What changed in this filing

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Item 1A. Risk Factors

2025-02-11 compared with 2024-02-08 · 64 added, 45 removed, 192 unchanged (36% of the section changed)

20 unchanged sentences

CMS Energy and Consumers rely on the capital markets, as well as on bank syndications, to meet their financial commitments and short-term liquidity needs not otherwise funded internally.

Disruptions in the capital and credit markets, or the inability to obtain required regulatory authorization for issuances of securities including debt, could adversely affect CMS Energy’s and Consumers’ access to liquidity needed for their businesses.

Disruptions in the capital and credit markets, or the inability to obtain required regulatory authorization for issuances of securities including debt, including as may be required from FERC, could adversely affect CMS Energy’s and Consumers’ access to liquidity needed for their businesses.

Any liquidity disruption could require CMS Energy and Consumers to take measures to conserve cash including, but not limited to, deferring capital expenditures, changing commodity purchasing strategies to avoid collateral-posting requirements, and reducing or eliminating future share repurchases, dividend payments, or other discretionary uses of cash.

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If the ROA limit were increased, this new ROA-like community solar system were allowed, or electric generation service in Michigan were deregulated, it could have a material adverse effect on CMS Energy and Consumers.

The creation of utilities by municipalities in Consumers’ service territory, or the impairment of Consumers’ franchise rights to serve customers in municipalities, could have a material adverse effect on CMS Energy’s and Consumers’ businesses.

Michigan law allows Consumers’ electric and natural gas utility businesses to serve customers pursuant to franchises granted by municipalities.

Michigan law also allows municipalities to create, own, and operate utilities.

If one or more municipalities in Consumers’ service territory created a new or supplemental utility, or impaired the franchise under which Consumers serves customers in the municipality, it could have a material adverse effect on CMS Energy and Consumers.

Distributed energy resources could have a material adverse effect on CMS Energy’s and Consumers’ businesses.

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It also specifies an inflow and outflow rate method that must be implemented by the MPSC and provides federal funding for low-income distributed generation.

Recent FERC policy allows many customer-owned behind-the-meter and grid-connected distributed energy resources to participate in and receive revenue from wholesale electricity markets.

FERC policy allows many customer-owned behind-the-meter and grid-connected distributed energy resources to participate in and receive revenue from wholesale electricity markets, as governed by evolving wholesale market rules subject to FERC oversight.

Increased customer use of distributed energy resources could result in a reduction of Consumers’ electric sales.

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These orders could also result in adverse regulatory treatment of other matters.

For example, MPSC orders could prevent or curtail Consumers from shutting off non‑paying customers or could prevent or limit the implementation of an electric or gas revenue mechanism.

For example, MPSC orders could prevent or curtail Consumers from shutting off non‑paying customers, could prevent or limit the implementation of an electric or gas revenue mechanism, or could penalize Consumers for not meeting service and reliability standards.

Regulators could face competitive or political pressures to avoid or limit rate increases for a number of reasons, including economic downturn in the state, reliability and economic justice concerns, or decreased customer base, among others.

FERC authorizes certain subsidiaries of CMS Energy, including Consumers, to sell wholesale electricity at market-based rates and to provide certain other wholesale electric services at rates and terms subject to FERC approval.

Failure of these subsidiaries to maintain this FERC authority could have a material

adverse effect on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations.

Failure of these subsidiaries to maintain this FERC authority could have a material adverse effect on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations.

Electric transmission and natural gas pipeline rates paid by Consumers and other CMS Energy subsidiaries are also set by FERC, as are the tariff terms governing the participation of Consumers and other CMS Energy subsidiaries in FERC-regulated wholesale electricity markets operated by regional transmission organizations and independent system operators such as MISO and PJM.

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The various risks associated with the MPSC and FERC regulation of CMS Energy’s and Consumers’ businesses, which include the risk of adverse decisions in any number of rate or regulatory proceedings before either agency, as well as judicial proceedings challenging any agency decisions, could have a material adverse effect on CMS Energy and Consumers.

Changes to the tariffs or business practice manuals of certain wholesale market operators such as MISO, PJM, or ERCOT could also have a material adverse effect on CMS Energy and Consumers.

Changes to the tariffs or business practice manuals of certain wholesale market operators such as MISO, PJM, or ERCOT, or corresponding impacts

such as interconnection delays for new electric generation or storage projects, could also have a material adverse effect on CMS Energy and Consumers.

Utility regulation, state or federal legislation, and compliance could have a material adverse effect on CMS Energy’s and Consumers’ businesses.

CMS Energy and certain of its subsidiaries, including Consumers, are subject to, or affected by, extensive utility regulation and state and federal legislation.

If it were determined that CMS Energy or Consumers failed to comply with applicable laws and regulations or with applicable tariff provisions, they could become subject to fines, penalties, or disallowed costs, or be required to implement additional compliance, cleanup, or remediation programs, the cost of which could be material.

CMS Energy and Consumers cannot predict the impact of new laws, rules, regulations, principles, or practices by federal or state agencies or wholesale electricity market operators, or challenges or changes to present laws, rules, regulations, principles, or practices and the interpretation of any adoption or change.

CMS Energy and certain of its subsidiaries, including Consumers, are subject to, or affected by, extensive utility regulation and state and federal legislation, including through application of policies and rules of numerous state and federal agencies and governmental entities.

If it were determined that CMS Energy or Consumers failed to comply with applicable laws and regulations or with applicable tariff provisions, they could become subject to fines, penalties, refund or disgorgement orders, or disallowed costs, or be required to implement additional compliance, cleanup, or remediation programs, the cost of which could be material.

CMS Energy and Consumers cannot predict the impact of new laws, rules, regulations, tariffs, principles, or practices by federal or state agencies or wholesale electricity market operators, or challenges or changes to present laws, rules, regulations, tariffs, principles, or practices and the interpretation of any adoption or change.

Furthermore, any state or federal legislation concerning CMS Energy’s or Consumers’ operations could also have a material adverse effect.

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CMS Energy and Consumers cannot predict the impact of FERC orders or actions of NERC and its regional entities on electric system reliability.

Additionally, national gas pipeline infrastructure has recently been under scrutiny following disruptions related to extreme weather and cyber incidents.

In 2021, the Transportation Security Administration issued two mandatory security directives related to natural gas pipelines that apply to Consumers.

Additionally, natural gas pipeline infrastructure has recently been under scrutiny following disruptions related to extreme weather and cyber incidents.

Additional regulation in this area could adversely affect Consumers’ gas operations.

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Achieving these plans depends on numerous factors, many of which are outside of their control.

Consumers has announced a long-term strategy for delivering clean, reliable, resilient, and affordable energy, including a plan to end coal use in 2025.

The MPSC, FERC, other regulatory authorities, or other third parties may prohibit, delay, or impair some or all of Consumers’ planned acquisitions of owned or purchased electric generation capacity.

Consumers may be unable to acquire, site, and/or permit some or all of the generation capacity proposed in its plan.

Consumers’ ability to implement its plan may be affected by environmental regulations, global supply chain disruptions, and changes in the cost, availability, and supply of generation capacity.

While CMS Energy and Consumers continue to advocate for advances in technologies required to reduce or eliminate greenhouse gases on a cost-effective basis, such advances are largely outside of CMS Energy’s and Consumers’ control.

Advancements in technology related to items such as battery storage and electric vehicles may not become commercially

available or economically feasible as projected.

Consumers has announced a long-term strategy for delivering clean, reliable, resilient, and affordable energy, including a plan to end the use of coal in owned generation in 2025, and other subsidiaries of CMS Energy have plans to develop and operate clean energy assets.

The MPSC, FERC, other regulatory authorities, or other third parties may prohibit, delay, or impair some or all of CMS Energy’s and Consumers’ planned acquisitions or development of owned or purchased electric generation and storage capacity.

Consumers’ planned electric generation capacity, including renewable generation or storage projects, may be adversely impacted by interconnection delays at MISO or in the footprints of other regional transmission organizations, and/or by interconnection costs.

CMS Energy and Consumers and its contractors may be unable to acquire, site, construct timely, and/or permit generation and storage capacity, including some or all of the generation and storage capacity proposed in Consumers’ plan.

CMS Energy and Consumers’ ability to implement their plans may be affected by environmental regulations, global supply chain disruptions, import tariffs, and changes in the cost, availability, and supply of generation and storage capacity.

While CMS Energy and Consumers continue to advocate for advances in commercially available technologies required to reduce or eliminate greenhouse gases on a cost-effective basis at scale, such advances are largely outside of CMS Energy’s and Consumers’ control.

Advancements in technology related to items such as battery storage, carbon capture/storage, and electric vehicles may not become commercially available or economically feasible as projected.

Customer programs such as energy efficiency and demand response may not realize the projected levels of customer participation.

Consumers has also announced its Reliability Roadmap.

The Reliability Roadmap includes larger investments in grid hardening, distribution capacity, and automation to deliver better than median reliability to customers given increasingly severe weather and customer adoption of new technologies.

The MPSC or other third parties may prohibit, delay, or impair the Reliability Roadmap and some or all

of the associated capital investments.

Consumers’ ability to implement its plan may be affected by global supply chain disruptions and/or workforce availability.

Consumers has also announced its Natural Gas Delivery Plan, a rolling ten‑year investment plan to deliver safe, reliable, clean, and affordable natural gas to customers.

This plan includes accelerated infrastructure replacements, innovative leak detection technology, and process changes to reduce or eliminate methane emissions.

The MPSC, FERC, other regulatory authorities, or other third parties may prohibit, delay, or impair the Natural Gas Delivery Plan and some or all of the associated capital investments.

Consumers’ ability to implement its plan may be affected by environmental regulations, global supply chain disruptions, and changes in the cost, availability, and supply of natural gas or the ability to deliver natural gas to customers.

The MPSC, FERC, U.S.

Department of Transportation, other regulatory authorities, or other third parties may prohibit, delay, or impair the Natural Gas Delivery Plan and some or all of the associated capital investments.

Consumers’ ability to implement its plan may be affected by environmental regulations, global supply chain disruptions, import tariffs, and changes in the cost, availability, and supply of natural gas or the ability to deliver natural gas to customers.

Advancements in technology related to items such as renewable natural gas may not become commercially available or economically feasible as projected in Consumers’ plan.

6 unchanged sentences

Additionally, changes in federal, state, or local tax rates or other changes in tax laws could have adverse impacts.

The change in administration and the expiring tax cuts in the TCJA could result in changes to the renewable energy tax credits enacted in the Inflation Reduction Act of 2022.

These changes could impact CMS Energy’s and Consumers’ clean energy efforts.

CMS Energy and its subsidiaries, including Consumers, must comply with the Dodd-Frank Act and its related regulations.

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CMS Energy and Consumers have interests in fossil-fuel-fired power plants, other types of power plants, and natural gas systems that emit greenhouse gases.

Federal, state, and local environmental laws and rules, as well as international accords and treaties, could require CMS Energy and Consumers to install

additional equipment for emission controls, undertake heat-rate improvement projects, purchase carbon emissions allowances, curtail operations, invest in generating capacity with fewer carbon dioxide emissions, or take other significant steps to manage or lower the emission of greenhouse gases.

Federal, state, and local environmental laws and rules, as well as international accords and treaties, could require CMS Energy and Consumers to install additional equipment for emission controls, undertake heat-rate improvement projects, purchase carbon emissions allowances, curtail operations, invest in generating capacity with fewer carbon dioxide emissions, or take other significant steps to manage or lower the emission of greenhouse gases.

Similarly, Consumers could be restricted from constructing natural gas infrastructure due to potential environmental regulations, which could require more costly alternatives.

The following risks related to climate change, emissions, and environmental regulations could also have a material adverse impact on CMS Energy and Consumers:

• a change in regulators’ implementation of policy or litigation originated by third parties against CMS Energy or Consumers due to CMS Energy’s or Consumers’ greenhouse gas or other emissions or CCR disposal and storage

• a change in policy/regulation, regulators’ implementation of policy/regulation or litigation originated by third parties against CMS Energy or Consumers due to CMS Energy’s or Consumers’ greenhouse gas or other emissions or CCR disposal and storage

• impairment of CMS Energy’s or Consumers’ reputation due to their greenhouse gas or other emissions and public perception of their response to potential environmental regulations, rules, and legislation

16 unchanged sentences

CMS Energy and Consumers expect to incur additional substantial costs related to environmental remediation of former sites.

Consumers expects to incur additional substantial costs related to the remediation of its former MGP sites and other response activity costs at a number of other former sites, including, but not limited to, sites of retired coal-fueled electric generating units, under NREPA, RCRA, and CERCLA.

NREPA, RCRA, CERCLA and related state and federal regulations.

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

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There are risks associated with Consumers’ substantial capital investment program planned for the next five years.

Consumers’ planned investments include the construction or acquisition of electric generation, electric and gas infrastructure, conversions and expansions, environmental controls, electric grid modernization technology, and other electric and gas investments to upgrade delivery systems, as well as decommissioning of older facilities.

Consumers’ planned investments include the construction or acquisition of electric generation, electric and gas infrastructure, conversions and expansions, environmental controls, electric grid automation technologies, and other electric and gas investments to upgrade delivery systems, as well as decommissioning of older facilities.

The success of these capital investments depends on or could be affected by a variety of factors that include, but are not limited to:

2 unchanged sentences

• availability of qualified construction personnel, both internal and contracted

• effective and timely contractor performance

• changes in commodity and other prices, applicable tariffs, and/or material and equipment availability

• governmental actions

• interconnection uncertainty, delays, and costs for electric generation projects

• operational performance

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CMS Energy and Consumers could be affected adversely by legacy litigation and retained liabilities.

The agreements that CMS Energy and Consumers enter into for the sale of assets customarily include provisions whereby they are required to:

The agreements that CMS Energy and Consumers enter into for the sale of assets can include provisions whereby they are required to:

• retain specified preexisting liabilities, such as for taxes, pensions, or environmental conditions

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Consumers’ electric and gas utility businesses are affected by the economic conditions impacting the customers they serve.

If the Michigan economy becomes sluggish or declines, Consumers could experience reduced demand for electricity or natural gas that could result in decreased earnings and cash

If the Michigan economy becomes sluggish or declines, Consumers could experience reduced demand for electricity or natural gas that could result in decreased earnings and cash flow.

In addition, economic conditions in Consumers’ service territory affect its collections of accounts receivable and levels of lost or stolen gas.

1 unchanged sentence

Technology advances, government incentives and subsidies, and regulatory decisions could increase the cost effectiveness of customer-owned methods of producing electricity and managing energy use resulting in reduced load, cross subsidization, and increased costs.

Customers could also reduce their consumption through energy waste reduction programs.

Customers could also reduce their consumption of electricity and natural gas through energy waste reduction programs.

Similarly, customers could also reduce their consumption of natural gas through alternative technologies or fuels or through electrification.

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Mild temperatures during the summer cooling season and winter heating season as well as the impact of extreme weather events on Consumers’ system could have a material adverse effect.

Demand for electricity associated with data center expansion could have a material effect on CMS Energy and Consumers.

Consumers’ utility operations are affected by new customers and load growth.

Rapid expansion of data centers associated with increasing demand for cloud services, artificial intelligence, and other applications could lead to an unprecedented increase in demand for electric power in MISO and in Consumers’ service territory.

Data center electric demand could require a rapid and significant increase in generation capacity and grid infrastructure in the MISO footprint as well as in Consumers’ service territory, which could have a material effect on CMS Energy and Consumers.

Alternatively, this rapid expansion of data centers and resulting increase in demand for electric power in MISO and in Consumers’ service territory may not develop as planned.

CMS Energy and Consumers are subject to information security risks, risks of unauthorized access to their systems, and technology failures.

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In addition, CMS Energy and Consumers operate in a highly regulated industry that requires the continued operation of sophisticated information and control technology systems and network infrastructure.

Despite implementation of security measures, technology systems, including disaster recovery and backup systems, are vulnerable to failure, cyber crime, unauthorized access, and being disabled.

Despite implementation of security measures, technology systems, including disaster recovery and backup systems, are vulnerable to failure, cyber attacks, unauthorized access, and being disabled.

These events could impact the reliability of electric generation and electric and gas delivery and also subject CMS Energy and Consumers to financial harm.

Cyber crime, which includes the use of malware, ransomware, computer viruses, and other means for disruption or unauthorized access against companies, including CMS Energy and Consumers, is increasing in frequency, scope, and potential impact.

Cyber attacks, which include the use of malware, ransomware, computer viruses, and other means for disruption or

unauthorized access against companies, including CMS Energy and Consumers, are increasing in frequency, scope, and potential impact.

While CMS Energy and Consumers have not been subject to cyber incidents that have had a material impact on their operations to date, their security measures in place may be insufficient to prevent a major cyber incident in the future.

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CMS Energy’s and Consumers’ businesses have liability risks.

Consumers’ electric and gas delivery systems, power plants, gas infrastructure including storage facilities, wind energy or solar equipment, energy products, vehicle fleets and equipment, or other assets;

the independent power plants or other assets and equipment owned in whole or in part by CMS Energy;

or CMS Energy or Consumers employees could be involved in incidents, failures, or accidents that result in injury, loss of life, or property loss to customers, employees, or the public.

Although CMS Energy and Consumers have insurance coverage for many potential incidents (subject to deductibles, limitations, and self-insurance amounts that could be material), depending upon the nature or severity of any incident, failure, or accident, CMS Energy or Consumers could suffer financial loss, reputational damage, and negative repercussions from regulatory agencies or other public authorities.

Assets, equipment, and personnel of CMS Energy and Consumers, including electric and gas delivery systems, power plants, gas infrastructure including storage facilities, wind energy or solar equipment, energy products, energy storage assets, vehicle fleets and equipment, other assets, or employees and contractors, could be involved in incidents, failures, or accidents that result in injury, loss of life, or property loss and damage to customers, employees, or the public.

CMS Energy and Consumers are subject to risks that are beyond their control, including but not limited to natural disasters, civil unrest, terrorist attacks and related acts of war, cyber incidents, vandalism, and other catastrophic events.

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CMS Energy and Consumers manage commodity price risk using established policies and procedures, and they may use various contracts to manage this risk, including swaps, options, futures, and forward contracts.

No assurance can be made that these strategies will be successful in managing CMS Energy’s and Consumers’ risk or that they will not result in net liabilities to CMS Energy or Consumers as a result of future volatility.

A substantial portion of Consumers’ operating expenses for its electric generating plants and vehicle fleet consists of the costs of obtaining these commodities.

No assurance can be made that these strategies will be successful in managing

CMS Energy’s and Consumers’ risk or that they will not result in net liabilities to CMS Energy or Consumers as a result of future volatility.

A substantial portion of Consumers’ operating expenses for its electric generating plants and vehicle fleet consists of the costs of obtaining commodities.

The contracts associated with Consumers’ fuel for electric generation and purchased power are executed in conjunction with the PSCR mechanism, which is designed to allow Consumers to recover prudently incurred costs associated with its positions in these commodities.

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Changes in laws that limit CMS Energy’s and Consumers’ ability to hedge could also have a negative effect on CMS Energy and Consumers.

Consumers might not be able to obtain an adequate supply of natural gas or coal, which could limit its ability to operate its electric generation facilities or serve its natural gas customers.

Consumers has natural gas and coal supply and transportation contracts in place for the natural gas and coal it requires for its electric generating capacity.

CMS Energy and Consumers might not be able to obtain an adequate supply of natural gas or coal, which could limit their ability to operate electric generation facilities or serve Consumers’ natural gas customers.

CMS Energy and Consumers have contracts in place for the supply and transportation of the natural gas, coal, and other fuel sources they require for their electric generating capacity.

Consumers also has interstate transportation and supply agreements in place to facilitate delivery of natural gas to its customers.

Apart from the contractual and monetary remedies available to Consumers in the event of a counterparty’s failure to perform under any of these contracts, there can be no assurances that the counterparties to these contracts will fulfill their obligations to provide natural gas or coal to Consumers.

The counterparties under the agreements could experience financial or operational problems that inhibit their ability to fulfill their obligations to Consumers.

In addition, counterparties under these contracts might not be required to supply natural gas or coal to Consumers under certain circumstances, such as in the event of a natural disaster or severe weather.

Apart from the contractual and monetary remedies available to CMS Energy and Consumers in the event of a counterparty’s failure to perform under any of these contracts, there can be no assurances that the counterparties to these contracts will fulfill their obligations to provide natural gas or coal to CMS Energy or Consumers.

The counterparties under the agreements could experience financial or operational problems that inhibit their ability to fulfill their obligations to CMS Energy or Consumers.

In addition, counterparties under these contracts might not be required to supply natural gas or coal to CMS Energy or Consumers under certain circumstances, such as in the event of a natural disaster or severe weather.

If Consumers were unable to obtain its supply requirements, it could be required to purchase natural gas or coal at higher prices, implement its natural gas curtailment program filed with the MPSC, or purchase replacement power at higher prices.

Unplanned outages or maintenance could be costly for CMS Energy or Consumers.

Unforeseen outages or maintenance of the electric and gas delivery systems, power plants, gas infrastructure including storage facilities and compression stations, wind energy or solar equipment, and energy products owned in whole or in part by CMS Energy or Consumers may be required for many reasons.

When unplanned outages occur, CMS Energy and Consumers will not only incur unexpected maintenance expenses, but may also have to make spot market purchases of electric and gas commodities that may exceed CMS Energy’s or Consumers’ expected cost of generation or gas supply, be forced to curtail services, or retire a given asset if the cost or timing of the maintenance is not reasonable and prudent.

Unforeseen outages or maintenance of the electric and gas delivery systems, power plants, gas infrastructure including storage facilities and compression stations, wind energy or solar equipment, energy storage assets, and energy products owned in whole or in part by CMS Energy or Consumers may be required for many reasons.

When unplanned outages occur, CMS Energy and Consumers will not only

incur unexpected maintenance expenses, but may also have to make spot market purchases of electric and gas commodities that may exceed CMS Energy’s or Consumers’ expected cost of generation or gas supply, be forced to curtail services, or retire a given asset if the cost or timing of the maintenance is not reasonable and prudent.

Unplanned generator outages could reduce the capacity credit CMS Energy or Consumers receives from MISO and could cause CMS Energy or Consumers to incur additional capacity costs in future years.

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CMS Energy and Consumers depend on these counterparties to remit payments and perform contracted services in a timely and adequate fashion.

Any delay or default in payment or performance, including inadequate performance, of contractual obligations could have a material adverse effect on CMS Energy and Consumers.

In addition, any delay or default in payment or performance, including inadequate performance, of contractual obligations (such as contractual obligations by third parties to perform work, supply equipment, provide services, and meet related specifications or requirements), could have a material adverse effect on CMS Energy and Consumers.

Volatility and disruptions in capital and credit markets could have a negative impact on CMS Energy’s and Consumers’ lenders, vendors, contractors, suppliers, customers, and other counterparties, causing them to fail to meet their obligations.

CMS Energy and Consumers are exposed to significant reputational risks.

CMS Energy and Consumers could suffer negative impacts to their reputations as a result of operational incidents, violations of corporate policies, regulatory violations, inappropriate use of social media, or other events.

CMS Energy and Consumers could suffer negative impacts to their reputations as a result of operational incidents, accidents, actual or perceived violations of corporate policies or regulatory violations, inappropriate use of social media, or other events.

Reputational damage could have a material adverse effect and could result in negative customer perception and increased regulatory oversight.

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

What changed 10-K

Item 1A. Risk Factors