What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-09 compared with 2022-02-10 · 468 added, 519 removed, 2106 unchanged (32% of the section changed)

21 unchanged sentences

Plant, Property, and Equipment

Leases and Palisades Financing

Asset Retirement Obligations

3 unchanged sentences

Other Income and Other Expense

Cash and Cash Equivalents

Reportable Segments

2 unchanged sentences

Exit Activities and Discontinued Operations

Quarterly Financial and Common Stock Information (Unaudited)

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

15 unchanged sentences

Other Income (Expense)

Interest income 3 4 7

Interest income – related parties — 7 —

Allowance for equity funds used during construction 8 6 10

Income from equity method investees 10 5 10

Non-operating retirement benefits, net 205 165 118

13 unchanged sentences

Net Income 813 1,330 752

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

Loss Attributable to Noncontrolling Interests ( 24 ) ( 23 ) ( 3 )

Net Income Attributable to CMS Energy 837 1,353 755

18 unchanged sentences

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

19 ( 15 ) ( 7 )

Settlement arising during the period, net of tax of $ — for all periods

4 unchanged sentences

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

2 ( 4 ) ( 3 )

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

1 unchanged sentence

Comprehensive Income 820 1,357 739

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

Comprehensive Loss Attributable to Noncontrolling Interests ( 24 ) ( 23 ) ( 3 )

Comprehensive Income Attributable to CMS Energy $ 844 $ 1,380 $ 742

28 unchanged sentences

Net cash used in investing activities ( 2,476 )

( 1,233 ) ( 2,867 )

Cash Flows from Financing Activities

1 unchanged sentence

Retirement of debt ( 106 ) ( 235 ) ( 2,010 )

Decrease in notes payable — ( 90 ) ( 7 )

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

Increase (decrease) in notes payable 20 — ( 90 )

Issuance of common stock 69 26 253

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

6 unchanged sentences

Net cash provided by (used in) financing activities 1,327

( 295 ) 1,619

Years Ended December 31 2022 2021 2020

Net Increase (Decrease) in Cash and Cash Equivalents, Including Restricted Amounts ( 294 ) 291 28

1 unchanged sentence

Cash and Cash Equivalents, Including Restricted Amounts, End of Period $ 182

Years Ended December 31 2021 2020 2019

Other Cash Flow Activities and Non‑cash Investing and Financing Activities

19 unchanged sentences

Regulatory assets 57 46

Assets held for sale 19 429

Prepayments and other current assets 113 139

10 unchanged sentences

Investments 71 71

Assets held for sale — 2,680

Postretirement benefits 1,208 1,150

Other 310 264

4 unchanged sentences

Current Liabilities

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

Current portion of long-term debt and finance leases $ 1,099 $ 382

Notes payable 20 —

Accounts payable 928 875

4 unchanged sentences

Regulatory liabilities 104 146

Liabilities held for sale — 953

Other current liabilities 166 156

2 unchanged sentences

Long-term debt 13,122 12,046

Non-current portion of finance leases and other financing 46 56

Non-current portion of finance leases 68 46

Regulatory liabilities 3,796 3,802

3 unchanged sentences

Deferred income taxes 2,407 2,210

Liabilities held for sale — 1,894

Other non‑current liabilities 397 375

8 unchanged sentences

Total common stockholders’ equity 6,791 6,407

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

outstanding 9.2 depositary shares in 2021

Cumulative redeemable perpetual preferred stock, Series C, authorized 9.2 depositary shares;

outstanding 9.2 depositary shares in both periods

Total stockholders’ equity 7,015 6,631

31 unchanged sentences

Unrealized gain (loss) on derivative instruments

2 ( 4 ) ( 3 )

Reclassification adjustments included in net income 1 1 2

2 unchanged sentences

At end of period ( 52 ) ( 59 ) ( 86 )

Retained Earnings (Accumulated Deficit)

Retained Earnings

At beginning of period 1,057 214 ( 25 )

7 unchanged sentences

Years Ended December 31 2022 2021 2020 2022 2021 2020

Cumulative Preferred Stock

Cumulative Redeemable Perpetual Preferred Stock, Series C

At beginning of period 224 — —

6 unchanged sentences

Contribution from noncontrolling interest 2 1 31

Income (loss) attributable to noncontrolling interests ( 23 ) ( 3 ) 2

Loss attributable to noncontrolling interests ( 24 ) ( 23 ) ( 3 )

Distributions and other changes in noncontrolling interests ( 4 ) ( 2 ) ( 2 )

19 unchanged sentences

Other Income (Expense)

Interest income 2 3 5

Interest and dividend income – related parties 5 5 5

Allowance for equity funds used during construction 8 6 10

Non-operating retirement benefits, net 195 155 112

20 unchanged sentences

Net gain (loss) arising during the period, net of tax of $ 5 , $ 1 , and $( 3 )

2 ( 9 ) ( 8 )

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

29 unchanged sentences

Retirement of debt ( 28 ) ( 27 ) ( 1,086 )

Decrease in notes payable — ( 90 ) ( 7 )

Increase in notes payable – related parties 85 307 —

Increase (decrease) in notes payable 20 — ( 90 )

Increase (decrease) in notes payable – related parties ( 317 ) 85 307

Stockholder contribution 685 575 650

3 unchanged sentences

Net cash provided by financing activities 1,366

Net Increase (Decrease) in Cash and Cash Equivalents, Including Restricted Amounts 9 7 ( 28 )

Net Increase in Cash and Cash Equivalents, Including Restricted Amounts 16 9 7

Cash and Cash Equivalents, Including Restricted Amounts, Beginning of Period 44 35 28

15 unchanged sentences

Accounts receivable and accrued revenue, less allowance of $ 27 in 2022 and $ 20 in 2021

Assets held for sale 19 —

Accounts and notes receivable – related parties 10 9

17 unchanged sentences

Accounts and notes receivable – related parties 99 102

Postretirement benefits 1,126 1,056

Other 286 251

4 unchanged sentences

Current Liabilities

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

Current portion of long-term debt and finance leases $ 1,000 $ 374

Notes payable 20 —

Notes payable – related parties 75 392

9 unchanged sentences

Long-term debt 9,192 8,050

Non-current portion of finance leases and other financing 46 56

Non-current portion of finance leases 45 46

Regulatory liabilities 3,796 3,802

51 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, and all other entities in which CMS Energy has a controlling financial interest or is the primary beneficiary.

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

Consumers’ consolidated financial statements comprise Consumers and all other entities in which it has a controlling financial interest.

4 unchanged sentences

Actual results could differ from those estimates.

Cash and Cash Equivalents and Restricted Cash and Cash Equivalents:

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

Restricted cash and cash equivalents are held primarily for the repayment of securitization bonds and funds held in escrow.

Cash and cash equivalents may also be restricted to pay other contractual obligations such as leasing of coal railcars.

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

Contingencies:

10 unchanged sentences

In order to support ongoing operations, CMS Energy and Consumers enter into contracts for the future purchase and sale of various commodities, such as electricity, natural gas, and coal.

These forward contracts are generally long-term in nature and result in physical delivery of the commodity at a contracted price.

These forward contracts are generally long-term in nature and result in physical delivery of the

commodity at a contracted price.

Most of these contracts are not subject to derivative accounting for one or more of the following reasons:

43 unchanged sentences

Property Taxes:

Property taxes are based on the taxable value of Consumers’ real and personal property assessed by local taxing authorities.

Consumers records property tax expense over the fiscal year of the taxing authority for which the taxes are levied.

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

Property taxes are based on the taxable value of CMS Energy’s and Consumers’ real and personal property assessed by local taxing authorities.

CMS Energy and Consumers record property tax expense over the fiscal year of the taxing authority for which the taxes are levied.

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

Reclassifications:

1 unchanged sentence

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.

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 and 2020.

For information regarding the sale of EnerBank, see Note 19, Exit Activities and Discontinued Operations.

CMS Energy and Consumers also reclassified certain prior period amounts relating to postretirement benefits.

The asset balances for postretirement benefits are presented discretely within other non-current assets on CMS Energy’s and Consumers’ consolidated balance sheets for the years ended December 31, 2022 and 2021.

Renewable Energy Grant:

1 unchanged sentence

Upon receipt of the grant, Consumers recorded a regulatory liability, which Consumers is amortizing over the life of Lake Winds ® Energy Park.

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

Consumers presents the amortization as a reduction to maintenance

and other operating expenses on its consolidated statements of income.

Consumers recorded the deferred income taxes related to the grant as a reduction of the book basis of Lake Winds ® Energy Park.

1 unchanged sentence

• Note 7, Plant, Property, and Equipment

• Note 8, Leases and Palisades Financing

• Note 8, Leases

• Note 9, Asset Retirement Obligations

3 unchanged sentences

• Note 14, Revenue

• Note 16, Cash and Cash Equivalents

• Note 18, Variable Interest Entities

1 unchanged sentence

Regulatory matters are critical to Consumers.

The Michigan Attorney General, ABATE, the MPSC Staff, and certain other parties typically participate in MPSC proceedings concerning Consumers, such as Consumers’ rate cases and PSCR and GCR processes.

The Michigan Attorney General, ABATE, the MPSC Staff, residential customer advocacy groups, environmental organizations, and certain other parties typically participate in MPSC proceedings concerning Consumers, such as Consumers’ rate cases and PSCR and GCR processes.

These parties often challenge various aspects of those proceedings, including the prudence of Consumers’ policies and practices, and seek cost disallowances and other relief.

13 unchanged sentences

2023 $ 47 $ 42

Deferred capital spending 2

Other 2023 10 4

Total current regulatory assets $ 57 $ 46

Postretirement benefits 3

various $ 837 $ 1,231

Costs of coal-fueled electric generating units to be retired 2

various $ 1,960 $ 678

Postretirement benefits 3

various 856 837

various 281 247

Securitized costs 2

3 unchanged sentences

Energy waste reduction plan incentive 1

Energy waste reduction plan 4

various 13 16

Retention incentive program 4

Demand response program 4

various 12 10

Energy waste reduction plan 4

various 10 13

Other various 17 12

4 unchanged sentences

Reserve for customer refunds 2023 47 2

Voluntary transmission asset sale gain share 2021 — 14

Other 2023 9 6

2 unchanged sentences

Income taxes, net various 1,267 1,297

Postretirement benefits various 54 —

Renewable energy grant 2043 45 47

Renewable energy plan 2028 32 13

ARO various — 11

Demand response program various 12 7

Energy waste reduction plan various 6 —

Postretirement benefits various — 54

Other various 8 9

3 unchanged sentences

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

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

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

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

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

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

Regulatory Assets

6 unchanged sentences

Consumers recognized incentive revenue under this program of $ 55 million in 2022.

Deferred Capital 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:

As part of the ratemaking process, the MPSC allows Consumers to recover the costs of postretirement benefits.

Accordingly, Consumers defers the net impact of actuarial losses and gains, prior service costs and credits, and settlements associated with postretirement benefits as a regulatory asset or liability.

The asset or liability will decrease as the deferred items are amortized and recognized as components of net periodic benefit cost.

For details about settlements and the amortization periods, see Note 10, Retirement Benefits.

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

In 2019, the MPSC approved the settlement agreement reached in Consumers’ 2018 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 will retire the D.E.

Karn coal-fueled electric generating units in 2023.

1 unchanged sentence

In 2019, Consumers removed from total plant, property, and equipment an amount representing the projected remaining book value of the two coal-fueled electric generating units upon their retirement, and recorded it as a regulatory asset.

In 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.

Until securitization, the book value of the generating units will remain in rate base and receive full regulatory returns in general rate cases.

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 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.

In June 2022, the MPSC approved the settlement agreement reached in Consumers’ 2021 IRP, under which Consumers plans to retire the J.H.

Campbell coal-fueled generating units in 2025.

Under the 2021 IRP, upon the units’ retirement, Consumers will receive regulatory asset treatment to recover their remaining book value, as well as a 9.0 ‑percent return on equity, over their original design lives.

Until retirement, the book value of the generating units will remain in rate base and receive full regulatory returns in general rate cases.

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

Postretirement Benefits:

As part of the ratemaking process, the MPSC allows Consumers to recover the costs of postretirement benefits.

The asset or liability will decrease as the deferred items are amortized and recognized as components of net periodic benefit cost.

For details about settlements and the amortization periods, see Note 10, Retirement Benefits.

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.

10 unchanged sentences

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

Retention Incentive Program:

To ensure necessary staffing at the D.E.

Karn and J.H.

Campbell generating complexes through the anticipated retirement of the coal-fueled generating units, Consumers has established retention incentive programs.

In 2020, the MPSC approved deferred accounting treatment for the retention and severance costs incurred under the D.E.

Karn program, and Consumers began deferring these costs as a regulatory asset in 2021.

In addition, under the 2021 IRP, the MPSC approved deferred accounting treatment for the retention and severance costs incurred under the J.H.

Campbell program during 2022;

deferral of costs beyond 2022 was approved as part of the 2022 electric rate case settlement.

For additional details regarding the retention incentive program, see Note 19, Exit Activities and Discontinued Operations.

Demand Response Program:

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 amount of spending incurred in excess of amounts included in rates for recovery is recorded as a regulatory asset and amortized when it is collected from customers.

The amount included in rates for recovery in excess of spending incurred is recorded as a regulatory liability to be refunded to customers.

Energy Waste Reduction Plan:

2 unchanged sentences

The amount of surcharges collected in excess of spending incurred is recorded as a regulatory liability and amortized as costs are incurred.

Demand Response Program:

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.

Regulatory Liabilities

2 unchanged sentences

This net balance will decrease over the remaining life of the related temporary differences and flow through income tax expense.

The majority of the net regulatory liability recorded related to income taxes is associated with plant assets that are subject to normalization, which is governed by the Internal Revenue Code, and will be returned to customers over the remaining book life of the related plant assets, the average of which is 44 years for gas plant assets and 27 years for electric plant assets.

The majority of the net regulatory liability recorded

related to income taxes is associated with plant assets that are subject to normalization, which is governed by the Internal Revenue Code, and will be returned to customers over the remaining book life of the related plant assets.

For additional details on deferred income taxes, see Note 12, Income Taxes.

1 unchanged sentence

In December 2022, the MPSC issued an order authorizing Consumers to refund $ 22 million voluntarily to utility customers.

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 through incremental service restoration spending in 2021;

this application was approved by the MPSC in February 2021.

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.

In January 2023, Consumers submitted a filing proposing that the refund take the form of incremental funding to cover the cost of, and return on, certain distribution capital investments above amounts included in rates and contributions to programs that assist vulnerable customers.

Additionally, in the settlement of its 2022 electric rate case, Consumers agreed to refund voluntarily $ 15 million of 2022 revenues to utility customers through a one-time bill credit and to fund $ 10 million in contributions to programs that directly assist vulnerable customers with utility bills.

Cost of Removal:

The MPSC allows Consumers to collect amounts from customers to fund future asset removal activities.

This regulatory liability is reduced as costs of removal are incurred.

The refund period of this regulatory liability approximates the useful life of the assets to be removed.

This regulatory liability is reduced as costs are incurred to remove the assets at the end of their useful lives.

Renewable Energy Grant:

8 unchanged sentences

2021 Electric Rate Case:

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 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.

In December 2021, the MPSC issued a final order in Consumers’ 2021 electric rate case, disallowing cost recovery for fleet assets and certain other categories of recently completed capital expenditures incurred by Consumers.

As a result, Consumers impaired certain of these capital expenditures, a portion of which were held by the gas utility, and recorded impairment charges totaling $ 45 million within maintenance and other operating expenses on its consolidated statements of income for the year ended December 31, 2021.

2022 Electric Rate Case:

In April 2022, Consumers filed an application with the MPSC seeking a rate increase of $ 272 million, based on a 10.25 -percent authorized return on equity for the projected twelve-month period ending December 31, 2023.

In September 2022, Consumers revised its requested increase to $ 292 million.

The filing requested authority to recover future investments associated with distribution system reliability, solar generation, environmental compliance, and enhanced technology.

In January 2023, the MPSC approved a settlement agreement authorizing an annual rate increase of $ 155 million, based on a 9.9 -percent authorized return on equity.

The MPSC also approved a surcharge for the recovery of $ 6 million of depreciation, property tax, and interest expense related to distribution investments made in 2021 that exceeded what was authorized in rates in accordance with the December 2020 electric rate order.

Additionally, the approved settlement provides for the following:

• a pension and OPEB tracker that will allow Consumers to defer the future recovery or refund of pension and OPEB expenses above or below the amounts used to set existing rates, respectively

• a refund of $ 15 million of 2022 revenues to utility customers through a one-time bill credit

• a commitment to fund $ 10 million in contributions to programs that directly assist vulnerable customers with utility bills

• deferred accounting treatment for depreciation and property tax expense as well as the debt component of the overall rate of return for distribution-related capital investments exceeding a certain threshold amount

• an increase to the distributed generation cap from two percent to four percent on Consumers’ system

There were no direct disallowances of historical capital expenditures within the approved settlement agreement.

The new rates became effective January 20, 2023.

Voluntary Radio Tower Asset Sale Gain Share:

In May 2022, Consumers completed a sale of various radio tower assets.

In June 2022, Consumers filed an application with the MPSC requesting approval to share voluntarily half of the gain from the sale with its electric and gas utility customers;

this application was approved by the MPSC in October 2022.

During 2022, Consumers shared two-thirds with electric customers through additional spending for tree trimming and one-third with gas customers through a donation to nonprofit agencies that provide customer energy bill assistance.

Consumers Gas Utility

2021 Gas Rate Case:

In December 2021, Consumers filed an application with the MPSC seeking an annual rate increase of $ 278 million, based on a 10.5 -percent authorized return on equity for the projected twelve-month period ending September 30, 2023.

In April 2022, Consumers reduced its requested annual rate increase to $ 233 million, based on a 10.25 -percent authorized return on equity.

In July 2022, the MPSC approved a settlement agreement authorizing an annual rate increase of $ 170 million, based on a 9.9 -percent authorized return on equity, effective October 1, 2022.

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.

Power Supply Cost Recovery and Gas Cost Recovery

1 unchanged sentence

The MPSC reviews these costs, policies, and practices in annual plan and reconciliation proceedings.

Consumers adjusts its PSCR and GCR billing charges monthly in order to minimize the underrecovery or overrecovery amount in the annual reconciliations.

Consumers adjusts its PSCR and GCR billing charges monthly, subject to ceiling factor limitations, in order to minimize the underrecovery or overrecovery amount in the annual reconciliations.

Underrecoveries represent probable future revenues that will be recovered from customers;

2 unchanged sentences

December 31 2022 2021

PSCR underrecoveries $ 401 $ —

GCR underrecoveries 8 25

1 unchanged sentence

PSCR overrecoveries $ — $ 12

GCR overrecoveries — 15

Accrued rate refunds $ — $ 12

Due to spikes in fuel prices during 2022, the cost of electric generation increased, resulting in higher market prices for electricity.

Accordingly, Consumers’ power supply costs for 2022 were significantly higher than those projected in its 2022 PSCR plan.

Consumers included a projection of its full-year 2022 underrecovery in the 2023 PSCR plan filed with the MPSC in September 2022.

In January 2023, Consumers filed a motion for a temporary order in its 2023 PSCR plan, requesting that the MPSC approve only a third of the 2022 underrecovery amount for recovery in 2023, with the remaining amount to be recovered equally during 2024 and 2025.

Recovering the 2022 underrecovery over three years will provide immediate relief to electric customers, and the financial impact will be neutral to Consumers’ earnings.

PSCR Plans and Reconciliations:

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 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.

In August 2022, the MPSC issued an order in Consumers’ 2020 PSCR reconciliation, authorizing recovery of $ 1.8 billion of power costs and authorizing Consumers to reflect in its 2021 PSCR reconciliation the underrecovery of $ 1 million.

In its order, the MPSC disallowed the recovery of $ 1 million of replacement power costs associated with an extended outage at Ludington.

Consumers filed an appeal of the MPSC’s order with the Michigan Court of Appeals in September 2022.

In March 2022, Consumers filed its 2021 PSCR reconciliation, requesting full recovery of $ 2.1 billion of power costs and authorization to reflect in its 2022 PSCR reconciliation the overrecovery of $ 8 million.

Consumers submitted its 2022 PSCR plan to the MPSC in September 2021 and self-implemented its proposed 2022 PSCR charge in January 2022.

GCR Plans and Reconciliations:

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.

In April 2022, the MPSC approved a settlement agreement in Consumers’ 2020-2021 GCR reconciliation, authorizing recovery of $ 0.4 billion of gas costs and authorizing Consumers to reflect in its 2021-2022 GCR reconciliation the overrecovery of $ 2 million.

In June 2022, Consumers filed its 2021-2022 GCR reconciliation, requesting full recovery of $ 0.7 billion of gas costs and authorization to reflect in its 2022-2023 GCR reconciliation the underrecovery of $ 9 million.

Consumers submitted its 2022-2023 GCR plan to the MPSC in December 2021 and self-implemented its proposed 2022-2023 GCR charge in April 2022.

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

In June 2022, Consumers filed with the MPSC a revised GCR plan requesting an increase to the GCR factor due to rising natural gas prices.

Consumers self-implemented that increased factor in October 2022.

Contingencies and Commitments

2 unchanged sentences

In their disclosures of these matters, CMS Energy and Consumers provide an estimate of the possible loss or range of loss when such an estimate can be made.

Disclosures that state that CMS Energy or Consumers cannot predict the outcome of a matter indicate that they are unable to estimate a possible loss or range of loss for the matter.

Disclosures stating that CMS Energy or Consumers cannot predict the outcome of a matter indicate that they are unable to estimate a possible loss or range of loss for the matter.

CMS Energy Contingencies

1 unchanged sentence

Leachate is produced when water enters into cement kiln dust piles left over from former cement plant operations at the site.

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

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

CMS Land completed all construction necessary to implement the remedies required by the agreement and will continue to maintain and operate a system to discharge treated leachate into Little Traverse Bay under an NPDES permit, which was renewed in January 2022 and is valid through 2025.

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Although a liability for its present estimate of remaining response activity costs has been recorded, CMS Energy cannot predict the ultimate financial impact or outcome of this matter.

Equatorial Guinea Tax Claim:

In 2002, CMS Energy sold its oil, gas, and methanol investments in Equatorial Guinea.

The government of Equatorial Guinea claims that, in connection with the sale, CMS Energy owes $ 152 million in taxes, plus substantial penalties and interest that could be up to or exceed the amount of the taxes claimed.

In 2015, the matter was proceeding to formal arbitration;

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

Consumers Electric Utility Contingencies

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Consumers believes that these costs should be recoverable in rates, but cannot guarantee that outcome.

Consumers estimates that its liability for NREPA sites for which it can estimate a range of loss will be between $ 2 million and $ 4 million.

At December 31, 2021, Consumers had a recorded liability of $ 2 million, the minimum amount in the range of its estimated probable NREPA liability, as no amount in the range was considered a better estimate than any other amount.

Consumers estimates its liability for NREPA sites for which it can estimate a range of loss to be between $ 2 million and $ 4 million.

At December 31, 2022, Consumers had

a recorded liability of $ 2 million, the minimum amount in the range of its estimated probable NREPA liability, as no amount in the range was considered a better estimate than any other amount.

Consumers is a potentially responsible party at a number of contaminated sites administered under CERCLA.

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In 2010, Consumers received official notification from the EPA that identified Consumers as a potentially responsible party for cleanup of PCBs at the Kalamazoo River CERCLA site.

The notification claimed that the EPA has reason to believe that Consumers disposed of PCBs and arranged for the disposal and treatment of PCB-containing materials at portions of the site.

The notification claimed that the EPA had reason to believe that Consumers disposed of PCBs and arranged for the disposal and treatment of PCB-containing materials at portions of the site.

In 2011, Consumers received a follow-up letter from the EPA requesting that Consumers agree to participate in a removal action plan along with several other companies for an area of lower Portage Creek, which is connected to the Kalamazoo River.

All parties, including Consumers, that were asked to participate in the removal action plan declined to accept liability.

All parties asked to participate in the removal action plan, including Consumers, declined to accept liability.

Until further information is received from the EPA, Consumers is unable to estimate a range of potential liability for cleanup of the river.

Based on its experience, Consumers estimates that its share of the total liability for known CERCLA sites will be between $ 3 million and $ 8 million.

Based on its experience, Consumers estimates its share of the total liability for known CERCLA sites to be between $ 3 million and $ 8 million.

Various factors, including the number and creditworthiness of potentially responsible parties involved with each site, affect Consumers’ share of the total liability.

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Consumers has had several communications with the EPA regarding this matter, but cannot predict the financial impact or outcome.

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

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.

Ludington Plant Overhaul Contract Dispute:

Consumers and DTE Electric, co-owners of Ludington, are parties to a 2010 engineering, procurement, and construction contract with TAES, under which TAES is charged with performing a major overhaul and upgrade of Ludington.

TAES’ performance has been unsatisfactory and resulted in overhaul project delays.

Consumers and DTE Electric have demanded that TAES provide a comprehensive plan to resolve quality control concerns, including adherence to its warranty commitments and other contractual obligations.

Consumers and DTE Electric have taken extensive efforts to resolve these issues with TAES, including a formal demand to TAES’ parent, Toshiba Corporation, a non-affiliated company, under a parent guaranty it provided in the contract.

TAES has not provided a comprehensive plan or otherwise met its performance obligations.

In order to enforce the contract, Consumers and DTE Electric filed a complaint against TAES and Toshiba Corporation in the U.S.

District Court for the Eastern District of Michigan in April 2022.

In June 2022, TAES and Toshiba Corporation filed a motion to dismiss the complaint, along with an answer and counterclaims seeking approximately $ 15 million in damages related to payments allegedly owed under the parties’ contract.

As a co-owner of Ludington, Consumers would be liable for 51 percent of any such damages.

In September 2022, the court denied the motion to dismiss filed by TAES and Toshiba Corporation.

Consumers believes the counterclaims are without merit, but cannot predict the financial impact or outcome of this matter.

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

In November 2022, Consumers and DTE Electric jointly filed an application with the MPSC, requesting authority to defer as a regulatory asset the costs associated with repairing or replacing the defective work performed by TAES while the litigation with TAES and Toshiba Corporation moves forward;

such costs would be offset by potential future litigation proceeds received from TAES or Toshiba Corporation.

If this application is approved by the MPSC, Consumers and DTE Electric will have the opportunity to seek appropriate recovery and ratemaking treatment for amounts recorded as a regulatory asset following resolution of the litigation.

Campbell 3 Plant Retirement Contract Dispute:

In May 2022, Consumers filed a complaint against Wolverine Power Supply Cooperative, Inc.

in the Ottawa County Circuit Court and requested a ruling that Consumers has sole authority to decide to retire the J.H.

Campbell 3 coal-fueled generating unit under the unit’s Joint Ownership and Operating Agreement.

In July 2022, Wolverine Power Supply Cooperative, Inc.

filed an answer, affirmative defenses, and a counterclaim seeking approximately $ 37 million in damages allegedly caused by Consumers’ decision to retire the unit before the end of its useful life.

In July 2022, Consumers filed a motion for summary disposition, which was heard in August 2022.

In October 2022, the state circuit court judge found that Consumers may, in its sole discretion, retire the J.H.

Campbell 3 coal-fueled generating unit, provided that Consumers continues to operate and make necessary improvements to the unit while the litigation concerning Wolverine Power Supply Cooperative, Inc.’s claim for damages is pending.

Consumers believes Wolverine Power Supply Cooperative, Inc.’s claim has no merit, but cannot predict the final impact or outcome on this matter.

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

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.

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.

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.

In February 2021, after the MPSC denied Consumers’ petition for rehearing challenging this disallowance, Consumers filed an appeal with the Michigan Court of Appeals.

In December 2022, the Michigan Court of Appeals issued a decision rejecting Consumers’ appeal.

Consumers plans to file an application for leave to appeal with the Michigan Supreme Court in February 2023.

In December 2021, Consumers filed a gas rate case with the MPSC that included a request for recovery of the capital expenditures incurred to restore and modify the compressor station.

Consumers incurred capital expenditures of $ 17 million during 2020 and 2021 to restore and modify the compressor station.

During 2022, Consumers received insurance proceeds of $ 13 million, representing recovery of costs incurred to restore the compressor station and incremental gas purchases related to the fire.

Consumers had recognized the insurance recovery during 2021.

In June 2022, Consumers, the MPSC Staff, and other intervenors reached a settlement of the gas rate case and the MPSC approved it in July 2022.

As a part of the settlement agreement, Consumers agreed, at this time, to not seek recovery of the capital expenditures, net of insurance proceeds, related to restoring and modifying the Ray Compressor Station.

As a result, Consumers recorded an impairment charge of $ 10 million within maintenance and other operating expenses on its consolidated statements of income in 2022.

Presented in the following table are CMS Energy’s and Consumers’ guarantees at December 31, 2022:

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CMS Energy, including Consumers

Indemnity obligations from purchase of VIE 1

September 2020 indefinite $ 314 $ —

Indemnity obligations from sale of membership interests in VIEs 1

various indefinite $ 325 $ —

Indemnity obligations from stock and asset sale agreements 2

various indefinite 226 3

July 2011 indefinite 30 —

July 2011 indefinite $ 30 $ —

1 In conjunction with the purchase of its interest in Aviator Wind Equity Holdings, CMS Enterprises assumed certain indemnity obligations that protect the associated tax equity investor against losses incurred as a result of breaches of representations and warranties provided by Aviator Wind Equity Holdings and its subsidiaries.

These obligations are generally capped at an amount equal to the tax equity investor’s capital contributions plus a specified return, less any distributions and tax benefits it receives, in connection with its membership interest in Aviator Wind.

CMS Enterprises would recover 49 percent of any amounts paid to the tax equity investor from the other owner of Aviator Wind Equity Holdings.

2011 indefinite 30 —

2011 indefinite $ 30 $ —

1 These obligations arose from the sale of membership interests in NWO Holdco and Aviator Wind to tax equity investors.

NorthStar Clean Energy provided certain indemnity obligations that protect the tax equity investors against losses incurred as a result of breaches of representations and warranties under the associated limited liability company agreements.

For any indemnity obligations related to Aviator Wind, NorthStar Clean Energy would recover 49 percent of any amounts paid to the tax equity investor from the other owner of Aviator Wind Equity Holdings.

Additionally, Aviator Wind holds insurance coverage that would partially protect against losses incurred as a result of certain failures to qualify for production tax credits.

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

For further details on NorthStar Clean Energy’s ownership interest in NWO Holdco and Aviator Wind, see Note 18, 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, including claims related to taxes and breaches of representations and warranties.

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.

The maximum obligation amount is mostly related to an Equatorial Guinea tax claim and an indemnity provided in connection with the sale of EnerBank to Regions Bank.

For further details on the sale, see Note 19, Exit Activities and Discontinued Operations .

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

3 This obligation comprises a guarantee provided by Consumers to the U.S.

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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.

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.

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

Other Contingencies

In addition to the matters disclosed in this Note, 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.

In addition to the matters disclosed in this Note and Note 2, Regulatory Matters, there are certain other lawsuits and administrative proceedings before various courts and governmental agencies, as well as unasserted claims that may result in such proceedings, arising in the ordinary course of business to which CMS Energy, Consumers, and certain other subsidiaries of CMS Energy are parties.

These other lawsuits, proceedings, and unasserted claims may involve personal injury, property damage, contracts, environmental matters, federal and state taxes, rates, licensing, employment, and other matters.

Further, CMS Energy and Consumers occasionally self-report certain regulatory non‑compliance matters that may or may not eventually result in administrative proceedings.

CMS Energy and Consumers occasionally self-report certain regulatory non‑compliance matters that may or may not eventually result in administrative proceedings.

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

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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 NorthStar Clean Energy.

Presented in the following table are CMS Energy’s and Consumers’ contractual purchase obligations at December 31, 2022 for each of the periods shown:

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MCV PPA $ 2,317 $ 286 $ 369 $ 357 $ 384 $ 406 $ 515

Palisades PPA 116 116 — — — — —

Related-party PPAs 320 76 76 53 35 38 42

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Total purchase obligations $ 11,901 $ 3,046 $ 1,628 $ 986 $ 823 $ 848 $ 4,570

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 was approved by the MPSC in 2021.

The amended and restated MCV PPA provides for:

• an extension of the termination date from March 2025 to May 2030

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

The MCV PPA provides for:

• a capacity charge of $ 10.14 per MWh of available capacity through March 2025 and $ 5.00 per MWh of available capacity from March 2025 through the termination date of the PPA

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Capacity and energy charges under the MCV PPA were $ 519 million in 2022, $ 348 million in 2021, and $ 298 million in 2020.

Palisades PPA:

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.

Total capacity and energy charges under the Palisades PPA were $ 413 million in 2021, $ 403 million in 2020, and $ 395 million in 2019.

For further details about Palisades, see Note 8, Leases and Palisades Financing.

Consumers has PPAs expiring through 2050 with various counterparties.

The majority of the PPAs have capacity and energy charges for delivered energy.

In addition, CMS Energy and Consumers account for several of their PPAs as leases.

Capacity and energy charges under these PPAs were $ 510 million in 2022, $ 338 million in 2021, and $ 327 million in 2020.

See Note 8, Leases and Palisades Financing for more information about CMS Energy’s and Consumers’ lease obligations.

CMS Energy and Consumers account for several of their PPAs as leases.

See Note 8, Leases for more information about CMS Energy’s and Consumers’ lease obligations.

Financings and Capitalization

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$ 1,975 $ 1,975

Term loan facility variable 2021 — 200

Junior subordinated notes 1

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Consumers 10,277 8,505

CMS Enterprises, including subsidiaries

NorthStar Clean Energy, including subsidiaries

Term loan facility variable 2025 — 78

Term loan facility variable 4

Total principal amount outstanding $ 14,362 $ 12,568

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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.

The interest rate for the debt is three-month LIBOR plus 1.500 percent through October 2022 and three-month LIBOR plus 1.750 percent thereafter.

At December 31, 2021 and 2020, the interest rate was 1.724 percent and 1.754 percent, respectively.

The same subsidiary of CMS Enterprises entered into interest rate swaps with the lending banks to fix the interest charges associated with the debt, at a rate of 4.702 percent through October 2022 and 4.952 percent thereafter.

Principal and interest payments are made quarterly.

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

4 Funds borrowed under this facility have an interest rate of one-month Term SOFR plus a spread of one percent.

At December 31, 2022, the interest rate for the loan issued under this facility was 5.423 percent.

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

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2.500 2060 525 525

4.350 2064 250 250

$ 8,997 $ 8,197

Tax-exempt revenue bonds 0.875 2

Securitization bonds 3.343 4

Term loan facility variable 6

Total principal amount outstanding $ 10,277 $ 8,505

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Total long-term debt $ 9,192 $ 8,050

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).

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.

At December 31, 2022, the interest rates were 4.469 percent for bonds due

September 2069, 4.375 percent for bonds due May 2070, and 3.484 percent for bonds due October 2070.

The interest rate for all variable-rate bonds at December 31, 2021 was zero percent.

The holders of these variable-rate bonds may put them to Consumers for redemption on certain dates prior to their stated maturity, including dates within one year of December 31, 2022.

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5 Principal and interest payments are made semiannually.

6 Loans under this facility have an interest rate of one-month Term SOFR plus 0.650 percent.

At December 31, 2022, the weighted-average interest rate for the loans issued under this facility was 4.975 percent at December 31, 2022.

Presented in the following table is a summary of major long-term debt issuances during 2022:

(In Millions) Interest Rate Issuance Date Maturity Date

NorthStar Clean Energy, including subsidiaries

Term loan facility 1

$ 100 variable December 2022 September 2023

Total NorthStar Clean Energy, including subsidiaries $ 100

Term loan facility 2

$ 1,000 variable July 2022 January 2024

First mortgage bonds 350 3.600 % August 2022 August 2032

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:

First mortgage bonds 450 4.200 % August 2022 September 2052

Total Consumers $ 1,800

Total CMS Energy $ 1,900

1 In December 2022, a subsidiary of NorthStar Clean Energy entered into a $ 185 million unsecured term loan credit agreement.

Under this credit agreement, $ 100 million of loans have been issued as of December 31, 2022.

In January 2023, an additional $ 30 million was borrowed under the unsecured term loan credit agreement.

2 In July 2022, Consumers entered into a delayed-draw $ 1.0 billion unsecured term loan credit agreement.

Under this credit agreement, Consumers issued loans of $ 550 million in September 2022 and $ 450 million in November 2022.

In January 2023, Consumers repaid $ 500 million of the term loan credit agreement.

In January 2023, Consumers entered into a bond purchase agreement to issue an aggregate principal amount of $ 400 million of first mortgage bonds through a private placement offering.

The bonds, which were priced in November 2022, carry a weighted average interest rate of 5.251 percent and mature at varying dates between 2026 and 2037.

The bonds are expected to be issued in May 2023.

The proceeds of the bonds will be used to finance a portion of the purchase price of the New Covert Generating Facility and for general corporate purposes.

Also in January 2023, Consumers issued $ 425 million of first mortgage bonds that mature in March 2028 and bear interest at a rate of 4.650 percent.

The proceeds of the bonds have been used to repay a portion of the $ 1.0 billion aggregate principal amount outstanding under Consumers’ term loan credit agreement and for general corporate purposes.

Presented in the following table is a summary of major long-term debt retirements during 2022:

(In Millions) Interest Rate Retirement Date Maturity Date

CMS Energy, parent only

Term Loan facility $ 200 variable October 2021 November 2021

NorthStar Clean Energy, including subsidiaries

Term loan facility $ 76 variable June 2022 October 2025

In June 2022, NorthStar Clean Energy sold a Class A membership interest in NWO Holdco to a tax equity investor for $ 49 million.

Proceeds from the sale were used to retire the non-recourse debt held by a subsidiary of NorthStar Clean Energy.

For more information, see Note 18, Variable Interest Entities.

First Mortgage Bonds:

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Consumers is required to maintain FERC authorization for financings.

Its current authorization terminates on July 31, 2022.

Its current authorization expires on March 31, 2024.

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.

In December 2022, Consumers filed an application for authority to issue securities between April 1, 2023 and March 31 2025.

Securitization Bonds:

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991 1,332 31 32 168

CMS Enterprises, including subsidiaries 8 9 10 51 —

NorthStar Clean Energy, including subsidiaries 100 — — — —

Total CMS Energy 1

$ 1,091 $ 1,582 $ 281 $ 332 $ 793

Long-term debt $ 991 $ 1,332 $ 31 $ 32 $ 168

1 This amount excludes debt issuance costs, related to the term loan agreement of a subsidiary of NorthStar Clean Energy, of less than $ 1 million .

Credit Facilities:

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CMS Energy, parent only

June 5, 2024 1

December 14, 2027 1

$ 550 $ — $ 18 $ 532

September 22, 2024

CMS Enterprises, including subsidiaries

NorthStar Clean Energy, including subsidiaries

September 25, 2025 2

$ 37 $ — $ 37 $ —

September 30, 2025 4

December 14, 2027

$ 1,100 $ — $ 29 $ 1,071

November 18, 2024

April 18, 2022

1 There were no borrowings under this facility during the year ended December 31, 2022.

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.

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

For more information regarding Aviator Wind Equity Holdings, see Note 18, Variable Interest Entities.

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

Obligations under this facility are secured by the collateral accounts with the lending bank.

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

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

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These issuances are supported by Consumers’ revolving credit facilities and may have an aggregate principal amount outstanding of up to $ 500 million.

While the amount of outstanding commercial paper does not reduce the available capacity of the revolving credit facilities, Consumers

does not intend to issue commercial paper in an amount exceeding the available capacity of the facilities.

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

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.

While the amount of outstanding commercial paper does not reduce the available capacity of the revolving credit facilities, Consumers does not intend to issue commercial paper in an amount exceeding the available capacity of the facilities.

At December 31, 2022, there were $ 20 million of commercial paper notes outstanding under this program at an annual interest rate of 4.710 percent, recorded as current notes payable on the consolidated balance sheets of CMS Energy and Consumers.

In December 2022, Consumers renewed a short-term credit agreement with CMS Energy, permitting Consumers to borrow up to $ 500 million.

At December 31, 2022, outstanding borrowings under the agreement were $ 75 million bearing the maximum interest rate authorized by FERC for this short-term credit agreement of 3.500 percent.

Dividend Restrictions:

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Issuance of Common Stock:

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.

Under an existing equity offering program, CMS Energy may sell shares of its common stock having an aggregate sales price of up to $ 500 million in privately negotiated transactions, in “at the market” offerings, through forward sales transactions, or otherwise.

In 2022, CMS Energy settled forward contracts under this program by issuing 962,354 shares of common stock at a weighted-average price of $ 57.36 per share, resulting in net proceeds of $ 55 million.

Presented in the following table are details of CMS Energy’s forward sales contracts under this program at December 31, 2022:

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Contract Date Maturity Date Number of Shares Initial December 31, 2022

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

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

August 3, 2022 February 1, 2024 2,944,207 67.59 67.83

August 24, 2022 February 26, 2024 1,677,938 69.46 69.69

August 29, 2022 February 26, 2024 1,783,388 68.18 68.38

These contracts allow CMS Energy to either physically settle the contracts by issuing shares of its common stock at the then-applicable forward sale price specified by the agreement or net settle the contracts through the delivery or receipt of cash or shares.

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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.

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.

No amounts are recorded on CMS Energy’s consolidated balance sheets until settlements of the forward equity sale contracts occur.

If CMS Energy had elected to net share settle or net cash settle the contracts as of December 31, 2022, CMS Energy would not have been required to deliver shares or pay cash.

Preferred Stock:

CMS Energy’s Series C preferred stock is traded on the New York Stock Exchange under the symbol CMS PRC .

Depositary shares represent a 1/1000th interest in a share of its Series C preferred stock.

The Series C preferred stock has no maturity or mandatory redemption date and is not redeemable at the option of the holders.

CMS Energy may, at its option, redeem the Series C preferred stock, in whole or in part, at 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.

CMS Energy may, at its option, redeem the Series C preferred stock, in whole or in part, at any time on or after July 15, 2026.

The Series C preferred stock ranks senior to CMS Energy’s common stock with respect to dividend rights and distribution rights upon liquidation.

Presented in the following table are details of CMS Energy’s Series C preferred stock at December 31, 2022 and 2021:

Depositary Share Par Value Depositary Share Optional Redemption Price Number of Depositary Shares Authorized Number of Depositary Shares Outstanding

Cumulative, redeemable perpetual $ 25 $ 25 9,200,000 9,200,000

Preferred Stock of Subsidiary:

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Restricted cash equivalents consist of money market funds with daily liquidity.

For further details, see Note 16, Cash and Cash Equivalents.

For further details, see Note 1, Significant Accounting Policies.

Nonqualified Deferred Compensation Plan Assets and Liabilities:

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CMS Energy’s and Consumers’ derivatives are classified as Level 2 or Level 3.

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

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

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

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

A subsidiary of NorthStar Clean Energy used 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 were accounted for as cash flow hedges of the future variability of interest payments on the debt.

In June 2022, NorthStar Clean Energy repaid the hedged debt and terminated the related interest rate swaps.

As a result, the associated unrecognized losses recorded in other comprehensive income were recognized in interest on long-term debt on CMS Energy’s consolidated statements of income;

this amount was immaterial.

NorthStar Clean Energy also had other interest rate swaps that economically hedged interest rate risk on debt, but that did not qualify for cash flow hedge

These swaps were also terminated in June 2022;

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

7 unchanged sentences

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.

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

These vehicles were subsequently sold at an amount exceeding their recorded fair value in 2022.

For additional information, see Item 8.

20 unchanged sentences

10,183 8,728 — 6,172 2,556 8,415 9,410 — 7,455 1,955

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

1 Includes current portion of long-term accounts receivable and notes receivable of $ 7 million at December 31, 2022 and $ 9 million at December 31, 2021.

2 Includes current portion of long-term debt of $ 1,090 million at December 31, 2022 and $ 373 million at December 31, 2021.

12 unchanged sentences

$ 29,342 $ 28,771

NorthStar Clean Energy

Independent power production 1

Assets under finance leases 2

Plant, property, and equipment, gross $ 30,491 $ 29,893

7 unchanged sentences

Distribution 15 - 75

Assets under finance leases and other financing 3

Assets under finance leases 2

Distribution 20 - 85

8 unchanged sentences

$ 21,545 $ 21,315

1 A significant portion of independent power production assets are leased to others under operating leases.

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

1 A portion of independent power production assets are leased to others under operating leases.

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

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

3 Consumers’ plant additions were $ 2.3 billion for the year ended December 31, 2022 and $ 2.4 billion for the year ended December 31, 2021.

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.

Consumers’ plant retirements, which include the impact of disallowances and transfers to held for sale, were $ 290 million for the year ended December 31, 2022 and $ 361 million

for the year ended December 31, 2021.

Consumers plans to retire the J.H.

Campbell 1, 2, & 3 coal-fueled electric generating units in 2025.

Accordingly, in 2022, Consumers removed from total plant, property, and equipment $ 1.3 billion, representing the remaining book value of the three units upon their retirement, and recorded it as a regulatory asset.

For additional details, see Note 2, Regulatory Matters.

4 Underground storage includes base natural gas of $ 26 million at December 31, 2022 and 2021.

2 unchanged sentences

Included in net plant, property, and equipment are intangible assets.

Presented in the following table are details about CMS Energy’s and Consumers’ intangible assets:

Description Amortization

Life in Years December 31, 2021 December 31, 2020

Presented in the following table are details about Consumers’ intangible assets:

Description Amortization Life in Years December 31, 2022 December 31, 2021

Accumulated Amortization Gross Cost 1

Accumulated Amortization

CMS Energy, including Consumers

Software development 3 - 15

6 unchanged sentences

Total $ 1,114 $ 686 $ 1,102 $ 684

Software development 3 - 15

$ 840 $ 592 $ 856 $ 568

Rights of way 50 - 85

211 60 197 57

Franchises and consents 5 - 50

Leasehold improvements various 2

Other intangibles various 26 16 25 16

Total $ 1,102 $ 684 $ 1,104 $ 658

1 Consumers’ intangible asset additions were $ 116 million for the year ended December 31, 2022 and $ 88 million for the year ended December 31, 2021.

10 unchanged sentences

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.

Consumers capitalizes AFUDC on regulated major construction projects, except pollution control facilities on its fossil-fuel-fired power plants.

Consumers capitalizes AFUDC on regulated major construction projects.

AFUDC represents the estimated cost of debt and authorized return-on-equity funds used to finance construction additions.

Consumers records the offsetting credit as a reduction of interest for the amount representing the borrowed funds component and as other income for the equity funds component on the consolidated statements of income.

Consumers records the offsetting credit as a reduction of interest for the amount representing the borrowed funds component and as other income for the equity funds component on the consolidated

statements of income.

When construction is completed and the property is placed in service, Consumers depreciates and recovers the capitalized AFUDC from customers over the life of the related asset.

3 unchanged sentences

Gas 5.6 5.6 5.7

Assets Under Finance Leases and Other Financing:

Presented in the following table are further details about changes in Consumers’ assets under finance leases and other financing:

Assets Under Finance Leases:

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

Years Ended December 31 2022 2021

CMS Energy, including Consumers

Balance at beginning of period $ 332 $ 336

2 unchanged sentences

Balance at end of period $ 170 $ 332

Assets under finance leases and other financing are presented as gross amounts.

Consumers’ accumulated amortization of assets under finance leases and other financing was $ 272 million at December 31, 2021 and $ 254 million at December 31, 2020.

Balance at beginning of period $ 332 $ 336

Additions 20 —

Net retirements and other adjustments ( 206 ) ( 4 )

Balance at end of period $ 146 $ 332

Assets under finance leases are presented as gross amounts.

CMS Energy and Consumers’ accumulated amortization of assets under finance leases was $ 88 million at December 31, 2022 and $ 272 million at December 31, 2021.

Depreciation and Amortization:

31 unchanged sentences

Total depreciation and amortization expense $ 1,088 $ 1,077 $ 1,023

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

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

2023 2024 2025 2026 2027

CMS Energy, including Consumers

Intangible asset amortization expense $ 96 $ 82 $ 80 $ 76 $ 64

Intangible asset amortization expense $ 108 $ 94 $ 84 $ 86 $ 84

Jointly Owned Regulated Utility Facilities

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Consumers is required to provide only its share of financing for the jointly owned utility facilities.

Leases and Palisades Financing

CMS Energy and Consumers lease various assets from third parties, including coal-carrying railcars, real estate, service vehicles, and gas pipeline capacity.

54 unchanged sentences

Total lease costs $ 147 $ 142

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

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

Years Ended December 31 2022 2021

4 unchanged sentences

Cash used in financing activities for finance leases 13 7

Lease liabilities arising from obtaining right-of-use assets

Operating leases 10 2

Finance leases 36 —

Cash paid for amounts included in the measurement of lease liabilities

2 unchanged sentences

Cash used in financing activities for finance leases 12 7

Lease liabilities arising from obtaining right-of-use assets

Operating leases 10 2

Finance leases 12 —

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

28 unchanged sentences

Total minimum lease payments $ 148

Consumers has an agreement to build, own, operate, and maintain a compressed natural gas fueling station through December 2038.

This agreement is accounted for as a direct finance lease, under which the lessee has the option to purchase the natural gas fueling station at the end of the lease term.

Fixed monthly payments escalate annually with inflation.

Consumers has a natural gas transportation agreement with a subsidiary of CMS Energy that extends through 2038, related to a pipeline owned by Consumers.

1 unchanged sentence

The effects of the lease are eliminated on CMS Energy’s consolidated financial statements.

Minimum rental payments to be received under Consumers’ direct financing leases are $ 1 million for each of the next five years and $ 17 million for the years thereafter.

The lease receivable was $ 10 million as of December 31, 2021, which does not include unearned income of $ 12 million.

Minimum rental payments to be received under CMS Energy’s direct finance lease are less than $ 1 million for each of the next five years and $ 6 million for the years thereafter.

Minimum rental payments to be received under Consumers’ direct financing leases are less than $ 1 million for each of the next five years and $ 8 million for the years thereafter.

The lease receivable was $ 6 million as of December 31, 2022, which does not include unearned income of $ 7 million.

Palisades Financing

In 2007, Consumers sold Palisades to Entergy and entered into a 15-year PPA to purchase virtually all of the capacity and energy produced by Palisades, up to the annual average capacity of 798 MW.

Consumers accounted for this transaction as a financing because of its continuing involvement with Palisades through security provided to Entergy for the PPA obligation and other arrangements.

Palisades has therefore remained on Consumers’ consolidated balance sheets and Consumers has continued to depreciate it.

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

Total amortization and interest charges under the financing were $ 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.

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

Asset Retirement Obligations

6 unchanged sentences

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

Company and ARO Description In-Service Date Long-Lived Assets

CMS Energy, including Consumers

Closure of coal ash disposal areas various Generating plants coal ash areas

Gas distribution cut, purge, and cap various Gas distribution mains and services

Asbestos abatement 1973 Electric and gas utility plant

Closure of renewable generation assets various Wind and solar generation facilities

Gas wells plug and abandon various Gas transmission and storage

ARO Description In-Service Date Long-Lived Assets

Closure of coal ash disposal areas various Generating plants coal ash areas

3 unchanged sentences

Gas wells plug and abandon various Gas transmission and storage

No assets have been restricted for purposes of settling AROs.

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

Company and ARO Description ARO Liability 12/31/2020 Incurred Settled Accretion Cash Flow Revisions ARO Liability 12/31/2021

Company and ARO Description ARO Liability 12/31/2021 Incurred Settled Accretion Cash Flow Revisions 1

ARO Liability 12/31/2022

CMS Energy, including Consumers

8 unchanged sentences

Total Consumers $ 605 $ 1 $ ( 39 ) $ 27 $ 128 $ 722

1 Increase was attributable to a proposed change for closure work at the J.H.

Campbell 3 ash disposal landfill and an updated cost estimate for other coal ash disposal areas.

Company and ARO Description ARO Liability 12/31/2020 Incurred Settled Accretion Cash Flow Revisions ARO Liability 12/31/2021

8 unchanged sentences

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

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

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

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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 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.

In March 2022, CMS Energy and Consumers determined that 2022 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 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, 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.

As a result, in accordance with GAAP, CMS Energy, including Consumers, performed a remeasurement of DB Pension Plan A at the end of each quarter in 2022.

For the year ended December 31, 2022, CMS Energy, including Consumers, recognized a settlement loss of $ 22 million;

$ 21 million of this amount was deferred as a regulatory asset.

Consumers recognized a settlement loss of $ 21 million, all of which was deferred as a regulatory asset.

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

8 unchanged sentences

DB SERP rabbi trust earnings are taxable.

Presented in the following table are the fair values of trust assets, ABO, and contributions for CMS Energy’s and Consumers’ DB SERP:

Presented in the following table are the fair values of trust assets and ABO for CMS Energy’s and Consumers’ DB SERP:

Years Ended December 31 2022 2021

1 unchanged sentence

Trust assets $ 137 $ 142

Contributions — 8

Trust assets $ 101 $ 104

Contributions — 5

Neither CMS Energy nor Consumers made any contributions to the DB SERP in 2022 or 2021.

On April 1, 2006, CMS Energy and Consumers implemented a DC SERP and froze further new participation in the DB SERP.

4 unchanged sentences

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, 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.

CMS Energy’s and Consumers’ DC SERP expense was $ 1 million for the year ended December 31, 2022, and $ 2 million for the years ended December 31, 2021 and 2020.

The 401(k) plan employer match equals four to six percent of employee eligible contributions based on an employee’s wages and class.

The total 401(k) plan cost for CMS Energy, including Consumers, was $ 44 million for the year ended December 31, 2022, $ 31 million for the year ended December 31, 2021, and $ 29 million for the year ended December 31, 2020.

2 unchanged sentences

Regular full-time employees who qualify for disability retirement under the DB Pension Plans or are disabled and covered by the DCCP and who have 15 years of applicable continuous service may also participate in the OPEB Plan.

Retiree health care costs were based on the assumption that costs would increase 6.25 percent in 2022 and 6.50 percent in 2021 for those under 65 and would increase 6.75 percent in 2022 and 7.00 percent in 2021 for those over 65.

Retiree health care costs were based on the assumption that costs would increase 6.50 percent in 2023 and 6.25 percent in 2022 for those under 65 and would increase 6.75 percent in 2023 and 2022 for those over 65.

The rate of increase was assumed to decline to 4.75 percent by 2032 and thereafter for all retirees.

27 unchanged sentences

DB SERP 5.50 5.50 5.50

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.

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

The mortality assumption for net periodic benefit cost was based on the Pri-2012 Mortality Table, with improvement scales MP-2021 for 2022, MP-2020 for 2021, and MP-2019 for 2020.

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.

2 unchanged sentences

this approach applies individual spot rates along the yield curve to future projected benefit payments based on the time of payment.

4 CMS Energy and Consumers determined the long-term rate of return using historical market returns, the present and expected future economic environment, the capital market principles of risk and return, and the

expert opinions of individuals and firms with financial market knowledge.

CMS Energy and Consumers considered the asset allocation of the portfolio in forecasting the future expected total return of the portfolio.

CMS Energy and Consumers

considered the asset allocation of the portfolio in forecasting the future expected total return of the portfolio.

The goal was to determine a long-term rate of return that could be incorporated into the planning of future cash flow requirements in conjunction with the change in the liability.

1 unchanged sentence

CMS Energy’s and Consumers’ expected long-term rate of return on the assets of the DB Pension Plans was 6.50 percent in 2022.

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.

The actual return (loss) on the assets of the DB Pension Plans was ( 15.9 ) percent in 2022, 12.0 percent in 2021, and 13.6 percent in 2020.

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:

22 unchanged sentences

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

For DB Pension Plan A, the estimated period of amortization of gains and losses was eight years for the years ended 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

(credit) is fully amortized.

For DB Pension Plan A, the estimated period of amortization of gains and losses was eight years for the years ended December 31, 2022, 2021, and 2020.

For DB Pension Plan B, the estimated period of amortization of gains and losses was 18 years for the years ended December 31, 2022 and 2021, and 19 years for the year ended December 31, 2020.

For the OPEB Plan, the estimated amortization period was nine years for the years ended December 31, 2022, 2021, and 2020.

CMS Energy and Consumers had new prior service costs for DB Pension Plan A in 2020.

12 unchanged sentences

Plan amendments — — — — — 5

Actuarial loss (gain) ( 108 ) 1

Actuarial gain ( 811 ) 1

( 25 ) ( 4 ) ( 274 ) 1

12 unchanged sentences

Plan amendments — — — 5

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

Actuarial gain ( 19 ) ( 3 ) ( 265 ) 1

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

6 unchanged sentences

Funded status $ ( 85 ) $ ( 109 ) $ 494 $ 546

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.

1 The actuarial gains for 2022 and 2021 for the DB Pension Plans and OPEB Plan were primarily the result of higher discount rates.

2 The total funded status of the DB Pension Plans attributable to Consumers, based on an allocation of expenses, was $ 632 million at December 31, 2022 and $ 510 million at December 31, 2021.

40 unchanged sentences

December 31, 2022 December 31, 2021

Total Level 1 Level 2 Total Level 1 Level 2

Total Level 1 Total Level 1 Level 2

CMS Energy, including Consumers

9 unchanged sentences

December 31, 2022 December 31, 2021

Total Level 1 Level 2 Total Level 1 Level 2

Total Level 1 Total Level 1 Level 2

CMS Energy, including Consumers

42 unchanged sentences

Real asset investments 11.0 5.0

Multi-asset investments 5.0 4.0

Cash and cash equivalents 4.0 2.0

100.0 % 100.0 %

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’s target 2022 asset allocation for the assets of the DB Pension Plans was 50 ‑percent equity, 40 ‑percent fixed income, and ten ‑percent real assets.

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 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 2022 asset allocation for the health trusts was 51 ‑percent equity, 39 ‑percent fixed income, and ten ‑percent real assets.

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

7 unchanged sentences

Contributions:

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

Years Ended December 31 2021 2020

CMS Energy, including Consumers

DB Pension Plans $ — $ 700

OPEB Plan — 1

DB Pension Plans $ — $ 682

OPEB Plan — 1

Contributions comprise required amounts and discretionary contributions.

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

Neither CMS Energy nor Consumers made any contributions in 2022 or 2021, or plans to contribute to the DB Pension Plans or OPEB Plan in 2023.

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.

20 unchanged sentences

The USW represents Zeeland plant employees.

The UWUA and USW agreements expired and new agreements were ratified in 2020.

These union contracts expire in 2025.

The UWUA and USW agreements expire in 2025.

Stock-based Compensation

32 unchanged sentences

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 2022.

32 unchanged sentences

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.

62 unchanged sentences

Effective tax rate 12.9 % 15.2 % 17.5 %

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 In 2020, the MPSC authorized Consumers to accelerate the amortization of a gas 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, has now been fully amortized.

2 In 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, have now been fully amortized.

3 In 2022, CMS Energy finalized a study of research and development tax credits for tax years 2019 through 2021.

As a result, Consumers recognized a $ 1 million decrease in the credit, net of reserves for uncertain tax positions.

There was no impact at the consolidated level.

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

As a result, in 2020, CMS Energy, including Consumers, recognized a $ 9 million increase in the credit, net of reserves for uncertain tax positions.

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

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

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

As a result, in 2020, CMS Energy recognized a $ 9 million income tax benefit for sequestered amounts related to its 2017 tax return.

36 unchanged sentences

Employee benefits ( 433 ) ( 399 )

Securitized costs ( 46 ) ( 53 )

Gas inventory ( 53 ) ( 22 )

Securitized costs ( 39 ) ( 46 )

Other ( 103 ) ( 59 )

9 unchanged sentences

Employee benefits ( 423 ) ( 388 )

Securitized costs ( 46 ) ( 53 )

Gas inventory ( 53 ) ( 22 )

Securitized costs ( 39 ) ( 46 )

Other ( 103 ) ( 50 )

5 unchanged sentences

CMS Energy, including Consumers

Federal net operating loss carryforwards $ 3 None

State net operating loss carryforwards $ 60 2030 – 2032

2 unchanged sentences

Federal charitable contribution carryforwards 2 2025

State charitable contribution carryforwards 1 2025

Total tax attributes $ 385

Federal net operating loss carryforwards $ 2 None

State net operating loss carryforwards $ 46 2030

General business credits 99 2035 – 2042

Federal charitable contribution carryforwards 5 2025

State charitable contribution carryforwards 1 2025

Total tax attributes $ 145

2 unchanged sentences

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

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:

12 unchanged sentences

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

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

however, a final conclusion is not anticipated in the next 12 months.

One uncertain tax benefit relates to the methodology of state apportionment for Consumers’ electricity sales to MISO.

The Michigan Tax Tribunal heard oral arguments on this methodology during 2022.

A final conclusion is not anticipated in the next 12 months.

CMS Energy and Consumers recognize accrued interest and penalties, where applicable, as part of income tax expense.

11 unchanged sentences

Income from continuing operations $ 809 $ 728 $ 694

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

Less loss attributable to noncontrolling interests ( 24 ) ( 23 ) ( 3 )

Less preferred stock dividends 10 5 —

15 unchanged sentences

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

1 unchanged sentence

These forward equity sale contracts are non‑participating securities.

While the forward sale price in the forward equity sale contract is decreased on certain dates by certain predetermined amounts to reflect expected dividend payments, these price adjustments were set upon inception of the agreement and the forward contract does not give the owner the right to participate in undistributed earnings.

While the forward sale price in the forward equity sale contract is decreased on certain dates by certain predetermined amounts to reflect expected dividend payments, these price

adjustments were set upon inception of the agreement and the forward contract does not give the owner the right to participate in undistributed earnings.

Accordingly, the forward equity sale contracts were included in the computation of diluted EPS, but not in the computation of basic EPS.

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

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

Year Ended December 31, 2022 Electric Utility Gas Utility NorthStar Clean Energy 1

CMS Energy, including Consumers

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Consumers alternative-revenue programs 43 14 — 57

Consumers revenues to be refunded ( 29 ) ( 8 ) — ( 37 )

Total operating revenue – CMS Energy $ 5,419 $ 2,732 $ 445 $ 8,596

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Alternative-revenue programs 43 14 57

Revenues to be refunded ( 29 ) ( 8 ) ( 37 )

Total operating revenue – Consumers $ 5,419 $ 2,732 $ 8,151

1 Amounts represent the enterprises segment’s operating revenue from independent power production and its sales of energy commodities.

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

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

Year Ended December 31, 2021 Electric Utility Gas Utility NorthStar Clean Energy 1

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

1 Amounts represent the enterprises segment’s operating revenue from independent power production and its sales of energy commodities.

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

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

Year Ended December 31, 2020 Electric Utility Gas Utility NorthStar Clean Energy 1

CMS Energy, including Consumers

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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 Amounts represent the enterprises segment’s operating revenue from independent power production and its sales of energy commodities.

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

Electric and Gas Utilities

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These arrangements generally do not have fixed terms and remain in effect as long as the customer consumes the utility service.

The rates are set by the MPSC through the rate-making process and represent the stand-alone selling price of a bundled product comprising the commodity, electricity or natural gas, and the service of delivering such commodity.

The rates are set by the MPSC through the rate-making process and represent the stand-alone selling price of a bundled

product comprising the commodity, electricity or natural gas, and the service of delivering such commodity.

In some instances, Consumers has specific fixed-term contracts with large commercial and industrial customers to provide electricity or gas at certain tariff rates or to provide gas transportation services at contracted rates.

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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 $ 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.

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

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

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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Revenues to Be Refunded:

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

This amount was refunded to customers during 2021 and 2022 in the form of incremental spending above amounts included in rates on various programs.

In December 2022, the MPSC issued an order authorizing Consumers to refund $ 22 million voluntarily to utility customers.

Additionally, in the settlement of its 2022 electric rate case, Consumers agreed to refund voluntarily $ 15 million of 2022 revenues to utility customers through a one-time bill credit.

For additional information, see Note 2, Regulatory Matters .

Other Income and Other Expense

Other income was not significant for any of the periods presented.

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

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

Years Ended December 31 2022 2021 2020

CMS Energy, including Consumers

Interest income $ 5 $ 3 $ 4

Interest income - related parties — — 7

Allowance for equity funds used during construction 6 8 6

Income from equity method investees 3 10 5

All other 5 9 6

Total other income – CMS Energy $ 19 $ 30 $ 28

Interest income $ 2 $ 2 $ 3

Interest income - related parties 5 5 5

Allowance for equity funds used during construction 6 8 6

All other 4 8 5

Total other income – Consumers $ 17 $ 23 $ 19

CMS Energy, including Consumers

Other expense

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Total other expense – Consumers $ ( 25 ) $ ( 18 ) $ ( 43 )

Cash and Cash Equivalents

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

December 31 2021 2020

CMS Energy, including Consumers

Cash and cash equivalents $ 452 $ 32

Restricted cash and cash equivalents 24 17

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 – Consumers $ 44 $ 35

Cash and Cash Equivalents:

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

Restricted Cash and Cash Equivalents:

Restricted cash and cash equivalents are held primarily for the repayment of securitization bonds and funds held in escrow.

Cash and cash equivalents may also be restricted to pay other contractual obligations such as leasing of coal railcars.

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

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

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

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.

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

• NorthStar Clean Energy (formerly known as the enterprises segment), 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

In August 2022, CMS Enterprises Company changed its legal name to NorthStar Clean Energy Company.

To align the segment reporting with the legal organizational structure and the internal reporting of CMS Energy, the enterprises segment will now be referred to as NorthStar Clean Energy.

There were no changes to CMS Energy’s reportable segment composition as a result of this name change.

In October 2021, EnerBank was acquired by Regions Bank.

As a result, EnerBank was removed from 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 information regarding the sale of EnerBank, see Note 19, 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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Gas utility 2,732 2,063 1,817

Enterprises 308 229 248

NorthStar Clean Energy 445 308 229

Total operating revenue – CMS Energy $ 8,596 $ 7,329 $ 6,418

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Gas utility 330 304 283

Enterprises 37 20 14

NorthStar Clean Energy 38 37 20

Other reconciling items 1 1 1

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Income from equity method investees 1

Enterprises $ 10 $ 5 $ 10

NorthStar Clean Energy $ 3 $ 10 $ 5

Total income from equity method investees – CMS Energy $ 3 $ 10 $ 5

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Gas utility 116 104 102

Enterprises 6 7 7

NorthStar Clean Energy 3 6 7

Other reconciling items 182 183 179

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Gas utility 32 39 58

Enterprises ( 2 ) ( 4 ) 2

NorthStar Clean Energy 3 ( 2 ) ( 4 )

Other reconciling items ( 51 ) ( 59 ) ( 54 )

Total income tax expense – CMS Energy $ 93 $ 95 $ 115

Income tax expense

Income tax expense (benefit)

Electric utility $ 109 $ 117 $ 115

Gas utility 32 39 58

Other reconciling items ( 1 ) — —

Total income tax expense – Consumers $ 140 $ 156 $ 173

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Gas utility 378 302 261

Enterprises 23 36 33

NorthStar Clean Energy 34 23 36

Other reconciling items ( 152 ) 458 ( 96 )

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11,443 10,601 9,581

Enterprises 1,122 1,113 405

NorthStar Clean Energy 1,148 1,122 1,113

Other reconciling items 30 23 21

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Investments in equity method investees 1

Enterprises $ 71 $ 70 $ 71

NorthStar Clean Energy $ 71 $ 71 $ 70

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

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11,873 10,517 9,429

Enterprises 1,312 1,276 527

NorthStar Clean Energy 1,464 1,312 1,276

Other reconciling items 109 431 3,132

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Gas utility 4

Enterprises 17 108 5

1,008 989 885

NorthStar Clean Energy 113 17 108

Other reconciling items 7 2 1

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Gas utility 4

1,008 989 885

Other reconciling items 7 2 1

Total capital expenditures – Consumers $ 2,280 $ 2,144 $ 2,167

1 Consumers had no significant equity method investments.

1 Consumers had no equity method investments.

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

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These transactions include but are not limited to:

• purchases of electricity from affiliates of CMS Enterprises

• purchases of electricity from affiliates of NorthStar Clean Energy

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

Transactions involving power supply purchases from certain affiliates of CMS Enterprises are based on avoided costs under PURPA, state law, and competitive bidding.

Transactions involving power supply purchases from certain affiliates of NorthStar Clean Energy are based on avoided costs under PURPA, state law, and competitive bidding.

The payment of parent company overhead costs is based on the use of accepted industry allocation methodologies.

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Description Related Party 2022 2021 2020

Purchases of capacity and energy Affiliates of CMS Enterprises $ 77 $ 64 $ 75

Purchases of capacity and energy Affiliates of NorthStar Clean Energy $ 76 $ 77 $ 64

Amounts payable to related parties for purchased power and other services were $ 20 million at December 31, 2022 and $ 22 million at December 31, 2021.

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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.

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, 2022 and 2021.

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.

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.

For additional details about the agreement, see Note 8, Leases.

In June 2021, Consumers entered into an agreement with DIG, CMS Generation Michigan Power, and CMS ERM to purchase NorthStar Clean Energy’s three natural gas-fueled generating units for $ 515 million, subject to certain adjustments.

Consumers had proposed purchasing these generating units as part of its 2021 IRP.

However, in accordance with the terms of the settlement agreement of its 2021 IRP, which was approved by the MPSC in June 2022, Consumers will not purchase these generating units.

In December 2022, Consumers renewed a short-term credit agreement with CMS Energy, permitting Consumers to borrow up to $ 500 million.

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Variable Interest Entities

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;

In June 2022, NorthStar Clean Energy sold a Class A membership interest in NWO Holdco to a tax equity investor for $ 49 million.

NWO Holdco owns 100 percent of Northwest Ohio Wind, LLC, a 100 ‑MW wind generation project in Paulding County, Ohio.

NorthStar Clean Energy retained a Class B membership interest in NWO Holdco.

NorthStar Clean Energy has a 51 ‑percent ownership interest in Aviator Wind Equity Holdings, which holds a Class B membership interest in Aviator Wind, the holding company of a 525 ‑MW wind generation project in Coke County, Texas.

The Class A membership interest in Aviator Wind is held by a tax equity investor.

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

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

Aviator Wind Equity Holdings and Aviator Wind represent VIEs.

In accordance with the associated limited liability company operating agreement, the tax equity investor is guaranteed preferred returns from Aviator Wind.

However, CMS Enterprises manages and controls the operating activities of Aviator Wind Equity Holdings and, ultimately, Aviator Wind.

As a result, CMS Enterprises is the primary beneficiary of Aviator Wind Equity Holdings and Aviator Wind, as it has the power to direct the activities that most significantly impact the economic performance of the companies, as well as the obligation to absorb losses or the right to receive benefits from the companies.

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

Since NWO Holdco’s and Aviator Wind’s income and cash flows are not distributed among their investors based on ownership interest percentages, NorthStar Clean Energy allocates the entities’ income (loss) among the investors by applying the hypothetical liquidation at book value method.

This method calculates each investor’s earnings based on a hypothetical liquidation of the entities at the net book value of underlying assets as of the balance sheet date.

The liquidation tax gain (loss) is allocated to each investor’s capital account, resulting in income (loss) equal to the period change in the investor’s capital account balance.

NWO Holdco, Aviator Wind Equity Holdings, and Aviator Wind are VIEs.

In accordance with the associated limited liability company agreements, the tax equity investors are guaranteed preferred returns from NWO Holdco and Aviator Wind.

However, NorthStar Clean Energy manages and controls the operating activities of NWO Holdco and Aviator Wind Equity Holdings (and, thereby, Aviator Wind).

As a result, NorthStar Clean Energy is the primary beneficiary, as it has the power to direct the activities that most significantly impact the economic performance of the companies, as well as the obligation to absorb losses or the right to receive benefits from the companies.

NorthStar Clean Energy consolidates NWO Holdco, Aviator Wind Equity Holdings, and Aviator Wind and presents the Class A membership interests and 49 percent of the Class B membership interest in Aviator Wind as noncontrolling interests.

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

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Cash and cash equivalents $ 28 $ 21

Restricted cash and cash equivalents — 1

Accounts receivable 7 3

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Accounts payable $ 15 $ 17

Other current liabilities — 2

Asset retirement obligations 24 23

Other non-current liabilities — 4

Total liabilities $ 39 $ 46

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.

NorthStar Clean Energy is obligated under certain indemnities that protect the tax equity investors against losses incurred as a result of breaches of representations and warranties under the associated limited liability company agreements.

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

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.

CMS Energy has variable interests in T.E.S.

Filer City, Grayling, Genesee, and Craven.

to direct the activities that most significantly impact the entities’ economic performance, such as operations and maintenance, plant dispatch, and fuel strategy.

While CMS Energy owns 50 percent of each partnership, it is not the primary beneficiary of any of these partnerships because decision making is shared among unrelated parties, and no one party has the ability to direct the activities that most significantly impact the entities’ economic performance, such as operations and maintenance, plant dispatch, and fuel strategy.

The partners must agree on all major decisions for each of the partnerships.

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

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.

CMS Energy’s maximum risk exposure to these partnerships is generally limited to its investment in the partnerships, which is included in investments on its consolidated balance sheets in the amount of $ 71 million at December 31, 2022 and 2021.

Exit Activities and Discontinued Operations

Exit Activities:

Under its Clean Energy Plan, Consumers plans to retire the D.E.

Under its Clean Energy Plan, Consumers will retire the D.E.

Karn coal-fueled electric generating units in 2023.

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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.

Under the 2021 IRP, Consumers will retire the J.H.

Campbell coal-fueled generating units in 2025.

Similar to the D.E.

Karn program, Consumers is providing a retention incentive program to ensure necessary staffing at the J.H.

Campbell generating complex through retirement.

Based on the number of employees that have chosen to participate, the aggregate cost of the program through 2025 is estimated to be $ 50 million.

Additionally, Consumers recognized $ 4 million related to severance benefits during the year ended December 31, 2022.

This amount was recorded in other non-current liabilities on its consolidated balance sheets at December 31, 2022.

The 2021 IRP provides deferred accounting treatment for the retention and severance costs recognized during 2022;

deferral of costs beyond 2022 was approved as part of the 2022 electric rate case settlement.

As of December 31, 2022, the cumulative cost incurred and charged to expense related to the D.E.

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Additionally, an amount of $ 4 million has been capitalized as a cost of plant, property, and equipment and an amount of $ 11 million has been deferred as a regulatory asset.

The cumulative cost incurred and deferred as a regulatory asset related to the J.H.

Campbell retention incentive program was $ 20 million.

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

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Retention benefit liability at beginning of period $ 14 $ 11

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

Costs deferred as a regulatory asset

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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.

In October 2021, EnerBank was acquired by Regions Bank.

CMS Energy received proceeds of over $ 1.0 billion from the transaction and recognized a pre-tax gain of $ 657 million in 2021.

In March 2022, CMS Energy received $ 6 million of additional proceeds as the result of a post-closing adjustment.

Net of related transaction costs, CMS Energy recognized a pre-tax gain of $ 5 million during 2022.

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 believed was inconsistent with the merger agreement.

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

In June 2022, the accounting firm rendered a determination on the disputed items entirely in favor of CMS Energy.

As a result, no further adjustment was required in 2022.

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

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Income from discontinued operations, net of tax $ 4 $ 602 $ 58

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

Three Months Ended March 31 June 30 September 30 December 31

CMS Energy, including Consumers

Operating revenue $ 2,013 $ 1,558 $ 1,725 $ 2,033

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

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

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.

In Millions, Except Per Share Amounts

Three Months Ended March 31 June 30 September 30 December 31

CMS Energy, including Consumers

Operating revenue $ 1,802 $ 1,382 $ 1,507 $ 1,727

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 (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

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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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, 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 have audited the accompanying consolidated balance sheets of CMS Energy Corporation and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of income, of comprehensive income, of changes in equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes and financial statement schedules listed in the index appearing under Item 15 (collectively referred to as the “consolidated financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, 2022, 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 the accompanying 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 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, 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 of December 31, 2022, the Company has recognized a total of $ 3,652 million of regulatory assets, $ 3,900 million of regulatory liabilities, and $ 409 million of accrued revenue.

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, 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”).

We have audited the accompanying consolidated balance sheets of Consumers Energy Company and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of income, of comprehensive income, of changes in equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes and financial statement schedule listed in the index appearing under 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 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, 2022, the Company has recognized a total of $ 3,652 million of regulatory assets, $ 3,900 million of regulatory liabilities, and $ 409 million of accrued revenue.

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