hedges of long‑term, fixed‑rate notes receivable with a notional amount of $ 134 million at December 31, 2020 and 2019.

The fair value of these interest rate swaps recorded in other liabilities was $ 6 million at December 31, 2020 and $ 1 million at December 31, 2019.

CMS Energy is adjusting the carrying value of the hedged notes receivable for the change in their fair value due to the hedged risk.

For the year ended December 31, 2020, CMS Energy recorded a $ 5 million loss within operating revenue for the change in the fair value of the interest rate swaps and a $ 5 million gain within operating revenue for the change in the carrying value of the hedged notes receivable notes.

Amounts recognized within operating revenue for the year ended December 31, 2019 were immaterial.

the amounts associated with these swaps were not material for the periods presented.

The majority of derivatives classified as Level 3 are FTRs held by Consumers.

Due to the lack of quoted pricing information, Consumers determines the fair value of its FTRs based on Consumers’ average historical settlements.

There was no material activity within the Level 3 categories of assets and liabilities during the years presented.

There was no material activity within the Level 3 categories of assets and liabilities during the periods presented.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Presented in the following table are Consumers’ assets, by level within the fair value hierarchy, reported at fair value on a nonrecurring basis during the year ended December 31, 2021:

Level 1 Level 2 Level 3 Gains (Losses)

Assets held for sale $ — $ 15 $ — $ ( 4 )

In 2021, Consumers wrote down fleet assets held for sale from their carrying amount of $ 19 million to their fair value, less selling costs, of $ 15 million, resulting in an impairment charge of $ 4 million, which was recorded within maintenance and other operating expenses on its consolidated statements of income for the year ended December 31, 2021.

The fair value was determined based on the market prices of similar fleet vehicles.

For additional information, see Item 8.

Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 2, Regulatory Matters.

Financial Instruments

8 unchanged sentences

$ 14 $ 14 $ — $ — $ 14 $ 17 $ 17 $ — $ — $ 17

Notes receivable 2

2,887 3,248 — — 3,248 2,500 2,652 — — 2,652

Securities held to maturity 3

28 29 — 29 — 26 26 — 26 —

Long-term debt 2

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1 Includes current portion of long-term accounts receivable of $ 9 million at December 31, 2021 and $ 12 million at December 31, 2020.

2 Includes current portion of notes receivable of $ 275 million at December 31, 2020 and $ 242 million at December 31, 2019.

For further details, see Note 8, Notes Receivable.

3 These investment securities consist primarily of mortgage-backed securities and Utah Housing Corporation bonds held by EnerBank.

There were $ 1 million of unrealized gains in 2020 and no unrealized gains or losses in 2019.

4 Includes current portion of long-term debt of $ 1.5 billion at December 31, 2020 and $ 1.1 billion at December 31, 2019.

2 Includes current portion of long-term debt of $ 373 million at December 31, 2021 and $ 571 million at December 31, 2020.

3 Includes current portion of long-term payables of $ 23 million at December 31, 2021 and $ 6 million at December 31, 2020.

4 Includes current portion of notes receivable – related party of $ 7 million at December 31, 2021 and 2020.

For further details on this note receivable, see Note 8, Notes Receivable.

5 Includes current portion of long-term debt of $ 365 million at December 31, 2021 and $ 364 million at December 31, 2020.

The effects of third-party credit enhancements were excluded from the fair value measurements of long-term debt.

The principal amount of CMS Energy’s long-term debt supported by third-party credit enhancements was $ 35 million at December 31, 2019.

The entirety of this amount was at Consumers.

DB SERP Securities:

In 2018, CMS Energy and Consumers sold available-for-sale investment securities held within the DB SERP, receiving proceeds of $ 142 million, $ 103 million of which was related to Consumers.

Notes Receivable

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

December 31 2020 2019

CMS Energy, including Consumers

EnerBank notes receivable, net of allowance for loan losses $ 275 $ 242

EnerBank notes receivable, net of allowance for loan losses 2,612 2,258

Total notes receivable $ 2,887 $ 2,500

DB SERP note receivable – related party $ 7 $ 7

DB SERP note receivable – related party 100 96

Total notes receivable $ 107 $ 103

EnerBank Notes Receivable

EnerBank notes receivable are primarily unsecured, fixed-rate installment loans provided throughout the U.S.

to finance home improvements.

EnerBank records its notes receivable at cost, less an allowance for loan losses.

Authorized contractors pay fees to EnerBank to provide borrowers with same-as-cash, zero interest, or reduced interest loans.

Unearned income associated with the loan fees, which is recorded as a reduction to notes receivable on CMS Energy’s consolidated balance sheets, was $ 128 million at December 31, 2020 and $ 134 million at December 31, 2019.

During 2020, EnerBank purchased portfolios of secured and unsecured consumer installment loans with a principal value of $ 90 million.

During 2020, EnerBank completed sales of notes receivable with a principal value of $ 246 million and recorded gains of $ 6 million.

EnerBank utilizes FICO scores as a key credit quality indicator when underwriting new loans and in assessing the credit exposures in its loan portfolio.

The score is determined at the time of a borrower’s application and is generally not updated since the average duration of loans is about two years.

At December 31, 2020, 86 percent of EnerBank’s loans had a FICO score rating between good and excellent.

At December 31, 2020, 97 percent of EnerBank’s loan portfolio was originated within the past five years.

The allowance for loan losses at December 31, 2020 reflects expected credit losses over the entire lifetime of the loan portfolio.

EnerBank estimates the allowance by using the “weighted-average remaining maturity” methodology for their term loans, and the “probability of default and loss given default” methodology for their same-as-cash loans.

These methodologies consider historical loan loss experience, prepayment expectations, and credit quality indicators.

EnerBank considers current and projected economic conditions, and other reasonable and supportable forecast information to determine if adjustments to the allowance are necessary.

The allowance is increased by the provision for loan losses and decreased by loan charge‑offs net of recoveries.

Loan losses are charged against the allowance when the loss is confirmed, but no later than the point at which a loan becomes 120 days past due.

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

Years Ended December 31 2020 2019

Balance at beginning of period $ 33 $ 24

Effects of new accounting standard 1

Provision for loan losses 60 38

Charge-offs ( 39 ) ( 35 )

Recoveries 7 6

Balance at end of period $ 123 $ 33

1 The allowance for loan losses at December 31, 2019 reflected expected credit losses over a 12-month period.

On January 1, 2020, in accordance with ASU 2016-13, Measurement of Credit Losses on Financial Instruments , the allowance for loan losses was adjusted to reflect expected credit losses over the life of the loan.

Additionally, EnerBank recorded $ 3 million for expected credit losses related to unfunded loan commitments.

For further details, see Note 2, New Accounting Standards.

Loans that are 30 days or more past due are considered delinquent.

The balance of EnerBank’s delinquent loans was $ 32 million at December 31, 2020 and $ 33 million at December 31, 2019.

At December 31, 2020 and 2019, EnerBank’s loans that had been modified as troubled debt restructurings were immaterial.

In response to the COVID-19 pandemic, and consistent with FDIC guidance, EnerBank offered new payment accommodations for current qualifying customers.

At December 31, 2020, EnerBank had not experienced increased delinquent loans, charge-offs, or increased loan modifications due to the COVID-19 pandemic.

EnerBank did not make any material adjustments to their allowance for loan losses at December 31, 2020 due to the COVID-19 pandemic.

EnerBank cannot predict the longer-term impacts of the pandemic, but could experience slower lending growth, higher loan write-offs, and increased loan modifications.

EnerBank issues loan commitments to meet customer-financing needs.

These commitments are agreements to provide credit as long as certain conditions are met and expire after 120 days.

EnerBank uses the same credit policies in making these commitments as it uses for loans.

EnerBank had $ 348 million of off-balance-sheet unfunded loan commitments at December 31, 2020, and had recorded a liability of $ 6 million for expected credit losses on those commitments.

EnerBank has entered into interest rate swaps on $ 134 million of its loans (notes receivable).

For information about interest rate swaps, see Note 6, Fair Value Measurements.

DB SERP Note Receivable – Related Party

The DB SERP note receivable – related party is Consumers’ portion of a demand note payable issued by CMS Energy to the DB SERP rabbi trust.

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Independent power production 1

EnerBank 1 - 7

Plant, property, and equipment, gross $ 29,893 $ 27,870

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Distribution 20 - 75

Transmission 46 - 75

Assets under finance leases and other financing 3

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For information regarding CMS Energy’s operating leases of owned assets, see Note 8, Leases and Palisades Financing.

2 Consumers’ plant additions were $ 2.0 billion for the years ended December 31, 2020 and 2019.

Consumers’ plant retirements were $ 220 million for the year ended December 31, 2020 and $ 380 million for the year ended December 31, 2019.

Consumers plans to retire the D.E.

Karn 1 & 2 coal-fueled electric generating units in 2023.

Accordingly, in 2019, Consumers removed from total plant, property, and

equipment $ 667 million, representing the projected remaining book value of the two units upon their retirement, and recorded it as a regulatory asset.

For additional details, see Note 3, Regulatory Matters.

2 Consumers’ plant additions were $ 2.4 billion for the year ended December 31, 2021 and $ 2.0 billion for the year ended December 31, 2020.

Consumers’ plant retirements, which include the impact of disallowances and transfers to held for sale, were $ 361 million for the year ended December 31, 2021, and $ 220 million for the year ended December 31, 2020.

3 For information regarding the amortization terms of Consumers’ assets under finance leases and other financing, see Note 8, Leases and Palisades Financing.

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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.

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.

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

4 Includes related-party lease liabilities of $ 25 million, of which less than $ 1 million was current, at December 31, 2020 and December 31, 2019.

4 Includes related-party lease liabilities of $ 25 million, of which less than $ 1 million was current, at December 31, 2021 and 2020.

5 This rate excludes the impact of Consumers’ pipeline agreements and long-term PPAs accounted for as finance leases.

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December 31, 2021

2026 and thereafter 18

Total minimum lease payments $ 196

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Fixed monthly payments escalate annually with inflation.

In December 2018, Consumers and a subsidiary of CMS Energy executed a 20 ‑year natural gas transportation agreement, related to a pipeline owned by Consumers.

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.

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At the time of the sale, Consumers recorded the sales proceeds as a financing obligation, and has subsequently recorded a portion of the payments under the PPA as interest expense and as a reduction of the financing obligation.

Total amortization and interest charges under the financing were $ 14 million for the year ended December 31, 2020, $ 15 million for the year ended December 31, 2019, and $ 16 million for the year ended December 31, 2018.

Total amortization and interest charges under the financing were $ 14 million for the years ended December 31, 2021 and 2020, and $ 15 million for the year ended December 31, 2019.

At December 31, 2021, the Palisades asset and financing obligation both had a balance of $ 3 million.

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

December 31, 2020

Total minimum payments $ 17

Less discount 1

Financing obligation $ 16

Less current portion 13

Non-current portion $ 3

The finance obligation reflects Consumers’ remaining minimum Palisades PPA payments.

Asset Retirement Obligations

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Gas wells plug and abandon 32 16 ( 9 ) 1 ( 5 ) 35

Cable under Straits of Mackinac 1

— 5 ( 5 ) — — —

Total Consumers $ 530 $ 71 $ ( 53 ) $ 24 $ 33 $ 605

1 For further details, see Note 4, Contingencies and Commitments—Consumers Electric Utility Contingencies.

Company and ARO Description ARO Liability 12/31/2019 Incurred Settled Accretion Cash Flow Revisions ARO Liability 12/31/2020

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Consumers $ 474 $ 46 $ ( 41 ) $ 23 $ 28 $ 530

Gas treating plant and gas wells 1 — ( 1 ) — — —

Renewable generation assets 3 19 — 1 — 23

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Gas wells plug and abandon 22 16 ( 7 ) 1 — 32

Cable under Straits of Mackinac — 5 ( 5 ) — — —

Total Consumers $ 474 $ 46 $ ( 41 ) $ 23 $ 28 $ 530

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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.

In September 2020, CMS Energy and Consumers determined it was probable that 2020 lump-sum payments to retired employees under DB Pension Plan A would exceed the plan’s service cost and interest cost components of net periodic cost for the year.

In November 2021, CMS Energy and Consumers determined that 2021 lump-sum payments to retired employees under DB Pension Plan A would exceed the plan’s service cost and interest cost components of net periodic cost for the year.

These lump-sum payments constitute pension plan liability settlements;

once such settlements meet the service and interest cost threshold, recognition in earnings is required.

As a result, in accordance with GAAP, CMS Energy, including Consumers, performed a remeasurement of DB Pension Plan A as of August 31, 2020 and recognized a settlement loss of $ 36 million;

As a result, in accordance with GAAP, CMS Energy, including Consumers, performed a remeasurement of DB Pension Plan A as of October 31, 2021 and recognized a settlement loss of $ 18 million;

$ 18 million of this amount was recognized by Consumers and deferred as a regulatory asset.

At December 31, 2020, CMS Energy, including Consumers, recognized an additional settlement loss of $ 10 million for the period September 1, 2020 to December 31, 2020;

At December 31, 2021, CMS Energy, including Consumers, recognized an additional settlement loss of $ 4 million for the period November 1, 2021 to December 31, 2021;

$ 3 million of this amount was recognized by Consumers and deferred as a regulatory asset.

CMS Energy and Consumers will amortize the regulatory asset over nine years .

CMS Energy and Consumers will amortize the regulatory asset over eight years .

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 seven percent of base pay, depending on years of service.

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.

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DC SERP assets are included in other non‑current assets on CMS Energy’s and Consumers’ consolidated balance sheets.

CMS Energy’s and Consumers’ DC SERP expense was $ 2 million for the years ended December 31, 2020 and 2019, and $ 1 million for the year ended December 31, 2018.

CMS Energy’s and Consumers’ DC SERP expense was $ 2 million for the years ended December 31, 2021, 2020, and 2019.

The 401(k) plan employer match equals 100 percent of eligible contributions up to the first three percent of an employee’s wages and 50 percent of eligible contributions up to the next two percent of an employee’s wages.

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The rate of increase was assumed to decline to 4.75 percent by 2028 and thereafter for all retirees.

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

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 2021 2020 2019

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DB SERP 5.50 5.50 5.50

1 The mortality assumption for benefit obligations was based on the Pri-2012 Mortality Table for 2020 and 2019 and the RP-2014 Mortality Table for 2018, with improvement scales MP-2020 for 2020, MP-2019 for 2019, and MP-2018 for 2018.

The mortality assumption for net periodic benefit cost was based on the Pri-2012 Mortality Table for 2020 and the RP-2014 Mortality Table for 2019 and 2018, with improvement scales MP-2019 for 2020, MP-2018 for 2019, and MP-2017 for 2018.

1 The mortality assumption for benefit obligations was based on the Pri-2012 Mortality Table, with improvement scales MP-2021 for 2021, MP-2020 for 2020, and MP-2019 for 2019.

The mortality assumption for net periodic benefit cost was based on the Pri-2012 Mortality Table for 2021 and 2020 and the RP-2014 Mortality Table for 2019, with improvement scales MP-2020 for 2021, MP-2019 for 2020, and MP-2018 for 2019.

2 The discount rate reflects the rate at which benefits could be effectively settled and is equal to the equivalent single rate resulting from a yield-curve analysis.

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CMS Energy’s and Consumers’ expected long-term rate of return on the assets of the DB Pension Plans was 6.75 percent in 2021.

The actual return (loss) on the assets of the DB Pension Plans was 13.6 percent in 2020, 21.0 percent in 2019, and ( 6.7 ) percent in 2018.

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

The actual return on the assets of the DB Pension Plans was 12.0 percent in 2021, 13.6 percent in 2020, and 21.0 percent in 2019.

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:

DB Pension Plans and DB SERP OPEB Plan

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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 year ended December 31, 2020, and nine years for the years ended December 31, 2019 and 2018.

For DB Pension Plan B, the estimated period of amortization of gains and losses was 19 years for the year ended December 31, 2020, and 20 years for the years ended December 31, 2019 and 2018.

For the OPEB Plan, the estimated amortization period was nine years for the year ended December 31, 2020, and ten years for the years ended December 31, 2019 and 2018.

For DB Pension Plan A, the estimated period of amortization of gains and losses was eight years for the years ended December 31, 2021 and 2020, and nine years for the year ended December 31, 2019.

For DB Pension Plan B, the estimated period of amortization of gains and losses was 18 years for the year ended December 31, 2021, 19 years for the year ended December 31, 2020, and 20 years for the year ended December 31, 2019.

For the OPEB Plan, the estimated amortization period was nine years for the years ended December 31, 2021 and 2020, and ten years for the year ended December 31, 2019.

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

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The estimated period of amortization of these new prior service costs is eight years .

CMS Energy and Consumers had new prior service credits for OPEB in 2018.

The estimated period of amortization of these new prior service credits is nine years .

CMS Energy and Consumers determine the MRV for the assets of the DB Pension Plans as the fair value of plan assets on the measurement date, adjusted by the gains or losses that will not be admitted into the MRV until future years.

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Reconciliations:

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

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:

DB Pension Plans DB SERP OPEB Plan

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Plan amendments — 24 — — 5 —

Actuarial loss 355 1

Actuarial loss (gain) ( 108 ) 1

( 4 ) 16 ( 32 ) 1

Benefits paid ( 201 ) ( 215 ) ( 10 ) ( 10 ) ( 53 ) ( 48 )

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Interest cost 2 3 23 31

Actuarial loss 12 11 37 1

Plan amendments — — 5 —

Actuarial loss (gain) ( 3 ) 12 ( 30 ) 1

Benefits paid ( 7 ) ( 7 ) ( 51 ) ( 45 )

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Funded status $ ( 109 ) $ ( 117 ) $ 546 $ 377

1 The actuarial loss for 2020 and 2019 for the DB Pension Plans was primarily the result of lower discount rates and lower interest rates used to calculate the value of lump-sum payments.

The actuarial loss for 2020 and 2019 for the OPEB Plan was primarily the result of lower discount rates.

1 The actuarial gains for 2021 for the DB Pension Plans and OPEB Plan were primarily the result of higher discount rates.

The actuarial loss for 2020 for the DB Pension Plans was primarily the result of lower discount rates and lower interest rates used to calculate the value of lump-sum payments.

The actuarial loss for 2020 for the OPEB Plan was primarily the result of lower discount rates.

2 The total funded status of the DB Pension Plans attributable to Consumers, based on an allocation of expenses, was $ 510 million at December 31, 2021 and $ 138 million at December 31, 2020.

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Non-current liabilities

DB Pension Plans — 531

DB SERP 139 150

4 unchanged sentences

Non-current liabilities

DB Pension Plans — 517

DB SERP 102 110

The ABO for the DB Pension Plans was $ 2.7 billion at December 31, 2021 and $ 2.9 billion at December 31, 2020.

At December 31, 2019, the PBO and ABO for one of the defined benefit pension plans exceeded plan assets;

presented in the following table is information related to that plan:

December 31 2019

CMS Energy, including Consumers

Fair value of plan assets 1,205

At December 31, 2021 and 2020, the PBO and ABO did not exceed plan assets for any of the defined benefit pension plans.

Items Not Yet Recognized as a Component of Net Periodic Benefit Cost:

Presented in the following table are the amounts recognized in regulatory assets and AOCI that have not been recognized as components of net periodic benefit cost.

For additional details on regulatory assets, see Note 3, Regulatory Matters.

Presented in the following table are the amounts recognized in regulatory assets, regulatory liabilities, and AOCI that have not been recognized as components of net periodic benefit cost.

For additional details on regulatory assets and regulatory liabilities, see Note 2, Regulatory Matters.

DB Pension Plans and DB SERP OPEB Plan

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CMS Energy, including Consumers

Regulatory assets

Regulatory assets (liabilities)

Net loss $ 812 $ 1,194 $ 136 $ 254

Prior service cost (credit) 25 29 ( 190 ) ( 246 )

Regulatory assets $ 1,223 $ 1,122 $ 8 $ 8

Regulatory assets (liabilities) $ 837 $ 1,223 $ ( 54 ) $ 8

Net loss (gain) 94 120 ( 17 ) ( 10 )

Prior service cost (credit) — 1 ( 5 ) ( 6 )

Total amounts recognized in regulatory assets and AOCI $ 1,344 $ 1,227 $ ( 8 ) $ ( 6 )

Regulatory assets

Total amounts recognized in regulatory assets (liabilities) and AOCI $ 931 $ 1,344 $ ( 76 ) $ ( 8 )

Regulatory assets (liabilities)

Net loss $ 812 $ 1,194 $ 136 $ 254

Prior service cost (credit) 25 29 ( 190 ) ( 246 )

Regulatory assets $ 1,223 $ 1,122 $ 8 $ 8

Regulatory assets (liabilities) $ 837 $ 1,223 $ ( 54 ) $ 8

Net loss 41 47 — —

Total amounts recognized in regulatory assets and AOCI $ 1,270 $ 1,158 $ 8 $ 8

Total amounts recognized in regulatory assets (liabilities) and AOCI $ 878 $ 1,270 $ ( 54 ) $ 8

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.

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Fixed-income securities 28.0 28.0

Real asset investments 12.0 12.0

Multi-asset investments 5.0 4.0

Cash and Cash Equivalents 1.0 1.0

100.0 % 100.0 %

CMS Energy’s target 2020 asset allocation for the assets of the DB Pension Plans was 53 percent equity, 35 percent fixed income, and 12 percent multi-asset investments.

The goal of this target asset allocation 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 plan.

Equity investments are diversified mostly across the S&P 500 Index, with lesser allocations to the S&P MidCap and SmallCap Indexes and Foreign Equity Funds.

Fixed-income investments are diversified across investment grade instruments of government and corporate issuers as well as high-yield and global bond funds.

Multi-assets are diversified across absolute return investment approaches and global tactical asset allocation, such as inflation protected securities, real estate investment trusts, commodities, currency, and preferred stock.

CMS Energy uses annual liability measurements, quarterly portfolio reviews, and periodic asset/liability studies to evaluate the need for adjustments to the portfolio allocation.

CMS Energy’s target 2021 asset allocation for the assets of the DB Pension Plans was 54 percent equity, 29 percent fixed income, 12 percent real assets, and five percent multi-asset investments.

CMS Energy established union and non‑union VEBA trusts to fund future retiree health and life insurance benefits.

These trusts are funded through the ratemaking process for Consumers and through direct contributions from the non‑utility subsidiaries.

CMS Energy’s target 2020 asset allocation for the health trusts was 50 percent equity, 30 percent fixed income, and 20 percent multi-asset investments.

CMS Energy’s target 2021 asset allocation for the health trusts was 55 percent equity, 30 percent fixed income, 12 percent real assets, and three percent multi-asset investments.

CMS Energy’s target asset allocation for the life trusts was 53 percent equity, 32 percent fixed income, and 15 percent multi-asset investments.

1 unchanged sentence

The level of acceptable risk is a function of the liabilities of the plans.

Equity investments are diversified mostly across the S&P 500 Index, with lesser allocations to the S&P SmallCap Index and Foreign Equity Funds.

Fixed-income investments are diversified across investment grade instruments of government and corporate issuers.

CMS Energy uses annual liability measurements, quarterly portfolio reviews, and periodic asset/liability studies to evaluate the need for adjustments to the portfolio allocation.

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.

Real asset investments are diversified across real estate investment trusts, public infrastructure, and public resource equity.

Multi-asset investments are global tactical asset allocations.

CMS Energy uses annual liability measurements, quarterly portfolio reviews, and periodic asset/liability studies to evaluate the need for adjustments to the portfolio allocations.

Contributions:

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Neither CMS Energy nor Consumers plans to contribute to the DB Pension Plans or OPEB Plan in 2022.

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.

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.

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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

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.

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In lieu of cash dividend payments, the dividends on restricted stock units are paid in additional units equal to the value of the dividends.

These additional restricted stock units are subject to the same vesting and distribution conditions as the underlying restricted stock units.

These additional restricted stock units are subject to the same vesting and

distribution conditions as the underlying restricted stock units.

No restricted stock units were forfeited during 2021.

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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.

CMS Energy and Consumers

base expected volatilities on the historical volatility of the price of CMS Energy common stock.

The risk-free rate for valuation of the market-based restricted stock awards was based on the three-year U.S.

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Effective tax rate 15.2 % 17.5 % 19.9 %

1 In December 2017, Consumers remeasured its deferred tax assets and liabilities at the new federal tax rate enacted by the TCJA and recorded a net $ 1.6 billion regulatory liability.

As a result of an order received in September 2019, Consumers began refunding these excess deferred taxes to customers.

In September 2020, the MPSC approved a settlement agreement in Consumers’ 2019 gas rate case including Consumers’ request to accelerate the amortization of its regulatory liability associated with the unprotected, non ‑ property-related excess deferred income taxes resulting from the TCJA.

Consumers will increase its TCJA amortization to fully refund this regulatory liability during the period October 2021 through September 2022 instead of the previous amortization schedule through 2029.

2 In 2013, the MPSC issued an order authorizing Consumers to accelerate the flow-through to electric and gas customers of certain income tax benefits associated primarily with the cost of removal of plant placed

in service before 1993.

Consumers implemented this regulatory treatment beginning in 2014, with the electric portion ending in 2018 and the gas portion expected to continue through 2025.

In September 2020, the MPSC approved a settlement agreement in Consumers’ 2019 gas rate case including Consumers’ request to accelerate the amortization of this income tax benefit to fully amortize the balance during the period October 2021 through September 2022 instead of the previous amortization schedule through 2025.

1 In September 2020, the MPSC authorized Consumers to accelerate the amortization of a regulatory liability associated with unprotected, non ‑ property-related excess deferred income taxes resulting from the TCJA.

The regulatory liability, which was previously scheduled to be amortized through 2029, will now be fully amortized by the end of 2022.

2 In September 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, which were previously scheduled to be amortized through 2025, will now be fully amortized by the end of 2022.

3 In March 2020, CMS Energy finalized a study of research and development tax credits for tax years 2012 through 2018.

1 unchanged sentence

Of this amount, $ 8 million was recognized at Consumers.

Also, in March 2018, Consumers finalized a study of research and development tax credits for the tax years 2012 through 2016.

As a result, CMS Energy and Consumers recognized an $ 8 million increase in the credit, net of reserves for uncertain tax positions, at that time.

4 In January 2020, the IRS issued a decision restoring alternative minimum tax credit refunds sequestered in years prior to 2018.

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Presented in the following table are the tax loss and credit carryforwards at December 31, 2021:

Gross Amount Tax Attribute Expiration

Tax Attribute Expiration

CMS Energy, including Consumers

3 unchanged sentences

General business credits 264 2034 – 2041

Federal charitable contribution carryforwards 6 2025

State charitable contribution carryforwards 1 2025

Total tax attributes $ 332

2 unchanged sentences

General business credits 83 2034-2041

Federal charitable contribution carryforwards 5 2025

State charitable contribution carryforwards 1 2025

Total tax attributes $ 134

2 unchanged sentences

It is reasonably possible that further adjustments will be made to the valuation allowances within one year.

As a result of a provision in the TCJA, as amended by the CARES Act, CMS Energy recovered all of its remaining alternative minimum tax credits in 2020.

CMS Energy utilized $ 7 million of these credits on its 2019 consolidated tax return, and received the remaining $ 69 million through a cash refund.

In 2021, the sale of EnerBank to Regions Bank resulted in utilization of most of the federal net operating loss carryforwards.

EnerBank is not included in CMS Energy’s Michigan tax filing, therefore state net operating loss carryforwards were not impacted by the sale of EnerBank.

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

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A trial is anticipated in 2022 with the Michigan Tax Tribunal related to the methodology of state apportionment for Consumers’ electricity sales to MISO;

A favorable outcome

of the court case or a potential settlement could result in a tax benefit of up to $ 9 million in the next 12 months.

however, 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 the years ended December 31, 2020, 2019, or 2018.

CMS Energy, including Consumers, recognized no interest or penalties for each of the years ended December 31, 2021, 2020, or 2019.

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.

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Earnings Per Share—CMS Energy

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

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

1 unchanged sentence

Income available to common stockholders

Net income $ 752 $ 682 $ 659

Income from continuing operations $ 728 $ 694 $ 633

Less income (loss) attributable to noncontrolling interests ( 23 ) ( 3 ) 2

Net income available to common stockholders – basic and diluted $ 755 $ 680 $ 657

Less preferred stock dividends 5 — —

Income from continuing operations available to common stockholders – basic and diluted $ 746 $ 697 $ 631

Average common shares outstanding

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Weighted-average shares – diluted 289.5 286.3 284.3

Net income per average common share available to common stockholders

Income from continuing operations per average common share available to common stockholders

Basic $ 2.58 $ 2.45 $ 2.23

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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.

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

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Year Ended December 31, 2021 Electric Utility Gas Utility Enterprises 1

EnerBank Consolidated

CMS Energy, including Consumers

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Consumers alternative-revenue programs 33 12 — 45

Consumers revenues to be refunded ( 16 ) ( 12 ) — — ( 28 )

Total operating revenue – CMS Energy $ 4,958 $ 2,063 $ 308 $ 7,329

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Alternative-revenue programs 33 12 45

Revenues to be refunded ( 16 ) ( 12 ) ( 28 )

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

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Year Ended December 31, 2020 Electric Utility Gas Utility Enterprises 1

EnerBank Consolidated

CMS Energy, including Consumers

5 unchanged sentences

Consumers alternative-revenue programs 29 14 — 43

Consumers revenues to be refunded ( 16 ) ( 12 ) — ( 28 )

Total operating revenue – CMS Energy $ 4,372 $ 1,817 $ 229 $ 6,418

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Alternative-revenue programs 29 14 43

Revenues to be refunded ( 16 ) ( 12 ) ( 28 )

Total operating revenue – Consumers $ 4,372 $ 1,817 $ 6,189

1 unchanged sentence

Year Ended December 31, 2019 Electric Utility Gas Utility Enterprises 1

EnerBank Consolidated

CMS Energy, including Consumers

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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 $ 33 million for the year ended December 31, 2020, and $ 29 million for the years ended December 31, 2019 and 2018.

At December 31, 2020, Consumers had deferred $ 4 million of uncollectible accounts expense as a non-current regulatory asset.

For additional information, see Note 3, Regulatory Matters.

CMS Energy and Consumers recorded uncollectible accounts expense of $ 22 million for the year ended December 31, 2021, $ 33 million for the year ended December 31, 2020, and $ 29 million for the year ended December 31, 2019.

Consumers’ customers are billed monthly in cycles having billing dates that do not generally coincide with the end of a calendar month.

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For additional information on these mechanisms, see Note 2, Regulatory Matters.

Under a gas revenue decoupling mechanism authorized by the MPSC, Consumers is allowed to adjust future gas rates for differences between Consumers’ actual weather‑normalized, non‑fuel revenues and the revenues approved by the MPSC.

Consumers accounts for this program as an alternative‑revenue program that meets the criteria for recognizing the effects of decoupling adjustments on revenue as gas is delivered.

Consumers does not reclassify revenue from its alternative-revenue program to revenue from contracts with customers at the time the amounts are collected from customers.

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Restricted cash and cash equivalents 24 17

Cash and cash equivalents, including restricted amounts $ 185 $ 157

Current assets held for sale — 136

Cash and cash equivalents, including restricted amounts – CMS Energy $ 476 $ 185

Cash and cash equivalents $ 22 $ 20

Restricted cash and cash equivalents 22 15

Cash and cash equivalents, including restricted amounts $ 35 $ 28

Cash and cash equivalents, including restricted amounts – Consumers $ 44 $ 35

Cash and Cash Equivalents:

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These amounts are classified as current assets since they relate to payments that could or will occur within one year.

Current Assets Held for Sale:

On October 1, 2021, EnerBank was acquired by Regions Bank.

EnerBank’s cash and cash equivalents are presented as assets held for sale on CMS Energy’s consolidated balance sheets at December 31, 2020.

For information regarding the sale of EnerBank, see Note 20, Exit Activities and Discontinued Operations.

Reportable Segments

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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.

The segments reported for CMS Energy are:

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

• EnerBank, a Utah state-chartered, FDIC-insured industrial bank providing primarily unsecured, fixed-rate installment loans throughout the U.S.

to finance home improvements

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

On October 1, 2021, EnerBank was acquired by Regions Bank.

As a result, EnerBank is no longer included in the composition of CMS Energy’s reportable segments.

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 years ended December 31, 2021, 2020, and 2019.

The assets and liabilities of EnerBank are presented as held for sale on CMS Energy’s consolidated balance sheet at December 31, 2020.

For information regarding the sale of EnerBank, see Note 20, Exit Activities and Discontinued Operations.

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

Beginning in 2021, CMS Land, which holds the environmental remediation obligations at Bay Harbor, will be included within other reconciling items rather than within the enterprises segment.

This change was not material and was made to align segment reporting with the legal organization and internal reporting of CMS Energy.

The segments reported for Consumers are:

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Enterprises 308 229 248

EnerBank 262 221 157

Total operating revenue – CMS Energy $ 7,329 $ 6,418 $ 6,624

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Enterprises 37 20 14

EnerBank 5 3 4

Other reconciling items 1 1 1

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Total depreciation and amortization – Consumers $ 1,077 $ 1,023 $ 975

Years Ended December 31 2021 2020 2019

CMS Energy, including Consumers

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Enterprises 6 7 7

EnerBank 56 59 32

Other reconciling items 183 179 157

Total interest charges – CMS Energy $ 500 $ 505 $ 460

Years Ended December 31 2020 2019 2018

Interest charges

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Enterprises ( 2 ) ( 4 ) 2

EnerBank 17 16 12

Other reconciling items ( 59 ) ( 54 ) ( 56 )

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Total income tax expense – Consumers $ 156 $ 173 $ 185

Years Ended December 31 2021 2020 2019

CMS Energy, including Consumers

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Enterprises 23 36 33

EnerBank 58 49 38

Other reconciling items 458 ( 96 ) ( 95 )

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Enterprises 1,122 1,113 405

EnerBank 37 22 25

Other reconciling items 23 21 20

Total plant, property, and equipment, gross – CMS Energy $ 29,893 $ 27,870 $ 25,368

Years Ended December 31 2020 2019 2018

Plant, property, and equipment, gross

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Total investments in equity method investees – CMS Energy $ 71 $ 70 $ 71

Years Ended December 31 2021 2020 2019

CMS Energy, including Consumers

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Enterprises 1,312 1,276 527

EnerBank 3,109 2,692 2,006

Other reconciling items 431 3,132 2,740

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Enterprises 17 108 5

EnerBank 5 8 10

Other reconciling items 2 1 1

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

3 Costs related to coal-fueled electric generating units to be retired in 2023 were removed and recorded as a regulatory asset in June 2019.

For additional details, see Note 3, Regulatory Matters.

3 Amounts include assets placed under finance lease.

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Accounts receivable from related parties were $ 7 million at December 31, 2021 and $ 16 million at December 31, 2020.

In 2018, CMS Energy and Consumers sold the DB SERP debt securities and CMS Energy issued a demand note payable to the DB SERP rabbi trust.

The portion of the demand note attributable to Consumers was recorded as a note receivable – related party on Consumers’ consolidated balance sheets at December 31, 2020 and December 31, 2019.

For additional details about the note receivable – related party, see Note 8, Notes Receivable.

In December 2018, Consumers and a subsidiary of CMS Energy executed a 20 ‑year natural gas transportation agreement, related to a pipeline owned by Consumers.

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, 2021 and 2020.

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 and Palisades Financing.

Consumers owned no shares of CMS Energy common stock at December 31, 2020 and CMS Energy common stock with a fair value of $ 1 million at December 31, 2019.

In June 2021, Consumers entered into an agreement with DIG, CMS Generation Michigan Power, and CMS ERM to purchase the enterprises segment’s three natural gas-fueled generating units, totaling 1,001 MW of nameplate capacity for $ 515 million, subject to certain adjustments.

The parties plan to close the sale, which is dependent upon regulatory approvals, in 2025.

In December 2021, Consumers renewed a short-term credit agreement with CMS Energy, permitting Consumers to borrow up to $ 500 million.

As of December 31, 2020, $ 307 million was outstanding under the agreement with an interest rate of 0.042 percent.

For additional details about the agreement, see Note 4, Financings and Capitalization .

Variable Interest Entities

In July 2020, CMS Enterprises purchased a 51 -percent ownership interest in Aviator Wind Equity Holdings.

At that time, Aviator Wind Equity Holdings owned 100 percent of Aviator Wind, a 525 -MW wind generation project being developed and constructed in Coke County, Texas.

Of Aviator Wind’s 525 -MW nameplate capacity, 420 MW has been committed under long-term PPAs.

Aviator Wind became operational in September 2020 and, at that time, Aviator Wind Equity Holdings sold a Class A membership interest in Aviator Wind to a tax equity investor, BHE Renewables, LLC, a subsidiary of Berkshire Hathaway Energy Company.

Aviator Wind Equity Holdings retained a Class B membership interest in Aviator Wind.

CMS Enterprises has a 51 -percent ownership interest in Aviator Wind Equity Holdings, which holds a Class B membership interest in Aviator Wind, 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, BHE Renewables, LLC, a subsidiary of Berkshire Hathaway Energy Company.

Earnings, tax attributes, and cash flows generated by Aviator Wind are allocated among and distributed to the membership classes in accordance with the ratios specified in the associated limited liability company operating agreement;

these ratios change over time and are not representative of the ownership interest percentages of each membership class.

Since Aviator Wind’s income and cash flows are not distributed among its investors based on ownership interest percentages, CMS Enterprises allocates Aviator Wind’s income (loss) among its investors by applying the hypothetical liquidation at book value method.

This method calculates each investor’s earnings based on a hypothetical liquidation of Aviator Wind at the net book value of its underlying net 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.

CMS Enterprises then receives 51 percent of the earnings, tax attributes, and cash flows that were allocated to Aviator Wind Equity Holdings.

Aviator Wind Equity Holdings and Aviator Wind represent VIEs.

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CMS Enterprises consolidates Aviator Wind Equity Holdings and Aviator Wind and presents the Class A membership interest and 49 percent of the Class B membership interest in Aviator Wind as noncontrolling interests.

No gain or loss was recognized upon initial consolidation of Aviator Wind Equity Holdings and Aviator Wind.

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

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

December 31 2021 2020

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

CMS Enterprises is obligated under certain indemnities that protect the tax equity investor against losses incurred as a result of breaches of representations and warranties provided by Aviator Wind Equity Holdings and its subsidiaries.

For additional details on these indemnity obligations, see Note 3, Contingencies and Commitments—Guarantees.

This method calculates each investor’s earnings based on a hypothetical liquidation of Aviator Wind at the net book value of its underlying net 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.

CMS Enterprises then receives 51 percent of the earnings, tax attributes, and cash flows that were allocated to Aviator Wind Equity Holdings.

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.

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.

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The creditors of these partnerships do not have recourse to the general credit of CMS Energy or Consumers.

Consumers has not provided any financial or other support during the periods presented that was not previously contractually required.

CMS Energy’s investment in these partnerships is included in investments on its consolidated balance sheets in the amount of $ 70 million as of December 31, 2020 and $ 71 million as of December 31, 2019.

Asset Sale and Exit Activities

In October 2020, Consumers completed a sale of the electric utility’s remaining transmission equipment to METC.

In December 2020, Consumers filed an application with the MPSC requesting approval to share voluntarily half of the gain from the sale with electric utility customers;

this application was approved by the MPSC in February 2021.

As a result, during 2020, Consumers recorded a regulatory liability of $ 14 million and recognized a pre-tax gain of $ 14 million within maintenance and other operating expenses on its consolidated statements of income.

For additional details on the sharing of the gain with customers, see Note 3, Regulatory Matters.

CMS Energy and Consumers have not provided any financial or other support during the periods presented that was not previously contractually required.

CMS Energy’s investment in these partnerships is included in investments on its consolidated balance sheets in the amount of $ 71 million at December 31, 2021 and $ 70 million at December 31, 2020.

Exit Activities and Discontinued Operations

Exit Activities:

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Karn coal-fueled electric generating units in 2023.

For additional details on Consumers’ plans to recover the remaining book value of the two units upon their retirement, see Note 3, Regulatory Matters.

In October 2019, Consumers announced a retention incentive program to ensure necessary staffing at the D.E.

In 2019, Consumers announced a retention incentive program to ensure necessary staffing at the D.E.

Karn generating complex through the anticipated retirement of the coal-fueled generating units.

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In its order in Consumers’ 2020 electric rate case, the MPSC approved deferred accounting treatment for these costs;

Consumers will begin deferring these costs as a regulatory asset in 2021.

As of December 31, 2020, the cumulative cost incurred and charged to expense related to this program was $ 16 million;

an amount of $ 3 million has been capitalized as a cost of plant, property, and equipment.

Consumers began deferring these costs as a regulatory asset in 2021.

Within its 2021 IRP, Consumers proposes to retire the J.H.

Campbell coal-fueled generating units.

No retention incentive costs related to this retirement will be recognized unless Consumers’ 2021 IRP is approved by the MPSC.

As of December 31, 2021, the cumulative cost incurred and charged to expense related to the D.E.

Karn retention incentive program was $ 16 million.

Additionally, an amount of $ 4 million has been capitalized as a cost of plant, property, and equipment and an amount of $ 7 million has been deferred as a regulatory asset.

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

2 unchanged sentences

Costs incurred and charged to maintenance and other operating expenses — 13

Costs deferred as a regulatory asset

Costs incurred and capitalized 1 2

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1 Includes current portion of other liabilities of $ 5 million at December 31, 2021 and $ 3 million at December 31, 2020.

Discontinued Operations:

On October 1, 2021, EnerBank was acquired by Regions Bank.

CMS Energy received proceeds of over $ 1 billion from the transaction and recognized a pre-tax gain of $ 657 million.

CMS Energy intends to use the proceeds from the sale to fund key initiatives in its core energy business related to safety, reliability, and its clean energy transformation.

In December 2021, CMS Energy submitted a notice of disagreement to Regions Bank relating to a $ 36 million negative post-closing purchase price adjustment that it believes is inconsistent with the merger agreement.

In accordance with the merger agreement, the disputed adjustment will be submitted to a mutually agreed upon independent accounting firm for final determination.

While CMS Energy does not believe material loss is probable, it cannot predict the outcome of this matter.

The assets and liabilities of EnerBank are presented as held for sale on CMS Energy’s consolidated balance sheet at December 31, 2020.

The table below presents the financial results of EnerBank included in income from discontinued operations:

Years Ended December 31 2021 2020 2019

Operating revenue $ 209 $ 262 $ 221

Operating expenses 60 130 97

Interest expense 34 56 59

Income before income taxes $ 115 $ 76 $ 65

Gain on sale 657 — —

Income from discontinued operations before income taxes $ 772 $ 76 $ 65

Income tax expense 170 18 16

Income from discontinued operations, net of tax $ 602 $ 58 $ 49

The table below presents the aggregate carrying amounts for the major classes of assets and liabilities held for sale related to EnerBank:

December 31 2020

Cash and cash equivalents $ 136

Accounts receivable and other current assets 18

Notes receivable, less allowance of $ 32

Total current assets

Plant, property, and equipment, net $ 22

Notes receivable, less allowance of $ 91

Other non‑current assets 46

Total non‑current assets

Total assets $ 3,109

Current portion of long-term debt $ 915

Accounts payable and other current liabilities 38

Total current liabilities

Long-term debt $ 1,890

Other non‑current liabilities 4

Total non‑current liabilities

Total liabilities $ 2,847

Quarterly Financial and Common Stock Information (Unaudited)

Presented in the table below are CMS Energy’s quarterly financial and common stock information.

CMS Energy has reclassified certain prior period amounts to conform to the presentation in the present period.

The most significant reclassification is related to the sale of EnerBank to Regions Bank.

In Millions, Except Per Share Amounts

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Operating income 430 252 260 204

Income From Continuing Operations 308 153 153 114

Income From Discontinued Operations, Net of Tax 34 18 30 520

Net income 342 171 183 634

Income (loss) attributable to noncontrolling interests — 1 ( 8 ) 4

Loss attributable to noncontrolling interests ( 7 ) ( 5 ) ( 6 ) ( 5 )

Net Income Attributable to CMS Energy 349 176 189 639

Preferred Stock Dividends — — 3 2

Net income available to common stockholders 349 176 186 637

Basic earnings per average common share

Income from continuing operations per average common share available to common stockholders 1

1.09 0.55 0.54 0.40

Income from discontinued operations per average common share available to common stockholders 1

0.12 0.06 0.10 1.80

Basic earnings per average common share 1

1.21 0.61 0.64 2.20

Diluted earnings per average common share

Income from continuing operations per average common share available to common stockholders 1

1.09 0.55 0.54 0.40

Operating revenue $ 1,744 $ 1,330 $ 1,450 $ 1,665

Operating income 329 246 338 308

Net income 235 160 230 191

Preferred stock dividends — 1 — 1

Net income available to common stockholder 235 159 230 190

Income from discontinued operations per average common share available to common stockholders 1

0.12 0.06 0.10 1.80

Diluted earnings per average common share 1

1.21 0.61 0.64 2.20

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

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Operating income 335 248 340 307

Income From Continuing Operations 229 129 198 138

Income From Discontinued Operations, Net of Tax 14 8 12 24

Net income 243 137 210 162

Income attributable to noncontrolling interests — 1 — 1

Income (loss) attributable to noncontrolling interests — 1 ( 8 ) 4

Net income available to common stockholders 243 136 218 158

Basic earnings per average common share

Income from continuing operations per average common share available to common stockholders 1

0.81 0.45 0.72 0.47

Income from discontinued operations per average common share available to common stockholders 1

0.05 0.03 0.04 0.08

Basic earnings per average common share 1

0.86 0.48 0.76 0.55

Diluted earnings per average common share

Income from continuing operations per average common share available to common stockholders 1

0.80 0.45 0.72 0.47

Operating revenue $ 1,943 $ 1,334 $ 1,429 $ 1,670

Operating income 328 175 319 308

Net income 226 98 213 206

Preferred stock dividends — 1 — 1

Net income available to common stockholder 226 97 213 205

Income from discontinued operations per average common share available to common stockholders 1

0.05 0.03 0.04 0.08

Diluted earnings per average common share 1

0.85 0.48 0.76 0.55

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

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Report of Independent Registered Public Accounting Firm

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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, 2020 and 2019, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2020, 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 have audited the accompanying consolidated balance sheets of CMS Energy Corporation and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2021, including the related notes and financial statement schedules listed in the index appearing after 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, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 9A.

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.

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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, 2020, the Company has recognized a total of $2,695 million of regulatory assets and $3,895 million of regulatory liabilities.

As of December 31, 2021, the Company has recognized a total of $ 2,305 million of regulatory assets, $ 3,948 million of regulatory liabilities, $ 25 million of accrued revenue, and $ 12 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.

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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, 2020 and 2019, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2020, 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 have audited the accompanying consolidated balance sheets of Consumers Energy Company and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2021, including the related notes and financial statement schedule listed in the index appearing after Item 15 (collectively referred to as the “consolidated financial statements”).

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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.

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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, 2020, the Company has recognized a total of $2,695 million of regulatory assets and $3,895 million of regulatory liabilities.

12 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data