What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-08 compared with 2023-02-09 · 432 added, 455 removed, 2119 unchanged (30% of the section changed)

82 unchanged sentences

Retirement Benefits Liability

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

Net gain arising during the period, net of tax of $ 2 , $ — , and $ 6

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

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

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

1 unchanged sentence

( 1 ) ( 1 ) ( 1 )

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

Unrealized gain on derivative instruments, net of tax of $ — , $ 1 , and $ —

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

Other Comprehensive Income (Loss) 7 27 ( 13 )

Other Comprehensive Income 6 7 27

Comprehensive Income 814 820 1,357

2 unchanged sentences

The accompanying notes are an integral part of these statements.

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CMS Energy Corporation

10 unchanged sentences

Other non‑cash operating activities and reconciling adjustments ( 274 ) ( 93 ) ( 70 )

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

Net cash used in discontinued operations — — ( 111 )

Changes in assets and liabilities

7 unchanged sentences

Capital expenditures (excludes assets placed under finance lease) ( 2,407 ) ( 2,374 ) ( 2,076 )

Covert Generating Station acquisition ( 812 ) — —

Net proceeds from sale of EnerBank — 5 898

Proceeds from sale of transmission equipment — — 58

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

Net cash provided by discontinued operations — — 78

Cost to retire property and other investing activities ( 167 ) ( 107 ) ( 133 )

4 unchanged sentences

Retirement of debt ( 2,132 ) ( 106 ) ( 235 )

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

Increase in notes payable 73 20 —

Issuance of common stock 192 69 26

1 unchanged sentence

Payment of dividends on common and preferred stock ( 579 ) ( 544 ) ( 508 )

Debt prepayment costs — — ( 59 )

Proceeds from the sale of membership interest in VIE to tax equity investor 86 49 —

Contribution from noncontrolling interest 6 2 1

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

Net cash used in discontinued operations — — ( 84 )

Other financing costs ( 54 ) ( 62 ) ( 54 )

8 unchanged sentences

Interest paid (net of amounts capitalized) $ 607 $ 490 $ 489

Income taxes paid (refunds received), net 1 16 ( 58 )

Income taxes paid 15 1 16

Non‑cash transactions

1 unchanged sentence

The accompanying notes are an integral part of these statements.

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CMS Energy Corporation

53 unchanged sentences

Common stockholders’ equity

Common stock, authorized 350.0 shares;

Common stock, authorized 350.0 shares in both periods;

outstanding 294.4 shares in 2023 and 291.3 shares in 2022

21 unchanged sentences

Common stock repurchased ( 119 ) ( 151 ) ( 157 ) ( 7 ) ( 9 ) ( 9 )

Common stock reissued — — 12 — — 1

Common stock reacquired ( 64 ) ( 43 ) ( 22 ) — — —

4 unchanged sentences

At beginning of period ( 52 ) ( 56 ) ( 80 )

Net gain (loss) arising during the period 1 19 ( 15 )

Net gain arising during the period 5 1 19

Settlement arising during the period — — 1

Prior service credit adjustment — — ( 1 )

Amortization of net actuarial loss 2 4 5

4 unchanged sentences

— ( 3 ) ( 6 )

Unrealized gain (loss) on derivative instruments

Unrealized gain on derivative instruments

Reclassification adjustments included in net income — 1 1

At end of period

— ( 3 ) ( 6 )

At end of period ( 46 ) ( 52 ) ( 59 )

1 unchanged sentence

At beginning of period 1,350 1,057 214

Cumulative effect of change in accounting principle — — ( 51 )

Net income attributable to CMS Energy 887 837 1,353

2 unchanged sentences

At end of period 1,658 1,350 1,057

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

Number of Shares

Years Ended December 31 2022 2021 2020 2022 2021 2020

Cumulative Redeemable Perpetual Preferred Stock, Series C

2 unchanged sentences

At end of period 224 224 224

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

Number of Shares

Years Ended December 31 2023 2022 2021 2023 2022 2021

Noncontrolling Interests

At beginning of period 580 557 581

Impact of purchase and consolidation of VIE — — 101

Sale of membership interest in VIE to tax equity investor 86 49 —

45 unchanged sentences

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

Other Comprehensive Income (Loss) 17 4 ( 8 )

Other Comprehensive Income — 17 4

Comprehensive Income $ 867 $ 962 $ 872

20 unchanged sentences

Capital expenditures (excludes assets placed under finance lease) ( 2,248 ) ( 2,239 ) ( 2,052 )

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

Proceeds from sale of transmission equipment — — 58

Covert Generating Station acquisition ( 812 ) — —

Cost to retire property and other investing activities ( 141 ) ( 105 ) ( 133 )

3 unchanged sentences

Retirement of debt ( 1,654 ) ( 28 ) ( 27 )

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

Increase in notes payable 73 20 —

Increase (decrease) in notes payable – related parties ( 75 ) ( 317 ) 85

1 unchanged sentence

Payment of dividends on common and preferred stock ( 697 ) ( 771 ) ( 724 )

Debt prepayment costs — — ( 43 )

Other financing costs ( 21 ) ( 22 ) ( 32 )

Net cash provided by financing activities 767

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

Net Increase (Decrease) in Cash and Cash Equivalents, Including Restricted Amounts ( 4 ) 16 9

Cash and Cash Equivalents, Including Restricted Amounts, Beginning of Period 60 44 35

54 unchanged sentences

Long-term debt 10,037 9,192

Long-term debt – related parties 424 —

Non-current portion of finance leases 39 45

29 unchanged sentences

Accumulated Other Comprehensive Loss

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

Retirement benefits liability

3 unchanged sentences

At end of period ( 15 ) ( 15 ) ( 32 )

At end of period ( 15 ) ( 32 ) ( 36 )

Retained Earnings

29 unchanged sentences

For environmental remediation projects in which the timing of estimated expenditures is considered reliably determinable, CMS Energy and Consumers record the liability at its net present value, using a discount rate equal to the interest rate on monetary assets that are essentially risk-free and have maturities comparable to that of the environmental liability.

CMS Energy and Consumers expense legal fees as incurred;

Unless regulatory accounting applies, CMS Energy and Consumers expense legal fees as incurred;

fees incurred but not yet billed are accrued based on estimates of work performed.

5 unchanged sentences

Derivative Instruments:

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

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

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

6 unchanged sentences

An FTR is a financial instrument that entitles its holder to receive compensation or requires its holder to remit payment for congestion-related transmission charges.

Consumers accounts for FTRs as derivatives.

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

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

At CMS Energy, if the derivative is accounted for as a cash flow hedge, unrealized gains and losses from changes in the fair value of the derivative are recognized in AOCI and subsequently recognized in earnings when the hedged transactions impact earnings.

If the derivative is accounted for as a fair value hedge, changes in the fair value of the derivative and changes in the fair value of the hedged item due to the hedged risk are recognized in earnings.

For the FTRs at Consumers, changes in fair value are deferred as regulatory assets or liabilities.

Consumers accounts for FTRs as derivatives and changes in the fair value of FTRs are deferred as regulatory assets or liabilities.

For details regarding CMS Energy’s and Consumers’ derivative instruments recorded at fair value, see Note 5, Fair Value Measurements.

CMS Energy calculates basic and diluted EPS using the weighted-average number of shares of common stock and dilutive potential common stock outstanding during the period.

Potential common stock, for purposes of determining diluted EPS, includes the effects of nonvested stock awards and forward equity sales.

Potential common stock, for purposes of determining diluted EPS, includes the effects of nonvested stock awards, forward equity sales, and convertible securities.

CMS Energy computes the effect on potential common stock using the treasury stock method.

Potentially dilutive common shares issuable upon conversion of the convertible senior notes are determined using the if-converted method for calculating diluted EPS.

Diluted EPS excludes the impact of antidilutive securities, which are those securities resulting in an increase in EPS or a decrease in loss per share.

10 unchanged sentences

Investment Tax Credits:

Consumers amortizes its investment tax credits over the life of the related property in accordance with regulatory treatment.

CMS Energy’s non‑regulated businesses use the deferral method of accounting for investment tax credits.

Under the deferral method, the book basis of the associated assets is reduced by the amount of the credit, resulting in lower depreciation expense over the life of the assets.

Furthermore, the tax basis of the assets is reduced by 50 percent of the related credit, resulting in a net deferred tax asset.

CMS Energy recognizes the tax benefit of this basis difference as a reduction to income tax expense in the year in which the plant reaches commercial operation.

CMS Energy and its subsidiaries use the flow-through method of accounting for investment tax credits.

Under the flow-through method, the credit is recognized as a reduction to income tax expense when the related plant, property, and equipment is placed into service.

For its regulated utility assets, Consumers amortizes its investment tax credits over the life of the related property in accordance with regulatory treatment.

CMS Energy and Consumers use the weighted-average cost method for valuing working gas, recoverable base gas in underground storage facilities, and materials and supplies inventory.

CMS Energy and Consumers also use this method for valuing coal inventory, and they classify these amounts as generating plant fuel stock on their consolidated balance sheets.

and Consumers also use this method for valuing coal inventory, and they classify these amounts as generating plant fuel stock on their consolidated balance sheets.

CMS Energy and Consumers account for RECs and emission allowances as inventory and use the weighted-average cost method to remove amounts from inventory.

11 unchanged sentences

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:

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

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

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:

In 2013, Consumers received a renewable energy cash grant for Lake Winds ® Energy Park under Section 1603 of the American Recovery and Reinvestment Tax Act of 2009.

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

Consumers presents the amortization as a reduction to maintenance

and other operating expenses on its consolidated statements of income.

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

For additional accounting policies, see:

• Note 2, Regulatory Matters

• Note 7, Plant, Property, and Equipment

9 unchanged sentences

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

Intervenors also participate in certain FERC matters, including FERC’s regulation of certain wholesale rates that affect Consumers’ power supply costs.

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

The parties also have appealed significant MPSC orders.

Depending upon the specific issues, the outcomes of rate cases and proceedings, including judicial proceedings challenging MPSC orders or other actions, could negatively affect CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations.

Depending upon the specific issues, the outcomes of rate cases and proceedings, including judicial proceedings challenging MPSC and FERC orders or other actions, could negatively affect CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations.

Consumers cannot predict the outcome of these proceedings.

6 unchanged sentences

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

December 31 End of Recovery or Refund Period 2022 2021

December 31 2023 2022

Regulatory assets

2022 PSCR underrecovery 1

Energy waste reduction plan incentive 2

2023 $ 47 $ 42

Other 2023 10 4

Retention incentive program 3

Total current regulatory assets $ 203 $ 57

Costs of coal-fueled electric generating units to be retired 1

various $ 1,960 $ 678

Postretirement benefits 3

various 856 837

various 281 247

$ 1,265 $ 1,258

Securitized costs 1

various 108 112

Postretirement benefits 4

2022 PSCR underrecovery 1

Unamortized loss on reacquired debt 1

various 100 104

Decommissioning costs 3

Energy waste reduction plan incentive 2

Retention incentive program 3

Demand response program 4

various 12 10

Postretirement benefits expense deferral mechanism 3

Energy waste reduction plan 3

various 10 13

Other various 17 12

Ludington overhaul contract dispute 3

Total non-current regulatory assets $ 3,683 $ 3,595

3 unchanged sentences

Reserve for customer refunds 2 47

Other 2023 9 6

Total current regulatory liabilities $ 56 $ 104

Cost of removal various $ 2,426 $ 2,375

Income taxes, net various 1,267 1,297

Cost of removal $ 2,545 $ 2,426

Income taxes, net 1,220 1,267

Renewable energy grant 43 45

Renewable energy plan 29 32

Demand response program various 12 7

Energy waste reduction plan various 6 —

Postretirement benefits various — 54

Other various 8 9

Energy waste reduction plan 25 6

Postretirement benefits expense deferral mechanism

Total non-current regulatory liabilities $ 3,894 $ 3,796

Total regulatory liabilities $ 3,950 $ 3,900

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

2 These regulatory assets have arisen from an alternative revenue program and are not associated with incurred costs or capital investments.

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

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

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

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

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

Regulatory Assets

2022 PSCR Underrecovery:

As a result of rising fuel prices during 2022, Consumers’ power supply costs for 2022 were significantly higher than those projected in its 2022 PSCR plan.

At the end of 2022, Consumers had recorded $ 401 million of under-recovered power supply costs.

In February 2023, the MPSC authorized Consumers to recover the 2022 underrecovery amount over three years, providing immediate relief to electric customers.

Energy Waste Reduction Plan Incentive:

1 unchanged sentence

Consumers accounts for this program as an alternative-revenue program that meets the criteria for recognizing revenue related to the incentive as soon as energy savings exceed the annual targets established by the MPSC.

In October 2022, the MPSC approved a settlement agreement authorizing Consumers to collect $ 46 million during 2023 as an incentive for exceeding its statutory savings targets in 2021.

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

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

1 unchanged sentence

Consumers recognized incentive revenue under this program of $ 58 million in 2023.

Retention Incentive Program:

To ensure necessary staffing at the D.E.

Karn and J.H.

Campbell coal-fueled generating units through their retirement, Consumers established retention incentive programs.

The MPSC has approved deferred accounting treatment for the retention and severance costs incurred under these programs and has allowed for recovery over three years.

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

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

In 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.

Under Michigan law, electric utilities have been permitted to use highly rated, low-cost securitization bonds to finance the recovery of qualified costs.

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

In June 2022, the MPSC approved Consumers’ Clean Energy Plan, under which Consumers plans to retire the J.H.

Campbell coal-fueled generating units in 2025.

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.

Upon the units’ retirement, Consumers will receive regulatory asset treatment to recover their remaining book value, as well as a 9.0 ‑percent return on equity, through 2040, the units’ original retirement date.

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

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

Securitized Costs:

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

generating units that Consumers retired in 2016, and the D.E.

Karn coal-fueled electric generating units that Consumers retired in June 2023.

Consumers has removed from plant, property, and equipment and recorded as a regulatory asset the book value of these units.

Consumers is amortizing the regulatory asset over the life of the related securitization bonds, which it issued through subsidiaries in 2014 and 2023.

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

Postretirement Benefits:

6 unchanged sentences

The recovery period approximates the useful life of the assets to be removed.

Securitized Costs:

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

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

Consumers is amortizing the regulatory asset over the life of the related securitization bonds, which it issued through a subsidiary in 2014.

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

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

The MPSC allows Consumers to recover from its natural gas customers over a ten ‑ year period the costs incurred to remediate the MGP sites.

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

Unamortized Loss on Reacquired Debt:

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

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.

Decommissioning Costs:

In Consumers’ electric depreciation and general rate cases, the MPSC has authorized Consumers to remove from depreciation rates the costs of decommissioning the D.E.

Karn coal-fueled electric generating units, and instead defer those costs as a regulatory asset to be recovered through 2031.

Additionally, ash disposal costs related to Consumers’ retired coal-fueled generating units may be deferred as a regulatory asset and collected over a ten-year period.

In its 2022 order approving Consumers’ Clean Energy Plan, the MPSC authorized similar treatment for the decommissioning and ash disposal costs associated with the J.H.

Campbell coal-fueled generating units that will be retired in 2025.

Postretirement Benefits Expense Deferral Mechanism:

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

Energy Waste Reduction Plan:

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.

Ludington Overhaul Contract Dispute:

The MPSC has authorized Consumers to defer as a regulatory asset costs associated with repairing or replacing defective work performed by TAES during a major overhaul and upgrade of Ludington.

Consumers will defer such costs while litigation with TAES and Toshiba moves forward;

such costs will be offset by potential future litigation proceeds received from

TAES or Toshiba.

Consumers will have the opportunity to seek appropriate recovery and ratemaking treatment for amounts recorded as a regulatory asset following resolution of the litigation.

For additional details on the contract dispute, see Note 3, Contingencies and Commitments—Consumers Electric Utility Contingencies.

Regulatory Liabilities

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 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 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.

During 2023, the MPSC approved Consumers’ requests that the refund take the form of contributions to programs that assist vulnerable electric and gas customers and incremental vegetation management.

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

6 unchanged sentences

The regulatory liability recorded for the grant will be amortized over the life of Lake Winds ® Energy Park.

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

Renewable Energy Plan:

2 unchanged sentences

Incremental costs represent costs incurred in excess of amounts recovered through the PSCR process.

Consumers Electric and Gas Utility

Meter Investigation:

In July 2023, the MPSC issued an order initiating an investigation into Consumers’ handling of malfunctioning meters and meters requiring transition from 3G to 4G technology, estimated billing, and new service installations.

The order directed Consumers to provide information on such meters and their replacement, meter-reading performance, communications with customers and the MPSC regarding these issues, and other information;

Consumers provided this information in August 2023.

As directed in the order, the MPSC Staff analyzed this information and made recommendations, including continued monitoring of Consumers’ performance in these areas and penalties for failure to comply with MPSC service rules.

In October 2023, the MPSC issued a show-cause order directing Consumers to provide further information on consecutive estimated billings, the provision of actual meter readings, and new service installation issues.

Consumers cannot predict the outcome of this matter, but it could be subject to regulatory penalties that are not expected to have a material effect on Consumers’ results of operations and Consumers could be subject to increased regulatory scrutiny.

Consumers Electric Utility

2022 Electric Rate Case:

In 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

2022 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.

In December 2022, Consumers filed an application with the MPSC seeking an annual rate increase of $ 212 million, based on a 10.25 ‑percent authorized return on equity for the projected 12 ‑ month period ending September 30, 2024.

In August 2023, the MPSC approved a settlement agreement authorizing an annual rate increase of $ 95 million, based on a 9.9 ‑percent authorized return on equity, effective October 1, 2023.

The MPSC also authorized the use of a cost deferral mechanism that will allow Consumers to defer for future recovery or refund pension and OPEB expense above or below the amounts used to set existing rates.

Power Supply Cost Recovery and Gas Cost Recovery

2 unchanged sentences

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;

Underrecoveries represent power supply and purchased natural gas costs that will be recovered from customers;

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

5 unchanged sentences

PSCR overrecoveries $ 10 $ —

GCR overrecoveries 44 —

Accrued rate refunds $ 54 $ —

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 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.

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

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

In November 2023, Consumers revised its reconciliation, requesting authorization to reflect in its 2023 PSCR reconciliation the underrecovery of $ 401 million.

Consumers submitted its 2023 PSCR plan to the MPSC in September 2022 and self-implemented a 2023 PSCR charge in accordance with that plan in January 2023.

As a result of significantly higher-than-projected power costs during 2022, Consumers subsequently filed a motion for a temporary order in its 2023 PSCR plan, requesting that the MPSC approve only a third of the 2022 underrecovery amount for recovery in 2023, with the remaining amount to be recovered equally during 2024 and 2025.

The MPSC approved Consumers’ motion in February 2023, providing immediate relief to electric customers.

The MPSC approved Consumers’ 2023 PSCR plan in August 2023.

GCR Plans and Reconciliations:

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

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

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

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

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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.

At December 31, 2023, CMS Energy had a recorded liability of $ 45 million for its remaining obligations for environmental remediation.

CMS Energy calculated this liability based on discounted projected costs, using a discount rate of 4.34 percent and an inflation rate of one percent on annual operating and maintenance costs.

CMS Energy calculated this liability based on discounted projected costs, using a discount rate of 4.34 percent and an inflation rate of one percent on annual operating and

maintenance costs.

The undiscounted amount of the remaining obligation is $ 57 million.

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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.

At December 31, 2023, Consumers had a recorded liability of $ 2 million, the minimum amount in the range of its estimated probable NREPA liability, as no amount in the range was considered a better estimate than any other amount.

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

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Consumers periodically reviews these cost estimates.

A change in the underlying assumptions, such as an increase in the number of sites, different remediation techniques, the nature and extent of contamination, and legal and regulatory requirements, could affect its estimates of NREPA and CERCLA liability.

Ludington PCB:

In 1998, during routine maintenance activities, Consumers identified PCB as a component in certain paint, grout, and sealant materials at Ludington.

Consumers removed part of the PCB material and replaced it with non‑PCB material.

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

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.

A change in the underlying assumptions, such as an increase in the number of sites, different remediation techniques, the

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

Ludington Overhaul Contract Dispute:

Consumers and DTE Electric, co-owners of Ludington, are parties to a 2010 engineering, procurement, and construction agreement with TAES, under which TAES contracted to perform a major overhaul and upgrade of Ludington.

The overhauled Ludington units are operational, but TAES’ work has been defective and non ‑ conforming.

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

Consumers and DTE Electric have taken extensive efforts to resolve these issues with TAES, including a formal demand to TAES’ parent, Toshiba, under a parent guaranty it provided.

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

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

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

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

In June 2022, TAES and Toshiba 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.

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

As a co-owner of Ludington, Consumers would be liable for 51 percent of any such damages, if liability and damages were proven.

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

The parties are engaged in ongoing litigation, including discovery, pursuant to a court-ordered schedule.

Consumers believes the counterclaims filed by TAES and Toshiba are without merit, but cannot predict the financial impact or outcome of this matter.

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

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.

Toshiba has announced that, through a common stock purchase, TBJH became the majority shareholder and new parent company of Toshiba.

TBJH is a subsidiary of a Japanese private equity firm.

Consumers and DTE Electric continue to monitor this development, but do not believe that this affects their rights under the parent guaranty provided by Toshiba.

In May 2023, the MPSC approved Consumers’ and DTE Electric’s jointly-filed request for authority to defer as a regulatory asset the costs associated with repairing or replacing the defective work performed by TAES while the litigation with TAES and Toshiba moves forward;

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

Consumers and DTE Electric will have the opportunity to seek appropriate recovery and ratemaking treatment for amounts recorded as a regulatory asset following resolution of the litigation, but cannot predict the financial impact or outcome of such proceedings.

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.

In May 2022, Consumers filed a complaint against Wolverine Power in the Ottawa County Circuit Court and requested a ruling that Consumers has sole authority to decide to retire the J.H.

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

In July 2022, Wolverine Power 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 July 2022, Wolverine Power filed an answer, affirmative defenses, and a counterclaim seeking approximately $ 37 million in damages allegedly caused by Consumers’ decision to retire the unit before the end of its useful life.

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

Campbell 3 coal-fueled generating unit, provided that Consumers continues to operate and make necessary improvements to the unit while the litigation concerning Wolverine Power 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.

In May 2023, the circuit court judge issued an order granting Consumers’ Motion for Clarification confirming that Consumers may continue to operate and invest in J.H.

Campbell 3 consistent with the May 2025 retirement date.

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

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

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At December 31, 2023, Consumers had a recorded liability of $ 62 million for its remaining obligations for these sites.

This amount represents the present value of long-term projected costs, using a discount rate of 2.57 percent and an inflation rate of 2.5 percent.

The undiscounted amount of the remaining obligation is $ 67 million.

Consumers expects to pay the following amounts for remediation and other response activity costs in each of the next five years:

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At December 31, 2023, Consumers had a recorded liability of less than $ 1 million, the minimum amount in the range of its estimated probable liability, as no amount in the range was considered a better estimate than any other amount.

Ray Compressor Station:

On January 30, 2019, Consumers experienced a fire at the Ray Compressor Station, which resulted in the Ray Storage Field being off‑line or operating at significantly reduced capacity, which negatively affected Consumers’ natural gas supply and delivery capacity.

This incident, which occurred during the extreme polar vortex weather condition, required Consumers to request voluntary reductions in customer load, to implement contingency gas supply purchases, and to implement a curtailment of natural gas deliveries for industrial and large commercial customers pursuant to Consumers’ MPSC curtailment tariff.

The curtailment and request for voluntary reductions of customer loads were canceled as of midnight, February 1, 2019.

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

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

The compressor station is presently operating at full capacity.

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

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, 2023:

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2011 indefinite $ 30 $ —

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

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

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

These 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.

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

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

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

For further details on NorthStar Clean Energy’s ownership interest in NWO Holdco 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 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 .

For further details on NorthStar Clean Energy’s ownership interest in NWO Holdco, Aviator Wind, and Newport Solar Holdings, see Note 18, Variable Interest Entities.

The maximum obligation amount is mostly related to an Equatorial Guinea tax claim.

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

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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.

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

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

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

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Purchase Obligations:

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

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

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

Related-party PPAs are between Consumers and certain affiliates of NorthStar Clean Energy.

Related-party PPAs are between Consumers and certain affiliates of NorthStar Clean

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

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Capacity and energy charges under these PPAs were $ 498 million in 2023, $ 510 million in 2022, and $ 338 million in 2021.

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

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

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

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$ 1,975 $ 1,975

Convertible senior notes 3.375 2028 800 —

Junior subordinated notes 1

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Total CMS Energy, parent only $ 4,785 $ 3,985

CMS Energy subsidiaries

Consumers 10,863 $ 10,277

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Term loan facility variable 2023 — 100

Term loan facility variable 4

Total principal amount outstanding $ 15,648 $ 14,362

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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 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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3.500 2051 575 575

2.650 2052 300 300

4.200 2052 450 450

3.860 2052 50 50

4.280 2057 185 185

2.500 2060 525 525

4.350 2064 250 250

Interest Rate

(%) Maturity 2023 2022

$ 10,397 $ 8,997

Tax-exempt revenue bonds 0.875 2

2014 Securitization bonds 3.421 4

2023 Securitization bonds 5.342 6

Term loan facility variable 2024 — 1,000

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Current amounts ( 725 ) ( 991 )

Long-term debt – related parties 7 principal amount outstanding

2050-2060 ( 431 ) —

Unamortized discounts ( 28 ) ( 27 )

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Total long-term debt $ 10,037 $ 9,192

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.

1 The variable-rate bonds bear interest quarterly at a rate of three-month SOFR minus 0.038 percent, subject to a zero-percent floor.

At December 31, 2023, the interest rates were 5.346 percent for bonds due September 2069, 5.329 percent for bonds due May 2070, and 5.368 percent for bonds due October 2070.

The interest rate for all variable-rate bonds at December 31, 2022 was zero percent.

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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.

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

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

CMS Energy’s Purchase of Consumers’ First Mortgage Bonds:

Presented in the following table is Consumers’ long-term debt—related parties at December 31, 2023:

(In Millions)

Interest Rate (%)

First mortgage bonds due 2060 $ 163 2.500

First mortgage bonds due 2052 106 2.650

First mortgage bonds due 2050 23 3.750

First mortgage bonds due 2050 52 3.100

First mortgage bonds due 2051 27 3.500

First mortgage bonds due 2048 60 4.050

Total principal amount outstanding $ 431

Unamortized discounts ( 3 )

Unamortized issuance costs ( 4 )

Total long-term debt — related parties $ 424

During 2023, CMS Energy purchased these Consumers’ first mortgage bonds for $ 293 million.

On a consolidated basis, CMS Energy’s repurchase of Consumers’ first mortgage bonds was accounted for as a debt extinguishment and resulted in a pre-tax gain of $ 131 million.

Interest expense related to the repurchased bonds was $ 5 million for the year ended December 31, 2023.

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

(In Millions) Interest Rate (%) Issuance Date Maturity Date

CMS Energy, parent only

Convertible senior notes $ 800 3.375 May 2023 May 2028

Total CMS Energy, parent only $ 800

NorthStar Clean Energy, including subsidiaries

Term loan facility 1

$ 100 variable December 2022 September 2023

$ 85 variable February 2023 November 2023

Total NorthStar Clean Energy, including subsidiaries $ 85

Term loan facility 2

$ 1,000 variable July 2022 January 2024

First mortgage bonds 350 3.600 % August 2022 August 2032

First mortgage bonds 450 4.200 % August 2022 September 2052

First mortgage bonds $ 425 4.650 January 2023 March 2028

First mortgage bonds 700 4.625 February 2023 May 2033

First mortgage bonds 115 5.240 May 2023 May 2026

First mortgage bonds 50 5.070 May 2023 May 2029

First mortgage bonds 95 5.170 May 2023 May 2032

First mortgage bonds 140 5.380 May 2023 May 2037

First mortgage bonds 500 4.900 August 2023 February 2029

2023 Securitization bonds 2

250 5.550 December 2023 March 2028

2023 Securitization bonds 2

396 5.210 December 2023 September 2031

Total Consumers $ 2,671

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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.

Under this credit agreement, a subsidiary of NorthStar Clean Energy borrowed $ 85 million in 2023.

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

In January 2024, Consumers issued $ 600 million of first mortgage bonds that mature in May 2029 and bear interest at a rate of 4.600 percent.

The proceeds of the bonds will be used for general corporate purposes.

Issuance of Convertible Senior Notes:

In May 2023, CMS Energy issued an aggregate principal amount of $ 800 million convertible senior notes that bear an interest rate of 3.375 percent and mature in May 2028 unless redeemed, repurchased, or converted earlier.

Unamortized debt costs associated with this issuance were $ 12 million at December 31, 2023.

The convertible senior notes rank equal in right of payment to any of CMS Energy’s unsecured indebtedness that is not subordinated.

There are no sinking fund requirements for the notes.

Holders of the convertible senior notes may convert their notes at their option in accordance with the conditions outlined in the related indenture.

CMS Energy will settle conversions of the notes by paying cash up to the aggregate principal amount of the notes to be converted and paying or delivering, as the case may be, cash, shares of CMS Energy common stock, or a combination of cash and shares of CMS Energy common stock, at its election, in respect of the remainder, if any, of its conversion obligation in excess of the aggregate principal amount of the notes being converted.

The conversion rate will be subject to adjustment for anti-dilutive events and fundamental change and redemption provisions

as described in the related indenture.

At December 31, 2023, the conversion price for the notes was $ 73.97 per share of common stock.

CMS Energy may redeem for cash all or any portion of the notes, at its option, on or after May 6, 2026 if the last reported sale price of its common stock has been at least 130 percent of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period.

Holders of the convertible senior notes may require CMS Energy to repurchase for cash all or any portion of their notes if a fundamental change, as outlined in the related indenture, occurs.

In both cases, CMS Energy will redeem or repurchase the notes at a price equal to 100 percent of the principal amount of the notes to be redeemed or repurchased, plus accrued and unpaid interest.

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

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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.

Term loan facility $ 185 variable November 2023 November 2023

Total NorthStar Clean Energy, including subsidiaries $ 185

Term loan facility $ 1,000 variable February 2023 January 2024

First mortgage bonds 300 0.350 June 2023 June 2023

First mortgage bonds 325 3.375 August 2023 August 2023

Total Consumers $ 1,625

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

Regulatory Authorization for Financings:

Consumers is required to maintain FERC authorization for financings.

Its current authorization ends on March 31, 2025.

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

First Mortgage Bonds:

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Restrictive issuance provisions in the First Mortgage Bond Indenture include achieving a two ‑ times interest coverage ratio and having sufficient unfunded net property additions.

Regulatory Authorization for Financings:

Consumers is required to maintain FERC authorization for financings.

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

Securitization Bonds:

Certain regulatory assets held by Consumers’ subsidiary, Consumers 2014 Securitization Funding, collateralize Consumers’ securitization bonds.

The bondholders have no recourse to Consumers’ assets except for those held by the subsidiary that issued the bonds.

Certain regulatory assets held by Consumers’ subsidiaries, Consumers 2014 Securitization Funding and Consumers 2023 Securitization Funding, collateralize Consumers’ securitization bonds.

Consumers 2014 Securitization Funding and Consumers 2023 Securitization Funding are distinct subsidiaries.

The bondholders of each entity have no recourse to the other’s assets or the assets of Consumers.

Consumers collects securitization surcharges to cover the principal and interest on the bonds as well as certain other qualified costs.

The surcharges collected are remitted to a trustee and are not available to creditors of Consumers or creditors of Consumers’ affiliates other than the subsidiary that issued the bonds.

The surcharges collected by Consumers on behalf of each entity are remitted to that subsidiary’s account and are not available to creditors of Consumers or creditors of Consumers’ affiliates other than the subsidiary that issued the bonds.

Debt Maturities:

5 unchanged sentences

725 116 237 263 843

NorthStar Clean Energy, including subsidiaries 100 — — — —

Total CMS Energy 1

1 unchanged sentence

Long-term debt $ 725 $ 116 $ 237 $ 263 $ 843

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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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.

At December 31, 2023, there were $ 93 million of commercial paper notes outstanding under this program with a weighted-average annual interest rate of 5.609 percent, recorded as current notes payable on the consolidated balance sheets of CMS Energy and Consumers.

In December 2023, Consumers renewed a short-term credit agreement with CMS Energy, permitting Consumers to borrow up to $ 500 million at an interest rate of the prior month’s average one-month Term SOFR minus 0.100 percent.

At December 31, 2023, there were no outstanding borrowings under the agreement.

Consumers’ Supplier Financing Program:

Under a supplier financing program, Consumers agrees to pay a bank, acting as its payment agent, the stated amount of confirmed invoices from participating suppliers on the original maturity dates of the invoices.

The supplier invoices that have been confirmed as valid under the program require payment in full within 60 days of the invoice date.

Consumers does not provide collateral or a guarantee to the bank in support of its payment obligations under the agreement, nor does it pay a fee for the service.

Consumers or the bank may terminate the supplier financing program agreement upon 30 days prior written notice to the other party.

There were no trade payables outstanding under the program in accounts payable on CMS Energy’s and Consumers’ consolidated balance sheets at December 31, 2023, and less than $ 1 million at December 31, 2022.

Dividend Restrictions:

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Issuance of Common Stock:

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:

In 2023, CMS Energy entered into an equity offering program under which it may sell shares of its common stock having an aggregate sales price of up to $ 1 billion in privately negotiated transactions, in “at the market” offerings, or through forward sales transactions.

There have been no sales of securities under this program.

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

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

Forward Price Per Share

Contract Date Maturity Date Number of Shares Initial December 31, 2023

August 3, 2022 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.

August 3, 2022 December 31, 2024 328,207 $ 67.59 $ 68.37

August 24, 2022 December 31, 2024 1,677,938 69.46 70.91

August 29, 2022 December 31, 2024 1,783,388 68.18 69.54

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

cash or shares.

CMS Energy may settle the contracts at any time through their maturity dates, and presently intends to physically settle the contracts by delivering shares of its common stock.

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If CMS Energy had elected to net share settle or net cash settle the contracts as of December 31, 2023, CMS Energy would not have been required to deliver shares or pay cash.

In January 2024, CMS Energy settled the remaining forward sale contracts issued under its previous equity offering program by issuing shares at a weighted average price of $ 70.31 p er share, resulting in net proceeds o f $ 266 million.

Preferred Stock:

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December 31 2023 2022 2023 2022

Cash equivalents $ 18 $ — $ — $ —

Restricted cash equivalents 21 18 21 17

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Nonqualified deferred compensation plan liabilities $ 30 $ 24 $ 22 $ 18

Derivative instruments — 7 — —

Total liabilities $ 30 $ 24 $ 22 $ 18

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

Restricted Cash Equivalents:

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

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

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

Cash Equivalents:

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

Nonqualified Deferred Compensation Plan Assets and Liabilities:

The nonqualified deferred compensation plan assets consist of mutual funds, which are valued using the daily quoted net asset values.

The nonqualified deferred compensation plan assets consist of mutual funds, which are bought and sold only at the discretion of plan participants.The assets are valued using the daily quoted net asset values.

CMS Energy and Consumers value their nonqualified deferred compensation plan liabilities based on the fair values of the plan assets, as they reflect the amount owed to the plan participants in accordance with their investment elections.

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CMS Energy and Consumers value their derivative instruments using either a market approach that incorporates information from market transactions, or an income approach that discounts future expected cash flows to a present value amount.

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

The derivatives classified as Level 2 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.

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

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

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

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

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

Level 1 Level 2 Level 3 Gains (Losses)

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

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

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

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

Financial Instruments

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10,762 9,757 — 7,741 2,016 10,183 8,728 — 6,172 2,556

Long-term debt – related party 424 303 — 303 — — — — — —

Long-term payables 5 5 — — 5 — — — — —

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

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

3 Includes current portion of long-term payables of $ 2 million at December 31, 2022 and $ 23 million at December 31, 2021.

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

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

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

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

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

The demand note bears interest at an annual rate of 4.10 percent and has a maturity date of 2028.

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Distribution 15 – 75

11,339 10,590

Assets under finance leases 2

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3 Consumers’ plant additions were $ 3.1 billion for the year ended December 31, 2023 and $ 2.3 billion for the year ended December 31, 2022.

Consumers’ plant retirements, which include the impact of 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’ plant retirements, which include the impact of transfers to held for sale, were $ 856 million for the year ended December 31, 2023 and $ 290 million for the year ended December 31, 2022.

Consumers plans to retire the J.H.

Campbell 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.

Campbell coal-fueled generating units in 2025.

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

For additional details, see Note 2, Regulatory Matters.

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Base natural gas is not subject to depreciation.

Asset Acquisition:

In May 2023, Consumers purchased the Covert Generating Station, a natural gas-fueled generating facility with 1,200 MW of nameplate capacity in Van Buren County, Michigan for $ 810 million.

In August 2023, Consumers paid an additional $ 2 million as a result of a post-closing adjustment required under the purchase agreement.

Consumers accounted for the purchase as an asset acquisition, allocating the purchase price to the assets acquired and liabilities assumed based on their relative fair value.

The original cost of the plant was $ 665 million and the seller had recognized $ 225 million of accumulated depreciation.

Upon acquisition, Consumers recorded the net book value of $ 440 million and a plant acquisition adjustment of $ 370 million, resulting in an increase to plant, property, and equipment of $ 810 million.

The remainder of the purchase price was allocated among various working capital accounts.

Intangible Assets:

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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.

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Non-utility plant assets 6 6

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

gas segments.

Consumers performs depreciation studies periodically to determine appropriate group lives.

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Utility plant in service $ 1,752 $ 619 $ 443

Accumulated depreciation ( 816 ) ( 210 ) ( 93 )

Construction work in progress 10 21 21

Accumulated provision for depreciation ( 812 ) ( 227 ) ( 97 )

Plant under construction 1 5 11

Net investment $ 941 $ 397 $ 357

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

Consumers plans to retire the J.H.

Campbell coal-fueled generating units and, in 2022, removed an amount representing the projected remaining book value of the electric generating units upon their retirement from total plant, property, and equipment and recorded it as a regulatory asset on its consolidated balance sheets.

For additional details, see Note 2, Regulatory Matters.

Consumers is engaged in ongoing litigation with Wolverine Power related to Consumers’ authority to decide to retire the J.H.

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

For additional details on this dispute, see Note 3, Contingencies and Commitments—J.H.

Campbell 3 Plant Retirement Contract Dispute.

Consumers and DTE Electric are engaged in ongoing litigation with TAES and Toshiba related to the 2010 engineering, procurement, and construction agreement with TAES, under which TAES contracted to perform a major overhaul and upgrade of Ludington.

For additional details on this dispute, see Note 3, Contingencies and Commitments—Ludington Overhaul Contract Dispute.

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

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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 less than $ 1 million for each of the next five years and $ 8 million for the years thereafter.

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

The lease receivable was $ 6 million as of December 31, 2023, which does not include unearned income of $ 5 million.

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

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

ARO Liability 12/31/2022

Company and ARO Description ARO Liability 12/31/2022 Incurred Settled Accretion Cash Flow Revisions ARO Liability 12/31/2023

CMS Energy, including Consumers

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Total Consumers $ 722 $ 4 $ ( 28 ) $ 32 $ 9 $ 739

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

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

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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.

Retirement Benefits

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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 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 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 .

CMS Energy and Consumers provide an employer contribution to the DCCP 401(k) plan for employees hired on or after July 1, 2003.

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

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

CMS Energy’s and Consumers’ DC SERP expense was $ 1 million for the years ended December 31, 2023 and 2022, and $ 2 million for the year ended December 31, 2021.

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

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The total 401(k) plan cost for Consumers was $ 40 million for the year ended December 31, 2023, $ 43 million for the year ended December 31, 2022, and $ 31 million for the year ended December 31, 2021.

Participants in the OPEB Plan include all regular full-time employees covered by the employee health care plan on the day before retirement from either CMS Energy or Consumers at age 55 or older with at least ten full years of applicable continuous service.

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

Retiree health care costs were based on the assumption that costs would increase 6.50 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.

Retiree health care costs were based on the assumption that costs would increase 8.00 percent in 2024 and 6.50 percent in 2023 for those under 65 and would increase 8.50 percent in 2024 and 6.75 percent in 2023 for those over 65.

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

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DB Pension Plan A 3.60 3.60 3.60

DB SERP 5.50 5.50 5.50

Weighted average for net periodic benefit cost 1

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DB SERP 5.50 5.50 5.50

1 The mortality assumption for benefit obligations was based on the Pri-2012 Mortality Table, 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.

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

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

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

This analysis incorporated the projected benefit payments specific to CMS Energy’s and Consumers’ DB Pension Plans and OPEB Plan and the yields on high-quality corporate bonds rated Aa or better.

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

4 CMS Energy and Consumers have elected to use a full-yield-curve approach in the estimation of service cost and interest cost;

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5 CMS Energy and Consumers determined the long-term rate of return using historical market returns, the present and expected future economic environment, the capital market principles of risk and return, and the expert opinions of individuals and firms with financial market knowledge.

CMS Energy and Consumers

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

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.

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Net periodic cost (credit) $ ( 52 ) $ ( 27 ) $ 19 $ ( 76 ) $ ( 120 ) $ ( 113 )

Net periodic cost (credit)

Net periodic credit

Service cost $ 28 $ 39 $ 51 $ 11 $ 17 $ 17

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Settlement loss 11 9 6 — — —

Net periodic cost (credit) $ ( 26 ) $ 19 $ 39 $ ( 113 ) $ ( 105 ) $ ( 86 )

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

In Consumers’ 2022 electric and gas rate cases, the MPSC approved a mechanism allowing Consumers to defer the future recovery or refund of pension and OPEB expenses above or below the amounts used to set existing rates, respectively, beginning in January 2023 for the electric utility and October 2023 for the gas utility.

At December 31, 2023, CMS Energy, including Consumers, had deferred $ 11 million of pension credits and $ 23 million of OPEB costs under this mechanism.

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

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

December 31, 2023, 2022, and 2021.

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

For the OPEB Plan, the estimated amortization period was nine years for the years ended December 31, 2023, 2022, and 2021.

Prior service cost (credit) amortization is established in the year in which the prior service cost (credit) first occurred, and is based on the same amortization period for all future years until the prior service cost (credit) is fully amortized.

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

CMS Energy and Consumers had new prior service costs for OPEB in 2020.

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

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Plan amendments — — — — — —

Actuarial gain ( 811 ) 1

( 25 ) ( 4 ) ( 274 ) 1

Actuarial loss (gain) 52 1

Benefits paid ( 161 ) ( 212 ) ( 10 ) ( 10 ) ( 54 ) ( 48 )

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Plan amendments — — — —

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

Actuarial loss (gain) 1 ( 19 ) 10 1

Benefits paid ( 7 ) ( 7 ) ( 52 ) ( 45 )

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Funded status $ ( 83 ) $ ( 85 ) $ 586 $ 494

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

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

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

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

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DB SERP 76 78

The ABO for the DB Pension Plans was $ 2.0 billion at December 31, 2022 and $ 2.7 billion at December 31, 2021.

The ABO for the DB Pension Plans was $ 2.0 billion at December 31, 2023 and 2022.

At December 31, 2023 and 2022, the PBO and ABO did not exceed plan assets for any of the defined benefit pension plans.

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

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

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

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

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

DB Pension Plans and DB SERP OPEB Plan

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CMS Energy, including Consumers

Regulatory assets (liabilities)

Regulatory assets

Net loss $ 634 $ 724 $ 191 $ 251

Prior service cost (credit) 16 21 ( 100 ) ( 140 )

Regulatory assets (liabilities) $ 745 $ 837 $ 111 $ ( 54 )

Regulatory assets $ 650 $ 745 $ 91 $ 111

Net loss (gain) 65 69 ( 3 ) 2

Prior service cost (credit) 1 1 ( 2 ) ( 3 )

Total amounts recognized in regulatory assets (liabilities) and AOCI $ 815 $ 931 $ 110 $ ( 76 )

Regulatory assets (liabilities)

Total amounts recognized in regulatory assets and AOCI $ 716 $ 815 $ 86 $ 110

Regulatory assets

Net loss $ 634 $ 724 $ 191 $ 251

Prior service cost (credit) 16 21 ( 100 ) ( 140 )

Regulatory assets (liabilities) $ 745 $ 837 $ 111 $ ( 54 )

Regulatory assets $ 650 $ 745 $ 91 $ 111

Net loss 20 20 — —

Total amounts recognized in regulatory assets (liabilities) and AOCI $ 765 $ 878 $ 111 $ ( 54 )

Total amounts recognized in regulatory assets and AOCI $ 670 $ 765 $ 91 $ 111

Presented in the following tables are the fair values of the assets of CMS Energy’s DB Pension Plans and OPEB Plan, by asset category and by level within the fair value hierarchy.

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December 31, 2023 December 31, 2022

Total Level 1 Total Level 1 Level 2

Total Level 1 Level 2 Total Level 1

CMS Energy, including Consumers

Cash and short-term investments $ 178 $ 178 $ — $ 122 $ 122

government and agencies securities — — 209 — 209

Corporate debt — — 595 — 595

State and municipal bonds — — 13 — 13

Foreign corporate bonds — — 66 — 66

Mutual funds 47 47 — 263 263

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December 31, 2023 December 31, 2022

Total Level 1 Total Level 1 Level 2

Total Level 1 Level 2 Total Level 1

CMS Energy, including Consumers

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Common Stocks:

Common stocks in the OPEB Plan consist of equity securities that are actively managed and tracked to the S&P 500 Index.

Common stocks in the OPEB Plan consist of equity securities that are actively managed and tracked to the S&P 500 Index and MSCI All Country World ex-US.

These securities are valued at their quoted closing prices.

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DB Pension Plans OPEB Plan

Equity securities 38.0 % 55.0 %

Fixed-income securities 42.0 % 40.0 %

Equity securities 38.0 42.0

Real asset investments 9.0 8.0

Return-seeking fixed income 6.0 5.0

Liquid alternative investments 4.0 4.0

Cash and cash equivalents 1.0 1.0

100.0 % 100.0 %

CMS Energy’s target 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.

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

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

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

CMS Energy’s target 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.

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

The goal of these target allocations was to maximize the long-term return on plan assets, while maintaining a prudent level of risk.

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

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

Multi-asset investments are global tactical asset allocations.

Return-seeking fixed-income investments are diversified exposure to high-yield bonds, emerging market debt, and bank loans.

Real asset investments are diversified across core real estate and real estate investment trusts.

Liquid alternatives are investments in private funds comprised of different and independent hedge funds with various investment strategies.

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

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

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

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

distribution conditions as the underlying restricted stock units.

No restricted stock units were forfeited during 2023.

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Dividends on restricted stock units 3,537 3,390

Additional market-based shares based on achievement of condition 52,627 50,428

Additional performance-based shares based on achievement of condition 55,179 53,613

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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.

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

Treasury yield at the award grant date.

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State and local income taxes, net of federal effect 1

Renewable energy tax credits ( 58 ) ( 51 ) ( 44 )

TCJA excess deferred taxes 2

( 40 ) ( 65 ) ( 50 )

Production tax credits ( 45 ) ( 40 ) ( 28 )

Taxes attributable to noncontrolling interests 17 5 5

Accelerated flow-through of regulatory tax benefits 3

— ( 39 ) ( 28 )

Research and development tax credits, net 3

( 2 ) ( 3 ) ( 11 )

Refund of alternative minimum tax sequestration 4

Other, net ( 3 ) 3 —

5 unchanged sentences

State and local income taxes, net of federal effect 1

Renewable energy tax credits ( 46 ) ( 46 ) ( 37 )

TCJA excess deferred taxes 2

2 unchanged sentences

— ( 39 ) ( 28 )

Production tax credits ( 40 ) ( 33 ) ( 19 )

Research and development tax credits, net 3

( 1 ) ( 3 ) ( 11 )

Other, net ( 5 ) 3 2

1 unchanged sentence

Effective tax rate 15.7 % 12.9 % 15.2 %

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.

1 CMS Energy initiated a plan to divest immaterial business activities in a non ‑ Michigan jurisdiction and will no longer have a taxable presence within that jurisdiction after 2023.

As a result of these actions, CMS Energy reversed a $ 13 million non ‑ Michigan reserve, all of which was recognized at Consumers.

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

This portion of the regulatory liability was fully amortized in 2022.

3 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 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.

CMS Energy received the refund in April 2020.

These tax benefits were fully amortized in 2022.

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

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State and local 1 — 1

$ 6 $ — $ ( 37 )

Deferred income taxes

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State and local 2 8 15

$ 6 $ 2 $ ( 4 )

Deferred income taxes

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General business credits 356 2035 – 2043

Federal charitable contribution carryforwards 2 2025

Total tax attributes $ 428

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The amount of income taxes paid is subject to ongoing audits by federal, state, local, and foreign tax authorities, which can result in proposed assessments.

CMS Energy’s federal income tax returns for 2019 and subsequent years remain subject to examination by the IRS.

CMS Energy’s Michigan Corporate Income Tax returns for 2013 and subsequent years remain subject to examination by the State of Michigan.

CMS Energy’s federal income tax returns for 2020

and subsequent years remain subject to examination by the IRS.

CMS Energy’s Michigan Corporate Income Tax returns for 2013-2016 and 2019 and subsequent years remain subject to examination by the State of Michigan.

CMS Energy’s and Consumers’ estimate of the potential outcome for any uncertain tax issue is highly judgmental.

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These forward equity sale contracts are non‑participating securities.

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

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

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

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

Accordingly, the forward equity sale contracts were

included in the computation of diluted EPS, but not in the computation of basic EPS.

For further details on the forward equity sale contracts, see Note 4, Financings and Capitalization.

Convertible Securities

In May 2023, CMS Energy issued an aggregate principal amount of $ 800 million convertible senior notes.

Potentially dilutive common shares issuable upon conversion of the convertible senior notes are determined using the if-converted method for calculating diluted EPS.

Upon conversion, the convertible senior notes are required to be paid in cash with only amounts exceeding the principal permitted to be settled in shares.

The convertible senior notes were anti-dilutive for the year ended December 31, 2023.

For further details on CMS Energy’s convertible senior notes, see Note 4, Financings and Capitalization.

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

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Consumers alternative-revenue programs 49 20 — 69

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

Total operating revenue – CMS Energy $ 4,745 $ 2,420 $ 297 $ 7,462

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Alternative-revenue programs 49 20 69

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

Other non-segment revenue — — 1

Total operating revenue – Consumers $ 4,745 $ 2,420 $ 7,166

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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

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Consumers alternative-revenue programs 33 12 — 45

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

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

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Alternative-revenue programs 33 12 45

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

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

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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.

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.

CMS Energy and Consumers recorded uncollectible accounts expense of $ 34 million for the year ended December 31, 2023, $ 50 million for the year ended December 31, 2022, and $ 22 million for the year ended December 31, 2021 .

Uncollectible accounts expense for the year ended December 31, 2022 included a commitment to contribute $ 10 million to directly assist vulnerable customers with utility bills.

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

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

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

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

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

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.

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CMS Energy, including Consumers

Gain on extinguishment of debt 1

$ 131 $ — $ —

Interest income 37 5 3

Interest income - related parties — — 7

Allowance for equity funds used during construction 7 6 8

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Civic and political expenditures ( 5 ) ( 6 ) ( 5 )

Loss on reacquired and extinguished debt — — ( 16 )

All other ( 7 ) ( 12 ) ( 7 )

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Total other expense – Consumers $ ( 12 ) $ ( 25 ) $ ( 18 )

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

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

• 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.

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

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

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Gas utility 2,420 2,732 2,063

Other reconciling items 1 — —

Total operating revenue – Consumers $ 7,166 $ 8,151 $ 7,021

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

• payments of principal and interest when due to CMS Energy related to borrowings under certain credit agreements and CMS Energy’s repurchase of Consumers’ first mortgage bonds

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

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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.

During 2023, CMS Energy repurchased certain of Consumers’ first mortgage bonds.

For more information about these repurchases, see Note 4, Financings and Capitalization—CMS Energy’s Purchase of Consumers’ First Mortgage Bonds.

In November 2023, an unregulated subsidiary of Consumers sold certain non-utility renewable development projects to NorthStar Clean Energy for $ 20 million, the projects’ net book value;

there was no gain or loss recognized on this sale.

In December 2023, Consumers renewed a short-term credit agreement with CMS Energy, permitting Consumers to borrow up to $ 500 million.

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

For additional details about the agreement, see Note 4, Financings and Capitalization—Short-term Borrowings .

Variable Interest Entities

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.

Consolidated VIEs:

During 2023, NorthStar Clean Energy sold a Class A membership interest in Newport Solar Holdings to tax equity investors for $ 86 million.

Newport Solar Holdings wholly owns Newport Solar, a 180 ‑MW solar generation project located in Jackson County, Arkansas;

the project began commercial operation in October 2023.

NorthStar Clean Energy holds a Class B membership interest in NWO Holdco, which wholly owns Northwest Ohio Wind, LLC, a 100 ‑MW wind generation project in Paulding County, Ohio.

The Class A membership interest in NWO Holdco is held by a tax equity investor.

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

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

Earnings, tax attributes, and cash flows generated by 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;

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

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

Since 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.

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

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

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

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).

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

In accordance with the associated limited liability company agreements, the tax equity investors are guaranteed preferred returns from these entities.

However, NorthStar Clean Energy manages and controls the entities’ operating activities.

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

NorthStar Clean Energy consolidates 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.

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

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 $ 43

Restricted cash and cash equivalents — 1

Accounts receivable 3 7

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Plant, property, and equipment, net 1,064 850

Construction work in progress — 156

Other non-current assets 3 —

Total assets 1

$ 1,102 $ 1,063

Current portion of long-term debt $ — $ 100

Accounts payable 12 33

Other current liabilities — 2

Non-current portion of finance leases 23 23

Asset retirement obligations 32 24

Other non-current liabilities — 4

Total liabilities $ 67 $ 180

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

Consumers’ wholly-owned subsidiaries, Consumers 2014 Securitization Funding and Consumers 2023 Securitization Funding, are VIEs designed to collateralize Consumers’ securitization bonds.

These entities are considered VIEs primarily because their equity capitalization is insufficient to support their operations.

Consumers is the primary beneficiary of and consolidates these VIEs, as it has the power to direct the activities that most significantly impact the economic performance of the companies, as well as the obligation to absorb losses or the right to receive benefits from the companies.

The VIEs’ primary assets and liabilities comprise regulatory assets and long-term debt.

For more information on these assets and liabilities, see Note 2, Regulatory Matters— Securitized Costs and Note 4, Financings and Capitalization—Securitization Bonds.

Non-consolidated VIEs:

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

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

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

Exit Activities and Discontinued Operations

Exit Activities:

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

Karn coal-fueled electric generating units in 2023.

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

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

Based on the number of employees that have chosen to participate, the aggregate cost of the program through 2023 is estimated to be $ 35 million.

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

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

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

In accordance with its Clean Energy Plan, Consumers retired the D.E.

Karn coal-fueled electric generating units in June 2023 and plans to retire the J.H.

Campbell coal-fueled generating units in 2025.

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.

In order to ensure necessary staffing at both D.E.

Karn and J.H.

Campbell through retirement, Consumers has implemented retention incentive programs.

The aggregate cost of the D.E.

Karn program, which is now complete, was $ 32 million.

The aggregate cost of the J.H.

Campbell program through 2025 is estimated to be $ 50 million.

The MPSC has approved deferred accounting treatment for these costs;

these expenses are deferred as a regulatory asset.

As of December 31, 2023, the cumulative cost incurred and charged to maintenance and other operating expenses related to the D.E.

Karn retention incentive program was $ 16 million.

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

Additionally, an amount of $ 4 million was capitalized as a cost of plant, property, and equipment and an amount of $ 12 million was deferred as a regulatory asset.

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

Campbell retention incentive program was $ 35 million.

The regulatory assets for both programs will be collected from customers over three years.

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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Costs deferred as a regulatory asset

Costs incurred and capitalized — 1

Costs paid or settled ( 21 ) ( 17 )

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Discontinued Operations:

In October 2021, EnerBank was acquired by Regions Bank.

In 2021, EnerBank was acquired by a non-affiliated company.

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

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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.

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

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Report of Independent Registered Public Accounting Firm

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Basis for Opinions

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

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

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits.

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Under regulatory accounting, the Company records regulatory assets or liabilities for certain transactions that would have been treated as expense or revenue by a non ‑ regulated business.

As of December 31, 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 of December 31, 2023, the Company has recognized a total of $3,886 million of regulatory assets, $3,950 million of regulatory liabilities, and $54 million of accrued rate refunds.

As described by management, there are multiple participants to rate case proceedings who often challenge various aspects of those proceedings, including the prudence of the Company’s policies and practices.

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The recovery of regulatory assets and the settlement of regulatory liabilities are contingent upon the outcomes of rate cases and regulatory proceedings.

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

The principal considerations for our determination that performing procedures relating to accounting for the effects of new regulatory matters is a critical audit matter are (i) the high degree of auditor judgment and subjectivity applied to evaluate management’s assessment of the potential outcomes and related accounting impacts associated with pending rate case proceedings;

(ii) in some cases, the significant audit effort necessary to assess contrary evidence from various parties involved in rate case proceedings;

and (iii) the significant audit effort necessary to evaluate audit evidence related to the recovery of regulatory assets and the settlement of regulatory liabilities.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s assessment of regulatory proceedings, including the probability of recovering incurred costs and the related accounting and disclosure impacts.

These procedures also included, among others, obtaining and evaluating the Company’s correspondence with regulators, evaluating the reasonableness of management’s assessment regarding whether recovery of regulatory assets and settlement of regulatory liabilities is probable and evaluating the sufficiency of the disclosures in the consolidated financial statements.

Procedures were performed to evaluate the regulatory assets and liabilities, including those subject to pending rate cases, based on provisions and formulas outlined in rate orders, other regulatory correspondence, or application of relevant regulatory precedents.

These procedures included testing the effectiveness of controls relating to management’s assessment of

regulatory proceedings, including the probability of recovering incurred costs and the related accounting and disclosure impacts.

These procedures also included, among others, (i) evaluating the Company’s correspondence with regulators;

(ii) evaluating the reasonableness of management’s assessment regarding whether recovery of regulatory assets and settlement of regulatory liabilities is probable;

(iii) evaluating the sufficiency of the disclosures in the consolidated financial statements;

and (iv) testing, on a sample basis, the regulatory assets and liabilities, including those subject to pending rate cases and regulatory proceedings, based on (a) provisions and formulas outlined in rate orders;

(b) other regulatory correspondence;

and (c) application of relevant regulatory precedents.

/s/ PricewaterhouseCoopers LLP