CMS ENERGY CORP, 10-K filed on 2/6/2020
Annual Report
v3.19.3.a.u2
Cover page - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2019
Jan. 10, 2020
Jun. 30, 2019
Document Information [Line Items]      
Document Type 10-K    
Document Annual Report true    
Document Period End Date Dec. 31, 2019    
Document Transition Report false    
Entity File Number 1-9513    
Entity Registrant Name CMS ENERGY CORPORATION    
Entity Tax Identification Number 38-2726431    
Entity Incorporation, State or Country Code MI    
Entity Address, Address Line One One Energy Plaza    
Entity Address, City or Town Jackson    
Entity Address, State or Province MI    
Entity Address, Postal Zip Code 49201    
City Area Code 517    
Local Phone Number 788‑0550    
Entity Well-known Seasoned Issuer Yes    
Entity Voluntary Filer No    
Entity Current Reporting Status Yes    
Entity Interactive Data Current Yes    
Entity Filer Category Large Accelerated Filer    
Entity Small Business false    
Entity Emerging Growth Company false    
Entity Shell Company false    
Entity Public Float     $ 16,352
Entity Common Stock, Shares Outstanding   283,882,207  
Documents Incorporated by Reference CMS Energy’s and Consumers’ proxy statement relating to their 2020 Annual Meetings of Shareholders to be held May 1, 2020.    
Entity Central Index Key 0000811156    
Current Fiscal Year End Date --12-31    
Document Fiscal Year Focus 2019    
Document Fiscal Period Focus FY    
Amendment Flag false    
Consumers Energy Company      
Document Information [Line Items]      
Entity File Number 1-5611    
Entity Registrant Name CONSUMERS ENERGY COMPANY    
Entity Tax Identification Number 38-0442310    
Entity Incorporation, State or Country Code MI    
Entity Address, Address Line One One Energy Plaza    
Entity Address, City or Town Jackson    
Entity Address, State or Province MI    
Entity Address, Postal Zip Code 49201    
City Area Code 517    
Local Phone Number 788‑0550    
Entity Well-known Seasoned Issuer Yes    
Entity Voluntary Filer No    
Entity Current Reporting Status Yes    
Entity Interactive Data Current Yes    
Entity Filer Category Non-accelerated Filer    
Entity Small Business false    
Entity Emerging Growth Company false    
Entity Shell Company false    
Entity Common Stock, Shares Outstanding   84,108,789  
Documents Incorporated by Reference CMS Energy’s and Consumers’ proxy statement relating to their 2020 Annual Meetings of Shareholders to be held May 1, 2020.    
Entity Central Index Key 0000201533    
CMS Energy Corporation Common Stock, $0.01 par value      
Document Information [Line Items]      
Title of 12(b) Security CMS Energy Corporation Common Stock, $0.01 par value    
Trading Symbol CMS    
Security Exchange Name NYSE    
CMS Energy Corporation 5.625% Junior Subordinated Notes due 2078      
Document Information [Line Items]      
Title of 12(b) Security CMS Energy Corporation 5.625% Junior Subordinated Notes due 2078    
Trading Symbol CMSA    
Security Exchange Name NYSE    
CMS Energy Corporation 5.875% Junior Subordinated Notes due 2078      
Document Information [Line Items]      
Title of 12(b) Security CMS Energy Corporation 5.875% Junior Subordinated Notes due 2078    
Trading Symbol CMSC    
Security Exchange Name NYSE    
CMS Energy Corporation 5.875% Junior Subordinated Notes due 2079      
Document Information [Line Items]      
Title of 12(b) Security CMS Energy Corporation 5.875% Junior Subordinated Notes due 2079    
Trading Symbol CMSD    
Security Exchange Name NYSE    
Consumers Energy Company Cumulative Preferred Stock, $100 par value: $4.50 Series      
Document Information [Line Items]      
Title of 12(b) Security Consumers Energy Company Cumulative Preferred Stock, $100 par value: $4.50 Series    
Trading Symbol CMS-PB    
Security Exchange Name NYSE    
v3.19.3.a.u2
Consolidated Statements Of Income - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Operating Revenue $ 6,845 $ 6,873 $ 6,583
Operating Expenses      
Fuel for electric generation 493 528 505
Purchased power – related parties 75 81 86
Maintenance and other operating expenses 1,448 1,417 1,236
Depreciation and amortization 992 933 881
General taxes 333 303 284
Total operating expenses 5,606 5,711 5,245
Operating Income 1,239 1,162 1,338
Other Income (Expense)      
Interest income 7 11 12
Allowance for equity funds used during construction 10 6 5
Income from equity method investees 10 9 15
Nonoperating retirement benefits, net 91 90 24
Other income 4 2 6
Other expense (13) (48) (76)
Total other income (expense) 109 70 (14)
Interest Charges      
Interest on long-term debt 439 412 406
Interest expense – related parties 9 0 0
Other interest expense 75 49 34
Allowance for borrowed funds used during construction (4) (3) (2)
Total interest charges 519 458 438
Income Before Income Taxes 829 774 886
Income Tax Expense 147 115 424
Net Income 682 659 462
Income Attributable to Noncontrolling Interests 2 2 2
Net Income Available to Common Stockholders $ 680 $ 657 $ 460
Basic earnings per average common share (in dollars per share) $ 2.40 $ 2.33 $ 1.64
Diluted earnings per average common share (in dollars per share) $ 2.39 $ 2.32 $ 1.64
Consumers Energy Company      
Operating Revenue $ 6,376 $ 6,464 $ 6,222
Operating Expenses      
Fuel for electric generation 375 407 398
Purchased and interchange power 1,470 1,587 1,491
Purchased power – related parties 75 83 90
Cost of gas sold 754 819 730
Maintenance and other operating expenses 1,275 1,287 1,113
Depreciation and amortization 975 921 872
General taxes 322 295 276
Total operating expenses 5,246 5,399 4,970
Operating Income 1,130 1,065 1,252
Other Income (Expense)      
Interest income 5 8 9
Interest and dividend income – related parties 5 2 1
Allowance for equity funds used during construction 10 6 5
Nonoperating retirement benefits, net 85 83 21
Other income 3 2 17
Other expense (13) (30) (58)
Total other income (expense) 95 71 (5)
Interest Charges      
Interest on long-term debt 277 276 263
Interest expense – related parties 9 0 0
Other interest expense 15 16 15
Allowance for borrowed funds used during construction (4) (3) (2)
Total interest charges 297 289 276
Income Before Income Taxes 928 847 971
Income Tax Expense 185 142 339
Net Income 743 705 632
Preferred Stock Dividends 2 2 2
Net Income Available to Common Stockholders 741 703 630
Purchased and interchange power      
Operating Expenses      
Cost of goods and services sold 1,496 1,613 1,503
Cost of gas sold      
Operating Expenses      
Cost of goods and services sold $ 769 $ 836 $ 750
v3.19.3.a.u2
Consolidated Statements Of Comprehensive Income - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Net Income $ 682 $ 659 $ 462
Retirement Benefits Liability      
Net loss arising during the period, net of tax (7) (4) (5)
Prior service credit adjustment, net of tax 0 (1) 4
Amortization of net actuarial loss 3 4 2
Amortization of prior service credit, net of tax (2) (1) (1)
Derivatives      
Unrealized loss on derivative instruments, net of tax of $(1), $-, and $- (3) (2)  
Unrealized loss on derivative instruments, net of tax of $(1), $-, and $-     0
Reclassification adjustments included in net income, net of tax of $- for all periods 1 0  
Reclassification adjustments included in net income, net of tax of $- for all periods     0
Other Comprehensive Loss (8) (4) 0
Comprehensive Income 674 655 462
Comprehensive Income Attributable to Noncontrolling Interests 2 2 2
Comprehensive Income Attributable to CMS Energy 672 653 460
Consumers Energy Company      
Net Income 743 705 632
Retirement Benefits Liability      
Net loss arising during the period, net of tax (8) 6 (4)
Amortization of net actuarial loss 1 2 1
Investments      
Unrealized gain on investments 0 (1) 3
Reclassification adjustments included in net income 0 1 (9)
Derivatives      
Other Comprehensive Loss (7) 8 (9)
Comprehensive Income $ 736 $ 713 $ 623
v3.19.3.a.u2
Consolidated Statements Of Comprehensive Income (Parenthetical) - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Net loss arising during the period TAX $ (3) $ (1) $ (4)
Prior service credit adjustment TAX 0 0 3
Amortization of net actuarial loss TAX (1) (1) (1)
Amortization of prior service credit TAX 0 (1) 0
Unrealized loss on derivative instruments TAX 1 0  
Unrealized loss on derivative instruments TAX     0
Reclassification adjustments included in net income TAX 0    
Reclassification adjustments included in net income TAX   0 0
Consumers Energy Company      
Net loss arising during the period TAX (3) 2 (1)
Amortization of net actuarial loss TAX 0 0 0
Unrealized gain on investments TAX 0 0 1
Reclassification adjustments included in net income TAX $ 0 $ 0 $ (6)
v3.19.3.a.u2
Consolidated Statements Of Cash Flows - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Cash Flows from Operating Activities      
Net Income $ 682 $ 659 $ 462
Adjustments to reconcile net income to net cash provided by operating activities      
Depreciation and amortization 992 933 881
Deferred income taxes and investment tax credits 150 182 417
Bad debt expense 67 54 49
Other non‑cash operating activities and reconciling adjustments (58) 22 82
Postretirement benefits contributions (10) (252) (12)
Cash provided by (used in) changes in assets and liabilities      
Accounts and notes receivable and accrued revenue 45 15 (66)
Inventories 44 14 (46)
Accounts payable and accrued rate refunds (69) 22 49
Other current and non‑current assets and liabilities (53) 54 (111)
Net cash provided by operating activities 1,790 1,703 1,705
Cash Flows from Investing Activities      
Capital expenditures (excludes assets placed under finance lease) (2,104) (2,074) (1,665)
Proceeds from DB SERP investments 0 146 0
Increase in EnerBank notes receivable (401) (307) (138)
Purchase of notes receivable by EnerBank (343) (225) 0
Proceeds from sale of EnerBank notes receivable 67 0 50
Proceeds from sale of transmission equipment 97 0 0
Cost to retire property and other investing activities (132) (146) (115)
Net cash used in investing activities (2,816) (2,606) (1,868)
Cash Flows from Financing Activities      
Proceeds from issuance of debt 2,151 2,767 1,633
Retirement of debt (1,285) (1,870) (980)
Increase in EnerBank certificates of deposit 631 513 47
Decrease in notes payable (7) (73) (228)
Issuance of common stock 12 41 83
Payment of dividends on common and preferred stock (436) (407) (377)
Debt prepayment costs (8) (36) (22)
Other financing costs (50) (61) (46)
Net cash provided by financing activities 1,008 874 110
Net Decrease in Cash and Cash Equivalents, Including Restricted Amounts (18) (29) (53)
Cash and Cash Equivalents, Including Restricted Amounts, Beginning of Period 175 204 257
Cash and Cash Equivalents, Including Restricted Amounts, End of Period 157 175 204
Cash transactions      
Interest paid (net of amounts capitalized) 498 458 418
Income taxes paid (refunds received), net (58) (123) 5
Non‑cash transactions      
Capital expenditures not paid 170 158 172
Other assets placed under finance lease 0 0 3
Consumers Energy Company      
Cash Flows from Operating Activities      
Net Income 743 705 632
Adjustments to reconcile net income to net cash provided by operating activities      
Depreciation and amortization 975 921 872
Deferred income taxes and investment tax credits 37 123 163
Bad debt expense     29
Other non‑cash operating activities and reconciling adjustments (32) 13 59
Postretirement benefits contributions (7) (242) (8)
Cash provided by (used in) changes in assets and liabilities      
Accounts and notes receivable and accrued revenue 8 (26) (63)
Inventories 40 15 (45)
Accounts payable and accrued rate refunds (63) 12 43
Other current and non‑current assets and liabilities (129) (101) 33
Net cash provided by operating activities 1,601 1,449 1,715
Cash Flows from Investing Activities      
Capital expenditures (excludes assets placed under finance lease) (2,085) (1,822) (1,632)
Proceeds from DB SERP investments 0 106 0
DB SERP investment in note receivable – related party 0 (106) 0
Proceeds from sale of transmission equipment 77 0 0
Cost to retire property and other investing activities (129) (149) (119)
Net cash used in investing activities (2,137) (1,971) (1,751)
Cash Flows from Financing Activities      
Proceeds from issuance of debt 993 2,106 834
Retirement of debt (541) (1,193) (555)
Decrease in notes payable (7) (73) (228)
Stockholder contribution 675 250 450
Payment of dividends on common and preferred stock (594) (533) (524)
Debt prepayment costs (8) (20) (4)
Other financing costs (10) (24) (24)
Net cash provided by financing activities 508 513 (51)
Net Decrease in Cash and Cash Equivalents, Including Restricted Amounts (28) (9) (87)
Cash and Cash Equivalents, Including Restricted Amounts, Beginning of Period 56 65 152
Cash and Cash Equivalents, Including Restricted Amounts, End of Period 28 56 65
Cash transactions      
Interest paid (net of amounts capitalized) 279 287 266
Income taxes paid (refunds received), net 132 156 (1)
Non‑cash transactions      
Capital expenditures not paid 160 143 160
Other assets placed under finance lease $ 0 $ 0 $ 3
v3.19.3.a.u2
Consolidated Balance Sheets - USD ($)
$ in Millions
Dec. 31, 2019
Dec. 31, 2018
Current Assets    
Cash and cash equivalents $ 140 $ 153
Restricted cash and cash equivalents 17 21
Accounts receivable and accrued revenue, less allowances of $20 in both periods 886 964
Notes receivable, less allowances of $33 in 2019 and $24 in 2018 223 233
Notes receivable held for sale 19 0
Accounts receivable – related parties 17 14
Accrued gas revenue 0 16
Inventories at average cost    
Gas in underground storage 399 450
Materials and supplies 140 143
Generating plant fuel stock 66 57
Deferred property taxes 305 279
Regulatory assets 33 37
Prepayments and other current assets 86 101
Total current assets 2,331 2,468
Plant, Property, and Equipment    
Plant, property, and equipment, gross 25,390 24,400
Less accumulated depreciation and amortization 7,360 7,037
Plant, property, and equipment, net 18,030 17,363
Construction work in progress 896 763
Total plant, property, and equipment 18,926 18,126
Other Non‑current Assets    
Regulatory assets 2,489 1,743
Accounts and notes receivable 2,281 1,645
Investments 71 69
Other 739 478
Total other non‑current assets 5,580 3,935
Total Assets 26,837 24,529
Current Liabilities    
Current portion of long-term debt, finance leases, and other financing 1,130 996
Notes payable 90 97
Accounts payable 622 723
Accounts payable – related parties 13 10
Accrued rate refunds 35 4
Accrued interest 104 94
Accrued taxes 437 398
Regulatory liabilities 87 155
Other current liabilities 186 147
Total current liabilities 2,704 2,624
Non‑current Liabilities    
Long-term debt 11,951 10,615
Non-current portion of finance leases and other financing 76 69
Regulatory liabilities 3,742 3,681
Postretirement benefits 674 436
Asset retirement obligations 477 432
Deferred investment tax credit 120 99
Deferred income taxes 1,655 1,487
Other non‑current liabilities 383 294
Total non‑current liabilities 19,078 17,113
Commitments and Contingencies
Common stockholders’ equity    
Common stock, authorized 350.0 shares; outstanding 283.9 shares in 2019 and 283.4 shares in 2018 3 3
Other paid-in capital 5,113 5,088
Accumulated other comprehensive loss (73) (65)
Accumulated deficit (25) (271)
Total common stockholders’ equity 5,018 4,755
Noncontrolling interests 37 37
Total equity 5,055 4,792
Total Liabilities and Equity 26,837 24,529
Consumers Energy Company    
Current Assets    
Cash and cash equivalents 11 39
Restricted cash and cash equivalents 17 17
Accounts receivable and accrued revenue, less allowances of $20 in both periods 827 855
Accounts receivable – related parties 9 15
Accrued gas revenue 0 16
Inventories at average cost    
Gas in underground storage 399 450
Materials and supplies 135 137
Generating plant fuel stock 63 52
Deferred property taxes 305 279
Regulatory assets 33 37
Prepayments and other current assets 73 83
Total current assets 1,872 1,980
Plant, property, and equipment, gross 24,963 23,963
Accumulated depreciation and amortization 7,272 6,958
Plant, Property, and Equipment    
Plant, property, and equipment, net 17,691 17,005
Construction work in progress 879 756
Total plant, property, and equipment 18,570 17,761
Other Non‑current Assets    
Regulatory assets 2,489 1,743
Accounts and notes receivable 29 27
Accounts and notes receivable – related parties 102 104
Other 637 410
Total other non‑current assets 3,257 2,284
Total Assets 23,699 22,025
Current Liabilities    
Current portion of long-term debt, finance leases, and other financing 221 48
Notes payable 90 97
Accounts payable 593 685
Accounts payable – related parties 20 14
Accrued rate refunds 35 4
Accrued interest 67 59
Accrued taxes 481 436
Regulatory liabilities 87 155
Other current liabilities 118 120
Total current liabilities 1,712 1,618
Non‑current Liabilities    
Long-term debt 7,048 6,779
Non-current portion of finance leases and other financing 76 69
Regulatory liabilities 3,742 3,681
Postretirement benefits 622 392
Asset retirement obligations 474 428
Deferred investment tax credit 120 99
Deferred income taxes 1,864 1,809
Other non‑current liabilities 304 230
Total non‑current liabilities 14,250 13,487
Commitments and Contingencies
Common stockholders’ equity    
Common stock, authorized 350.0 shares; outstanding 283.9 shares in 2019 and 283.4 shares in 2018 841 841
Other paid-in capital 5,374 4,699
Accumulated other comprehensive loss (28) (21)
Accumulated deficit 1,513 1,364
Total common stockholders’ equity 7,700 6,883
Cumulative preferred stock, $4.50 series 37 37
Total equity 7,737 6,920
Total Liabilities and Equity $ 23,699 $ 22,025
v3.19.3.a.u2
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Millions
Dec. 31, 2019
Dec. 31, 2018
Allowance for doubtful accounts receivable $ 20 $ 20
Allowances for doubtful notes receivable $ 33 $ 24
Common stock authorized (in shares) 350,000,000 350,000,000
Common stock outstanding (in shares) 283,900,000 283,400,000
Par value of preferred stock (in dollars per share) $ 0.01  
Consumers Energy Company    
Allowance for doubtful accounts receivable $ 20 $ 20
Common stock authorized (in shares) 125,000,000 125,000,000
Common stock outstanding (in shares) 84,100,000 84,100,000
Par value of preferred stock (in dollars per share) $ 4.50 $ 4.50
v3.19.3.a.u2
Consolidated Statements Of Changes In Equity - USD ($)
shares in Thousands, $ in Millions
Total
Common Stock
Other Paid-in Capital
Accumulated Other Comprehensive Loss
Retirement benefits liability
Derivative instruments
Derivative instruments
Accumulated Deficit
Noncontrolling Interests
Consumers Energy Company
Consumers Energy Company
Common Stock
Consumers Energy Company
Other Paid-in Capital
Consumers Energy Company
Accumulated Other Comprehensive Loss
Consumers Energy Company
Retirement benefits liability
Consumers Energy Company
Investments
Consumers Energy Company
Accumulated Deficit
Consumers Energy Company
Cumulative Preferred Stock
Total Equity at Beginning of Period at Dec. 31, 2016 $ 4,290 $ 3 $ 4,916 $ (50) $ (50)   $ 0 $ (616) $ 37 $ 5,939 $ 841 $ 3,999 $ (3) $ (21) $ 18 $ 1,065 $ 37
Beginning of period (in shares) at Dec. 31, 2016   279,206                              
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                  
Common stock issued (in shares)   2,492                              
Common stock issued     102                            
Common stock repurchased (in shares)   (317)                              
Common stock repurchased     (14)                            
Common stock reissued (in shares)   360                              
Common stock reissued     15                            
Common stock reacquired (in shares)   (94)                              
Common stock reacquired     0                            
Stockholder contribution                       450          
Net loss arising during the period (5)       (5)         (4)       (4)      
Prior service credit adjustment 4       4                        
Amortization of net actuarial loss 2       2         1       1      
Amortization of prior service credit (1)       (1)                        
Reclassification adjustments included in net income                   (9)         (9)    
Unrealized gain on investments                   3         3    
Unrealized loss on derivative instruments 0           0                    
Reclassification adjustments included in net income 0           0                    
Net income attributable to CMS Energy 460             460                  
Net Income 462                 632           632  
Dividends declared on common stock               (375)               (522)  
Dividends declared on preferred stock                               (2)  
Income attributable to noncontrolling interests 2               2                
Distributions and other changes in noncontrolling interests                 (2)                
End of period (in shares) at Dec. 31, 2017   281,647                              
Total Equity at End of Period at Dec. 31, 2017 $ 4,478 $ 3 5,019 (50) (50)   0 (531) 37 6,488 841 4,449 (12) (24) 12 1,173 37
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                  
Dividends declared per common share (in dollars per share) $ 1.33                                
Common stock issued (in shares)   1,554                              
Common stock issued     59                            
Common stock repurchased (in shares)   (224)                              
Common stock repurchased     (10)                            
Common stock reissued (in shares)   423                              
Common stock reissued     20                            
Common stock reacquired (in shares)   (26)                              
Common stock reacquired     0                            
Stockholder contribution                       250          
Net loss arising during the period $ (4)       (4)         6       6      
Prior service credit adjustment (1)       (1)                        
Amortization of net actuarial loss 4       4         2       2      
Amortization of prior service credit (1)       (1)                        
Reclassification adjustments included in net income                   1         1    
Unrealized gain on investments                   (1)         (1)    
Unrealized loss on derivative instruments (2)         $ (2)                      
Reclassification adjustments included in net income 0         0                      
Net income attributable to CMS Energy 657             657                  
Net Income 659                 $ 705           705  
Dividends declared on common stock               (405)               (531)  
Dividends declared on preferred stock                               (2)  
Income attributable to noncontrolling interests $ 2               2                
Distributions and other changes in noncontrolling interests                 (2)                
End of period (in shares) at Dec. 31, 2018 283,400 283,374               84,100              
Total Equity at End of Period at Dec. 31, 2018 $ 4,792 $ 3 5,088 (65) (63) (2) $ (2) (271) 37 $ 6,920 841 4,699 (21) (21) 0 1,364 37
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                  
Dividends declared per common share (in dollars per share) $ 1.43                                
Common stock issued (in shares)   710                              
Common stock issued     35                            
Common stock repurchased (in shares)   (181)                              
Common stock repurchased     (10)                            
Common stock reissued (in shares)   8                              
Common stock reissued     0                            
Common stock reacquired (in shares)   (47)                              
Common stock reacquired     0                            
Stockholder contribution                       675          
Net loss arising during the period $ (7)       (7)         (8)       (8)      
Prior service credit adjustment 0       0                        
Amortization of net actuarial loss 3       3         1       1      
Amortization of prior service credit (2)       (2)                        
Reclassification adjustments included in net income                   0         0    
Unrealized gain on investments                   0         0    
Unrealized loss on derivative instruments (3)         (3)                      
Reclassification adjustments included in net income 1         1                      
Net income attributable to CMS Energy 680             680                  
Net Income 682                 $ 743           743  
Dividends declared on common stock               (434)               (592)  
Dividends declared on preferred stock                               (2)  
Income attributable to noncontrolling interests $ 2               2                
Distributions and other changes in noncontrolling interests                 (2)                
End of period (in shares) at Dec. 31, 2019 283,900 283,864               84,100              
Total Equity at End of Period at Dec. 31, 2019 $ 5,055 $ 3 $ 5,113 $ (73) $ (69) $ (4)   $ (25) $ 37 $ 7,737 $ 841 $ 5,374 $ (28) $ (28) $ 0 $ 1,513 $ 37
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                  
Dividends declared per common share (in dollars per share) $ 1.53                                
v3.19.3.a.u2
New Accounting Standards
12 Months Ended
Dec. 31, 2019
New Accounting Pronouncements or Change in Accounting Principle [Line Items]  
New Accounting Standards
New Accounting Standards
Implementation of New Accounting Standards
ASU 201602, Leases: This standard, which was effective on January 1, 2019 for CMS Energy and Consumers, establishes a new accounting model for leases. The standard requires lessees to recognize
lease assets and liabilities on the balance sheet for all leases with a term of more than one year, including operating leases, which were not recorded on the balance sheet under previous standards. The new guidance also amends the definition of a lease to require that a lessee have the right to control the use of a specified asset, and not simply control or take the output of the asset. On the statement of income, operating leases are generally accounted for under a straight-line expense model, while finance leases, which were previously referred to as capital leases, are generally accounted for under a financing model. Consistent with the previous lease guidance, however, the standard allows rate-regulated utilities to recognize expense consistent with the timing of recovery in rates.
CMS Energy and Consumers elected to use certain practical expedients permitted by the standard, under which they were not required to perform lease assessments or reassessments for agreements existing on the effective date. They also elected a transition method under which they initially applied the standard on January 1, 2019, without adjusting amounts presented for prior periods. Under the standard, CMS Energy and Consumers recognized additional lease assets and liabilities on their consolidated balance sheets as of January 1, 2019 for their operating leases. In addition, in accordance with the standard, they have provided additional disclosures about their leases in Note 10, Leases and Palisades Financing. The standard did not have any impact on CMS Energy’s and Consumers’ consolidated net income or cash flows, and there was no cumulative-effect adjustment recorded to beginning retained earnings.
New Accounting Standards Not Yet Effective
ASU 201613, Measurement of Credit Losses on Financial Instruments: This standard, effective January 1, 2020 for CMS Energy and Consumers, provides new guidance for measuring and recognizing credit losses on financial instruments. The standard applies to financial assets that are not measured at fair value through net income as well as to certain off-balance sheet credit exposures. Entities will apply the standard using a modified retrospective approach, with a cumulative‑effect adjustment recorded to beginning retained earnings on the effective date.
The standard will require an increase to the allowance for loan losses at EnerBank. At December 31, 2019, the allowance reflected expected credit losses over a 12‑month period, but the new standard will require the allowance to reflect expected credit losses over the entire life of the loans. EnerBank expects to record a $65 million increase to its expected credit loss reserves on January 1, 2020, with the offsetting adjustment recorded to retained earnings, net of taxes. The standard will also require an increase in the initial provision for loan losses recognized in net income for new loans originated in 2020 and beyond. At Consumers, the new guidance will apply to the allowance for uncollectible accounts; however, Consumers does not expect material impacts from the standard.
Consumers Energy Company  
New Accounting Pronouncements or Change in Accounting Principle [Line Items]  
New Accounting Standards
New Accounting Standards
Implementation of New Accounting Standards
ASU 201602, Leases: This standard, which was effective on January 1, 2019 for CMS Energy and Consumers, establishes a new accounting model for leases. The standard requires lessees to recognize
lease assets and liabilities on the balance sheet for all leases with a term of more than one year, including operating leases, which were not recorded on the balance sheet under previous standards. The new guidance also amends the definition of a lease to require that a lessee have the right to control the use of a specified asset, and not simply control or take the output of the asset. On the statement of income, operating leases are generally accounted for under a straight-line expense model, while finance leases, which were previously referred to as capital leases, are generally accounted for under a financing model. Consistent with the previous lease guidance, however, the standard allows rate-regulated utilities to recognize expense consistent with the timing of recovery in rates.
CMS Energy and Consumers elected to use certain practical expedients permitted by the standard, under which they were not required to perform lease assessments or reassessments for agreements existing on the effective date. They also elected a transition method under which they initially applied the standard on January 1, 2019, without adjusting amounts presented for prior periods. Under the standard, CMS Energy and Consumers recognized additional lease assets and liabilities on their consolidated balance sheets as of January 1, 2019 for their operating leases. In addition, in accordance with the standard, they have provided additional disclosures about their leases in Note 10, Leases and Palisades Financing. The standard did not have any impact on CMS Energy’s and Consumers’ consolidated net income or cash flows, and there was no cumulative-effect adjustment recorded to beginning retained earnings.
New Accounting Standards Not Yet Effective
ASU 201613, Measurement of Credit Losses on Financial Instruments: This standard, effective January 1, 2020 for CMS Energy and Consumers, provides new guidance for measuring and recognizing credit losses on financial instruments. The standard applies to financial assets that are not measured at fair value through net income as well as to certain off-balance sheet credit exposures. Entities will apply the standard using a modified retrospective approach, with a cumulative‑effect adjustment recorded to beginning retained earnings on the effective date.
The standard will require an increase to the allowance for loan losses at EnerBank. At December 31, 2019, the allowance reflected expected credit losses over a 12‑month period, but the new standard will require the allowance to reflect expected credit losses over the entire life of the loans. EnerBank expects to record a $65 million increase to its expected credit loss reserves on January 1, 2020, with the offsetting adjustment recorded to retained earnings, net of taxes. The standard will also require an increase in the initial provision for loan losses recognized in net income for new loans originated in 2020 and beyond. At Consumers, the new guidance will apply to the allowance for uncollectible accounts; however, Consumers does not expect material impacts from the standard.
v3.19.3.a.u2
Regulatory Matters
12 Months Ended
Dec. 31, 2019
Public Utilities, General Disclosures [Line Items]  
Regulatory Matters
Regulatory Matters
Regulatory matters are critical to Consumers. The Michigan Attorney General, ABATE, the MPSC Staff, and certain other parties typically participate in MPSC proceedings concerning Consumers, such as Consumers’ rate cases and PSCR and GCR processes. These parties often challenge various aspects of those proceedings, including the prudence of Consumers’ policies and practices, and seek cost disallowances and other relief. The parties also have appealed significant MPSC orders. Depending upon the specific issues, the outcomes of rate cases and proceedings, including judicial proceedings challenging MPSC orders or other actions, could negatively affect CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. Consumers cannot predict the outcome of these proceedings.
There are multiple appeals pending that involve various issues concerning cost recovery from customers, the adequacy of the record of evidence supporting the recovery of Smart Energy investments, and other matters. 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.
Presented in the following table are the regulatory assets and liabilities on Consumers’ consolidated balance sheets:
In Millions
 
December 31
End of Recovery
or Refund Period
2019
 
2018
 
Regulatory assets
 
 
 
 
 
 
Current
 
 
 
 
 
 
Energy waste reduction plan incentive1
 
2020
 
$
33

 
$
32

Other
 
2019
 

 
5

Total current regulatory assets
 
 
 
$
33

 
$
37

Non-current
 
 
 
 
 
 
Postretirement benefits2
 
various
 
$
1,130

 
$
1,028

Costs of coal-fueled electric generating units to be retired3
 
various
 
667

 

Securitized costs3
 
2029
 
247

 
273

ARO4
 
various
 
191

 
175

MGP sites4
 
various
 
130

 
133

Unamortized loss on reacquired debt4
 
various
 
70

 
68

Energy waste reduction plan incentive1
 
2021
 
34

 
34

Energy waste reduction plan4
 
various
 
10

 
26

Deferred capital spending4
 
various
 
3

 

Gas storage inventory adjustments4
 
various
 
3

 
4

Other
 
various
 
4

 
2

Total non-current regulatory assets
 
 
 
$
2,489

 
$
1,743

Total regulatory assets
 
 
 
$
2,522

 
$
1,780

Regulatory liabilities
 
 
 
 
 
 
Current
 
 
 
 
 
 
Income taxes, net
 
2020
 
$
65

 
$
18

Gain to be shared with customers
 
2020
 
17

 

Reserve for customer refunds
 
2019
 
2

 
36

TCJA reserve for refund
 
2019
 

 
98

Other
 
2020
 
3

 
3

Total current regulatory liabilities
 
 
 
$
87

 
$
155

Non-current
 
 
 
 
 
 
Cost of removal
 
various
 
$
2,126

 
$
1,966

Income taxes, net
 
various
 
1,510

 
1,537

Renewable energy grant
 
2043
 
52

 
54

ARO
 
various
 
26

 
38

Renewable energy plan
 
2028
 
17

 
42

TCJA reserve for refund
 
various
 

 
35

Other
 
various
 
11

 
9

Total non-current regulatory liabilities
 
 
 
$
3,742

 
$
3,681

Total regulatory liabilities
 
 
 
$
3,829

 
$
3,836

1 
These regulatory assets have arisen from an alternative revenue program and are not associated with incurred costs or capital investments. Therefore, the MPSC has provided for recovery without a return.
2 
This regulatory asset is included in rate base, thereby providing a return.
3 
The MPSC has historically authorized and Consumers expects the MPSC to authorize a specific return on these regulatory assets.
4 
These regulatory assets represent incurred costs for which the MPSC has provided, or Consumers expects, recovery without a return on investment.
Regulatory Assets 
Energy Waste Reduction Plan Incentive: In December 2019, the MPSC approved a settlement agreement authorizing Consumers to collect $34 million during 2020 as an incentive for exceeding its statutory savings targets in 2018. Consumers recognized incentive revenue under this program of $34 million in 2018.
Consumers also exceeded its statutory savings targets in 2019, achieved certain other goals, and will request the MPSC’s approval to collect $34 million, the maximum performance incentive, in the energy waste reduction reconciliation to be filed in 2020. Consumers recognized incentive revenue under this program of $34 million in 2019.
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 as well as prior service costs and credits 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 the amortization periods, see Note 12, Retirement Benefits.
Costs of Coal-fueled Electric Generating Units to be Retired: In June 2019, the MPSC approved the settlement agreement reached in Consumers’ IRP, under which Consumers plans to retire the D.E. Karn 1 & 2 coal-fueled electric generating units in 2023. Under Michigan law, electric utilities have been permitted to use highly rated, low-cost securitization bonds to finance the recovery of qualified costs. Consumers will file for securitization financing by May 2023, requesting the MPSC’s approval to securitize the remaining book value of the two coal-fueled electric generating units upon their retirement.
In 2019, Consumers removed from total plant, property, and equipment an amount representing the remaining book value of the two coal-fueled electric generating units upon their retirement, and recorded it as a regulatory asset. Until securitization, the book value of the generating units will remain in rate base and receive full regulatory returns in general rate cases.
Securitized Costs: In 2013, the MPSC issued a securitization financing order authorizing Consumers to issue securitization bonds in order to finance the recovery of the remaining book value of seven smaller coal-fueled electric generating units that Consumers retired in 2016 and three smaller natural gas-fueled electric generating units that Consumers retired in 2015. Upon receipt of the MPSC’s order, Consumers removed the book value of the ten units from plant, property, and equipment and recorded this amount as a regulatory asset. Consumers is amortizing the regulatory asset over the life of the related securitization bonds, which it issued through a subsidiary in 2014. For additional details regarding the securitization bonds, see Note 5, Financings and Capitalization.
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.
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.
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.
Deferred Capital Spending: In January 2019, the MPSC approved a settlement agreement in Consumers’ 2018 electric rate case, which provided deferred accounting treatment for distribution-related capital investments exceeding certain threshold amounts. Thus, for actual capital spending above the threshold amounts detailed in the settlement agreement, Consumers has deferred as a regulatory asset the associated depreciation and property tax expense as well as the debt component of the overall rate of return on such spending.
Gas Storage Inventory Adjustments: Consumers incurs inventory expenses related to the loss of gas from its natural gas storage fields. The MPSC allows Consumers to recover these costs from its natural gas customers over a five-year period.
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 current income tax benefit. For additional details on deferred income taxes, see the Consumers Electric Utility and Gas Utility—Tax Cuts and Jobs Act section below and Note 14, Income Taxes.
Gain to be Shared with Customers: In December 2019, Consumers filed an application with the MPSC requesting approval to share voluntarily with electric utility customers half of the gain recognized on a sale of a portion of its substation transmission equipment to METC. Consumers proposed the gain sharing take place through an offset to additional spending in 2020 or through a bill credit to customers in 2021.
Reserve for Customer Refunds: At December 31, 2018, Consumers had recorded a provision for revenue subject to refund associated with electric rates it self-implemented in 2017. In August 2019, the MPSC approved Consumers’ reconciliation of total revenues collected from rates it self-implemented to those that would have been collected under the final rates approved in June 2018 and Consumers refunded the resulting amount in September 2019. The 2016 Energy Law eliminated utilities’ self-implementation of rates under general rate cases, but provided for more timely processing of general rate cases.
TCJA Reserve for Refund: In early 2018, the MPSC ordered Consumers to file various proceedings to determine the reduction in its electric and gas revenue requirements as a result of the TCJA. For further information on the various TCJA proceedings, see the Consumers Electric Utility and Gas Utility—Tax Cuts and Jobs Act section below.
Cost of Removal: The MPSC allows Consumers to collect amounts from customers to fund future asset removal activities. This regulatory liability is reduced as costs of removal are incurred. The refund period of this regulatory liability approximates the useful life of the assets to be removed.
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.
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 Utility and Gas Utility
Tax Cuts and Jobs Act: The TCJA, which changed existing federal tax law and included numerous provisions that affect businesses, was signed into law in December 2017.
In early 2018, the MPSC ordered Consumers to file various proceedings to determine the reduction in its electric and gas revenue requirements as a result of the reduction in the corporate income tax rate, and to implement bill credits to reflect that reduction until customer rates could be adjusted through Consumers’ general rate cases. Consumers filed, and the MPSC approved, such proceedings throughout 2018, resulting in credits to customer bills during 2018 to reflect reductions in Consumers’ electric and gas revenue requirements.
Consumers filed additional proceedings to address amounts collected from customers during 2018 prior to the implementation of bill credits. In late 2018, the MPSC approved the refund of $31 million to gas customers over six months beginning in December 2018 and the refund of $70 million to electric customers over six months beginning in January 2019.
In October 2018, Consumers filed an application to address the December 31, 2017 remeasurement of its deferred income taxes and other base rate impacts of the TCJA on customers. In September 2019, the MPSC authorized Consumers to begin returning net regulatory tax liabilities of $0.4 billion to gas customers through rates approved in the 2018 gas rate case and $1.2 billion to electric customers through rates to be determined in Consumers’ next electric rate case. Until then, the MPSC authorized Consumers to refund $32 million to electric customers through a temporary bill credit. Consumers’ total $1.6 billion of net regulatory tax liabilities comprises:
A regulatory tax liability of $1.7 billion associated with plant assets that are subject to normalization, which is governed by the Internal Revenue Code; this regulatory tax liability will be returned over the remaining book life of the related plant assets, the average of which is 44 years for gas plant assets and 27 years for electric plant assets.
A regulatory tax asset of $0.3 billion associated with plant assets that are not subject to normalization; this regulatory tax asset will be collected over 44 years from gas customers and over 27 years from electric customers.
A regulatory tax liability of $0.2 billion, which is primarily related to employee benefits; this regulatory tax liability will be refunded to customers over ten years.
In January 2018, Consumers began to reduce the regulatory liability subject to normalization by crediting income tax expense. Consumers fully reserved for the eventual refund of these excess deferred taxes that it credited to income tax expense in a separate non‑current regulatory liability established by reducing revenue. As a result of an order received in September 2019, Consumers began refunding these excess deferred taxes to customers and will no longer reserve for their refund. At the date of the order, this reserve for refund of these excess deferred taxes totaled $62 million. For additional details on the remeasurement, see Note 14, Income Taxes.
Consumers Electric Utility
2018 Electric Rate Case: In May 2018, Consumers filed an application with the MPSC seeking an annual rate increase of $58 million, based on a 10.75 percent authorized return on equity. In October 2018, Consumers reduced its requested annual rate increase to $44 million. In January 2019, the MPSC approved a settlement agreement authorizing an annual rate decrease of $24 million, based on a 10.0 percent authorized return on equity. With the elimination of the $113 million TCJA credit to customer bills, the approved settlement agreement resulted in an $89 million net increase in annual rates. The settlement agreement also provided for deferred accounting treatment for distribution-related capital investments exceeding certain amounts. Consumers also agreed to not file a new electric rate case prior to January 2020.
Consumers Gas Utility
2018 Gas Rate Case: In November 2018, Consumers filed an application with the MPSC seeking an annual rate increase of $229 million, based on a 10.75 percent authorized return on equity. In April 2019, Consumers reduced its requested annual rate increase to $204 million. In September 2019, the MPSC approved an annual rate increase of $144 million, based on a 9.90 percent authorized return on equity. This increase includes a $13 million adjustment to begin returning net regulatory tax liabilities associated with the TCJA to customers. The MPSC also approved the continuation of a revenue decoupling mechanism, which annually reconciles Consumers’ actual weather-normalized, non‑fuel revenues with the revenues approved by the MPSC.
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 in order to minimize the underrecovery or overrecovery amount in the annual reconciliations. Underrecoveries represent probable future revenues 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
2019
 
2018
 
Assets
 
 
 
 
GCR underrecoveries
 
$

 
$
16

Accrued gas revenue
 
$

 
$
16

Liabilities
 
 
 
 
PSCR overrecoveries
 
$
33

 
$
4

GCR overrecoveries
 
2

 

Accrued rate refunds
 
$
35

 
$
4


PSCR Plans and Reconciliations: In October 2019, the MPSC issued an order in Consumers’ 2017 PSCR reconciliation, authorizing recovery of $1.9 billion of power costs and authorizing Consumers to reflect in its 2018 PSCR reconciliation the overrecovery of $32 million.
In November 2019, the MPSC issued an order in Consumers’ 2018 PSCR plan authorizing the 2018 PSCR charge that Consumers self-implemented beginning in January 2018. In March 2019, Consumers filed its 2018 PSCR reconciliation, requesting full recovery of $2.0 billion of power costs and authorization to reflect in its 2019 PSCR reconciliation the underrecovery of $31 million.
Consumers submitted its 2019 PSCR plan to the MPSC in September 2018 and, in accordance with its proposed plan, self-implemented the 2019 PSCR charge beginning in January 2019.
GCR Plans and Reconciliations: In September 2019, the MPSC issued an order in Consumers’ 2017-2018 GCR reconciliation, authorizing full recovery of $0.6 billion of gas costs and authorizing Consumers to reflect in its 2018-2019 GCR reconciliation the overrecovery of $1 million.
In June 2019, Consumers filed its 2018-2019 GCR reconciliation, requesting full recovery of $0.6 billion of gas costs and authorization to reflect in its 2019-2020 GCR reconciliation the underrecovery of $18 million.
In January 2020, the MPSC issued an order in Consumers’ 2019-2020 GCR plan authorizing the 2019-2020 GCR charge that Consumers self-implemented beginning in April 2019.
Consumers Energy Company  
Public Utilities, General Disclosures [Line Items]  
Regulatory Matters
Regulatory Matters
Regulatory matters are critical to Consumers. The Michigan Attorney General, ABATE, the MPSC Staff, and certain other parties typically participate in MPSC proceedings concerning Consumers, such as Consumers’ rate cases and PSCR and GCR processes. These parties often challenge various aspects of those proceedings, including the prudence of Consumers’ policies and practices, and seek cost disallowances and other relief. The parties also have appealed significant MPSC orders. Depending upon the specific issues, the outcomes of rate cases and proceedings, including judicial proceedings challenging MPSC orders or other actions, could negatively affect CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. Consumers cannot predict the outcome of these proceedings.
There are multiple appeals pending that involve various issues concerning cost recovery from customers, the adequacy of the record of evidence supporting the recovery of Smart Energy investments, and other matters. 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.
Presented in the following table are the regulatory assets and liabilities on Consumers’ consolidated balance sheets:
In Millions
 
December 31
End of Recovery
or Refund Period
2019
 
2018
 
Regulatory assets
 
 
 
 
 
 
Current
 
 
 
 
 
 
Energy waste reduction plan incentive1
 
2020
 
$
33

 
$
32

Other
 
2019
 

 
5

Total current regulatory assets
 
 
 
$
33

 
$
37

Non-current
 
 
 
 
 
 
Postretirement benefits2
 
various
 
$
1,130

 
$
1,028

Costs of coal-fueled electric generating units to be retired3
 
various
 
667

 

Securitized costs3
 
2029
 
247

 
273

ARO4
 
various
 
191

 
175

MGP sites4
 
various
 
130

 
133

Unamortized loss on reacquired debt4
 
various
 
70

 
68

Energy waste reduction plan incentive1
 
2021
 
34

 
34

Energy waste reduction plan4
 
various
 
10

 
26

Deferred capital spending4
 
various
 
3

 

Gas storage inventory adjustments4
 
various
 
3

 
4

Other
 
various
 
4

 
2

Total non-current regulatory assets
 
 
 
$
2,489

 
$
1,743

Total regulatory assets
 
 
 
$
2,522

 
$
1,780

Regulatory liabilities
 
 
 
 
 
 
Current
 
 
 
 
 
 
Income taxes, net
 
2020
 
$
65

 
$
18

Gain to be shared with customers
 
2020
 
17

 

Reserve for customer refunds
 
2019
 
2

 
36

TCJA reserve for refund
 
2019
 

 
98

Other
 
2020
 
3

 
3

Total current regulatory liabilities
 
 
 
$
87

 
$
155

Non-current
 
 
 
 
 
 
Cost of removal
 
various
 
$
2,126

 
$
1,966

Income taxes, net
 
various
 
1,510

 
1,537

Renewable energy grant
 
2043
 
52

 
54

ARO
 
various
 
26

 
38

Renewable energy plan
 
2028
 
17

 
42

TCJA reserve for refund
 
various
 

 
35

Other
 
various
 
11

 
9

Total non-current regulatory liabilities
 
 
 
$
3,742

 
$
3,681

Total regulatory liabilities
 
 
 
$
3,829

 
$
3,836

1 
These regulatory assets have arisen from an alternative revenue program and are not associated with incurred costs or capital investments. Therefore, the MPSC has provided for recovery without a return.
2 
This regulatory asset is included in rate base, thereby providing a return.
3 
The MPSC has historically authorized and Consumers expects the MPSC to authorize a specific return on these regulatory assets.
4 
These regulatory assets represent incurred costs for which the MPSC has provided, or Consumers expects, recovery without a return on investment.
Regulatory Assets 
Energy Waste Reduction Plan Incentive: In December 2019, the MPSC approved a settlement agreement authorizing Consumers to collect $34 million during 2020 as an incentive for exceeding its statutory savings targets in 2018. Consumers recognized incentive revenue under this program of $34 million in 2018.
Consumers also exceeded its statutory savings targets in 2019, achieved certain other goals, and will request the MPSC’s approval to collect $34 million, the maximum performance incentive, in the energy waste reduction reconciliation to be filed in 2020. Consumers recognized incentive revenue under this program of $34 million in 2019.
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 as well as prior service costs and credits 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 the amortization periods, see Note 12, Retirement Benefits.
Costs of Coal-fueled Electric Generating Units to be Retired: In June 2019, the MPSC approved the settlement agreement reached in Consumers’ IRP, under which Consumers plans to retire the D.E. Karn 1 & 2 coal-fueled electric generating units in 2023. Under Michigan law, electric utilities have been permitted to use highly rated, low-cost securitization bonds to finance the recovery of qualified costs. Consumers will file for securitization financing by May 2023, requesting the MPSC’s approval to securitize the remaining book value of the two coal-fueled electric generating units upon their retirement.
In 2019, Consumers removed from total plant, property, and equipment an amount representing the remaining book value of the two coal-fueled electric generating units upon their retirement, and recorded it as a regulatory asset. Until securitization, the book value of the generating units will remain in rate base and receive full regulatory returns in general rate cases.
Securitized Costs: In 2013, the MPSC issued a securitization financing order authorizing Consumers to issue securitization bonds in order to finance the recovery of the remaining book value of seven smaller coal-fueled electric generating units that Consumers retired in 2016 and three smaller natural gas-fueled electric generating units that Consumers retired in 2015. Upon receipt of the MPSC’s order, Consumers removed the book value of the ten units from plant, property, and equipment and recorded this amount as a regulatory asset. Consumers is amortizing the regulatory asset over the life of the related securitization bonds, which it issued through a subsidiary in 2014. For additional details regarding the securitization bonds, see Note 5, Financings and Capitalization.
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.
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.
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.
Deferred Capital Spending: In January 2019, the MPSC approved a settlement agreement in Consumers’ 2018 electric rate case, which provided deferred accounting treatment for distribution-related capital investments exceeding certain threshold amounts. Thus, for actual capital spending above the threshold amounts detailed in the settlement agreement, Consumers has deferred as a regulatory asset the associated depreciation and property tax expense as well as the debt component of the overall rate of return on such spending.
Gas Storage Inventory Adjustments: Consumers incurs inventory expenses related to the loss of gas from its natural gas storage fields. The MPSC allows Consumers to recover these costs from its natural gas customers over a five-year period.
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 current income tax benefit. For additional details on deferred income taxes, see the Consumers Electric Utility and Gas Utility—Tax Cuts and Jobs Act section below and Note 14, Income Taxes.
Gain to be Shared with Customers: In December 2019, Consumers filed an application with the MPSC requesting approval to share voluntarily with electric utility customers half of the gain recognized on a sale of a portion of its substation transmission equipment to METC. Consumers proposed the gain sharing take place through an offset to additional spending in 2020 or through a bill credit to customers in 2021.
Reserve for Customer Refunds: At December 31, 2018, Consumers had recorded a provision for revenue subject to refund associated with electric rates it self-implemented in 2017. In August 2019, the MPSC approved Consumers’ reconciliation of total revenues collected from rates it self-implemented to those that would have been collected under the final rates approved in June 2018 and Consumers refunded the resulting amount in September 2019. The 2016 Energy Law eliminated utilities’ self-implementation of rates under general rate cases, but provided for more timely processing of general rate cases.
TCJA Reserve for Refund: In early 2018, the MPSC ordered Consumers to file various proceedings to determine the reduction in its electric and gas revenue requirements as a result of the TCJA. For further information on the various TCJA proceedings, see the Consumers Electric Utility and Gas Utility—Tax Cuts and Jobs Act section below.
Cost of Removal: The MPSC allows Consumers to collect amounts from customers to fund future asset removal activities. This regulatory liability is reduced as costs of removal are incurred. The refund period of this regulatory liability approximates the useful life of the assets to be removed.
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.
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 Utility and Gas Utility
Tax Cuts and Jobs Act: The TCJA, which changed existing federal tax law and included numerous provisions that affect businesses, was signed into law in December 2017.
In early 2018, the MPSC ordered Consumers to file various proceedings to determine the reduction in its electric and gas revenue requirements as a result of the reduction in the corporate income tax rate, and to implement bill credits to reflect that reduction until customer rates could be adjusted through Consumers’ general rate cases. Consumers filed, and the MPSC approved, such proceedings throughout 2018, resulting in credits to customer bills during 2018 to reflect reductions in Consumers’ electric and gas revenue requirements.
Consumers filed additional proceedings to address amounts collected from customers during 2018 prior to the implementation of bill credits. In late 2018, the MPSC approved the refund of $31 million to gas customers over six months beginning in December 2018 and the refund of $70 million to electric customers over six months beginning in January 2019.
In October 2018, Consumers filed an application to address the December 31, 2017 remeasurement of its deferred income taxes and other base rate impacts of the TCJA on customers. In September 2019, the MPSC authorized Consumers to begin returning net regulatory tax liabilities of $0.4 billion to gas customers through rates approved in the 2018 gas rate case and $1.2 billion to electric customers through rates to be determined in Consumers’ next electric rate case. Until then, the MPSC authorized Consumers to refund $32 million to electric customers through a temporary bill credit. Consumers’ total $1.6 billion of net regulatory tax liabilities comprises:
A regulatory tax liability of $1.7 billion associated with plant assets that are subject to normalization, which is governed by the Internal Revenue Code; this regulatory tax liability will be returned over the remaining book life of the related plant assets, the average of which is 44 years for gas plant assets and 27 years for electric plant assets.
A regulatory tax asset of $0.3 billion associated with plant assets that are not subject to normalization; this regulatory tax asset will be collected over 44 years from gas customers and over 27 years from electric customers.
A regulatory tax liability of $0.2 billion, which is primarily related to employee benefits; this regulatory tax liability will be refunded to customers over ten years.
In January 2018, Consumers began to reduce the regulatory liability subject to normalization by crediting income tax expense. Consumers fully reserved for the eventual refund of these excess deferred taxes that it credited to income tax expense in a separate non‑current regulatory liability established by reducing revenue. As a result of an order received in September 2019, Consumers began refunding these excess deferred taxes to customers and will no longer reserve for their refund. At the date of the order, this reserve for refund of these excess deferred taxes totaled $62 million. For additional details on the remeasurement, see Note 14, Income Taxes.
Consumers Electric Utility
2018 Electric Rate Case: In May 2018, Consumers filed an application with the MPSC seeking an annual rate increase of $58 million, based on a 10.75 percent authorized return on equity. In October 2018, Consumers reduced its requested annual rate increase to $44 million. In January 2019, the MPSC approved a settlement agreement authorizing an annual rate decrease of $24 million, based on a 10.0 percent authorized return on equity. With the elimination of the $113 million TCJA credit to customer bills, the approved settlement agreement resulted in an $89 million net increase in annual rates. The settlement agreement also provided for deferred accounting treatment for distribution-related capital investments exceeding certain amounts. Consumers also agreed to not file a new electric rate case prior to January 2020.
Consumers Gas Utility
2018 Gas Rate Case: In November 2018, Consumers filed an application with the MPSC seeking an annual rate increase of $229 million, based on a 10.75 percent authorized return on equity. In April 2019, Consumers reduced its requested annual rate increase to $204 million. In September 2019, the MPSC approved an annual rate increase of $144 million, based on a 9.90 percent authorized return on equity. This increase includes a $13 million adjustment to begin returning net regulatory tax liabilities associated with the TCJA to customers. The MPSC also approved the continuation of a revenue decoupling mechanism, which annually reconciles Consumers’ actual weather-normalized, non‑fuel revenues with the revenues approved by the MPSC.
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 in order to minimize the underrecovery or overrecovery amount in the annual reconciliations. Underrecoveries represent probable future revenues 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
2019
 
2018
 
Assets
 
 
 
 
GCR underrecoveries
 
$

 
$
16

Accrued gas revenue
 
$