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Implementation of New Accounting Standards
ASU 2017‑07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost: This standard was issued to improve the reporting of net benefit cost by employers that offer defined benefit pension plans and other postretirement benefit plans. The required effective date of the standard for CMS Energy and Consumers is January 1, 2018, but early adoption was permitted in the first interim period of 2017. CMS Energy and Consumers elected to adopt the standard as of January 1, 2017. The standard requires employers to report the service cost component of net benefit cost in the same line item on the income statement as other employee compensation costs, while presenting the other cost components separately outside of operating income. This change is to be applied retrospectively to all prior periods presented. Accordingly, for the three months and nine months ended September 30, 2017 and 2016, CMS Energy and Consumers have presented the service cost component of their retirement benefits plans in maintenance and other operating expenses on the consolidated statements of income, while presenting the other components in nonoperating retirement benefits, net, under other income (expense). Prior to this standard, CMS Energy and Consumers had presented all of the cost components in maintenance and other operating expenses. Under a practical expedient permitted by the standard, CMS Energy and Consumers used benefit cost amounts disclosed for prior periods as the basis for retrospective application.
In addition, under this standard, only the service cost component is eligible for capitalization as part of the cost of an asset. This change is to be applied prospectively upon adoption. Accordingly, for the three months and nine months ended September 30, 2017, CMS Energy and Consumers capitalized a portion of the service cost component of their retirement benefits plans to plant, property, and equipment, while recognizing the other components in net income. In prior periods, a portion of all cost components was capitalized. For further details on the net periodic cost of CMS Energy’s and Consumers’ retirement benefits plans, see Note 8, Retirement Benefits. 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.
New Accounting Standards Not Yet Effective
ASU 2014‑09, Revenue from Contracts with Customers: This standard 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 will replace most of the existing revenue recognition requirements in GAAP, although certain guidance specific to rate-regulated utilities will be retained. The standard will be effective on January 1, 2018 for CMS Energy and Consumers, but early adoption in 2017 is permitted. Entities will have the option to apply the standard retrospectively to all prior periods presented, or to apply it retrospectively only to contracts existing at the effective date, with the cumulative effect of the standard recorded as an adjustment to beginning retained earnings. CMS Energy and Consumers are not adopting the standard early, and will apply the standard retrospectively only to contracts existing on the effective date, with the cumulative effect of the standard recorded as an adjustment to beginning retained earnings.
CMS Energy and Consumers are continuing to evaluate the standard; however, they do not expect that it will have a material impact on their consolidated net income, cash flows, or financial position. CMS Energy and Consumers will provide additional disclosures about their revenues in accordance with the new standard, but they have not yet identified any significant changes in their revenue recognition practices that may be required.
ASU 2016‑01, Recognition and Measurement of Financial Assets and Financial Liabilities: This standard, which will be effective January 1, 2018 for CMS Energy and Consumers, is intended to improve the accounting for financial instruments. The standard will require 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 will no longer permit unrealized gains and losses for certain equity investments to be recorded in AOCI. CMS Energy and Consumers presently record unrealized gains and losses on certain equity investments, including the mutual funds in the DB SERP and Consumers’ investment in CMS Energy common stock, in AOCI, except that unrealized losses determined to be other than temporary are reported in earnings. For further details on these investments, see Note 6, Financial Instruments. Entities will apply the standard using a modified retrospective approach, with a cumulative-effect adjustment recorded to beginning retained earnings on the effective date.
ASU 2016‑02, Leases: This standard establishes a new accounting model for leases. The standard will require 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. As a result, CMS Energy and Consumers expect to recognize additional lease assets and liabilities for their operating leases under this standard. The new guidance will also amend 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 income statement, 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 will be effective on January 1, 2019 for CMS Energy and Consumers, but early adoption is permitted. CMS Energy and Consumers are continuing to evaluate the impact of the standard on their consolidated financial statements and do not presently expect to adopt the standard early.
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.
Implementation of New Accounting Standards
ASU 2017‑07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost: This standard was issued to improve the reporting of net benefit cost by employers that offer defined benefit pension plans and other postretirement benefit plans. The required effective date of the standard for CMS Energy and Consumers is January 1, 2018, but early adoption was permitted in the first interim period of 2017. CMS Energy and Consumers elected to adopt the standard as of January 1, 2017. The standard requires employers to report the service cost component of net benefit cost in the same line item on the income statement as other employee compensation costs, while presenting the other cost components separately outside of operating income. This change is to be applied retrospectively to all prior periods presented. Accordingly, for the three months and nine months ended September 30, 2017 and 2016, CMS Energy and Consumers have presented the service cost component of their retirement benefits plans in maintenance and other operating expenses on the consolidated statements of income, while presenting the other components in nonoperating retirement benefits, net, under other income (expense). Prior to this standard, CMS Energy and Consumers had presented all of the cost components in maintenance and other operating expenses. Under a practical expedient permitted by the standard, CMS Energy and Consumers used benefit cost amounts disclosed for prior periods as the basis for retrospective application.
In addition, under this standard, only the service cost component is eligible for capitalization as part of the cost of an asset. This change is to be applied prospectively upon adoption. Accordingly, for the three months and nine months ended September 30, 2017, CMS Energy and Consumers capitalized a portion of the service cost component of their retirement benefits plans to plant, property, and equipment, while recognizing the other components in net income. In prior periods, a portion of all cost components was capitalized. For further details on the net periodic cost of CMS Energy’s and Consumers’ retirement benefits plans, see Note 8, Retirement Benefits. 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.
New Accounting Standards Not Yet Effective
ASU 2014‑09, Revenue from Contracts with Customers: This standard 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 will replace most of the existing revenue recognition requirements in GAAP, although certain guidance specific to rate-regulated utilities will be retained. The standard will be effective on January 1, 2018 for CMS Energy and Consumers, but early adoption in 2017 is permitted. Entities will have the option to apply the standard retrospectively to all prior periods presented, or to apply it retrospectively only to contracts existing at the effective date, with the cumulative effect of the standard recorded as an adjustment to beginning retained earnings. CMS Energy and Consumers are not adopting the standard early, and will apply the standard retrospectively only to contracts existing on the effective date, with the cumulative effect of the standard recorded as an adjustment to beginning retained earnings.
CMS Energy and Consumers are continuing to evaluate the standard; however, they do not expect that it will have a material impact on their consolidated net income, cash flows, or financial position. CMS Energy and Consumers will provide additional disclosures about their revenues in accordance with the new standard, but they have not yet identified any significant changes in their revenue recognition practices that may be required.
ASU 2016‑01, Recognition and Measurement of Financial Assets and Financial Liabilities: This standard, which will be effective January 1, 2018 for CMS Energy and Consumers, is intended to improve the accounting for financial instruments. The standard will require 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 will no longer permit unrealized gains and losses for certain equity investments to be recorded in AOCI. CMS Energy and Consumers presently record unrealized gains and losses on certain equity investments, including the mutual funds in the DB SERP and Consumers’ investment in CMS Energy common stock, in AOCI, except that unrealized losses determined to be other than temporary are reported in earnings. For further details on these investments, see Note 6, Financial Instruments. Entities will apply the standard using a modified retrospective approach, with a cumulative-effect adjustment recorded to beginning retained earnings on the effective date.
ASU 2016‑02, Leases: This standard establishes a new accounting model for leases. The standard will require 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. As a result, CMS Energy and Consumers expect to recognize additional lease assets and liabilities for their operating leases under this standard. The new guidance will also amend 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 income statement, 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 will be effective on January 1, 2019 for CMS Energy and Consumers, but early adoption is permitted. CMS Energy and Consumers are continuing to evaluate the impact of the standard on their consolidated financial statements and do not presently expect to adopt the standard early.
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.
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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.
Electric Rate Case: In March 2016, Consumers filed an application with the MPSC seeking an annual rate increase of $225 million, based on a 10.7 percent authorized return on equity. In September 2016, Consumers self‑implemented an annual rate increase of $170 million, subject to refund with interest. The MPSC issued an order in February 2017, authorizing an annual rate increase of $113 million, based on a 10.1 percent authorized return on equity.
In May 2017, 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 refund would be required, and Consumers had a $17 million recorded reserve for customer refunds at September 30, 2017. In October 2017, the MPSC approved a settlement agreement that will result in a $17 million refund to customers during December 2017.
Gas Rate Case: In August 2016, Consumers filed an application with the MPSC seeking an annual rate increase of $90 million, based on a 10.6 percent authorized return on equity. Consumers later reduced its requested annual rate increase to $80 million. In January 2017, Consumers self-implemented an annual rate increase of $20 million.
The MPSC issued an order in July 2017, authorizing an annual rate increase of $29 million beginning in August 2017. The MPSC also approved an investment recovery mechanism that will provide for additional annual rate increases of $18 million beginning in 2018 and another $18 million beginning in 2019 for incremental investments that Consumers plans to make in those years, subject to reconciliation. These future investments are intended to help ensure adequate system capacity, deliverability, and safety. The investment recovery surcharge will remain in effect until rates are reset in a subsequent general rate case.
Energy Optimization Plan Incentive: In September 2017, the MPSC approved a settlement agreement authorizing Consumers to collect $18 million during 2018 as an incentive for exceeding its statutory savings targets in 2016. Consumers recognized incentive revenue under this program of $18 million in 2016.
Depreciation Rate Case: In August 2016, Consumers filed a depreciation rate case related to its gas utility property, requesting to decrease depreciation expense by $3 million annually. In March 2017, the MPSC approved a settlement agreement authorizing the requested decrease in depreciation expense effective as of January 2017.
FERC Transmission Order: In September 2016, FERC issued an order reducing the rate of return on equity earned by transmission owners operating within MISO to a base of 10.32 percent from 12.38 percent. FERC ordered MISO and transmission owners to provide refunds, with interest, to transmission customers such as Consumers for the period from November 2013 through February 2015. In February 2017, as a result of this order, Consumers received from MISO a credit of $28 million, which it will return to its electric customers through the PSCR ratemaking process. The FERC order is subject to further legal proceedings and Consumers’ MISO credit may be adjusted accordingly.
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.
Electric Rate Case: In March 2016, Consumers filed an application with the MPSC seeking an annual rate increase of $225 million, based on a 10.7 percent authorized return on equity. In September 2016, Consumers self‑implemented an annual rate increase of $170 million, subject to refund with interest. The MPSC issued an order in February 2017, authorizing an annual rate increase of $113 million, based on a 10.1 percent authorized return on equity.
In May 2017, 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 refund would be required, and Consumers had a $17 million recorded reserve for customer refunds at September 30, 2017. In October 2017, the MPSC approved a settlement agreement that will result in a $17 million refund to customers during December 2017.
Gas Rate Case: In August 2016, Consumers filed an application with the MPSC seeking an annual rate increase of $90 million, based on a 10.6 percent authorized return on equity. Consumers later reduced its requested annual rate increase to $80 million. In January 2017, Consumers self-implemented an annual rate increase of $20 million.
The MPSC issued an order in July 2017, authorizing an annual rate increase of $29 million beginning in August 2017. The MPSC also approved an investment recovery mechanism that will provide for additional annual rate increases of $18 million beginning in 2018 and another $18 million beginning in 2019 for incremental investments that Consumers plans to make in those years, subject to reconciliation. These future investments are intended to help ensure adequate system capacity, deliverability, and safety. The investment recovery surcharge will remain in effect until rates are reset in a subsequent general rate case.
Energy Optimization Plan Incentive: In September 2017, the MPSC approved a settlement agreement authorizing Consumers to collect $18 million during 2018 as an incentive for exceeding its statutory savings targets in 2016. Consumers recognized incentive revenue under this program of $18 million in 2016.
Depreciation Rate Case: In August 2016, Consumers filed a depreciation rate case related to its gas utility property, requesting to decrease depreciation expense by $3 million annually. In March 2017, the MPSC approved a settlement agreement authorizing the requested decrease in depreciation expense effective as of January 2017.
FERC Transmission Order: In September 2016, FERC issued an order reducing the rate of return on equity earned by transmission owners operating within MISO to a base of 10.32 percent from 12.38 percent. FERC ordered MISO and transmission owners to provide refunds, with interest, to transmission customers such as Consumers for the period from November 2013 through February 2015. In February 2017, as a result of this order, Consumers received from MISO a credit of $28 million, which it will return to its electric customers through the PSCR ratemaking process. The FERC order is subject to further legal proceedings and Consumers’ MISO credit may be adjusted accordingly.
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3:Contingencies and Commitments
CMS Energy and Consumers are involved in various matters that give rise to contingent liabilities. Depending on the specific issues, the resolution of these contingencies could negatively affect CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. In their disclosures of these matters, CMS Energy and Consumers provide an estimate of the possible loss or range of loss when such an estimate can be made. Disclosures that state that CMS Energy or Consumers cannot predict the outcome of a matter indicate that they are unable to estimate a possible loss or range of loss for the matter.
CMS Energy Contingencies
Gas Index Price Reporting Litigation: CMS Energy, along with CMS MST, CMS Field Services, Cantera Natural Gas, Inc., and Cantera Gas Company, have been named as defendants in four class action lawsuits and one individual lawsuit arising as a result of alleged inaccurate natural gas price reporting to publications that report trade information. Allegations include price-fixing conspiracies, restraint of trade, and artificial inflation of natural gas retail prices in Kansas, Missouri, and Wisconsin. Plaintiffs are making claims for the following: treble damages, full consideration damages, exemplary damages, costs, interest, and/or attorneys’ fees.
After removal to federal court, all of the cases were transferred to a single federal district court pursuant to the multidistrict litigation process. In 2010 and 2011, all claims against CMS Energy defendants were dismissed by the district court based on FERC preemption. In 2013, the U.S. Court of Appeals for the Ninth Circuit reversed the district court decision. The appellate court found that FERC preemption does not apply under the facts of these cases. The appellate court affirmed the district court’s denial of leave to amend to add federal antitrust claims. The matter was appealed to the U.S. Supreme Court, which in 2015 upheld the Ninth Circuit’s decision. The cases were remanded back to the federal district court.
In May 2016, the federal district court granted the defendants’ motion for summary judgment in the individual lawsuit based on a release in a prior settlement involving similar allegations and reinstated CMS Energy as a defendant in one of the class action lawsuits. The order of summary judgment has been appealed.
In December 2016, CMS Energy entities reached a settlement with the plaintiffs in the three Kansas and Missouri cases for an amount that was not material to CMS Energy. In August 2017, the federal district court approved the settlement.
CMS Energy entities remain as defendants in the Wisconsin class action lawsuits. In March 2017, the federal district court denied plaintiffs’ motion for class certification. The plaintiffs appealed that decision to the U.S. Court of Appeals for the Ninth Circuit, which has accepted the matter for hearing. In June 2017, an unaffiliated company that is also a defendant in these cases filed for bankruptcy, which could increase the risk of loss to CMS Energy.
These cases involve complex facts, a large number of similarly situated defendants with different factual positions, and multiple jurisdictions. Presently, any estimate of liability would be highly speculative; the amount of CMS Energy’s reasonably possible loss would be based on widely varying models previously untested in this context. If the outcome after appeals is unfavorable, these cases could negatively affect CMS Energy’s liquidity, financial condition, and results of operations.
Bay Harbor: CMS Land retained environmental remediation obligations for the collection and treatment of leachate, a liquid consisting of water and other substances, at Bay Harbor after selling its interests in the development in 2002. Leachate is produced when water enters into cement kiln dust piles left over from former cement plant operations at the site. In 2012, CMS Land and the MDEQ finalized an agreement that established the final remedies and the future water quality criteria at the site. CMS Land completed all construction necessary to implement the remedies required by the agreement and will continue to maintain and operate a system to discharge treated leachate into Little Traverse Bay under an NPDES permit issued in 2010 and renewed in October 2016. The renewed NPDES permit is valid through September 2020.
Various claims have been brought against CMS Land or its affiliates, including CMS Energy, alleging environmental damage to property, loss of property value, insufficient disclosure of environmental matters, breach of agreement relating to access, or other matters. CMS Land and other parties have received a demand for payment from the EPA in the amount of $8 million, plus interest. The EPA is seeking recovery under CERCLA of response costs allegedly incurred at Bay Harbor. These costs exceed what was agreed to in a 2005 order between CMS Land and the EPA, and CMS Land has communicated to the EPA that it does not believe that this is a valid claim. The EPA has filed a lawsuit to collect these costs.
At September 30, 2017, CMS Energy had a recorded liability of $49 million for its remaining obligations for environmental remediation. CMS Energy calculated this liability based on discounted projected costs, using a discount rate of 4.34 percent and an inflation rate of one percent on annual operating and maintenance costs. The undiscounted amount of the remaining obligation is $62 million. CMS Energy expects to pay the following amounts for long-term liquid disposal and operating and maintenance costs during the remainder of 2017 and in each of the next five years:
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In Millions |
|||||||||||||||||||
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2017 | 2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||||
CMS Energy |
|||||||||||||||||||
Long-term liquid disposal and operating and maintenance costs |
$ |
1 |
$ |
4 |
$ |
4 |
$ |
4 |
$ |
4 |
$ |
4 |
CMS Energy’s estimate of response activity costs and the timing of expenditures could change if there are changes in circumstances or assumptions used in calculating the liability. Although a liability for its present estimate of remaining response activity costs has been recorded, CMS Energy cannot predict the ultimate financial impact or outcome of this matter.
Equatorial Guinea Tax Claim: In 2002, CMS Energy sold its oil, gas, and methanol investments in Equatorial Guinea. The government of Equatorial Guinea claims that, in connection with the sale, CMS Energy owes $152 million in taxes, plus substantial penalties and interest that could be up to the amount of the taxes claimed. The matter is proceeding to formal arbitration. CMS Energy has concluded that the government’s tax claim is without merit and is contesting the claim, but cannot predict the financial impact or outcome of the matter. An unfavorable outcome could have a material adverse effect on CMS Energy’s liquidity, financial condition, and results of operations.
Consumers Electric Utility Contingencies
Electric Environmental Matters: Consumers’ operations are subject to environmental laws and regulations. Historically, Consumers has generally been able to recover, in customer rates, the costs to operate its facilities in compliance with these laws and regulations.
Cleanup and Solid Waste: Consumers expects to incur remediation and other response activity costs at a number of sites under the NREPA. Consumers believes that these costs should be recoverable in rates, but cannot guarantee that outcome. Consumers estimates that its liability for NREPA sites for which it can estimate a range of loss will be between $3 million and $4 million. At September 30, 2017, Consumers had a recorded liability of $3 million, the minimum amount in the range of its estimated probable NREPA liability, as no amount in the range was considered a better estimate than any other amount.
Consumers is a potentially responsible party at a number of contaminated sites administered under CERCLA. CERCLA liability is joint and several. In 2010, Consumers received official notification from the EPA that identified Consumers as a potentially responsible party for cleanup of PCBs at the Kalamazoo River CERCLA site. The notification claimed that the EPA has reason to believe that Consumers disposed of PCBs and arranged for the disposal and treatment of PCB-containing materials at portions of the site. In 2011, Consumers received a follow‑up letter from the EPA requesting that Consumers agree to participate in a removal action plan along with several other companies for an area of lower Portage Creek, which is connected to the Kalamazoo River. All parties, including Consumers, that were asked to participate in the removal action plan declined to accept liability. Until further information is received from the EPA, Consumers is unable to estimate a range of potential liability for cleanup of the river.
Based on its experience, Consumers estimates that its share of the total liability for known CERCLA sites will be between $3 million and $8 million. Various factors, including the number and creditworthiness of potentially responsible parties involved with each site, affect Consumers’ share of the total liability. At September 30, 2017, Consumers had a recorded liability of $3 million for its share of the total liability at these sites, the minimum amount in the range of its estimated probable CERCLA liability, as no amount in the range was considered a better estimate than any other amount.
The timing of payments related to Consumers’ remediation and other response activities at its CERCLA and NREPA sites is uncertain. Consumers periodically reviews these cost estimates. A change in the underlying assumptions, such as an increase in the number of sites, different remediation techniques, the nature and extent of contamination, and legal and regulatory requirements, could affect its estimates of NREPA and CERCLA liability.
Ludington PCB: In 1998, during routine maintenance activities, Consumers identified PCB as a component in certain paint, grout, and sealant materials at Ludington. Consumers removed part of the PCB material and replaced it with non‑PCB material. Consumers has had several communications with the EPA regarding this matter, but cannot predict the financial impact or outcome.
Consumers Gas Utility Contingencies
Gas Environmental Matters: Consumers expects to incur remediation and other response activity costs at a number of sites under the NREPA. These sites include 23 former MGP facilities. Consumers operated the facilities on these sites for some part of their operating lives. For some of these sites, Consumers has no present ownership interest or may own only a portion of the original site.
At September 30, 2017, Consumers had a recorded liability of $93 million for its remaining obligations for these sites. This amount represents the present value of long-term projected costs, using a discount rate of 2.57 percent and an inflation rate of 2.5 percent. The undiscounted amount of the remaining obligation is $104 million. Consumers expects to pay the following amounts for remediation and other response activity costs during the remainder of 2017 and in each of the next five years:
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In Millions |
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2017 | 2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||||
Consumers |
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Remediation and other response activity costs |
$ |
8 |
$ |
16 |
$ |
18 |
$ |
10 |
$ |
18 |
$ |
7 |
Consumers periodically reviews these cost estimates. Any significant change in the underlying assumptions, such as an increase in the number of sites, changes in remediation techniques, or legal and regulatory requirements, could affect Consumers’ estimates of annual response activity costs and the MGP liability.
Pursuant to orders issued by the MPSC, Consumers defers its MGP-related remediation costs and recovers them from its customers over a ten‑year period. At September 30, 2017, Consumers had a regulatory asset of $141 million related to the MGP sites.
Consumers estimates that its liability to perform remediation and other response activities at NREPA sites other than the MGP sites could reach $3 million. At September 30, 2017, Consumers had a recorded liability of less than $1 million, the minimum amount in the range of its estimated probable liability, as no amount in the range was considered a better estimate than any other amount.
Guarantees
Presented in the following table are CMS Energy’s and Consumers’ guarantees at September 30, 2017:
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In Millions |
|||||||||
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Maximum |
Carrying |
|||||||
Guarantee Description |
Issue Date |
Expiration Date |
Obligation |
Amount |
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CMS Energy, including Consumers |
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Indemnity obligations from stock and asset sale agreements1 |
Various |
Indefinite |
$ |
153 |
$ |
7 | |||
Guarantees2 |
Various |
Indefinite |
45 |
- |
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Consumers |
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Guarantee2 |
July 2011 |
Indefinite |
$ |
30 |
$ |
- |
1These obligations arose from stock and asset sale agreements under which CMS Energy or a subsidiary of CMS Energy indemnified the purchaser for losses resulting from various matters, primarily claims related to taxes. CMS Energy believes the likelihood of material loss to be remote for the indemnity obligations not recorded as liabilities.
2At Consumers, this obligation comprises a guarantee provided to the U.S. Department of Energy in connection with a settlement agreement regarding damages resulting from the department’s failure to accept spent nuclear fuel from nuclear power plants formerly owned by Consumers. At CMS Energy, the guarantee obligations comprise Consumers’ guarantee to the U.S. Department of Energy and CMS Energy’s 1994 guarantee of non-recourse revenue bonds issued by Genesee.
Additionally, in the normal course of business, CMS Energy, Consumers, and certain other subsidiaries of CMS Energy have entered into various agreements containing tax and other indemnity provisions for which they are unable to estimate the maximum potential obligation. The carrying value of these indemnity obligations is $1 million. CMS Energy and Consumers consider the likelihood that they would be required to perform or incur substantial losses related to these indemnities to be remote.
Other Contingencies
In addition to the matters disclosed in this Note and Note 2, Regulatory Matters, there are certain other lawsuits and administrative proceedings before various courts and governmental agencies arising in the ordinary course of business to which CMS Energy, Consumers, and certain other subsidiaries of CMS Energy are parties. These other lawsuits and proceedings may involve personal injury, property damage, contracts, environmental matters, federal and state taxes, rates, licensing, employment, and other matters. Further, CMS Energy and Consumers occasionally self-report certain regulatory non‑compliance matters that may or may not eventually result in administrative proceedings. CMS Energy and Consumers believe that the outcome of any one of these proceedings will not have a material negative effect on their consolidated results of operations, financial condition, or liquidity.
3:Contingencies and Commitments
CMS Energy and Consumers are involved in various matters that give rise to contingent liabilities. Depending on the specific issues, the resolution of these contingencies could negatively affect CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. In their disclosures of these matters, CMS Energy and Consumers provide an estimate of the possible loss or range of loss when such an estimate can be made. Disclosures that state that CMS Energy or Consumers cannot predict the outcome of a matter indicate that they are unable to estimate a possible loss or range of loss for the matter.
CMS Energy Contingencies
Gas Index Price Reporting Litigation: CMS Energy, along with CMS MST, CMS Field Services, Cantera Natural Gas, Inc., and Cantera Gas Company, have been named as defendants in four class action lawsuits and one individual lawsuit arising as a result of alleged inaccurate natural gas price reporting to publications that report trade information. Allegations include price-fixing conspiracies, restraint of trade, and artificial inflation of natural gas retail prices in Kansas, Missouri, and Wisconsin. Plaintiffs are making claims for the following: treble damages, full consideration damages, exemplary damages, costs, interest, and/or attorneys’ fees.
After removal to federal court, all of the cases were transferred to a single federal district court pursuant to the multidistrict litigation process. In 2010 and 2011, all claims against CMS Energy defendants were dismissed by the district court based on FERC preemption. In 2013, the U.S. Court of Appeals for the Ninth Circuit reversed the district court decision. The appellate court found that FERC preemption does not apply under the facts of these cases. The appellate court affirmed the district court’s denial of leave to amend to add federal antitrust claims. The matter was appealed to the U.S. Supreme Court, which in 2015 upheld the Ninth Circuit’s decision. The cases were remanded back to the federal district court.
In May 2016, the federal district court granted the defendants’ motion for summary judgment in the individual lawsuit based on a release in a prior settlement involving similar allegations and reinstated CMS Energy as a defendant in one of the class action lawsuits. The order of summary judgment has been appealed.
In December 2016, CMS Energy entities reached a settlement with the plaintiffs in the three Kansas and Missouri cases for an amount that was not material to CMS Energy. In August 2017, the federal district court approved the settlement.
CMS Energy entities remain as defendants in the Wisconsin class action lawsuits. In March 2017, the federal district court denied plaintiffs’ motion for class certification. The plaintiffs appealed that decision to the U.S. Court of Appeals for the Ninth Circuit, which has accepted the matter for hearing. In June 2017, an unaffiliated company that is also a defendant in these cases filed for bankruptcy, which could increase the risk of loss to CMS Energy.
These cases involve complex facts, a large number of similarly situated defendants with different factual positions, and multiple jurisdictions. Presently, any estimate of liability would be highly speculative; the amount of CMS Energy’s reasonably possible loss would be based on widely varying models previously untested in this context. If the outcome after appeals is unfavorable, these cases could negatively affect CMS Energy’s liquidity, financial condition, and results of operations.
Bay Harbor: CMS Land retained environmental remediation obligations for the collection and treatment of leachate, a liquid consisting of water and other substances, at Bay Harbor after selling its interests in the development in 2002. Leachate is produced when water enters into cement kiln dust piles left over from former cement plant operations at the site. In 2012, CMS Land and the MDEQ finalized an agreement that established the final remedies and the future water quality criteria at the site. CMS Land completed all construction necessary to implement the remedies required by the agreement and will continue to maintain and operate a system to discharge treated leachate into Little Traverse Bay under an NPDES permit issued in 2010 and renewed in October 2016. The renewed NPDES permit is valid through September 2020.
Various claims have been brought against CMS Land or its affiliates, including CMS Energy, alleging environmental damage to property, loss of property value, insufficient disclosure of environmental matters, breach of agreement relating to access, or other matters. CMS Land and other parties have received a demand for payment from the EPA in the amount of $8 million, plus interest. The EPA is seeking recovery under CERCLA of response costs allegedly incurred at Bay Harbor. These costs exceed what was agreed to in a 2005 order between CMS Land and the EPA, and CMS Land has communicated to the EPA that it does not believe that this is a valid claim. The EPA has filed a lawsuit to collect these costs.
At September 30, 2017, CMS Energy had a recorded liability of $49 million for its remaining obligations for environmental remediation. CMS Energy calculated this liability based on discounted projected costs, using a discount rate of 4.34 percent and an inflation rate of one percent on annual operating and maintenance costs. The undiscounted amount of the remaining obligation is $62 million. CMS Energy expects to pay the following amounts for long-term liquid disposal and operating and maintenance costs during the remainder of 2017 and in each of the next five years:
|
|||||||||||||||||||
In Millions |
|||||||||||||||||||
|
2017 | 2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||||
CMS Energy |
|||||||||||||||||||
Long-term liquid disposal and operating and maintenance costs |
$ |
1 |
$ |
4 |
$ |
4 |
$ |
4 |
$ |
4 |
$ |
4 |
CMS Energy’s estimate of response activity costs and the timing of expenditures could change if there are changes in circumstances or assumptions used in calculating the liability. Although a liability for its present estimate of remaining response activity costs has been recorded, CMS Energy cannot predict the ultimate financial impact or outcome of this matter.
Equatorial Guinea Tax Claim: In 2002, CMS Energy sold its oil, gas, and methanol investments in Equatorial Guinea. The government of Equatorial Guinea claims that, in connection with the sale, CMS Energy owes $152 million in taxes, plus substantial penalties and interest that could be up to the amount of the taxes claimed. The matter is proceeding to formal arbitration. CMS Energy has concluded that the government’s tax claim is without merit and is contesting the claim, but cannot predict the financial impact or outcome of the matter. An unfavorable outcome could have a material adverse effect on CMS Energy’s liquidity, financial condition, and results of operations.
Consumers Electric Utility Contingencies
Electric Environmental Matters: Consumers’ operations are subject to environmental laws and regulations. Historically, Consumers has generally been able to recover, in customer rates, the costs to operate its facilities in compliance with these laws and regulations.
Cleanup and Solid Waste: Consumers expects to incur remediation and other response activity costs at a number of sites under the NREPA. Consumers believes that these costs should be recoverable in rates, but cannot guarantee that outcome. Consumers estimates that its liability for NREPA sites for which it can estimate a range of loss will be between $3 million and $4 million. At September 30, 2017, Consumers had a recorded liability of $3 million, the minimum amount in the range of its estimated probable NREPA liability, as no amount in the range was considered a better estimate than any other amount.
Consumers is a potentially responsible party at a number of contaminated sites administered under CERCLA. CERCLA liability is joint and several. In 2010, Consumers received official notification from the EPA that identified Consumers as a potentially responsible party for cleanup of PCBs at the Kalamazoo River CERCLA site. The notification claimed that the EPA has reason to believe that Consumers disposed of PCBs and arranged for the disposal and treatment of PCB-containing materials at portions of the site. In 2011, Consumers received a follow‑up letter from the EPA requesting that Consumers agree to participate in a removal action plan along with several other companies for an area of lower Portage Creek, which is connected to the Kalamazoo River. All parties, including Consumers, that were asked to participate in the removal action plan declined to accept liability. Until further information is received from the EPA, Consumers is unable to estimate a range of potential liability for cleanup of the river.
Based on its experience, Consumers estimates that its share of the total liability for known CERCLA sites will be between $3 million and $8 million. Various factors, including the number and creditworthiness of potentially responsible parties involved with each site, affect Consumers’ share of the total liability. At September 30, 2017, Consumers had a recorded liability of $3 million for its share of the total liability at these sites, the minimum amount in the range of its estimated probable CERCLA liability, as no amount in the range was considered a better estimate than any other amount.
The timing of payments related to Consumers’ remediation and other response activities at its CERCLA and NREPA sites is uncertain. Consumers periodically reviews these cost estimates. A change in the underlying assumptions, such as an increase in the number of sites, different remediation techniques, the nature and extent of contamination, and legal and regulatory requirements, could affect its estimates of NREPA and CERCLA liability.
Ludington PCB: In 1998, during routine maintenance activities, Consumers identified PCB as a component in certain paint, grout, and sealant materials at Ludington. Consumers removed part of the PCB material and replaced it with non‑PCB material. Consumers has had several communications with the EPA regarding this matter, but cannot predict the financial impact or outcome.
Consumers Gas Utility Contingencies
Gas Environmental Matters: Consumers expects to incur remediation and other response activity costs at a number of sites under the NREPA. These sites include 23 former MGP facilities. Consumers operated the facilities on these sites for some part of their operating lives. For some of these sites, Consumers has no present ownership interest or may own only a portion of the original site.
At September 30, 2017, Consumers had a recorded liability of $93 million for its remaining obligations for these sites. This amount represents the present value of long-term projected costs, using a discount rate of 2.57 percent and an inflation rate of 2.5 percent. The undiscounted amount of the remaining obligation is $104 million. Consumers expects to pay the following amounts for remediation and other response activity costs during the remainder of 2017 and in each of the next five years:
|
|||||||||||||||||||
In Millions |
|||||||||||||||||||
|
2017 | 2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||||
Consumers |
|||||||||||||||||||
Remediation and other response activity costs |
$ |
8 |
$ |
16 |
$ |
18 |
$ |
10 |
$ |
18 |
$ |
7 |
Consumers periodically reviews these cost estimates. Any significant change in the underlying assumptions, such as an increase in the number of sites, changes in remediation techniques, or legal and regulatory requirements, could affect Consumers’ estimates of annual response activity costs and the MGP liability.
Pursuant to orders issued by the MPSC, Consumers defers its MGP-related remediation costs and recovers them from its customers over a ten‑year period. At September 30, 2017, Consumers had a regulatory asset of $141 million related to the MGP sites.
Consumers estimates that its liability to perform remediation and other response activities at NREPA sites other than the MGP sites could reach $3 million. At September 30, 2017, Consumers had a recorded liability of less than $1 million, the minimum amount in the range of its estimated probable liability, as no amount in the range was considered a better estimate than any other amount.
Guarantees
Presented in the following table are CMS Energy’s and Consumers’ guarantees at September 30, 2017:
|
|||||||||
In Millions |
|||||||||
|
Maximum |
Carrying |
|||||||
Guarantee Description |
Issue Date |
Expiration Date |
Obligation |
Amount |
|||||
CMS Energy, including Consumers |
|||||||||
Indemnity obligations from stock and asset sale agreements1 |
Various |
Indefinite |
$ |
153 |
$ |
7 | |||
Guarantees2 |
Various |
Indefinite |
45 |
- |
|||||
Consumers |
|||||||||
Guarantee2 |
July 2011 |
Indefinite |
$ |
30 |
$ |
- |
1These obligations arose from stock and asset sale agreements under which CMS Energy or a subsidiary of CMS Energy indemnified the purchaser for losses resulting from various matters, primarily claims related to taxes. CMS Energy believes the likelihood of material loss to be remote for the indemnity obligations not recorded as liabilities.
2At Consumers, this obligation comprises a guarantee provided to the U.S. Department of Energy in connection with a settlement agreement regarding damages resulting from the department’s failure to accept spent nuclear fuel from nuclear power plants formerly owned by Consumers. At CMS Energy, the guarantee obligations comprise Consumers’ guarantee to the U.S. Department of Energy and CMS Energy’s 1994 guarantee of non-recourse revenue bonds issued by Genesee.
Additionally, in the normal course of business, CMS Energy, Consumers, and certain other subsidiaries of CMS Energy have entered into various agreements containing tax and other indemnity provisions for which they are unable to estimate the maximum potential obligation. The carrying value of these indemnity obligations is $1 million. CMS Energy and Consumers consider the likelihood that they would be required to perform or incur substantial losses related to these indemnities to be remote.
Other Contingencies
In addition to the matters disclosed in this Note and Note 2, Regulatory Matters, there are certain other lawsuits and administrative proceedings before various courts and governmental agencies arising in the ordinary course of business to which CMS Energy, Consumers, and certain other subsidiaries of CMS Energy are parties. These other lawsuits and proceedings may involve personal injury, property damage, contracts, environmental matters, federal and state taxes, rates, licensing, employment, and other matters. Further, CMS Energy and Consumers occasionally self-report certain regulatory non‑compliance matters that may or may not eventually result in administrative proceedings. CMS Energy and Consumers believe that the outcome of any one of these proceedings will not have a material negative effect on their consolidated results of operations, financial condition, or liquidity.
|
4:Financings and Capitalization
Financings: Presented in the following table is a summary of major long-term debt transactions during the nine months ended September 30, 2017.
|
||||||||
|
Principal |
Interest Rate |
Issue/Retirement |
Maturity Date |
||||
Debt issuances |
||||||||
CMS Energy, parent only |
||||||||
Senior notes |
$ |
350 | 3.450 |
% |
February 2017 |
August 2027 |
||
Total CMS Energy, parent only |
$ |
350 | ||||||
Consumers |
||||||||
First mortgage bonds |
$ |
350 | 3.950 |
% |
February 2017 |
July 2047 |
||
First mortgage bonds1 |
40 | 3.180 |
September 2017 |
September 2032 |
||||
First mortgage bonds1 |
125 | 3.520 |
September 2017 |
September 2037 |
||||
First mortgage bonds1 |
20 | 3.860 |
September 2017 |
September 2052 |
||||
Total Consumers |
$ |
535 | ||||||
Total CMS Energy |
$ |
885 | ||||||
Debt retirements |
||||||||
Consumers |
||||||||
First mortgage bonds |
$ |
250 | 5.150 |
% |
February 2017 |
February 2017 |
||
Senior notes |
180 | 6.875 |
September 2017 |
March 2018 |
||||
Total Consumers |
$ |
430 | ||||||
Total CMS Energy |
$ |
430 |
1These first mortgage bonds were issued in a September private placement under a bond purchase agreement executed in August. Under the agreement, Consumers will issue an additional $300 million of first mortgage bonds in a second private placement in November, consisting of $60 million of 3.18-percent first mortgage bonds due 2032, $210 million of 3.52-percent first mortgage bonds due 2037, and $30 million of 3.86-percent first mortgage bonds due 2052.
In October 2017, Consumers retired $100 million of 3.21‑percent first mortgage bonds at maturity.
Term Loan: In April 2017, CMS Energy reached an agreement to extend the maturity date of its $180 million term loan by one year, through April 2019.
Revolving Credit Facilities: The following secured revolving credit facilities with banks were available at September 30, 2017:
|
|||||||||||||
In Millions |
|||||||||||||
Expiration Date |
Amount of Facility |
Amount Borrowed |
Letters of Credit |
Amount Available |
|||||||||
CMS Energy, parent only |
|||||||||||||
May 27, 20221,2 |
$ |
550 |
$ |
- |
$ |
1 |
$ |
549 | |||||
Consumers |
|||||||||||||
May 27, 20222,3 |
$ |
650 |
$ |
- |
$ |
7 |
$ |
643 | |||||
November 23, 20183 |
250 |
- |
- |
250 | |||||||||
September 9, 20193,4 |
30 |
- |
30 |
- |
1During the nine months ended September 30, 2017, CMS Energy’s average borrowings totaled $28 million with a weighted-average interest rate of 2.02 percent. Obligations under this facility are secured by Consumers common stock.
2In May 2017, the expiration date of this revolving credit agreement was extended from May 2021 to May 2022.
3Obligations under this facility are secured by first mortgage bonds of Consumers.
4In June 2017, the expiration date of this letter of credit reimbursement agreement was extended from May 2018 to September 2019.
Short-term Borrowings: Under Consumers’ commercial paper program, Consumers may issue, in one or more placements, commercial paper notes with maturities of up to 365 days and that bear interest at fixed or floating rates. These issuances are supported by Consumers’ revolving credit facilities and may have an aggregate principal amount outstanding of up to $500 million. While the amount of outstanding commercial paper does not reduce the available capacity of the revolving credit facilities, Consumers does not intend to issue commercial paper in an amount exceeding the available capacity. At September 30, 2017, $230 million of commercial paper notes were outstanding under this program and recorded as current notes payable on the consolidated balance sheets of CMS Energy and Consumers.
Dividend Restrictions: At September 30, 2017, payment of dividends by CMS Energy on its common stock was limited to $4.5 billion under provisions of the Michigan Business Corporation Act of 1972.
Under the provisions of its articles of incorporation, at September 30, 2017, Consumers had $1.1 billion of unrestricted retained earnings available to pay dividends on its common stock to CMS Energy. Provisions of the Federal Power Act and the Natural Gas Act appear to restrict dividends payable by Consumers to the amount of Consumers’ retained earnings. Several decisions from FERC suggest that under a variety of circumstances, dividends from Consumers on its common stock would not be limited to amounts in Consumers’ retained earnings. Any decision by Consumers to pay dividends on its common stock in excess of retained earnings would be based on specific facts and circumstances and would be subject to a formal regulatory filing process.
For the nine months ended September 30, 2017, Consumers paid $347 million in dividends on its common stock to CMS Energy.
Issuance of Common Stock: In March 2017, CMS Energy entered into an updated continuous equity offering program permitting it to sell, from time to time in “at the market” offerings, common stock having an aggregate sales price of up to $100 million. Presented in the following table are the transactions that CMS Energy entered into under the program:
|
||||||||
|
Number of |
Average |
Net Proceeds |
|||||
June 2017 |
1,494,371 |
$ |
47.31 |
$ |
70 |
4:Financings and Capitalization
Financings: Presented in the following table is a summary of major long-term debt transactions during the nine months ended September 30, 2017.
|
||||||||
|
Principal |
Interest Rate |
Issue/Retirement |
Maturity Date |
||||
Debt issuances |
||||||||
CMS Energy, parent only |
||||||||
Senior notes |
$ |
350 | 3.450 |
% |
February 2017 |
August 2027 |
||
Total CMS Energy, parent only |
$ |
350 | ||||||
Consumers |
||||||||
First mortgage bonds |
$ |
350 | 3.950 |
% |
February 2017 |
July 2047 |
||
First mortgage bonds1 |
40 | 3.180 |
September 2017 |
September 2032 |
||||
First mortgage bonds1 |
125 | 3.520 |
September 2017 |
September 2037 |
||||
First mortgage bonds1 |
20 | 3.860 |
September 2017 |
September 2052 |
||||
Total Consumers |
$ |
535 | ||||||
Total CMS Energy |
$ |
885 | ||||||
Debt retirements |
||||||||
Consumers |
||||||||
First mortgage bonds |
$ |
250 | 5.150 |
% |
February 2017 |
February 2017 |
||
Senior notes |
180 | 6.875 |
September 2017 |
March 2018 |
||||
Total Consumers |
$ |
430 | ||||||
Total CMS Energy |
$ |
430 |
1These first mortgage bonds were issued in a September private placement under a bond purchase agreement executed in August. Under the agreement, Consumers will issue an additional $300 million of first mortgage bonds in a second private placement in November, consisting of $60 million of 3.18-percent first mortgage bonds due 2032, $210 million of 3.52-percent first mortgage bonds due 2037, and $30 million of 3.86-percent first mortgage bonds due 2052.
In October 2017, Consumers retired $100 million of 3.21‑percent first mortgage bonds at maturity.
Term Loan: In April 2017, CMS Energy reached an agreement to extend the maturity date of its $180 million term loan by one year, through April 2019.
Revolving Credit Facilities: The following secured revolving credit facilities with banks were available at September 30, 2017:
|
|||||||||||||
In Millions |
|||||||||||||
Expiration Date |
Amount of Facility |
Amount Borrowed |
Letters of Credit |
Amount Available |
|||||||||
CMS Energy, parent only |
|||||||||||||
May 27, 20221,2 |
$ |
550 |
$ |
- |
$ |
1 |
$ |
549 | |||||
Consumers |
|||||||||||||
May 27, 20222,3 |
$ |
650 |
$ |
- |
$ |
7 |
$ |
643 | |||||
November 23, 20183 |
250 |
- |
- |
250 | |||||||||
September 9, 20193,4 |
30 |
- |
30 |
- |
1During the nine months ended September 30, 2017, CMS Energy’s average borrowings totaled $28 million with a weighted-average interest rate of 2.02 percent. Obligations under this facility are secured by Consumers common stock.
2In May 2017, the expiration date of this revolving credit agreement was extended from May 2021 to May 2022.
3Obligations under this facility are secured by first mortgage bonds of Consumers.
4In June 2017, the expiration date of this letter of credit reimbursement agreement was extended from May 2018 to September 2019.
Short-term Borrowings: Under Consumers’ commercial paper program, Consumers may issue, in one or more placements, commercial paper notes with maturities of up to 365 days and that bear interest at fixed or floating rates. These issuances are supported by Consumers’ revolving credit facilities and may have an aggregate principal amount outstanding of up to $500 million. While the amount of outstanding commercial paper does not reduce the available capacity of the revolving credit facilities, Consumers does not intend to issue commercial paper in an amount exceeding the available capacity. At September 30, 2017, $230 million of commercial paper notes were outstanding under this program and recorded as current notes payable on the consolidated balance sheets of CMS Energy and Consumers.
Dividend Restrictions: At September 30, 2017, payment of dividends by CMS Energy on its common stock was limited to $4.5 billion under provisions of the Michigan Business Corporation Act of 1972.
Under the provisions of its articles of incorporation, at September 30, 2017, Consumers had $1.1 billion of unrestricted retained earnings available to pay dividends on its common stock to CMS Energy. Provisions of the Federal Power Act and the Natural Gas Act appear to restrict dividends payable by Consumers to the amount of Consumers’ retained earnings. Several decisions from FERC suggest that under a variety of circumstances, dividends from Consumers on its common stock would not be limited to amounts in Consumers’ retained earnings. Any decision by Consumers to pay dividends on its common stock in excess of retained earnings would be based on specific facts and circumstances and would be subject to a formal regulatory filing process.
For the nine months ended September 30, 2017, Consumers paid $347 million in dividends on its common stock to CMS Energy.
Issuance of Common Stock: In March 2017, CMS Energy entered into an updated continuous equity offering program permitting it to sell, from time to time in “at the market” offerings, common stock having an aggregate sales price of up to $100 million. Presented in the following table are the transactions that CMS Energy entered into under the program:
|
||||||||
|
Number of |
Average |
Net Proceeds |
|||||
June 2017 |
1,494,371 |
$ |
47.31 |
$ |
70 |
|
Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. When measuring fair value, CMS Energy and Consumers are required to incorporate all assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. A fair value hierarchy prioritizes inputs used to measure fair value according to their observability in the market. The three levels of the fair value hierarchy are as follows:
· |
Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities. |
· |
Level 2 inputs are observable, market-based inputs, other than Level 1 prices. Level 2 inputs may include quoted prices for similar assets or liabilities in active markets, quoted prices in inactive markets, and inputs derived from or corroborated by observable market data. |
· |
Level 3 inputs are unobservable inputs that reflect CMS Energy’s or Consumers’ own assumptions about how market participants would value their assets and liabilities. |
CMS Energy and Consumers classify fair value measurements within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement in its entirety.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Presented in the following table are CMS Energy’s and Consumers’ assets and liabilities recorded at fair value on a recurring basis:
|
||||||||||||||||
In Millions |
||||||||||||||||
|
CMS Energy, including Consumers |
Consumers |
||||||||||||||
|
September 30 |
December 31 |
September 30 |
December 31 |
||||||||||||
|
2017 | 2016 | 2017 | 2016 | ||||||||||||
Assets1 |
||||||||||||||||
Cash equivalents |
$ |
21 |
$ |
44 |
$ |
- |
$ |
- |
||||||||
Restricted cash equivalents |
27 | 19 | 27 | 19 | ||||||||||||
CMS Energy common stock |
- |
- |
21 | 33 | ||||||||||||
Nonqualified deferred |
13 | 12 | 9 | 8 | ||||||||||||
DB SERP |
||||||||||||||||
Cash equivalents |
4 | 3 | 3 | 2 | ||||||||||||
Mutual funds |
145 | 141 | 105 | 102 | ||||||||||||
Derivative instruments |
||||||||||||||||
Commodity contracts |
2 | 1 | 2 | 1 | ||||||||||||
Total |
$ |
212 |
$ |
220 |
$ |
167 |
$ |
165 | ||||||||
Liabilities1 |
||||||||||||||||
Nonqualified deferred |
$ |
13 |
$ |
12 |
$ |
9 |
$ |
8 | ||||||||
Derivative instruments |
||||||||||||||||
Commodity contracts |
1 |
- |
1 |
- |
||||||||||||
Total |
$ |
14 |
$ |
12 |
$ |
10 |
$ |
8 |
1All assets and liabilities were classified as Level 1 with the exception of some commodity contracts, which were classified as Level 3.
Cash Equivalents: Cash equivalents and restricted cash equivalents consist of money market funds with daily liquidity. Short-term debt instruments classified as cash equivalents on the consolidated balance sheets are not included since they are recorded at amortized cost.
Nonqualified Deferred Compensation Plan Assets and Liabilities: The nonqualified deferred compensation plan assets consist of mutual funds, which are valued using the daily quoted net asset values. CMS Energy and Consumers value their nonqualified deferred compensation plan liabilities based on the fair values of the plan assets, as they reflect what is owed to the plan participants in accordance with their investment elections. CMS Energy and Consumers report the assets in other non‑current assets and the liabilities in other non‑current liabilities on their consolidated balance sheets.
DB SERP Assets: The DB SERP cash equivalents consist of a money market fund with daily liquidity. The DB SERP invests in mutual funds that hold primarily fixed-income instruments of varying maturities. In order to meet their investment objectives, the funds hold investment-grade debt securities, and may invest a portion of their assets in high-yield securities, foreign debt, and derivative instruments. CMS Energy and Consumers value these funds using the daily quoted net asset values. CMS Energy and Consumers report their DB SERP assets in other non‑current assets on their consolidated balance sheets. For additional details about DB SERP securities, see Note 6, Financial Instruments.
Derivative Instruments: CMS Energy and Consumers value their derivative instruments using either a market approach that incorporates information from market transactions, or an income approach that discounts future expected cash flows to a present value amount. CMS Energy values its exchange-traded derivative contracts based on Level 1 quoted prices. CMS Energy’s and Consumers’ remaining derivatives are classified as Level 3.
The majority of these derivatives are FTRs held by Consumers. Consumers 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. Under regulatory accounting, all changes in fair value associated with FTRs are deferred as regulatory assets and liabilities until the instruments are settled. Due to the lack of quoted pricing information, Consumers determines the fair value of its FTRs based on Consumers’ average historical settlements.
Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. When measuring fair value, CMS Energy and Consumers are required to incorporate all assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. A fair value hierarchy prioritizes inputs used to measure fair value according to their observability in the market. The three levels of the fair value hierarchy are as follows:
· |
Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities. |
· |
Level 2 inputs are observable, market-based inputs, other than Level 1 prices. Level 2 inputs may include quoted prices for similar assets or liabilities in active markets, quoted prices in inactive markets, and inputs derived from or corroborated by observable market data. |
· |
Level 3 inputs are unobservable inputs that reflect CMS Energy’s or Consumers’ own assumptions about how market participants would value their assets and liabilities. |
CMS Energy and Consumers classify fair value measurements within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement in its entirety.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Presented in the following table are CMS Energy’s and Consumers’ assets and liabilities recorded at fair value on a recurring basis:
|
||||||||||||||||
In Millions |
||||||||||||||||
|
CMS Energy, including Consumers |
Consumers |
||||||||||||||
|
September 30 |
December 31 |
September 30 |
December 31 |
||||||||||||
|
2017 | 2016 | 2017 | 2016 | ||||||||||||
Assets1 |
||||||||||||||||
Cash equivalents |
$ |
21 |
$ |
44 |
$ |
- |
$ |
- |
||||||||
Restricted cash equivalents |
27 | 19 | 27 | 19 | ||||||||||||
CMS Energy common stock |
- |
- |
21 | 33 | ||||||||||||
Nonqualified deferred |
13 | 12 | 9 | 8 | ||||||||||||
DB SERP |
||||||||||||||||
Cash equivalents |
4 | 3 | 3 | 2 | ||||||||||||
Mutual funds |
145 | 141 | 105 | 102 | ||||||||||||
Derivative instruments |
||||||||||||||||
Commodity contracts |
2 | 1 | 2 | 1 | ||||||||||||
Total |
$ |
212 |
$ |
220 |
$ |
167 |
$ |
165 | ||||||||
Liabilities1 |
||||||||||||||||
Nonqualified deferred |
$ |
13 |
$ |
12 |
$ |
9 |
$ |
8 | ||||||||
Derivative instruments |
||||||||||||||||
Commodity contracts |
1 |
- |
1 |
- |
||||||||||||
Total |
$ |
14 |
$ |
12 |
$ |
10 |
$ |
8 |
1All assets and liabilities were classified as Level 1 with the exception of some commodity contracts, which were classified as Level 3.
Cash Equivalents: Cash equivalents and restricted cash equivalents consist of money market funds with daily liquidity. Short-term debt instruments classified as cash equivalents on the consolidated balance sheets are not included since they are recorded at amortized cost.
Nonqualified Deferred Compensation Plan Assets and Liabilities: The nonqualified deferred compensation plan assets consist of mutual funds, which are valued using the daily quoted net asset values. CMS Energy and Consumers value their nonqualified deferred compensation plan liabilities based on the fair values of the plan assets, as they reflect what is owed to the plan participants in accordance with their investment elections. CMS Energy and Consumers report the assets in other non‑current assets and the liabilities in other non‑current liabilities on their consolidated balance sheets.
DB SERP Assets: The DB SERP cash equivalents consist of a money market fund with daily liquidity. The DB SERP invests in mutual funds that hold primarily fixed-income instruments of varying maturities. In order to meet their investment objectives, the funds hold investment-grade debt securities, and may invest a portion of their assets in high-yield securities, foreign debt, and derivative instruments. CMS Energy and Consumers value these funds using the daily quoted net asset values. CMS Energy and Consumers report their DB SERP assets in other non‑current assets on their consolidated balance sheets. For additional details about DB SERP securities, see Note 6, Financial Instruments.
Derivative Instruments: CMS Energy and Consumers value their derivative instruments using either a market approach that incorporates information from market transactions, or an income approach that discounts future expected cash flows to a present value amount. CMS Energy values its exchange-traded derivative contracts based on Level 1 quoted prices. CMS Energy’s and Consumers’ remaining derivatives are classified as Level 3.
The majority of these derivatives are FTRs held by Consumers. Consumers 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. Under regulatory accounting, all changes in fair value associated with FTRs are deferred as regulatory assets and liabilities until the instruments are settled. Due to the lack of quoted pricing information, Consumers determines the fair value of its FTRs based on Consumers’ average historical settlements.
|
Presented in the following table are the carrying amounts and fair values, by level within the fair value hierarchy, of CMS Energy’s and Consumers’ financial instruments that are not recorded at fair value. The table excludes cash, cash equivalents, short-term financial instruments, and trade accounts receivable and payable whose carrying amounts approximate their fair values. For information about assets and liabilities recorded at fair value and for additional details regarding the fair value hierarchy, see Note 5, Fair Value Measurements.
|
||||||||||||||||||||||||||||||||
In Millions |
||||||||||||||||||||||||||||||||
|
September 30, 2017 |
December 31, 2016 |
||||||||||||||||||||||||||||||
|
Fair Value |
Fair Value |
||||||||||||||||||||||||||||||
|
Carrying |
Level |
Carrying |
Level |
||||||||||||||||||||||||||||
|
Amount |
Total |
1 | 2 | 3 |
Amount |
Total |
1 | 2 | 3 | ||||||||||||||||||||||
CMS Energy, including Consumers |
||||||||||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||
Long-term |
$ |
22 |
$ |
22 |
$ |
- |
$ |
- |
$ |
22 |
$ |
22 |
$ |
22 |
$ |
- |
$ |
- |
$ |
22 | ||||||||||||
Notes |
1,382 | 1,479 |
- |
- |
1,479 | 1,326 | 1,415 |
- |
- |
1,415 | ||||||||||||||||||||||
Securities held |
16 | 16 |
- |
16 |
- |
13 | 13 |
- |
13 |
- |
||||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||||||||||
Long-term |
9,983 | 10,484 |
- |
9,331 | 1,153 | 9,504 | 9,953 |
- |
8,990 | 963 | ||||||||||||||||||||||
Long-term |
18 | 18 |
- |
- |
18 | 17 | 17 |
- |
- |
17 | ||||||||||||||||||||||
Consumers |
||||||||||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||
Long-term |
$ |
22 |
$ |
22 |
$ |
- |
$ |
- |
$ |
22 |
$ |
22 |
$ |
22 |
$ |
- |
$ |
- |
$ |
22 | ||||||||||||
Notes |
46 | 46 |
- |
- |
46 | 45 | 45 |
- |
- |
45 | ||||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||||||||||
Long-term |
5,718 | 6,032 |
- |
4,879 | 1,153 | 5,628 | 5,903 |
- |
4,940 | 963 |
1Includes current accounts receivable of $14 million at September 30, 2017 and $12 million at December 31, 2016.
2Includes current portion of notes receivable of $228 million at September 30, 2017 and $219 million at December 31, 2016.
3Includes current portion of long-term debt of $959 million at September 30, 2017 and $864 million at December 31, 2016.
4Includes current portion of long-term payables of $1 million at September 30, 2017 and December 31, 2016.
5Includes current portion of notes receivable of $30 million at September 30, 2017 and $29 million at December 31, 2016.
6Includes current portion of long-term debt of $443 million at September 30, 2017 and $375 million at December 31, 2016.
At CMS Energy, notes receivable consist primarily of EnerBank’s fixed-rate installment loans. EnerBank estimates the fair value of these loans using a discounted cash flows technique that incorporates market interest rates as well as assumptions about the remaining life of the loans and credit risk.
CMS Energy and Consumers estimate the fair value of their long-term debt using quoted prices from market trades of the debt, if available. In the absence of quoted prices, CMS Energy and Consumers calculate market yields and prices for the debt using a matrix method that incorporates market data for similarly rated debt. Depending on the information available, other valuation techniques and models may be used that rely on assumptions that cannot be observed or confirmed through market transactions.
The effects of third-party credit enhancements are excluded from the fair value measurements of long-term debt. At September 30, 2017 and December 31, 2016, CMS Energy’s long-term debt included $103 million principal amount that was supported by third-party credit enhancements. This entire principal amount was at Consumers.
Presented in the following table are CMS Energy’s and Consumers’ investment securities classified as available for sale or held to maturity:
|
||||||||||||||||||||||||||
In Millions |
||||||||||||||||||||||||||
|
September 30, 2017 |
December 31, 2016 |
||||||||||||||||||||||||
|
Unrealized |
Unrealized |
Fair |
Unrealized |
Unrealized |
Fair |
||||||||||||||||||||
|
Cost |
Gains |
Losses |
Value |
Cost |
Gains |
Losses |
Value |
||||||||||||||||||
CMS Energy, including Consumers |
||||||||||||||||||||||||||
Available for sale |
||||||||||||||||||||||||||
DB SERP |
||||||||||||||||||||||||||
Mutual funds |
$ |
142 |
$ |
3 |
$ |
- |
$ |
145 |
$ |
141 |
$ |
- |
$ |
- |
$ |
141 | ||||||||||
Held to maturity |
||||||||||||||||||||||||||
Debt securities |
16 |
- |
- |
16 | 13 |
- |
- |
13 | ||||||||||||||||||
Consumers |
||||||||||||||||||||||||||
Available for sale |
||||||||||||||||||||||||||
DB SERP |
||||||||||||||||||||||||||
Mutual funds |
$ |
103 |
$ |
2 |
$ |
- |
$ |
105 |
$ |
102 |
$ |
- |
$ |
- |
$ |
102 | ||||||||||
CMS Energy |
2 | 19 |
- |
21 | 4 | 29 |
- |
33 |
The mutual funds classified as available for sale hold primarily fixed-income instruments of varying maturities. Debt securities classified as held to maturity consist primarily of mortgage-backed securities and Utah Housing Corporation bonds held by EnerBank.
Presented in the following table are the carrying amounts and fair values, by level within the fair value hierarchy, of CMS Energy’s and Consumers’ financial instruments that are not recorded at fair value. The table excludes cash, cash equivalents, short-term financial instruments, and trade accounts receivable and payable whose carrying amounts approximate their fair values. For information about assets and liabilities recorded at fair value and for additional details regarding the fair value hierarchy, see Note 5, Fair Value Measurements.
|
||||||||||||||||||||||||||||||||
In Millions |
||||||||||||||||||||||||||||||||
|
September 30, 2017 |
December 31, 2016 |
||||||||||||||||||||||||||||||
|
Fair Value |
Fair Value |
||||||||||||||||||||||||||||||
|
Carrying |
Level |
Carrying |
Level |
||||||||||||||||||||||||||||
|
Amount |
Total |
1 | 2 | 3 |
Amount |
Total |
1 | 2 | 3 | ||||||||||||||||||||||
CMS Energy, including Consumers |
||||||||||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||
Long-term |
$ |
22 |
$ |
22 |
$ |
- |
$ |
- |
$ |
22 |
$ |
22 |
$ |
22 |
$ |
- |
$ |
- |
$ |
22 | ||||||||||||
Notes |
1,382 | 1,479 |
- |
- |
1,479 | 1,326 | 1,415 |
- |
- |
1,415 | ||||||||||||||||||||||
Securities held |
16 | 16 |
- |
16 |
- |
13 | 13 |
- |
13 |
- |
||||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||||||||||
Long-term |
9,983 | 10,484 |
- |
9,331 | 1,153 | 9,504 | 9,953 |
- |
8,990 | 963 | ||||||||||||||||||||||
Long-term |
18 | 18 |
- |
- |
18 | 17 | 17 |
- |
- |
17 | ||||||||||||||||||||||
Consumers |
||||||||||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||
Long-term |
$ |
22 |
$ |
22 |
$ |
- |
$ |
- |
$ |
22 |
$ |
22 |
$ |
22 |
$ |
- |
$ |
- |
$ |
22 | ||||||||||||
Notes |
46 | 46 |
- |
- |
46 | 45 | 45 |
- |
- |
45 | ||||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||||||||||
Long-term |
5,718 | 6,032 |
- |
4,879 | 1,153 | 5,628 | 5,903 |
- |
4,940 | 963 |
1Includes current accounts receivable of $14 million at September 30, 2017 and $12 million at December 31, 2016.
2Includes current portion of notes receivable of $228 million at September 30, 2017 and $219 million at December 31, 2016.
3Includes current portion of long-term debt of $959 million at September 30, 2017 and $864 million at December 31, 2016.
4Includes current portion of long-term payables of $1 million at September 30, 2017 and December 31, 2016.
5Includes current portion of notes receivable of $30 million at September 30, 2017 and $29 million at December 31, 2016.
6Includes current portion of long-term debt of $443 million at September 30, 2017 and $375 million at December 31, 2016.
At CMS Energy, notes receivable consist primarily of EnerBank’s fixed-rate installment loans. EnerBank estimates the fair value of these loans using a discounted cash flows technique that incorporates market interest rates as well as assumptions about the remaining life of the loans and credit risk.
CMS Energy and Consumers estimate the fair value of their long-term debt using quoted prices from market trades of the debt, if available. In the absence of quoted prices, CMS Energy and Consumers calculate market yields and prices for the debt using a matrix method that incorporates market data for similarly rated debt. Depending on the information available, other valuation techniques and models may be used that rely on assumptions that cannot be observed or confirmed through market transactions.
The effects of third-party credit enhancements are excluded from the fair value measurements of long-term debt. At September 30, 2017 and December 31, 2016, CMS Energy’s long-term debt included $103 million principal amount that was supported by third-party credit enhancements. This entire principal amount was at Consumers.
Presented in the following table are CMS Energy’s and Consumers’ investment securities classified as available for sale or held to maturity:
|
||||||||||||||||||||||||||
In Millions |
||||||||||||||||||||||||||
|
September 30, 2017 |
December 31, 2016 |
||||||||||||||||||||||||
|
Unrealized |
Unrealized |
Fair |
Unrealized |
Unrealized |
Fair |
||||||||||||||||||||
|
Cost |
Gains |
Losses |
Value |
Cost |
Gains |
Losses |
Value |
||||||||||||||||||
CMS Energy, including Consumers |
||||||||||||||||||||||||||
Available for sale |
||||||||||||||||||||||||||
DB SERP |
||||||||||||||||||||||||||
Mutual funds |
$ |
142 |
$ |
3 |
$ |
- |
$ |
145 |
$ |
141 |
$ |
- |
$ |
- |
$ |
141 | ||||||||||
Held to maturity |
||||||||||||||||||||||||||
Debt securities |
16 |
- |
- |
16 | 13 |
- |
- |
13 | ||||||||||||||||||
Consumers |
||||||||||||||||||||||||||
Available for sale |
||||||||||||||||||||||||||
DB SERP |
||||||||||||||||||||||||||
Mutual funds |
$ |
103 |
$ |
2 |
$ |
- |
$ |
105 |
$ |
102 |
$ |
- |
$ |
- |
$ |
102 | ||||||||||
CMS Energy |
2 | 19 |
- |
21 | 4 | 29 |
- |
33 |
The mutual funds classified as available for sale hold primarily fixed-income instruments of varying maturities. Debt securities classified as held to maturity consist primarily of mortgage-backed securities and Utah Housing Corporation bonds held by EnerBank.
|
7:Notes Receivable
Presented in the following table are details of CMS Energy’s and Consumers’ current and non‑current notes receivable:
|
|||||||
In Millions |
|||||||
|
September 30, 2017 |
December 31, 2016 |
|||||
CMS Energy, including Consumers |
|||||||
Current |
|||||||
EnerBank notes receivable, net of allowance for loan losses |
$ |
167 |
$ |
151 | |||
EnerBank notes receivable held for sale |
31 | 39 | |||||
Michigan tax settlement |
30 | 29 | |||||
Non-current |
|||||||
EnerBank notes receivable |
1,134 | 1,088 | |||||
Michigan tax settlement |
20 | 19 | |||||
Total notes receivable |
$ |
1,382 |
$ |
1,326 | |||
Consumers |
|||||||
Current |
|||||||
Michigan tax settlement |
$ |
30 |
$ |
29 | |||
Non-current |
|||||||
Michigan tax settlement |
16 | 16 | |||||
Total notes receivable |
$ |
46 |
$ |
45 |
EnerBank notes receivable are unsecured consumer installment loans for financing home improvements. EnerBank records its notes receivable at cost, less an allowance for loan losses. In March 2017, EnerBank completed a sale of notes receivable, receiving proceeds of $19 million and recording an insignificant gain. At September 30, 2017, $31 million of notes receivable remained classified as held for sale; the fair value of notes receivable held for sale exceeded their carrying value. These notes are expected to be sold in 2017.
Authorized contractors pay fees to EnerBank to provide borrowers with same-as-cash, zero interest, or reduced interest loans. Unearned income associated with the loan fees, which is recorded as a reduction to notes receivable on CMS Energy’s consolidated balance sheets, was $83 million at September 30, 2017 and $84 million at December 31, 2016. Unearned income associated with the loan fees for notes receivable held for sale was $6 million at September 30, 2017 and $8 million at December 31, 2016.
The allowance for loan losses is a valuation allowance to reflect estimated credit losses. The allowance is increased by the provision for loan losses and decreased by loan charge-offs net of recoveries. Management estimates the allowance balance required by taking into consideration historical loan loss experience, the nature and volume of the portfolio, economic conditions, and other factors. Loan losses are charged against the allowance when the loss is confirmed, but no later than the point at which a loan becomes 120 days past due.
Loans that are 30 days or more past due are considered delinquent. The balance of EnerBank’s delinquent consumer loans was $12 million at September 30, 2017 and $11 million at December 31, 2016.
At September 30, 2017 and December 31, 2016, $1 million of EnerBank’s loans had been modified as troubled debt restructurings.
7:Notes Receivable
Presented in the following table are details of CMS Energy’s and Consumers’ current and non‑current notes receivable:
|
|||||||
In Millions |
|||||||
|
September 30, 2017 |
December 31, 2016 |
|||||
CMS Energy, including Consumers |
|||||||
Current |
|||||||
EnerBank notes receivable, net of allowance for loan losses |
$ |
167 |
$ |
151 | |||
EnerBank notes receivable held for sale |
31 | 39 | |||||
Michigan tax settlement |
30 | 29 | |||||
Non-current |
|||||||
EnerBank notes receivable |
1,134 | 1,088 | |||||
Michigan tax settlement |
20 | 19 | |||||
Total notes receivable |
$ |
1,382 |
$ |
1,326 | |||
Consumers |
|||||||
Current |
|||||||
Michigan tax settlement |
$ |
30 |
$ |
29 | |||
Non-current |
|||||||
Michigan tax settlement |
16 | 16 | |||||
Total notes receivable |
$ |
46 |
$ |
45 |
EnerBank notes receivable are unsecured consumer installment loans for financing home improvements. EnerBank records its notes receivable at cost, less an allowance for loan losses. In March 2017, EnerBank completed a sale of notes receivable, receiving proceeds of $19 million and recording an insignificant gain. At September 30, 2017, $31 million of notes receivable remained classified as held for sale; the fair value of notes receivable held for sale exceeded their carrying value. These notes are expected to be sold in 2017.
Authorized contractors pay fees to EnerBank to provide borrowers with same-as-cash, zero interest, or reduced interest loans. Unearned income associated with the loan fees, which is recorded as a reduction to notes receivable on CMS Energy’s consolidated balance sheets, was $83 million at September 30, 2017 and $84 million at December 31, 2016. Unearned income associated with the loan fees for notes receivable held for sale was $6 million at September 30, 2017 and $8 million at December 31, 2016.
The allowance for loan losses is a valuation allowance to reflect estimated credit losses. The allowance is increased by the provision for loan losses and decreased by loan charge-offs net of recoveries. Management estimates the allowance balance required by taking into consideration historical loan loss experience, the nature and volume of the portfolio, economic conditions, and other factors. Loan losses are charged against the allowance when the loss is confirmed, but no later than the point at which a loan becomes 120 days past due.
Loans that are 30 days or more past due are considered delinquent. The balance of EnerBank’s delinquent consumer loans was $12 million at September 30, 2017 and $11 million at December 31, 2016.
At September 30, 2017 and December 31, 2016, $1 million of EnerBank’s loans had been modified as troubled debt restructurings.
|
CMS Energy and Consumers provide pension, OPEB, and other retirement benefits to employees under a number of different plans.
CMS Energy and Consumers elected to adopt ASU 2017‑07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, as of January 1, 2017. For further details on the implementation of this standard, see Note 1, New Accounting Standards.
Presented in the following table are the costs (credits) and other changes in plan assets and benefit obligations incurred in CMS Energy’s and Consumers’ retirement benefits plans:
|
||||||||||||||||||||||||||||
In Millions |
||||||||||||||||||||||||||||
|
DB Pension Plan |
OPEB Plan |
||||||||||||||||||||||||||
|
Three Months Ended |
Nine Months Ended |
Three Months Ended |
Nine Months Ended |
||||||||||||||||||||||||
September 30 |
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||
CMS Energy, including Consumers |
||||||||||||||||||||||||||||
Net periodic cost (credit) |
||||||||||||||||||||||||||||
Service cost |
$ |
12 |
$ |
10 |
$ |
34 |
$ |
31 |
$ |
5 |
$ |
5 |
$ |
15 |
$ |
14 | ||||||||||||
Interest cost |
23 | 21 | 67 | 64 | 13 | 12 | 39 | 35 | ||||||||||||||||||||
Expected return on plan assets |
(39) | (36) | (115) | (110) | (22) | (22) | (67) | (65) | ||||||||||||||||||||
Amortization of: |
||||||||||||||||||||||||||||
Net loss |
20 | 17 | 60 | 52 | 7 | 5 | 23 | 16 | ||||||||||||||||||||
Prior service cost (credit) |
1 | 1 | 3 | 3 | (8) | (10) | (26) | (31) | ||||||||||||||||||||
Net periodic cost (credit) |
$ |
17 |
$ |
13 |
$ |
49 |
$ |
40 |
$ |
(5) |
$ |
(10) |
$ |
(16) |
$ |
(31) | ||||||||||||
Consumers |
||||||||||||||||||||||||||||
Net periodic cost (credit) |
||||||||||||||||||||||||||||
Service cost |
$ |
11 |
$ |
11 |
$ |
33 |
$ |
31 |
$ |
5 |
$ |
4 |
$ |
14 |
$ |
13 | ||||||||||||
Interest cost |
22 | 20 | 65 | 62 | 12 | 12 | 38 | 34 | ||||||||||||||||||||
Expected return on plan assets |
(38) | (35) | (112) | (107) | (21) | (20) | (63) | (60) | ||||||||||||||||||||
Amortization of: |
||||||||||||||||||||||||||||
Net loss |
19 | 16 | 58 | 50 | 8 | 5 | 24 | 16 | ||||||||||||||||||||
Prior service cost (credit) |
1 | 1 | 3 | 3 | (8) | (10) | (25) | (30) | ||||||||||||||||||||
Net periodic cost (credit) |
$ |
15 |
$ |
13 |
$ |
47 |
$ |
39 |
$ |
(4) |
$ |
(9) |
$ |
(12) |
$ |
(27) |
CMS Energy and Consumers provide pension, OPEB, and other retirement benefits to employees under a number of different plans.
CMS Energy and Consumers elected to adopt ASU 2017‑07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, as of January 1, 2017. For further details on the implementation of this standard, see Note 1, New Accounting Standards.
Presented in the following table are the costs (credits) and other changes in plan assets and benefit obligations incurred in CMS Energy’s and Consumers’ retirement benefits plans:
|
||||||||||||||||||||||||||||
In Millions |
||||||||||||||||||||||||||||
|
DB Pension Plan |
OPEB Plan |
||||||||||||||||||||||||||
|
Three Months Ended |
Nine Months Ended |
Three Months Ended |
Nine Months Ended |
||||||||||||||||||||||||
September 30 |
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||
CMS Energy, including Consumers |
||||||||||||||||||||||||||||
Net periodic cost (credit) |
||||||||||||||||||||||||||||
Service cost |
$ |
12 |
$ |
10 |
$ |
34 |
$ |
31 |
$ |
5 |
$ |
5 |
$ |
15 |
$ |
14 | ||||||||||||
Interest cost |
23 | 21 | 67 | 64 | 13 | 12 | 39 | 35 | ||||||||||||||||||||
Expected return on plan assets |
(39) | (36) | (115) | (110) | (22) | (22) | (67) | (65) | ||||||||||||||||||||
Amortization of: |
||||||||||||||||||||||||||||
Net loss |
20 | 17 | 60 | 52 | 7 | 5 | 23 | 16 | ||||||||||||||||||||
Prior service cost (credit) |
1 | 1 | 3 | 3 | (8) | (10) | (26) | (31) | ||||||||||||||||||||
Net periodic cost (credit) |
$ |
17 |
$ |
13 |
$ |
49 |
$ |
40 |
$ |
(5) |
$ |
(10) |
$ |
(16) |
$ |
(31) | ||||||||||||
Consumers |
||||||||||||||||||||||||||||
Net periodic cost (credit) |
||||||||||||||||||||||||||||
Service cost |
$ |
11 |
$ |
11 |
$ |
33 |
$ |
31 |
$ |
5 |
$ |
4 |
$ |
14 |
$ |
13 | ||||||||||||
Interest cost |
22 | 20 | 65 | 62 | 12 | 12 | 38 | 34 | ||||||||||||||||||||
Expected return on plan assets |
(38) | (35) | (112) | (107) | (21) | (20) | (63) | (60) | ||||||||||||||||||||
Amortization of: |
||||||||||||||||||||||||||||
Net loss |
19 | 16 | 58 | 50 | 8 | 5 | 24 | 16 | ||||||||||||||||||||
Prior service cost (credit) |
1 | 1 | 3 | 3 | (8) | (10) | (25) | (30) | ||||||||||||||||||||
Net periodic cost (credit) |
$ |
15 |
$ |
13 |
$ |
47 |
$ |
39 |
$ |
(4) |
$ |
(9) |
$ |
(12) |
$ |
(27) |
|
Presented in the following table is a reconciliation of the statutory U.S. federal income tax rate to the effective income tax rate from continuing operations:
|
|||||||
Nine Months Ended September 30 |
2017 | 2016 | |||||
CMS Energy, including Consumers |
|||||||
U.S. federal income tax rate |
35.0 |
% |
35.0 |
% |
|||
Increase (decrease) in income taxes from: |
|||||||
State and local income taxes, net of federal effect1 |
2.3 | 4.2 | |||||
Accelerated flow-through of regulatory tax benefits2 |
(4.3) | (4.7) | |||||
Employee share-based awards |
(0.9) | (0.8) | |||||
Other, net |
(2.0) | (1.4) | |||||
Effective tax rate |
30.1 |
% |
32.3 |
% |
|||
Consumers |
|||||||
U.S. federal income tax rate |
35.0 |
% |
35.0 |
% |
|||
Increase (decrease) in income taxes from: |
|||||||
State and local income taxes, net of federal effect1 |
2.3 | 4.6 | |||||
Accelerated flow-through of regulatory tax benefits2 |
(3.9) | (4.0) | |||||
Employee share-based awards |
(0.8) | (0.7) | |||||
Other, net |
(2.3) | (1.2) | |||||
Effective tax rate |
30.3 |
% |
33.7 |
% |
1In September 2017, CMS Energy completed the evaluation of its methodology for the state apportionment of Consumers’ electricity sales to MISO, taking into account recent state tax law developments in the electric utility sector. As a result, CMS Energy intends to amend state income tax filings for 2013 through 2016 to seek a refund of taxes previously paid. To recognize the anticipated refund and the impact of the expected lower effective tax rate on their deferred state tax liabilities, CMS Energy recorded a $15 million income tax benefit and Consumers recorded a $16 million income tax benefit in September 2017. Both amounts are net of reserves for uncertain tax positions. For the nine months ended September 30, 2017, the impact of the benefit was a 2.3 percentage point reduction to CMS Energy’s effective tax rate and a 2.2 percentage point reduction to Consumers’ effective tax rate.
2Since 2014, Consumers has followed a regulatory treatment ordered by the MPSC that accelerates the return of certain income tax benefits to customers. This change, which also accelerates Consumers’ recognition of the income tax benefits, reduced Consumers’ income tax expense by $28 million for the nine months ended September 30, 2017 and by $30 million for the nine months ended September 30, 2016.
Presented in the following table is a reconciliation of the statutory U.S. federal income tax rate to the effective income tax rate from continuing operations:
|
|||||||
Nine Months Ended September 30 |
2017 | 2016 | |||||
CMS Energy, including Consumers |
|||||||
U.S. federal income tax rate |
35.0 |
% |
35.0 |
% |
|||
Increase (decrease) in income taxes from: |
|||||||
State and local income taxes, net of federal effect1 |
2.3 | 4.2 | |||||
Accelerated flow-through of regulatory tax benefits2 |
(4.3) | (4.7) | |||||
Employee share-based awards |
(0.9) | (0.8) | |||||
Other, net |
(2.0) | (1.4) | |||||
Effective tax rate |
30.1 |
% |
32.3 |
% |
|||
Consumers |
|||||||
U.S. federal income tax rate |
35.0 |
% |
35.0 |
% |
|||
Increase (decrease) in income taxes from: |
|||||||
State and local income taxes, net of federal effect1 |
2.3 | 4.6 | |||||
Accelerated flow-through of regulatory tax benefits2 |
(3.9) | (4.0) | |||||
Employee share-based awards |
(0.8) | (0.7) | |||||
Other, net |
(2.3) | (1.2) | |||||
Effective tax rate |
30.3 |
% |
33.7 |
% |
1In September 2017, CMS Energy completed the evaluation of its methodology for the state apportionment of Consumers’ electricity sales to MISO, taking into account recent state tax law developments in the electric utility sector. As a result, CMS Energy intends to amend state income tax filings for 2013 through 2016 to seek a refund of taxes previously paid. To recognize the anticipated refund and the impact of the expected lower effective tax rate on their deferred state tax liabilities, CMS Energy recorded a $15 million income tax benefit and Consumers recorded a $16 million income tax benefit in September 2017. Both amounts are net of reserves for uncertain tax positions. For the nine months ended September 30, 2017, the impact of the benefit was a 2.3 percentage point reduction to CMS Energy’s effective tax rate and a 2.2 percentage point reduction to Consumers’ effective tax rate.
2Since 2014, Consumers has followed a regulatory treatment ordered by the MPSC that accelerates the return of certain income tax benefits to customers. This change, which also accelerates Consumers’ recognition of the income tax benefits, reduced Consumers’ income tax expense by $28 million for the nine months ended September 30, 2017 and by $30 million for the nine months ended September 30, 2016.
|
Presented in the following table are the components of total cash and cash equivalents, including restricted amounts, and their location on CMS Energy’s and Consumers’ consolidated balance sheets:
|
|||||||
In Millions |
|||||||
|
September 30 |
December 31 |
|||||
|
2017 | 2016 | |||||
CMS Energy, including Consumers |
|||||||
Cash and cash equivalents |
$ |
142 |
$ |
235 | |||
Restricted cash and cash equivalents |
27 | 19 | |||||
Other non-current assets |
4 | 3 | |||||
Cash and cash equivalents, including restricted amounts |
$ |
173 |
$ |
257 | |||
Consumers |
|||||||
Cash and cash equivalents |
$ |
55 |
$ |
131 | |||
Restricted cash and cash equivalents |
27 | 19 | |||||
Other non-current assets |
3 | 2 | |||||
Cash and cash equivalents, including restricted amounts |
$ |
85 |
$ |
152 |
Cash and Cash Equivalents: Cash and cash equivalents include short-term, highly liquid investments with original maturities of three months or less.
Restricted Cash and Cash Equivalents: Restricted cash and cash equivalents are held primarily for the repayment of securitization bonds. Cash and cash equivalents may also be restricted to pay other contractual obligations such as leasing of coal rail cars. These amounts are classified as current assets since they relate to payments that could or will occur within one year.
Other Non‑current Assets: The cash equivalents classified as other non‑current assets represent an investment in a money market fund held in the DB SERP rabbi trust. See Note 5, Fair Value Measurements for more information regarding the DB SERP.
Implementation of ASU 2016‑18, Restricted Cash: CMS Energy and Consumers have early adopted the provisions of ASU 2016‑18, Restricted Cash, which requires restricted cash and cash equivalents to be included with cash and cash equivalents when reconciling beginning-of-period and end-of-period amounts shown on the statement of cash flows. In addition, the standard requires that entities apply the new guidance retrospectively to all prior periods presented. Accordingly, CMS Energy and Consumers made the following adjustments to prior-period amounts on their consolidated statements of cash flows:
|
||||
In Millions |
||||
Nine Months Ended September 30 |
2016 | |||
CMS Energy, including Consumers |
||||
Change in: |
||||
Net cash used in investing activities |
$ |
7 | ||
Cash and cash equivalents, including restricted amounts, end of period |
29 | |||
Consumers |
||||
Change in: |
||||
Net cash used in investing activities |
$ |
8 | ||
Cash and cash equivalents, including restricted amounts, end of period |
29 |
Presented in the following table are the components of total cash and cash equivalents, including restricted amounts, and their location on CMS Energy’s and Consumers’ consolidated balance sheets:
|
|||||||
In Millions |
|||||||
|
September 30 |
December 31 |
|||||
|
2017 | 2016 | |||||
CMS Energy, including Consumers |
|||||||
Cash and cash equivalents |
$ |
142 |
$ |
235 | |||
Restricted cash and cash equivalents |
27 | 19 | |||||
Other non-current assets |
4 | 3 | |||||
Cash and cash equivalents, including restricted amounts |
$ |
173 |
$ |
257 | |||
Consumers |
|||||||
Cash and cash equivalents |
$ |
55 |
$ |
131 | |||
Restricted cash and cash equivalents |
27 | 19 | |||||
Other non-current assets |
3 | 2 | |||||
Cash and cash equivalents, including restricted amounts |
$ |
85 |
$ |
152 |
Cash and Cash Equivalents: Cash and cash equivalents include short-term, highly liquid investments with original maturities of three months or less.
Restricted Cash and Cash Equivalents: Restricted cash and cash equivalents are held primarily for the repayment of securitization bonds. Cash and cash equivalents may also be restricted to pay other contractual obligations such as leasing of coal rail cars. These amounts are classified as current assets since they relate to payments that could or will occur within one year.
Other Non‑current Assets: The cash equivalents classified as other non‑current assets represent an investment in a money market fund held in the DB SERP rabbi trust. See Note 5, Fair Value Measurements for more information regarding the DB SERP.
Implementation of ASU 2016‑18, Restricted Cash: CMS Energy and Consumers have early adopted the provisions of ASU 2016‑18, Restricted Cash, which requires restricted cash and cash equivalents to be included with cash and cash equivalents when reconciling beginning-of-period and end-of-period amounts shown on the statement of cash flows. In addition, the standard requires that entities apply the new guidance retrospectively to all prior periods presented. Accordingly, CMS Energy and Consumers made the following adjustments to prior-period amounts on their consolidated statements of cash flows:
|
||||
In Millions |
||||
Nine Months Ended September 30 |
2016 | |||
CMS Energy, including Consumers |
||||
Change in: |
||||
Net cash used in investing activities |
$ |
7 | ||
Cash and cash equivalents, including restricted amounts, end of period |
29 | |||
Consumers |
||||
Change in: |
||||
Net cash used in investing activities |
$ |
8 | ||
Cash and cash equivalents, including restricted amounts, end of period |
29 |
|
Reportable segments consist of business units defined by the products and services they offer. CMS Energy and Consumers evaluate the performance of each segment based on its contribution to net income available to CMS Energy’s common stockholders.
CMS Energy
The reportable segments for CMS Energy are:
· |
electric utility, consisting of regulated activities associated with the generation, transmission, and distribution of electricity in Michigan |
· |
gas utility, consisting of regulated activities associated with the transportation, storage, and distribution of natural gas in Michigan |
· |
enterprises, consisting of various subsidiaries engaging primarily in domestic independent power production |
CMS Energy presents EnerBank and corporate interest and other expenses within other reconciling items.
Consumers
The reportable segments for Consumers are:
· |
electric utility, consisting of regulated activities associated with the generation, transmission, and distribution of electricity in Michigan |
· |
gas utility, consisting of regulated activities associated with the transportation, storage, and distribution of natural gas in Michigan |
Consumers’ other consolidated entities are presented within other reconciling items.
Presented in the following tables is financial information by reportable segment:
|
||||||||||||||
In Millions |
||||||||||||||
|
Three Months Ended |
Nine Months Ended |
||||||||||||
September 30 |
2017 | 2016 | 2017 | 2016 | ||||||||||
CMS Energy, including Consumers |
||||||||||||||
Operating revenue |
||||||||||||||
Electric utility |
$ |
1,247 |
$ |
1,313 |
$ |
3,360 |
$ |
3,348 | ||||||
Gas utility |
190 | 185 | 1,176 | 1,166 | ||||||||||
Enterprises |
58 | 59 | 172 | 156 | ||||||||||
Other reconciling items |
32 | 30 | 97 | 89 | ||||||||||
Total operating revenue – CMS Energy |
$ |
1,527 |
$ |
1,587 |
$ |
4,805 |
$ |
4,759 | ||||||
Consumers |
||||||||||||||
Operating revenue |
||||||||||||||
Electric utility |
$ |
1,247 |
$ |
1,313 |
$ |
3,360 |
$ |
3,348 | ||||||
Gas utility |
190 | 185 | 1,176 | 1,166 | ||||||||||
Total operating revenue – Consumers |
$ |
1,437 |
$ |
1,498 |
$ |
4,536 |
$ |
4,514 | ||||||
CMS Energy, including Consumers |
||||||||||||||
Net income (loss) available to common stockholders |
||||||||||||||
Electric utility |
$ |
176 |
$ |
191 |
$ |
394 |
$ |
395 | ||||||
Gas utility |
5 | 3 | 101 | 102 | ||||||||||
Enterprises |
8 | 8 | 27 | 17 | ||||||||||
Other reconciling items |
(17) | (16) | (59) | (40) | ||||||||||
Total net income available to common stockholders – CMS Energy |
$ |
172 |
$ |
186 |
$ |
463 |
$ |
474 | ||||||
Consumers |
||||||||||||||
Net income available to common stockholder |
||||||||||||||
Electric utility |
$ |
176 |
$ |
191 |
$ |
394 |
$ |
395 | ||||||
Gas utility |
5 | 3 | 101 | 102 | ||||||||||
Other reconciling items |
- |
1 |
- |
1 | ||||||||||
Total net income available to common stockholder – Consumers |
$ |
181 |
$ |
195 |
$ |
495 |
$ |
498 |
|
|||||||
In Millions |
|||||||
|
September 30, 2017 |
December 31, 2016 |
|||||
CMS Energy, including Consumers |
|||||||
Plant, property, and equipment, gross |
|||||||
Electric utility1 |
$ |
15,056 |
$ |
14,540 | |||
Gas utility1 |
6,713 | 6,283 | |||||
Enterprises |
164 | 157 | |||||
Other reconciling items |
33 | 30 | |||||
Total plant, property, and equipment, gross – CMS Energy |
$ |
21,966 |
$ |
21,010 | |||
Consumers |
|||||||
Plant, property, and equipment, gross |
|||||||
Electric utility1 |
$ |
15,056 |
$ |
14,540 | |||
Gas utility1 |
6,713 | 6,283 | |||||
Other reconciling items |
15 | 15 | |||||
Total plant, property, and equipment, gross – Consumers |
$ |
21,784 |
$ |
20,838 | |||
CMS Energy, including Consumers |
|||||||
Total assets |
|||||||
Electric utility1 |
$ |
13,639 |
$ |
13,429 | |||
Gas utility1 |
6,701 | 6,446 | |||||
Enterprises |
280 | 269 | |||||
Other reconciling items |
1,500 | 1,478 | |||||
Total assets – CMS Energy |
$ |
22,120 |
$ |
21,622 | |||
Consumers |
|||||||
Total assets |
|||||||
Electric utility1 |
$ |
13,640 |
$ |
13,430 | |||
Gas utility1 |
6,701 | 6,446 | |||||
Other reconciling items |
39 | 70 | |||||
Total assets – Consumers |
$ |
20,380 |
$ |
19,946 |
1Amounts include a portion of Consumers’ other common assets attributable to both the electric and gas utility businesses.
Reportable segments consist of business units defined by the products and services they offer. CMS Energy and Consumers evaluate the performance of each segment based on its contribution to net income available to CMS Energy’s common stockholders.
CMS Energy
The reportable segments for CMS Energy are:
· |
electric utility, consisting of regulated activities associated with the generation, transmission, and distribution of electricity in Michigan |
· |
gas utility, consisting of regulated activities associated with the transportation, storage, and distribution of natural gas in Michigan |
· |
enterprises, consisting of various subsidiaries engaging primarily in domestic independent power production |
CMS Energy presents EnerBank and corporate interest and other expenses within other reconciling items.
Consumers
The reportable segments for Consumers are:
· |
electric utility, consisting of regulated activities associated with the generation, transmission, and distribution of electricity in Michigan |
· |
gas utility, consisting of regulated activities associated with the transportation, storage, and distribution of natural gas in Michigan |
Consumers’ other consolidated entities are presented within other reconciling items.
Presented in the following tables is financial information by reportable segment:
|
||||||||||||||
In Millions |
||||||||||||||
|
Three Months Ended |
Nine Months Ended |
||||||||||||
September 30 |
2017 | 2016 | 2017 | 2016 | ||||||||||
CMS Energy, including Consumers |
||||||||||||||
Operating revenue |
||||||||||||||
Electric utility |
$ |
1,247 |
$ |
1,313 |
$ |
3,360 |
$ |
3,348 | ||||||
Gas utility |
190 | 185 | 1,176 | 1,166 | ||||||||||
Enterprises |
58 | 59 | 172 | 156 | ||||||||||
Other reconciling items |
32 | 30 | 97 | 89 | ||||||||||
Total operating revenue – CMS Energy |
$ |
1,527 |
$ |
1,587 |
$ |
4,805 |
$ |
4,759 | ||||||
Consumers |
||||||||||||||
Operating revenue |
||||||||||||||
Electric utility |
$ |
1,247 |
$ |
1,313 |
$ |
3,360 |
$ |
3,348 | ||||||
Gas utility |
190 | 185 | 1,176 | 1,166 | ||||||||||
Total operating revenue – Consumers |
$ |
1,437 |
$ |
1,498 |
$ |
4,536 |
$ |
4,514 | ||||||
CMS Energy, including Consumers |
||||||||||||||
Net income (loss) available to common stockholders |
||||||||||||||
Electric utility |
$ |
176 |
$ |
191 |
$ |
394 |
$ |
395 | ||||||
Gas utility |
5 | 3 | 101 | 102 | ||||||||||
Enterprises |
8 | 8 | 27 | 17 | ||||||||||
Other reconciling items |
(17) | (16) | (59) | (40) | ||||||||||
Total net income available to common stockholders – CMS Energy |
$ |
172 |
$ |
186 |
$ |
463 |
$ |
474 | ||||||
Consumers |
||||||||||||||
Net income available to common stockholder |
||||||||||||||
Electric utility |
$ |
176 |
$ |
191 |
$ |
394 |
$ |
395 | ||||||
Gas utility |
5 | 3 | 101 | 102 | ||||||||||
Other reconciling items |
- |
1 |
- |
1 | ||||||||||
Total net income available to common stockholder – Consumers |
$ |
181 |
$ |
195 |
$ |
495 |
$ |
498 |
|
|||||||
In Millions |
|||||||
|
September 30, 2017 |
December 31, 2016 |
|||||
CMS Energy, including Consumers |
|||||||
Plant, property, and equipment, gross |
|||||||
Electric utility1 |
$ |
15,056 |
$ |
14,540 | |||
Gas utility1 |
6,713 | 6,283 | |||||
Enterprises |
164 | 157 | |||||
Other reconciling items |
33 | 30 | |||||
Total plant, property, and equipment, gross – CMS Energy |
$ |
21,966 |
$ |
21,010 | |||
Consumers |
|||||||
Plant, property, and equipment, gross |
|||||||
Electric utility1 |
$ |
15,056 |
$ |
14,540 | |||
Gas utility1 |
6,713 | 6,283 | |||||
Other reconciling items |
15 | 15 | |||||
Total plant, property, and equipment, gross – Consumers |
$ |
21,784 |
$ |
20,838 | |||
CMS Energy, including Consumers |
|||||||
Total assets |
|||||||
Electric utility1 |
$ |
13,639 |
$ |
13,429 | |||
Gas utility1 |
6,701 | 6,446 | |||||
Enterprises |
280 | 269 | |||||
Other reconciling items |
1,500 | 1,478 | |||||
Total assets – CMS Energy |
$ |
22,120 |
$ |
21,622 | |||
Consumers |
|||||||
Total assets |
|||||||
Electric utility1 |
$ |
13,640 |
$ |
13,430 | |||
Gas utility1 |
6,701 | 6,446 | |||||
Other reconciling items |
39 | 70 | |||||
Total assets – Consumers |
$ |
20,380 |
$ |
19,946 |
1Amounts include a portion of Consumers’ other common assets attributable to both the electric and gas utility businesses.
|
The allowance for loan losses is a valuation allowance to reflect estimated credit losses. The allowance is increased by the provision for loan losses and decreased by loan charge-offs net of recoveries. Management estimates the allowance balance required by taking into consideration historical loan loss experience, the nature and volume of the portfolio, economic conditions, and other factors. Loan losses are charged against the allowance when the loss is confirmed, but no later than the point at which a loan becomes 120 days past due.
|
|
|||||||||
In Millions |
|||||||||
|
Maximum |
Carrying |
|||||||
Guarantee Description |
Issue Date |
Expiration Date |
Obligation |
Amount |
|||||
CMS Energy, including Consumers |
|||||||||
Indemnity obligations from stock and asset sale agreements1 |
Various |
Indefinite |
$ |
153 |
$ |
7 | |||
Guarantees2 |
Various |
Indefinite |
45 |
- |
|||||
Consumers |
|||||||||
Guarantee2 |
July 2011 |
Indefinite |
$ |
30 |
$ |
- |
1These obligations arose from stock and asset sale agreements under which CMS Energy or a subsidiary of CMS Energy indemnified the purchaser for losses resulting from various matters, primarily claims related to taxes. CMS Energy believes the likelihood of material loss to be remote for the indemnity obligations not recorded as liabilities.
2At Consumers, this obligation comprises a guarantee provided to the U.S. Department of Energy in connection with a settlement agreement regarding damages resulting from the department’s failure to accept spent nuclear fuel from nuclear power plants formerly owned by Consumers. At CMS Energy, the guarantee obligations comprise Consumers’ guarantee to the U.S. Department of Energy and CMS Energy’s 1994 guarantee of non-recourse revenue bonds issued by Genesee.
|
|||||||||
In Millions |
|||||||||
|
Maximum |
Carrying |
|||||||
Guarantee Description |
Issue Date |
Expiration Date |
Obligation |
Amount |
|||||
CMS Energy, including Consumers |
|||||||||
Indemnity obligations from stock and asset sale agreements1 |
Various |
Indefinite |
$ |
153 |
$ |
7 | |||
Guarantees2 |
Various |
Indefinite |
45 |
- |
|||||
Consumers |
|||||||||
Guarantee2 |
July 2011 |
Indefinite |
$ |
30 |
$ |
- |
1These obligations arose from stock and asset sale agreements under which CMS Energy or a subsidiary of CMS Energy indemnified the purchaser for losses resulting from various matters, primarily claims related to taxes. CMS Energy believes the likelihood of material loss to be remote for the indemnity obligations not recorded as liabilities.
2At Consumers, this obligation comprises a guarantee provided to the U.S. Department of Energy in connection with a settlement agreement regarding damages resulting from the department’s failure to accept spent nuclear fuel from nuclear power plants formerly owned by Consumers. At CMS Energy, the guarantee obligations comprise Consumers’ guarantee to the U.S. Department of Energy and CMS Energy’s 1994 guarantee of non-recourse revenue bonds issued by Genesee.
|
|||||||||||||||||||
In Millions |
|||||||||||||||||||
|
2017 | 2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||||
CMS Energy |
|||||||||||||||||||
Long-term liquid disposal and operating and maintenance costs |
$ |
1 |
$ |
4 |
$ |
4 |
$ |
4 |
$ |
4 |
$ |
4 |
|
|||||||||||||||||||
In Millions |
|||||||||||||||||||
|
2017 | 2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||||
Consumers |
|||||||||||||||||||
Remediation and other response activity costs |
$ |
8 |
$ |
16 |
$ |
18 |
$ |
10 |
$ |
18 |
$ |
7 |
|
|
||||||||
|
Principal |
Interest Rate |
Issue/Retirement |
Maturity Date |
||||
Debt issuances |
||||||||
CMS Energy, parent only |
||||||||
Senior notes |
$ |
350 | 3.450 |
% |
February 2017 |
August 2027 |
||
Total CMS Energy, parent only |
$ |
350 | ||||||
Consumers |
||||||||
First mortgage bonds |
$ |
350 | 3.950 |
% |
February 2017 |
July 2047 |
||
First mortgage bonds1 |
40 | 3.180 |
September 2017 |
September 2032 |
||||
First mortgage bonds1 |
125 | 3.520 |
September 2017 |
September 2037 |
||||
First mortgage bonds1 |
20 | 3.860 |
September 2017 |
September 2052 |
||||
Total Consumers |
$ |
535 | ||||||
Total CMS Energy |
$ |
885 | ||||||
Debt retirements |
||||||||
Consumers |
||||||||
First mortgage bonds |
$ |
250 | 5.150 |
% |
February 2017 |
February 2017 |
||
Senior notes |
180 | 6.875 |
September 2017 |
March 2018 |
||||
Total Consumers |
$ |
430 | ||||||
Total CMS Energy |
$ |
430 |
1These first mortgage bonds were issued in a September private placement under a bond purchase agreement executed in August. Under the agreement, Consumers will issue an additional $300 million of first mortgage bonds in a second private placement in November, consisting of $60 million of 3.18-percent first mortgage bonds due 2032, $210 million of 3.52-percent first mortgage bonds due 2037, and $30 million of 3.86-percent first mortgage bonds due 2052.
|
|||||||||||||
In Millions |
|||||||||||||
Expiration Date |
Amount of Facility |
Amount Borrowed |
Letters of Credit |
Amount Available |
|||||||||
CMS Energy, parent only |
|||||||||||||
May 27, 20221,2 |
$ |
550 |
$ |
- |
$ |
1 |
$ |
549 | |||||
Consumers |
|||||||||||||
May 27, 20222,3 |
$ |
650 |
$ |
- |
$ |
7 |
$ |
643 | |||||
November 23, 20183 |
250 |
- |
- |
250 | |||||||||
September 9, 20193,4 |
30 |
- |
30 |
- |
1During the nine months ended September 30, 2017, CMS Energy’s average borrowings totaled $28 million with a weighted-average interest rate of 2.02 percent. Obligations under this facility are secured by Consumers common stock.
2In May 2017, the expiration date of this revolving credit agreement was extended from May 2021 to May 2022.
3Obligations under this facility are secured by first mortgage bonds of Consumers.
4In June 2017, the expiration date of this letter of credit reimbursement agreement was extended from May 2018 to September 2019.
|
||||||||
|
Number of |
Average |
Net Proceeds |
|||||
June 2017 |
1,494,371 |
$ |
47.31 |
$ |
70 |
|
||||||||
|
Principal |
Interest Rate |
Issue/Retirement |
Maturity Date |
||||
Debt issuances |
||||||||
CMS Energy, parent only |
||||||||
Senior notes |
$ |
350 | 3.450 |
% |
February 2017 |
August 2027 |
||
Total CMS Energy, parent only |
$ |
350 | ||||||
Consumers |
||||||||
First mortgage bonds |
$ |
350 | 3.950 |
% |
February 2017 |
July 2047 |
||
First mortgage bonds1 |
40 | 3.180 |
September 2017 |
September 2032 |
||||
First mortgage bonds1 |
125 | 3.520 |
September 2017 |
September 2037 |
||||
First mortgage bonds1 |
20 | 3.860 |
September 2017 |
September 2052 |
||||
Total Consumers |
$ |
535 | ||||||
Total CMS Energy |
$ |
885 | ||||||
Debt retirements |
||||||||
Consumers |
||||||||
First mortgage bonds |
$ |
250 | 5.150 |
% |
February 2017 |
February 2017 |
||
Senior notes |
180 | 6.875 |
September 2017 |
March 2018 |
||||
Total Consumers |
$ |
430 | ||||||
Total CMS Energy |
$ |
430 |
1These first mortgage bonds were issued in a September private placement under a bond purchase agreement executed in August. Under the agreement, Consumers will issue an additional $300 million of first mortgage bonds in a second private placement in November, consisting of $60 million of 3.18-percent first mortgage bonds due 2032, $210 million of 3.52-percent first mortgage bonds due 2037, and $30 million of 3.86-percent first mortgage bonds due 2052.
|
|||||||||||||
In Millions |
|||||||||||||
Expiration Date |
Amount of Facility |
Amount Borrowed |
Letters of Credit |
Amount Available |
|||||||||
CMS Energy, parent only |
|||||||||||||
May 27, 20221,2 |
$ |
550 |
$ |
- |
$ |
1 |
$ |
549 | |||||
Consumers |
|||||||||||||
May 27, 20222,3 |
$ |
650 |
$ |
- |
$ |
7 |
$ |
643 | |||||
November 23, 20183 |
250 |
- |
- |
250 | |||||||||
September 9, 20193,4 |
30 |
- |
30 |
- |
1During the nine months ended September 30, 2017, CMS Energy’s average borrowings totaled $28 million with a weighted-average interest rate of 2.02 percent. Obligations under this facility are secured by Consumers common stock.
2In May 2017, the expiration date of this revolving credit agreement was extended from May 2021 to May 2022.
3Obligations under this facility are secured by first mortgage bonds of Consumers.
4In June 2017, the expiration date of this letter of credit reimbursement agreement was extended from May 2018 to September 2019.
|
|
||||||||||||||||
In Millions |
||||||||||||||||
|
CMS Energy, including Consumers |
Consumers |
||||||||||||||
|
September 30 |
December 31 |
September 30 |
December 31 |
||||||||||||
|
2017 | 2016 | 2017 | 2016 | ||||||||||||
Assets1 |
||||||||||||||||
Cash equivalents |
$ |
21 |
$ |
44 |
$ |
- |
$ |
- |
||||||||
Restricted cash equivalents |
27 | 19 | 27 | 19 | ||||||||||||
CMS Energy common stock |
- |
- |
21 | 33 | ||||||||||||
Nonqualified deferred |
13 | 12 | 9 | 8 | ||||||||||||
DB SERP |
||||||||||||||||
Cash equivalents |
4 | 3 | 3 | 2 | ||||||||||||
Mutual funds |
145 | 141 | 105 | 102 | ||||||||||||
Derivative instruments |
||||||||||||||||
Commodity contracts |
2 | 1 | 2 | 1 | ||||||||||||
Total |
$ |
212 |
$ |
220 |
$ |
167 |
$ |
165 | ||||||||
Liabilities1 |
||||||||||||||||
Nonqualified deferred |
$ |
13 |
$ |
12 |
$ |
9 |
$ |
8 | ||||||||
Derivative instruments |
||||||||||||||||
Commodity contracts |
1 |
- |
1 |
- |
||||||||||||
Total |
$ |
14 |
$ |
12 |
$ |
10 |
$ |
8 |
1All assets and liabilities were classified as Level 1 with the exception of some commodity contracts, which were classified as Level 3.
|
||||||||||||||||
In Millions |
||||||||||||||||
|
CMS Energy, including Consumers |
Consumers |
||||||||||||||
|
September 30 |
December 31 |
September 30 |
December 31 |
||||||||||||
|
2017 | 2016 | 2017 | 2016 | ||||||||||||
Assets1 |
||||||||||||||||
Cash equivalents |
$ |
21 |
$ |
44 |
$ |
- |
$ |
- |
||||||||
Restricted cash equivalents |
27 | 19 | 27 | 19 | ||||||||||||
CMS Energy common stock |
- |
- |
21 | 33 | ||||||||||||
Nonqualified deferred |
13 | 12 | 9 | 8 | ||||||||||||
DB SERP |
||||||||||||||||
Cash equivalents |
4 | 3 | 3 | 2 | ||||||||||||
Mutual funds |
145 | 141 | 105 | 102 | ||||||||||||
Derivative instruments |
||||||||||||||||
Commodity contracts |
2 | 1 | 2 | 1 | ||||||||||||
Total |
$ |
212 |
$ |
220 |
$ |
167 |
$ |
165 | ||||||||
Liabilities1 |
||||||||||||||||
Nonqualified deferred |
$ |
13 |
$ |
12 |
$ |
9 |
$ |
8 | ||||||||
Derivative instruments |
||||||||||||||||
Commodity contracts |
1 |
- |
1 |
- |
||||||||||||
Total |
$ |
14 |
$ |
12 |
$ |
10 |
$ |
8 |
1All assets and liabilities were classified as Level 1 with the exception of some commodity contracts, which were classified as Level 3.
|
|
||||||||||||||||||||||||||||||||
In Millions |
||||||||||||||||||||||||||||||||
|
September 30, 2017 |
December 31, 2016 |
||||||||||||||||||||||||||||||
|
Fair Value |
Fair Value |
||||||||||||||||||||||||||||||
|
Carrying |
Level |
Carrying |
Level |
||||||||||||||||||||||||||||
|
Amount |
Total |
1 | 2 | 3 |
Amount |
Total |
1 | 2 | 3 | ||||||||||||||||||||||
CMS Energy, including Consumers |
||||||||||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||
Long-term |
$ |
22 |
$ |
22 |
$ |
- |
$ |
- |
$ |
22 |
$ |
22 |
$ |
22 |
$ |
- |
$ |
- |
$ |
22 | ||||||||||||
Notes |
1,382 | 1,479 |
- |
- |
1,479 | 1,326 | 1,415 |
- |
- |
1,415 | ||||||||||||||||||||||
Securities held |
16 | 16 |
- |
16 |
- |
13 | 13 |
- |
13 |
- |
||||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||||||||||
Long-term |
9,983 | 10,484 |
- |
9,331 | 1,153 | 9,504 | 9,953 |
- |
8,990 | 963 | ||||||||||||||||||||||
Long-term |
18 | 18 |
- |
- |
18 | 17 | 17 |
- |
- |
17 | ||||||||||||||||||||||
Consumers |
||||||||||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||
Long-term |
$ |
22 |
$ |
22 |
$ |
- |
$ |
- |
$ |
22 |
$ |
22 |
$ |
22 |
$ |
- |
$ |
- |
$ |
22 | ||||||||||||
Notes |
46 | 46 |
- |
- |
46 | 45 | 45 |
- |
- |
45 | ||||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||||||||||
Long-term |
5,718 | 6,032 |
- |
4,879 | 1,153 | 5,628 | 5,903 |
- |
4,940 | 963 |
1Includes current accounts receivable of $14 million at September 30, 2017 and $12 million at December 31, 2016.
2Includes current portion of notes receivable of $228 million at September 30, 2017 and $219 million at December 31, 2016.
3Includes current portion of long-term debt of $959 million at September 30, 2017 and $864 million at December 31, 2016.
4Includes current portion of long-term payables of $1 million at September 30, 2017 and December 31, 2016.
5Includes current portion of notes receivable of $30 million at September 30, 2017 and $29 million at December 31, 2016.
6Includes current portion of long-term debt of $443 million at September 30, 2017 and $375 million at December 31, 2016.
|
||||||||||||||||||||||||||
In Millions |
||||||||||||||||||||||||||
|
September 30, 2017 |
December 31, 2016 |
||||||||||||||||||||||||
|
Unrealized |
Unrealized |
Fair |
Unrealized |
Unrealized |
Fair |
||||||||||||||||||||
|
Cost |
Gains |
Losses |
Value |
Cost |
Gains |
Losses |
Value |
||||||||||||||||||
CMS Energy, including Consumers |
||||||||||||||||||||||||||
Available for sale |
||||||||||||||||||||||||||
DB SERP |
||||||||||||||||||||||||||
Mutual funds |
$ |
142 |
$ |
3 |
$ |
- |
$ |
145 |
$ |
141 |
$ |
- |
$ |
- |
$ |
141 | ||||||||||
Held to maturity |
||||||||||||||||||||||||||
Debt securities |
16 |
- |
- |
16 | 13 |
- |
- |
13 | ||||||||||||||||||
Consumers |
||||||||||||||||||||||||||
Available for sale |
||||||||||||||||||||||||||
DB SERP |
||||||||||||||||||||||||||
Mutual funds |
$ |
103 |
$ |
2 |
$ |
- |
$ |
105 |
$ |
102 |
$ |
- |
$ |
- |
$ |
102 | ||||||||||
CMS Energy |
2 | 19 |
- |
21 | 4 | 29 |
- |
33 |
|
||||||||||||||||||||||||||||||||
In Millions |
||||||||||||||||||||||||||||||||
|
September 30, 2017 |
December 31, 2016 |
||||||||||||||||||||||||||||||
|
Fair Value |
Fair Value |
||||||||||||||||||||||||||||||
|
Carrying |
Level |
Carrying |
Level |
||||||||||||||||||||||||||||
|
Amount |
Total |
1 | 2 | 3 |
Amount |
Total |
1 | 2 | 3 | ||||||||||||||||||||||
CMS Energy, including Consumers |
||||||||||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||
Long-term |
$ |
22 |
$ |
22 |
$ |
- |
$ |
- |
$ |
22 |
$ |
22 |
$ |
22 |
$ |
- |
$ |
- |
$ |
22 | ||||||||||||
Notes |
1,382 | 1,479 |
- |
- |
1,479 | 1,326 | 1,415 |
- |
- |
1,415 | ||||||||||||||||||||||
Securities held |
16 | 16 |
- |
16 |
- |
13 | 13 |
- |
13 |
- |
||||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||||||||||
Long-term |
9,983 | 10,484 |
- |
9,331 | 1,153 | 9,504 | 9,953 |
- |
8,990 | 963 | ||||||||||||||||||||||
Long-term |
18 | 18 |
- |
- |
18 | 17 | 17 |
- |
- |
17 | ||||||||||||||||||||||
Consumers |
||||||||||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||
Long-term |
$ |
22 |
$ |
22 |
$ |
- |
$ |
- |
$ |
22 |
$ |
22 |
$ |
22 |
$ |
- |
$ |
- |
$ |
22 | ||||||||||||
Notes |
46 | 46 |
- |
- |
46 | 45 | 45 |
- |
- |
45 | ||||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||||||||||
Long-term |
5,718 | 6,032 |
- |
4,879 | 1,153 | 5,628 | 5,903 |
- |
4,940 | 963 |
1Includes current accounts receivable of $14 million at September 30, 2017 and $12 million at December 31, 2016.
2Includes current portion of notes receivable of $228 million at September 30, 2017 and $219 million at December 31, 2016.
3Includes current portion of long-term debt of $959 million at September 30, 2017 and $864 million at December 31, 2016.
4Includes current portion of long-term payables of $1 million at September 30, 2017 and December 31, 2016.
5Includes current portion of notes receivable of $30 million at September 30, 2017 and $29 million at December 31, 2016.
6Includes current portion of long-term debt of $443 million at September 30, 2017 and $375 million at December 31, 2016.
|
||||||||||||||||||||||||||
In Millions |
||||||||||||||||||||||||||
|
September 30, 2017 |
December 31, 2016 |
||||||||||||||||||||||||
|
Unrealized |
Unrealized |
Fair |
Unrealized |
Unrealized |
Fair |
||||||||||||||||||||
|
Cost |
Gains |
Losses |
Value |
Cost |
Gains |
Losses |
Value |
||||||||||||||||||
CMS Energy, including Consumers |
||||||||||||||||||||||||||
Available for sale |
||||||||||||||||||||||||||
DB SERP |
||||||||||||||||||||||||||
Mutual funds |
$ |
142 |
$ |
3 |
$ |
- |
$ |
145 |
$ |
141 |
$ |
- |
$ |
- |
$ |
141 | ||||||||||
Held to maturity |
||||||||||||||||||||||||||
Debt securities |
16 |
- |
- |
16 | 13 |
- |
- |
13 | ||||||||||||||||||
Consumers |
||||||||||||||||||||||||||
Available for sale |
||||||||||||||||||||||||||
DB SERP |
||||||||||||||||||||||||||
Mutual funds |
$ |
103 |
$ |
2 |
$ |
- |
$ |
105 |
$ |
102 |
$ |
- |
$ |
- |
$ |
102 | ||||||||||
CMS Energy |
2 | 19 |
- |
21 | 4 | 29 |
- |
33 |
|
|
|||||||
In Millions |
|||||||
|
September 30, 2017 |
December 31, 2016 |
|||||
CMS Energy, including Consumers |
|||||||
Current |
|||||||
EnerBank notes receivable, net of allowance for loan losses |
$ |
167 |
$ |
151 | |||
EnerBank notes receivable held for sale |
31 | 39 | |||||
Michigan tax settlement |
30 | 29 | |||||
Non-current |
|||||||
EnerBank notes receivable |
1,134 | 1,088 | |||||
Michigan tax settlement |
20 | 19 | |||||
Total notes receivable |
$ |
1,382 |
$ |
1,326 | |||
Consumers |
|||||||
Current |
|||||||
Michigan tax settlement |
$ |
30 |
$ |
29 | |||
Non-current |
|||||||
Michigan tax settlement |
16 | 16 | |||||
Total notes receivable |
$ |
46 |
$ |
45 |
|
|||||||
In Millions |
|||||||
|
September 30, 2017 |
December 31, 2016 |
|||||
CMS Energy, including Consumers |
|||||||
Current |
|||||||
EnerBank notes receivable, net of allowance for loan losses |
$ |
167 |
$ |
151 | |||
EnerBank notes receivable held for sale |
31 | 39 | |||||
Michigan tax settlement |
30 | 29 | |||||
Non-current |
|||||||
EnerBank notes receivable |
1,134 | 1,088 | |||||
Michigan tax settlement |
20 | 19 | |||||
Total notes receivable |
$ |
1,382 |
$ |
1,326 | |||
Consumers |
|||||||
Current |
|||||||
Michigan tax settlement |
$ |
30 |
$ |
29 | |||
Non-current |
|||||||
Michigan tax settlement |
16 | 16 | |||||
Total notes receivable |
$ |
46 |
$ |
45 |
|
|
||||||||||||||||||||||||||||
In Millions |
||||||||||||||||||||||||||||
|
DB Pension Plan |
OPEB Plan |
||||||||||||||||||||||||||
|
Three Months Ended |
Nine Months Ended |
Three Months Ended |
Nine Months Ended |
||||||||||||||||||||||||
September 30 |
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||
CMS Energy, including Consumers |
||||||||||||||||||||||||||||
Net periodic cost (credit) |
||||||||||||||||||||||||||||
Service cost |
$ |
12 |
$ |
10 |
$ |
34 |
$ |
31 |
$ |
5 |
$ |
5 |
$ |
15 |
$ |
14 | ||||||||||||
Interest cost |
23 | 21 | 67 | 64 | 13 | 12 | 39 | 35 | ||||||||||||||||||||
Expected return on plan assets |
(39) | (36) | (115) | (110) | (22) | (22) | (67) | (65) | ||||||||||||||||||||
Amortization of: |
||||||||||||||||||||||||||||
Net loss |
20 | 17 | 60 | 52 | 7 | 5 | 23 | 16 | ||||||||||||||||||||
Prior service cost (credit) |
1 | 1 | 3 | 3 | (8) | (10) | (26) | (31) | ||||||||||||||||||||
Net periodic cost (credit) |
$ |
17 |
$ |
13 |
$ |
49 |
$ |
40 |
$ |
(5) |
$ |
(10) |
$ |
(16) |
$ |
(31) | ||||||||||||
Consumers |
||||||||||||||||||||||||||||
Net periodic cost (credit) |
||||||||||||||||||||||||||||
Service cost |
$ |
11 |
$ |
11 |
$ |
33 |
$ |
31 |
$ |
5 |
$ |
4 |
$ |
14 |
$ |
13 | ||||||||||||
Interest cost |
22 | 20 | 65 | 62 | 12 | 12 | 38 | 34 | ||||||||||||||||||||
Expected return on plan assets |
(38) | (35) | (112) | (107) | (21) | (20) | (63) | (60) | ||||||||||||||||||||
Amortization of: |
||||||||||||||||||||||||||||
Net loss |
19 | 16 | 58 | 50 | 8 | 5 | 24 | 16 | ||||||||||||||||||||
Prior service cost (credit) |
1 | 1 | 3 | 3 | (8) | (10) | (25) | (30) | ||||||||||||||||||||
Net periodic cost (credit) |
$ |
15 |
$ |
13 |
$ |
47 |
$ |
39 |
$ |
(4) |
$ |
(9) |
$ |
(12) |
$ |
(27) |
|
||||||||||||||||||||||||||||
In Millions |
||||||||||||||||||||||||||||
|
DB Pension Plan |
OPEB Plan |
||||||||||||||||||||||||||
|
Three Months Ended |
Nine Months Ended |
Three Months Ended |
Nine Months Ended |
||||||||||||||||||||||||
September 30 |
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||
CMS Energy, including Consumers |
||||||||||||||||||||||||||||
Net periodic cost (credit) |
||||||||||||||||||||||||||||
Service cost |
$ |
12 |
$ |
10 |
$ |
34 |
$ |
31 |
$ |
5 |
$ |
5 |
$ |
15 |
$ |
14 | ||||||||||||
Interest cost |
23 | 21 | 67 | 64 | 13 | 12 | 39 | 35 | ||||||||||||||||||||
Expected return on plan assets |
(39) | (36) | (115) | (110) | (22) | (22) | (67) | (65) | ||||||||||||||||||||
Amortization of: |
||||||||||||||||||||||||||||
Net loss |
20 | 17 | 60 | 52 | 7 | 5 | 23 | 16 | ||||||||||||||||||||
Prior service cost (credit) |
1 | 1 | 3 | 3 | (8) | (10) | (26) | (31) | ||||||||||||||||||||
Net periodic cost (credit) |
$ |
17 |
$ |
13 |
$ |
49 |
$ |
40 |
$ |
(5) |
$ |
(10) |
$ |
(16) |
$ |
(31) | ||||||||||||
Consumers |
||||||||||||||||||||||||||||
Net periodic cost (credit) |
||||||||||||||||||||||||||||
Service cost |
$ |
11 |
$ |
11 |
$ |
33 |
$ |
31 |
$ |
5 |
$ |
4 |
$ |
14 |
$ |
13 | ||||||||||||
Interest cost |
22 | 20 | 65 | 62 | 12 | 12 | 38 | 34 | ||||||||||||||||||||
Expected return on plan assets |
(38) | (35) | (112) | (107) | (21) | (20) | (63) | (60) | ||||||||||||||||||||
Amortization of: |
||||||||||||||||||||||||||||
Net loss |
19 | 16 | 58 | 50 | 8 | 5 | 24 | 16 | ||||||||||||||||||||
Prior service cost (credit) |
1 | 1 | 3 | 3 | (8) | (10) | (25) | (30) | ||||||||||||||||||||
Net periodic cost (credit) |
$ |
15 |
$ |
13 |
$ |
47 |
$ |
39 |
$ |
(4) |
$ |
(9) |
$ |
(12) |
$ |
(27) |
|
|
|||||||
Nine Months Ended September 30 |
2017 | 2016 | |||||
CMS Energy, including Consumers |
|||||||
U.S. federal income tax rate |
35.0 |
% |
35.0 |
% |
|||
Increase (decrease) in income taxes from: |
|||||||
State and local income taxes, net of federal effect1 |
2.3 | 4.2 | |||||
Accelerated flow-through of regulatory tax benefits2 |
(4.3) | (4.7) | |||||
Employee share-based awards |
(0.9) | (0.8) | |||||
Other, net |
(2.0) | (1.4) | |||||
Effective tax rate |
30.1 |
% |
32.3 |
% |
|||
Consumers |
|||||||
U.S. federal income tax rate |
35.0 |
% |
35.0 |
% |
|||
Increase (decrease) in income taxes from: |
|||||||
State and local income taxes, net of federal effect1 |
2.3 | 4.6 | |||||
Accelerated flow-through of regulatory tax benefits2 |
(3.9) | (4.0) | |||||
Employee share-based awards |
(0.8) | (0.7) | |||||
Other, net |
(2.3) | (1.2) | |||||
Effective tax rate |
30.3 |
% |
33.7 |
% |
1In September 2017, CMS Energy completed the evaluation of its methodology for the state apportionment of Consumers’ electricity sales to MISO, taking into account recent state tax law developments in the electric utility sector. As a result, CMS Energy intends to amend state income tax filings for 2013 through 2016 to seek a refund of taxes previously paid. To recognize the anticipated refund and the impact of the expected lower effective tax rate on their deferred state tax liabilities, CMS Energy recorded a $15 million income tax benefit and Consumers recorded a $16 million income tax benefit in September 2017. Both amounts are net of reserves for uncertain tax positions. For the nine months ended September 30, 2017, the impact of the benefit was a 2.3 percentage point reduction to CMS Energy’s effective tax rate and a 2.2 percentage point reduction to Consumers’ effective tax rate.
2Since 2014, Consumers has followed a regulatory treatment ordered by the MPSC that accelerates the return of certain income tax benefits to customers. This change, which also accelerates Consumers’ recognition of the income tax benefits, reduced Consumers’ income tax expense by $28 million for the nine months ended September 30, 2017 and by $30 million for the nine months ended September 30, 2016.
|
|||||||
Nine Months Ended September 30 |
2017 | 2016 | |||||
CMS Energy, including Consumers |
|||||||
U.S. federal income tax rate |
35.0 |
% |
35.0 |
% |
|||
Increase (decrease) in income taxes from: |
|||||||
State and local income taxes, net of federal effect1 |
2.3 | 4.2 | |||||
Accelerated flow-through of regulatory tax benefits2 |
(4.3) | (4.7) | |||||
Employee share-based awards |
(0.9) | (0.8) | |||||
Other, net |
(2.0) | (1.4) | |||||
Effective tax rate |
30.1 |
% |
32.3 |
% |
|||
Consumers |
|||||||
U.S. federal income tax rate |
35.0 |
% |
35.0 |
% |
|||
Increase (decrease) in income taxes from: |
|||||||
State and local income taxes, net of federal effect1 |
2.3 | 4.6 | |||||
Accelerated flow-through of regulatory tax benefits2 |
(3.9) | (4.0) | |||||
Employee share-based awards |
(0.8) | (0.7) | |||||
Other, net |
(2.3) | (1.2) | |||||
Effective tax rate |
30.3 |
% |
33.7 |
% |
1In September 2017, CMS Energy completed the evaluation of its methodology for the state apportionment of Consumers’ electricity sales to MISO, taking into account recent state tax law developments in the electric utility sector. As a result, CMS Energy intends to amend state income tax filings for 2013 through 2016 to seek a refund of taxes previously paid. To recognize the anticipated refund and the impact of the expected lower effective tax rate on their deferred state tax liabilities, CMS Energy recorded a $15 million income tax benefit and Consumers recorded a $16 million income tax benefit in September 2017. Both amounts are net of reserves for uncertain tax positions. For the nine months ended September 30, 2017, the impact of the benefit was a 2.3 percentage point reduction to CMS Energy’s effective tax rate and a 2.2 percentage point reduction to Consumers’ effective tax rate.
2Since 2014, Consumers has followed a regulatory treatment ordered by the MPSC that accelerates the return of certain income tax benefits to customers. This change, which also accelerates Consumers’ recognition of the income tax benefits, reduced Consumers’ income tax expense by $28 million for the nine months ended September 30, 2017 and by $30 million for the nine months ended September 30, 2016.
|
|
|||||||
In Millions |
|||||||
|
September 30 |
December 31 |
|||||
|
2017 | 2016 | |||||
CMS Energy, including Consumers |
|||||||
Cash and cash equivalents |
$ |
142 |
$ |
235 | |||
Restricted cash and cash equivalents |
27 | 19 | |||||
Other non-current assets |
4 | 3 | |||||
Cash and cash equivalents, including restricted amounts |
$ |
173 |
$ |
257 | |||
Consumers |
|||||||
Cash and cash equivalents |
$ |
55 |
$ |
131 | |||
Restricted cash and cash equivalents |
27 | 19 | |||||
Other non-current assets |
3 | 2 | |||||
Cash and cash equivalents, including restricted amounts |
$ |
85 |
$ |
152 |
|
||||
In Millions |
||||
Nine Months Ended September 30 |
2016 | |||
CMS Energy, including Consumers |
||||
Change in: |
||||
Net cash used in investing activities |
$ |
7 | ||
Cash and cash equivalents, including restricted amounts, end of period |
29 | |||
Consumers |
||||
Change in: |
||||
Net cash used in investing activities |
$ |
8 | ||
Cash and cash equivalents, including restricted amounts, end of period |
29 |
|
|||||||
In Millions |
|||||||
|
September 30 |
December 31 |
|||||
|
2017 | 2016 | |||||
CMS Energy, including Consumers |
|||||||
Cash and cash equivalents |
$ |
142 |
$ |
235 | |||
Restricted cash and cash equivalents |
27 | 19 | |||||
Other non-current assets |
4 | 3 | |||||
Cash and cash equivalents, including restricted amounts |
$ |
173 |
$ |
257 | |||
Consumers |
|||||||
Cash and cash equivalents |
$ |
55 |
$ |
131 | |||
Restricted cash and cash equivalents |
27 | 19 | |||||
Other non-current assets |
3 | 2 | |||||
Cash and cash equivalents, including restricted amounts |
$ |
85 |
$ |
152 |
|
||||
In Millions |
||||
Nine Months Ended September 30 |
2016 | |||
CMS Energy, including Consumers |
||||
Change in: |
||||
Net cash used in investing activities |
$ |
7 | ||
Cash and cash equivalents, including restricted amounts, end of period |
29 | |||
Consumers |
||||
Change in: |
||||
Net cash used in investing activities |
$ |
8 | ||
Cash and cash equivalents, including restricted amounts, end of period |
29 |
|
|
||||||||||||||
In Millions |
||||||||||||||
|
Three Months Ended |
Nine Months Ended |
||||||||||||
September 30 |
2017 | 2016 | 2017 | 2016 | ||||||||||
CMS Energy, including Consumers |
||||||||||||||
Operating revenue |
||||||||||||||
Electric utility |
$ |
1,247 |
$ |
1,313 |
$ |
3,360 |
$ |
3,348 | ||||||
Gas utility |
190 | 185 | 1,176 | 1,166 | ||||||||||
Enterprises |
58 | 59 | 172 | 156 | ||||||||||
Other reconciling items |
32 | 30 | 97 | 89 | ||||||||||
Total operating revenue – CMS Energy |
$ |
1,527 |
$ |
1,587 |
$ |
4,805 |
$ |
4,759 | ||||||
Consumers |
||||||||||||||
Operating revenue |
||||||||||||||
Electric utility |
$ |
1,247 |
$ |
1,313 |
$ |
3,360 |
$ |
3,348 | ||||||
Gas utility |
190 | 185 | 1,176 | 1,166 | ||||||||||
Total operating revenue – Consumers |
$ |
1,437 |
$ |
1,498 |
$ |
4,536 |
$ |
4,514 | ||||||
CMS Energy, including Consumers |
||||||||||||||
Net income (loss) available to common stockholders |
||||||||||||||
Electric utility |
$ |
176 |
$ |
191 |
$ |
394 |
$ |
395 | ||||||
Gas utility |
5 | 3 | 101 | 102 | ||||||||||
Enterprises |
8 | 8 | 27 | 17 | ||||||||||
Other reconciling items |
(17) | (16) | (59) | (40) | ||||||||||
Total net income available to common stockholders – CMS Energy |
$ |
172 |
$ |
186 |
$ |
463 |
$ |
474 | ||||||
Consumers |
||||||||||||||
Net income available to common stockholder |
||||||||||||||
Electric utility |
$ |
176 |
$ |
191 |
$ |
394 |
$ |
395 | ||||||
Gas utility |
5 | 3 | 101 | 102 | ||||||||||
Other reconciling items |
- |
1 |
- |
1 | ||||||||||
Total net income available to common stockholder – Consumers |
$ |
181 |
$ |
195 |
$ |
495 |
$ |
498 |
|
|||||||
In Millions |
|||||||
|
September 30, 2017 |
December 31, 2016 |
|||||
CMS Energy, including Consumers |
|||||||
Plant, property, and equipment, gross |
|||||||
Electric utility1 |
$ |
15,056 |
$ |
14,540 | |||
Gas utility1 |
6,713 | 6,283 | |||||
Enterprises |
164 | 157 | |||||
Other reconciling items |
33 | 30 | |||||
Total plant, property, and equipment, gross – CMS Energy |
$ |
21,966 |
$ |
21,010 | |||
Consumers |
|||||||
Plant, property, and equipment, gross |
|||||||
Electric utility1 |
$ |
15,056 |
$ |
14,540 | |||
Gas utility1 |
6,713 | 6,283 | |||||
Other reconciling items |
15 | 15 | |||||
Total plant, property, and equipment, gross – Consumers |
$ |
21,784 |
$ |
20,838 | |||
CMS Energy, including Consumers |
|||||||
Total assets |
|||||||
Electric utility1 |
$ |
13,639 |
$ |
13,429 | |||
Gas utility1 |
6,701 | 6,446 | |||||
Enterprises |
280 | 269 | |||||
Other reconciling items |
1,500 | 1,478 | |||||
Total assets – CMS Energy |
$ |
22,120 |
$ |
21,622 | |||
Consumers |
|||||||
Total assets |
|||||||
Electric utility1 |
$ |
13,640 |
$ |
13,430 | |||
Gas utility1 |
6,701 | 6,446 | |||||
Other reconciling items |
39 | 70 | |||||
Total assets – Consumers |
$ |
20,380 |
$ |
19,946 |
1Amounts include a portion of Consumers’ other common assets attributable to both the electric and gas utility businesses.
|
||||||||||||||
In Millions |
||||||||||||||
|
Three Months Ended |
Nine Months Ended |
||||||||||||
September 30 |
2017 | 2016 | 2017 | 2016 | ||||||||||
CMS Energy, including Consumers |
||||||||||||||
Operating revenue |
||||||||||||||
Electric utility |
$ |
1,247 |
$ |
1,313 |
$ |
3,360 |
$ |
3,348 | ||||||
Gas utility |
190 | 185 | 1,176 | 1,166 | ||||||||||
Enterprises |
58 | 59 | 172 | 156 | ||||||||||
Other reconciling items |
32 | 30 | 97 | 89 | ||||||||||
Total operating revenue – CMS Energy |
$ |
1,527 |
$ |
1,587 |
$ |
4,805 |
$ |
4,759 | ||||||
Consumers |
||||||||||||||
Operating revenue |
||||||||||||||
Electric utility |
$ |
1,247 |
$ |
1,313 |
$ |
3,360 |
$ |
3,348 | ||||||
Gas utility |
190 | 185 | 1,176 | 1,166 | ||||||||||
Total operating revenue – Consumers |
$ |
1,437 |
$ |
1,498 |
$ |
4,536 |
$ |
4,514 | ||||||
CMS Energy, including Consumers |
||||||||||||||
Net income (loss) available to common stockholders |
||||||||||||||
Electric utility |
$ |
176 |
$ |
191 |
$ |
394 |
$ |
395 | ||||||
Gas utility |
5 | 3 | 101 | 102 | ||||||||||
Enterprises |
8 | 8 | 27 | 17 | ||||||||||
Other reconciling items |
(17) | (16) | (59) | (40) | ||||||||||
Total net income available to common stockholders – CMS Energy |
$ |
172 |
$ |
186 |
$ |
463 |
$ |
474 | ||||||
Consumers |
||||||||||||||
Net income available to common stockholder |
||||||||||||||
Electric utility |
$ |
176 |
$ |
191 |
$ |
394 |
$ |
395 | ||||||
Gas utility |
5 | 3 | 101 | 102 | ||||||||||
Other reconciling items |
- |
1 |
- |
1 | ||||||||||
Total net income available to common stockholder – Consumers |
$ |
181 |
$ |
195 |
$ |
495 |
$ |
498 |
|
|||||||
In Millions |
|||||||
|
September 30, 2017 |
December 31, 2016 |
|||||
CMS Energy, including Consumers |
|||||||
Plant, property, and equipment, gross |
|||||||
Electric utility1 |
$ |
15,056 |
$ |
14,540 | |||
Gas utility1 |
6,713 | 6,283 | |||||
Enterprises |
164 | 157 | |||||
Other reconciling items |
33 | 30 | |||||
Total plant, property, and equipment, gross – CMS Energy |
$ |
21,966 |
$ |
21,010 | |||
Consumers |
|||||||
Plant, property, and equipment, gross |
|||||||
Electric utility1 |
$ |
15,056 |
$ |
14,540 | |||
Gas utility1 |
6,713 | 6,283 | |||||
Other reconciling items |
15 | 15 | |||||
Total plant, property, and equipment, gross – Consumers |
$ |
21,784 |
$ |
20,838 | |||
CMS Energy, including Consumers |
|||||||
Total assets |
|||||||
Electric utility1 |
$ |
13,639 |
$ |
13,429 | |||
Gas utility1 |
6,701 | 6,446 | |||||
Enterprises |
280 | 269 | |||||
Other reconciling items |
1,500 | 1,478 | |||||
Total assets – CMS Energy |
$ |
22,120 |
$ |
21,622 | |||
Consumers |
|||||||
Total assets |
|||||||
Electric utility1 |
$ |
13,640 |
$ |
13,430 | |||
Gas utility1 |
6,701 | 6,446 | |||||
Other reconciling items |
39 | 70 | |||||
Total assets – Consumers |
$ |
20,380 |
$ |
19,946 |
1Amounts include a portion of Consumers’ other common assets attributable to both the electric and gas utility businesses.
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