CMS ENERGY CORP 10-K

Item 8. Financial Statements and Supplementary Data Index to Financial Statements CMS Energy Consolidated Financial Statements 92 Consolidated Statements of Income 92 Consolidated Statements of Comprehensive Income 94 Consolidated Statements of Cash Flows 95 Consolidated Balance Sheets 98 Consolidated Statements of Changes in Equity 100 Consumers Consolidated Financial Statements 102 Consolidated Statements of Income 102 Consolidated Statements of Comprehensive Income 103 Consolidated Statements of Cash Flows 104 Consolidated Balance Sheets 106 Consolidated Statements of Changes in Equity 108 Notes to the Consolidated Financial Statements 109 1: Significant Accounting Policies 109 2: Regulatory Matters 112 3: Contingencies and Commitments 118 4: Financings and Capitalization 124 5: Fair Value Measurements 132 6: Financial Instruments 134 7: Plant, Property, and Equipment 135 8: Leases 140 9: Asset Retirement Obligations 144 10: Retirement Benefits 146 11: Stock-based Compensation 157 12: Income Taxes 160 13: Earnings Per Share—CMS Energy 164 14: Revenue 165 15: Other Income and Other Expense 169 16: Reportable Segments 170 17: Related-party Transactions—Consumers 175 18: Variable Interest Entities 176 19: Exit Activities and Discontinued Operations 178 Reports of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 180 CMS Energy 180 Consumers 184 91 Table of Contents CMS Energy Corporation Consolidated Statements of Income In Millions, Except Per Share Amounts Years Ended December 31 2023 2022 2021 Operating Revenue $ 7,462 $ 8,596 $ 7,329 Operating Expenses Fuel for electric generation 561 905 593 Purchased and interchange power 1,375 1,928 1,665 Purchased power – related parties 75 76 77 Cost of gas sold 902 1,256 735 Maintenance and other operating expenses 1,687 1,669 1,610 Depreciation and amortization 1,180 1,126 1,114 General taxes 447 412 389 Total operating expenses 6,227 7,372 6,183 Operating Income 1,235 1,224 1,146 Other Income (Expense) Non-operating retirement benefits, net 180 205 165 Other income 195 19 30 Other expense ( 13 ) ( 27 ) ( 18 ) Total other income 362 197 177 Interest Charges Interest on long-term debt 616 509 481 Interest expense – related parties 12 12 12 Other interest expense 18 — 10 Allowance for borrowed funds used during construction ( 3 ) ( 2 ) ( 3 ) Total interest charges 643 519 500 Income Before Income Taxes 954 902 823 Income Tax Expense 147 93 95 Income From Continuing Operations 807 809 728 Income From Discontinued Operations, Net of Tax of $ — , $ 1 , and $ 170 1 4 602 Net Income 808 813 1,330 Loss Attributable to Noncontrolling Interests ( 79 ) ( 24 ) ( 23 ) Net Income Attributable to CMS Energy 887 837 1,353 Preferred Stock Dividends 10 10 5 Net Income Available to Common Stockholders $ 877 $ 827 $ 1,348 92 Table of Contents In Millions, Except Per Share Amounts Years Ended December 31 2023 2022 2021 Basic Earnings Per Average Common Share Income from continuing operations per average common share available to common stockholders $ 3.01 $ 2.84 $ 2.58 Income from discontinued operations per average common share available to common stockholders — 0.01 2.08 Basic earnings per average common share $ 3.01 $ 2.85 $ 4.66 Diluted Earnings Per Average Common Share Income from continuing operations per average common share available to common stockholders $ 3.01 $ 2.84 $ 2.58 Income from discontinued operations per average common share available to common stockholders — 0.01 2.08 Diluted earnings per average common share $ 3.01 $ 2.85 $ 4.66 The accompanying notes are an integral part of these statements. 93 Table of Contents CMS Energy Corporation Consolidated Statements of Comprehensive Income In Millions Years Ended December 31 2023 2022 2021 Net Income $ 808 $ 813 $ 1,330 Retirement Benefits Liability Net gain arising during the period, net of tax of $ 2 , $ — , and $ 6 5 1 19 Settlement arising during the period, net of tax of $ — for all periods — — 1 Amortization of net actuarial loss, net of tax of $ — , $ 1 , and $ 2 2 4 5 Amortization of prior service credit, net of tax of $ — for all periods ( 1 ) ( 1 ) ( 1 ) Derivatives Unrealized gain on derivative instruments, net of tax of $ — , $ 1 , and $ — — 2 2 Reclassification adjustments included in net income, net of tax of $ — , $ — , and $ 1 — 1 1 Other Comprehensive Income 6 7 27 Comprehensive Income 814 820 1,357 Comprehensive Loss Attributable to Noncontrolling Interests ( 79 ) ( 24 ) ( 23 ) Comprehensive Income Attributable to CMS Energy $ 893 $ 844 $ 1,380 The accompanying notes are an integral part of these statements. 94 Table of Contents CMS Energy Corporation Consolidated Statements of Cash Flows In Millions Years Ended December 31 2023 2022 2021 Cash Flows from Operating Activities Net income $ 808 $ 813 $ 1,330 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 1,180 1,126 1,114 Deferred income taxes and investment tax credits 157 89 249 Bad debt expense 34 50 22 Postretirement benefits contributions ( 12 ) ( 12 ) ( 12 ) Gain from sale of EnerBank — ( 5 ) ( 657 ) Other non‑cash operating activities and reconciling adjustments ( 274 ) ( 93 ) ( 70 ) Net cash used in discontinued operations — — ( 111 ) Changes in assets and liabilities Accounts receivable and accrued revenue 241 ( 677 ) ( 103 ) Inventories 185 ( 450 ) ( 93 ) Accounts payable and accrued rate refunds ( 136 ) 4 153 Other current assets and liabilities ( 21 ) 14 13 Other non‑current assets and liabilities 147 ( 4 ) ( 16 ) Net cash provided by operating activities 2,309 855 1,819 Cash Flows from Investing Activities Capital expenditures (excludes assets placed under finance lease) ( 2,407 ) ( 2,374 ) ( 2,076 ) Covert Generating Station acquisition ( 812 ) — — Net proceeds from sale of EnerBank — 5 898 Net cash provided by discontinued operations — — 78 Cost to retire property and other investing activities ( 167 ) ( 107 ) ( 133 ) Net cash used in investing activities ( 3,386 ) ( 2,476 ) ( 1,233 ) Cash Flows from Financing Activities Proceeds from issuance of debt 3,551 1,899 335 Retirement of debt ( 2,132 ) ( 106 ) ( 235 ) Increase in notes payable 73 20 — Issuance of common stock 192 69 26 Issuance of preferred stock, net of issuance costs — — 224 Payment of dividends on common and preferred stock ( 579 ) ( 544 ) ( 508 ) Proceeds from the sale of membership interest in VIE to tax equity investor 86 49 — Contribution from noncontrolling interest 6 2 1 Net cash used in discontinued operations — — ( 84 ) Other financing costs ( 54 ) ( 62 ) ( 54 ) Net cash provided by (used in) financing activities 1,143 1,327 ( 295 ) 95 Table of Contents In Millions Years Ended December 31 2023 2022 2021 Net Increase (Decrease) in Cash and Cash Equivalents, Including Restricted Amounts 66 ( 294 ) 291 Cash and Cash Equivalents, Including Restricted Amounts, Beginning of Period 182 476 185 Cash and Cash Equivalents, Including Restricted Amounts, End of Period $ 248 $ 182 $ 476 Other Cash Flow Activities and Non‑cash Investing and Financing Activities Cash transactions Interest paid (net of amounts capitalized) $ 607 $ 490 $ 489 Income taxes paid 15 1 16 Non‑cash transactions Capital expenditures not paid $ 265 $ 228 $ 196 The accompanying notes are an integral part of these statements. 96 Table of Contents (This page intentionally left blank) 97 Table of Contents CMS Energy Corporation Consolidated Balance Sheets ASSETS In Millions December 31 2023 2022 Current Assets Cash and cash equivalents $ 227 $ 164 Restricted cash and cash equivalents 21 18 Accounts receivable and accrued revenue, less allowance of $ 21 in 2023 and $ 27 in 2022 933 1,564 Accounts receivable – related parties 11 16 Inventories at average cost Gas in underground storage 587 840 Materials and supplies 267 212 Generating plant fuel stock 84 65 Deferred property taxes 426 384 Regulatory assets 203 57 Prepayments and other current assets 80 113 Total current assets 2,839 3,433 Plant, Property, and Equipment Plant, property, and equipment, gross 33,135 30,491 Less accumulated depreciation and amortization 9,007 8,960 Plant, property, and equipment, net 24,128 21,531 Construction work in progress 944 1,182 Total plant, property, and equipment 25,072 22,713 Other Non‑current Assets Regulatory assets 3,683 3,595 Accounts receivable 22 23 Investments 76 71 Postretirement benefits 1,468 1,208 Other 357 310 Total other non‑current assets 5,606 5,207 Total Assets $ 33,517 $ 31,353 98 Table of Contents LIABILITIES AND EQUITY In Millions December 31 2023 2022 Current Liabilities Current portion of long-term debt and finance leases $ 980 $ 1,099 Notes payable 93 20 Accounts payable 802 928 Accounts payable – related parties 7 8 Accrued rate refunds 54 — Accrued interest 142 122 Accrued taxes 612 538 Regulatory liabilities 56 104 Other current liabilities 149 166 Total current liabilities 2,895 2,985 Non‑current Liabilities Long-term debt 14,508 13,122 Non-current portion of finance leases 62 68 Regulatory liabilities 3,894 3,796 Postretirement benefits 106 108 Asset retirement obligations 771 746 Deferred investment tax credit 126 129 Deferred income taxes 2,615 2,407 Other non‑current liabilities 415 397 Total non‑current liabilities 22,497 20,773 Commitments and Contingencies (Notes 2 and 3) Equity Common stockholders’ equity Common stock, authorized 350.0 shares in both periods; outstanding 294.4 shares in 2023 and 291.3 shares in 2022 3 3 Other paid-in capital 5,705 5,490 Accumulated other comprehensive loss ( 46 ) ( 52 ) Retained earnings 1,658 1,350 Total common stockholders’ equity 7,320 6,791 Cumulative redeemable perpetual preferred stock, Series C, authorized 9.2 depositary shares; outstanding 9.2 depositary shares in both periods 224 224 Total stockholders’ equity 7,544 7,015 Noncontrolling interests 581 580 Total equity 8,125 7,595 Total Liabilities and Equity $ 33,517 $ 31,353 The accompanying notes are an integral part of these statements. 99 Table of Contents CMS Energy Corporation Consolidated Statements of Changes in Equity In Millions, Except Number of Shares in Thousands and Per Share Amounts Number of Shares Years Ended December 31 2023 2022 2021 2023 2022 2021 Total Equity at Beginning of Period $ 7,595 $ 7,188 $ 6,077 Common Stock At beginning and end of period 3 3 3 Other Paid-in Capital At beginning of period 291,268 289,758 288,940 5,490 5,406 5,365 Common stock issued 3,355 1,704 997 222 93 50 Common stock repurchased ( 119 ) ( 151 ) ( 157 ) ( 7 ) ( 9 ) ( 9 ) Common stock reacquired ( 64 ) ( 43 ) ( 22 ) — — — At end of period 294,440 291,268 289,758 5,705 5,490 5,406 Accumulated Other Comprehensive Loss At beginning of period ( 52 ) ( 59 ) ( 86 ) Retirement benefits liability At beginning of period ( 52 ) ( 56 ) ( 80 ) Net gain arising during the period 5 1 19 Settlement arising during the period — — 1 Amortization of net actuarial loss 2 4 5 Amortization of prior service credit ( 1 ) ( 1 ) ( 1 ) At end of period ( 46 ) ( 52 ) ( 56 ) Derivative instruments At beginning of period — ( 3 ) ( 6 ) Unrealized gain on derivative instruments — 2 2 Reclassification adjustments included in net income — 1 1 At end of period — — ( 3 ) At end of period ( 46 ) ( 52 ) ( 59 ) Retained Earnings At beginning of period 1,350 1,057 214 Net income attributable to CMS Energy 887 837 1,353 Dividends declared on common stock ( 569 ) ( 534 ) ( 505 ) Dividends declared on preferred stock ( 10 ) ( 10 ) ( 5 ) At end of period 1,658 1,350 1,057 Cumulative Redeemable Perpetual Preferred Stock, Series C At beginning of period 224 224 — Preferred stock issued, net of issuance costs — — 224 At end of period 224 224 224 100 Table of Contents In Millions, Except Number of Shares in Thousands and Per Share Amounts Number of Shares Years Ended December 31 2023 2022 2021 2023 2022 2021 Noncontrolling Interests At beginning of period 580 557 581 Sale of membership interest in VIE to tax equity investor 86 49 — Contribution from noncontrolling interest 6 2 1 Loss attributable to noncontrolling interests ( 79 ) ( 24 ) ( 23 ) Distributions and other changes in noncontrolling interests ( 12 ) ( 4 ) ( 2 ) At end of period 581 580 557 Total Equity at End of Period $ 8,125 $ 7,595 $ 7,188 Dividends declared per common share $ 1.9500 $ 1.8400 $ 1.7400 Dividends declared per preferred stock Series C depositary share $ 1.0500 $ 1.0500 $ 0.5688 The accompanying notes are an integral part of these statements. 101 Table of Contents Consumers Energy Company Consolidated Statements of Income In Millions Years Ended December 31 2023 2022 2021 Operating Revenue $ 7,166 $ 8,151 $ 7,021 Operating Expenses Fuel for electric generation 435 662 463 Purchased and interchange power 1,331 1,867 1,599 Purchased power – related parties 75 76 77 Cost of gas sold 897 1,243 726 Maintenance and other operating expenses 1,586 1,582 1,531 Depreciation and amortization 1,137 1,088 1,077 General taxes 437 400 373 Total operating expenses 5,898 6,918 5,846 Operating Income 1,268 1,233 1,175 Other Income (Expense) Non-operating retirement benefits, net 171 195 155 Other income 49 17 23 Other expense ( 12 ) ( 25 ) ( 18 ) Total other income 208 187 160 Interest Charges Interest on long-term debt 415 325 294 Interest expense – related parties 20 12 12 Other interest expense 16 — 8 Allowance for borrowed funds used during construction ( 3 ) ( 2 ) ( 3 ) Total interest charges 448 335 311 Income Before Income Taxes 1,028 1,085 1,024 Income Tax Expense 161 140 156 Net Income 867 945 868 Preferred Stock Dividends 2 2 2 Net Income Available to Common Stockholder $ 865 $ 943 $ 866 The accompanying notes are an integral part of these statements. 102 Table of Contents Consumers Energy Company Consolidated Statements of Comprehensive Income In Millions Years Ended December 31 2023 2022 2021 Net Income $ 867 $ 945 $ 868 Retirement Benefits Liability Net gain (loss) arising during the period, net of tax of $ — , $ 5 , and $ 1 ( 1 ) 15 2 Amortization of net actuarial loss, net of tax of $ — , $ — , and $ 1 1 2 2 Other Comprehensive Income — 17 4 Comprehensive Income $ 867 $ 962 $ 872 The accompanying notes are an integral part of these statements. 103 Table of Contents Consumers Energy Company Consolidated Statements of Cash Flows In Millions Years Ended December 31 2023 2022 2021 Cash Flows from Operating Activities Net income $ 867 $ 945 $ 868 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 1,137 1,088 1,077 Deferred income taxes and investment tax credits 156 134 154 Bad debt expense 34 50 22 Postretirement benefits contributions ( 9 ) ( 9 ) ( 9 ) Other non‑cash operating activities and reconciling adjustments ( 123 ) ( 87 ) ( 64 ) Changes in assets and liabilities Accounts and notes receivable and accrued revenue 219 ( 660 ) ( 103 ) Inventories 186 ( 447 ) ( 90 ) Accounts payable and accrued rate refunds ( 127 ) ( 9 ) 140 Other current assets and liabilities ( 35 ) 18 27 Other non-current assets and liabilities 125 ( 29 ) ( 40 ) Net cash provided by operating activities 2,430 994 1,982 Cash Flows from Investing Activities Capital expenditures (excludes assets placed under finance lease) ( 2,248 ) ( 2,239 ) ( 2,052 ) Covert Generating Station acquisition ( 812 ) — — Cost to retire property and other investing activities ( 141 ) ( 105 ) ( 133 ) Net cash used in investing activities ( 3,201 ) ( 2,344 ) ( 2,185 ) Cash Flows from Financing Activities Proceeds from issuance of debt 2,666 1,799 335 Retirement of debt ( 1,654 ) ( 28 ) ( 27 ) Increase in notes payable 73 20 — Increase (decrease) in notes payable – related parties ( 75 ) ( 317 ) 85 Stockholder contribution 475 685 575 Payment of dividends on common and preferred stock ( 697 ) ( 771 ) ( 724 ) Other financing costs ( 21 ) ( 22 ) ( 32 ) Net cash provided by financing activities 767 1,366 212 Net Increase (Decrease) in Cash and Cash Equivalents, Including Restricted Amounts ( 4 ) 16 9 Cash and Cash Equivalents, Including Restricted Amounts, Beginning of Period 60 44 35 Cash and Cash Equivalents, Including Restricted Amounts, End of Period $ 56 $ 60 $ 44 104 In Millions Years Ended December 31 2023 2022 2021 Other Cash Flow Activities and Non‑cash Investing and Financing Activities Cash transactions Interest paid (net of amounts capitalized) $ 417 $ 309 $ 298 Income taxes paid (refunds received), net 31 ( 2 ) ( 10 ) Non‑cash transactions Capital expenditures not paid $ 264 $ 210 $ 192 The accompanying notes are an integral part of these statements. 105 Table of Contents Consumers Energy Company Consolidated Balance Sheets ASSETS In Millions December 31 2023 2022 Current Assets Cash and cash equivalents $ 35 $ 43 Restricted cash and cash equivalents 21 17 Accounts receivable and accrued revenue, less allowance of $ 21 in 2023 and $ 27 in 2022 909 1,524 Accounts and notes receivable – related parties 11 10 Inventories at average cost Gas in underground storage 587 840 Materials and supplies 257 206 Generating plant fuel stock 80 59 Deferred property taxes 426 384 Regulatory assets 203 57 Prepayments and other current assets 65 96 Total current assets 2,594 3,236 Plant, Property, and Equipment Plant, property, and equipment, gross 31,723 29,342 Less accumulated depreciation and amortization 8,796 8,791 Plant, property, and equipment, net 22,927 20,551 Construction work in progress 845 994 Total plant, property, and equipment 23,772 21,545 Other Non-current Assets Regulatory assets 3,683 3,595 Accounts receivable 28 29 Accounts and notes receivable – related parties 95 99 Postretirement benefits 1,367 1,126 Other 313 286 Total other non-current assets 5,486 5,135 Total Assets $ 31,852 $ 29,916 106 Table of Contents LIABILITIES AND EQUITY In Millions December 31 2023 2022 Current Liabilities Current portion of long-term debt and finance leases $ 731 $ 1,000 Notes payable 93 20 Notes payable – related parties — 75 Accounts payable 764 864 Accounts payable – related parties 13 15 Accrued rate refunds 54 — Accrued interest 110 90 Accrued taxes 614 556 Regulatory liabilities 56 104 Other current liabilities 128 147 Total current liabilities 2,563 2,871 Non-current Liabilities Long-term debt 10,037 9,192 Long-term debt – related parties 424 — Non-current portion of finance leases 39 45 Regulatory liabilities 3,894 3,796 Postretirement benefits 77 79 Asset retirement obligations 739 722 Deferred investment tax credit 126 129 Deferred income taxes 2,789 2,585 Other non-current liabilities 364 342 Total non-current liabilities 18,489 16,890 Commitments and Contingencies (Notes 2 and 3) Equity Common stockholder’s equity Common stock, authorized 125.0 shares; outstanding 84.1 shares in both periods 841 841 Other paid-in capital 7,759 7,284 Accumulated other comprehensive loss ( 15 ) ( 15 ) Retained earnings 2,178 2,008 Total common stockholder’s equity 10,763 10,118 Cumulative preferred stock, $ 4.50 series, authorized 7.5 shares; outstanding 0.4 shares in both periods 37 37 Total equity 10,800 10,155 Total Liabilities and Equity $ 31,852 $ 29,916 The accompanying notes are an integral part of these statements. 107 Table of Contents Consumers Energy Company Consolidated Statements of Changes in Equity In Millions Years Ended December 31 2023 2022 2021 Total Equity at Beginning of Period $ 10,155 $ 9,279 $ 8,556 Common Stock At beginning and end of period 841 841 841 Other Paid-in Capital At beginning of period 7,284 6,599 6,024 Stockholder contribution 475 685 575 At end of period 7,759 7,284 6,599 Accumulated Other Comprehensive Loss Retirement benefits liability At beginning of period ( 15 ) ( 32 ) ( 36 ) Net gain (loss) arising during the period ( 1 ) 15 2 Amortization of net actuarial loss 1 2 2 At end of period ( 15 ) ( 15 ) ( 32 ) Retained Earnings At beginning of period 2,008 1,834 1,690 Net income 867 945 868 Dividends declared on common stock ( 695 ) ( 769 ) ( 722 ) Dividends declared on preferred stock ( 2 ) ( 2 ) ( 2 ) At end of period 2,178 2,008 1,834 Cumulative Preferred Stock At beginning and end of period 37 37 37 Total Equity at End of Period $ 10,800 $ 10,155 $ 9,279 The accompanying notes are an integral part of these statements. 108 Table of Contents CMS Energy Corporation Consumers Energy Company Notes to the Consolidated Financial Statements 1: Significant Accounting Policies Principles of Consolidation: CMS Energy and Consumers prepare their consolidated financial statements in conformity with GAAP. CMS Energy’s consolidated financial statements comprise CMS Energy, Consumers, NorthStar Clean Energy, and all other entities in which CMS Energy has a controlling financial interest or is the primary beneficiary. Consumers’ consolidated financial statements comprise Consumers and all other entities in which it has a controlling financial interest. CMS Energy uses the equity method of accounting for investments in companies and partnerships that are not consolidated, where they have significant influence over operations and financial policies but are not the primary beneficiary. CMS Energy and Consumers eliminate intercompany transactions and balances. Use of Estimates: CMS Energy and Consumers are required to make estimates using assumptions that may affect reported amounts and disclosures. Actual results could differ from those estimates. Cash and Cash Equivalents and Restricted Cash and Cash Equivalents: Cash and cash equivalents include short-term, highly liquid investments with original maturities of three months or less. Restricted cash and cash equivalents are held primarily for the repayment of securitization bonds and funds held in escrow. Cash and cash equivalents may also be restricted to pay other contractual obligations such as leasing of coal railcars. These amounts are classified as current assets since they relate to payments that could or will occur within one year. Contingencies: CMS Energy and Consumers record estimated loss contingencies on their consolidated financial statements when it is probable that a loss has been incurred and when the amount of loss can be reasonably estimated. For environmental remediation projects in which the timing of estimated expenditures is considered reliably determinable, CMS Energy and Consumers record the liability at its net present value, using a discount rate equal to the interest rate on monetary assets that are essentially risk-free and have maturities comparable to that of the environmental liability. Unless regulatory accounting applies, CMS Energy and Consumers expense legal fees as incurred; fees incurred but not yet billed are accrued based on estimates of work performed. Debt Issuance Costs, Discounts, Premiums, and Refinancing Costs: Upon the issuance of long-term debt, CMS Energy and Consumers defer issuance costs, discounts, and premiums and amortize those amounts over the terms of the associated debt. Debt issuance costs are presented as a direct deduction from the carrying amount of long-term debt on the balance sheet. Upon the refinancing of long-term debt, Consumers, as a regulated entity, defers any remaining unamortized issuance costs, discounts, and premiums associated with the refinanced debt and amortizes those amounts over the term of the newly issued debt. For the non‑regulated portions of CMS Energy’s business, any remaining unamortized issuance costs, discounts, and premiums associated with extinguished debt are charged to earnings. Derivative Instruments: In order to support ongoing operations, CMS Energy and Consumers may enter into contracts for the future purchase and sale of various commodities, such as electricity, natural gas, and coal. These forward contracts are generally long-term in nature and result in physical delivery of the 109 Table of Contents commodity at a contracted price. Most of these contracts are not subject to derivative accounting for one or more of the following reasons: • they do not have a notional amount (that is, a number of units specified in a derivative instrument, such as MWh of electricity or bcf of natural gas) • they qualify for the normal purchases and sales exception • they cannot be net settled due in part to the absence of an active market for the commodity Consumers also uses FTRs to manage price risk related to electricity transmission congestion. An FTR is a financial instrument that entitles its holder to receive compensation or requires its holder to remit payment for congestion-related transmission charges. Consumers accounts for FTRs as derivatives and changes in the fair value of FTRs are deferred as regulatory assets or liabilities. For details regarding CMS Energy’s and Consumers’ derivative instruments recorded at fair value, see Note 5, Fair Value Measurements. EPS: CMS Energy calculates basic and diluted EPS using the weighted-average number of shares of common stock and dilutive potential common stock outstanding during the period. Potential common stock, for purposes of determining diluted EPS, includes the effects of nonvested stock awards, forward equity sales, and convertible securities. CMS Energy computes the effect on potential common stock using the treasury stock method. Potentially dilutive common shares issuable upon conversion of the convertible senior notes are determined using the if-converted method for calculating diluted EPS. Diluted EPS excludes the impact of antidilutive securities, which are those securities resulting in an increase in EPS or a decrease in loss per share. For EPS computations, see Note 13, Earnings Per Share—CMS Energy. Impairment of Long-lived Assets and Equity Method Investments: CMS Energy and Consumers perform tests of impairment if certain triggering events occur that indicate the carrying amount of an asset may not be recoverable or that there has been a decline in value that may be other than temporary. CMS Energy and Consumers evaluate long-lived assets held in use for impairment by calculating the undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. If the undiscounted future cash flows are less than the carrying amount, CMS Energy and Consumers recognize an impairment loss equal to the amount by which the carrying amount exceeds the fair value. CMS Energy and Consumers estimate the fair value of the asset using quoted market prices, market prices of similar assets, or discounted future cash flow analyses. CMS Energy also assesses equity method investments for impairment whenever there has been a decline in value that is other than temporary. This assessment requires CMS Energy to determine the fair value of the equity method investment. CMS Energy determines fair value using valuation methodologies, including discounted cash flows, and assesses the ability of the investee to sustain an earnings capacity that justifies the carrying amount of the investment. CMS Energy records an impairment if the fair value is less than the carrying amount and the decline in value is considered to be other than temporary. Investment Tax Credits: CMS Energy and its subsidiaries use the flow-through method of accounting for investment tax credits. Under the flow-through method, the credit is recognized as a reduction to income tax expense when the related plant, property, and equipment is placed into service. For its regulated utility assets, Consumers amortizes its investment tax credits over the life of the related property in accordance with regulatory treatment. Inventory: CMS Energy and Consumers use the weighted-average cost method for valuing working gas, recoverable base gas in underground storage facilities, and materials and supplies inventory. CMS Energy 110 Table of Contents and Consumers also use this method for valuing coal inventory, and they classify these amounts as generating plant fuel stock on their consolidated balance sheets. CMS Energy and Consumers account for RECs and emission allowances as inventory and use the weighted-average cost method to remove amounts from inventory. RECs and emission allowances are used to satisfy compliance obligations related to the generation of power. CMS Energy and Consumers classify these amounts within other assets on their consolidated balance sheets. CMS Energy and Consumers evaluate inventory for impairment as required to ensure that its carrying value does not exceed the lower of cost or net realizable value. MISO Transactions: MISO requires the submission of hourly day-ahead and real-time bids and offers for energy at locations across the MISO region. CMS Energy and Consumers account for MISO transactions on a net hourly basis in each of the real-time and day-ahead markets, netted across all MISO energy market locations. CMS Energy and Consumers record net hourly purchases in purchased and interchange power and net hourly sales in operating revenue on their consolidated statements of income. They record net billing adjustments upon receipt of settlement statements, record accruals for future net purchases and sales adjustments based on historical experience, and reconcile accruals to actual expenses and sales upon receipt of settlement statements. Property Taxes: Property taxes are based on the taxable value of CMS Energy’s and Consumers’ real and personal property assessed by local taxing authorities. CMS Energy and Consumers record property tax expense over the fiscal year of the taxing authority for which the taxes are levied. The deferred property tax balance represents the amount of CMS Energy’s and Consumers’ accrued property tax that will be recognized over future governmental fiscal periods. Other: For additional accounting policies, see: • Note 2, Regulatory Matters • Note 7, Plant, Property, and Equipment • Note 8, Leases • Note 9, Asset Retirement Obligations • Note 10, Retirement Benefits • Note 12, Income Taxes • Note 13, Earnings Per Share—CMS Energy • Note 14, Revenue • Note 18, Variable Interest Entities 111 Table of Contents 2: Regulatory Matters Regulatory matters are critical to Consumers. The Michigan Attorney General, ABATE, the MPSC Staff, residential customer advocacy groups, environmental organizations, and certain other parties typically participate in MPSC proceedings concerning Consumers, such as Consumers’ rate cases and PSCR and GCR processes. Intervenors also participate in certain FERC matters, including FERC’s regulation of certain wholesale rates that affect Consumers’ power supply costs. These parties often challenge various aspects of those proceedings, including the prudence of Consumers’ policies and practices, and seek cost disallowances and other relief. The parties also have appealed significant MPSC orders. Depending upon the specific issues, the outcomes of rate cases and proceedings, including judicial proceedings challenging MPSC and FERC orders or other actions, could negatively affect CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. Consumers cannot predict the outcome of these proceedings. There are multiple appeals pending that involve various issues concerning cost recovery from customers, the MPSC’s authority to approve voluntary revenue refunds, and other matters. Consumers is unable to predict the outcome of these appeals. Regulatory Assets and Liabilities Consumers is subject to the actions of the MPSC and FERC and therefore prepares its consolidated financial statements in accordance with the provisions of regulatory accounting. A utility must apply regulatory accounting when its rates are designed to recover specific costs of providing regulated services. Under regulatory accounting, Consumers records regulatory assets or liabilities for certain transactions that would have been treated as expense or revenue by non‑regulated businesses. 112 Table of Contents Presented in the following table are the regulatory assets and liabilities on Consumers’ consolidated balance sheets: In Millions December 31 2023 2022 Regulatory assets Current 2022 PSCR underrecovery 1 $ 126 $ — Energy waste reduction plan incentive 2 54 47 Retention incentive program 3 12 2 Other 11 8 Total current regulatory assets $ 203 $ 57 Non-current Costs of coal-fueled electric generating units to be retired 1 $ 1,265 $ 1,258 Securitized costs 1 778 843 Postretirement benefits 4 741 856 ARO 3 328 281 2022 PSCR underrecovery 1 126 — MGP sites 1 99 108 Unamortized loss on reacquired debt 1 96 100 Decommissioning costs 3 83 24 Energy waste reduction plan incentive 2 58 55 Retention incentive program 3 27 31 Postretirement benefits expense deferral mechanism 3 24 — Energy waste reduction plan 3 19 10 Ludington overhaul contract dispute 3 13 — Other 26 29 Total non-current regulatory assets $ 3,683 $ 3,595 Total regulatory assets $ 3,886 $ 3,652 Regulatory liabilities Current Income taxes, net $ 49 $ 48 Reserve for customer refunds 2 47 Other 5 9 Total current regulatory liabilities $ 56 $ 104 Non-current Cost of removal $ 2,545 $ 2,426 Income taxes, net 1,220 1,267 Renewable energy grant 43 45 Renewable energy plan 29 32 Energy waste reduction plan 25 6 Postretirement benefits expense deferral mechanism 12 — Other 20 20 Total non-current regulatory liabilities $ 3,894 $ 3,796 Total regulatory liabilities $ 3,950 $ 3,900 113 Table of Contents 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. 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: The energy waste reduction incentive mechanism provides a financial incentive if the energy savings of Consumers’ customers exceed annual targets established by the MPSC. Consumers accounts for this program as an alternative-revenue program that meets the criteria for recognizing revenue related to the incentive as soon as energy savings exceed the annual targets established by the MPSC. In November 2023, the MPSC approved a settlement agreement authorizing Consumers to collect $ 55 million during 2024 as an incentive for exceeding its statutory savings targets in 2022. Consumers recognized incentive revenue under this program of $ 55 million in 2022. Consumers also exceeded its statutory savings targets in 2023, achieved certain other goals, and will request the MPSC’s approval to collect $ 58 million, the maximum performance incentive, in the energy waste reduction reconciliation to be filed in May 2024. Consumers recognized incentive revenue under this program of $ 58 million in 2023. Retention Incentive Program: To ensure necessary staffing at the D.E. Karn and J.H. Campbell coal-fueled generating units through their retirement, Consumers established retention incentive programs. The MPSC has approved deferred accounting treatment for the retention and severance costs incurred under these programs and has allowed for recovery over three years. For additional details regarding the retention incentive program, see Note 19, Exit Activities and Discontinued Operations. Costs of Coal-fueled Electric Generating Units to be Retired: In June 2022, the MPSC approved Consumers’ Clean Energy Plan, under which Consumers plans to retire the J.H. Campbell coal-fueled generating units in 2025. Upon the units’ retirement, Consumers will receive regulatory asset treatment to recover their remaining book value, as well as a 9.0 ‑percent return on equity, through 2040, the units’ original retirement date. Until retirement, the book value of the generating units will remain in rate base and receive full regulatory returns in general rate cases. In June 2022, Consumers removed from total plant, property, and equipment an amount of $ 1.3 billion, representing the projected remaining book value of the electric generating units upon their retirement, and recorded it as a non ‑ current regulatory asset on its consolidated balance sheets. Securitized Costs: The MPSC has issued securitization financing orders authorizing Consumers to issue securitization bonds in order to finance the recovery of the remaining book value of three smaller natural gas-fueled electric generating units that Consumers retired in 2015, seven smaller coal-fueled electric 114 Table of Contents generating units that Consumers retired in 2016, and the D.E. Karn coal-fueled electric generating units that Consumers retired in June 2023. Consumers has removed from plant, property, and equipment and recorded as a regulatory asset the book value of these units. Consumers is amortizing the regulatory asset over the life of the related securitization bonds, which it issued through subsidiaries in 2014 and 2023. For additional details regarding the securitization bonds, see Note 4, Financings and Capitalization—Securitization Bonds. Postretirement Benefits: As part of the ratemaking process, the MPSC allows Consumers to recover the costs of postretirement benefits. Accordingly, Consumers defers the net impact of actuarial losses and gains, prior service costs and credits, and settlements associated with postretirement benefits as a regulatory asset or liability. The asset or liability will decrease as the deferred items are amortized and recognized as components of net periodic benefit cost. For details about settlements and the amortization periods, see Note 10, Retirement Benefits. ARO: The recovery of the underlying asset investments and related removal and monitoring costs of recorded AROs is approved by the MPSC in depreciation rate cases. Consumers records a regulatory asset and a regulatory liability for timing differences between the recognition of AROs for financial reporting purposes and the recovery of these costs from customers. The recovery period approximates the useful life of the assets to be removed. MGP Sites: Consumers is incurring environmental remediation and other response activity costs at 23 former MGP facilities. The MPSC allows Consumers to recover from its natural gas customers over a ten ‑ year period the costs incurred to remediate the MGP sites. For additional information, see Note 3, Contingencies and Commitments—Consumers Gas Utility Contingencies—Gas Environmental Matters. Unamortized Loss on Reacquired Debt: Under regulatory accounting, any unamortized discount, premium, or expense related to debt redeemed with the proceeds of new debt is capitalized and amortized over the life of the new debt. Decommissioning Costs: In Consumers’ electric depreciation and general rate cases, the MPSC has authorized Consumers to remove from depreciation rates the costs of decommissioning the D.E. Karn coal-fueled electric generating units, and instead defer those costs as a regulatory asset to be recovered through 2031. Additionally, ash disposal costs related to Consumers’ retired coal-fueled generating units may be deferred as a regulatory asset and collected over a ten-year period. In its 2022 order approving Consumers’ Clean Energy Plan, the MPSC authorized similar treatment for the decommissioning and ash disposal costs associated with the J.H. Campbell coal-fueled generating units that will be retired in 2025. Postretirement Benefits Expense Deferral Mechanism: In Consumers’ general rate cases, the MPSC approved a mechanism allowing Consumers to defer the future recovery or refund of pension and OPEB expenses above or below the amounts used to set existing rates, respectively, beginning in January 2023 for the electric utility and October 2023 for the gas utility. Energy Waste Reduction Plan: The MPSC allows Consumers to collect surcharges from customers to fund its energy waste reduction plan. The amount of spending incurred in excess of surcharges collected is recorded as a regulatory asset and amortized as surcharges are collected from customers over the plan period. The amount of surcharges collected in excess of spending incurred is recorded as a regulatory liability and amortized as costs are incurred. Ludington Overhaul Contract Dispute: The MPSC has authorized Consumers to defer as a regulatory asset costs associated with repairing or replacing defective work performed by TAES during a major overhaul and upgrade of Ludington. Consumers will defer such costs while litigation with TAES and Toshiba moves forward; such costs will be offset by potential future litigation proceeds received from 115 Table of Contents TAES or Toshiba. Consumers will have the opportunity to seek appropriate recovery and ratemaking treatment for amounts recorded as a regulatory asset following resolution of the litigation. For additional details on the contract dispute, see Note 3, Contingencies and Commitments—Consumers Electric Utility Contingencies. Regulatory Liabilities Income Taxes, Net: Consumers records regulatory assets and liabilities to reflect the difference between deferred income taxes recognized for financial reporting purposes and amounts previously reflected in Consumers’ rates. This net balance will decrease over the remaining life of the related temporary differences and flow through income tax expense. The majority of the net regulatory liability recorded related to income taxes is associated with plant assets that are subject to normalization, which is governed by the Internal Revenue Code, and will be returned to customers over the remaining book life of the related plant assets. For additional details on deferred income taxes, see Note 12, Income Taxes. Reserve for Customer Refunds: In December 2022, the MPSC issued an order authorizing Consumers to refund $ 22 million voluntarily to utility customers. During 2023, the MPSC approved Consumers’ requests that the refund take the form of contributions to programs that assist vulnerable electric and gas customers and incremental vegetation management. Additionally, in the settlement of its 2022 electric rate case, Consumers agreed to refund voluntarily $ 15 million of 2022 revenues to utility customers through a one ‑ time bill credit and to fund $ 10 million in contributions to programs that directly assist vulnerable customers with utility bills. Cost of Removal: The MPSC allows Consumers to collect amounts from customers to fund future asset removal activities. This regulatory liability is reduced as costs are incurred to remove the assets at the end of their useful lives. Renewable Energy Grant: In 2013, Consumers received a $ 69 million renewable energy grant for Lake Winds ® Energy Park, which began operations in 2012. This grant reduces Consumers’ cost of complying with Michigan’s renewable portfolio standard and, accordingly, reduces the overall renewable energy surcharge to be collected from customers. The regulatory liability recorded for the grant will be amortized over the life of Lake Winds ® Energy Park. Consumers presents the amortization as a reduction to maintenance and other operating expenses on its consolidated statements of income. Renewable Energy Plan: Consumers has collected surcharges to fund its renewable energy plan. Amounts not yet spent under the plan are recorded as a regulatory liability, which is amortized as incremental costs are incurred to operate and depreciate Consumers’ renewable generation facilities and to purchase RECs under renewable energy purchase agreements. Incremental costs represent costs incurred in excess of amounts recovered through the PSCR process. Consumers Electric and Gas Utility Meter Investigation: In July 2023, the MPSC issued an order initiating an investigation into Consumers’ handling of malfunctioning meters and meters requiring transition from 3G to 4G technology, estimated billing, and new service installations. The order directed Consumers to provide information on such meters and their replacement, meter-reading performance, communications with customers and the MPSC regarding these issues, and other information; Consumers provided this information in August 2023. As directed in the order, the MPSC Staff analyzed this information and made recommendations, including continued monitoring of Consumers’ performance in these areas and penalties for failure to comply with MPSC service rules. 116 Table of Contents In October 2023, the MPSC issued a show-cause order directing Consumers to provide further information on consecutive estimated billings, the provision of actual meter readings, and new service installation issues. Consumers cannot predict the outcome of this matter, but it could be subject to regulatory penalties that are not expected to have a material effect on Consumers’ results of operations and Consumers could be subject to increased regulatory scrutiny. Consumers Electric Utility 2022 Electric Rate Case: In January 2023, the MPSC approved a settlement agreement authorizing an annual rate increase of $ 155 million, based on a 9.9 ‑percent authorized return on equity. The MPSC also approved a surcharge for the recovery of $ 6 million of depreciation, property tax, and interest expense related to distribution investments made in 2021 that exceeded what was authorized in rates in accordance with the December 2020 electric rate order. The new rates became effective January 20, 2023. Consumers Gas Utility 2022 Gas Rate Case: In December 2022, Consumers filed an application with the MPSC seeking an annual rate increase of $ 212 million, based on a 10.25 ‑percent authorized return on equity for the projected 12 ‑ month period ending September 30, 2024. In August 2023, the MPSC approved a settlement agreement authorizing an annual rate increase of $ 95 million, based on a 9.9 ‑percent authorized return on equity, effective October 1, 2023. The MPSC also authorized the use of a cost deferral mechanism that will allow Consumers to defer for future recovery or refund pension and OPEB expense above or below the amounts used to set existing rates. Power Supply Cost Recovery and Gas Cost Recovery The PSCR and GCR ratemaking processes are designed to allow Consumers to recover all of its power supply and purchased natural gas costs if incurred under reasonable and prudent policies and practices. The MPSC reviews these costs, policies, and practices in annual plan and reconciliation proceedings. Consumers adjusts its PSCR and GCR billing charges monthly, subject to ceiling factor limitations, in order to minimize the underrecovery or overrecovery amount in the annual reconciliations. Underrecoveries represent power supply and purchased natural gas costs that will be recovered from customers; overrecoveries represent previously collected revenues that will be refunded to customers. Presented in the following table are the assets and liabilities for PSCR and GCR underrecoveries and overrecoveries reflected on Consumers’ consolidated balance sheets: In Millions December 31 2023 2022 Assets PSCR underrecoveries $ — $ 401 GCR underrecoveries — 8 Accounts receivable and accrued revenue $ — $ 409 Liabilities PSCR overrecoveries $ 10 $ — GCR overrecoveries 44 — Accrued rate refunds $ 54 $ — 117 Table of Contents PSCR Plans and Reconciliations: In September 2023, the MPSC issued an order in Consumers’ 2021 PSCR reconciliation, authorizing recovery of $ 2.1 billion of power costs and authorizing Consumers to reflect in its 2022 PSCR reconciliation the overrecovery of $ 7 million. In March 2023, Consumers filed its 2022 PSCR reconciliation, requesting full recovery of $ 2.5 billion of power costs and authorization to reflect in its 2023 PSCR reconciliation the underrecovery of $ 404 million. In November 2023, Consumers revised its reconciliation, requesting authorization to reflect in its 2023 PSCR reconciliation the underrecovery of $ 401 million. Consumers submitted its 2023 PSCR plan to the MPSC in September 2022 and self-implemented a 2023 PSCR charge in accordance with that plan in January 2023. As a result of significantly higher-than-projected power costs during 2022, Consumers subsequently filed a motion for a temporary order in its 2023 PSCR plan, requesting that the MPSC approve only a third of the 2022 underrecovery amount for recovery in 2023, with the remaining amount to be recovered equally during 2024 and 2025. The MPSC approved Consumers’ motion in February 2023, providing immediate relief to electric customers. The MPSC approved Consumers’ 2023 PSCR plan in August 2023. GCR Plans and Reconciliations: In March 2023, the MPSC approved a settlement agreement in Consumers’ 2021-2022 GCR reconciliation, authorizing recovery of $ 0.7 billion of gas costs and authorizing Consumers to reflect in its 2022-2023 GCR reconciliation the underrecovery of $ 9 million. In June 2023, Consumers filed its 2022-2023 GCR reconciliation, requesting full recovery of $ 1.1 billion of gas costs and authorization to reflect in its 2023-2024 GCR reconciliation the underrecovery of $ 15 million. Consumers submitted its 2023-2024 GCR plan to the MPSC in December 2022 and self-implemented its proposed 2023-2024 GCR charge in April 2023. 3: Contingencies and Commitments CMS Energy and Consumers are involved in various matters that give rise to contingent liabilities. Depending on the specific issues, the resolution of these contingencies could negatively affect CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. In their disclosures of these matters, CMS Energy and Consumers provide an estimate of the possible loss or range of loss when such an estimate can be made. Disclosures stating that CMS Energy or Consumers cannot predict the outcome of a matter indicate that they are unable to estimate a possible loss or range of loss for the matter. CMS Energy Contingencies Bay Harbor: CMS Land retained environmental remediation obligations for the collection and treatment of leachate at Bay Harbor after selling its interests in the development in 2002. Leachate is produced when water enters into cement kiln dust piles left over from former cement plant operations at the site. In 2012, CMS Land and EGLE finalized an agreement establishing the final remedies and the future water quality criteria at the site. CMS Land completed all construction necessary to implement the remedies required by the agreement and will continue to maintain and operate a system to discharge treated leachate into Little Traverse Bay under an NPDES permit, which is valid through 2025. At December 31, 2023, CMS Energy had a recorded liability of $ 45 million for its remaining obligations for environmental remediation. CMS Energy calculated this liability based on discounted projected costs, using a discount rate of 4.34 percent and an inflation rate of one percent on annual operating and 118 Table of Contents maintenance costs. The undiscounted amount of the remaining obligation is $ 57 million. CMS Energy expects to pay the following amounts for long-term leachate disposal and operating and maintenance costs in each of the next five years: In Millions 2024 2025 2026 2027 2028 CMS Energy Long-term leachate disposal and operating and maintenance costs $ 4 $ 4 $ 4 $ 4 $ 4 CMS Energy’s estimate of response activity costs and the timing of expenditures could change if there are changes in circumstances or assumptions used in calculating the liability. Although a liability for its present estimate of remaining response activity costs has been recorded, CMS Energy cannot predict the ultimate financial impact or outcome of this matter. Consumers Electric Utility Contingencies Electric Environmental Matters: Consumers’ operations are subject to environmental laws and regulations. Historically, Consumers has generally been able to recover, in customer rates, the costs to operate its facilities in compliance with these laws and regulations. Cleanup and Solid Waste: Consumers expects to incur remediation and other response activity costs at a number of sites under NREPA. Consumers believes that these costs should be recoverable in rates, but cannot guarantee that outcome. Consumers estimates its liability for NREPA sites for which it can estimate a range of loss to be between $ 2 million and $ 4 million. At December 31, 2023, Consumers had a recorded liability of $ 2 million, the minimum amount in the range of its estimated probable NREPA liability, as no amount in the range was considered a better estimate than any other amount. Consumers is a potentially responsible party at a number of contaminated sites administered under CERCLA. CERCLA liability is joint and several. In 2010, Consumers received official notification from the EPA that identified Consumers as a potentially responsible party for cleanup of PCBs at the Kalamazoo River CERCLA site. The notification claimed that the EPA had reason to believe that Consumers disposed of PCBs and arranged for the disposal and treatment of PCB-containing materials at portions of the site. In 2011, Consumers received a follow-up letter from the EPA requesting that Consumers agree to participate in a removal action plan along with several other companies for an area of lower Portage Creek, which is connected to the Kalamazoo River. All parties asked to participate in the removal action plan, including Consumers, declined to accept liability. Until further information is received from the EPA, Consumers is unable to estimate a range of potential liability for cleanup of the river. Based on its experience, Consumers estimates its share of the total liability for known CERCLA sites to be between $ 3 million and $ 8 million. Various factors, including the number and creditworthiness of potentially responsible parties involved with each site, affect Consumers’ share of the total liability. At December 31, 2023, Consumers had a recorded liability of $ 3 million for its share of the total liability at these sites, the minimum amount in the range of its estimated probable CERCLA liability, as no amount in the range was considered a better estimate than any other amount. The timing of payments related to Consumers’ remediation and other response activities at its CERCLA and NREPA sites is uncertain. Consumers periodically reviews these cost estimates. A change in the underlying assumptions, such as an increase in the number of sites, different remediation techniques, the 119 Table of Contents nature and extent of contamination, and legal and regulatory requirements, could affect its estimates of NREPA and CERCLA liability. Ludington Overhaul Contract Dispute: Consumers and DTE Electric, co-owners of Ludington, are parties to a 2010 engineering, procurement, and construction agreement with TAES, under which TAES contracted to perform a major overhaul and upgrade of Ludington. The overhauled Ludington units are operational, but TAES’ work has been defective and non ‑ conforming. Consumers and DTE Electric have demanded that TAES provide a comprehensive plan to resolve those matters, including adherence to its warranty commitments and other contractual obligations. Consumers and DTE Electric have taken extensive efforts to resolve these issues with TAES, including a formal demand to TAES’ parent, Toshiba, under a parent guaranty it provided. TAES has not provided a comprehensive plan or otherwise met its performance obligations. In order to enforce the contract, Consumers and DTE Electric filed a complaint against TAES and Toshiba in the U.S. District Court for the Eastern District of Michigan in April 2022. In June 2022, TAES and Toshiba filed a motion to dismiss the complaint, along with an answer and counterclaims seeking approximately $ 15 million in damages related to payments allegedly owed under the parties’ contract. As a co-owner of Ludington, Consumers would be liable for 51 percent of any such damages, if liability and damages were proven. In September 2022, the court denied the motion to dismiss filed by TAES and Toshiba. The parties are engaged in ongoing litigation, including discovery, pursuant to a court-ordered schedule. Consumers believes the counterclaims filed by TAES and Toshiba are without merit, but cannot predict the financial impact or outcome of this matter. An unfavorable outcome could have a material adverse effect on CMS Energy’s and Consumers’ financial condition, results of operations, or liquidity. Toshiba has announced that, through a common stock purchase, TBJH became the majority shareholder and new parent company of Toshiba. TBJH is a subsidiary of a Japanese private equity firm. Consumers and DTE Electric continue to monitor this development, but do not believe that this affects their rights under the parent guaranty provided by Toshiba. In May 2023, the MPSC approved Consumers’ and DTE Electric’s jointly-filed request for authority to defer as a regulatory asset the costs associated with repairing or replacing the defective work performed by TAES while the litigation with TAES and Toshiba moves forward; such costs will be offset by potential future litigation proceeds received from TAES or Toshiba. Consumers and DTE Electric will have the opportunity to seek appropriate recovery and ratemaking treatment for amounts recorded as a regulatory asset following resolution of the litigation, but cannot predict the financial impact or outcome of such proceedings. J.H. Campbell 3 Plant Retirement Contract Dispute: In May 2022, Consumers filed a complaint against Wolverine Power in the Ottawa County Circuit Court and requested a ruling that Consumers has sole authority to decide to retire the J.H. Campbell 3 coal-fueled generating unit under the unit’s Joint Ownership and Operating Agreement. In July 2022, Wolverine Power filed an answer, affirmative defenses, and a counterclaim seeking approximately $ 37 million in damages allegedly caused by Consumers’ decision to retire the unit before the end of its useful life. In October 2022, the state circuit court judge found that Consumers may, in its sole discretion, retire the J.H. Campbell 3 coal-fueled generating unit, provided that Consumers continues to operate and make necessary improvements to the unit while the litigation concerning Wolverine Power’s claim for damages is pending. In May 2023, the circuit court judge issued an order granting Consumers’ Motion for Clarification confirming that Consumers may continue to operate and invest in J.H. Campbell 3 consistent with the May 2025 retirement date. Consumers believes Wolverine Power’s claim has no merit, but cannot predict the final impact or outcome on this matter. An unfavorable outcome could have a material adverse effect on CMS Energy’s and Consumers’ financial condition, results of operations, or liquidity. 120 Table of Contents Consumers Gas Utility Contingencies Gas Environmental Matters: Consumers expects to incur remediation and other response activity costs at a number of sites under NREPA. These sites include 23 former MGP facilities. Consumers operated the facilities on these sites for some part of their operating lives. For some of these sites, Consumers has no present ownership interest or may own only a portion of the original site. At December 31, 2023, Consumers had a recorded liability of $ 62 million for its remaining obligations for these sites. Consumers expects to pay the following amounts for remediation and other response activity costs in each of the next five years: In Millions 2024 2025 2026 2027 2028 Consumers Remediation and other response activity costs $ 2 $ 1 $ 7 $ 10 $ 25 Consumers periodically reviews these cost estimates. Any significant change in the underlying assumptions, such as an increase in the number of sites, changes in remediation techniques, or legal and regulatory requirements, could affect Consumers’ estimates of annual response activity costs and the MGP liability. Pursuant to orders issued by the MPSC, Consumers defers its MGP-related remediation costs and recovers them from its customers over a ten-year period. At December 31, 2023, Consumers had a regulatory asset of $ 99 million related to the MGP sites. Consumers estimates that its liability to perform remediation and other response activities at NREPA sites other than the MGP sites could reach $ 1 million. At December 31, 2023, Consumers had a recorded liability of less than $ 1 million, the minimum amount in the range of its estimated probable liability, as no amount in the range was considered a better estimate than any other amount. Guarantees Presented in the following table are CMS Energy’s and Consumers’ guarantees at December 31, 2023: In Millions Guarantee Description Issue Date Expiration Date Maximum Obligation Carrying Amount CMS Energy, including Consumers Indemnity obligations from sale of membership interests in VIEs 1 various indefinite $ 304 $ — Indemnity obligations from stock and asset sale agreements 2 various indefinite 153 1 Guarantee 3 2011 indefinite 30 — Consumers Guarantee 3 2011 indefinite $ 30 $ — 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 121 Table of Contents obligations are generally capped at an amount equal to the tax equity investor’s capital contributions plus a specified return, less any distributions and tax benefits it receives, in connection with its membership interest. For any indemnity obligations related to Aviator Wind, NorthStar Clean Energy would recover 49 percent of any amounts paid to the tax equity investor from the other owner of Aviator Wind Equity Holdings. Additionally, Aviator Wind holds insurance coverage that would partially protect against losses incurred as a result of certain failures to qualify for production tax credits. For further details on NorthStar Clean Energy’s ownership interest in NWO Holdco, Aviator Wind, and Newport Solar Holdings, see Note 18, Variable Interest Entities. 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. 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. Department of Energy in connection with a settlement agreement regarding damages resulting from the department’s failure to accept spent nuclear fuel from nuclear power plants formerly owned by Consumers. Additionally, in the normal course of business, CMS Energy, Consumers, and certain other subsidiaries of CMS Energy have entered into various agreements containing tax and other indemnity provisions for which they are unable to estimate the maximum potential obligation. CMS Energy and Consumers consider the likelihood that they would be required to perform or incur substantial losses related to these indemnities and those disclosed in the table to be remote. Other Contingencies In addition to the matters disclosed in this Note and Note 2, Regulatory Matters, there are certain other lawsuits and administrative proceedings before various courts and governmental agencies, as well as unasserted claims that may result in such proceedings, arising in the ordinary course of business to which CMS Energy, Consumers, and certain other subsidiaries of CMS Energy are parties. These other lawsuits, proceedings, and unasserted claims may involve personal injury, property damage, contracts, environmental matters, federal and state taxes, rates, licensing, employment, and other matters. Further, CMS Energy and Consumers occasionally self-report certain regulatory non‑compliance matters that may or may not eventually result in administrative proceedings. CMS Energy and Consumers believe that the outcome of any one of these proceedings and potential claims will not have a material negative effect on their consolidated results of operations, financial condition, or liquidity. Contractual Commitments Purchase Obligations: Purchase obligations arise from long-term contracts for the purchase of commodities and related services, and construction and service agreements. The commodities and related services include long-term PPAs, natural gas and associated transportation, and coal and associated transportation. Related-party PPAs are between Consumers and certain affiliates of NorthStar Clean 122 Table of Contents Energy. Presented in the following table are CMS Energy’s and Consumers’ contractual purchase obligations at December 31, 2023 for each of the periods shown: In Millions Payments Due Total 2024 2025 2026 2027 2028 Beyond 2028 CMS Energy, including Consumers Total PPAs $ 7,204 $ 711 $ 792 $ 783 $ 787 $ 702 $ 3,429 Other 3,491 1,720 885 301 207 150 228 Total purchase obligations $ 10,695 $ 2,431 $ 1,677 $ 1,084 $ 994 $ 852 $ 3,657 Consumers PPAs MCV PPA $ 2,506 $ 342 $ 402 $ 416 $ 410 $ 371 $ 565 Related-party PPAs 206 60 44 30 31 14 27 Other PPAs 4,492 309 346 337 346 317 2,837 Total PPAs $ 7,204 $ 711 $ 792 $ 783 $ 787 $ 702 $ 3,429 Other 2,802 1,615 648 266 168 82 23 Total purchase obligations $ 10,006 $ 2,326 $ 1,440 $ 1,049 $ 955 $ 784 $ 3,452 MCV PPA: Consumers has a PPA with the MCV Partnership giving Consumers the right to purchase up to 1,240 MW of capacity and energy produced by the MCV Facility through May 2030. The MCV PPA provides for: • a capacity charge of $ 10.14 per MWh of available capacity through March 2025 and $ 5.00 per MWh of available capacity from March 2025 through the termination date of the PPA • a fixed energy charge of $ 6.30 per MWh for on-peak hours and $ 6.00 for off-peak hours • a variable energy charge based on the MCV Partnership’s cost of production for energy delivered to Consumers • a $ 5 million annual contribution by the MCV Partnership to a renewable resources program through March 2025 Capacity and energy charges under the MCV PPA were $ 340 million in 2023, $ 519 million in 2022, and $ 348 million in 2021. Other PPAs: Consumers has PPAs expiring through 2048 with various counterparties. The majority of the PPAs have capacity and energy charges for delivered energy. Capacity and energy charges under these PPAs were $ 498 million in 2023, $ 510 million in 2022, and $ 338 million in 2021. In addition, CMS Energy and Consumers account for several of their PPAs as leases. See Note 8, Leases for more information about CMS Energy’s and Consumers’ lease obligations. 123 Table of Contents 4: Financings and Capitalization Presented in the following table is CMS Energy’s long-term debt at December 31: In Millions Interest Rate (%) Maturity 2023 2022 CMS Energy, including Consumers CMS Energy, parent only Senior notes 3.875 2024 $ 250 $ 250 3.600 2025 250 250 3.000 2026 300 300 2.950 2027 275 275 3.450 2027 350 350 4.700 2043 250 250 4.875 2044 300 300 $ 1,975 $ 1,975 Convertible senior notes 3.375 2028 800 — $ 800 $ — Junior subordinated notes 1 4.750 2 2050 500 500 3.750 3 2050 400 400 5.625 2078 200 200 5.875 2078 280 280 5.875 2079 630 630 $ 2,010 $ 2,010 Total CMS Energy, parent only $ 4,785 $ 3,985 CMS Energy subsidiaries Consumers 10,863 $ 10,277 NorthStar Clean Energy, including subsidiaries Term loan facility variable 2023 — 100 Total principal amount outstanding $ 15,648 $ 14,362 Current amounts ( 975 ) ( 1,090 ) Unamortized discounts ( 30 ) ( 30 ) Unamortized issuance costs ( 135 ) ( 120 ) Total long-term debt $ 14,508 $ 13,122 1 These unsecured obligations rank subordinate and junior in right of payment to all of CMS Energy’s existing and future senior indebtedness. 2 On June 1, 2030, and every five years thereafter, the notes will reset to an interest rate equal to the five-year treasury rate plus 4.116 percent. 3 On December 1, 2030, and every five years thereafter, the notes will reset to an interest rate equal to the five‑year treasury rate plus 2.900 percent. 124 Table of Contents Presented in the following table is Consumers’ long-term debt at December 31: In Millions Interest Rate (%) Maturity 2023 2022 Consumers First mortgage bonds 0.350 2023 $ — $ 300 3.375 2023 — 325 3.125 2024 250 250 3.190 2024 52 52 5.240 2026 115 — 3.680 2027 100 100 3.390 2027 35 35 4.650 2028 425 — 3.800 2028 300 300 4.900 2029 500 — 5.070 2029 50 — 5.170 2032 95 — 3.600 2032 350 350 3.180 2032 100 100 4.625 2033 700 — 5.800 2035 175 175 5.380 2037 140 — 3.520 2037 335 335 4.010 2038 215 215 6.170 2040 50 50 4.970 2040 50 50 4.310 2042 263 263 3.950 2043 425 425 4.100 2045 250 250 3.250 2046 450 450 3.950 2047 350 350 4.050 2048 550 550 4.350 2049 550 550 3.750 2050 300 300 3.100 2050 550 550 3.500 2051 575 575 2.650 2052 300 300 4.200 2052 450 450 3.860 2052 50 50 4.280 2057 185 185 2.500 2060 525 525 4.350 2064 250 250 variable 1 2069 76 76 variable 1 2070 134 134 variable 1 2070 127 127 125 Table of Contents In Millions Interest Rate (%) Maturity 2023 2022 $ 10,397 $ 8,997 Tax-exempt revenue bonds 0.875 2 2035 35 35 1.800 3 2049 75 75 $ 110 $ 110 2014 Securitization bonds 3.421 4 2025-2029 5 $ 141 $ 170 2023 Securitization bonds 5.342 6 2028-2031 5 646 — $ 787 $ 170 Term loan facility variable 2024 — 1,000 Total principal amount outstanding $ 11,294 $ 10,277 Current amounts ( 725 ) ( 991 ) Long-term debt – related parties 7 principal amount outstanding 2050-2060 ( 431 ) — Unamortized discounts ( 28 ) ( 27 ) Unamortized issuance costs ( 73 ) ( 67 ) Total long-term debt $ 10,037 $ 9,192 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. The holders of these variable-rate bonds may put them to Consumers for redemption on certain dates prior to their stated maturity, including dates within one year of December 31, 2023. 2 The interest rate on these tax-exempt revenue bonds will reset on October 8, 2026. 3 The interest rate on these tax‑exempt revenue bonds will reset on October 1, 2024. 4 The weighted-average interest rate for Consumers’ securitization bonds issued through its subsidiary, Consumers 2014 Securitization Funding, was 3.421 percent at December 31, 2023 and 3.343 percent at December 31, 2022. 5 Principal and interest payments are made semiannually. 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. 126 Table of Contents CMS Energy’s Purchase of Consumers’ First Mortgage Bonds: Presented in the following table is Consumers’ long-term debt—related parties at December 31, 2023: Principal (In Millions) Interest Rate (%) First mortgage bonds due 2060 $ 163 2.500 First mortgage bonds due 2052 106 2.650 First mortgage bonds due 2050 23 3.750 First mortgage bonds due 2050 52 3.100 First mortgage bonds due 2051 27 3.500 First mortgage bonds due 2048 60 4.050 Total principal amount outstanding $ 431 Unamortized discounts ( 3 ) Unamortized issuance costs ( 4 ) Total long-term debt — related parties $ 424 During 2023, CMS Energy purchased these Consumers’ first mortgage bonds for $ 293 million. On a consolidated basis, CMS Energy’s repurchase of Consumers’ first mortgage bonds was accounted for as a debt extinguishment and resulted in a pre-tax gain of $ 131 million. Interest expense related to the repurchased bonds was $ 5 million for the year ended December 31, 2023. 127 Table of Contents Financings: Presented in the following table is a summary of major long-term debt issuances during 2023: Principal (In Millions) Interest Rate (%) Issuance Date Maturity Date CMS Energy, parent only Convertible senior notes $ 800 3.375 May 2023 May 2028 Total CMS Energy, parent only $ 800 NorthStar Clean Energy, including subsidiaries Term loan facility 1 $ 85 variable February 2023 November 2023 Total NorthStar Clean Energy, including subsidiaries $ 85 Consumers First mortgage bonds $ 425 4.650 January 2023 March 2028 First mortgage bonds 700 4.625 February 2023 May 2033 First mortgage bonds 115 5.240 May 2023 May 2026 First mortgage bonds 50 5.070 May 2023 May 2029 First mortgage bonds 95 5.170 May 2023 May 2032 First mortgage bonds 140 5.380 May 2023 May 2037 First mortgage bonds 500 4.900 August 2023 February 2029 2023 Securitization bonds 2 250 5.550 December 2023 March 2028 2023 Securitization bonds 2 396 5.210 December 2023 September 2031 Total Consumers $ 2,671 Total CMS Energy $ 3,556 1 In December 2022, a subsidiary of NorthStar Clean Energy entered into a $ 185 million unsecured term loan credit agreement. Under this credit agreement, a subsidiary of NorthStar Clean Energy borrowed $ 85 million in 2023. 2 For additional details on the securitization, see Note 2, Regulatory Matters— Securitized Costs. In January 2024, Consumers issued $ 600 million of first mortgage bonds that mature in May 2029 and bear interest at a rate of 4.600 percent. The proceeds of the bonds will be used for general corporate purposes. Issuance of Convertible Senior Notes: In May 2023, CMS Energy issued an aggregate principal amount of $ 800 million convertible senior notes that bear an interest rate of 3.375 percent and mature in May 2028 unless redeemed, repurchased, or converted earlier. Unamortized debt costs associated with this issuance were $ 12 million at December 31, 2023. The convertible senior notes rank equal in right of payment to any of CMS Energy’s unsecured indebtedness that is not subordinated. There are no sinking fund requirements for the notes. Holders of the convertible senior notes may convert their notes at their option in accordance with the conditions outlined in the related indenture. CMS Energy will settle conversions of the notes by paying cash up to the aggregate principal amount of the notes to be converted and paying or delivering, as the case may be, cash, shares of CMS Energy common stock, or a combination of cash and shares of CMS Energy common stock, at its election, in respect of the remainder, if any, of its conversion obligation in excess of the aggregate principal amount of the notes being converted. The conversion rate will be subject to adjustment for anti-dilutive events and fundamental change and redemption provisions 128 Table of Contents as described in the related indenture. At December 31, 2023, the conversion price for the notes was $ 73.97 per share of common stock. CMS Energy may redeem for cash all or any portion of the notes, at its option, on or after May 6, 2026 if the last reported sale price of its common stock has been at least 130 percent of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period. Holders of the convertible senior notes may require CMS Energy to repurchase for cash all or any portion of their notes if a fundamental change, as outlined in the related indenture, occurs. In both cases, CMS Energy will redeem or repurchase the notes at a price equal to 100 percent of the principal amount of the notes to be redeemed or repurchased, plus accrued and unpaid interest. Retirements: Presented in the following table is a summary of major long-term debt retirements during 2023: Principal (In Millions) Interest Rate (%) Retirement Date Maturity Date NorthStar Clean Energy, including subsidiaries Term loan facility $ 185 variable November 2023 November 2023 Total NorthStar Clean Energy, including subsidiaries $ 185 Consumers Term loan facility $ 1,000 variable February 2023 January 2024 First mortgage bonds 300 0.350 June 2023 June 2023 First mortgage bonds 325 3.375 August 2023 August 2023 Total Consumers $ 1,625 In January 2024, CMS Energy retired $ 250 million of its senior notes bearing an interest rate of 3.875 percent and an original maturity date of March 2024. Regulatory Authorization for Financings: Consumers is required to maintain FERC authorization for financings. Its current authorization ends on March 31, 2025. Any long-term issuances during the authorization period are exempt from FERC’s competitive bidding and negotiated placement requirements. First Mortgage Bonds: Consumers secures its first mortgage bonds by a mortgage and lien on substantially all of its property. Consumers’ ability to issue first mortgage bonds is restricted by certain provisions in the First Mortgage Bond Indenture and the need for regulatory approvals under federal law. Restrictive issuance provisions in the First Mortgage Bond Indenture include achieving a two ‑ times interest coverage ratio and having sufficient unfunded net property additions. Securitization Bonds: Certain regulatory assets held by Consumers’ subsidiaries, Consumers 2014 Securitization Funding and Consumers 2023 Securitization Funding, collateralize Consumers’ securitization bonds. Consumers 2014 Securitization Funding and Consumers 2023 Securitization Funding are distinct subsidiaries. The bondholders of each entity have no recourse to the other’s assets or the assets of Consumers. Consumers collects securitization surcharges to cover the principal and interest on the bonds as well as certain other qualified costs. The surcharges collected by Consumers on behalf of each entity are remitted to that subsidiary’s account and are not available to creditors of Consumers or creditors of Consumers’ affiliates other than the subsidiary that issued the bonds. 129 Table of Contents Debt Maturities: At December 31, 2023, the aggregate annual maturities for long-term debt for the next five years, based on stated maturities or earlier put dates, were: In Millions 2024 2025 2026 2027 2028 CMS Energy, including Consumers Long-term debt CMS Energy, parent only $ 250 $ 250 $ 300 $ 625 $ 800 Consumers 725 116 237 263 843 Total CMS Energy 1 $ 975 $ 366 $ 537 $ 888 $ 1,643 Consumers Long-term debt $ 725 $ 116 $ 237 $ 263 $ 843 Credit Facilities: The following credit facilities with banks were available at December 31, 2023: In Millions Expiration Date Amount of Facility Amount Borrowed Letters of Credit Outstanding Amount Available CMS Energy, parent only December 14, 2027 1 $ 550 $ — $ 24 $ 526 September 22, 2024 50 — 50 — NorthStar Clean Energy, including subsidiaries September 25, 2025 2 $ 37 $ — $ 37 $ — Consumers 3 December 14, 2027 $ 1,100 $ — $ 27 $ 1,073 November 18, 2025 250 — 48 202 1 There were no borrowings under this facility during the year ended December 31, 2023. 2 This letter of credit facility is available to Aviator Wind Equity Holdings. For more information regarding Aviator Wind Equity Holdings, see Note 18, Variable Interest Entities. 3 Obligations under these facilities are secured by first mortgage bonds of Consumers. There were no borrowings under these facilities during the year ended December 31, 2023. Short-term Borrowings: Under Consumers’ commercial paper program, Consumers may issue, in one or more placements, investment-grade commercial paper notes with maturities of up to 365 days at market interest rates. These issuances are supported by Consumers’ revolving credit facilities and may have an aggregate principal amount outstanding of up to $ 500 million. While the amount of outstanding commercial paper does not reduce the available capacity of the revolving credit facilities, Consumers does not intend to issue commercial paper in an amount exceeding the available capacity of the facilities. At December 31, 2023, there were $ 93 million of commercial paper notes outstanding under this program with a weighted-average annual interest rate of 5.609 percent, recorded as current notes payable on the consolidated balance sheets of CMS Energy and Consumers. In December 2023, Consumers renewed a short-term credit agreement with CMS Energy, permitting Consumers to borrow up to $ 500 million at an interest rate of the prior month’s average one-month Term SOFR minus 0.100 percent. At December 31, 2023, there were no outstanding borrowings under the agreement. 130 Table of Contents Consumers’ Supplier Financing Program: Under a supplier financing program, Consumers agrees to pay a bank, acting as its payment agent, the stated amount of confirmed invoices from participating suppliers on the original maturity dates of the invoices. The supplier invoices that have been confirmed as valid under the program require payment in full within 60 days of the invoice date. Consumers does not provide collateral or a guarantee to the bank in support of its payment obligations under the agreement, nor does it pay a fee for the service. Consumers or the bank may terminate the supplier financing program agreement upon 30 days prior written notice to the other party. There were no trade payables outstanding under the program in accounts payable on CMS Energy’s and Consumers’ consolidated balance sheets at December 31, 2023, and less than $ 1 million at December 31, 2022. Dividend Restrictions: At December 31, 2023, payment of dividends by CMS Energy on its common stock was limited to $ 7.3 billion under provisions of the Michigan Business Corporation Act of 1972. Under the provisions of its articles of incorporation, at December 31, 2023, Consumers had $ 2.1 billion of unrestricted retained earnings available to pay dividends on its common stock to CMS Energy. Provisions of the Federal Power Act and the Natural Gas Act appear to restrict dividends payable by Consumers to the amount of Consumers’ retained earnings. Several decisions from FERC suggest that, under a variety of circumstances, dividends from Consumers on its common stock would not be limited to amounts in Consumers’ retained earnings. Any decision by Consumers to pay dividends on its common stock in excess of retained earnings would be based on specific facts and circumstances and would be subject to a formal regulatory filing process. During the year ended December 31, 2023, Consumers paid $ 695 million in dividends on its common stock to CMS Energy. Capitalization: The authorized capital stock of CMS Energy consists of: • 350 million shares of CMS Energy Common Stock, par value $ 0.01 per share • 10 million shares of CMS Energy Preferred Stock, par value $ 0.01 per share Issuance of Common Stock: In 2023, CMS Energy entered into an equity offering program under which it may sell shares of its common stock having an aggregate sales price of up to $ 1 billion in privately negotiated transactions, in “at the market” offerings, or through forward sales transactions. There have been no sales of securities under this program. In November 2023, CMS Energy partially settled a forward contract, issued under its previous equity offering program, by issuing shares of its common stock at a weighted-average price of $ 68.05 per share, resulting in net proceeds of $ 178 million. Presented in the following table are details of CMS Energy’s forward sales contracts under its equity offering program at December 31, 2023: Forward Price Per Share Contract Date Maturity Date Number of Shares Initial December 31, 2023 August 3, 2022 December 31, 2024 328,207 $ 67.59 $ 68.37 August 24, 2022 December 31, 2024 1,677,938 69.46 70.91 August 29, 2022 December 31, 2024 1,783,388 68.18 69.54 Under these contracts, CMS Energy may either settle physically by issuing shares of its common stock at the then-applicable forward sale price specified by the agreement or settle net by delivering or receiving 131 Table of Contents cash or shares. CMS Energy may settle the contracts at any time through their maturity dates, and presently intends to physically settle the contracts by delivering shares of its common stock. The initial forward price in the forward equity sale contracts includes a deduction for commissions and will be adjusted on a daily basis over the term based on an interest rate factor and decreased on certain dates by certain predetermined amounts to reflect expected dividend payments. No amounts are recorded on CMS Energy’s consolidated balance sheets until settlements of the forward equity sale contracts occur. If CMS Energy had elected to net share settle or net cash settle the contracts as of December 31, 2023, CMS Energy would not have been required to deliver shares or pay cash. In January 2024, CMS Energy settled the remaining forward sale contracts issued under its previous equity offering program by issuing shares at a weighted average price of $ 70.31 p er share, resulting in net proceeds o f $ 266 million. Preferred Stock: CMS Energy’s Series C preferred stock is traded on the New York Stock Exchange under the symbol CMS PRC. Depositary shares represent a 1/1000th interest in a share of its Series C preferred stock. The Series C preferred stock has no maturity or mandatory redemption date and is not redeemable at the option of the holders. CMS Energy may, at its option, redeem the Series C preferred stock, in whole or in part, at any time on or after July 15, 2026. The Series C preferred stock ranks senior to CMS Energy’s common stock with respect to dividend rights and distribution rights upon liquidation. Presented in the following table are details of CMS Energy’s Series C preferred stock at December 31, 2023 and 2022: Depositary Share Par Value Depositary Share Optional Redemption Price Number of Depositary Shares Authorized Number of Depositary Shares Outstanding Cumulative, redeemable perpetual $ 25 $ 25 9,200,000 9,200,000 Preferred Stock of Subsidiary: Consumers’ preferred stock is traded on the New York Stock Exchange under the symbol CMS-PB . Presented in the following table are details of Consumers’ preferred stock at December 31, 2023 and 2022: Par Value Optional Redemption Price Number of Shares Authorized Number of Shares Outstanding Cumulative, with no mandatory redemption $ 100 $ 110 7,500,000 373,148 5: Fair Value Measurements Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. When measuring fair value, CMS Energy and Consumers are required to incorporate all assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. A fair value hierarchy prioritizes inputs used to measure fair value according to their observability in the market. The three levels of the fair value hierarchy are as follows: • Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities. • Level 2 inputs are observable, market-based inputs, other than Level 1 prices. Level 2 inputs may include quoted prices for similar assets or liabilities in active markets, quoted prices in inactive markets, and inputs derived from or corroborated by observable market data. 132 Table of Contents • Level 3 inputs are unobservable inputs that reflect CMS Energy’s or Consumers’ own assumptions about how market participants would value their assets and liabilities. CMS Energy and Consumers classify fair value measurements within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement in its entirety. Assets and Liabilities Measured at Fair Value on a Recurring Basis Presented in the following table are CMS Energy’s and Consumers’ assets and liabilities recorded at fair value on a recurring basis: In Millions CMS Energy, including Consumers Consumers December 31 2023 2022 2023 2022 Assets 1 Cash equivalents $ 18 $ — $ — $ — Restricted cash equivalents 21 18 21 17 Nonqualified deferred compensation plan assets 30 24 22 18 Derivative instruments 2 2 2 2 Total assets $ 71 $ 44 $ 45 $ 37 Liabilities 1 Nonqualified deferred compensation plan liabilities $ 30 $ 24 $ 22 $ 18 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 3. Cash Equivalents: Cash equivalents and restricted cash equivalents consist of money market funds with daily liquidity. Nonqualified Deferred Compensation Plan Assets and Liabilities: The nonqualified deferred compensation plan assets consist of mutual funds, which are bought and sold only at the discretion of plan participants.The assets are valued using the daily quoted net asset values. CMS Energy and Consumers value their nonqualified deferred compensation plan liabilities based on the fair values of the plan assets, as they reflect the amount owed to the plan participants in accordance with their investment elections. CMS Energy and Consumers report the assets in other non‑current assets and the liabilities in other non‑current liabilities on their consolidated balance sheets. Derivative Instruments: CMS Energy and Consumers value their derivative instruments using either a market approach that incorporates information from market transactions, or an income approach that discounts future expected cash flows to a present value amount. CMS Energy’s and Consumers’ derivatives are classified as Level 3. The majority of derivatives classified as Level 3 are FTRs held by Consumers. Due to the lack of quoted pricing information, Consumers determines the fair value of its FTRs based on Consumers’ average historical settlements. There was no material activity within the Level 3 categories of assets and liabilities during the periods presented. 133 Table of Contents 6: Financial Instruments Presented in the following table are the carrying amounts and fair values, by level within the fair value hierarchy, of CMS Energy’s and Consumers’ financial instruments that are not recorded at fair value. The table excludes cash, cash equivalents, short-term financial instruments, and trade accounts receivable and payable whose carrying amounts approximate their fair values. For information about assets and liabilities recorded at fair value and for additional details regarding the fair value hierarchy, see Note 5, Fair Value Measurements. In Millions December 31, 2023 December 31, 2022 Carrying Amount Fair Value Carrying Amount Fair Value Total Level Total Level 1 2 3 1 2 3 CMS Energy, including Consumers Assets Long-term receivables 1 $ 11 $ 11 $ — $ — $ 11 $ 14 $ 14 $ — $ — $ 14 Liabilities Long-term debt 2 15,483 14,305 1,103 11,186 2,016 14,212 12,384 987 8,741 2,656 Long-term payables 3 11 11 — — 11 9 7 — — 7 Consumers Assets Long-term receivables 1 $ 11 $ 11 $ — $ — $ 11 $ 14 $ 14 $ — $ — $ 14 Notes receivable – related party 4 97 97 — — 97 101 101 — — 101 Liabilities Long-term debt 5 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. 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. 134 Table of Contents Notes receivable – related party represents Consumers’ portion of the DB SERP demand note payable issued by CMS Energy to the DB SERP rabbi trust. The demand note bears interest at an annual rate of 4.10 percent and has a maturity date of 2028. 7: Plant, Property, and Equipment Presented in the following table are details of CMS Energy’s and Consumers’ plant, property, and equipment: In Millions December 31 Estimated Depreciable Life in Years 2023 2022 CMS Energy, including Consumers Plant, property, and equipment, gross Consumers 3 – 125 $ 31,723 $ 29,342 NorthStar Clean Energy Independent power production 1 3 – 40 1,387 1,124 Assets under finance leases 2 24 24 Other 3 – 5 1 1 Plant, property, and equipment, gross $ 33,135 $ 30,491 Construction work in progress 944 1,182 Accumulated depreciation and amortization ( 9,007 ) ( 8,960 ) Total plant, property, and equipment 3 $ 25,072 $ 22,713 Consumers Plant, property, and equipment, gross Electric Generation 15 – 125 $ 6,511 $ 5,780 Distribution 15 – 75 11,339 10,590 Other 5 – 55 1,355 1,374 Assets under finance leases 2 97 126 Gas Distribution 20 – 85 7,452 6,951 Transmission 17 – 75 2,806 2,440 Underground storage facilities 4 27 – 75 1,295 1,197 Other 5 – 55 815 835 Assets under finance leases 2 15 20 Other non-utility property 3 – 51 38 29 Plant, property, and equipment, gross $ 31,723 $ 29,342 Construction work in progress 845 994 Accumulated depreciation and amortization ( 8,796 ) ( 8,791 ) Total plant, property, and equipment 2 $ 23,772 $ 21,545 1 A portion of independent power production assets are leased to others under operating leases. For information regarding CMS Energy’s operating leases of owned assets, see Note 8, Leases. 2 For information regarding the amortization terms of CMS Energy’s and Consumers’ assets under finance leases, see Note 8, Leases. 135 Table of Contents 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 transfers to held for sale, were $ 856 million for the year ended December 31, 2023 and $ 290 million for the year ended December 31, 2022. Consumers plans to retire the J.H. Campbell coal-fueled generating units in 2025. Accordingly, in 2022, Consumers removed from total plant, property, and equipment an amount of $ 1.3 billion, representing the projected remaining book value of the electric generating units upon their retirement, and recorded it as a regulatory asset. For additional details, see Note 2, Regulatory Matters. 4 Underground storage includes base natural gas of $ 26 million at December 31, 2023 and 2022. Base natural gas is not subject to depreciation. Asset Acquisition: In May 2023, Consumers purchased the Covert Generating Station, a natural gas-fueled generating facility with 1,200 MW of nameplate capacity in Van Buren County, Michigan for $ 810 million. In August 2023, Consumers paid an additional $ 2 million as a result of a post-closing adjustment required under the purchase agreement. Consumers accounted for the purchase as an asset acquisition, allocating the purchase price to the assets acquired and liabilities assumed based on their relative fair value. The original cost of the plant was $ 665 million and the seller had recognized $ 225 million of accumulated depreciation. Upon acquisition, Consumers recorded the net book value of $ 440 million and a plant acquisition adjustment of $ 370 million, resulting in an increase to plant, property, and equipment of $ 810 million. The remainder of the purchase price was allocated among various working capital accounts. Intangible Assets: Included in net plant, property, and equipment are intangible assets. Presented in the following table are details about Consumers’ intangible assets: In Millions Description Amortization Life in Years December 31, 2023 December 31, 2022 Gross Cost 1 Accumulated Amortization Gross Cost 1 Accumulated Amortization Consumers Software development 3 – 15 $ 772 $ 543 $ 846 $ 593 Rights of way 50 – 85 229 64 218 61 Franchises and consents 5 – 50 16 11 16 10 Leasehold improvements various 2 11 7 9 6 Other intangibles various 24 15 25 16 Total $ 1,052 $ 640 $ 1,114 $ 686 1 Consumers’ intangible asset additions were $ 80 million for the year ended December 31, 2023 and $ 116 million for the year ended December 31, 2022. Consumers’ intangible asset retirements were $ 142 million for the year ended December 31, 2023 and $ 104 million for the year ended December 31, 2022. 2 Leasehold improvements are amortized over the life of the lease, which may change whenever the lease is renewed or extended. Capitalization: CMS Energy and Consumers record plant, property, and equipment at original cost when placed into service. The cost includes labor, material, applicable taxes, overhead such as pension and other benefits, and AFUDC, if applicable. Consumers’ plant, property, and equipment is generally recoverable through its general ratemaking process. 136 Table of Contents With the exception of utility property for which the remaining book value has been securitized, mothballed utility property stays in rate base and continues to be depreciated at the same rate as before the mothball period. When utility property is retired or otherwise disposed of in the ordinary course of business, Consumers records the original cost to accumulated depreciation, along with associated cost of removal, net of salvage. CMS Energy and Consumers recognize gains or losses on the retirement or disposal of non‑regulated assets in income. Consumers records cost of removal collected from customers, but not spent, as a regulatory liability. Software: CMS Energy and Consumers capitalize the costs to purchase and develop internal-use computer software. These costs are expensed evenly over the estimated useful life of the internal-use computer software. If computer software is integral to computer hardware, then its cost is capitalized and depreciated with the hardware. AFUDC: Consumers capitalizes AFUDC on regulated major construction projects. AFUDC represents the estimated cost of debt and authorized return-on-equity funds used to finance construction additions. Consumers records the offsetting credit as a reduction of interest for the amount representing the borrowed funds component and as other income for the equity funds component on the consolidated statements of income. When construction is completed and the property is placed in service, Consumers depreciates and recovers the capitalized AFUDC from customers over the life of the related asset. Presented in the following table are Consumers’ average AFUDC capitalization rates: Years Ended December 31 2023 2022 2021 Electric 6.5 % 6.2 % 6.2 % Gas 5.8 5.6 5.6 Assets Under Finance Leases: Presented in the following table are further details about changes in CMS Energy’s and Consumers’ assets under finance leases: In Millions Years Ended December 31 2023 2022 CMS Energy, including Consumers Balance at beginning of period $ 170 $ 332 Additions — 44 Net retirements and other adjustments ( 34 ) ( 206 ) Balance at end of period $ 136 $ 170 Consumers Balance at beginning of period $ 146 $ 332 Additions — 20 Net retirements and other adjustments ( 34 ) ( 206 ) Balance at end of period $ 112 $ 146 Assets under finance leases are presented as gross amounts. CMS Energy and Consumers’ accumulated amortization of assets under finance leases was $ 64 million at December 31, 2023 and $ 88 million at December 31, 2022. 137 Table of Contents Depreciation and Amortization: Presented in the following table are further details about CMS Energy’s and Consumers’ accumulated depreciation and amortization: In Millions Years Ended December 31 2023 2022 CMS Energy, including Consumers Utility plant assets $ 8,790 $ 8,785 Non-utility plant assets 217 175 Consumers Utility plant assets $ 8,790 $ 8,785 Non-utility plant assets 6 6 Consumers depreciates utility property on an asset-group basis, in which it applies a single MPSC-approved depreciation rate to the gross investment in a particular class of property within the electric and gas segments. Consumers performs depreciation studies periodically to determine appropriate group lives. Presented in the following table are the composite depreciation rates for Consumers’ segment properties: Years Ended December 31 2023 2022 2021 Electric utility property 3.8 % 3.7 % 3.9 % Gas utility property 2.8 2.9 2.9 Other property 7.8 8.9 9.4 CMS Energy and Consumers record property repairs and minor property replacement as maintenance expense. CMS Energy and Consumers record planned major maintenance activities as operating expense unless the cost represents the acquisition of additional long-lived assets or the replacement of an existing long-lived asset. Presented in the following table are the components of CMS Energy’s and Consumers’ depreciation and amortization expense: In Millions Years Ended December 31 2023 2022 2021 CMS Energy, including Consumers Depreciation expense – plant, property, and equipment $ 1,050 $ 990 $ 975 Amortization expense Software 92 103 108 Other intangible assets 5 5 4 Securitized regulatory assets 33 28 27 Total depreciation and amortization expense $ 1,180 $ 1,126 $ 1,114 Consumers Depreciation expense – plant, property, and equipment $ 1,007 $ 952 $ 938 Amortization expense Software 92 103 108 Other intangible assets 5 5 4 Securitized regulatory assets 33 28 27 Total depreciation and amortization expense $ 1,137 $ 1,088 $ 1,077 138 Table of Contents Presented in the following table is Consumers’ estimated amortization expense on intangible assets for each of the next five years: In Millions 2024 2025 2026 2027 2028 Consumers Intangible asset amortization expense $ 89 $ 88 $ 87 $ 81 $ 73 Jointly Owned Regulated Utility Facilities Presented in the following table are Consumers’ investments in jointly owned regulated utility facilities at December 31, 2023: In Millions, Except Ownership Share J.H. Campbell Unit 3 Ludington Other Ownership share 93.3 % 51.0 % various Utility plant in service $ 1,752 $ 619 $ 443 Accumulated provision for depreciation ( 812 ) ( 227 ) ( 97 ) Plant under construction 1 5 11 Net investment $ 941 $ 397 $ 357 Consumers includes its share of the direct expenses of the jointly owned plants in operating expenses. Consumers shares operation, maintenance, and other expenses of these jointly owned utility facilities in proportion to each participant’s undivided ownership interest. Consumers is required to provide only its share of financing for the jointly owned utility facilities. Consumers plans to retire the J.H. Campbell coal-fueled generating units and, in 2022, removed an amount representing the projected remaining book value of the electric generating units upon their retirement from total plant, property, and equipment and recorded it as a regulatory asset on its consolidated balance sheets. For additional details, see Note 2, Regulatory Matters. Consumers is engaged in ongoing litigation with Wolverine Power related to Consumers’ authority to decide to retire the J.H. Campbell 3 coal-fueled generating unit under the unit’s Joint Ownership and Operating Agreement. For additional details on this dispute, see Note 3, Contingencies and Commitments—J.H. Campbell 3 Plant Retirement Contract Dispute. Consumers and DTE Electric are engaged in ongoing litigation with TAES and Toshiba related to the 2010 engineering, procurement, and construction agreement with TAES, under which TAES contracted to perform a major overhaul and upgrade of Ludington. For additional details on this dispute, see Note 3, Contingencies and Commitments—Ludington Overhaul Contract Dispute. 139 Table of Contents 8: Leases Lessee CMS Energy and Consumers lease various assets from third parties, including coal-carrying railcars, real estate, service vehicles, and gas pipeline capacity. In addition, CMS Energy and Consumers account for several of their PPAs as leases. CMS Energy and Consumers do not record right-of-use assets or lease liabilities on their consolidated balance sheets for rentals with lease terms of 12 months or less, most of which are for the lease of real estate and service vehicles. Lease expense for these rentals is recognized on a straight-line basis over the lease term. CMS Energy and Consumers include future payments for all renewal options, fair market value extensions, and buyout provisions reasonably certain of exercise in their measurement of lease right-of-use assets and lease liabilities. In addition, certain leases for service vehicles contain end-of-lease adjustment clauses based on proceeds received from the sale or disposition of the vehicles. CMS Energy and Consumers also include executory costs in the measurement of their right-of-use assets and lease liabilities, except for maintenance costs related to their coal-carrying railcar leases. Most of Consumers’ PPAs contain provisions at the end of the initial contract terms to renew the agreements annually under mutually agreed‑upon terms at the time of renewal. Energy and capacity payments that vary depending on quantities delivered are recognized as variable lease costs when incurred. Consumers accounts for a PPA with one of CMS Energy’s equity method subsidiaries as a finance lease. 140 Table of Contents Presented in the following table is information about CMS Energy’s and Consumers’ lease right-of-use assets and lease liabilities: In Millions, Except as Noted CMS Energy, including Consumers Consumers December 31 2023 2022 2023 2022 Operating leases Right-of-use assets 1 $ 26 $ 31 $ 23 $ 27 Lease liabilities Current lease liabilities 2 4 4 4 4 Non-current lease liabilities 3 22 27 19 23 Finance leases Right-of-use assets 71 82 48 58 Lease liabilities 4 Current lease liabilities 5 9 5 9 Non-current lease liabilities 62 68 39 45 Weighted-average remaining lease term (in years) Operating leases 19 20 18 18 Finance leases 19 18 11 10 Weighted-average discount rate Operating leases 5.2 % 4.0 % 5.3 % 3.9 % Finance leases 5 5.3 5.2 1.5 1.6 1 CMS Energy’s and Consumers’ operating right-of-use lease assets are reported as other non ‑ current assets on their consolidated balance sheets. 2 The current portion of CMS Energy’s and Consumers’ operating lease liabilities are reported as other current liabilities on their consolidated balance sheets. 3 The non ‑ current portion of CMS Energy’s and Consumers’ operating lease liabilities are reported as other non ‑ current liabilities on their consolidated balance sheets. 4 Includes related-party lease liabilities of $ 24 million, of which less than $ 1 million was current, at December 31, 2023 and 2022. 5 This rate excludes the impact of Consumers’ pipeline agreements and long-term PPAs accounted for as finance leases. The required capacity payments under these agreements, when compared to the underlying fair value of the leased assets, result in effective interest rates that exceed market rates for leases with similar terms. 141 Table of Contents CMS Energy and Consumers report operating, variable, and short-term lease costs as operating expenses on their consolidated statements of income, except for certain amounts that may be capitalized to other assets. Presented in the following table is a summary of CMS Energy’s and Consumers’ total lease costs: In Millions Years Ended December 31 2023 2022 CMS Energy, including Consumers Operating lease costs $ 6 $ 6 Finance lease costs Amortization of right-of-use assets 9 12 Interest on lease liabilities 15 14 Variable lease costs 107 93 Short-term lease costs 14 23 Total lease costs $ 151 $ 148 Consumers Operating lease costs $ 5 $ 6 Finance lease costs Amortization of right-of-use assets 8 12 Interest on lease liabilities 13 14 Variable lease costs 107 93 Short-term lease costs 14 22 Total lease costs $ 147 $ 147 Presented in the following table is supplemental cash flow information related to CMS Energy’s and Consumers’ lease liabilities: In Millions Years Ended December 31 2023 2022 CMS Energy, including Consumers Cash paid for amounts included in the measurement of lease liabilities Cash used in operating activities for operating leases $ 6 $ 6 Cash used in operating activities for finance leases 15 14 Cash used in financing activities for finance leases 8 13 Lease liabilities arising from obtaining right-of-use assets Operating leases 1 10 Finance leases — 36 Consumers Cash paid for amounts included in the measurement of lease liabilities Cash used in operating activities for operating leases $ 6 $ 6 Cash used in operating activities for finance leases 13 14 Cash used in financing activities for finance leases 8 12 Lease liabilities arising from obtaining right-of-use assets Operating leases 1 10 Finance leases — 12 142 Table of Contents Presented in the following table are the minimum rental commitments under CMS Energy’s and Consumers’ non ‑ cancelable leases: In Millions Finance Leases December 31, 2023 Operating Leases Pipelines and PPAs Other Total CMS Energy, including Consumers 2024 $ 5 $ 13 $ 6 $ 19 2025 4 13 3 16 2026 3 13 4 17 2027 2 13 1 14 2028 1 13 1 14 2029 and thereafter 30 26 66 92 Total minimum lease payments $ 45 $ 91 $ 81 $ 172 Less discount 19 62 43 105 Present value of minimum lease payments $ 26 $ 29 $ 38 $ 67 Consumers 2024 $ 5 $ 13 $ 5 $ 18 2025 4 13 2 15 2026 2 13 2 15 2027 2 13 — 13 2028 1 13 — 13 2029 and thereafter 24 26 8 34 Total minimum lease payments $ 38 $ 91 $ 17 $ 108 Less discount 15 62 2 64 Present value of minimum lease payments $ 23 $ 29 $ 15 $ 44 Lessor CMS Energy and Consumers are the lessor under power sales and natural gas delivery agreements that are accounted for as leases. CMS Energy has power sales agreements that are accounted for as operating leases. In addition to fixed payments, these agreements have variable payments based on energy delivered. For the year ended December 31, 2023, lease revenue from these power sales agreements was $ 116 million, which included variable lease payments of $ 74 million. For the year ended December 31, 2022, lease revenue from these power sales agreements was $ 240 million, which included variable lease payments of $ 191 million. 143 Table of Contents Presented in the following table are the minimum rental payments to be received under CMS Energy’s non‑cancelable operating leases: In Millions December 31, 2023 2024 $ 43 2025 44 2026 18 Total minimum lease payments $ 105 Consumers has a natural gas transportation agreement with a subsidiary of CMS Energy that extends through 2038, related to a pipeline owned by Consumers. This agreement is accounted for as a direct finance lease and will automatically extend annually unless terminated by either party. The effects of the lease are eliminated on CMS Energy’s consolidated financial statements. Minimum rental payments to be received under Consumers’ direct financing lease are less than $ 1 million for each of the next five years and $ 6 million for the years thereafter. The lease receivable was $ 6 million as of December 31, 2023, which does not include unearned income of $ 5 million. 9: Asset Retirement Obligations CMS Energy and Consumers record the fair value of the cost to remove assets at the end of their useful lives, if there is a legal obligation to remove them. If a reasonable estimate of fair value cannot be made in the period in which the ARO is incurred, such as for assets with indeterminate lives, the liability is recognized when a reasonable estimate of fair value can be made. CMS Energy and Consumers have not recorded liabilities associated with the closure of certain gas wells that have an indeterminate life. CMS Energy and Consumers have not recorded liabilities for assets that have immaterial cumulative disposal costs, such as substation batteries. CMS Energy and Consumers calculate the fair value of ARO liabilities using an expected present-value technique that reflects assumptions about costs and inflation, and uses a credit-adjusted risk-free rate to discount the expected cash flows. CMS Energy’s ARO liabilities are primarily at Consumers. Presented below are the categories of assets that CMS Energy and Consumers have legal obligations to remove at the end of their useful lives and for which they have an ARO liability recorded: ARO Description In-Service Date Long-Lived Assets Closure of coal ash disposal areas various Generating plants coal ash areas Gas distribution cut, purge, and cap various Gas distribution mains and services Asbestos abatement 1973 Electric and gas utility plant Closure of renewable generation assets various Wind and solar generation facilities Gas wells plug and abandon various Gas transmission and storage 144 Table of Contents Presented in the following tables are the changes in CMS Energy’s and Consumers’ ARO liabilities: In Millions Company and ARO Description ARO Liability 12/31/2022 Incurred Settled Accretion Cash Flow Revisions ARO Liability 12/31/2023 CMS Energy, including Consumers Consumers $ 722 $ 4 $ ( 28 ) $ 32 $ 9 $ 739 Renewable generation assets 24 7 — 1 — 32 Total CMS Energy $ 746 $ 11 $ ( 28 ) $ 33 $ 9 $ 771 Consumers Coal ash disposal areas $ 272 $ — $ ( 15 ) $ 11 $ — $ 268 Gas distribution cut, purge, and cap 287 — ( 10 ) 14 ( 1 ) 290 Asbestos abatement 39 — ( 1 ) 3 10 51 Renewable generation assets 95 4 — 3 — 102 Gas wells plug and abandon 29 — ( 2 ) 1 — 28 Total Consumers $ 722 $ 4 $ ( 28 ) $ 32 $ 9 $ 739 In Millions Company and ARO Description ARO Liability 12/31/2021 Incurred Settled Accretion Cash Flow Revisions 1 ARO Liability 12/31/2022 CMS Energy, including Consumers Consumers $ 605 $ 1 $ ( 39 ) $ 27 $ 128 $ 722 Renewable generation assets 23 — — 1 — 24 Total CMS Energy $ 628 $ 1 $ ( 39 ) $ 28 $ 128 $ 746 Consumers Coal ash disposal areas $ 157 $ — $ ( 20 ) $ 7 $ 128 $ 272 Gas distribution cut, purge, and cap 282 1 ( 11 ) 15 — 287 Asbestos abatement 38 — ( 1 ) 2 — 39 Renewable generation assets 93 — — 2 — 95 Gas wells plug and abandon 35 — ( 7 ) 1 — 29 Total Consumers $ 605 $ 1 $ ( 39 ) $ 27 $ 128 $ 722 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. 145 Table of Contents 10: Retirement Benefits Benefit Plans: CMS Energy and Consumers provide pension, OPEB, and other retirement benefits to employees under a number of different plans. These plans include: • non‑contributory, qualified DB Pension Plans (closed to new non‑union participants as of July 1, 2003 and closed to new union participants as of September 1, 2005) • a non‑contributory, qualified DCCP for employees hired on or after July 1, 2003 • benefits to certain management employees under a non‑contributory, nonqualified DB SERP (closed to new participants as of March 31, 2006) • a non‑contributory, nonqualified DC SERP for certain management employees hired or promoted on or after April 1, 2006 • a contributory, qualified defined contribution 401(k) plan • health care and life insurance benefits under an OPEB Plan DB Pension Plans: Participants in the pension plans include present and former employees of CMS Energy and Consumers, including certain present and former affiliates and subsidiaries. Pension plan trust assets are not distinguishable by company. Effective December 31, 2017, CMS Energy’s and Consumers’ then-existing pension plan was amended to include only retired and former employees already covered; this amended plan is referred to as DB Pension Plan B. Also effective December 31, 2017, active employees were moved to a newly created pension plan, referred to as DB Pension Plan A, whose benefits mirror those provided under DB Pension Plan B. Maintaining separate plans for the two groups allows CMS Energy and Consumers to employ a more targeted investment strategy and provides additional opportunities to mitigate risk and volatility. DCCP: CMS Energy and Consumers provide an employer contribution to the DCCP 401(k) plan for employees hired on or after July 1, 2003. The contribution ranges from five percent to ten percent of base pay, depending on years of service and employee class. Employees are not required to contribute in order to receive the plan’s employer contribution. DCCP expense for CMS Energy, including Consumers, was $ 51 million for the year ended December 31, 2023, $ 48 million for the year ended December 31, 2022, and $ 41 million for the year ended December 31, 2021. DCCP expense for Consumers was $ 50 million for the year ended December 31, 2023, $ 48 million for the year ended December 31, 2022, and $ 41 million for the year ended December 31, 2021. DB SERP: The DB SERP is a nonqualified plan as defined by the Internal Revenue Code. DB SERP benefits are paid from a rabbi trust established in 1988. The trust assets are not considered plan assets under ASC 715. DB SERP rabbi trust earnings are taxable. Presented in the following table are the fair values of trust assets and ABO for CMS Energy’s and Consumers’ DB SERP: In Millions Years Ended December 31 2023 2022 CMS Energy, including Consumers Trust assets $ 132 $ 137 ABO 115 118 Consumers Trust assets $ 98 $ 101 ABO 83 85 146 Table of Contents Neither CMS Energy nor Consumers made any contributions to the DB SERP in 2023 or 2022. DC SERP: On April 1, 2006, CMS Energy and Consumers implemented a DC SERP and froze further new participation in the DB SERP. The DC SERP provides participants benefits ranging from five percent to 15 percent of total compensation. The DC SERP requires a minimum of five years of participation before vesting. CMS Energy’s and Consumers’ contributions to the plan, if any, are placed in a grantor trust. For CMS Energy and Consumers, trust assets were $ 14 million at December 31, 2023 and $ 12 million at December 31, 2022. DC SERP assets are included in other non‑current assets on CMS Energy’s and Consumers’ consolidated balance sheets. CMS Energy’s and Consumers’ DC SERP expense was $ 1 million for the years ended December 31, 2023 and 2022, and $ 2 million for the year ended December 31, 2021. 401(k) Plan: The 401(k) plan employer match equals four to six percent of employee eligible contributions based on an employee’s wages and class. The total 401(k) plan cost for CMS Energy, including Consumers, was $ 41 million for the year ended December 31, 2023, $ 44 million for the year ended December 31, 2022, and $ 31 million for the year ended December 31, 2021. The total 401(k) plan cost for Consumers was $ 40 million for the year ended December 31, 2023, $ 43 million for the year ended December 31, 2022, and $ 31 million for the year ended December 31, 2021. OPEB Plan: Participants in the OPEB Plan include all regular full-time employees covered by the employee health care plan on the day before retirement from either CMS Energy or Consumers at age 55 or older with at least 10 full years of applicable continuous service. Regular full-time employees who qualify for disability retirement under the DB Pension Plans or are disabled and covered by the DCCP and who have 15 years of applicable continuous service may also participate in the OPEB Plan. Retiree health care costs were based on the assumption that costs would increase 8.00 percent in 2024 and 6.50 percent in 2023 for those under 65 and would increase 8.50 percent in 2024 and 6.75 percent in 2023 for those over 65. The rate of increase was assumed to decline to 4.75 percent by 2032 and thereafter for all retirees. 147 Table of Contents Assumptions: Presented in the following table are the weighted-average assumptions used in CMS Energy’s and Consumers’ retirement benefit plans to determine benefit obligations and net periodic benefit cost: December 31 2023 2022 2021 CMS Energy, including Consumers Weighted average for benefit obligations 1 Discount rate 2 DB Pension Plan A 5.05 % 5.24 % 3.02 % DB Pension Plan B 4.95 5.14 2.79 DB SERP 4.94 5.13 2.78 OPEB Plan 5.02 5.21 2.99 Rate of compensation increase DB Pension Plan A 3.60 3.60 3.60 DB SERP 3 — 5.50 5.50 Weighted average for net periodic benefit cost 1 Service cost discount rate 2,4 DB Pension Plan A 5.27 % 3.09 % 2.83 % DB SERP 5.18 3.09 2.84 OPEB Plan 5.31 3.23 3.03 Interest cost discount rate 2,4 DB Pension Plan A 5.12 2.44 1.97 DB Pension Plan B 5.06 2.21 1.70 DB SERP 5.06 2.21 1.72 OPEB Plan 5.10 2.45 1.99 Expected long-term rate of return on plan assets 5 DB Pension Plans 7.20 6.50 6.75 OPEB Plan 7.20 6.50 6.75 Rate of compensation increase DB Pension Plan A 3.60 3.60 3.50 DB SERP 5.50 5.50 5.50 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; this approach applies individual spot rates along the yield curve to future projected benefit payments based on the time of payment. 148 Table of Contents 5 CMS Energy and Consumers determined the long-term rate of return using historical market returns, the present and expected future economic environment, the capital market principles of risk and return, and the expert opinions of individuals and firms with financial market knowledge. CMS Energy and Consumers considered the asset allocation of the portfolio in forecasting the future expected total return of the portfolio. The goal was to determine a long-term rate of return that could be incorporated into the planning of future cash flow requirements in conjunction with the change in the liability. Annually, CMS Energy and Consumers review for reasonableness and appropriateness the forecasted returns for various classes of assets used to construct an expected return model. CMS Energy’s and Consumers’ expected long-term rate of return on the assets of the DB Pension Plans was 7.20 percent in 2023. The actual return (loss) on the assets of the DB Pension Plans was 12.6 percent in 2023, ( 15.9 ) percent in 2022, and 12.0 percent in 2021. Costs: Presented in the following table are the costs (credits) and other changes in plan assets and benefit obligations incurred in CMS Energy’s and Consumers’ retirement benefit plans: In Millions DB Pension Plans and DB SERP OPEB Plan Years Ended December 31 2023 2022 2021 2023 2022 2021 CMS Energy, including Consumers Net periodic cost (credit) Service cost $ 29 $ 41 $ 53 $ 12 $ 17 $ 18 Interest cost 112 84 63 44 28 23 Settlement loss — 1 1 — — — Expected return on plan assets ( 220 ) ( 206 ) ( 208 ) ( 103 ) ( 115 ) ( 109 ) Amortization of: Net loss 12 40 100 12 1 8 Prior service cost (credit) 4 4 4 ( 41 ) ( 51 ) ( 53 ) Settlement loss 11 9 6 — — — Net periodic cost (credit) $ ( 52 ) $ ( 27 ) $ 19 $ ( 76 ) $ ( 120 ) $ ( 113 ) Consumers Net periodic credit Service cost $ 28 $ 39 $ 51 $ 11 $ 17 $ 17 Interest cost 105 79 59 42 27 23 Expected return on plan assets ( 208 ) ( 194 ) ( 197 ) ( 95 ) ( 107 ) ( 102 ) Amortization of: Net loss 11 37 96 12 — 8 Prior service cost (credit) 4 4 4 ( 40 ) ( 50 ) ( 51 ) Settlement loss 11 9 6 — — — Net periodic credit $ ( 49 ) $ ( 26 ) $ 19 $ ( 70 ) $ ( 113 ) $ ( 105 ) In Consumers’ 2022 electric and gas rate cases, the MPSC approved a mechanism allowing Consumers to defer the future recovery or refund of pension and OPEB expenses above or below the amounts used to set existing rates, respectively, beginning in January 2023 for the electric utility and October 2023 for the gas utility. At December 31, 2023, CMS Energy, including Consumers, had deferred $ 11 million of pension credits and $ 23 million of OPEB costs under this mechanism. CMS Energy and Consumers amortize net gains and losses in excess of ten percent of the greater of the PBO or the MRV over the average remaining service period for DB Pension Plan A and the OPEB Plan and over the average remaining life expectancy of participants for DB Pension Plan B. For DB Pension Plan A, the estimated period of amortization of gains and losses was eight years for the years ended 149 Table of Contents December 31, 2023, 2022, and 2021. For DB Pension Plan B, the estimated period of amortization of gains and losses was 17 years for the year ended December 31, 2023, and 18 years for the years ended December 31, 2022 and 2021. For the OPEB Plan, the estimated amortization period was nine years for the years ended December 31, 2023, 2022, and 2021. Prior service cost (credit) amortization is established in the year in which the prior service cost (credit) first occurred, and is based on the same amortization period for all future years until the prior service cost (credit) is fully amortized. CMS Energy and Consumers had new prior service costs for OPEB in 2020. The estimated period of amortization of these new prior service costs is eight years . CMS Energy and Consumers determine the MRV for the assets of the DB Pension Plans as the fair value of plan assets on the measurement date, adjusted by the gains or losses that will not be admitted into the MRV until future years. CMS Energy and Consumers reflect each year’s gain or loss in the MRV in equal amounts over a five ‑ year period beginning on the date the original amount was determined. CMS Energy and Consumers determine the MRV for OPEB Plan assets as the fair value of assets on the measurement date. 150 Table of Contents Reconciliations: Presented in the following table are reconciliations of the funded status of CMS Energy’s and Consumers’ retirement benefit plans with their retirement benefit plans’ liabilities: In Millions DB Pension Plans DB SERP OPEB Plan Years Ended December 31 2023 2022 2023 2022 2023 2022 CMS Energy, including Consumers Benefit obligation at beginning of period $ 2,169 $ 3,070 $ 117 $ 149 $ 889 $ 1,166 Service cost 29 41 — — 12 17 Interest cost 106 81 6 3 44 28 Plan amendments — — — — — — Actuarial loss (gain) 52 1 ( 811 ) 1 1 ( 25 ) 9 1 ( 274 ) 1 Benefits paid ( 161 ) ( 212 ) ( 10 ) ( 10 ) ( 54 ) ( 48 ) Benefit obligation at end of period $ 2,195 $ 2,169 $ 114 $ 117 $ 900 $ 889 Plan assets at fair value at beginning of period $ 2,820 $ 3,599 $ — $ — $ 1,446 $ 1,787 Actual return on plan assets 345 ( 567 ) — — 165 ( 294 ) Company contribution — — 10 10 — — Actual benefits paid ( 161 ) ( 212 ) ( 10 ) ( 10 ) ( 52 ) ( 47 ) Plan assets at fair value at end of period $ 3,004 $ 2,820 $ — $ — $ 1,559 $ 1,446 Funded status $ 809 2 $ 651 2 $ ( 114 ) $ ( 117 ) $ 659 $ 557 Consumers Benefit obligation at beginning of period $ 85 $ 109 $ 856 $ 1,122 Service cost — — 11 17 Interest cost 4 2 42 27 Plan amendments — — — — Actuarial loss (gain) 1 ( 19 ) 10 1 ( 265 ) 1 Benefits paid ( 7 ) ( 7 ) ( 52 ) ( 45 ) Benefit obligation at end of period $ 83 $ 85 $ 867 $ 856 Plan assets at fair value at beginning of period $ — $ — $ 1,350 $ 1,668 Actual return on plan assets — — 154 ( 273 ) Company contribution 7 7 — — Actual benefits paid ( 7 ) ( 7 ) ( 51 ) ( 45 ) Plan assets at fair value at end of period $ — $ — $ 1,453 $ 1,350 Funded status $ ( 83 ) $ ( 85 ) $ 586 $ 494 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. 151 Table of Contents Presented in the following table is the classification of CMS Energy’s and Consumers’ retirement benefit plans’ assets and liabilities: In Millions December 31 2023 2022 CMS Energy, including Consumers Non-current assets DB Pension Plans $ 809 $ 651 OPEB Plan 659 557 Current liabilities DB SERP 10 10 Non-current liabilities DB SERP 104 107 Consumers Non-current assets DB Pension Plans $ 781 $ 632 OPEB Plan 586 494 Current liabilities DB SERP 7 7 Non-current liabilities DB SERP 76 78 The ABO for the DB Pension Plans was $ 2.0 billion at December 31, 2023 and 2022. At December 31, 2023 and 2022, the PBO and ABO did not exceed plan assets for any of the defined benefit pension plans. 152 Table of Contents Items Not Yet Recognized as a Component of Net Periodic Benefit Cost: Presented in the following table are the amounts recognized in regulatory assets and AOCI that have not been recognized as components of net periodic benefit cost. For additional details on regulatory assets see Note 2, Regulatory Matters. In Millions DB Pension Plans and DB SERP OPEB Plan December 31 2023 2022 2023 2022 CMS Energy, including Consumers Regulatory assets Net loss $ 634 $ 724 $ 191 $ 251 Prior service cost (credit) 16 21 ( 100 ) ( 140 ) Regulatory assets $ 650 $ 745 $ 91 $ 111 AOCI Net loss (gain) 65 69 ( 3 ) 2 Prior service cost (credit) 1 1 ( 2 ) ( 3 ) Total amounts recognized in regulatory assets and AOCI $ 716 $ 815 $ 86 $ 110 Consumers Regulatory assets Net loss $ 634 $ 724 $ 191 $ 251 Prior service cost (credit) 16 21 ( 100 ) ( 140 ) Regulatory assets $ 650 $ 745 $ 91 $ 111 AOCI Net loss 20 20 — — Total amounts recognized in regulatory assets and AOCI $ 670 $ 765 $ 91 $ 111 153 Table of Contents Plan Assets: Presented in the following tables are the fair values of the assets of CMS Energy’s DB Pension Plans and OPEB Plan, by asset category and by level within the fair value hierarchy. For additional details regarding the fair value hierarchy, see Note 5, Fair Value Measurements. In Millions DB Pension Plans December 31, 2023 December 31, 2022 Total Level 1 Level 2 Total Level 1 CMS Energy, including Consumers Cash and short-term investments $ 178 $ 178 $ — $ 122 $ 122 Mutual funds 47 47 — 263 263 $ 225 $ 225 $ — $ 385 $ 385 Pooled funds 2,779 2,435 Total $ 3,004 $ 2,820 In Millions OPEB Plan December 31, 2023 December 31, 2022 Total Level 1 Level 2 Total Level 1 CMS Energy, including Consumers Cash and short-term investments $ 82 $ 82 $ — $ 28 $ 28 U.S. government and agencies securities 16 — 16 — — Corporate debt 67 — 67 — — State and municipal bonds 1 — 1 — — Foreign corporate bonds 15 — 15 — — Common stocks 161 161 — 69 69 Mutual funds 60 60 — 754 754 $ 402 $ 303 $ 99 $ 851 $ 851 Pooled funds 1,157 595 Total $ 1,559 $ 1,446 Cash and Short-term Investments: Cash and short-term investments consist of money market funds with daily liquidity. U.S. Government and Agencies Securities: U.S. government and agencies securities consist of U.S. Treasury notes and other debt securities backed by the U.S. government and related agencies. These securities are valued based on quoted market prices. Corporate Debt: Corporate debt investments consist of investment grade bonds of U.S. issuers from diverse industries. These securities are valued based on quoted market prices, when available, or yields available on comparable securities of issuers with similar credit ratings. State and Municipal Bonds: State and municipal bonds are valued using a matrix-pricing model that incorporates Level 2 market-based information. The fair value of the bonds is derived from various observable inputs, including benchmark yields, reported securities trades, broker/dealer quotes, bond ratings, and general information on market movements for investment grade state and municipal securities normally considered by market participants when pricing such debt securities. 154 Table of Contents Foreign Corporate Bonds: Foreign corporate debt securities are valued based on quoted market prices, when available, or on yields available on comparable securities of issuers with similar credit ratings. Common Stocks: Common stocks in the OPEB Plan consist of equity securities that are actively managed and tracked to the S&P 500 Index and MSCI All Country World ex-US. These securities are valued at their quoted closing prices. Mutual Funds: Mutual funds represent shares in registered investment companies that are priced based on the daily quoted net asset values that are publicly available and are the basis for transactions to buy or sell shares in the funds. Pooled Funds: Pooled funds include both common and collective trust funds as well as special funds that contain only employee benefit plan assets from two or more unrelated benefit plans. These funds primarily consist of U.S. and foreign equity securities, but also include U.S. and foreign fixed-income securities and multi-asset investments. Since these investments are valued at their net asset value as a practical expedient, they are not classified in the fair value hierarchy. Asset Allocations: Presented in the following table are the investment components of the assets of CMS Energy’s DB Pension Plans and OPEB Plan as of December 31, 2023: DB Pension Plans OPEB Plan Fixed-income securities 42.0 % 40.0 % Equity securities 38.0 42.0 Real asset investments 9.0 8.0 Return-seeking fixed income 6.0 5.0 Liquid alternative investments 4.0 4.0 Cash and cash equivalents 1.0 1.0 100.0 % 100.0 % CMS Energy’s target 2023 asset allocation for the assets of the DB Pension Plans was 40 ‑percent fixed income, 38 ‑percent equity, 11 ‑percent real assets, 7 ‑percent return-seeking fixed income, and 4 ‑percent liquid alternatives. CMS Energy established union and non‑union VEBA trusts to fund future retiree health and life insurance benefits known as OPEB. These trusts are funded through the ratemaking process for Consumers and through direct contributions from the non‑utility subsidiaries. CMS Energy’s target 2023 asset allocation for OPEB trusts was 40 ‑percent fixed income, 38 ‑percent equity, 11 ‑percent real assets, 7 ‑percent return-seeking fixed income, and 4 ‑percent liquid alternatives. The goal of these target allocations was to maximize the long-term return on plan assets, while maintaining a prudent level of risk. The level of acceptable risk is a function of the liabilities of the plans. Equity investments are diversified mostly across the S&P 500 Index, with lesser allocations to the S&P MidCap and SmallCap Indexes and Foreign Equity Funds. Fixed-income investments are diversified across investment grade instruments of government and corporate issuers, as well as high-yield and global bond funds. Return-seeking fixed-income investments are diversified exposure to high-yield bonds, emerging market debt, and bank loans. Real asset investments are diversified across core real estate and real estate investment trusts. Liquid alternatives are investments in private funds comprised of different and independent hedge funds with various investment strategies. CMS Energy uses annual liability measurements, quarterly portfolio reviews, and periodic asset/liability studies to evaluate the need for adjustments to the portfolio allocations. 155 Table of Contents Contributions: Contributions comprise required amounts and discretionary contributions. Neither CMS Energy nor Consumers made any contributions in 2023 or 2022, or plans to contribute to the DB Pension Plans or OPEB Plan in 2024. Actual future contributions will depend on future investment performance, discount rates, and various factors related to the participants of the DB Pension Plans and OPEB Plan. CMS Energy and Consumers will, at a minimum, contribute to the plans as needed to comply with federal funding requirements. Benefit Payments: Presented in the following table are the expected benefit payments for each of the next five years and the five ‑ year period thereafter: In Millions DB Pension Plans DB SERP OPEB Plan CMS Energy, including Consumers 2024 $ 158 $ 10 $ 55 2025 160 10 57 2026 159 10 58 2027 159 10 60 2028 159 9 61 2029-2033 785 43 315 Consumers 2024 $ 148 $ 7 $ 53 2025 151 7 54 2026 150 7 56 2027 150 7 57 2028 150 6 59 2029-2033 741 29 301 Collective Bargaining Agreements: At December 31, 2023, unions represented 44 percent of CMS Energy’s employees and 45 percent of Consumers’ employees. The UWUA represents Consumers’ operating, maintenance, construction, and customer contact center employees. The USW represents Zeeland plant employees. The UWUA and USW agreements expire in 2025. 156 Table of Contents 11: Stock-based Compensation CMS Energy and Consumers provide a PISP to officers, employees, and non‑employee directors based on their contributions to the successful management of the company. The PISP has a ten ‑ year term, expiring in May 2030. In 2023, all awards were in the form of restricted stock or restricted stock units. The PISP also allows for unrestricted common stock, stock options, stock appreciation rights, phantom shares, performance units, and incentive options, none of which was granted in 2023, 2022, or 2021. Shares awarded or subject to stock options, phantom shares, or performance units may not exceed 6.5 million shares from June 2020 through May 2030. CMS Energy and Consumers may issue awards of up to 4,960,465 shares of common stock under the PISP as of December 31, 2023. Shares for which payment or exercise is in cash, as well as shares that expire, terminate, or are canceled or forfeited, may be awarded or granted again under the PISP. All awards under the PISP vest fully upon death. Upon a change of control of CMS Energy or termination under an officer separation agreement, the awards will vest in accordance with specific officer agreements. If stated in the award, for restricted stock recipients who terminate employment due to retirement or disability, a pro-rata portion of the award will vest upon termination, with any market-based award also contingent upon the outcome of the market condition and any performance-based award contingent upon the outcome of the performance condition. The pro-rata portion is equal to the portion of the service period served between the award grant date and the employee’s termination date. The remaining portion of the awards will be forfeited. All awards for directors vest fully upon retirement. Restricted shares may be forfeited if employment terminates for any other reason or if the minimum service requirements are not met, as described in the award document. Restricted Stock Awards: Restricted stock awards for employees under the PISP are in the form of performance-based, market-based, and time-lapse restricted stock. Award recipients receive shares of CMS Energy common stock that have dividend and voting rights. The dividends on time-lapse restricted stock are paid in cash or in CMS Energy common stock. The dividends on performance-based and market-based restricted stock are paid in restricted shares equal to the value of the dividends. These additional restricted shares are subject to the same vesting conditions as the underlying restricted stock shares. Performance-based restricted stock vesting is contingent on meeting at least a 36 ‑ month service requirement and a performance condition. The performance condition is based on an adjusted measure of CMS Energy’s EPS growth relative to a peer group over a three‑year period. The awards granted in 2023, 2022, and 2021 require a 38 ‑month service period. Market-based restricted stock vesting is generally contingent on meeting a three‑year service requirement and a market condition. The market condition is based on a comparison of CMS Energy’s total shareholder return with the median total shareholder return of a peer group over the same three‑year period. Depending on the outcome of the performance condition or the market condition, a recipient may earn a total award ranging from zero to 200 percent of the initial grant. Time-lapse restricted stock generally vests after a service period of three years. Restricted Stock Units: In 2023, 2022, and 2021, CMS Energy and Consumers granted restricted stock units to certain non‑employee directors who elected to defer their restricted stock awards. The restricted stock units generally vest after a service period of one year or, if earlier, at the next annual meeting. The restricted stock units will be distributed to the recipients as shares in accordance with the directors’ deferral agreements. Restricted stock units do not have voting rights, but do have dividend rights. In lieu of cash dividend payments, the dividends on restricted stock units are paid in additional units equal to the value of the dividends. These additional restricted stock units are subject to the same vesting and 157 Table of Contents distribution conditions as the underlying restricted stock units. No restricted stock units were forfeited during 2023. Presented in the following tables is the activity for restricted stock and restricted stock units under the PISP: CMS Energy, including Consumers Consumers Year Ended December 31, 2023 Number of Shares Weighted-Average Grant Date Fair Value per Share Number of Shares Weighted-Average Grant Date Fair Value per Share Nonvested at beginning of period 1,029,523 $ 60.13 978,146 $ 60.15 Granted Restricted stock 502,039 52.62 474,917 52.42 Restricted stock units 19,082 50.32 18,315 50.34 Vested Restricted stock ( 313,344 ) 51.54 ( 302,177 ) 51.48 Restricted stock units ( 15,211 ) 52.60 ( 14,523 ) 52.55 Forfeited – restricted stock ( 63,987 ) 53.57 ( 60,312 ) 53.45 Nonvested at end of period 1,158,102 $ 59.50 1,094,366 $ 59.50 Year Ended December 31, 2023 CMS Energy, including Consumers Consumers Granted Time-lapse awards 115,591 108,216 Market-based awards 147,453 139,255 Performance-based awards 153,383 145,008 Restricted stock units 15,545 14,925 Dividends on market-based awards 14,825 14,038 Dividends on performance-based awards 15,608 14,787 Dividends on restricted stock units 3,537 3,390 Additional performance-based shares based on achievement of condition 55,179 53,613 Total granted 521,121 493,232 CMS Energy and Consumers charge the fair value of the restricted stock awards to expense over the required service period and charge the fair value of the restricted stock units to expense immediately. For performance-based awards, CMS Energy and Consumers estimate the number of shares expected to vest at the end of the performance period based on the probable achievement of the performance objective. Performance-based and market-based restricted stock awards have graded vesting features for retirement-eligible employees, and CMS Energy and Consumers recognize expense for those awards on a graded vesting schedule over the required service period. Expense for performance-based and market-based restricted stock awards for non‑retirement-eligible employees and time-lapse awards is recognized on a straight-line basis over the required service period. The fair value of performance-based and time-lapse restricted stock and restricted stock units is based on the price of CMS Energy’s common stock on the grant date. The fair value of market-based restricted stock awards is calculated on the grant date using a Monte Carlo simulation. CMS Energy and Consumers base expected volatilities on the historical volatility of the price of CMS Energy common stock. The risk- 158 Table of Contents free rate for valuation of the market-based restricted stock awards was based on the three‑year U.S. Treasury yield at the award grant date. Presented in the following table are the most significant assumptions used to estimate the fair value of the market-based restricted stock awards: Years Ended December 31 2023 2022 2021 Expected volatility 30.3 % 27.3 % 27.6 % Expected dividend yield 2.9 2.8 2.8 Risk-free rate 3.9 1.4 0.2 Presented in the following table is the weighted-average grant-date fair value of all awards under the PISP: In Millions Years Ended December 31 2023 2022 2021 CMS Energy, including Consumers Weighted-average grant-date fair value per share Restricted stock granted $ 52.62 $ 48.69 $ 43.52 Restricted stock units granted 50.32 56.13 54.11 Consumers Weighted-average grant-date fair value per share Restricted stock granted $ 52.42 $ 48.57 $ 42.85 Restricted stock units granted 50.34 56.07 53.93 Presented in the following table are amounts related to restricted stock awards and restricted stock units: In Millions Years Ended December 31 2023 2022 2021 CMS Energy, including Consumers Fair value of shares that vested during the year $ 20 $ 27 $ 25 Compensation expense recognized 28 26 22 Income tax benefit recognized 3 — 1 Consumers Fair value of shares that vested during the year $ 19 $ 25 $ 24 Compensation expense recognized 26 25 21 Income tax benefit recognized 2 — 1 At December 31, 2023, $ 29 million of total unrecognized compensation cost was related to restricted stock for CMS Energy, including Consumers, and $ 27 million of total unrecognized compensation cost was related to restricted stock for Consumers. CMS Energy and Consumers expect to recognize this cost over a weighted-average period of two years. 159 Table of Contents 12: Income Taxes CMS Energy and its subsidiaries file a consolidated U.S. federal income tax return as well as a Michigan Corporate Income Tax return for the unitary business group and various other state unitary group combined income tax returns. Income taxes are allocated based on each company’s separate taxable income in accordance with the CMS Energy tax sharing agreement. Presented in the following table is the difference between actual income tax expense on continuing operations and income tax expense computed by applying the statutory U.S. federal income tax rate: In Millions, Except Tax Rate Years Ended December 31 2023 2022 2021 CMS Energy, including Consumers Income from continuing operations before income taxes $ 954 $ 902 $ 823 Income tax expense at statutory rate 200 189 173 Increase (decrease) in income taxes from: State and local income taxes, net of federal effect 1 31 51 39 Renewable energy tax credits ( 58 ) ( 51 ) ( 44 ) TCJA excess deferred taxes 2 ( 40 ) ( 65 ) ( 50 ) Taxes attributable to noncontrolling interests 17 5 5 Accelerated flow-through of regulatory tax benefits 3 — ( 39 ) ( 28 ) Other, net ( 3 ) 3 — Income tax expense $ 147 $ 93 $ 95 Effective tax rate 15.4 % 10.3 % 11.5 % Consumers Income from continuing operations before income taxes $ 1,028 $ 1,085 $ 1,024 Income tax expense at statutory rate 216 228 215 Increase (decrease) in income taxes from: State and local income taxes, net of federal effect 1 36 59 54 Renewable energy tax credits ( 46 ) ( 46 ) ( 37 ) TCJA excess deferred taxes 2 ( 40 ) ( 65 ) ( 50 ) Accelerated flow-through of regulatory tax benefits 3 — ( 39 ) ( 28 ) Other, net ( 5 ) 3 2 Income tax expense $ 161 $ 140 $ 156 Effective tax rate 15.7 % 12.9 % 15.2 % 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 were fully amortized in 2022. 160 Table of Contents Presented in the following table are the significant components of income tax expense on continuing operations: In Millions Years Ended December 31 2023 2022 2021 CMS Energy, including Consumers Current income taxes Federal $ 5 $ 6 $ ( 1 ) State and local 1 — 1 $ 6 $ 6 $ — Deferred income taxes Federal 107 4 49 State and local 38 65 49 $ 145 $ 69 $ 98 Deferred income tax credit ( 4 ) 18 ( 3 ) Tax expense $ 147 $ 93 $ 95 Consumers Current income taxes Federal $ 3 $ ( 2 ) $ ( 13 ) State and local 2 8 15 $ 5 $ 6 $ 2 Deferred income taxes Federal 117 50 103 State and local 43 66 54 $ 160 $ 116 $ 157 Deferred income tax credit ( 4 ) 18 ( 3 ) Tax expense $ 161 $ 140 $ 156 161 Table of Contents Presented in the following table are the principal components of deferred income tax assets (liabilities) recognized: In Millions December 31 2023 2022 CMS Energy, including Consumers Deferred income tax assets Tax loss and credit carryforwards $ 428 $ 385 Net regulatory tax liability 305 318 Reserves and accruals 28 35 Total deferred income tax assets $ 761 $ 738 Valuation allowance ( 2 ) ( 2 ) Total deferred income tax assets, net of valuation allowance $ 759 $ 736 Deferred income tax liabilities Plant, property, and equipment $ ( 2,520 ) $ ( 2,515 ) Employee benefits ( 473 ) ( 433 ) Gas inventory ( 66 ) ( 53 ) Securitized costs ( 194 ) ( 39 ) Other ( 121 ) ( 103 ) Total deferred income tax liabilities $ ( 3,374 ) $ ( 3,143 ) Total net deferred income tax liabilities $ ( 2,615 ) $ ( 2,407 ) Consumers Deferred income tax assets Net regulatory tax liability $ 305 $ 318 Tax loss and credit carryforwards 175 145 Reserves and accruals 27 28 Total deferred income tax assets $ 507 $ 491 Deferred income tax liabilities Plant, property, and equipment $ ( 2,498 ) $ ( 2,458 ) Employee benefits ( 459 ) ( 423 ) Gas inventory ( 66 ) ( 53 ) Securitized costs ( 194 ) ( 39 ) Other ( 79 ) ( 103 ) Total deferred income tax liabilities $ ( 3,296 ) $ ( 3,076 ) Total net deferred income tax liabilities $ ( 2,789 ) $ ( 2,585 ) Deferred tax assets and liabilities are recognized for the estimated future tax effect of temporary differences between the tax basis of assets or liabilities and the reported amounts on CMS Energy’s and Consumers’ consolidated financial statements. 162 Table of Contents Presented in the following table are the tax loss and credit carryforwards at December 31, 2023: In Millions Tax Attribute Expiration CMS Energy, including Consumers State net operating loss carryforwards $ 69 2030 – 2033 Local net operating loss carryforwards 3 2024 – 2040 General business credits 356 2035 – 2043 Total tax attributes $ 428 Consumers State net operating loss carryforwards $ 53 2030 – 2033 General business credits 122 2035 – 2043 Total tax attributes $ 175 CMS Energy has provided a valuation allowance of $ 2 million for the local tax loss carryforward. CMS Energy and Consumers expect to utilize fully their tax loss and credit carryforwards for which no valuation allowance has been provided. It is reasonably possible that further adjustments will be made to the valuation allowances within one year. Presented in the following table is a reconciliation of the beginning and ending amount of uncertain tax benefits: In Millions Years Ended December 31 2023 2022 2021 CMS Energy, including Consumers Balance at beginning of period $ 28 $ 27 $ 25 Additions for current-year tax positions 1 1 2 Additions for prior-year tax positions — 1 — Reductions for prior-year tax positions ( 3 ) ( 1 ) — Balance at end of period $ 26 $ 28 $ 27 Consumers Balance at beginning of period $ 36 $ 34 $ 31 Additions for current-year tax positions 1 3 3 Additions for prior-year tax positions 2 1 — Reductions for prior-year tax positions ( 3 ) ( 2 ) — Balance at end of period $ 36 $ 36 $ 34 If recognized, all of these uncertain tax benefits would affect CMS Energy’s and Consumers’ annual effective tax rates in future years. One uncertain tax benefit relates to the methodology of state apportionment for Consumers’ electricity sales to MISO. The Michigan Tax Tribunal heard oral arguments on this methodology during 2022. A final conclusion is not anticipated in the next 12 months. CMS Energy and Consumers recognize accrued interest and penalties, where applicable, as part of income tax expense. CMS Energy, including Consumers, recognized no interest or penalties for each of the years ended December 31, 2023, 2022, or 2021. The amount of income taxes paid is subject to ongoing audits by federal, state, local, and foreign tax authorities, which can result in proposed assessments. CMS Energy’s federal income tax returns for 2020 163 Table of Contents and subsequent years remain subject to examination by the IRS. CMS Energy’s Michigan Corporate Income Tax returns for 2013-2016 and 2019 and subsequent years remain subject to examination by the State of Michigan. CMS Energy’s and Consumers’ estimate of the potential outcome for any uncertain tax issue is highly judgmental. CMS Energy and Consumers believe that their accrued tax liabilities at December 31, 2023 were adequate for all years. 13: Earnings Per Share—CMS Energy Presented in the following table are CMS Energy’s basic and diluted EPS computations based on income from continuing operations: In Millions, Except Per Share Amounts Years Ended December 31 2023 2022 2021 Income available to common stockholders Income from continuing operations $ 807 $ 809 $ 728 Less loss attributable to noncontrolling interests ( 79 ) ( 24 ) ( 23 ) Less preferred stock dividends 10 10 5 Income from continuing operations available to common stockholders – basic and diluted $ 876 $ 823 $ 746 Average common shares outstanding Weighted-average shares – basic 291.2 289.5 289.0 Add dilutive nonvested stock awards 0.5 0.3 0.5 Add dilutive forward equity sale contracts — 0.2 — Weighted-average shares – diluted 291.7 290.0 289.5 Income from continuing operations per average common share available to common stockholders Basic $ 3.01 $ 2.84 $ 2.58 Diluted 3.01 2.84 2.58 Nonvested Stock Awards CMS Energy’s nonvested stock awards are composed of participating and non‑participating securities. The participating securities accrue cash dividends when common stockholders receive dividends. Since the recipient is not required to return the dividends to CMS Energy if the recipient forfeits the award, the nonvested stock awards are considered participating securities. As such, the participating nonvested stock awards were included in the computation of basic EPS. The non‑participating securities accrue stock dividends that vest concurrently with the stock award. If the recipient forfeits the award, the stock dividends accrued on the non‑participating securities are also forfeited. Accordingly, the non‑participating awards and stock dividends were included in the computation of diluted EPS, but not in the computation of basic EPS. Forward Equity Sale Contracts CMS Energy has entered into forward equity sale contracts. These forward equity sale contracts are non‑participating securities. While the forward sale price in the forward equity sale contract is decreased on certain dates by certain predetermined amounts to reflect expected dividend payments, these price adjustments were set upon inception of the agreement and the forward contract does not give the owner the right to participate in undistributed earnings. Accordingly, the forward equity sale contracts were 164 Table of Contents included in the computation of diluted EPS, but not in the computation of basic EPS. For further details on the forward equity sale contracts, see Note 4, Financings and Capitalization. Convertible Securities In May 2023, CMS Energy issued an aggregate principal amount of $ 800 million convertible senior notes. Potentially dilutive common shares issuable upon conversion of the convertible senior notes are determined using the if-converted method for calculating diluted EPS. Upon conversion, the convertible senior notes are required to be paid in cash with only amounts exceeding the principal permitted to be settled in shares. The convertible senior notes were anti-dilutive for the year ended December 31, 2023. For further details on CMS Energy’s convertible senior notes, see Note 4, Financings and Capitalization. 14: Revenue Presented in the following tables are the components of operating revenue: In Millions Year Ended December 31, 2023 Electric Utility Gas Utility NorthStar Clean Energy 1 Consolidated CMS Energy, including Consumers Consumers utility revenue $ 4,686 $ 2,394 $ — $ 7,080 Other — — 181 181 Revenue recognized from contracts with customers $ 4,686 $ 2,394 $ 181 $ 7,261 Leasing income — — 116 116 Financing income 10 6 — 16 Consumers alternative-revenue programs 49 20 — 69 Total operating revenue – CMS Energy $ 4,745 $ 2,420 $ 297 $ 7,462 Consumers Consumers utility revenue Residential $ 2,236 $ 1,619 $ 3,855 Commercial 1,550 489 2,039 Industrial 660 60 720 Other 240 226 466 Revenue recognized from contracts with customers $ 4,686 $ 2,394 $ 7,080 Financing income 10 6 16 Alternative-revenue programs 49 20 69 Other non-segment revenue — — 1 Total operating revenue – Consumers $ 4,745 $ 2,420 $ 7,166 1 Amounts represent NorthStar Clean Energy’s operating revenue from independent power production and its sales of energy commodities. 165 Table of Contents In Millions Year Ended December 31, 2022 Electric Utility Gas Utility NorthStar Clean Energy 1 Consolidated CMS Energy, including Consumers Consumers utility revenue $ 5,395 $ 2,720 $ — $ 8,115 Other — — 205 205 Revenue recognized from contracts with customers $ 5,395 $ 2,720 $ 205 $ 8,320 Leasing income — — 240 240 Financing income 10 6 — 16 Consumers alternative-revenue programs 43 14 — 57 Consumers revenues to be refunded ( 29 ) ( 8 ) — ( 37 ) Total operating revenue – CMS Energy $ 5,419 $ 2,732 $ 445 $ 8,596 Consumers Consumers utility revenue Residential $ 2,523 $ 1,879 $ 4,402 Commercial 1,733 559 2,292 Industrial 792 75 867 Other 347 207 554 Revenue recognized from contracts with customers $ 5,395 $ 2,720 $ 8,115 Financing income 10 6 16 Alternative-revenue programs 43 14 57 Revenues to be refunded ( 29 ) ( 8 ) ( 37 ) Total operating revenue – Consumers $ 5,419 $ 2,732 $ 8,151 1 Amounts represent NorthStar Clean Energy’s operating revenue from independent power production and its sales of energy commodities. 166 Table of Contents In Millions Year Ended December 31, 2021 Electric Utility Gas Utility NorthStar Clean Energy 1 Consolidated CMS Energy, including Consumers Consumers utility revenue $ 4,915 $ 2,046 $ — $ 6,961 Other — — 114 114 Revenue recognized from contracts with customers $ 4,915 $ 2,046 $ 114 $ 7,075 Leasing income — — 194 194 Financing income 10 5 — 15 Consumers alternative-revenue programs 33 12 — 45 Total operating revenue – CMS Energy $ 4,958 $ 2,063 $ 308 $ 7,329 Consumers Consumers utility revenue Residential $ 2,402 $ 1,396 $ 3,798 Commercial 1,573 396 1,969 Industrial 624 54 678 Other 316 200 516 Revenue recognized from contracts with customers $ 4,915 $ 2,046 $ 6,961 Financing income 10 5 15 Alternative-revenue programs 33 12 45 Total operating revenue – Consumers $ 4,958 $ 2,063 $ 7,021 1 Amounts represent NorthStar Clean Energy’s operating revenue from independent power production and its sales of energy commodities. Electric and Gas Utilities Consumers Utility Revenue: Consumers recognizes revenue primarily from the sale of electric and gas utility services at tariff-based rates regulated by the MPSC. Consumers’ customer base consists of a mix of residential, commercial, and diversified industrial customers. Consumers’ tariff-based sales performance obligations are described below. • Consumers has performance obligations for the service of standing ready to deliver electricity or natural gas to customers, and it satisfies these performance obligations over time. Consumers recognizes revenue at a fixed rate as it provides these services. These arrangements generally do not have fixed terms and remain in effect as long as the customer consumes the utility service. The rates are set by the MPSC through the rate-making process and represent the stand-alone selling price of Consumers’ service to stand ready to deliver. • Consumers has performance obligations for the service of delivering the commodity of electricity or natural gas to customers, and it satisfies these performance obligations upon delivery. Consumers recognizes revenue at a price per unit of electricity or natural gas delivered, based on the tariffs established by the MPSC. These arrangements generally do not have fixed terms and remain in effect as long as the customer consumes the utility service. The rates are set by the MPSC through the rate-making process and represent the stand-alone selling price of a bundled product comprising the commodity, electricity or natural gas, and the service of delivering such commodity. 167 Table of Contents In some instances, Consumers has specific fixed-term contracts with large commercial and industrial customers to provide electricity or gas at certain tariff rates or to provide gas transportation services at contracted rates. The amount of electricity and gas to be delivered under these contracts and the associated future revenue to be received are generally dependent on the customers’ needs. Accordingly, Consumers recognizes revenues at the tariff or contracted rate as electricity or gas is delivered to the customer. Consumers also has other miscellaneous contracts with customers related to pole and other property rentals, appliance service plans, and utility contract work. Generally, these contracts are short term or evergreen in nature. Accounts Receivable and Unbilled Revenues: Accounts receivable comprise trade receivables and unbilled receivables. CMS Energy and Consumers record their accounts receivable at cost less an allowance for uncollectible accounts. The allowance is increased for uncollectible accounts expense and decreased for account write-offs net of recoveries. CMS Energy and Consumers establish the allowance based on historical losses, management’s assessment of existing economic conditions, customer payment trends, and reasonable and supported forecast information. CMS Energy and Consumers assess late payment fees on trade receivables based on contractual past-due terms established with customers. Accounts are written off when deemed uncollectible, which is generally when they become six months past due. CMS Energy and Consumers recorded uncollectible accounts expense of $ 34 million for the year ended December 31, 2023, $ 50 million for the year ended December 31, 2022, and $ 22 million for the year ended December 31, 2021 . Uncollectible accounts expense for the year ended December 31, 2022 included a commitment to contribute $ 10 million to directly assist vulnerable customers with utility bills. Consumers’ customers are billed monthly in cycles having billing dates that do not generally coincide with the end of a calendar month. This results in customers having received electricity or natural gas that they have not been billed for as of the month-end. Consumers estimates its unbilled revenues by applying an average billed rate to total unbilled deliveries for each customer class. Unbilled revenues, which are recorded as accounts receivable and accrued revenue on CMS Energy’s and Consumers’ consolidated balance sheets, were $ 494 million at December 31, 2023 and $ 663 million at December 31, 2022. Alternative ‑ revenue Programs: Consumers accounts for its energy waste reduction incentive mechanism and financial compensation mechanism as alternative-revenue programs. Consumers recognizes revenue related to the energy waste reduction incentive as soon as energy savings exceed the annual targets established by the MPSC and recognizes revenue related to the financial compensation mechanism as payments are made on MPSC-approved PPAs. For additional information on these mechanisms, see Note 2, Regulatory Matters. Consumers does not reclassify revenue from its alternative-revenue program to revenue from contracts with customers at the time the amounts are collected from customers. Revenues to Be Refunded: In December 2022, the MPSC issued an order authorizing Consumers to refund $ 22 million voluntarily to utility customers. Additionally, in the settlement of its 2022 electric rate case, Consumers agreed to refund voluntarily $ 15 million of 2022 revenues to utility customers through a one ‑ time bill credit. For additional information, see Note 2, Regulatory Matters. 168 Table of Contents 15: Other Income and Other Expense Presented in the following table are the components of other income and other expense at CMS Energy and Consumers: In Millions Years Ended December 31 2023 2022 2021 CMS Energy, including Consumers Other income Gain on extinguishment of debt 1 $ 131 $ — $ — Interest income 37 5 3 Allowance for equity funds used during construction 7 6 8 Income from equity method investees 7 3 10 All other 13 5 9 Total other income – CMS Energy $ 195 $ 19 $ 30 Consumers Other income Interest income $ 25 $ 2 $ 2 Interest income - related parties 5 5 5 Allowance for equity funds used during construction 7 6 8 All other 12 4 8 Total other income – Consumers $ 49 $ 17 $ 23 CMS Energy, including Consumers Other expense Donations $ ( 1 ) $ ( 9 ) $ ( 6 ) Civic and political expenditures ( 5 ) ( 6 ) ( 5 ) All other ( 7 ) ( 12 ) ( 7 ) Total other expense – CMS Energy $ ( 13 ) $ ( 27 ) $ ( 18 ) Consumers Other expense Donations $ ( 1 ) $ ( 9 ) $ ( 6 ) Civic and political expenditures ( 5 ) ( 6 ) ( 5 ) All other ( 6 ) ( 10 ) ( 7 ) Total other expense – Consumers $ ( 12 ) $ ( 25 ) $ ( 18 ) 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. 169 Table of Contents 16: Reportable Segments Reportable segments consist of business units defined by the products and services they offer. CMS Energy and Consumers evaluate the performance of each segment based on its contribution to net income available to CMS Energy’s common stockholders. Accounting policies for CMS Energy’s and Consumers’ segments are as described in Note 1, Significant Accounting Policies. The consolidated financial statements reflect the assets, liabilities, revenues, and expenses of the individual segments when appropriate. Accounts are allocated among the segments when common accounts are attributable to more than one segment. The allocations are based on certain measures of business activities, such as revenue, labor dollars, customers, other operating and maintenance expense, construction expense, leased property, taxes, or functional surveys. For example, customer receivables are allocated based on revenue, and pension provisions are allocated based on labor dollars. Inter-segment sales and transfers are accounted for at current market prices and are eliminated in consolidated net income available to common stockholders by segment. Inter-segment sales and transfers were immaterial for all periods presented. CMS Energy The segments reported for CMS Energy are: • electric utility, consisting of regulated activities associated with the generation, purchase, distribution, and sale of electricity in Michigan • gas utility, consisting of regulated activities associated with the purchase, transmission, storage, distribution, and sale of natural gas in Michigan • NorthStar Clean Energy, consisting of various subsidiaries engaging in domestic independent power production, including the development and operation of renewable generation, and the marketing of independent power production CMS Energy presents corporate interest and other expenses, discontinued operations, and Consumers’ other consolidated entities within other reconciling items. Consumers The segments reported for Consumers are: • electric utility, consisting of regulated activities associated with the generation, purchase, distribution, and sale of electricity in Michigan • gas utility, consisting of regulated activities associated with the purchase, transmission, storage, distribution, and sale of natural gas in Michigan Consumers’ other consolidated entities are presented within other reconciling items. 170 Table of Contents Presented in the following tables is financial information by segment: In Millions Years Ended December 31 2023 2022 2021 CMS Energy, including Consumers Operating revenue Electric utility $ 4,745 $ 5,419 $ 4,958 Gas utility 2,420 2,732 2,063 NorthStar Clean Energy 297 445 308 Total operating revenue – CMS Energy $ 7,462 $ 8,596 $ 7,329 Consumers Operating revenue Electric utility $ 4,745 $ 5,419 $ 4,958 Gas utility 2,420 2,732 2,063 Other reconciling items 1 — — Total operating revenue – Consumers $ 7,166 $ 8,151 $ 7,021 CMS Energy, including Consumers Depreciation and amortization Electric utility $ 797 $ 757 $ 772 Gas utility 338 330 304 NorthStar Clean Energy 43 38 37 Other reconciling items 2 1 1 Total depreciation and amortization – CMS Energy $ 1,180 $ 1,126 $ 1,114 Consumers Depreciation and amortization Electric utility $ 797 $ 757 $ 772 Gas utility 338 330 304 Other reconciling items 2 1 1 Total depreciation and amortization – Consumers $ 1,137 $ 1,088 $ 1,077 171 Table of Contents In Millions Years Ended December 31 2023 2022 2021 CMS Energy, including Consumers Income from equity method investees 1 NorthStar Clean Energy $ 7 $ 3 $ 10 Total income from equity method investees – CMS Energy $ 7 $ 3 $ 10 CMS Energy, including Consumers Interest charges Electric utility $ 281 $ 218 $ 207 Gas utility 158 116 104 NorthStar Clean Energy 2 3 6 Other reconciling items 202 182 183 Total interest charges – CMS Energy $ 643 $ 519 $ 500 Consumers Interest charges Electric utility $ 285 $ 218 $ 207 Gas utility 161 116 104 Other reconciling items 2 1 — Total interest charges – Consumers $ 448 $ 335 $ 311 CMS Energy, including Consumers Income tax expense (benefit) Electric utility $ 67 $ 109 $ 117 Gas utility 98 32 39 NorthStar Clean Energy 4 3 ( 2 ) Other reconciling items ( 22 ) ( 51 ) ( 59 ) Total income tax expense – CMS Energy $ 147 $ 93 $ 95 Consumers Income tax expense (benefit) Electric utility $ 67 $ 109 $ 117 Gas utility 98 32 39 Other reconciling items ( 4 ) ( 1 ) — Total income tax expense – Consumers $ 161 $ 140 $ 156 172 Table of Contents In Millions Years Ended December 31 2023 2022 2021 CMS Energy, including Consumers Net income (loss) available to common stockholders Electric utility $ 550 $ 567 $ 565 Gas utility 315 378 302 NorthStar Clean Energy 67 34 23 Other reconciling items ( 55 ) ( 152 ) 458 Total net income available to common stockholders – CMS Energy $ 877 $ 827 $ 1,348 Consumers Net income (loss) available to common stockholder Electric utility $ 550 $ 567 $ 565 Gas utility 315 378 302 Other reconciling items — ( 2 ) ( 1 ) Total net income available to common stockholder – Consumers $ 865 $ 943 $ 866 CMS Energy, including Consumers Plant, property, and equipment, gross Electric utility 2 $ 19,302 $ 17,870 $ 18,147 Gas utility 2 12,383 11,443 10,601 NorthStar Clean Energy 1,420 1,148 1,122 Other reconciling items 30 30 23 Total plant, property, and equipment, gross – CMS Energy $ 33,135 $ 30,491 $ 29,893 Consumers Plant, property, and equipment, gross Electric utility 2 $ 19,302 $ 17,870 $ 18,147 Gas utility 2 12,383 11,443 10,601 Other reconciling items 38 29 23 Total plant, property, and equipment, gross – Consumers $ 31,723 $ 29,342 $ 28,771 CMS Energy, including Consumers Investments in equity method investees 1 NorthStar Clean Energy $ 76 $ 71 $ 71 Total investments in equity method investees – CMS Energy $ 76 $ 71 $ 71 173 Table of Contents In Millions Years Ended December 31 2023 2022 2021 CMS Energy, including Consumers Total assets Electric utility 2 $ 19,358 $ 17,907 $ 16,493 Gas utility 2 12,353 11,873 10,517 NorthStar Clean Energy 1,604 1,464 1,312 Other reconciling items 202 109 431 Total assets – CMS Energy $ 33,517 $ 31,353 $ 28,753 Consumers Total assets Electric utility 2 $ 19,417 $ 17,968 $ 16,555 Gas utility 2 12,397 11,918 10,564 Other reconciling items 38 30 21 Total assets – Consumers $ 31,852 $ 29,916 $ 27,140 CMS Energy, including Consumers Capital expenditures 3 Electric utility 4 $ 2,081 $ 1,265 $ 1,153 Gas utility 4 1,041 1,008 989 NorthStar Clean Energy 156 113 17 Other reconciling items 2 7 2 Total capital expenditures – CMS Energy $ 3,280 $ 2,393 $ 2,161 Consumers Capital expenditures 3 Electric utility 4 $ 2,081 $ 1,265 $ 1,153 Gas utility 4 1,041 1,008 989 Other reconciling items 23 7 2 Total capital expenditures – Consumers $ 3,145 $ 2,280 $ 2,144 1 Consumers had no equity method investments. 2 Amounts include a portion of Consumers’ other common assets attributable to both the electric and gas utility businesses. 3 Amounts include assets placed under finance lease. 4 Amounts include a portion of Consumers’ capital expenditures for plant and equipment attributable to both the electric and gas utility businesses. 174 Table of Contents 17: Related-party Transactions—Consumers Consumers enters into a number of transactions with related parties in the normal course of business. These transactions include but are not limited to: • purchases of electricity from affiliates of NorthStar Clean Energy • payments to and from CMS Energy related to parent company overhead costs • payments of principal and interest when due to CMS Energy related to borrowings under certain credit agreements and CMS Energy’s repurchase of Consumers’ first mortgage bonds Transactions involving power supply purchases from certain affiliates of NorthStar Clean Energy are based on avoided costs under PURPA, state law, and competitive bidding. The payment of parent company overhead costs is based on the use of accepted industry allocation methodologies. These payments are for costs that occur in the normal course of business. Presented in the following table is Consumers’ expense recorded from related-party transactions for the years ended December 31: In Millions Description Related Party 2023 2022 2021 Purchases of capacity and energy Affiliates of NorthStar Clean Energy $ 75 $ 76 $ 77 Amounts payable to related parties for purchased power and other services were $ 19 million at December 31, 2023 and $ 20 million at December 31, 2022. Accounts receivable from related parties were $ 9 million at December 31, 2023 and $ 8 million at December 31, 2022. CMS Energy has a demand note payable to the DB SERP rabbi trust. The demand note bears interest at an annual rate of 4.10 percent and has a maturity date of 2028. The portion of the demand note attributable to Consumers was recorded as a note receivable – related party on Consumers’ consolidated balance sheets at December 31, 2023 and 2022. Consumers has a natural gas transportation agreement with a subsidiary of CMS Energy that extends through 2038, related to a pipeline owned by Consumers. For additional details about the agreement, see Note 8, Leases. During 2023, CMS Energy repurchased certain of Consumers’ first mortgage bonds. For more information about these repurchases, see Note 4, Financings and Capitalization—CMS Energy’s Purchase of Consumers’ First Mortgage Bonds. In November 2023, an unregulated subsidiary of Consumers sold certain non-utility renewable development projects to NorthStar Clean Energy for $ 20 million, the projects’ net book value; there was no gain or loss recognized on this sale. In December 2023, Consumers renewed a short-term credit agreement with CMS Energy, permitting Consumers to borrow up to $ 500 million. For additional details about the agreement, see Note 4, Financings and Capitalization—Short-term Borrowings . 175 Table of Contents 18: Variable Interest Entities Consolidated VIEs: During 2023, NorthStar Clean Energy sold a Class A membership interest in Newport Solar Holdings to tax equity investors for $ 86 million. Newport Solar Holdings wholly owns Newport Solar, a 180 ‑MW solar generation project located in Jackson County, Arkansas; the project began commercial operation in October 2023. NorthStar Clean Energy holds a Class B membership interest in NWO Holdco, which wholly owns Northwest Ohio Wind, LLC, a 100 ‑MW wind generation project in Paulding County, Ohio. The Class A membership interest in NWO Holdco is held by a tax equity investor. NorthStar Clean Energy has a 51 -percent ownership interest in Aviator Wind Equity Holdings, which holds a Class B membership interest in Aviator Wind, the holding company of a 525 ‑MW wind generation project in Coke County, Texas. The Class A membership interest in Aviator Wind is held by a tax equity investor. Earnings, tax attributes, and cash flows generated by Newport Solar Holdings, NWO Holdco, and Aviator Wind are allocated among and distributed to the membership classes in accordance with the ratios specified in the associated limited liability company agreements; these ratios change over time and are not representative of the ownership interest percentages of each membership class. Since these entities’ income and cash flows are not distributed among their investors based on ownership interest percentages, NorthStar Clean Energy allocates the entities’ income (loss) among the investors by applying the hypothetical liquidation at book value method. This method calculates each investor’s earnings based on a hypothetical liquidation of the entities at the net book value of underlying assets as of the balance sheet date. The liquidation tax gain (loss) is allocated to each investor’s capital account, resulting in income (loss) equal to the period change in the investor’s capital account balance. Newport Solar Holdings, NWO Holdco, Aviator Wind Equity Holdings, and Aviator Wind are VIEs. In accordance with the associated limited liability company agreements, the tax equity investors are guaranteed preferred returns from these entities. However, NorthStar Clean Energy manages and controls the entities’ operating activities. As a result, NorthStar Clean Energy is the primary beneficiary, as it has the power to direct the activities that most significantly impact the economic performance of the companies, as well as the obligation to absorb losses or the right to receive benefits from the companies. NorthStar Clean Energy consolidates Newport Solar Holdings, NWO Holdco, Aviator Wind Equity Holdings, and Aviator Wind and presents the Class A membership interests and 49 percent of Aviator Wind Equity Holdings as noncontrolling interests. 176 Table of Contents Presented in the following table are the carrying values of the VIEs’ assets and liabilities included on CMS Energy’s consolidated balance sheets: In Millions December 31 2023 2022 Current Cash and cash equivalents $ 28 $ 43 Accounts receivable 3 7 Prepayments and other current assets 4 7 Non-current Plant, property, and equipment, net 1,064 850 Construction work in progress — 156 Other non-current assets 3 — Total assets 1 $ 1,102 $ 1,063 Current Current portion of long-term debt $ — $ 100 Accounts payable 12 33 Non-current Non-current portion of finance leases 23 23 Asset retirement obligations 32 24 Total liabilities $ 67 $ 180 1 Assets may be used only to meet VIEs’ obligations and commitments. NorthStar Clean Energy is obligated under certain indemnities that protect the tax equity investors against losses incurred as a result of breaches of representations and warranties under the associated limited liability company agreements. For additional details on these indemnity obligations, see Note 3, Contingencies and Commitments—Guarantees. Consumers’ wholly-owned subsidiaries, Consumers 2014 Securitization Funding and Consumers 2023 Securitization Funding, are VIEs designed to collateralize Consumers’ securitization bonds. These entities are considered VIEs primarily because their equity capitalization is insufficient to support their operations. Consumers is the primary beneficiary of and consolidates these VIEs, as it has the power to direct the activities that most significantly impact the economic performance of the companies, as well as the obligation to absorb losses or the right to receive benefits from the companies. The VIEs’ primary assets and liabilities comprise regulatory assets and long-term debt. For more information on these assets and liabilities, see Note 2, Regulatory Matters— Securitized Costs and Note 4, Financings and Capitalization—Securitization Bonds. Non-consolidated VIEs: CMS Energy has variable interests in T.E.S. Filer City, Grayling, Genesee, and Craven. While CMS Energy owns 50 percent of each partnership, it is not the primary beneficiary of any of these partnerships because decision making is shared among unrelated parties, and no one party has the ability to direct the activities that most significantly impact the entities’ economic performance, such as operations and maintenance, plant dispatch, and fuel strategy. The partners must agree on all major decisions for each of the partnerships. 177 Table of Contents Presented in the following table is information about these partnerships: Name Nature of the Entity Nature of CMS Energy’s Involvement T.E.S. Filer City Coal-fueled power generator Long-term PPA between partnership and Consumers Employee assignment agreement Grayling Wood waste-fueled power generator Long-term PPA between partnership and Consumers Reduced dispatch agreement with Consumers 1 Operating and management contract Genesee Wood waste-fueled power generator Long-term PPA between partnership and Consumers Reduced dispatch agreement with Consumers 1 Operating and management contract Craven Wood waste-fueled power generator Operating and management contract 1 Reduced dispatch agreements allow the facilities to be dispatched based on the market price of power compared with the cost of production of the plants. This results in fuel cost savings that each partnership shares with Consumers’ customers. The creditors of these partnerships do not have recourse to the general credit of CMS Energy or Consumers. CMS Energy’s maximum risk exposure to these partnerships is generally limited to its investment in the partnerships, which is included in investments on its consolidated balance sheets in the amount of $ 74 million at December 31, 2023 and $ 71 million at December 31, 2022. 19: Exit Activities and Discontinued Operations Exit Activities: In accordance with its Clean Energy Plan, Consumers retired the D.E. Karn coal-fueled electric generating units in June 2023 and plans to retire the J.H. Campbell coal-fueled generating units in 2025. In order to ensure necessary staffing at both D.E. Karn and J.H. Campbell through retirement, Consumers has implemented retention incentive programs. The aggregate cost of the D.E. Karn program, which is now complete, was $ 32 million. The aggregate cost of the J.H. Campbell program through 2025 is estimated to be $ 50 million. The MPSC has approved deferred accounting treatment for these costs; these expenses are deferred as a regulatory asset. As of December 31, 2023, the cumulative cost incurred and charged to maintenance and other operating expenses related to the D.E. Karn retention incentive program was $ 16 million. Additionally, an amount of $ 4 million was capitalized as a cost of plant, property, and equipment and an amount of $ 12 million was deferred as a regulatory asset. The cumulative cost incurred and deferred as a regulatory asset related to the J.H. Campbell retention incentive program was $ 35 million. The regulatory assets for both programs will be collected from customers over three years. 178 Table of Contents Presented in the following table is a reconciliation of the retention benefit liability recorded in other liabilities on Consumers’ consolidated balance sheets: In Millions Years Ended December 31 2023 2022 Retention benefit liability at beginning of period $ 21 $ 14 Costs deferred as a regulatory asset 16 24 Costs paid or settled ( 21 ) ( 17 ) Retention benefit liability at the end of the period 1 $ 16 $ 21 1 Includes current portion of other liabilities of $ 7 million at December 31, 2023 and $ 13 million at December 31, 2022. Discontinued Operations: In 2021, EnerBank was acquired by a non-affiliated company. CMS Energy received proceeds of over $ 1.0 billion from the transaction and recognized a pre-tax gain of $ 657 million in 2021. In March 2022, CMS Energy received $ 6 million of additional proceeds as the result of a post-closing adjustment. Net of related transaction costs, CMS Energy recognized a pre-tax gain of $ 5 million during 2022. EnerBank’s results of operations through the date of the sale are presented as income from discontinued operations on CMS Energy’s consolidated statements of income for the year ended December 31, 2021. The table below presents the financial results of EnerBank included in income from discontinued operations: In Millions Years Ended December 31 2022 2021 Operating revenue $ — $ 209 Expenses Operating expenses — 60 Interest expense — 34 Income before income taxes $ — $ 115 Gain on sale 5 657 Income from discontinued operations before income taxes $ 5 $ 772 Income tax expense 1 170 Income from discontinued operations, net of tax $ 4 $ 602 179 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of CMS Energy Corporation Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of CMS Energy Corporation and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of income, of comprehensive income, of changes in equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes and financial statement schedules listed in the index appearing under Item 15 (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. 180 Table of Contents Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Accounting for the Effects of New Regulatory Matters As described in Note 2 to the consolidated financial statements, the Company is a utility and must apply regulatory accounting when its rates are designed to recover specific costs of providing regulated services. Under regulatory accounting, the Company records regulatory assets or liabilities for certain transactions that would have been treated as expense or revenue by a non ‑ regulated business. As of December 31, 2023, the Company has recognized a total of $3,886 million of regulatory assets, $3,950 million of regulatory liabilities, and $54 million of accrued rate refunds. As described by management, there are multiple participants to rate case proceedings who often challenge various aspects of those proceedings, including the prudence of the Company’s policies and practices. These participants often seek cost disallowances and other relief and have appealed significant decisions reached by the regulators. The recovery of regulatory assets and the settlement of regulatory liabilities are contingent upon the outcomes of rate cases and regulatory proceedings. The principal considerations for our determination that performing procedures relating to accounting for the effects of new regulatory matters is a critical audit matter are (i) the high degree of auditor judgment and subjectivity applied to evaluate management’s assessment of the potential outcomes and related accounting impacts associated with pending rate case proceedings; (ii) in some cases, the significant audit effort necessary to assess contrary evidence from various parties involved in rate case proceedings; and (iii) the significant audit effort necessary to evaluate audit evidence related to the recovery of regulatory assets and the settlement of regulatory liabilities. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s assessment of 181 Table of Contents regulatory proceedings, including the probability of recovering incurred costs and the related accounting and disclosure impacts. These procedures also included, among others, (i) evaluating the Company’s correspondence with regulators; (ii) evaluating the reasonableness of management’s assessment regarding whether recovery of regulatory assets and settlement of regulatory liabilities is probable; (iii) evaluating the sufficiency of the disclosures in the consolidated financial statements; and (iv) testing, on a sample basis, the regulatory assets and liabilities, including those subject to pending rate cases and regulatory proceedings, based on (a) provisions and formulas outlined in rate orders; (b) other regulatory correspondence; and (c) application of relevant regulatory precedents. /s/ PricewaterhouseCoopers LLP Detroit, Michigan February 8, 2024 We have served as the Company’s auditor since 2007. 182 Table of Contents (This page intentionally left blank) 183 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholder of Consumers Energy Company Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Consumers Energy Company and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of income, of comprehensive income, of changes in equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes and financial statement schedule listed in the index appearing under Item 15 (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. 184 Table of Contents Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Accounting for the Effects of New Regulatory Matters As described in Note 2 to the consolidated financial statements, the Company is a utility and must apply regulatory accounting when its rates are designed to recover specific costs of providing regulated services. Under regulatory accounting, the Company records regulatory assets or liabilities for certain transactions that would have been treated as expense or revenue by a non ‑ regulated business. As of December 31, 2023, the Company has recognized a total of $3,886 million of regulatory assets, $3,950 million of regulatory liabilities, and $54 million of accrued rate refunds. As described by management, there are multiple participants to rate case proceedings who often challenge various aspects of those proceedings, including the prudence of the Company’s policies and practices. These participants often seek cost disallowances and other relief and have appealed significant decisions reached by the regulators. The recovery of regulatory assets and the settlement of regulatory liabilities are contingent upon the outcomes of rate cases and regulatory proceedings. The principal considerations for our determination that performing procedures relating to accounting for the effects of new regulatory matters is a critical audit matter are (i) the high degree of auditor judgment and subjectivity applied to evaluate management’s assessment of the potential outcomes and related accounting impacts associated with pending rate case proceedings; (ii) in some cases, the significant audit effort necessary to assess contrary evidence from various parties involved in rate case proceedings; and (iii) the significant audit effort necessary to evaluate audit evidence related to the recovery of regulatory assets and the settlement of regulatory liabilities. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s assessment of 185 Table of Contents regulatory proceedings, including the probability of recovering incurred costs and the related accounting and disclosure impacts. These procedures also included, among others, (i) evaluating the Company’s correspondence with regulators; (ii) evaluating the reasonableness of management’s assessment regarding whether recovery of regulatory assets and settlement of regulatory liabilities is probable; (iii) evaluating the sufficiency of the disclosures in the consolidated financial statements; and (iv) testing, on a sample basis, the regulatory assets and liabilities, including those subject to pending rate cases and regulatory proceedings, based on (a) provisions and formulas outlined in rate orders; (b) other regulatory correspondence; and (c) application of relevant regulatory precedents. /s/ PricewaterhouseCoopers LLP Detroit, Michigan February 8, 2024 We have served as the Company’s auditor since 2007. 186 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.