CMS ENERGY CORP, 10-K filed on 2/5/2019
Annual Report
v3.10.0.1
Document And Entity Information - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2018
Jan. 14, 2019
Jun. 30, 2018
Document Information [Line Items]      
Entity Registrant Name CMS Energy Corporation    
Trading Symbol cms    
Entity Central Index Key 0000811156    
Current Fiscal Year End Date --12-31    
Entity Filer Category Large Accelerated Filer    
Entity Emerging Growth Company false    
Entity Small Business false    
Entity Shell Company false    
Entity Well-known Seasoned Issuer Yes    
Entity Voluntary Filer No    
Entity Current Reporting Status Yes    
Document Type 10-K    
Document Period End Date Dec. 31, 2018    
Document Fiscal Year Focus 2018    
Document Fiscal Period Focus FY    
Amendment Flag false    
Entity Public Float     $ 13,332
Entity Common Stock, Shares Outstanding   283,400,105  
Consumers Energy Company      
Document Information [Line Items]      
Entity Registrant Name Consumers Energy Company    
Entity Central Index Key 0000201533    
Entity Filer Category Non-accelerated Filer    
Entity Common Stock, Shares Outstanding   84,108,789  
v3.10.0.1
Consolidated Statements Of Income - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Operating Revenue $ 6,873 $ 6,583 $ 6,399
Operating Expenses      
Fuel for electric generation 528 505 499
Purchased power – related parties 81 86 86
Maintenance and other operating expenses 1,417 1,236 1,248
Depreciation and amortization 933 881 811
General taxes 303 284 281
Total operating expenses 5,711 5,245 5,143
Operating Income 1,162 1,338 1,256
Other Income (Expense)      
Interest income 11 12 6
Allowance for equity funds used during construction 6 5 12
Income from equity method investees 9 15 13
Nonoperating retirement benefits, net 90 24 41
Other income 2 6 8
Other expense (48) (76) (75)
Total other income (expense) 70 (14) 5
Interest Charges      
Interest on long-term debt 412 406 411
Other interest expense 49 34 29
Allowance for borrowed funds used during construction (3) (2) (5)
Total interest charges 458 438 435
Income Before Income Taxes 774 886 826
Income Tax Expense 115 424 273
Net Income 659 462 553
Income Attributable to Noncontrolling Interests 2 2 2
Net Income Available to Common Stockholders $ 657 $ 460 $ 551
Basic earnings per average common share (in dollars per share) $ 2.33 $ 1.64 $ 1.99
Diluted earnings per average common share (in dollars per share) $ 2.32 $ 1.64 $ 1.98
Consumers Energy Company      
Operating Revenue $ 6,464 $ 6,222 $ 6,064
Operating Expenses      
Fuel for electric generation 407 398 393
Purchased and interchange power 1,587 1,491 1,486
Purchased power – related parties 83 90 88
Purchased power – related parties 83 90 88
Cost of gas sold 819 730 693
Maintenance and other operating expenses 1,287 1,113 1,127
Depreciation and amortization 921 872 803
Depreciation and amortization 921 872 803
General taxes 295 276 277
Operating Income 1,065 1,252 1,197
Total operating expenses 5,399 4,970 4,867
Other Income (Expense)      
Interest income 8 9 4
Interest and dividend income – related parties 2 1 1
Allowance for equity funds used during construction 6 5 12
Nonoperating retirement benefits, net 83 21 37
Other income 2 17 8
Other expense (30) (58) (55)
Total other income (expense) 71 (5) 7
Interest Charges      
Interest on long-term debt 276 263 261
Other interest expense 16 15 12
Allowance for borrowed funds used during construction (3) (2) (5)
Total interest charges 289 276 268
Income Before Income Taxes 847 971 936
Income Tax Expense 142 339 320
Net Income 705 632 616
Preferred Stock Dividends 2 2 2
Net Income Available to Common Stockholders 703 630 614
Purchased and interchange power      
Operating Expenses      
Cost of goods and services sold 1,613 1,503 1,508
Cost of gas sold      
Operating Expenses      
Cost of goods and services sold $ 836 $ 750 $ 710
v3.10.0.1
Consolidated Statements Of Comprehensive Income - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Net Income $ 659 $ 462 $ 553
Retirement Benefits Liability      
Net loss arising during the period, net of tax (4) (5) (8)
Prior service credit adjustment, net of tax (1) 4 0
Amortization of net actuarial loss 4 2 2
Amortization of prior service credit, net of tax (1) (1) (1)
Investments      
Unrealized gain on investments 0 0 1
Other-than-temporary impairment included in net income, net of tax 0 0 3
Derivatives      
Unrealized loss on derivative instruments, net of tax of $- for all periods (2) 0 0
Other Comprehensive Loss (2) 0 (3)
Comprehensive Income 657 462 550
Comprehensive Income Attributable to Noncontrolling Interests 2 2 2
Comprehensive Income Attributable to CMS Energy 655 460 548
Consumers Energy Company      
Net Income 705 632 616
Retirement Benefits Liability      
Net loss arising during the period, net of tax 6 (4) (3)
Amortization of net actuarial loss 2 1 1
Investments      
Unrealized gain on investments (1) 3 3
Reclassification adjustments included in net income 1 (9) 0
Other-than-temporary impairment included in net income, net of tax 0 0 2
Derivatives      
Other Comprehensive Loss 8 (9) 3
Comprehensive Income Attributable to CMS Energy $ 713 $ 623 $ 619
v3.10.0.1
Consolidated Statements Of Comprehensive Income (Parenthetical) - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Net loss arising during the period TAX $ (1) $ (4) $ (5)
Prior service credit adjustment TAX 0 3 0
Amortization of net actuarial loss TAX 1 1 0
Amortization of prior service credit TAX (1) 0 0
Unrealized gain on investments TAX 0 0 0
Other-than-temporary impairment included in net income TAX 0 0 2
Unrealized loss on derivative instruments, TAX 0 0 0
Consumers Energy Company      
Net loss arising during the period TAX 2 (1) (1)
Amortization of net actuarial loss TAX 0 0 0
Unrealized gain on investments TAX 0 1 2
Reclassification adjustments included in net income TAX 0 (6) 0
Other-than-temporary impairment included in net income TAX $ 0 $ 0 $ 2
v3.10.0.1
Consolidated Statements Of Cash Flows - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Cash Flows from Operating Activities      
Net Income $ 659 $ 462 $ 553
Adjustments to reconcile net income to net cash provided by operating activities      
Depreciation and amortization 933 881 811
Deferred income taxes and investment tax credit 182 417 264
Bad debt expense 54 49 50
Other non-cash operating activities and reconciling adjustments 22 82 52
Postretirement benefits contributions (252) (12) (108)
Cash provided by (used in) changes in assets and liabilities      
Accounts and notes receivable and accrued revenue 15 (66) (155)
Inventories 14 (46) 146
Accounts payable and accrued rate refunds 22 49 59
Other current and non-current assets and liabilities 54 (111) (43)
Net cash provided by operating activities 1,703 1,705 1,629
Cash Flows from Investing Activities      
Capital expenditures (excludes assets placed under capital lease) (2,074) (1,665) (1,672)
Increase in EnerBank notes receivable (307) (138) (136)
Purchase of notes receivable by EnerBank (225) 0 0
Proceeds from DB SERP investments 146 0 0
Proceeds from the sale of EnerBank notes receivable 0 50 0
Cost to retire property and other investing activities (146) (115) (107)
Net cash used in investing activities (2,606) (1,868) (1,915)
Cash Flows from Financing Activities      
Proceeds from issuance of debt 2,767 1,633 1,049
Retirement of debt (1,870) (980) (728)
Increase in EnerBank certificates of deposit 513 47 100
Increase (decrease) in notes payable (73) (228)  
Increase (decrease) in notes payable     149
Issuance of common stock 41 83 72
Payment of dividends on common and preferred stock (407) (377) (347)
Debt prepayment costs (36) (22) (18)
Payment of capital lease obligations and other financing costs (61) (46) (22)
Net cash provided by financing activities 874 110 255
Net Decrease in Cash and Cash Equivalents, Including Restricted Amounts (29) (53) (31)
Cash and Cash Equivalents, Including Restricted Amounts, Beginning of Period 204 257 288
Cash and Cash Equivalents, Including Restricted Amounts, End of Period 175 204 257
Cash transactions      
Interest paid (net of amounts capitalized) 458 418 427
Income taxes paid (refunds received), net (123) 5 32
Non-cash transactions      
Capital expenditures not paid 158 172 138
Note receivable recorded for future refund of use taxes paid and capitalized 0 0 29
Other assets placed under capital lease 0 3 13
Consumers Energy Company      
Cash Flows from Operating Activities      
Net Income 705 632 616
Adjustments to reconcile net income to net cash provided by operating activities      
Depreciation and amortization 921 872 803
Deferred income taxes and investment tax credit 123 163 289
Bad debt expense   29 31
Other non-cash operating activities and reconciling adjustments 13 59 25
Postretirement benefits contributions (242) (8) (98)
Cash provided by (used in) changes in assets and liabilities      
Accounts and notes receivable and accrued revenue (26) (63) (138)
Inventories 15 (45) 145
Accounts payable and accrued rate refunds 12 43 57
Other current and non-current assets and liabilities (101) 33 (49)
Net cash provided by operating activities 1,449 1,715 1,681
Cash Flows from Investing Activities      
Capital expenditures (excludes assets placed under capital lease) (1,822) (1,632) (1,656)
DB SERP investment in note receivable – related party (106) 0 0
Proceeds from DB SERP investments 106 0 0
Cost to retire property and other investing activities (149) (119) (112)
Net cash used in investing activities (1,971) (1,751) (1,768)
Cash Flows from Financing Activities      
Proceeds from issuance of debt 2,106 834 446
Retirement of debt (1,193) (555) (198)
Increase (decrease) in notes payable (73) (228)  
Increase (decrease) in notes payable     149
Stockholder contribution 250 450 275
Payment of dividends on common and preferred stock (533) (524) (501)
Debt prepayment costs (20) (4) 0
Payment of capital lease obligations and other financing costs (24) (24) (3)
Net cash provided by financing activities 513 (51) 168
Net Decrease in Cash and Cash Equivalents, Including Restricted Amounts (9) (87) 81
Cash and Cash Equivalents, Including Restricted Amounts, Beginning of Period 65 152 71
Cash and Cash Equivalents, Including Restricted Amounts, End of Period 56 65 152
Cash transactions      
Interest paid (net of amounts capitalized) 287 266 256
Income taxes paid (refunds received), net 156 (1) 50
Non-cash transactions      
Capital expenditures not paid 143 160 127
Note receivable recorded for future refund of use taxes paid and capitalized 0 0 29
Other assets placed under capital lease $ 0 $ 3 $ 13
v3.10.0.1
Consolidated Balance Sheets - USD ($)
$ in Millions
Dec. 31, 2018
Dec. 31, 2017
Current Assets    
Cash and cash equivalents $ 153 $ 182
Restricted cash and cash equivalents 21 17
Accounts receivable and accrued revenue, less allowances of $20 in both periods 964 1,032
Notes receivable, less allowances of $24 in 2018 and $20 in 2017 233 198
Notes receivable held for sale 0 2
Accounts receivable – related parties 14 12
Accrued gas revenue 16 0
Inventories at average cost    
Gas in underground storage 450 458
Materials and supplies 143 133
Generating plant fuel stock 57 81
Deferred property taxes 279 257
Regulatory assets 37 20
Prepayments and other current assets 101 83
Total current assets 2,468 2,475
Plant, Property, and Equipment    
Plant, property, and equipment, gross 24,400 22,506
Less accumulated depreciation and amortization 7,037 6,510
Plant, property, and equipment, net 17,363 15,996
Construction work in progress 763 765
Total plant, property, and equipment 18,126 16,761
Other Non-current Assets    
Regulatory assets 1,743 1,764
Accounts and notes receivable 1,645 1,187
Investments 69 64
Other 478 799
Total other non-current assets 3,935 3,814
Total Assets 24,529 23,050
Current Liabilities    
Current portion of long-term debt, capital leases, and financing obligation 996 1,103
Notes payable 97 170
Accounts payable 723 725
Accounts payable – related parties 10 15
Accrued rate refunds 4 33
Accrued interest 94 103
Accrued taxes 398 360
Regulatory liabilities 155 80
Other current liabilities 147 195
Total current liabilities 2,624 2,784
Non-current Liabilities    
Long-term debt 10,615 9,123
Non-current portion of capital leases and financing obligation 69 91
Regulatory liabilities 3,681 3,715
Postretirement benefits 436 766
Asset retirement obligations 432 430
Deferred investment tax credit 99 87
Deferred income taxes 1,487 1,269
Other non-current liabilities 294 307
Total non-current liabilities 17,113 15,788
Commitments and Contingencies
Common stockholders’ equity    
Common stock, authorized 350.0 shares; outstanding 283.4 shares in 2018 and 281.6 shares in 2017 3 3
Other paid-in capital 5,088 5,019
Accumulated other comprehensive loss (65) (50)
Accumulated deficit (271) (531)
Total common stockholders’ equity 4,755 4,441
Noncontrolling interests 37 37
Total equity 4,792 4,478
Total Liabilities and Equity 24,529 23,050
Consumers Energy Company    
Current Assets    
Cash and cash equivalents 39 44
Restricted cash and cash equivalents 17 17
Accounts receivable and accrued revenue, less allowances of $20 in both periods 855 885
Notes receivable, less allowances of $24 in 2018 and $20 in 2017 0 17
Accounts receivable – related parties 15 2
Accrued gas revenue 16 0
Inventories at average cost    
Gas in underground storage 450 458
Materials and supplies 137 128
Generating plant fuel stock 52 76
Deferred property taxes 279 257
Regulatory assets 37 20
Prepayments and other current assets 83 71
Total current assets 1,980 1,975
Plant, Property, and Equipment    
Plant, property, and equipment, gross 23,963 22,318
Less accumulated depreciation and amortization 6,958 6,441
Plant, property, and equipment, net 17,005 15,877
Construction work in progress 756 753
Total plant, property, and equipment 17,761 16,630
Other Non-current Assets    
Regulatory assets 1,743 1,764
Accounts and notes receivable 27 22
Accounts and notes receivable – related parties 104 0
Other 410 708
Total other non-current assets 2,284 2,494
Total Assets 22,025 21,099
Current Liabilities    
Current portion of long-term debt, capital leases, and financing obligation 48 365
Notes payable 97 170
Accounts payable 685 701
Accounts payable – related parties 14 19
Accrued rate refunds 4 33
Accrued interest 59 67
Accrued taxes 436 542
Regulatory liabilities 155 80
Other current liabilities 120 159
Total current liabilities 1,618 2,136
Non-current Liabilities    
Long-term debt 6,779 5,561
Non-current portion of capital leases and financing obligation 69 91
Regulatory liabilities 3,681 3,715
Postretirement benefits 392 711
Asset retirement obligations 428 429
Deferred investment tax credit 99 87
Deferred income taxes 1,809 1,640
Other non-current liabilities 230 241
Total non-current liabilities 13,487 12,475
Commitments and Contingencies
Common stockholders’ equity    
Common stock, authorized 350.0 shares; outstanding 283.4 shares in 2018 and 281.6 shares in 2017 841 841
Other paid-in capital 4,699 4,449
Accumulated other comprehensive loss (21) (12)
Accumulated deficit 1,364 1,173
Total common stockholders’ equity 6,883 6,451
Cumulative preferred stock, $4.50 series 37 37
Total equity 6,920 6,488
Total Liabilities and Equity $ 22,025 $ 21,099
v3.10.0.1
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Millions
Dec. 31, 2018
Dec. 31, 2017
Allowance for doubtful accounts receivable $ 20 $ 20
Allowances for doubtful notes receivable $ 24 $ 20
Common stock authorized (in shares) 350,000,000 350,000,000
Common stock outstanding (in shares) 283,400,000 281,600,000
Consumers Energy Company    
Allowance for doubtful accounts receivable $ 20 $ 20
Common stock authorized (in shares) 125,000,000 125,000,000
Common stock outstanding (in shares) 84,100,000 84,100,000
v3.10.0.1
Consolidated Statements Of Changes In Equity - USD ($)
shares in Thousands, $ in Millions
Total
Common Stock
Other Paid-in Capital
Accumulated Other Comprehensive Loss
Retirement benefits liability
Investments
Derivative instruments
Accumulated Deficit
Noncontrolling Interests
Consumers Energy Company
Consumers Energy Company
Common Stock
Consumers Energy Company
Other Paid-in Capital
Consumers Energy Company
Accumulated Other Comprehensive Loss
Consumers Energy Company
Retirement benefits liability
Consumers Energy Company
Investments
Consumers Energy Company
Accumulated Deficit
Consumers Energy Company
Cumulative Preferred Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                  
Cumulative effect of change in accounting principle         $ 0     $ 33           $ 0 $ 0 $ 0  
Total Equity at Beginning of Period at Dec. 31, 2015 $ 3,975 $ 3 $ 4,837 $ (47) (43) $ (4) $ 0 (855) $ 37 $ 5,546 $ 841 $ 3,724 $ (6) (19) 13 950 $ 37
Beginning of period (in shares) at Dec. 31, 2015   277,163                              
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                  
Common stock issued (in shares)   2,580                              
Common stock issued     90                            
Common stock repurchased (in shares)   (292)                              
Common stock repurchased     (11)                            
Common stock reissued (in shares)   0                              
Common stock reissued     0                            
Common stock reacquired (in shares)   (245)                              
Common stock reacquired     0                            
Stockholder contribution                       275          
Net income attributable to CMS Energy 551             551                  
Net loss arising during the period (8)       (8)         (3)       (3)      
Prior service credit adjustment 0       0                        
Amortization of net actuarial loss 2       2         1       1      
Amortization of prior service credit (1)       (1)                        
Reclassification adjustments included in net income                   0         0    
Unrealized gain on investments 1         1       3         3    
Other-than-temporary impairment included in net income 3         3       2         2    
Unrealized loss on derivative instruments 0           0                    
Net Income 553                 616           616  
Dividends declared on common stock               (345)               (499)  
Dividends declared on preferred stock                               (2)  
Income attributable to noncontrolling interests $ 2               2                
Distributions and other changes in noncontrolling interests                 (2)                
Dividends declared per common share (in dollars per share) $ 1.24                                
End of period (in shares) at Dec. 31, 2016   279,206                              
Total Equity at End of Period at Dec. 31, 2016 $ 4,290 $ 3 4,916 (50) (50) 0 0 (616) 37 5,939 841 3,999 (3) (21) 18 1,065 37
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                  
Cumulative effect of change in accounting principle         0     0           0 0 0  
Common stock issued (in shares)   2,492                              
Common stock issued     102                            
Common stock repurchased (in shares)   (317)                              
Common stock repurchased     (14)                            
Common stock reissued (in shares)   360                              
Common stock reissued     15                            
Common stock reacquired (in shares)   (94)                              
Common stock reacquired     0                            
Stockholder contribution                       450          
Net income attributable to CMS Energy 460             460                  
Net loss arising during the period (5)       (5)         (4)       (4)      
Prior service credit adjustment 4       4                        
Amortization of net actuarial loss 2       2         1       1      
Amortization of prior service credit (1)       (1)                        
Reclassification adjustments included in net income                   (9)         (9)    
Unrealized gain on investments 0         0       3         3    
Other-than-temporary impairment included in net income 0         0       0         0    
Unrealized loss on derivative instruments 0           0                    
Net Income 462                 $ 632           632  
Dividends declared on common stock               (375)               (522)  
Dividends declared on preferred stock                               (2)  
Income attributable to noncontrolling interests $ 2               2                
Distributions and other changes in noncontrolling interests                 (2)                
Dividends declared per common share (in dollars per share) $ 1.33                                
End of period (in shares) at Dec. 31, 2017 281,600 281,647               84,100              
Total Equity at End 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]                                  
Cumulative effect of change in accounting principle         (11)     8         (19) (5) (12) 19  
Common stock issued (in shares)   1,554                              
Common stock issued     59                            
Common stock repurchased (in shares)   (224)                              
Common stock repurchased     (10)                            
Common stock reissued (in shares)   423                              
Common stock reissued     20                            
Common stock reacquired (in shares)   (26)                              
Common stock reacquired     0                            
Stockholder contribution                       250          
Net income attributable to CMS Energy 657             657                  
Net loss arising during the period (4)       (4)         6       6      
Prior service credit adjustment (1)       (1)                        
Amortization of net actuarial loss 4       4         2       2      
Amortization of prior service credit (1)       (1)                        
Reclassification adjustments included in net income                   1         1    
Unrealized gain on investments 0         0       (1)         (1)    
Other-than-temporary impairment included in net income 0         0       0         0    
Unrealized loss on derivative instruments (2)           (2)                    
Net Income 659                 $ 705           705  
Dividends declared on common stock               (405)               (531)  
Dividends declared on preferred stock                               (2)  
Income attributable to noncontrolling interests $ 2               2                
Distributions and other changes in noncontrolling interests                 (2)                
Dividends declared per common share (in dollars per share) $ 1.43                                
End of period (in shares) at Dec. 31, 2018 283,400 283,374               84,100              
Total Equity at End of Period at Dec. 31, 2018 $ 4,792 $ 3 $ 5,088 $ (65) $ (63) $ 0 $ (2) $ (271) $ 37 $ 6,920 $ 841 $ 4,699 $ (21) $ (21) $ 0 $ 1,364 $ 37
v3.10.0.1
Significant Accounting Policies
12 Months Ended
Dec. 31, 2018
Significant Accounting Policies [Line Items]  
Significant Accounting Policies
Significant Accounting Policies
Principles of Consolidation: CMS Energy and Consumers prepare their consolidated financial statements in conformity with GAAP. CMS Energy’s consolidated financial statements comprise CMS Energy, Consumers, CMS Enterprises, and all other entities in which CMS Energy has a controlling financial interest or is the primary beneficiary. Consumers’ consolidated financial statements comprise Consumers and all other entities in which it has a controlling financial interest or is the primary beneficiary. CMS Energy uses the equity method of accounting for investments in companies and partnerships that are not consolidated, where they have significant influence over operations and financial policies but are not the primary beneficiary. CMS Energy and Consumers eliminate intercompany transactions and balances.
Use of Estimates: CMS Energy and Consumers are required to make estimates using assumptions that may affect reported amounts and disclosures. Actual results could differ from those estimates.
Contingencies: CMS Energy and Consumers record estimated liabilities for contingencies on their consolidated financial statements when it is probable that a liability has been incurred and when the amount of loss can be reasonably estimated. For environmental remediation projects in which the timing of estimated expenditures is considered reliably determinable, CMS Energy and Consumers record the liability at its net present value, using a discount rate equal to the interest rate on monetary assets that are essentially risk-free and have maturities comparable to that of the environmental liability. CMS Energy and Consumers expense legal fees as incurred; fees incurred but not yet billed are accrued based on estimates of work performed.
Debt Issuance Costs, Discounts, Premiums, and Refinancing Costs: Upon the issuance of long-term debt, CMS Energy and Consumers defer issuance costs, discounts, and premiums and amortize those amounts over the terms of the associated debt. Debt issuance costs are presented as a direct deduction from the carrying amount of long-term debt on the balance sheet. Upon the refinancing of long-term debt, Consumers, as a regulated entity, defers any remaining unamortized issuance costs, discounts, and premiums associated with the refinanced debt and amortizes those amounts over the term of the newly issued debt. For the non‑regulated portions of CMS Energy’s business, any remaining unamortized issuance costs, discounts, and premiums associated with extinguished debt are charged to earnings.
Derivative Instruments: In order to support ongoing operations, CMS Energy and Consumers enter into contracts for the future purchase and sale of various commodities, such as electricity, natural gas, and coal. These forward contracts are generally long-term in nature and result in physical delivery of the commodity at a contracted price. Most of these contracts are not subject to derivative accounting for one or more of the following reasons:
they do not have a notional amount (that is, a number of units specified in a derivative instrument, such as MWh of electricity or bcf of natural gas)
they qualify for the normal purchases and sales exception
there is not an active market for the commodity
Consumers also uses FTRs to manage price risk related to electricity transmission congestion. An FTR is a financial instrument that entitles its holder to receive compensation or requires its holder to remit payment for congestion-related transmission charges. Consumers accounts for FTRs as derivatives.
Additionally, CMS Energy uses interest rate swaps to manage its interest rate risk on certain long-term debt transactions.
CMS Energy and Consumers record derivative contracts that do not qualify for the normal purchases and sales exception at fair value on their consolidated balance sheets. Each reporting period, the resulting asset or liability is adjusted to reflect any change in the fair value of the contract. At Consumers, changes in fair value are deferred as regulatory assets or liabilities. At CMS Energy, the changes are reported in earnings or, if the derivative qualifies for cash flow hedge accounting, in AOCI. For details regarding CMS Energy’s and Consumers’ derivative instruments recorded at fair value, see Note 6, Fair Value Measurements.
EPS: CMS Energy calculates basic and diluted EPS using the weighted-average number of shares of common stock and dilutive potential common stock outstanding during the period. Potential common stock, for purposes of determining diluted EPS, includes the effects of nonvested stock awards and forward equity sales. CMS Energy computes the effect on potential common stock using the treasury stock method. Diluted EPS excludes the impact of antidilutive securities, which are those securities resulting in an increase in EPS or a decrease in loss per share. For EPS computations, see Note 15, Earnings Per Share—CMS Energy.
Impairment of Long-Lived Assets and Equity Method Investments: CMS Energy and Consumers perform tests of impairment if certain triggering events occur or if there has been a decline in value that may be other than temporary.
CMS Energy and Consumers evaluate long-lived assets held in use for impairment by calculating the undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. If the undiscounted future cash flows are less than the carrying amount, CMS Energy and Consumers recognize an impairment loss equal to the amount by which the carrying amount exceeds the fair value. CMS Energy and Consumers estimate the fair value of the asset using quoted market prices, market prices of similar assets, or discounted future cash flow analyses.
CMS Energy also assesses equity method investments for impairment whenever there has been a decline in value that is other than temporary. This assessment requires CMS Energy to determine the fair value of the equity method investment. CMS Energy determines fair value using valuation methodologies, including discounted cash flows, and assesses the ability of the investee to sustain an earnings capacity that justifies the carrying amount of the investment. CMS Energy records an impairment if the fair value is less than the carrying amount and the decline in value is considered to be other than temporary.
Investment Tax Credits: Consumers amortizes its investment tax credits over the life of the related property in accordance with regulatory treatment. CMS Energy’s non‑regulated businesses use the deferral method of accounting for investment tax credits. In 2018, CMS Enterprises qualified for $13 million of investment tax credits from placing solar generation projects in service. Under the deferral method, the book basis of the associated assets is reduced by the amount of the credit, resulting in lower depreciation expense over the life of the assets. Furthermore, the tax basis of the assets is reduced by 50 percent of the related credit, resulting in a net deferred tax asset. CMS Energy recognizes the tax benefit of this basis difference as a reduction to income tax expense in the year in which the plant reaches commercial operation.
Inventory: CMS Energy and Consumers use the weighted-average cost method for valuing working gas, recoverable base gas in underground storage facilities, and materials and supplies inventory. CMS Energy and Consumers also use this method for valuing coal inventory, and they classify these amounts as generating plant fuel stock on their consolidated balance sheets.
CMS Energy and Consumers account for RECs and emission allowances as inventory and use the weighted-average cost method to remove amounts from inventory. RECs and emission allowances are used to satisfy compliance obligations related to the generation of power. CMS Energy and Consumers classify these amounts within other assets on their consolidated balance sheets.
CMS Energy and Consumers evaluate inventory for impairment as required to ensure that its carrying value does not exceed the lower of cost or net realizable value.
MISO Transactions: MISO requires the submission of hourly day-ahead and real-time bids and offers for energy at locations across the MISO region. CMS Energy and Consumers account for MISO transactions on a net hourly basis in each of the real-time and day-ahead markets, netted across all MISO energy market locations. CMS Energy and Consumers record net hourly purchases in purchased and interchange power and net hourly sales in operating revenue on their consolidated statements of income. They record net billing adjustments upon receipt of settlement statements, record accruals for future net purchases and sales adjustments based on historical experience, and reconcile accruals to actual expenses and sales upon receipt of settlement statements.
Property Taxes: Property taxes are based on the taxable value of Consumers’ real and personal property assessed by local taxing authorities. Consumers records property tax expense over the fiscal year of the taxing authority for which the taxes are levied. The deferred property tax balance represents the amount of Consumers’ accrued property tax that will be recognized over future governmental fiscal periods.
Renewable Energy Grant: In 2013, Consumers received a renewable energy cash grant for Lake Winds® Energy Park under Section 1603 of the American Recovery and Reinvestment Tax Act of 2009. Upon receipt of the grant, Consumers recorded a regulatory liability, which Consumers is amortizing over the life of Lake Winds® Energy Park. Consumers presents the amortization as a reduction to maintenance and other operating expenses on its consolidated statements of income. Consumers recorded the deferred income taxes related to the grant as a reduction of the book basis of Lake Winds® Energy Park.
Other: For additional accounting policies, see:
Note 8, Notes Receivable
Note 9, Plant, Property, and Equipment
Note 11, Asset Retirement Obligations
Note 12, Retirement Benefits
Note 14, Income Taxes
Note 15, Earnings Per Share—CMS Energy
Note 16, Revenue
Note 18, Cash and Cash Equivalents
Consumers Energy Company  
Significant Accounting Policies [Line Items]  
Significant Accounting Policies
Significant Accounting Policies
Principles of Consolidation: CMS Energy and Consumers prepare their consolidated financial statements in conformity with GAAP. CMS Energy’s consolidated financial statements comprise CMS Energy, Consumers, CMS Enterprises, and all other entities in which CMS Energy has a controlling financial interest or is the primary beneficiary. Consumers’ consolidated financial statements comprise Consumers and all other entities in which it has a controlling financial interest or is the primary beneficiary. CMS Energy uses the equity method of accounting for investments in companies and partnerships that are not consolidated, where they have significant influence over operations and financial policies but are not the primary beneficiary. CMS Energy and Consumers eliminate intercompany transactions and balances.
Use of Estimates: CMS Energy and Consumers are required to make estimates using assumptions that may affect reported amounts and disclosures. Actual results could differ from those estimates.
Contingencies: CMS Energy and Consumers record estimated liabilities for contingencies on their consolidated financial statements when it is probable that a liability has been incurred and when the amount of loss can be reasonably estimated. For environmental remediation projects in which the timing of estimated expenditures is considered reliably determinable, CMS Energy and Consumers record the liability at its net present value, using a discount rate equal to the interest rate on monetary assets that are essentially risk-free and have maturities comparable to that of the environmental liability. CMS Energy and Consumers expense legal fees as incurred; fees incurred but not yet billed are accrued based on estimates of work performed.
Debt Issuance Costs, Discounts, Premiums, and Refinancing Costs: Upon the issuance of long-term debt, CMS Energy and Consumers defer issuance costs, discounts, and premiums and amortize those amounts over the terms of the associated debt. Debt issuance costs are presented as a direct deduction from the carrying amount of long-term debt on the balance sheet. Upon the refinancing of long-term debt, Consumers, as a regulated entity, defers any remaining unamortized issuance costs, discounts, and premiums associated with the refinanced debt and amortizes those amounts over the term of the newly issued debt. For the non‑regulated portions of CMS Energy’s business, any remaining unamortized issuance costs, discounts, and premiums associated with extinguished debt are charged to earnings.
Derivative Instruments: In order to support ongoing operations, CMS Energy and Consumers enter into contracts for the future purchase and sale of various commodities, such as electricity, natural gas, and coal. These forward contracts are generally long-term in nature and result in physical delivery of the commodity at a contracted price. Most of these contracts are not subject to derivative accounting for one or more of the following reasons:
they do not have a notional amount (that is, a number of units specified in a derivative instrument, such as MWh of electricity or bcf of natural gas)
they qualify for the normal purchases and sales exception
there is not an active market for the commodity
Consumers also uses FTRs to manage price risk related to electricity transmission congestion. An FTR is a financial instrument that entitles its holder to receive compensation or requires its holder to remit payment for congestion-related transmission charges. Consumers accounts for FTRs as derivatives.
Additionally, CMS Energy uses interest rate swaps to manage its interest rate risk on certain long-term debt transactions.
CMS Energy and Consumers record derivative contracts that do not qualify for the normal purchases and sales exception at fair value on their consolidated balance sheets. Each reporting period, the resulting asset or liability is adjusted to reflect any change in the fair value of the contract. At Consumers, changes in fair value are deferred as regulatory assets or liabilities. At CMS Energy, the changes are reported in earnings or, if the derivative qualifies for cash flow hedge accounting, in AOCI. For details regarding CMS Energy’s and Consumers’ derivative instruments recorded at fair value, see Note 6, Fair Value Measurements.
EPS: CMS Energy calculates basic and diluted EPS using the weighted-average number of shares of common stock and dilutive potential common stock outstanding during the period. Potential common stock, for purposes of determining diluted EPS, includes the effects of nonvested stock awards and forward equity sales. CMS Energy computes the effect on potential common stock using the treasury stock method. Diluted EPS excludes the impact of antidilutive securities, which are those securities resulting in an increase in EPS or a decrease in loss per share. For EPS computations, see Note 15, Earnings Per Share—CMS Energy.
Impairment of Long-Lived Assets and Equity Method Investments: CMS Energy and Consumers perform tests of impairment if certain triggering events occur or if there has been a decline in value that may be other than temporary.
CMS Energy and Consumers evaluate long-lived assets held in use for impairment by calculating the undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. If the undiscounted future cash flows are less than the carrying amount, CMS Energy and Consumers recognize an impairment loss equal to the amount by which the carrying amount exceeds the fair value. CMS Energy and Consumers estimate the fair value of the asset using quoted market prices, market prices of similar assets, or discounted future cash flow analyses.
CMS Energy also assesses equity method investments for impairment whenever there has been a decline in value that is other than temporary. This assessment requires CMS Energy to determine the fair value of the equity method investment. CMS Energy determines fair value using valuation methodologies, including discounted cash flows, and assesses the ability of the investee to sustain an earnings capacity that justifies the carrying amount of the investment. CMS Energy records an impairment if the fair value is less than the carrying amount and the decline in value is considered to be other than temporary.
Investment Tax Credits: Consumers amortizes its investment tax credits over the life of the related property in accordance with regulatory treatment. CMS Energy’s non‑regulated businesses use the deferral method of accounting for investment tax credits. In 2018, CMS Enterprises qualified for $13 million of investment tax credits from placing solar generation projects in service. Under the deferral method, the book basis of the associated assets is reduced by the amount of the credit, resulting in lower depreciation expense over the life of the assets. Furthermore, the tax basis of the assets is reduced by 50 percent of the related credit, resulting in a net deferred tax asset. CMS Energy recognizes the tax benefit of this basis difference as a reduction to income tax expense in the year in which the plant reaches commercial operation.
Inventory: CMS Energy and Consumers use the weighted-average cost method for valuing working gas, recoverable base gas in underground storage facilities, and materials and supplies inventory. CMS Energy and Consumers also use this method for valuing coal inventory, and they classify these amounts as generating plant fuel stock on their consolidated balance sheets.
CMS Energy and Consumers account for RECs and emission allowances as inventory and use the weighted-average cost method to remove amounts from inventory. RECs and emission allowances are used to satisfy compliance obligations related to the generation of power. CMS Energy and Consumers classify these amounts within other assets on their consolidated balance sheets.
CMS Energy and Consumers evaluate inventory for impairment as required to ensure that its carrying value does not exceed the lower of cost or net realizable value.
MISO Transactions: MISO requires the submission of hourly day-ahead and real-time bids and offers for energy at locations across the MISO region. CMS Energy and Consumers account for MISO transactions on a net hourly basis in each of the real-time and day-ahead markets, netted across all MISO energy market locations. CMS Energy and Consumers record net hourly purchases in purchased and interchange power and net hourly sales in operating revenue on their consolidated statements of income. They record net billing adjustments upon receipt of settlement statements, record accruals for future net purchases and sales adjustments based on historical experience, and reconcile accruals to actual expenses and sales upon receipt of settlement statements.
Property Taxes: Property taxes are based on the taxable value of Consumers’ real and personal property assessed by local taxing authorities. Consumers records property tax expense over the fiscal year of the taxing authority for which the taxes are levied. The deferred property tax balance represents the amount of Consumers’ accrued property tax that will be recognized over future governmental fiscal periods.
Renewable Energy Grant: In 2013, Consumers received a renewable energy cash grant for Lake Winds® Energy Park under Section 1603 of the American Recovery and Reinvestment Tax Act of 2009. Upon receipt of the grant, Consumers recorded a regulatory liability, which Consumers is amortizing over the life of Lake Winds® Energy Park. Consumers presents the amortization as a reduction to maintenance and other operating expenses on its consolidated statements of income. Consumers recorded the deferred income taxes related to the grant as a reduction of the book basis of Lake Winds® Energy Park.
Other: For additional accounting policies, see:
Note 8, Notes Receivable
Note 9, Plant, Property, and Equipment
Note 11, Asset Retirement Obligations
Note 12, Retirement Benefits
Note 14, Income Taxes
Note 15, Earnings Per Share—CMS Energy
Note 16, Revenue
Note 18, Cash and Cash Equivalents
v3.10.0.1
New Accounting Standards
12 Months Ended
Dec. 31, 2018
New Accounting Pronouncements or Change in Accounting Principle [Line Items]  
New Accounting Standards
New Accounting Standards
Implementation of New Accounting Standards
ASU 2014-09, Revenue from Contracts with Customers: This standard, which was effective on January 1, 2018 for CMS Energy and Consumers, provides new guidance for recognizing revenue from contracts with customers. A primary objective of the standard is to provide a single, comprehensive revenue recognition model that will be applied across entities, industries, and capital markets. The new guidance replaced most of the previous revenue recognition requirements in GAAP, although certain guidance specific to rate-regulated utilities was retained. CMS Energy and Consumers had the option to apply the standard retrospectively to all prior periods presented or retrospectively with the cumulative effect of the standard recorded as an adjustment to beginning retained earnings. They also had the option to apply the standard only to contracts existing on the effective date. CMS Energy and Consumers applied the standard retrospectively to contracts existing on the effective date, and recorded an immaterial cumulative-effect reduction to beginning retained earnings for certain contract costs that can no longer be deferred under the new guidance.
The implementation of this standard did not have a material impact on CMS Energy’s or Consumers’ consolidated net income, cash flows, or financial position. CMS Energy and Consumers did not identify any significant changes to their revenue recognition practices that were required by the new guidance, but in accordance with the standard, they have provided additional disclosures about their revenues in Note 16, Revenue.
ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities: This standard, which was effective on January 1, 2018 for CMS Energy and Consumers, is intended to improve the accounting for financial instruments. The standard requires investments in equity securities to be measured at fair value, with changes in fair value recognized in net income, except for certain investments such as those that qualify for equity-method accounting. The standard no longer permits unrealized gains and losses for certain equity investments to be recorded in AOCI. There are other targeted changes as well. Entities must apply the standard using a modified retrospective approach, with the cumulative effect of the standard recorded as an adjustment to beginning retained earnings.
The implementation of the standard had no impact on CMS Energy’s consolidated financial statements. In accordance with the standard, as of January 1, 2018, Consumers removed a $19 million unrealized gain and the associated deferred taxes on its investment in CMS Energy common stock from AOCI and recorded the gain in retained earnings. In January 2018, Consumers transferred substantially all of its shares in CMS Energy common stock to a related charitable foundation and, in accordance with this standard, recognized all unrealized gains and losses on its remaining shares in net income for the year ended December 31, 2018. The accounting treatment for this investment is reflected in Consumers’ consolidated financial statements only, and had no impact on CMS Energy’s consolidated financial statements. For further details on CMS Energy’s and Consumers’ investments in debt and equity securities, see Note 7, Financial Instruments.
ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income: This standard addresses the income tax effects stranded in AOCI as a result of the TCJA. Existing GAAP requires that the remeasurement of deferred tax assets and liabilities resulting from a change in tax laws or rates be presented in net income from continuing operations, even if the deferred taxes were associated with items that were originally recognized in AOCI. As a result, upon recognizing the effects of the TCJA, the tax effects of items in AOCI (referred to as stranded tax effects) no longer reflected the current income tax rate. To address this matter, this standard permits companies to reclassify to retained earnings the stranded tax effects of the TCJA. The standard is effective on January 1, 2019 for CMS Energy and Consumers, but early adoption is permitted. The new guidance is to be applied either in the period of adoption or retrospectively to each prior period in which the effect of the TCJA was recognized. CMS Energy and Consumers elected to adopt this standard early. Accordingly, as of January 1, 2018, CMS Energy reclassified $11 million of stranded tax effects from AOCI to retained earnings, which included $5 million reclassified at Consumers. At December 31, 2018, CMS Energy and Consumers did not have any material stranded tax effects remaining in AOCI.
New Accounting Standards Not Yet Effective
ASU 2016-02, Leases: This standard establishes a new accounting model for leases. The standard requires entities 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 are not recorded on the balance sheet under existing standards. The new guidance also amends the definition of a lease to require that a lessee control the use of a specified asset, and not simply control or take the output of the asset. On the statement of income, leases that meet existing capital lease criteria will generally be accounted for under a financing model, while operating leases will generally be accounted for under a straight-line expense model. The standard is effective on January 1, 2019 for CMS Energy and Consumers, but early adoption is permitted.
CMS Energy and Consumers did not adopt the standard early and will elect certain practical expedients permitted by the standard, under which they will not be required to perform lease assessments or reassessments for agreements existing on the effective date. They also will elect a transition method under which they will initially apply the standard on January 1, 2019, without adjusting amounts presented for prior periods. Under this method, the cumulative effect of applying the standard must be recorded as an adjustment to beginning retained earnings. Under the standard, CMS Energy and Consumers will recognize additional lease assets and liabilities on their consolidated balance sheets as of January 1, 2019 for their operating leases. CMS Energy and Consumers are finalizing their implementation of the standard and do not expect it to have a material impact on their consolidated net income or cash flows. See Note 10, Leases and Palisades Financing, for more information on CMS Energy’s and Consumers’ operating lease obligations.
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 2014-09, Revenue from Contracts with Customers: This standard, which was effective on January 1, 2018 for CMS Energy and Consumers, provides new guidance for recognizing revenue from contracts with customers. A primary objective of the standard is to provide a single, comprehensive revenue recognition model that will be applied across entities, industries, and capital markets. The new guidance replaced most of the previous revenue recognition requirements in GAAP, although certain guidance specific to rate-regulated utilities was retained. CMS Energy and Consumers had the option to apply the standard retrospectively to all prior periods presented or retrospectively with the cumulative effect of the standard recorded as an adjustment to beginning retained earnings. They also had the option to apply the standard only to contracts existing on the effective date. CMS Energy and Consumers applied the standard retrospectively to contracts existing on the effective date, and recorded an immaterial cumulative-effect reduction to beginning retained earnings for certain contract costs that can no longer be deferred under the new guidance.
The implementation of this standard did not have a material impact on CMS Energy’s or Consumers’ consolidated net income, cash flows, or financial position. CMS Energy and Consumers did not identify any significant changes to their revenue recognition practices that were required by the new guidance, but in accordance with the standard, they have provided additional disclosures about their revenues in Note 16, Revenue.
ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities: This standard, which was effective on January 1, 2018 for CMS Energy and Consumers, is intended to improve the accounting for financial instruments. The standard requires investments in equity securities to be measured at fair value, with changes in fair value recognized in net income, except for certain investments such as those that qualify for equity-method accounting. The standard no longer permits unrealized gains and losses for certain equity investments to be recorded in AOCI. There are other targeted changes as well. Entities must apply the standard using a modified retrospective approach, with the cumulative effect of the standard recorded as an adjustment to beginning retained earnings.
The implementation of the standard had no impact on CMS Energy’s consolidated financial statements. In accordance with the standard, as of January 1, 2018, Consumers removed a $19 million unrealized gain and the associated deferred taxes on its investment in CMS Energy common stock from AOCI and recorded the gain in retained earnings. In January 2018, Consumers transferred substantially all of its shares in CMS Energy common stock to a related charitable foundation and, in accordance with this standard, recognized all unrealized gains and losses on its remaining shares in net income for the year ended December 31, 2018. The accounting treatment for this investment is reflected in Consumers’ consolidated financial statements only, and had no impact on CMS Energy’s consolidated financial statements. For further details on CMS Energy’s and Consumers’ investments in debt and equity securities, see Note 7, Financial Instruments.
ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income: This standard addresses the income tax effects stranded in AOCI as a result of the TCJA. Existing GAAP requires that the remeasurement of deferred tax assets and liabilities resulting from a change in tax laws or rates be presented in net income from continuing operations, even if the deferred taxes were associated with items that were originally recognized in AOCI. As a result, upon recognizing the effects of the TCJA, the tax effects of items in AOCI (referred to as stranded tax effects) no longer reflected the current income tax rate. To address this matter, this standard permits companies to reclassify to retained earnings the stranded tax effects of the TCJA. The standard is effective on January 1, 2019 for CMS Energy and Consumers, but early adoption is permitted. The new guidance is to be applied either in the period of adoption or retrospectively to each prior period in which the effect of the TCJA was recognized. CMS Energy and Consumers elected to adopt this standard early. Accordingly, as of January 1, 2018, CMS Energy reclassified $11 million of stranded tax effects from AOCI to retained earnings, which included $5 million reclassified at Consumers. At December 31, 2018, CMS Energy and Consumers did not have any material stranded tax effects remaining in AOCI.
New Accounting Standards Not Yet Effective
ASU 2016-02, Leases: This standard establishes a new accounting model for leases. The standard requires entities 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 are not recorded on the balance sheet under existing standards. The new guidance also amends the definition of a lease to require that a lessee control the use of a specified asset, and not simply control or take the output of the asset. On the statement of income, leases that meet existing capital lease criteria will generally be accounted for under a financing model, while operating leases will generally be accounted for under a straight-line expense model. The standard is effective on January 1, 2019 for CMS Energy and Consumers, but early adoption is permitted.
CMS Energy and Consumers did not adopt the standard early and will elect certain practical expedients permitted by the standard, under which they will not be required to perform lease assessments or reassessments for agreements existing on the effective date. They also will elect a transition method under which they will initially apply the standard on January 1, 2019, without adjusting amounts presented for prior periods. Under this method, the cumulative effect of applying the standard must be recorded as an adjustment to beginning retained earnings. Under the standard, CMS Energy and Consumers will recognize additional lease assets and liabilities on their consolidated balance sheets as of January 1, 2019 for their operating leases. CMS Energy and Consumers are finalizing their implementation of the standard and do not expect it to have a material impact on their consolidated net income or cash flows. See Note 10, Leases and Palisades Financing, for more information on CMS Energy’s and Consumers’ operating lease obligations.
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.
v3.10.0.1
Regulatory Matters
12 Months Ended
Dec. 31, 2018
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 evidence supporting the recovery of Smart Energy investments, and other matters. Consumers is unable to predict the outcome of these appeals.
Regulatory Assets and Liabilities
Consumers is subject to the actions of the MPSC and FERC and therefore prepares its consolidated financial statements in accordance with the provisions of regulatory accounting. A utility must apply regulatory accounting when its rates are designed to recover specific costs of providing regulated services. Under regulatory accounting, Consumers records regulatory assets or liabilities for certain transactions that would have been treated as expense or revenue by non‑regulated businesses.
Presented in the following table are the regulatory assets and liabilities on Consumers’ consolidated balance sheets:
In Millions
 
December 31
End of Recovery
or Refund Period
2018
 
2017
 
Regulatory assets
 
 
 
 
 
 
Current
 
 
 
 
 
 
Energy waste reduction plan incentive1
 
2019
 
$
32

 
$
18

Other
 
2019
 
5

 
2

Total current regulatory assets
 
 
 
$
37

 
$
20

Non-current
 
 
 
 
 
 
Postretirement benefits2
 
various
 
$
1,028

 
$
1,028

Securitized costs3
 
2029
 
273

 
298

ARO4
 
various
 
175

 
161

MGP sites4
 
various
 
133

 
142

Unamortized loss on reacquired debt4
 
various
 
68

 
53

Energy waste reduction plan incentive1
 
2020
 
34

 
31

Energy waste reduction plan4
 
various
 
26

 
39

Gas storage inventory adjustments4
 
various
 
4

 
10

Other
 
various
 
2

 
2

Total non-current regulatory assets
 
 
 
$
1,743

 
$
1,764

Total regulatory assets
 
 
 
$
1,780

 
$
1,784

Regulatory liabilities
 
 
 
 
 
 
Current
 
 
 
 
 
 
TCJA reserve for refund
 
2019
 
$
98

 
$

Reserve for customer refunds
 
2019
 
36

 
25

Income taxes, net
 
2019
 
18

 
52

Other
 
2019
 
3

 
3

Total current regulatory liabilities
 
 
 
$
155

 
$
80

Non-current
 
 
 
 
 
 
Cost of removal
 
various
 
$
1,966

 
$
1,844

Income taxes, net
 
various
 
1,537

 
1,564

Renewable energy grant
 
2043
 
54

 
56

Renewable energy plan
 
2028
 
42

 
56

ARO
 
various
 
38

 
50

TCJA reserve for refund
 
various
 
35

 

Postretirement benefits
 
various
 

 
135

Other
 
various
 
9

 
10

Total non-current regulatory liabilities
 
 
 
$
3,681

 
$
3,715

Total regulatory liabilities
 
 
 
$
3,836

 
$
3,795

1 
These regulatory assets have arisen from an alternative revenue program and are not associated with incurred costs or capital investments. Therefore, the MPSC has provided for recovery without a return.
2 
This regulatory asset is offset partially by liabilities. The net amount is included in rate base, thereby providing a return.
3 
The MPSC has authorized a specific return on this regulatory asset.
4 
These regulatory assets represent incurred costs for which the MPSC has provided, or Consumers expects, recovery without a return on investment.
Regulatory Assets 
Energy Waste Reduction Plan Incentive: In December 2018, the MPSC approved a settlement agreement authorizing Consumers to collect $31 million during 2019 as an incentive for exceeding its statutory savings targets in 2017. Consumers recognized incentive revenue under this program of $31 million in 2017.
Consumers also exceeded its statutory savings targets in 2018, achieved certain other goals, and will request the MPSC’s approval to collect $34 million, the maximum performance incentive, in the energy waste reduction reconciliation to be filed in 2019. Consumers recognized incentive revenue under this program of $34 million in 2018.
Postretirement Benefits: As part of the ratemaking process, the MPSC allows Consumers to recover the costs of postretirement benefits. Accordingly, Consumers defers the net impact of actuarial losses and gains as well as prior service costs and credits associated with postretirement benefits as a regulatory asset or liability. The asset or liability will decrease as the deferred items are amortized and recognized as components of net periodic benefit cost. For details about the amortization periods, see Note 12, Retirement Benefits.
Securitized Costs: In 2013, the MPSC issued a securitization financing order authorizing Consumers to issue securitization bonds in order to finance the recovery of the remaining book value of seven smaller coal-fueled electric generating units that Consumers retired in 2016 and three smaller natural gas-fueled electric generating units that Consumers retired in 2015. Upon receipt of the MPSC’s order, Consumers removed the book value of the ten units from plant, property, and equipment and recorded this amount as a regulatory asset. Consumers is amortizing the regulatory asset over the life of the related securitization bonds, which it issued through a subsidiary in 2014. For additional details regarding the securitization bonds, see Note 5, Financings and Capitalization.
ARO: The recovery of the underlying asset investments and related removal and monitoring costs of recorded AROs is approved by the MPSC in depreciation rate cases. Consumers records a regulatory asset and a regulatory liability for timing differences between the recognition of AROs for financial reporting purposes and the recovery of these costs from customers. The recovery period approximates the useful life of the assets to be removed.
MGP Sites: Consumers is incurring environmental remediation and other response activity costs at 23 former MGP facilities. The MPSC allows Consumers to recover from its natural gas customers over a ten-year period the costs incurred to remediate the MGP sites.
Unamortized Loss on Reacquired Debt: Under regulatory accounting, any unamortized discount, premium, or expense related to debt redeemed with the proceeds of new debt is capitalized and amortized over the life of the new debt.
Energy Waste Reduction Plan: The MPSC allows Consumers to collect surcharges from customers to fund its energy waste reduction plan. The amount of spending incurred in excess of surcharges collected is recorded as a regulatory asset and amortized as surcharges are collected from customers over the plan period.
Gas Storage Inventory Adjustments: Consumers incurs inventory expenses related to the loss of gas from its natural gas storage fields. The MPSC allows Consumers to recover these costs from its natural gas customers over a five-year period.
Regulatory Liabilities
TCJA Reserve for Refund: In February 2018, the MPSC ordered Consumers to file various proceedings to determine the reduction in its electric and gas revenue requirements as a result of the TCJA. For further information on the various TCJA proceedings, see the Consumers Electric Utility and Gas UtilityTax Cuts and Jobs Act section below.
Reserve for Customer Refunds: The 2016 Energy Law eliminated utilities’ self-implementation of rates under general rate cases, but provided for more timely processing of general rate cases. Consumers filed an electric rate case in March 2017, prior to the effective date of that law, and as result was allowed to self-implement new energy rates in October 2017, subject to refund with interest and potential penalties. Consumers recognized revenue associated with self-implemented rates, but recorded a provision for revenue subject to refund because it considered it probable that it would be required to refund a portion of its self-implemented rates.
Income Taxes, Net: Consumers records regulatory assets and liabilities to reflect the difference between deferred income taxes recognized for financial reporting purposes and amounts previously reflected in Consumers’ rates. This net balance will decrease over the remaining life of the related temporary differences and flow through current income tax benefit. For additional details on deferred income taxes, see Note 14, Income Taxes.
At December 31, 2017, Consumers measured its deferred tax assets and liabilities using the 21 percent federal tax rate enacted in the TCJA. Due to the lower corporate tax rate, Consumers reduced its net deferred tax liabilities associated with its utility book-tax temporary differences by $1.6 billion and recorded an offsetting regulatory liability. For further information on Consumers’ proposal to return this to customers, see the Consumers Electric Utility and Gas UtilityTax Cuts and Jobs Act section below.
Cost of Removal: The MPSC allows Consumers to collect amounts from customers to fund future asset removal activities. This regulatory liability is reduced as costs of removal are incurred. The refund period of this regulatory liability approximates the useful life of the assets to be removed.
Renewable Energy Grant: In 2013, Consumers received a $69 million renewable energy grant for Lake Winds® Energy Park, which began operations in 2012. This grant reduces Consumers’ cost of complying with Michigan’s renewable portfolio standard and, accordingly, reduces the overall renewable energy surcharge to be collected from customers. The regulatory liability recorded for the grant will be amortized over the life of Lake Winds® Energy Park.
Renewable Energy Plan: Consumers has collected surcharges to fund its renewable energy plan. Amounts not yet spent under the plan are recorded as a regulatory liability, which is amortized as incremental costs are incurred to operate and depreciate Consumers’ renewable generation facilities and to purchase RECs under renewable energy purchase agreements. Incremental costs represent costs incurred in excess of amounts recovered through the PSCR process.
Consumers Electric Utility and Gas Utility
Tax Cuts and Jobs Act: The TCJA, which changed existing federal tax law and included numerous provisions that affect businesses, was signed into law in December 2017. In February 2018, the MPSC ordered Consumers to file various proceedings to determine the reduction in its electric and gas revenue requirements as a result of the TCJA. The MPSC also ordered Consumers to implement bill credits to reflect that reduction until customer rates are adjusted through Consumers’ general rate cases. Consumers filed the first of these proceedings in March 2018, requesting a $49 million reduction in its annual gas revenue requirement. The MPSC approved this reduction in June 2018, with credits to customer bills beginning in July 2018; this credit ended with the settlement of the gas rate case in August 2018. Consumers filed the second proceeding in April 2018, requesting a $113 million reduction in its annual electric revenue requirement. The MPSC approved this reduction in July 2018, with credits to customer bills beginning in August 2018; this credit ended with the settlement of the electric rate case in January 2019. These credits reduced rates prospectively for the impact of the TCJA but did not include potential refunds associated with Consumers’ remeasurement of its deferred income taxes.
Consumers filed two more proceedings to address amounts collected from customers during 2018 through the implementation of the first two proceedings. Consumers filed the first of these proceedings in August 2018, requesting to refund $31 million to gas customers over six months beginning in December 2018. The MPSC approved this refund in November 2018. Consumers filed the second proceeding in September 2018, requesting to refund $70 million to electric customers over six months beginning in January 2019. The MPSC approved this refund in December 2018. Consumers has recorded a current regulatory liability in an amount reflecting these approved refunds.
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. The application requested approval to begin returning $0.4 billion of net regulatory tax liabilities through rates to be determined in a future gas proceeding and $1.2 billion through the rates determined in Consumers’ next-filed 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 15 years.
In January 2018, Consumers began to reduce this net regulatory tax liability 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. For additional details on the remeasurement, see Note 14, Income Taxes.
Consumers Electric Utility
2017 Electric Rate Case: In March 2017, Consumers filed an application with the MPSC seeking an annual rate increase of $173 million, based on a 10.5 percent authorized return on equity. The filing requested authority to recover new investment in system reliability, environmental compliance, and technology enhancements. In September 2017, Consumers reduced its requested annual rate increase to $148 million. In October 2017, Consumers self-implemented an annual rate increase of $130 million, subject to refund with interest and potential penalties. The MPSC issued an order in March 2018, authorizing an annual rate increase of $66 million, based on a 10.0 percent authorized return on equity. In June 2018, as a result of a petition for rehearing filed by Consumers, the MPSC issued an order adjusting the authorized annual rate increase to $72 million by allowing recovery of additional retirement benefit plan costs. In July 2018, Consumers filed a reconciliation of total revenues collected during self-implementation 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 December 31, 2018. In its filing, Consumers proposed refunding this amount to customers in February 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. In October 2018, Consumers reduced its requested annual rate increase to $44 million. The filing requested authority to recover new investment in system reliability, environmental compliance, and technology enhancements. 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 of equity. With the elimination of the $113 million TCJA credit to customer bills, the approved settlement agreement results in an $89 million increase in annual rates. In lieu of the investment recovery mechanism requested by Consumers, the settlement agreement provides for deferred accounting treatment for distribution-related capital investments exceeding certain amounts. Consumers also agreed to not file a new electric rate case prior to January 2020.
Consumers Gas Utility
Gas Rate Case: In October 2017, Consumers filed an application with the MPSC seeking an annual rate increase of $178 million, based on a 10.5 percent authorized return on equity. In March 2018, Consumers reduced its requested revenue requirement to $145 million, before taking into consideration any impact of the TCJA. Consumers further reduced its requested revenue requirement to $83 million to reflect the impact of the TCJA, offset partially by an increase in the authorized return of equity to 10.75 percent to compensate for the anticipated negative effects of tax reform on Consumers’ cash flows from operating activities. In July 2018, Consumers reduced its requested revenue requirement to $60 million, based on a 10.0 percent authorized return on equity.
In August 2018, the MPSC approved a settlement agreement authorizing an annual rate increase of $11 million, based on a 10.0 percent authorized return on equity. With the elimination of the $49 million TCJA credit to customer bills, the approved settlement agreement results in a $60 million increase in annual rates. The MPSC also approved two rate adjustment mechanisms: a revenue decoupling mechanism and an investment recovery mechanism. The revenue decoupling mechanism will annually reconcile Consumers’ actual weather-normalized non‑fuel revenues with the revenues approved by the MPSC. The investment recovery mechanism will provide for an additional annual rate increase of $9 million beginning in July 2019 and another $10 million beginning in July 2020 for incremental investments that Consumers plans to make in those years, subject to reconciliation. The investment recovery surcharge will remain in effect until rates are reset in a subsequent general rate case.
Power Supply Cost Recovery and Gas Cost Recovery
The PSCR and GCR ratemaking processes are designed to allow Consumers to recover all of its power supply and purchased natural gas costs if incurred under reasonable and prudent policies and practices. The MPSC reviews these costs, policies, and practices in annual plan and reconciliation proceedings. Consumers adjusts its PSCR and GCR billing charges monthly in order to minimize the underrecovery or overrecovery amount in the annual reconciliations. Underrecoveries represent probable future revenues that will be recovered from customers; overrecoveries represent previously collected revenues that will be refunded to customers.
Presented in the following table are the assets and liabilities for PSCR and GCR underrecoveries and overrecoveries reflected on Consumers’ consolidated balance sheets:
In Millions
 
December 31
2018
 
2017
 
Assets
 
 
 
 
GCR underrecoveries
 
16

 

Accrued gas revenue
 
$
16

 
$

Liabilities
 
 
 
 
PSCR overrecoveries
 
$
4

 
$
27

GCR overrecoveries
 

 
6

Accrued rate refunds
 
$
4

 
$
33


PSCR Plans and Reconciliations: In June 2018, the MPSC approved a settlement agreement in Consumers’ 2016 PSCR reconciliation, authorizing recovery of $1.9 billion of power costs and authorizing Consumers to reflect in its 2017 PSCR reconciliation the overrecovery of $12 million.
In March 2018, Consumers filed its 2017 PSCR reconciliation, requesting full recovery of $1.9 billion of power costs and authorization to reflect in its 2018 PSCR reconciliation the overrecovery of $32 million.
Consumers submitted its 2018 PSCR plan to the MPSC in September 2017 and, in accordance with its proposed plan, self-implemented the 2018 PSCR charge beginning in January 2018.
GCR Plans and Reconciliations: In May 2018, the MPSC approved a settlement agreement in Consumers’ 2016-2017 GCR reconciliation, authorizing full recovery of $0.5 billion of gas costs and authorizing Consumers to reflect in its 2017-2018 GCR reconciliation the overrecovery of $2 million.
In June 2018, Consumers filed its 2017-2018 GCR reconciliation, requesting full recovery of $0.6 billion of gas costs and authorization to reflect in its 2018-2019 GCR reconciliation the overrecovery of $1 million.
In October 2018, the MPSC approved a settlement agreement in Consumers’ 2018-2019 GCR plan, authorizing the 2018-2019 GCR factor that Consumers self-implemented beginning in April 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 evidence supporting the recovery of Smart Energy investments, and other matters. Consumers is unable to predict the outcome of these appeals.
Regulatory Assets and Liabilities
Consumers is subject to the actions of the MPSC and FERC and therefore prepares its consolidated financial statements in accordance with the provisions of regulatory accounting. A utility must apply regulatory accounting when its rates are designed to recover specific costs of providing regulated services. Under regulatory accounting, Consumers records regulatory assets or liabilities for certain transactions that would have been treated as expense or revenue by non‑regulated businesses.
Presented in the following table are the regulatory assets and liabilities on Consumers’ consolidated balance sheets:
In Millions
 
December 31
End of Recovery
or Refund Period
2018
 
2017
 
Regulatory assets
 
 
 
 
 
 
Current
 
 
 
 
 
 
Energy waste reduction plan incentive1
 
2019
 
$
32

 
$
18

Other
 
2019
 
5

 
2

Total current regulatory assets
 
 
 
$
37

 
$
20

Non-current
 
 
 
 
 
 
Postretirement benefits2
 
various
 
$
1,028

 
$
1,028

Securitized costs3
 
2029
 
273

 
298

ARO4
 
various
 
175

 
161

MGP sites4
 
various
 
133

 
142

Unamortized loss on reacquired debt4
 
various
 
68

 
53

Energy waste reduction plan incentive1
 
2020
 
34

 
31

Energy waste reduction plan4
 
various
 
26

 
39

Gas storage inventory adjustments4
 
various
 
4

 
10

Other
 
various
 
2

 
2

Total non-current regulatory assets
 
 
 
$
1,743

 
$
1,764

Total regulatory assets
 
 
 
$
1,780

 
$
1,784

Regulatory liabilities
 
 
 
 
 
 
Current
 
 
 
 
 
 
TCJA reserve for refund
 
2019
 
$
98

 
$

Reserve for customer refunds
 
2019
 
36

 
25

Income taxes, net
 
2019
 
18

 
52

Other
 
2019
 
3

 
3

Total current regulatory liabilities
 
 
 
$
155

 
$
80

Non-current
 
 
 
 
 
 
Cost of removal
 
various
 
$
1,966

 
$
1,844

Income taxes, net
 
various
 
1,537

 
1,564

Renewable energy grant
 
2043
 
54

 
56

Renewable energy plan
 
2028
 
42

 
56

ARO
 
various
 
38

 
50

TCJA reserve for refund
 
various
 
35

 

Postretirement benefits
 
various
 

 
135

Other
 
various
 
9

 
10

Total non-current regulatory liabilities
 
 
 
$
3,681

 
$
3,715

Total regulatory liabilities
 
 
 
$
3,836

 
$
3,795

1 
These regulatory assets have arisen from an alternative revenue program and are not associated with incurred costs or capital investments. Therefore, the MPSC has provided for recovery without a return.
2 
This regulatory asset is offset partially by liabilities. The net amount is included in rate base, thereby providing a return.
3 
The MPSC has authorized a specific return on this regulatory asset.
4 
These regulatory assets represent incurred costs for which the MPSC has provided, or Consumers expects, recovery without a return on investment.
Regulatory Assets 
Energy Waste Reduction Plan Incentive: In December 2018, the MPSC approved a settlement agreement authorizing Consumers to collect $31 million during 2019 as an incentive for exceeding its statutory savings targets in 2017. Consumers recognized incentive revenue under this program of $31 million in 2017.
Consumers also exceeded its statutory savings targets in 2018, achieved certain other goals, and will request the MPSC’s approval to collect $34 million, the maximum performance incentive, in the energy waste reduction reconciliation to be filed in 2019. Consumers recognized incentive revenue under this program of $34 million in 2018.
Postretirement Benefits: As part of the ratemaking process, the MPSC allows Consumers to recover the costs of postretirement benefits. Accordingly, Consumers defers the net impact of actuarial losses and gains as well as prior service costs and credits associated with postretirement benefits as a regulatory asset or liability. The asset or liability will decrease as the deferred items are amortized and recognized as components of net periodic benefit cost. For details about the amortization periods, see Note 12, Retirement Benefits.
Securitized Costs: In 2013, the MPSC issued a securitization financing order authorizing Consumers to issue securitization bonds in order to finance the recovery of the remaining book value of seven smaller coal-fueled electric generating units that Consumers retired in 2016 and three smaller natural gas-fueled electric generating units that Consumers retired in 2015. Upon receipt of the MPSC’s order, Consumers removed the book value of the ten units from plant, property, and equipment and recorded this amount as a regulatory asset. Consumers is amortizing the regulatory asset over the life of the related securitization bonds, which it issued through a subsidiary in 2014. For additional details regarding the securitization bonds, see Note 5, Financings and Capitalization.
ARO: The recovery of the underlying asset investments and related removal and monitoring costs of recorded AROs is approved by the MPSC in depreciation rate cases. Consumers records a regulatory asset and a regulatory liability for timing differences between the recognition of AROs for financial reporting purposes and the recovery of these costs from customers. The recovery period approximates the useful life of the assets to be removed.
MGP Sites: Consumers is incurring environmental remediation and other response activity costs at 23 former MGP facilities. The MPSC allows Consumers to recover from its natural gas customers over a ten-year period the costs incurred to remediate the MGP sites.
Unamortized Loss on Reacquired Debt: Under regulatory accounting, any unamortized discount, premium, or expense related to debt redeemed with the proceeds of new debt is capitalized and amortized over the life of the new debt.
Energy Waste Reduction Plan: The MPSC allows Consumers to collect surcharges from customers to fund its energy waste reduction plan. The amount of spending incurred in excess of surcharges collected is recorded as a regulatory asset and amortized as surcharges are collected from customers over the plan period.
Gas Storage Inventory Adjustments: Consumers incurs inventory expenses related to the loss of gas from its natural gas storage fields. The MPSC allows Consumers to recover these costs from its natural gas customers over a five-year period.
Regulatory Liabilities
TCJA Reserve for Refund: In February 2018, the MPSC ordered Consumers to file various proceedings to determine the reduction in its electric and gas revenue requirements as a result of the TCJA. For further information on the various TCJA proceedings, see the Consumers Electric Utility and Gas UtilityTax Cuts and Jobs Act section below.
Reserve for Customer Refunds: The 2016 Energy Law eliminated utilities’ self-implementation of rates under general rate cases, but provided for more timely processing of general rate cases. Consumers filed an electric rate case in March 2017, prior to the effective date of that law, and as result was allowed to self-implement new energy rates in October 2017, subject to refund with interest and potential penalties. Consumers recognized revenue associated with self-implemented rates, but recorded a provision for revenue subject to refund because it considered it probable that it would be required to refund a portion of its self-implemented rates.
Income Taxes, Net: Consumers records regulatory assets and liabilities to reflect the difference between deferred income taxes recognized for financial reporting purposes and amounts previously reflected in Consumers’ rates. This net balance will decrease over the remaining life of the related temporary differences and flow through current income tax benefit. For additional details on deferred income taxes, see Note 14, Income Taxes.
At December 31, 2017, Consumers measured its deferred tax assets and liabilities using the 21 percent federal tax rate enacted in the TCJA. Due to the lower corporate tax rate, Consumers reduced its net deferred tax liabilities associated with its utility book-tax temporary differences by $1.6 billion and recorded an offsetting regulatory liability. For further information on Consumers’ proposal to return this to customers, see the Consumers Electric Utility and Gas UtilityTax Cuts and Jobs Act section below.
Cost of Removal: The MPSC allows Consumers to collect amounts from customers to fund future asset removal activities. This regulatory liability is reduced as costs of removal are incurred. The refund period of this regulatory liability approximates the useful life of the assets to be removed.
Renewable Energy Grant: In 2013, Consumers received a $69 million renewable energy grant for Lake Winds® Energy Park, which began operations in 2012. This grant reduces Consumers’ cost of complying with Michigan’s renewable portfolio standard and, accordingly, reduces the overall renewable energy surcharge to be collected from customers. The regulatory liability recorded for the grant will be amortized over the life of Lake Winds® Energy Park.
Renewable Energy Plan: Consumers has collected surcharges to fund its renewable energy plan. Amounts not yet spent under the plan are recorded as a regulatory liability, which is amortized as incremental costs are incurred to operate and depreciate Consumers’ renewable generation facilities and to purchase RECs under renewable energy purchase agreements. Incremental costs represent costs incurred in excess of amounts recovered through the PSCR process.
Consumers Electric Utility and Gas Utility
Tax Cuts and Jobs Act: The TCJA, which changed existing federal tax law and included numerous provisions that affect businesses, was signed into law in December 2017. In February 2018, the MPSC ordered Consumers to file various proceedings to determine the reduction in its electric and gas revenue requirements as a result of the TCJA. The MPSC also ordered Consumers to implement bill credits to reflect that reduction until customer rates are adjusted through Consumers’ general rate cases. Consumers filed the first of these proceedings in March 2018, requesting a $49 million reduction in its annual gas revenue requirement. The MPSC approved this reduction in June 2018, with credits to customer bills beginning in July 2018; this credit ended with the settlement of the gas rate case in August 2018. Consumers filed the second proceeding in April 2018, requesting a $113 million reduction in its annual electric revenue requirement. The MPSC approved this reduction in July 2018, with credits to customer bills beginning in August 2018; this credit ended with the settlement of the electric rate case in January 2019. These credits reduced rates prospectively for the impact of the TCJA but did not include potential refunds associated with Consumers’ remeasurement of its deferred income taxes.
Consumers filed two more proceedings to address amounts collected from customers during 2018 through the implementation of the first two proceedings. Consumers filed the first of these proceedings in August 2018, requesting to refund $31 million to gas customers over six months beginning in December 2018. The MPSC approved this refund in November 2018. Consumers filed the second proceeding in September 2018, requesting to refund $70 million to electric customers over six months beginning in January 2019. The MPSC approved this refund in December 2018. Consumers has recorded a current regulatory liability in an amount reflecting these approved refunds.
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. The application requested approval to begin returning $0.4 billion of net regulatory tax liabilities through rates to be determined in a future gas proceeding and $1.2 billion through the rates determined in Consumers’ next-filed 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 15 years.
In January 2018, Consumers began to reduce this net regulatory tax liability 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. For additional details on the remeasurement, see Note 14, Income Taxes.
Consumers Electric Utility
2017 Electric Rate Case: In March 2017, Consumers filed an application with the MPSC seeking an annual rate increase of $173 million, based on a 10.5 percent authorized return on equity. The filing requested authority to recover new investment in system reliability, environmental compliance, and technology enhancements. In September 2017, Consumers reduced its requested annual rate increase to $148 million. In October 2017, Consumers self-implemented an annual rate increase of $130 million, subject to refund with interest and potential penalties. The MPSC issued an order in March 2018, authorizing an annual rate increase of $66 million, based on a 10.0 percent authorized return on equity. In June 2018, as a result of a petition for rehearing filed by Consumers, the MPSC issued an order adjusting the authorized annual rate increase to $72 million by allowing recovery of additional retirement benefit plan costs. In July 2018, Consumers filed a reconciliation of total revenues collected during self-implementation 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 December 31, 2018. In its filing, Consumers proposed refunding this amount to customers in February 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. In October 2018, Consumers reduced its requested annual rate increase to $44 million. The filing requested authority to recover new investment in system reliability, environmental compliance, and technology enhancements. 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 of equity. With the elimination of the $113 million TCJA credit to customer bills, the approved settlement agreement results in an $89 million increase in annual rates. In lieu of the investment recovery mechanism requested by Consumers, the settlement agreement provides for deferred accounting treatment for distribution-related capital investments exceeding certain amounts. Consumers also agreed to not file a new electric rate case prior to January 2020.
Consumers Gas Utility
Gas Rate Case: In October 2017, Consumers filed an application with the MPSC seeking an annual rate increase of $178 million, based on a 10.5 percent authorized return on equity. In March 2018, Consumers reduced its requested revenue requirement to $145 million, before taking into consideration any impact of the TCJA. Consumers further reduced its requested revenue requirement to $83 million to reflect the impact of the TCJA, offset partially by an increase in the authorized return of equity to 10.75 percent to compensate for the anticipated negative effects of tax reform on Consumers’ cash flows from operating activities. In July 2018, Consumers reduced its requested revenue requirement to $60 million, based on a 10.0 percent authorized return on equity.
In August 2018, the MPSC approved a settlement agreement authorizing an annual rate increase of $11 million, based on a 10.0 percent authorized return on equity. With the elimination of the $49 million TCJA credit to customer bills, the approved settlement agreement results in a $60 million increase in annual rates. The MPSC also approved two rate adjustment mechanisms: a revenue decoupling mechanism and an investment recovery mechanism. The revenue decoupling mechanism will annually reconcile Consumers’ actual weather-normalized non‑fuel revenues with the revenues approved by the MPSC. The investment recovery mechanism will provide for an additional annual rate increase of $9 million beginning in July 2019 and another $10 million beginning in July 2020 for incremental investments that Consumers plans to make in those years, subject to reconciliation. The investment recovery surcharge will remain in effect until rates are reset in a subsequent general rate case.
Power Supply Cost Recovery and Gas Cost Recovery
The PSCR and GCR ratemaking processes are designed to allow Consumers to recover all of its power supply and purchased natural gas costs if incurred under reasonable and prudent policies and practices. The MPSC reviews these costs, policies, and practices in annual plan and reconciliation proceedings. Consumers adjusts its PSCR and GCR billing charges monthly in order to minimize the underrecovery or overrecovery amount in the annual reconciliations. Underrecoveries represent probable future revenues that will be recovered from customers; overrecoveries represent previously collected revenues that will be refunded to customers.
Presented in the following table are the assets and liabilities for PSCR and GCR underrecoveries and overrecoveries reflected on Consumers’ consolidated balance sheets:
In Millions
 
December 31
2018
 
2017
 
Assets