CMS ENERGY CORP, 10-Q filed on 7/25/2019
Quarterly Report
v3.19.2
Document And Entity Information - shares
6 Months Ended
Jun. 30, 2019
Jul. 09, 2019
Document Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Jun. 30, 2019  
Document Transition Report false  
Commission File Number 1-9513  
Entity Registrant Name CMS ENERGY CORPORATION  
IRS Employer Identification No. 38-2726431  
Entity Incorporation State MI  
Entity Address One Energy Plaza  
City Jackson  
State MI  
Postal Zip Code 49201  
City Area Code 517  
Local Phone Number 788‑0550  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Smaller reporting company false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   283,787,006
Entity Central Index Key 0000811156  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q2  
Amendment Flag false  
Consumers Energy Company    
Document Information [Line Items]    
Commission File Number 1-5611  
Entity Registrant Name CONSUMERS ENERGY COMPANY  
IRS Employer Identification No. 38-0442310  
Entity Incorporation State MI  
Entity Address One Energy Plaza  
City Jackson  
State MI  
Postal Zip Code 49201  
City Area Code 517  
Local Phone Number 788‑0550  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Smaller reporting company false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   84,108,789
Entity Central Index Key 0000201533  
Common Stock    
Document Information [Line Items]    
Title of each class 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 each class 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 each class 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 each class 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 each class Consumers Energy Company Cumulative Preferred Stock, $100 par value: $4.50 Series  
Trading Symbol CMS-PB  
Security Exchange Name NYSE  
v3.19.2
Consolidated Statements of Income (Unaudited) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Operating Revenue $ 1,445 $ 1,492 $ 3,504 $ 3,445
Operating Expenses        
Fuel for electric generation 119 115 261 247
Purchased power – related parties 16 19 34 38
Maintenance and other operating expenses 343 326 697 636
Depreciation and amortization 216 204 514 483
General taxes 71 68 177 155
Total operating expenses 1,227 1,237 2,927 2,827
Operating Income 218 255 577 618
Other Income (Expense)        
Interest income 2 4 3 6
Allowance for equity funds used during construction 3 1 5 2
Income from equity method investees 2 4 1 7
Nonoperating retirement benefits, net 23 22 46 46
Other income 2 0 3 1
Other expense (5) (9) (8) (11)
Total other income 27 22 50 51
Interest Charges        
Interest on long-term debt 110 103 216 203
Interest expense – related parties 3 0 3 0
Other interest expense 19 10 35 21
Allowance for borrowed funds used during construction (1) (1) (2) (1)
Total interest charges 131 112 252 223
Income Before Income Taxes 114 165 375 446
Income Tax Expense 20 25 68 65
Net Income 94 140 307 381
Income Attributable to Noncontrolling Interests 1 1 1 1
Net Income Available to Common Stockholders $ 93 $ 139 $ 306 $ 380
Basic earnings per average common share (in dollars per share) $ 0.33 $ 0.49 $ 1.08 $ 1.35
Diluted earnings per average common share (in dollars per share) $ 0.33 $ 0.49 $ 1.08 $ 1.35
Consumers Energy Company        
Operating Revenue $ 1,334 $ 1,395 $ 3,277 $ 3,250
Operating Expenses        
Fuel for electric generation 88 86 194 188
Purchased and interchange power 350 388 724 766
Purchased power – related parties 16 19 34 39
Cost of gas sold 104 108 505 485
Maintenance and other operating expenses 320 298 639 580
Depreciation and amortization 212 201 506 478
General taxes 69 66 172 151
Total operating expenses 1,159 1,166 2,774 2,687
Operating Income 175 229 503 563
Other Income (Expense)        
Interest income 1 2 2 4
Interest and dividend income – related parties 1 0 2 0
Allowance for equity funds used during construction 3 1 5 2
Nonoperating retirement benefits, net 22 20 43 42
Other income 1 0 2 1
Other expense (5) (3) (8) (5)
Total other income 23 20 46 44
Interest Charges        
Interest on long-term debt 68 67 137 134
Interest expense – related parties 3 0 3 0
Other interest expense 4 4 7 9
Allowance for borrowed funds used during construction (1) (1) (2) (1)
Total interest charges 74 70 145 142
Income Before Income Taxes 124 179 404 465
Income Tax Expense 26 27 80 71
Net Income 98 152 324 394
Preferred Stock Dividends 1 1 1 1
Net Income Available to Common Stockholder 97 151 323 393
Purchased and interchange power        
Operating Expenses        
Cost of sales 356 393 734 775
Cost of gas sold        
Operating Expenses        
Cost of sales $ 106 $ 112 $ 510 $ 493
v3.19.2
Consolidated Statements of Comprehensive Income (Unaudited) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Net income $ 94 $ 140 $ 307 $ 381
Retirement Benefits Liability        
Amortization of net actuarial loss, net of tax of $- for all periods 1 1 2 2
Amortization of prior service credit 0 (1) (1) (1)
Investments        
Unrealized loss on investments 0 0 0 (1)
Derivatives        
Unrealized loss on derivative instruments, net of tax of $(1), $-, $(1), and $- (2)   (3)  
Unrealized loss on derivative instruments, net of tax of $(1), $-, $(1), and $-   0   0
Other Comprehensive Loss (1) 0 (2) 0
Comprehensive Income 93 140 305 381
Comprehensive Income Attributable to Noncontrolling Interests 1 1 1 1
Comprehensive Income 92 139 304 380
Consumers Energy Company        
Net income 98 152 324 394
Retirement Benefits Liability        
Amortization of net actuarial loss, net of tax of $- for all periods 1 0 1 1
Investments        
Unrealized loss on investments 0 0 0 (1)
Derivatives        
Other Comprehensive Loss 1 0 1 0
Comprehensive Income $ 99 $ 152    
Comprehensive Income     $ 325 $ 394
v3.19.2
Consolidated Statements Of Comprehensive Income (Parenthetical) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Amortization of net actuarial loss TAX $ 0 $ 0 $ 0 $ 0
Amortization of prior service credit (TAX BENEFIT) 0 0 0 0
Unrealized loss on investments (TAX BENEFIT) 0 0 0 0
Reclassification adjustments included in net income TAX (TAX BENEFIT) 0 0 0 0
Unrealized loss on derivative instruments (TAX BENEFIT) (1)   (1)  
Unrealized loss on derivative instruments (TAX BENEFIT)   0   0
Consumers Energy Company        
Amortization of net actuarial loss TAX 0 0 0 0
Unrealized loss on investments (TAX BENEFIT) 0 0 0 0
Reclassification adjustments included in net income TAX (TAX BENEFIT) $ 0 $ 0 $ 0 $ 0
v3.19.2
Consolidated Statements Of Cash Flows (Unaudited) - USD ($)
$ in Millions
6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Cash Flows from Operating Activities    
Net income $ 307 $ 381
Adjustments to reconcile net income to net cash provided by operating activities    
Depreciation and amortization 514 483
Deferred income taxes and investment tax credit 60 60
Other non-cash operating activities and reconciling adjustments 9 22
Cash provided by (used in) changes in assets and liabilities    
Accounts and notes receivable and accrued revenue 190 298
Inventories 98 101
Accounts payable and accrued rate refunds (48) (41)
Other current and non-current assets and liabilities 55 112
Net cash provided by operating activities 1,185 1,416
Cash Flows from Investing Activities    
Capital expenditures (excludes assets placed under finance lease) (973) (872)
Increase in EnerBank notes receivable (170) (80)
Purchase of notes receivable by EnerBank (220) 0
Cost to retire property and other investing activities (47) (56)
Net cash used in investing activities (1,410) (1,008)
Cash Flows from Financing Activities    
Proceeds from issuance of debt 1,455 794
Retirement of debt (1,104) (660)
Increase in EnerBank certificates of deposit 371 136
Decrease in notes payable (97) (170)
Issuance of common stock 6 36
Payment of dividends on common and preferred stock (218) (204)
Payment of finance lease obligations and other financing costs (29) (43)
Net cash provided by (used in) financing activities 384 (111)
Net Increase in Cash and Cash Equivalents, Including Restricted Amounts 159 297
Cash and Cash Equivalents, Including Restricted Amounts, Beginning of Period 175 204
Cash and Cash Equivalents, Including Restricted Amounts, End of Period 334 501
Non-cash transactions    
Capital expenditures not paid 150 140
Consumers Energy Company    
Cash Flows from Operating Activities    
Net income 324 394
Adjustments to reconcile net income to net cash provided by operating activities    
Depreciation and amortization 506 478
Deferred income taxes and investment tax credit 41 35
Other non-cash operating activities and reconciling adjustments 4 15
Cash provided by (used in) changes in assets and liabilities    
Accounts and notes receivable and accrued revenue 187 172
Inventories 96 98
Accounts payable and accrued rate refunds (41) (34)
Other current and non-current assets and liabilities (7) (60)
Net cash provided by operating activities 1,110 1,098
Cash Flows from Investing Activities    
Capital expenditures (excludes assets placed under finance lease) (963) (859)
Cost to retire property and other investing activities (63) (55)
Net cash used in investing activities (1,026) (914)
Cash Flows from Financing Activities    
Proceeds from issuance of debt 297 544
Retirement of debt (528) (330)
Decrease in notes payable (97) (170)
Stockholder contribution 675 250
Payment of dividends on common and preferred stock (273) (246)
Payment of finance lease obligations and other financing costs (2) (21)
Net cash provided by (used in) financing activities 72 27
Net Increase in Cash and Cash Equivalents, Including Restricted Amounts 156 211
Cash and Cash Equivalents, Including Restricted Amounts, Beginning of Period 56 65
Cash and Cash Equivalents, Including Restricted Amounts, End of Period 212 276
Non-cash transactions    
Capital expenditures not paid $ 138 $ 116
v3.19.2
Consolidated Balance Sheets (Unaudited) - USD ($)
$ in Millions
Jun. 30, 2019
Dec. 31, 2018
Current Assets    
Cash and cash equivalents $ 312 $ 153
Restricted cash and cash equivalents 22 21
Accounts receivable and accrued revenue, less allowance of $20 in both periods 749 964
Notes receivable, less allowance of $28 in 2019 and $24 in 2018 249 233
Assets held for sale 40 0
Accounts receivable – related parties 15 14
Accrued gas revenue 10 16
Inventories at average cost    
Gas in underground storage 353 450
Materials and supplies 147 143
Generating plant fuel stock 52 57
Deferred property taxes 204 279
Regulatory assets 18 37
Prepayments and other current assets 83 101
Total current assets 2,254 2,468
Plant, Property, and Equipment    
Plant, property, and equipment, gross 24,263 24,400
Less accumulated depreciation and amortization 7,130 7,037
Plant, property, and equipment, net 17,133 17,363
Construction work in progress 973 763
Total plant, property, and equipment 18,106 18,126
Other Non-current Assets    
Regulatory assets 2,344 1,743
Accounts and notes receivable 2,005 1,645
Investments 64 69
Other 519 478
Total other non-current assets 4,932 3,935
Total Assets 25,292 24,529
Current Liabilities    
Current portion of long-term debt, finance leases, and other financing 1,077 996
Notes payable 0 97
Accounts payable 627 723
Accounts payable – related parties 9 10
Accrued rate refunds 34 4
Accrued interest 95 94
Accrued taxes 295 398
Regulatory liabilities 67 155
Other current liabilities 182 147
Total current liabilities 2,386 2,624
Non-current Liabilities    
Long-term debt 11,236 10,615
Non-current portion of finance leases and other financing 86 69
Regulatory liabilities 3,786 3,681
Postretirement benefits 443 436
Asset retirement obligations 438 432
Deferred investment tax credit 117 99
Deferred income taxes 1,548 1,487
Other non-current liabilities 364 294
Total non-current liabilities 18,018 17,113
Commitments and contingencies
Common stockholders’ equity    
Common stock, authorized 350.0 shares; outstanding 283.8 shares in 2019 and 283.4 shares in 2018 3 3
Other paid-in capital 5,097 5,088
Accumulated other comprehensive loss (67) (65)
Accumulated deficit (182) (271)
Total common stockholders’ equity 4,851 4,755
Noncontrolling interests 37 37
Total equity 4,888 4,792
Total Liabilities and Equity 25,292 24,529
Consumers Energy Company    
Current Assets    
Cash and cash equivalents 196 39
Restricted cash and cash equivalents 16 17
Accounts receivable and accrued revenue, less allowance of $20 in both periods 653 855
Assets held for sale 40 0
Accounts receivable – related parties 8 15
Accrued gas revenue 10 16
Inventories at average cost    
Gas in underground storage 353 450
Materials and supplies 142 137
Generating plant fuel stock 48 52
Deferred property taxes 204 279
Regulatory assets 18 37
Prepayments and other current assets 71 83
Total current assets 1,759 1,980
Plant, Property, and Equipment    
Plant, property, and equipment, gross 23,833 23,963
Less accumulated depreciation and amortization 7,046 6,958
Plant, property, and equipment, net 16,787 17,005
Construction work in progress 960 756
Total plant, property, and equipment 17,747 17,761
Other Non-current Assets    
Regulatory assets 2,344 1,743
Accounts and notes receivable 29 27
Accounts and notes receivable – related parties 103 104
Other 434 410
Total other non-current assets 2,910 2,284
Total Assets 22,416 22,025
Current Liabilities    
Current portion of long-term debt, finance leases, and other financing 47 48
Notes payable 0 97
Accounts payable 595 685
Accounts payable – related parties 16 14
Accrued rate refunds 34 4
Accrued interest 58 59
Accrued taxes 298 436
Regulatory liabilities 67 155
Other current liabilities 142 120
Total current liabilities 1,257 1,618
Non-current Liabilities    
Long-term debt 6,546 6,779
Non-current portion of finance leases and other financing 86 69
Regulatory liabilities 3,786 3,681
Postretirement benefits 400 392
Asset retirement obligations 435 428
Deferred investment tax credit 117 99
Deferred income taxes 1,851 1,809
Other non-current liabilities 291 230
Total non-current liabilities 13,512 13,487
Commitments and contingencies
Common stockholders’ equity    
Common stock, authorized 350.0 shares; outstanding 283.8 shares in 2019 and 283.4 shares in 2018 841 841
Other paid-in capital 5,374 4,699
Accumulated other comprehensive loss (20) (21)
Accumulated deficit 1,415 1,364
Total common stockholders’ equity 7,610 6,883
Preferred stock 37 37
Total equity 7,647 6,920
Total Liabilities and Equity $ 22,416 $ 22,025
v3.19.2
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Millions
Jun. 30, 2019
Dec. 31, 2018
Accounts receivable and accrued revenue ALLOWANCE $ 20 $ 20
Accounts and notes receivable ALLOWANCE $ 28 $ 24
Common stock, authorized (in shares) 350,000,000.0 350,000,000.0
Common stock, outstanding (in shares) 283,800,000 283,400,000
Consumers Energy Company    
Accounts receivable and accrued revenue ALLOWANCE $ 20 $ 20
Common stock, authorized (in shares) 125,000,000 125,000,000
Common stock, outstanding (in shares) 84,100,000 84,100,000
v3.19.2
Consolidated Statements of Changes In Equity (Unaudited) - USD ($)
$ in Millions
Total
Common Stock
Other Paid-in Capital
Accumulated Other Comprehensive Loss
Retirement benefits liability
Investments
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
Preferred Stock
Total Equity at Beginning of Period at Dec. 31, 2017 $ 4,478 $ 3 $ 5,019 $ (50) $ (50) $ 0 $ 0   $ (531) $ 37 $ 6,488 $ 841 $ 4,449 $ (12) $ (24) $ 12 $ 1,173 $ 37
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                    
Common stock issued     47                              
Common stock repurchased     (10)                              
Common stock reissued     20                              
Stockholder contribution                         250          
Amortization of net actuarial loss 2       2           1       1      
Amortization of prior service credit (1)       (1)                          
Unrealized loss on investments (1)         (1)         (1)         (1)    
Unrealized loss on derivative instruments, net of tax of $(1), $-, $(1), and $- 0                                  
Net income 381               380 1 394           394  
Dividends declared on common stock                 (203)               (245)  
Dividends declared on preferred stock                                 (1)  
Distributions and other changes in noncontrolling interests                   (1)                
Total Equity at End of Period at Jun. 30, 2018 $ 4,709   5,076 (61) (60) (1)     (346) 37 6,888 841 4,699 (29) (28) (1) 1,340 37
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                    
Dividends declared per common share (in dollars per share) $ 0.7150                                  
Total Equity at Beginning of Period at Dec. 31, 2017 $ 4,478 3 5,019 (50) (50) 0 0   (531) 37 6,488 841 4,449 (12) (24) 12 1,173 37
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                    
Unrealized loss on derivative instruments, net of tax of $(1), $-, $(1), and $-             0                      
Total Equity at End of Period at Dec. 31, 2018 4,792 3 5,088 (65) (63) 0   $ (2) (271) 37 6,920 841 4,699 (21) (21) 0 1,364 37
Total Equity at Beginning of Period at Mar. 31, 2018 4,633 3 5,037 (61) (60) (1) 0   (383) 37 6,713 841 4,549 (29) (28) (1) 1,315 37
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                    
Common stock issued     39                              
Common stock repurchased     0                              
Common stock reissued     0                              
Stockholder contribution                         150          
Amortization of net actuarial loss 1       1           0       0      
Amortization of prior service credit (1)       (1)                          
Unrealized loss on investments 0         0         0         0    
Unrealized loss on derivative instruments, net of tax of $(1), $-, $(1), and $- 0           $ 0                      
Net income 140               139 1 152           152  
Dividends declared on common stock                 (102)               (126)  
Dividends declared on preferred stock                                 (1)  
Distributions and other changes in noncontrolling interests                   (1)                
Total Equity at End of Period at Jun. 30, 2018 $ 4,709   5,076 (61) (60) (1)     (346) 37 6,888 841 4,699 (29) (28) (1) 1,340 37
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                    
Dividends declared per common share (in dollars per share) $ 0.3575                                  
Total Equity at Beginning of Period at Dec. 31, 2018 $ 4,792 3 5,088 (65) (63) 0   (2) (271) 37 6,920 841 4,699 (21) (21) 0 1,364 37
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                    
Common stock issued     17                              
Common stock repurchased     (8)                              
Common stock reissued     0                              
Stockholder contribution                         675          
Amortization of net actuarial loss 2       2           1       1      
Amortization of prior service credit (1)       (1)                          
Unrealized loss on investments 0         0         0         0    
Unrealized loss on derivative instruments (3)             (3)                    
Net income 307               306 1 324           324  
Dividends declared on common stock                 (217)               (272)  
Dividends declared on preferred stock                                 (1)  
Distributions and other changes in noncontrolling interests                   (1)                
Total Equity at End of Period at Jun. 30, 2019 $ 4,888   5,097 (67) (62) 0   (5) (182) 37 7,647 841 5,374 (20) (20) 0 1,415 37
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                    
Dividends declared per common share (in dollars per share) $ 0.7650                                  
Total Equity at Beginning of Period at Mar. 31, 2019 $ 4,895 $ 3 5,087 (66) (63) 0   (3) (166) 37 7,324 841 5,049 (21) (21) 0 1,418 37
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                    
Common stock issued     10                              
Common stock repurchased     0                              
Common stock reissued     0                              
Stockholder contribution                         325          
Amortization of net actuarial loss 1       1           1       1      
Amortization of prior service credit 0       0                          
Unrealized loss on investments 0         0         0         0    
Unrealized loss on derivative instruments (2)             (2)                    
Net income 94               93 1 98           98  
Dividends declared on common stock                 (109)               (100)  
Dividends declared on preferred stock                                 (1)  
Distributions and other changes in noncontrolling interests                   (1)                
Total Equity at End of Period at Jun. 30, 2019 $ 4,888   $ 5,097 $ (67) $ (62) $ 0   $ (5) $ (182) $ 37 $ 7,647 $ 841 $ 5,374 $ (20) $ (20) $ 0 $ 1,415 $ 37
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                    
Dividends declared per common share (in dollars per share) $ 0.3825                                  
v3.19.2
New Accounting Standards
6 Months Ended
Jun. 30, 2019
New Accounting Pronouncements or Change in Accounting Principle [Line Items]  
New Accounting Standards New Accounting Standards
Implementation of New Accounting Standards
ASU 2016‑02, 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 8, Leases. 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 2016‑13, Measurement of Credit Losses on Financial Instruments: This standard, which will be effective January 1, 2020 for CMS Energy and Consumers, provides new guidance for estimating and
recording credit losses on financial instruments. The standard will apply to the recognition of loan losses at EnerBank as well as to the recognition of uncollectible accounts expense at Consumers. Entities will apply the standard using a modified retrospective approach, with a cumulative‑effect adjustment recorded to beginning retained earnings on the effective date. CMS Energy and Consumers are evaluating the impact of the standard on their consolidated financial statements.
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 2016‑02, 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 8, Leases. 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 2016‑13, Measurement of Credit Losses on Financial Instruments: This standard, which will be effective January 1, 2020 for CMS Energy and Consumers, provides new guidance for estimating and
recording credit losses on financial instruments. The standard will apply to the recognition of loan losses at EnerBank as well as to the recognition of uncollectible accounts expense at Consumers. Entities will apply the standard using a modified retrospective approach, with a cumulative‑effect adjustment recorded to beginning retained earnings on the effective date. CMS Energy and Consumers are evaluating the impact of the standard on their consolidated financial statements.
v3.19.2
Regulatory Matters
6 Months Ended
Jun. 30, 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.
2017 Electric Rate Case: In June 2018, the MPSC issued an order authorizing an annual rate increase of $72 million, based on a 10.0 percent authorized return on equity. In July 2018, Consumers filed a reconciliation of total revenues collected from rates it self‑implemented in October 2017 to those that would have been collected under final rates. The reconciliation indicated that a $36 million refund would be required, which was recorded on Consumers’ consolidated balance sheets as a current regulatory liability at June 30, 2019.
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. The filing requested authority to recover new investment in system reliability, environmental compliance, and technology enhancements. 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.
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. Consumers had a recorded current regulatory liability of $9 million for these approved refunds at June 30, 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 April 2019, Consumers filed rebuttal testimony and is now proposing approval to begin returning $0.4 billion of net regulatory tax liabilities through rates to be determined in Consumers’ pending gas rate case and $1.2 billion through a temporary bill credit until customer rates can be adjusted through an electric rate case. 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 requires that the regulatory tax liability 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. Consumers proposed to collect this 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. Consumers proposed to refund this amount to customers over ten years.
In January 2018, Consumers began to reduce the regulatory liability subject to normalization by crediting income tax expense. Consumers has fully reserved for the eventual refund of these excess deferred taxes that it has credited to income tax expense in a separate non‑current regulatory liability established by reducing revenue, and will continue to do so until these benefits are passed on to customers in accordance with an MPSC order, expected to be issued in 2019. At June 30, 2019, this reserve for refund of these excess deferred taxes totaled $53 million. For additional details on the remeasurement, see Note 10, Income Taxes.
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 qualified costs of $657 million, representing the remaining book value in 2023 of the two coal-fueled electric generating units upon their retirement. In June 2019, Consumers removed this amount from plant, property, and equipment 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.
Energy Waste Reduction Plan Incentive: Consumers filed its 2018 waste reduction reconciliation in May 2019, requesting the MPSC’s approval to collect from customers the maximum performance incentive of $34 million for exceeding its statutory savings targets in 2018. Consumers recognized incentive revenue under this program of $34 million in 2018.
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.
2017 Electric Rate Case: In June 2018, the MPSC issued an order authorizing an annual rate increase of $72 million, based on a 10.0 percent authorized return on equity. In July 2018, Consumers filed a reconciliation of total revenues collected from rates it self‑implemented in October 2017 to those that would have been collected under final rates. The reconciliation indicated that a $36 million refund would be required, which was recorded on Consumers’ consolidated balance sheets as a current regulatory liability at June 30, 2019.
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. The filing requested authority to recover new investment in system reliability, environmental compliance, and technology enhancements. 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.
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. Consumers had a recorded current regulatory liability of $9 million for these approved refunds at June 30, 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 April 2019, Consumers filed rebuttal testimony and is now proposing approval to begin returning $0.4 billion of net regulatory tax liabilities through rates to be determined in Consumers’ pending gas rate case and $1.2 billion through a temporary bill credit until customer rates can be adjusted through an electric rate case. 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 requires that the regulatory tax liability 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. Consumers proposed to collect this 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. Consumers proposed to refund this amount to customers over ten years.
In January 2018, Consumers began to reduce the regulatory liability subject to normalization by crediting income tax expense. Consumers has fully reserved for the eventual refund of these excess deferred taxes that it has credited to income tax expense in a separate non‑current regulatory liability established by reducing revenue, and will continue to do so until these benefits are passed on to customers in accordance with an MPSC order, expected to be issued in 2019. At June 30, 2019, this reserve for refund of these excess deferred taxes totaled $53 million. For additional details on the remeasurement, see Note 10, Income Taxes.
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 qualified costs of $657 million, representing the remaining book value in 2023 of the two coal-fueled electric generating units upon their retirement. In June 2019, Consumers removed this amount from plant, property, and equipment 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.
Energy Waste Reduction Plan Incentive: Consumers filed its 2018 waste reduction reconciliation in May 2019, requesting the MPSC’s approval to collect from customers the maximum performance incentive of $34 million for exceeding its statutory savings targets in 2018. Consumers recognized incentive revenue under this program of $34 million in 2018.
v3.19.2
Contingencies and Commitments
6 Months Ended
Jun. 30, 2019
Site Contingency [Line Items]  
Contingencies and Commitments Contingencies and Commitments
CMS Energy and Consumers are involved in various matters that give rise to contingent liabilities. Depending on the specific issues, the resolution of these contingencies could negatively affect CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. In their disclosures of these matters, CMS Energy and Consumers provide an estimate of the possible loss or
range of loss when such an estimate can be made. Disclosures that state that CMS Energy or Consumers cannot predict the outcome of a matter indicate that they are unable to estimate a possible loss or range of loss for the matter.
CMS Energy Contingencies
Gas Index Price Reporting Litigation: CMS Energy, along with CMS MST, CMS Field Services, Cantera Natural Gas, Inc., and Cantera Gas Company, were named as defendants in four class action lawsuits and one individual lawsuit arising as a result of alleged inaccurate natural gas price reporting to publications that report trade information. Allegations include price‑fixing conspiracies, restraint of trade, and artificial inflation of natural gas retail prices in Kansas, Missouri, and Wisconsin. In 2016, CMS Energy entities reached a settlement with the plaintiffs in the Kansas and Missouri class action cases for an amount that was not material to CMS Energy. In 2017, the federal district court approved the settlement. Plaintiffs are making claims for the following: treble damages, full consideration damages, exemplary damages, costs, interest, and/or attorneys’ fees.
After removal to federal court, all of the cases were transferred to a single federal district court pursuant to the multidistrict litigation process. In 2010 and 2011, all claims against CMS Energy defendants were dismissed by the district court based on FERC preemption.
In 2013, the U.S. Court of Appeals for the Ninth Circuit reversed the district court decision. The appellate court found that FERC preemption does not apply under the facts of these cases. The appellate court affirmed the district court’s denial of leave to amend to add federal antitrust claims. The matter was appealed to the U.S. Supreme Court, which in 2015 upheld the Ninth Circuit’s decision. The cases were remanded back to the federal district court.
In 2016, the federal district court granted the defendants’ motion for summary judgment in the individual lawsuit filed in Kansas based on a release in a prior settlement involving similar allegations; the order of summary judgment was subsequently appealed. In March 2018, the U.S. Court of Appeals for the Ninth Circuit reversed the lower court’s ruling and remanded the case back to the federal district court.
In 2017, the federal district court denied plaintiffs’ motion for class certification in the two pending class action cases in Wisconsin. The plaintiffs appealed that decision to the U.S. Court of Appeals for the Ninth Circuit and in August 2018, the Ninth Circuit Court of Appeals reversed and remanded the matter back to the federal district court for further consideration.
In January 2019, the judge in the multidistrict litigation granted motions filed by plaintiffs for Suggestion of Remand of the actions back to the respective transferor courts in Wisconsin and Kansas for further handling. In the Kansas action, the Judicial Panel on Multidistrict Litigation ordered the remand and the case is being transferred. In the Wisconsin actions, oppositions to the remand were filed, but the Judicial Panel on Multidistrict Litigation granted the remand in June 2019.
These cases involve complex facts, a large number of similarly situated defendants with different factual positions, and multiple jurisdictions. Presently, any estimate of liability would be highly speculative; the amount of CMS Energy’s reasonably possible loss would be based on widely varying models previously untested in this context. If the outcome after appeals is unfavorable, these cases could negatively affect CMS Energy’s liquidity, financial condition, and results of operations.
Bay Harbor: CMS Land retained environmental remediation obligations for the collection and treatment of leachate, a liquid consisting of water and other substances, at Bay Harbor after selling its interests in the development in 2002. Leachate is produced when water enters into cement kiln dust piles left over from former cement plant operations at the site. In 2012, CMS Land and EGLE finalized an agreement
that established the final remedies and the future water quality criteria at the site. CMS Land completed all construction necessary to implement the remedies required by the agreement and will continue to maintain and operate a system to discharge treated leachate into Little Traverse Bay under an NPDES permit issued in 2010 and renewed in 2016. The renewed NPDES permit is valid through September 2020.
At June 30, 2019, CMS Energy had a recorded liability of $45 million for its remaining obligations for environmental remediation. CMS Energy calculated this liability based on discounted projected costs, using a discount rate of 4.34 percent and an inflation rate of one percent on annual operating and maintenance costs. The undiscounted amount of the remaining obligation is $56 million. CMS Energy expects to pay the following amounts for long‑term liquid disposal and operating and maintenance costs during the remainder of 2019 and in each of the next five years:
In Millions
 
 
2019
 
2020
 
2021
 
2022
 
2023
 
2024
 
CMS Energy
 
 
 
 
 
 
 
 
 
 
 
 
Long‑term liquid disposal and operating and maintenance costs
 
$
2

 
$
4

 
$
4

 
$
4

 
$
4

 
$
4


CMS Energy’s estimate of response activity costs and the timing of expenditures could change if there are changes in circumstances or assumptions used in calculating the liability. Although a liability for its present estimate of remaining response activity costs has been recorded, CMS Energy cannot predict the ultimate financial impact or outcome of this matter.
Equatorial Guinea Tax Claim: In 2002, CMS Energy sold its oil, gas, and methanol investments in Equatorial Guinea. The government of Equatorial Guinea claims that, in connection with the sale, CMS Energy owes $152 million in taxes, plus substantial penalties and interest that could be up to the amount of the taxes claimed. In 2015, the matter was proceeding to formal arbitration; however, since then, the government of Equatorial Guinea has stopped communicating. CMS Energy has concluded that the government’s tax claim is without merit and will continue to contest the claim, but cannot predict the financial impact or outcome of the matter. An unfavorable outcome could have a material adverse effect on CMS Energy’s liquidity, financial condition, and results of operations.
Consumers Electric Utility Contingencies
Electric Environmental Matters: Consumers’ operations are subject to environmental laws and regulations. Historically, Consumers has generally been able to recover, in customer rates, the costs to operate its facilities in compliance with these laws and regulations.
Cleanup and Solid Waste: Consumers expects to incur remediation and other response activity costs at a number of sites under the NREPA. Consumers believes that these costs should be recoverable in rates, but cannot guarantee that outcome. Consumers estimates that its liability for NREPA sites for which it can estimate a range of loss will be between $3 million and $4 million. At June 30, 2019, Consumers had a recorded liability of $3 million, the minimum amount in the range of its estimated probable NREPA liability, as no amount in the range was considered a better estimate than any other amount.
Consumers is a potentially responsible party at a number of contaminated sites administered under CERCLA. CERCLA liability is joint and several. In 2010, Consumers received official notification from the EPA that identified Consumers as a potentially responsible party for cleanup of PCBs at the Kalamazoo River CERCLA site. The notification claimed that the EPA has reason to believe that Consumers disposed of PCBs and arranged for the disposal and treatment of PCB‑containing materials at portions of the site. In 2011, Consumers received a follow‑up letter from the EPA requesting that
Consumers agree to participate in a removal action plan along with several other companies for an area of lower Portage Creek, which is connected to the Kalamazoo River. All parties, including Consumers, that were asked to participate in the removal action plan declined to accept liability. Until further information is received from the EPA, Consumers is unable to estimate a range of potential liability for cleanup of the river.
Based on its experience, Consumers estimates that its share of the total liability for known CERCLA sites will be between $3 million and $8 million. Various factors, including the number and creditworthiness of potentially responsible parties involved with each site, affect Consumers’ share of the total liability. At June 30, 2019, Consumers had a recorded liability of $3 million for its share of the total liability at these sites, the minimum amount in the range of its estimated probable CERCLA liability, as no amount in the range was considered a better estimate than any other amount.
The timing of payments related to Consumers’ remediation and other response activities at its CERCLA and NREPA sites is uncertain. Consumers periodically reviews these cost estimates. A change in the underlying assumptions, such as an increase in the number of sites, different remediation techniques, the nature and extent of contamination, and legal and regulatory requirements, could affect its estimates of NREPA and CERCLA liability.
Ludington PCB: In 1998, during routine maintenance activities, Consumers identified PCB as a component in certain paint, grout, and sealant materials at Ludington. Consumers removed part of the PCB material and replaced it with non‑PCB material. Consumers has had several communications with the EPA regarding this matter, but cannot predict the financial impact or outcome.
MCV PPA: In December 2017, the MCV Partnership initiated arbitration against Consumers, asserting a breach of contract associated with the MCV PPA. Under this PPA, Consumers pays the MCV Partnership a fixed energy charge based on Consumers’ annual average baseload coal generating plant operating and maintenance cost, fuel inventory, and administrative and general expenses. The MCV Partnership asserts that, under the Clean Air Act, Consumers should have installed pollution control equipment on coal‑fueled electric generating units years before they were retired. The MCV Partnership also asserts that Consumers should have installed pollution control equipment earlier on its remaining coal‑fueled electric generating units. Additionally, the MCV Partnership claims that Consumers improperly characterized certain costs included in the calculation of the fixed energy charge.
In January 2019, an arbitration panel issued an order concluding that the MCV Partnership is not entitled to any damages associated with its claim against Consumers related to the Clean Air Act; the majority of the MCV Partnership’s claim, which estimated damages and interest in excess of $270 million, was related to this dismissed claim. Consumers believes that the MCV Partnership’s remaining claims are without merit, but cannot predict the financial impact or outcome of the matter.
Underwater Cables in Straits of Mackinac: Consumers owns certain underwater electric cables in the Straits of Mackinac, which were de‑energized and retired in 1990. Consumers was notified that some of these cables were damaged as a result of vessel activity in April 2018. Following the notification, Consumers located, inspected, sampled, capped, and returned the damaged retired cables to their original location on the lake bottom, and did not find any substantive evidence of environmental contamination. Consumers is collaborating with the State of Michigan, local Native American tribes, and other stakeholders to evaluate the status of the cables and to determine if any additional action is advisable. Consumers cannot predict the outcome of this matter, but if Consumers is required to remove all the cables, it could incur additional costs of up to $10 million. Consumers has filed suit against the companies that own the vessels that allegedly caused the damage. Consumers will seek recovery from customers of any costs incurred.
Consumers Gas Utility Contingencies
Gas Environmental Matters: Consumers expects to incur remediation and other response activity costs at a number of sites under the NREPA. These sites include 23 former MGP facilities. Consumers operated the facilities on these sites for some part of their operating lives. For some of these sites, Consumers has no present ownership interest or may own only a portion of the original site.
At June 30, 2019, Consumers had a recorded liability of $68 million for its remaining obligations for these sites. This amount represents the present value of long‑term projected costs, using a discount rate of 2.57 percent and an inflation rate of 2.5 percent. The undiscounted amount of the remaining obligation is $74 million. Consumers expects to pay the following amounts for remediation and other response activity costs during the remainder of 2019 and in each of the next five years: 
In Millions
 
 
2019
 
2020
 
2021
 
2022
 
2023
 
2024
 
Consumers
 
 
 
 
 
 
 
 
 
 
 
 
Remediation and other response activity costs
 
$
8

 
$
16

 
$
21

 
$
7

 
$
2

 
$
2


Consumers periodically reviews these cost estimates. Any significant change in the underlying assumptions, such as an increase in the number of sites, changes in remediation techniques, or legal and regulatory requirements, could affect Consumers’ estimates of annual response activity costs and the MGP liability.
Pursuant to orders issued by the MPSC, Consumers defers its MGP‑related remediation costs and recovers them from its customers over a ten‑year period. At June 30, 2019, Consumers had a regulatory asset of $129 million related to the MGP sites.
Consumers estimates that its liability to perform remediation and other response activities at NREPA sites other than the MGP sites could reach $3 million. At June 30, 2019, Consumers had a recorded liability of less than $1 million, the minimum amount in the range of its estimated probable liability, as no amount in the range was considered a better estimate than any other amount.
Ray Compressor Station: On January 30, 2019, Consumers experienced a fire at the Ray Compressor Station, which resulted in the Ray Storage Field being off‑line or operating at significantly reduced capacity, which negatively affected Consumers’ natural gas supply and delivery capacity. This incident, which occurred during the extreme polar vortex weather condition, required Consumers to request voluntary reductions in customer load, to implement contingency gas supply purchases, and to implement a curtailment of natural gas deliveries for industrial and large commercial customers pursuant to Consumers’ MPSC curtailment tariff. The curtailment and request for voluntary reductions of customer loads were canceled as of midnight, February 1, 2019. Consumers investigated the cause of the incident, and filed a report on the incident with the MPSC in April 2019. In response, the MPSC issued an order in July 2019, directing Consumers to file additional reports regarding the incident and to include detail of the resulting costs in a future rate proceeding.
As a result of the fire and the resulting curtailment, Consumers could be subject to various claims from impacted customers or claims for damages. Consumers may also be subject to regulatory penalties and disallowances of gas purchased, gas lost, and costs associated with the repairs to the Ray Compressor Station. At this time, Consumers cannot predict the outcome of these matters or other gas-related incidents and a reasonable estimate of any loss cannot be made, but they could have a material adverse effect on Consumers’ results of operations, financial condition, or liquidity, and could subject Consumers’ gas utility to increased regulatory scrutiny.
Consumers Electric and Gas Utility Contingencies
Electric and Gas Staking: In June 2019, the MPSC ordered Consumers to show cause as to why it should not be found in violation of the MISS DIG Act. The MPSC alleges that Consumers violated the law by failing to respond in a timely manner to over 20,000 requests to mark the location of underground facilities in April and May 2019 and only partially responding to others. The law provides the MPSC with discretion in setting fines for violations, if any; however, the fines cannot exceed $5,000 per violation. An order by the MPSC in this proceeding is not expected until mid-2020. Consumers has resolved the backlog of staking requests. Consumers cannot predict the outcome of this matter, but it could be subject to regulatory penalties that have a material adverse effect on Consumers’ results of operations, financial condition, or liquidity, and Consumers could be subject to increased regulatory scrutiny.
Guarantees
Presented in the following table are CMS Energy’s and Consumers’ guarantees at June 30, 2019:
In Millions
 
Guarantee Description
Issue Date
Expiration Date
Maximum Obligation
 
Carrying Amount
 
CMS Energy, including Consumers
 
 
 
 
 
 
 
 
Indemnity obligations from stock and asset sale agreements1
 
various
 
indefinite
 
$
153

 
$
2

Guarantees2
 
various
 
indefinite
 
36

 

Consumers
 
 
 
 
 
 
 
 
Guarantee2
 
July 2011
 
indefinite
 
$
30

 
$

1 
These obligations arose from stock and asset sale agreements under which CMS Energy or a subsidiary of CMS Energy indemnified the purchaser for losses resulting from various matters, primarily claims related to taxes. CMS Energy believes the likelihood of material loss to be remote for the indemnity obligations not recorded as liabilities.
2 
At Consumers, this obligation comprises a guarantee provided to the U.S. Department of Energy in connection with a settlement agreement regarding damages resulting from the department’s failure to accept spent nuclear fuel from nuclear power plants formerly owned by Consumers. At CMS Energy, the guarantee obligations comprise Consumers’ guarantee to the U.S. Department of Energy and CMS Energy’s 1994 guarantee of non‑recourse revenue bonds issued by Genesee.
Additionally, in the normal course of business, CMS Energy, Consumers, and certain other subsidiaries of CMS Energy have entered into various agreements containing tax and other indemnity provisions for which they are unable to estimate the maximum potential obligation. The carrying value of these indemnity obligations is $1 million. CMS Energy and Consumers consider the likelihood that they would be required to perform or incur substantial losses related to these indemnities to be remote.
Other Contingencies
In addition to the matters disclosed in this Note and Note 2, Regulatory Matters, there are certain other lawsuits and administrative proceedings before various courts and governmental agencies, as well as unasserted claims that may result in such proceedings, arising in the ordinary course of business to which CMS Energy, Consumers, and certain other subsidiaries of CMS Energy are parties. These other lawsuits, proceedings, and unasserted claims may involve personal injury, property damage, contracts, environmental matters, federal and state taxes, rates, licensing, employment, and other matters. Further,
CMS Energy and Consumers occasionally self‑report certain regulatory non‑compliance matters that may or may not eventually result in administrative proceedings. CMS Energy and Consumers believe that the outcome of any one of these proceedings and potential claims will not have a material negative effect on their consolidated results of operations, financial condition, or liquidity.
Consumers Energy Company  
Site Contingency [Line Items]  
Contingencies and Commitments Contingencies and Commitments
CMS Energy and Consumers are involved in various matters that give rise to contingent liabilities. Depending on the specific issues, the resolution of these contingencies could negatively affect CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. In their disclosures of these matters, CMS Energy and Consumers provide an estimate of the possible loss or
range of loss when such an estimate can be made. Disclosures that state that CMS Energy or Consumers cannot predict the outcome of a matter indicate that they are unable to estimate a possible loss or range of loss for the matter.
CMS Energy Contingencies
Gas Index Price Reporting Litigation: CMS Energy, along with CMS MST, CMS Field Services, Cantera Natural Gas, Inc., and Cantera Gas Company, were named as defendants in four class action lawsuits and one individual lawsuit arising as a result of alleged inaccurate natural gas price reporting to publications that report trade information. Allegations include price‑fixing conspiracies, restraint of trade, and artificial inflation of natural gas retail prices in Kansas, Missouri, and Wisconsin. In 2016, CMS Energy entities reached a settlement with the plaintiffs in the Kansas and Missouri class action cases for an amount that was not material to CMS Energy. In 2017, the federal district court approved the settlement. Plaintiffs are making claims for the following: treble damages, full consideration damages, exemplary damages, costs, interest, and/or attorneys’ fees.
After removal to federal court, all of the cases were transferred to a single federal district court pursuant to the multidistrict litigation process. In 2010 and 2011, all claims against CMS Energy defendants were dismissed by the district court based on FERC preemption.
In 2013, the U.S. Court of Appeals for the Ninth Circuit reversed the district court decision. The appellate court found that FERC preemption does not apply under the facts of these cases. The appellate court affirmed the district court’s denial of leave to amend to add federal antitrust claims. The matter was appealed to the U.S. Supreme Court, which in 2015 upheld the Ninth Circuit’s decision. The cases were remanded back to the federal district court.
In 2016, the federal district court granted the defendants’ motion for summary judgment in the individual lawsuit filed in Kansas based on a release in a prior settlement involving similar allegations; the order of summary judgment was subsequently appealed. In March 2018, the U.S. Court of Appeals for the Ninth Circuit reversed the lower court’s ruling and remanded the case back to the federal district court.
In 2017, the federal district court denied plaintiffs’ motion for class certification in the two pending class action cases in Wisconsin. The plaintiffs appealed that decision to the U.S. Court of Appeals for the Ninth Circuit and in August 2018, the Ninth Circuit Court of Appeals reversed and remanded the matter back to the federal district court for further consideration.
In January 2019, the judge in the multidistrict litigation granted motions filed by plaintiffs for Suggestion of Remand of the actions back to the respective transferor courts in Wisconsin and Kansas for further handling. In the Kansas action, the Judicial Panel on Multidistrict Litigation ordered the remand and the case is being transferred. In the Wisconsin actions, oppositions to the remand were filed, but the Judicial Panel on Multidistrict Litigation granted the remand in June 2019.
These cases involve complex facts, a large number of similarly situated defendants with different factual positions, and multiple jurisdictions. Presently, any estimate of liability would be highly speculative; the amount of CMS Energy’s reasonably possible loss would be based on widely varying models previously untested in this context. If the outcome after appeals is unfavorable, these cases could negatively affect CMS Energy’s liquidity, financial condition, and results of operations.
Bay Harbor: CMS Land retained environmental remediation obligations for the collection and treatment of leachate, a liquid consisting of water and other substances, at Bay Harbor after selling its interests in the development in 2002. Leachate is produced when water enters into cement kiln dust piles left over from former cement plant operations at the site. In 2012, CMS Land and EGLE finalized an agreement
that established the final remedies and the future water quality criteria at the site. CMS Land completed all construction necessary to implement the remedies required by the agreement and will continue to maintain and operate a system to discharge treated leachate into Little Traverse Bay under an NPDES permit issued in 2010 and renewed in 2016. The renewed NPDES permit is valid through September 2020.
At June 30, 2019, CMS Energy had a recorded liability of $45 million for its remaining obligations for environmental remediation. CMS Energy calculated this liability based on discounted projected costs, using a discount rate of 4.34 percent and an inflation rate of one percent on annual operating and maintenance costs. The undiscounted amount of the remaining obligation is $56 million. CMS Energy expects to pay the following amounts for long‑term liquid disposal and operating and maintenance costs during the remainder of 2019 and in each of the next five years:
In Millions
 
 
2019
 
2020
 
2021
 
2022
 
2023
 
2024
 
CMS Energy
 
 
 
 
 
 
 
 
 
 
 
 
Long‑term liquid disposal and operating and maintenance costs
 
$
2

 
$
4

 
$
4

 
$
4

 
$
4

 
$
4


CMS Energy’s estimate of response activity costs and the timing of expenditures could change if there are changes in circumstances or assumptions used in calculating the liability. Although a liability for its present estimate of remaining response activity costs has been recorded, CMS Energy cannot predict the ultimate financial impact or outcome of this matter.
Equatorial Guinea Tax Claim: In 2002, CMS Energy sold its oil, gas, and methanol investments in Equatorial Guinea. The government of Equatorial Guinea claims that, in connection with the sale, CMS Energy owes $152 million in taxes, plus substantial penalties and interest that could be up to the amount of the taxes claimed. In 2015, the matter was proceeding to formal arbitration; however, since then, the government of Equatorial Guinea has stopped communicating. CMS Energy has concluded that the government’s tax claim is without merit and will continue to contest the claim, but cannot predict the financial impact or outcome of the matter. An unfavorable outcome could have a material adverse effect on CMS Energy’s liquidity, financial condition, and results of operations.
Consumers Electric Utility Contingencies
Electric Environmental Matters: Consumers’ operations are subject to environmental laws and regulations. Historically, Consumers has generally been able to recover, in customer rates, the costs to operate its facilities in compliance with these laws and regulations.
Cleanup and Solid Waste: Consumers expects to incur remediation and other response activity costs at a number of sites under the NREPA. Consumers believes that these costs should be recoverable in rates, but cannot guarantee that outcome. Consumers estimates that its liability for NREPA sites for which it can estimate a range of loss will be between $3 million and $4 million. At June 30, 2019, Consumers had a recorded liability of $3 million, the minimum amount in the range of its estimated probable NREPA liability, as no amount in the range was considered a better estimate than any other amount.
Consumers is a potentially responsible party at a number of contaminated sites administered under CERCLA. CERCLA liability is joint and several. In 2010, Consumers received official notification from the EPA that identified Consumers as a potentially responsible party for cleanup of PCBs at the Kalamazoo River CERCLA site. The notification claimed that the EPA has reason to believe that Consumers disposed of PCBs and arranged for the disposal and treatment of PCB‑containing materials at portions of the site. In 2011, Consumers received a follow‑up letter from the EPA requesting that
Consumers agree to participate in a removal action plan along with several other companies for an area of lower Portage Creek, which is connected to the Kalamazoo River. All parties, including Consumers, that were asked to participate in the removal action plan declined to accept liability. Until further information is received from the EPA, Consumers is unable to estimate a range of potential liability for cleanup of the river.
Based on its experience, Consumers estimates that its share of the total liability for known CERCLA sites will be between $3 million and $8 million. Various factors, including the number and creditworthiness of potentially responsible parties involved with each site, affect Consumers’ share of the total liability. At June 30, 2019, Consumers had a recorded liability of $3 million for its share of the total liability at these sites, the minimum amount in the range of its estimated probable CERCLA liability, as no amount in the range was considered a better estimate than any other amount.
The timing of payments related to Consumers’ remediation and other response activities at its CERCLA and NREPA sites is uncertain. Consumers periodically reviews these cost estimates. A change in the underlying assumptions, such as an increase in the number of sites, different remediation techniques, the nature and extent of contamination, and legal and regulatory requirements, could affect its estimates of NREPA and CERCLA liability.
Ludington PCB: In 1998, during routine maintenance activities, Consumers identified PCB as a component in certain paint, grout, and sealant materials at Ludington. Consumers removed part of the PCB material and replaced it with non‑PCB material. Consumers has had several communications with the EPA regarding this matter, but cannot predict the financial impact or outcome.
MCV PPA: In December 2017, the MCV Partnership initiated arbitration against Consumers, asserting a breach of contract associated with the MCV PPA. Under this PPA, Consumers pays the MCV Partnership a fixed energy charge based on Consumers’ annual average baseload coal generating plant operating and maintenance cost, fuel inventory, and administrative and general expenses. The MCV Partnership asserts that, under the Clean Air Act, Consumers should have installed pollution control equipment on coal‑fueled electric generating units years before they were retired. The MCV Partnership also asserts that Consumers should have installed pollution control equipment earlier on its remaining coal‑fueled electric generating units. Additionally, the MCV Partnership claims that Consumers improperly characterized certain costs included in the calculation of the fixed energy charge.
In January 2019, an arbitration panel issued an order concluding that the MCV Partnership is not entitled to any damages associated with its claim against Consumers related to the Clean Air Act; the majority of the MCV Partnership’s claim, which estimated damages and interest in excess of $270 million, was related to this dismissed claim. Consumers believes that the MCV Partnership’s remaining claims are without merit, but cannot predict the financial impact or outcome of the matter.
Underwater Cables in Straits of Mackinac: Consumers owns certain underwater electric cables in the Straits of Mackinac, which were de‑energized and retired in 1990. Consumers was notified that some of these cables were damaged as a result of vessel activity in April 2018. Following the notification, Consumers located, inspected, sampled, capped, and returned the damaged retired cables to their original location on the lake bottom, and did not find any substantive evidence of environmental contamination. Consumers is collaborating with the State of Michigan, local Native American tribes, and other stakeholders to evaluate the status of the cables and to determine if any additional action is advisable. Consumers cannot predict the outcome of this matter, but if Consumers is required to remove all the cables, it could incur additional costs of up to $10 million. Consumers has filed suit against the companies that own the vessels that allegedly caused the damage. Consumers will seek recovery from customers of any costs incurred.
Consumers Gas Utility Contingencies
Gas Environmental Matters: Consumers expects to incur remediation and other response activity costs at a number of sites under the NREPA. These sites include 23 former MGP facilities. Consumers operated the facilities on these sites for some part of their operating lives. For some of these sites, Consumers has no present ownership interest or may own only a portion of the original site.
At June 30, 2019, Consumers had a recorded liability of $68 million for its remaining obligations for these sites. This amount represents the present value of long‑term projected costs, using a discount rate of 2.57 percent and an inflation rate of 2.5 percent. The undiscounted amount of the remaining obligation is $74 million. Consumers expects to pay the following amounts for remediation and other response activity costs during the remainder of 2019 and in each of the next five years: 
In Millions
 
 
2019
 
2020
 
2021
 
2022
 
2023
 
2024
 
Consumers
 
 
 
 
 
 
 
 
 
 
 
 
Remediation and other response activity costs
 
$
8

 
$
16

 
$
21

 
$
7

 
$
2

 
$
2


Consumers periodically reviews these cost estimates. Any significant change in the underlying assumptions, such as an increase in the number of sites, changes in remediation techniques, or legal and regulatory requirements, could affect Consumers’ estimates of annual response activity costs and the MGP liability.
Pursuant to orders issued by the MPSC, Consumers defers its MGP‑related remediation costs and recovers them from its customers over a ten‑year period. At June 30, 2019, Consumers had a regulatory asset of $129 million related to the MGP sites.
Consumers estimates that its liability to perform remediation and other response activities at NREPA sites other than the MGP sites could reach $3 million. At June 30, 2019, Consumers had a recorded liability of less than $1 million, the minimum amount in the range of its estimated probable liability, as no amount in the range was considered a better estimate than any other amount.
Ray Compressor Station: On January 30, 2019, Consumers experienced a fire at the Ray Compressor Station, which resulted in the Ray Storage Field being off‑line or operating at significantly reduced capacity, which negatively affected Consumers’ natural gas supply and delivery capacity. This incident, which occurred during the extreme polar vortex weather condition, required Consumers to request voluntary reductions in customer load, to implement contingency gas supply purchases, and to implement a curtailment of natural gas deliveries for industrial and large commercial customers pursuant to Consumers’ MPSC curtailment tariff. The curtailment and request for voluntary reductions of customer loads were canceled as of midnight, February 1, 2019. Consumers investigated the cause of the incident, and filed a report on the incident with the MPSC in April 2019. In response, the MPSC issued an order in July 2019, directing Consumers to file additional reports regarding the incident and to include detail of the resulting costs in a future rate proceeding.
As a result of the fire and the resulting curtailment, Consumers could be subject to various claims from impacted customers or claims for damages. Consumers may also be subject to regulatory penalties and disallowances of gas purchased, gas lost, and costs associated with the repairs to the Ray Compressor Station. At this time, Consumers cannot predict the outcome of these matters or other gas-related incidents and a reasonable estimate of any loss cannot be made, but they could have a material adverse effect on Consumers’ results of operations, financial condition, or liquidity, and could subject Consumers’ gas utility to increased regulatory scrutiny.
Consumers Electric and Gas Utility Contingencies
Electric and Gas Staking: In June 2019, the MPSC ordered Consumers to show cause as to why it should not be found in violation of the MISS DIG Act. The MPSC alleges that Consumers violated the law by failing to respond in a timely manner to over 20,000 requests to mark the location of underground facilities in April and May 2019 and only partially responding to others. The law provides the MPSC with discretion in setting fines for violations, if any; however, the fines cannot exceed $5,000 per violation. An order by the MPSC in this proceeding is not expected until mid-2020. Consumers has resolved the backlog of staking requests. Consumers cannot predict the outcome of this matter, but it could be subject to regulatory penalties that have a material adverse effect on Consumers’ results of operations, financial condition, or liquidity, and Consumers could be subject to increased regulatory scrutiny.
Guarantees
Presented in the following table are CMS Energy’s and Consumers’ guarantees at June 30, 2019:
In Millions
 
Guarantee Description
Issue Date
Expiration Date
Maximum Obligation
 
Carrying Amount
 
CMS Energy, including Consumers
 
 
 
 
 
 
 
 
Indemnity obligations from stock and asset sale agreements1
 
various
 
indefinite
 
$
153

 
$
2

Guarantees2
 
various
 
indefinite
 
36

 

Consumers
 
 
 
 
 
 
 
 
Guarantee2
 
July 2011
 
indefinite
 
$
30

 
$

1 
These obligations arose from stock and asset sale agreements under which CMS Energy or a subsidiary of CMS Energy indemnified the purchaser for losses resulting from various matters, primarily claims related to taxes. CMS Energy believes the likelihood of material loss to be remote for the indemnity obligations not recorded as liabilities.
2 
At Consumers, this obligation comprises a guarantee provided to the U.S. Department of Energy in connection with a settlement agreement regarding damages resulting from the department’s failure to accept spent nuclear fuel from nuclear power plants formerly owned by Consumers. At CMS Energy, the guarantee obligations comprise Consumers’ guarantee to the U.S. Department of Energy and CMS Energy’s 1994 guarantee of non‑recourse revenue bonds issued by Genesee.
Additionally, in the normal course of business, CMS Energy, Consumers, and certain other subsidiaries of CMS Energy have entered into various agreements containing tax and other indemnity provisions for which they are unable to estimate the maximum potential obligation. The carrying value of these indemnity obligations is $1 million. CMS Energy and Consumers consider the likelihood that they would be required to perform or incur substantial losses related to these indemnities to be remote.
Other Contingencies
In addition to the matters disclosed in this Note and Note 2, Regulatory Matters, there are certain other lawsuits and administrative proceedings before various courts and governmental agencies, as well as unasserted claims that may result in such proceedings, arising in the ordinary course of business to which CMS Energy, Consumers, and certain other subsidiaries of CMS Energy are parties. These other lawsuits, proceedings, and unasserted claims may involve personal injury, property damage, contracts, environmental matters, federal and state taxes, rates, licensing, employment, and other matters. Further,
CMS Energy and Consumers occasionally self‑report certain regulatory non‑compliance matters that may or may not eventually result in administrative proceedings. CMS Energy and Consumers believe that the outcome of any one of these proceedings and potential claims will not have a material negative effect on their consolidated results of operations, financial condition, or liquidity.
v3.19.2
Financings and Capitalization
6 Months Ended
Jun. 30, 2019
Debt Instrument [Line Items]  
Financings and Capitalization Financings and Capitalization
Financings: Presented in the following table is a summary of major long‑term debt transactions during the six months ended June 30, 2019:
 
Principal
 (In Millions)
 
Interest Rate

Issue/Retirement
Date
Maturity Date
Debt issuances
 
 
 
 
 
CMS Energy, parent only
 
 
 
 
 
Term loan facility
 
$
300

variable

January 2019
December 2019
Junior subordinated notes1

630

5.875
%
February 2019
March 2079
Term loan facility2
 
165

variable

June 2019
June 2020
Total CMS Energy, parent only
 
$
1,095

 
 
 
Consumers
 
 
 
 
 
First mortgage bonds
 
$
300

3.750
%
May 2019
February 2050
Total Consumers
 
$
300

 
 
 
Total CMS Energy
 
$
1,395

 
 
 
Debt retirements
 
 
 
 
 
CMS Energy, parent only
 
 
 
 
 
Term loan facility
 
$
300

variable

February 2019
December 2019
Term loan facility
 
180

variable

February 2019
April 2019
Total CMS Energy, parent only
 
$
480

 
 
 
Consumers
 
 
 
 
 
First mortgage bonds 
 
$
300

5.650
%
May 2019
April 2020
Total Consumers
 
$
300

 
 
 
Total CMS Energy
 
$
780

 
 
 
1 
These unsecured obligations rank subordinate and junior in right of payment to all of CMS Energy’s existing and future senior indebtedness.
2 
Outstanding borrowings bear interest at an annual rate of LIBOR plus 0.500 percent (2.845 percent at June 30, 2019).
Revolving Credit Facilities: The following revolving credit facilities with banks were available at June 30, 2019:
In Millions
 
Expiration Date
Amount of Facility
 
Amount Borrowed
 
Letters of Credit Outstanding
 
Amount Available
 
CMS Energy, parent only
 
 
 
 
 
 
 
 
June 5, 2023
 
$
550

 
$

 
$
2

 
$
548

CMS Enterprises, including subsidiaries
 
 
 
 
 
 
 
 
September 30, 20251
 
$
18

 
$

 
$
8

 
$
10

Consumers2
 
 
 
 
 
 
 
 
June 5, 2023
 
$
850

 
$

 
$
7

 
$
843

November 23, 2020
 
250

 

 
15

 
235

September 9, 20193
 
30

 

 
30

 


1 
Under this facility, $8 million is available solely for the purpose of issuing letters of credit. Obligations under this facility are secured by the collateral accounts with the lending bank.
2 
Obligations under these facilities are secured by first mortgage bonds of Consumers.
3 
In July 2019, Consumers amended this revolving credit facility by extending the expiration date to April 2022.
Short‑term Borrowings: Under Consumers’ commercial paper program, Consumers may issue, in one or more placements, commercial paper notes with maturities of up to 365 days and that bear interest at fixed or floating rates. These issuances are supported by Consumers’ revolving credit facilities and may have an aggregate principal amount outstanding of up to $500 million. While the amount of outstanding commercial paper does not reduce the available capacity of the revolving credit facilities, Consumers does not intend to issue commercial paper in an amount exceeding the available capacity of the facilities. At June 30, 2019, there were no commercial paper notes outstanding under this program.
Dividend Restrictions: At June 30, 2019, payment of dividends by CMS Energy on its common stock was limited to $4.9 billion under provisions of the Michigan Business Corporation Act of 1972.
Under the provisions of its articles of incorporation, at June 30, 2019, Consumers had $1.3 billion of unrestricted retained earnings available to pay dividends on its common stock to CMS Energy. Provisions of the Federal Power Act and the Natural Gas Act appear to restrict dividends payable by Consumers to the amount of Consumers’ retained earnings. Several decisions from FERC suggest that, under a variety of circumstances, dividends from Consumers on its common stock would not be limited to amounts in Consumers’ retained earnings. Any decision by Consumers to pay dividends on its common stock in excess of retained earnings would be based on specific facts and circumstances and would be subject to a formal regulatory filing process.
For the six months ended June 30, 2019, Consumers paid $272 million in dividends on its common stock to CMS Energy.
Issuance of Common Stock: In 2018, CMS Energy entered into an equity offering program under which it may sell, from time to time, shares of CMS Energy common stock having an aggregate sales price of up to $250 million. Under this program, CMS Energy may sell its common stock in privately negotiated transactions, in “at the market” offerings, through forward sales transactions or otherwise. CMS Energy has entered into forward sales contracts having an aggregate sales price of $250 million. Presented in the following table are details of these contracts:
Contract Date
Maturity Date
Number of Shares

Initial Forward Price Per Share
 
November 16, 2018
May 16, 2020
2,017,783

 
$
49.06

November 20, 2018
May 20, 2020
777,899

 
50.91

February 21, 2019
August 21, 2020
2,083,340

 
52.27


These contracts allow CMS Energy to either physically settle the contracts by issuing shares of its common stock at the then‑applicable forward sale price specified by the agreement or net settle the contracts through the delivery or receipt of cash or shares. CMS Energy may settle the contracts at any time through their maturity dates, and presently intends to physically settle the contracts by delivering shares of its common stock.
The initial forward price in the forward equity sale contracts includes a deduction for commissions and will be adjusted on a daily basis over the term based on an interest rate factor and decreased on certain dates by certain predetermined amounts to reflect expected dividend payments.
No amounts have or will be recorded on CMS Energy’s consolidated balance sheets until settlements of the forward equity sale contracts occur. If CMS Energy had elected to net share settle the contracts as of June 30, 2019, CMS Energy would have been required to deliver 621,923 shares.
Consumers Energy Company  
Debt Instrument [Line Items]  
Financings and Capitalization Financings and Capitalization
Financings: Presented in the following table is a summary of major long‑term debt transactions during the six months ended June 30, 2019:
 
Principal
 (In Millions)
 
Interest Rate

Issue/Retirement
Date
Maturity Date
Debt issuances
 
 
 
 
 
CMS Energy, parent only
 
 
 
 
 
Term loan facility
 
$
300

variable

January 2019
December 2019
Junior subordinated notes1

630

5.875
%
February 2019
March 2079
Term loan facility2
 
165

variable

June 2019
June 2020
Total CMS Energy, parent only
 
$
1,095

 
 
 
Consumers
 
 
 
 
 
First mortgage bonds
 
$
300

3.750
%
May 2019
February 2050
Total Consumers
 
$
300

 
 
 
Total CMS Energy
 
$
1,395

 
 
 
Debt retirements
 
 
 
 
 
CMS Energy, parent only
 
 
 
 
 
Term loan facility
 
$
300

variable

February 2019
December 2019
Term loan facility
 
180

variable

February 2019
April 2019
Total CMS Energy, parent only
 
$
480

 
 
 
Consumers
 
 
 
 
 
First mortgage bonds 
 
$
300

5.650
%
May 2019
April 2020
Total Consumers
 
$
300

 
 
 
Total CMS Energy
 
$
780

 
 
 
1 
These unsecured obligations rank subordinate and junior in right of payment to all of CMS Energy’s existing and future senior indebtedness.
2 
Outstanding borrowings bear interest at an annual rate of LIBOR plus 0.500 percent (2.845 percent at June 30, 2019).
Revolving Credit Facilities: The following revolving credit facilities with banks were available at June 30, 2019:
In Millions
 
Expiration Date
Amount of Facility
 
Amount Borrowed
 
Letters of Credit Outstanding
 
Amount Available
 
CMS Energy, parent only
 
 
 
 
 
 
 
 
June 5, 2023
 
$
550

 
$

 
$
2

 
$
548

CMS Enterprises, including subsidiaries
 
 
 
 
 
 
 
 
September 30, 20251
 
$
18

 
$

 
$
8

 
$
10

Consumers2
 
 
 
 
 
 
 
 
June 5, 2023
 
$
850

 
$

 
$
7

 
$
843

November 23, 2020
 
250

 

 
15

 
235

September 9, 20193
 
30

 

 
30

 


1 
Under this facility, $8 million is available solely for the purpose of issuing letters of credit. Obligations under this facility are secured by the collateral accounts with the lending bank.
2 
Obligations under these facilities are secured by first mortgage bonds of Consumers.
3 
In July 2019, Consumers amended this revolving credit facility by extending the expiration date to April 2022.
Short‑term Borrowings: Under Consumers’ commercial paper program, Consumers may issue, in one or more placements, commercial paper notes with maturities of up to 365 days and that bear interest at fixed or floating rates. These issuances are supported by Consumers’ revolving credit facilities and may have an aggregate principal amount outstanding of up to $500 million. While the amount of outstanding commercial paper does not reduce the available capacity of the revolving credit facilities, Consumers does not intend to issue commercial paper in an amount exceeding the available capacity of the facilities. At June 30, 2019, there were no commercial paper notes outstanding under this program.
Dividend Restrictions: At June 30, 2019, payment of dividends by CMS Energy on its common stock was limited to $4.9 billion under provisions of the Michigan Business Corporation Act of 1972.
Under the provisions of its articles of incorporation, at June 30, 2019, Consumers had $1.3 billion of unrestricted retained earnings available to pay dividends on its common stock to CMS Energy. Provisions of the Federal Power Act and the Natural Gas Act appear to restrict dividends payable by Consumers to the amount of Consumers’ retained earnings. Several decisions from FERC suggest that, under a variety of circumstances, dividends from Consumers on its common stock would not be limited to amounts in Consumers’ retained earnings. Any decision by Consumers to pay dividends on its common stock in excess of retained earnings would be based on specific facts and circumstances and would be subject to a formal regulatory filing process.
For the six months ended June 30, 2019, Consumers paid $272 million in dividends on its common stock to CMS Energy.
Issuance of Common Stock: In 2018, CMS Energy entered into an equity offering program under which it may sell, from time to time, shares of CMS Energy common stock having an aggregate sales price of up to $250 million. Under this program, CMS Energy may sell its common stock in privately negotiated transactions, in “at the market” offerings, through forward sales transactions or otherwise. CMS Energy has entered into forward sales contracts having an aggregate sales price of $250 million. Presented in the following table are details of these contracts:
Contract Date
Maturity Date
Number of Shares

Initial Forward Price Per Share
 
November 16, 2018
May 16, 2020
2,017,783

 
$
49.06

November 20, 2018
May 20, 2020
777,899

 
50.91

February 21, 2019
August 21, 2020
2,083,340

 
52.27


These contracts allow CMS Energy to either physically settle the contracts by issuing shares of its common stock at the then‑applicable forward sale price specified by the agreement or net settle the contracts through the delivery or receipt of cash or shares. CMS Energy may settle the contracts at any time through their maturity dates, and presently intends to physically settle the contracts by delivering shares of its common stock.
The initial forward price in the forward equity sale contracts includes a deduction for commissions and will be adjusted on a daily basis over the term based on an interest rate factor and decreased on certain dates by certain predetermined amounts to reflect expected dividend payments.
No amounts have or will be recorded on CMS Energy’s consolidated balance sheets until settlements of the forward equity sale contracts occur. If CMS Energy had elected to net share settle the contracts as of June 30, 2019, CMS Energy would have been required to deliver 621,923 shares.
v3.19.2
Fair Value Measurements
6 Months Ended
Jun. 30, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Fair Value Measurements Fair Value Measurements
Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. When measuring fair value, CMS Energy and Consumers are required to incorporate all assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. A fair value hierarchy prioritizes inputs used to measure fair value according to their observability in the market. The three levels of the fair value hierarchy are as follows:
Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 inputs are observable, market‑based inputs, other than Level 1 prices. Level 2 inputs may include quoted prices for similar assets or liabilities in active markets, quoted prices in inactive markets, and inputs derived from or corroborated by observable market data.