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1:Significant Accounting Policies
Principles of Consolidation: CMS Energy and Consumers prepare their consolidated financial statements in conformity with GAAP. CMS Energy’s consolidated financial statements comprise CMS Energy, Consumers, CMS Enterprises, and all other entities in which CMS Energy has a controlling financial interest or is the primary beneficiary. Consumers’ consolidated financial statements comprise Consumers and all other entities in which it has a controlling financial interest or is the primary beneficiary. CMS Energy uses the equity method of accounting for investments in companies and partnerships that are not consolidated, where they have significant influence over operations and financial policies but are not the primary beneficiary. CMS Energy and Consumers eliminate intercompany transactions and balances.
Use of Estimates: CMS Energy and Consumers are required to make estimates using assumptions that may affect reported amounts and disclosures. Actual results could differ from those estimates.
Revenue Recognition Policy: CMS Energy and Consumers recognize revenue from deliveries of electricity and natural gas, and from the transportation, processing, and storage of natural gas, when services are provided. CMS Energy and Consumers record unbilled revenue for the estimated amount of energy delivered to customers but not yet billed. CMS Energy and Consumers record sales tax net and exclude it from revenue. CMS Energy recognizes revenue on sales of marketed electricity, natural gas, and other energy products at delivery.
Alternative-Revenue Program: The energy waste reduction incentive mechanism provides a financial incentive if the energy savings of Consumers’ customers exceed annual targets established by the MPSC. The maximum incentive that Consumers may earn under this mechanism is 20 percent of the amount it spends on energy waste reduction programs. Consumers accounts for this program as an alternative-revenue program that meets the criteria for recognizing revenue related to the incentive as soon as energy savings exceed the annual targets established by the MPSC.
Self-Implemented Rates: The 2016 Energy Law, which became effective in April 2017, eliminated utilities’ self-implementation of rates under general rate cases, but provided for more timely processing of general rate cases. Consumers filed an electric rate case in March 2017, prior to the effective date of that law, and as result was allowed to self-implement new energy rates in October 2017, subject to refund with interest and potential penalties. Consumers recognized revenue associated with self-implemented rates, but recorded a provision for revenue subject to refund because it considered it probable that it would be required to refund a portion of its self-implemented rates.
EnerBank: EnerBank provides four types of unsecured consumer installment loans: same-as-cash, zero interest, reduced interest, and traditional. Under EnerBank’s same-as-cash programs, authorized contractors pay EnerBank a fee to provide a borrower with the option to pay off the loan interest-free during the same-as-cash period. EnerBank recognizes the fee on a straight-line basis over the same-as-cash period, which typically ranges from three to 24 months. If a borrower does not exercise its option to pay off its loan interest-free during the same-as-cash period, EnerBank charges the borrower accrued interest at the loan’s contractual rate on the outstanding balance from the origination date. Under the zero interest and reduced interest programs, authorized contractors pay EnerBank a fee to provide a borrower with no interest or reduced rates of interest for the entire term of the loan. EnerBank recognizes the fee using the interest method over the term of the loan, which ranges from one to 12 years. Unearned income associated with the fees is recorded as a reduction to notes receivable on CMS Energy’s consolidated balance sheets.
EnerBank recognizes interest income using the interest method and amortizes loan origination fees, net of certain direct origination costs, over the loan term. EnerBank ceases recognizing interest income when a loan loss is confirmed or when a loan becomes 120 days past due, at which time the loan principal is charged against the allowance for loan losses. At that time, EnerBank recognizes any interest accrued but not received for such loan losses as a reversal of interest income.
The loan fees and interest income earned by EnerBank are reported as operating revenue on CMS Energy’s consolidated statements of income.
Accounts Receivable: Accounts receivable comprise trade receivables and unbilled receivables. CMS Energy and Consumers record their accounts receivable at cost, which approximates fair value. CMS Energy and Consumers establish an allowance for uncollectible accounts based on historical losses, management’s assessment of existing economic conditions, customer trends, and other factors. CMS Energy and Consumers assess late payment fees on trade receivables based on contractual past-due terms established with customers. CMS Energy and Consumers charge off accounts deemed uncollectible to operating expense. Unbilled receivables, which are recorded as accounts receivable on CMS Energy’s and Consumers’ consolidated balance sheets, were $481 million at December 31, 2017 and $361 million at December 31, 2016.
Contingencies: CMS Energy and Consumers record estimated liabilities for contingencies on their consolidated financial statements when it is probable that a liability has been incurred and when the amount of loss can be reasonably estimated. For environmental remediation projects in which the timing of estimated expenditures is considered reliably determinable, CMS Energy and Consumers record the liability at its net present value, using a discount rate equal to the interest rate on monetary assets that are essentially risk-free and have maturities comparable to that of the environmental liability. CMS Energy and Consumers expense legal fees as incurred; fees incurred but not yet billed are accrued based on estimates of work performed.
Debt Issuance Costs, Discounts, Premiums, and Refinancing Costs: Upon the issuance of long-term debt, CMS Energy and Consumers defer issuance costs, discounts, and premiums and amortize those amounts over the terms of the associated debt. Debt issuance costs are presented as a direct deduction from the carrying amount of long-term debt on the balance sheet. Upon the refinancing of long-term debt, Consumers, as a regulated entity, defers any remaining unamortized issuance costs, discounts, and premiums associated with the refinanced debt and amortizes those amounts over the term of the newly issued debt. For the non‑regulated portions of CMS Energy’s business, any remaining unamortized issuance costs, discounts, and premiums associated with extinguished debt are charged to earnings.
Derivative Instruments: In order to support ongoing operations, CMS Energy and Consumers enter into contracts for the future purchase and sale of various commodities, such as electricity, natural gas, and coal. These forward contracts are generally long-term in nature and result in physical delivery of the commodity at a contracted price. Most of these contracts are not subject to derivative accounting for one or more of the following reasons:
|
· |
they do not have a notional amount (that is, a number of units specified in a derivative instrument, such as MWh of electricity or bcf of natural gas) |
|
· |
they qualify for the normal purchases and sales exception |
|
· |
there is not an active market for the commodity |
Consumers’ coal purchase contracts are not derivatives because there is not an active market for the coal it purchases. If an active market for coal develops in the future, some of these contracts may qualify as derivatives. Since Consumers is subject to regulatory accounting, the resulting fair value gains and losses would be deferred as regulatory assets or liabilities and would not affect net income.
Consumers also uses FTRs to manage price risk related to electricity transmission congestion. An FTR is a financial instrument that entitles its holder to receive compensation or requires its holder to remit payment for congestion-related transmission charges. Consumers accounts for FTRs as derivatives. All changes in fair value associated with FTRs are deferred as regulatory assets and liabilities until the instruments are settled.
CMS Energy and Consumers record derivative contracts that do not qualify for the normal purchases and sales exception at fair value on their consolidated balance sheets. Each reporting period, the resulting asset or liability is adjusted to reflect any change in the fair value of the contract. Since none of CMS Energy’s or Consumers’ derivatives has been designated as an accounting hedge, all changes in fair value are either reported in earnings or deferred as regulatory assets or liabilities. For details regarding CMS Energy’s and Consumers’ derivative instruments recorded at fair value, see Note 6, Fair Value Measurements.
Earnings Per Share: CMS Energy calculates basic and diluted EPS using the weighted-average number of shares of common stock and dilutive potential common stock outstanding during the period. Potential common stock, for purposes of determining diluted EPS, includes the effects of nonvested stock awards and contingently convertible securities. CMS Energy computes the effect on potential common stock using the treasury stock method or the if‑converted method, as applicable. Diluted EPS excludes the impact of antidilutive securities, which are those securities resulting in an increase in EPS or a decrease in loss per share. For EPS computations, see Note 15, Earnings Per Share—CMS Energy.
Financial Instruments: CMS Energy and Consumers record debt and equity securities classified as available for sale at fair value as determined from quoted market prices or other observable, market-based inputs. Unrealized gains and losses resulting from changes in fair value of these securities are determined on a specific-identification basis. CMS Energy and Consumers report unrealized gains and losses on these securities, net of tax, in equity as part of AOCI, except that unrealized losses determined to be other than temporary are reported in earnings. For additional details regarding financial instruments, see Note 7, Financial Instruments.
Impairment of Long-Lived Assets and Equity Method Investments: CMS Energy and Consumers perform tests of impairment if certain triggering events occur or if there has been a decline in value that may be other than temporary.
CMS Energy and Consumers evaluate long-lived assets held in use for impairment by calculating the undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. If the undiscounted future cash flows are less than the carrying amount, CMS Energy and Consumers recognize an impairment loss equal to the amount by which the carrying amount exceeds the fair value. CMS Energy and Consumers estimate the fair value of the asset using quoted market prices, market prices of similar assets, or discounted future cash flow analyses.
CMS Energy also assesses equity method investments for impairment whenever there has been a decline in value that is other than temporary. This assessment requires CMS Energy to determine the fair value of the equity method investment. CMS Energy determines fair value using valuation methodologies, including discounted cash flows, and assesses the ability of the investee to sustain an earnings capacity that justifies the carrying amount of the investment. CMS Energy records an impairment if the fair value is less than the carrying amount and the decline in value is considered to be other than temporary.
Inventory: CMS Energy and Consumers use the weighted-average cost method for valuing working gas, recoverable base gas in underground storage facilities, and materials and supplies inventory. CMS Energy and Consumers also use this method for valuing coal inventory, and they classify these amounts as generating plant fuel stock on their consolidated balance sheets.
CMS Energy and Consumers account for RECs and emission allowances as inventory and use the weighted-average cost method to remove amounts from inventory. RECs and emission allowances are used to satisfy compliance obligations related to the generation of power. CMS Energy and Consumers classify these amounts within other assets on their consolidated balance sheets.
CMS Energy and Consumers evaluate inventory for impairment as required to ensure that its carrying value does not exceed the lower of cost or net realizable value.
MISO Transactions: MISO requires the submission of hourly day-ahead and real-time bids and offers for energy at locations across the MISO region. CMS Energy and Consumers account for MISO transactions on a net hourly basis in each of the real-time and day-ahead markets, netted across all MISO energy market locations. CMS Energy and Consumers record net hourly purchases in purchased and interchange power and net hourly sales in operating revenue on their consolidated statements of income. They record net billing adjustments upon receipt of settlement statements, record accruals for future net purchases and sales adjustments based on historical experience, and reconcile accruals to actual expenses and sales upon receipt of settlement statements.
Property Taxes: Property taxes are based on the taxable value of Consumers’ real and personal property assessed by local taxing authorities. Consumers records property tax expense over the fiscal year of the taxing authority for which the taxes are levied. The deferred property tax balance represents the amount of Consumers’ accrued property tax that will be recognized over future governmental fiscal periods.
Renewable Energy Grant: In 2013, Consumers received a renewable energy cash grant for Lake Winds® Energy Park under Section 1603 of the American Recovery and Reinvestment Tax Act of 2009. Upon receipt of the grant, Consumers recorded a regulatory liability, which Consumers is amortizing over the life of Lake Winds® Energy Park. Consumers presents the amortization as a reduction to maintenance and other operating expenses on its consolidated statements of income. Consumers recorded the deferred income taxes related to the grant as a reduction of the book basis of Lake Winds® Energy Park.
Other: For additional accounting policies, see:
|
· |
Note 8, Notes Receivable |
|
· |
Note 9, Plant, Property, and Equipment |
|
· |
Note 11, Asset Retirement Obligations |
|
· |
Note 12, Retirement Benefits |
|
· |
Note 14, Income Taxes |
|
· |
Note 17, Cash and Cash Equivalents |
1:Significant Accounting Policies
Principles of Consolidation: CMS Energy and Consumers prepare their consolidated financial statements in conformity with GAAP. CMS Energy’s consolidated financial statements comprise CMS Energy, Consumers, CMS Enterprises, and all other entities in which CMS Energy has a controlling financial interest or is the primary beneficiary. Consumers’ consolidated financial statements comprise Consumers and all other entities in which it has a controlling financial interest or is the primary beneficiary. CMS Energy uses the equity method of accounting for investments in companies and partnerships that are not consolidated, where they have significant influence over operations and financial policies but are not the primary beneficiary. CMS Energy and Consumers eliminate intercompany transactions and balances.
Use of Estimates: CMS Energy and Consumers are required to make estimates using assumptions that may affect reported amounts and disclosures. Actual results could differ from those estimates.
Revenue Recognition Policy: CMS Energy and Consumers recognize revenue from deliveries of electricity and natural gas, and from the transportation, processing, and storage of natural gas, when services are provided. CMS Energy and Consumers record unbilled revenue for the estimated amount of energy delivered to customers but not yet billed. CMS Energy and Consumers record sales tax net and exclude it from revenue. CMS Energy recognizes revenue on sales of marketed electricity, natural gas, and other energy products at delivery.
Alternative-Revenue Program: The energy waste reduction incentive mechanism provides a financial incentive if the energy savings of Consumers’ customers exceed annual targets established by the MPSC. The maximum incentive that Consumers may earn under this mechanism is 20 percent of the amount it spends on energy waste reduction programs. Consumers accounts for this program as an alternative-revenue program that meets the criteria for recognizing revenue related to the incentive as soon as energy savings exceed the annual targets established by the MPSC.
Self-Implemented Rates: The 2016 Energy Law, which became effective in April 2017, eliminated utilities’ self-implementation of rates under general rate cases, but provided for more timely processing of general rate cases. Consumers filed an electric rate case in March 2017, prior to the effective date of that law, and as result was allowed to self-implement new energy rates in October 2017, subject to refund with interest and potential penalties. Consumers recognized revenue associated with self-implemented rates, but recorded a provision for revenue subject to refund because it considered it probable that it would be required to refund a portion of its self-implemented rates.
EnerBank: EnerBank provides four types of unsecured consumer installment loans: same-as-cash, zero interest, reduced interest, and traditional. Under EnerBank’s same-as-cash programs, authorized contractors pay EnerBank a fee to provide a borrower with the option to pay off the loan interest-free during the same-as-cash period. EnerBank recognizes the fee on a straight-line basis over the same-as-cash period, which typically ranges from three to 24 months. If a borrower does not exercise its option to pay off its loan interest-free during the same-as-cash period, EnerBank charges the borrower accrued interest at the loan’s contractual rate on the outstanding balance from the origination date. Under the zero interest and reduced interest programs, authorized contractors pay EnerBank a fee to provide a borrower with no interest or reduced rates of interest for the entire term of the loan. EnerBank recognizes the fee using the interest method over the term of the loan, which ranges from one to 12 years. Unearned income associated with the fees is recorded as a reduction to notes receivable on CMS Energy’s consolidated balance sheets.
EnerBank recognizes interest income using the interest method and amortizes loan origination fees, net of certain direct origination costs, over the loan term. EnerBank ceases recognizing interest income when a loan loss is confirmed or when a loan becomes 120 days past due, at which time the loan principal is charged against the allowance for loan losses. At that time, EnerBank recognizes any interest accrued but not received for such loan losses as a reversal of interest income.
The loan fees and interest income earned by EnerBank are reported as operating revenue on CMS Energy’s consolidated statements of income.
Accounts Receivable: Accounts receivable comprise trade receivables and unbilled receivables. CMS Energy and Consumers record their accounts receivable at cost, which approximates fair value. CMS Energy and Consumers establish an allowance for uncollectible accounts based on historical losses, management’s assessment of existing economic conditions, customer trends, and other factors. CMS Energy and Consumers assess late payment fees on trade receivables based on contractual past-due terms established with customers. CMS Energy and Consumers charge off accounts deemed uncollectible to operating expense. Unbilled receivables, which are recorded as accounts receivable on CMS Energy’s and Consumers’ consolidated balance sheets, were $481 million at December 31, 2017 and $361 million at December 31, 2016.
Contingencies: CMS Energy and Consumers record estimated liabilities for contingencies on their consolidated financial statements when it is probable that a liability has been incurred and when the amount of loss can be reasonably estimated. For environmental remediation projects in which the timing of estimated expenditures is considered reliably determinable, CMS Energy and Consumers record the liability at its net present value, using a discount rate equal to the interest rate on monetary assets that are essentially risk-free and have maturities comparable to that of the environmental liability. CMS Energy and Consumers expense legal fees as incurred; fees incurred but not yet billed are accrued based on estimates of work performed.
Debt Issuance Costs, Discounts, Premiums, and Refinancing Costs: Upon the issuance of long-term debt, CMS Energy and Consumers defer issuance costs, discounts, and premiums and amortize those amounts over the terms of the associated debt. Debt issuance costs are presented as a direct deduction from the carrying amount of long-term debt on the balance sheet. Upon the refinancing of long-term debt, Consumers, as a regulated entity, defers any remaining unamortized issuance costs, discounts, and premiums associated with the refinanced debt and amortizes those amounts over the term of the newly issued debt. For the non‑regulated portions of CMS Energy’s business, any remaining unamortized issuance costs, discounts, and premiums associated with extinguished debt are charged to earnings.
Derivative Instruments: In order to support ongoing operations, CMS Energy and Consumers enter into contracts for the future purchase and sale of various commodities, such as electricity, natural gas, and coal. These forward contracts are generally long-term in nature and result in physical delivery of the commodity at a contracted price. Most of these contracts are not subject to derivative accounting for one or more of the following reasons:
|
· |
they do not have a notional amount (that is, a number of units specified in a derivative instrument, such as MWh of electricity or bcf of natural gas) |
|
· |
they qualify for the normal purchases and sales exception |
|
· |
there is not an active market for the commodity |
Consumers’ coal purchase contracts are not derivatives because there is not an active market for the coal it purchases. If an active market for coal develops in the future, some of these contracts may qualify as derivatives. Since Consumers is subject to regulatory accounting, the resulting fair value gains and losses would be deferred as regulatory assets or liabilities and would not affect net income.
Consumers also uses FTRs to manage price risk related to electricity transmission congestion. An FTR is a financial instrument that entitles its holder to receive compensation or requires its holder to remit payment for congestion-related transmission charges. Consumers accounts for FTRs as derivatives. All changes in fair value associated with FTRs are deferred as regulatory assets and liabilities until the instruments are settled.
CMS Energy and Consumers record derivative contracts that do not qualify for the normal purchases and sales exception at fair value on their consolidated balance sheets. Each reporting period, the resulting asset or liability is adjusted to reflect any change in the fair value of the contract. Since none of CMS Energy’s or Consumers’ derivatives has been designated as an accounting hedge, all changes in fair value are either reported in earnings or deferred as regulatory assets or liabilities. For details regarding CMS Energy’s and Consumers’ derivative instruments recorded at fair value, see Note 6, Fair Value Measurements.
Earnings Per Share: CMS Energy calculates basic and diluted EPS using the weighted-average number of shares of common stock and dilutive potential common stock outstanding during the period. Potential common stock, for purposes of determining diluted EPS, includes the effects of nonvested stock awards and contingently convertible securities. CMS Energy computes the effect on potential common stock using the treasury stock method or the if‑converted method, as applicable. Diluted EPS excludes the impact of antidilutive securities, which are those securities resulting in an increase in EPS or a decrease in loss per share. For EPS computations, see Note 15, Earnings Per Share—CMS Energy.
Financial Instruments: CMS Energy and Consumers record debt and equity securities classified as available for sale at fair value as determined from quoted market prices or other observable, market-based inputs. Unrealized gains and losses resulting from changes in fair value of these securities are determined on a specific-identification basis. CMS Energy and Consumers report unrealized gains and losses on these securities, net of tax, in equity as part of AOCI, except that unrealized losses determined to be other than temporary are reported in earnings. For additional details regarding financial instruments, see Note 7, Financial Instruments.
Impairment of Long-Lived Assets and Equity Method Investments: CMS Energy and Consumers perform tests of impairment if certain triggering events occur or if there has been a decline in value that may be other than temporary.
CMS Energy and Consumers evaluate long-lived assets held in use for impairment by calculating the undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. If the undiscounted future cash flows are less than the carrying amount, CMS Energy and Consumers recognize an impairment loss equal to the amount by which the carrying amount exceeds the fair value. CMS Energy and Consumers estimate the fair value of the asset using quoted market prices, market prices of similar assets, or discounted future cash flow analyses.
CMS Energy also assesses equity method investments for impairment whenever there has been a decline in value that is other than temporary. This assessment requires CMS Energy to determine the fair value of the equity method investment. CMS Energy determines fair value using valuation methodologies, including discounted cash flows, and assesses the ability of the investee to sustain an earnings capacity that justifies the carrying amount of the investment. CMS Energy records an impairment if the fair value is less than the carrying amount and the decline in value is considered to be other than temporary.
Inventory: CMS Energy and Consumers use the weighted-average cost method for valuing working gas, recoverable base gas in underground storage facilities, and materials and supplies inventory. CMS Energy and Consumers also use this method for valuing coal inventory, and they classify these amounts as generating plant fuel stock on their consolidated balance sheets.
CMS Energy and Consumers account for RECs and emission allowances as inventory and use the weighted-average cost method to remove amounts from inventory. RECs and emission allowances are used to satisfy compliance obligations related to the generation of power. CMS Energy and Consumers classify these amounts within other assets on their consolidated balance sheets.
CMS Energy and Consumers evaluate inventory for impairment as required to ensure that its carrying value does not exceed the lower of cost or net realizable value.
MISO Transactions: MISO requires the submission of hourly day-ahead and real-time bids and offers for energy at locations across the MISO region. CMS Energy and Consumers account for MISO transactions on a net hourly basis in each of the real-time and day-ahead markets, netted across all MISO energy market locations. CMS Energy and Consumers record net hourly purchases in purchased and interchange power and net hourly sales in operating revenue on their consolidated statements of income. They record net billing adjustments upon receipt of settlement statements, record accruals for future net purchases and sales adjustments based on historical experience, and reconcile accruals to actual expenses and sales upon receipt of settlement statements.
Property Taxes: Property taxes are based on the taxable value of Consumers’ real and personal property assessed by local taxing authorities. Consumers records property tax expense over the fiscal year of the taxing authority for which the taxes are levied. The deferred property tax balance represents the amount of Consumers’ accrued property tax that will be recognized over future governmental fiscal periods.
Renewable Energy Grant: In 2013, Consumers received a renewable energy cash grant for Lake Winds® Energy Park under Section 1603 of the American Recovery and Reinvestment Tax Act of 2009. Upon receipt of the grant, Consumers recorded a regulatory liability, which Consumers is amortizing over the life of Lake Winds® Energy Park. Consumers presents the amortization as a reduction to maintenance and other operating expenses on its consolidated statements of income. Consumers recorded the deferred income taxes related to the grant as a reduction of the book basis of Lake Winds® Energy Park.
Other: For additional accounting policies, see:
|
· |
Note 8, Notes Receivable |
|
· |
Note 9, Plant, Property, and Equipment |
|
· |
Note 11, Asset Retirement Obligations |
|
· |
Note 12, Retirement Benefits |
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· |
Note 14, Income Taxes |
|
· |
Note 17, Cash and Cash Equivalents |
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2:New Accounting Standards
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 years ended December 31, 2017, 2016, and 2015, 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 year ended December 31, 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 12, 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.
SEC Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act: The SEC staff issued this guidance to address situations where a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the TCJA in the period in which the TCJA was enacted. Under the guidance, registrants can report the effects of the TCJA as provisional amounts based on reasonable estimates in those areas in which the accounting is incomplete. The provisional amounts are subject to adjustment during a measurement period that can extend no longer than one year from the enactment date. For further details on how CMS Energy and Consumers applied this guidance to their consolidated financial statements, see Note 14, Income Taxes.
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 replaces most of the existing revenue recognition requirements in GAAP, although certain guidance specific to rate-regulated utilities has been retained. The standard is effective on January 1, 2018 for CMS Energy and Consumers. Entities 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 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 finalizing their implementation of the standard and they do not expect it to 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 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, effective January 1, 2018 for CMS Energy and Consumers, is intended to improve the accounting for financial instruments. The standard requires investments in equity securities to be measured at fair value, with changes in fair value recognized in net income, except for certain investments such as those that qualify for equity-method accounting. The standard no longer permits unrealized gains and losses for certain equity investments to be recorded in AOCI. There are other targeted changes as well. Entities will apply the standard using a modified retrospective approach, with a cumulative adjustment recorded to beginning retained earnings on the effective date.
During 2017, CMS Energy and Consumers sold the mutual fund investments in the DB SERP and reinvested in U.S. Treasury debt securities. Prior to the sale of the mutual funds, CMS Energy and Consumers recorded unrealized gains and losses on these investments in AOCI, except that unrealized losses determined to be other than temporary were reported in earnings. With the sale of these funds in 2017, CMS Energy does not expect this standard to have a significant impact on its consolidated financial statements. Consumers presently records unrealized gains and losses on its investment in CMS Energy common stock in AOCI. In accordance with the standard, as of January 1, 2018, Consumers will remove the $19 million unrealized gain and the associated deferred taxes on its investment in CMS Energy common stock from AOCI and record the gain in retained earnings. In addition, subsequent to January 1, 2018, Consumers will recognize all unrealized gains and losses on this investment in net income. The changes to the accounting treatment for this investment will be reflected in Consumers’ consolidated financial statements only, with no impact on CMS Energy’s consolidated financial statements. For further details on CMS Energy’s and Consumers’ investments in debt and equity securities, see Note 7, Financial Instruments.
ASU 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. As part of their adoption of the new standard, CMS Energy and Consumers expect to elect certain practical expedients permitted by the standard, under which they will not be required to perform lease assessments or reassessments for agreements existing on the effective date. CMS Energy and Consumers have decided not to adopt the standard early and are continuing to evaluate the impact of the standard on their consolidated financial statements. See Note 10, Leases and Palisades Financing, for more information on CMS Energy’s and Consumers’ operating lease obligations.
ASU 2016‑13, Measurement of Credit Losses on Financial Instruments: This standard, which will be effective January 1, 2020 for CMS Energy and Consumers, provides new guidance for estimating and recording credit losses on financial instruments. The standard will apply to the recognition of loan losses at EnerBank as well as to the recognition of uncollectible accounts expense at Consumers. Entities will apply the standard using a modified retrospective approach, with a cumulative-effect adjustment recorded to beginning retained earnings on the effective date. CMS Energy and Consumers are evaluating the impact of the standard on their consolidated financial statements.
2:New Accounting Standards
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 years ended December 31, 2017, 2016, and 2015, 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 year ended December 31, 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 12, 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.
SEC Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act: The SEC staff issued this guidance to address situations where a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the TCJA in the period in which the TCJA was enacted. Under the guidance, registrants can report the effects of the TCJA as provisional amounts based on reasonable estimates in those areas in which the accounting is incomplete. The provisional amounts are subject to adjustment during a measurement period that can extend no longer than one year from the enactment date. For further details on how CMS Energy and Consumers applied this guidance to their consolidated financial statements, see Note 14, Income Taxes.
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 replaces most of the existing revenue recognition requirements in GAAP, although certain guidance specific to rate-regulated utilities has been retained. The standard is effective on January 1, 2018 for CMS Energy and Consumers. Entities 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 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 finalizing their implementation of the standard and they do not expect it to 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 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, effective January 1, 2018 for CMS Energy and Consumers, is intended to improve the accounting for financial instruments. The standard requires investments in equity securities to be measured at fair value, with changes in fair value recognized in net income, except for certain investments such as those that qualify for equity-method accounting. The standard no longer permits unrealized gains and losses for certain equity investments to be recorded in AOCI. There are other targeted changes as well. Entities will apply the standard using a modified retrospective approach, with a cumulative adjustment recorded to beginning retained earnings on the effective date.
During 2017, CMS Energy and Consumers sold the mutual fund investments in the DB SERP and reinvested in U.S. Treasury debt securities. Prior to the sale of the mutual funds, CMS Energy and Consumers recorded unrealized gains and losses on these investments in AOCI, except that unrealized losses determined to be other than temporary were reported in earnings. With the sale of these funds in 2017, CMS Energy does not expect this standard to have a significant impact on its consolidated financial statements. Consumers presently records unrealized gains and losses on its investment in CMS Energy common stock in AOCI. In accordance with the standard, as of January 1, 2018, Consumers will remove the $19 million unrealized gain and the associated deferred taxes on its investment in CMS Energy common stock from AOCI and record the gain in retained earnings. In addition, subsequent to January 1, 2018, Consumers will recognize all unrealized gains and losses on this investment in net income. The changes to the accounting treatment for this investment will be reflected in Consumers’ consolidated financial statements only, with no impact on CMS Energy’s consolidated financial statements. For further details on CMS Energy’s and Consumers’ investments in debt and equity securities, see Note 7, Financial Instruments.
ASU 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. As part of their adoption of the new standard, CMS Energy and Consumers expect to elect certain practical expedients permitted by the standard, under which they will not be required to perform lease assessments or reassessments for agreements existing on the effective date. CMS Energy and Consumers have decided not to adopt the standard early and are continuing to evaluate the impact of the standard on their consolidated financial statements. See Note 10, Leases and Palisades Financing, for more information on CMS Energy’s and Consumers’ operating lease obligations.
ASU 2016‑13, Measurement of Credit Losses on Financial Instruments: This standard, which will be effective January 1, 2020 for CMS Energy and Consumers, provides new guidance for estimating and recording credit losses on financial instruments. The standard will apply to the recognition of loan losses at EnerBank as well as to the recognition of uncollectible accounts expense at Consumers. Entities will apply the standard using a modified retrospective approach, with a cumulative-effect adjustment recorded to beginning retained earnings on the effective date. CMS Energy and Consumers are evaluating the impact of the standard on their consolidated financial statements.
|
|||
3:Regulatory Matters
Regulatory matters are critical to Consumers. The Michigan Attorney General, ABATE, the MPSC Staff, and certain other parties typically participate in MPSC proceedings concerning Consumers, such as Consumers’ rate cases and PSCR and GCR processes. These parties often challenge various aspects of those proceedings, including the prudence of Consumers’ policies and practices, and seek cost disallowances and other relief. The parties also have appealed significant MPSC orders. Depending upon the specific issues, the outcomes of rate cases and proceedings, including judicial proceedings challenging MPSC orders or other actions, could negatively affect CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. Consumers cannot predict the outcome of these proceedings.
There are multiple appeals pending that involve various issues concerning cost recovery from customers, the adequacy of the record evidence supporting the recovery of Smart Energy investments, and other matters. Consumers is unable to predict the outcome of these appeals.
Regulatory Assets and Liabilities
Consumers is subject to the actions of the MPSC and FERC and therefore prepares its consolidated financial statements in accordance with the provisions of regulatory accounting. A utility must apply regulatory accounting when its rates are designed to recover specific costs of providing regulated services. Under regulatory accounting, Consumers records regulatory assets or liabilities for certain transactions that would have been treated as expense or revenue by non‑regulated businesses.
Presented in the following table are the regulatory assets and liabilities on Consumers’ consolidated balance sheets:
|
|
||||||||
|
In Millions |
||||||||
|
December 31 |
End of Recovery |
2017 | 2016 | |||||
|
Regulatory assets |
||||||||
|
Current |
||||||||
|
Energy waste reduction plan incentive1 |
2018 |
$ |
18 |
$ |
17 | |||
|
Other |
2018 | 2 |
- |
|||||
|
Total current regulatory assets |
$ |
20 |
$ |
17 | ||||
|
Non-current |
||||||||
|
Postretirement benefits2 |
various |
$ |
1,028 |
$ |
1,373 | |||
|
Securitized costs3 |
2029 | 298 | 323 | |||||
|
ARO4 |
various |
161 | 166 | |||||
|
MGP sites4 |
various |
142 | 139 | |||||
|
Unamortized loss on reacquired debt4 |
various |
53 | 54 | |||||
|
Energy waste reduction plan4 |
various |
39 | 1 | |||||
|
Energy waste reduction plan incentive1 |
2019 | 31 | 18 | |||||
|
Gas storage inventory adjustments4 |
various |
10 | 14 | |||||
|
Other |
various |
2 | 3 | |||||
|
Total non-current regulatory assets |
$ |
1,764 |
$ |
2,091 | ||||
|
Total regulatory assets |
$ |
1,784 |
$ |
2,108 | ||||
|
Regulatory liabilities |
||||||||
|
Current |
||||||||
|
Income taxes, net |
2018 |
$ |
52 |
$ |
64 | |||
|
Other |
2018 | 28 | 31 | |||||
|
Total current regulatory liabilities |
$ |
80 |
$ |
95 | ||||
|
Non-current |
||||||||
|
Cost of removal |
various |
$ |
1,844 |
$ |
1,809 | |||
|
Income taxes, net |
various |
1,564 | 7 | |||||
|
Postretirement benefits |
various |
135 |
- |
|||||
|
Renewable energy plan |
2028 | 56 | 83 | |||||
|
Renewable energy grant |
2043 | 56 | 58 | |||||
|
ARO |
various |
50 | 62 | |||||
|
Energy waste reduction plan |
various |
- |
11 | |||||
|
Other |
various |
10 | 11 | |||||
|
Total non-current regulatory liabilities |
$ |
3,715 |
$ |
2,041 | ||||
|
Total regulatory liabilities |
$ |
3,795 |
$ |
2,136 | ||||
1These regulatory assets have arisen from an alternative revenue program and are not associated with incurred costs or capital investments. Therefore, the MPSC has provided for recovery without a return.
2This regulatory asset is offset partially by liabilities. The net amount is included in rate base, thereby providing a return.
3The MPSC has authorized a specific return on this regulatory asset.
4These regulatory assets represent incurred costs for which the MPSC has provided, or Consumers expects, recovery without a return on investment.
Regulatory Assets
Energy Waste Reduction Plan Incentive: In 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.
Consumers also exceeded its statutory savings targets in 2017, achieved certain other goals, and will request the MPSC’s approval to collect $31 million, the maximum performance incentive, in the energy waste reduction reconciliation to be filed in 2018. Consumers recognized incentive revenue under this program of $31 million in 2017.
Postretirement Benefits: As part of the ratemaking process, the MPSC allows Consumers to recover the costs of postretirement benefits. Accordingly, Consumers defers the net impact of actuarial losses and gains as well as prior service costs and credits associated with postretirement benefits as a regulatory asset or liability. The asset or liability will decrease as the deferred items are amortized and recognized as components of net periodic benefit cost. For details about the amortization periods, see Note 12, Retirement Benefits.
Securitized Costs: In 2013, the MPSC issued a securitization financing order authorizing Consumers to issue securitization bonds in order to finance the recovery of the remaining book value of seven smaller coal-fueled electric generating units that Consumers retired in April 2016 and three smaller natural gas-fueled electric generating units that Consumers retired in 2015. Upon receipt of the MPSC’s order, Consumers removed the book value of the ten units from plant, property, and equipment and recorded this amount as a regulatory asset. Consumers is amortizing the regulatory asset over the life of the related securitization bonds, which it issued through a subsidiary in 2014. For additional details regarding the securitization bonds, see Note 5, Financings and Capitalization.
ARO: The recovery of the underlying asset investments and related removal and monitoring costs of recorded AROs is approved by the MPSC in depreciation rate cases. Consumers records a regulatory asset and a regulatory liability for timing differences between the recognition of AROs for financial reporting purposes and the recovery of these costs from customers. The recovery period approximates the useful life of the assets to be removed.
MGP Sites: Consumers is incurring environmental remediation and other response activity costs at 23 former MGP facilities. The MPSC allows Consumers to recover from its natural gas customers over a ten-year period the costs incurred to remediate the MGP sites.
Unamortized Loss on Reacquired Debt: Under regulatory accounting, any unamortized discount, premium, or expense related to debt redeemed with the proceeds of new debt is capitalized and amortized over the life of the new debt.
Energy Waste Reduction Plan: The MPSC allows Consumers to collect surcharges from customers to fund its energy waste reduction plan. The amount of spending incurred in excess of surcharges collected is recorded as a regulatory asset and amortized as surcharges are collected from customers over the plan period. The amount of surcharges collected in excess of spending incurred is recorded as a regulatory liability and amortized as costs are incurred.
Gas Storage Inventory Adjustments: Consumers incurs inventory expenses related to the loss of gas from its natural gas storage fields. The MPSC allows Consumers to recover these costs from its natural gas customers over a five-year period.
Regulatory Liabilities
Income Taxes, Net: Consumers records regulatory assets and liabilities to reflect the difference between deferred income taxes recognized for financial reporting purposes and amounts previously reflected in Consumers’ rates. This net balance will decrease over the remaining life of the related temporary differences and flow through current income tax benefit.
At December 31, 2017, Consumers measured its deferred tax assets and liabilities using the 21 percent federal tax rate enacted in the TCJA. Due to the lower corporate tax rate, Consumers reduced its net deferred tax liabilities associated with its utility book-tax temporary differences by $1.6 billion and recorded an offsetting regulatory liability. For additional details on the TCJA, see Note 14, Income Taxes.
Cost of Removal: The MPSC allows Consumers to collect amounts from customers to fund future asset removal activities. This regulatory liability is reduced as costs of removal are incurred. The refund period of this regulatory liability approximates the useful life of the assets to be removed.
Renewable Energy Plan: Consumers has collected surcharges to fund its renewable energy plan. Amounts not yet spent under the plan are recorded as a regulatory liability, which is amortized as incremental costs are incurred to operate and depreciate Consumers’ renewable generation facilities and to purchase RECs under renewable energy purchase agreements. Incremental costs represent costs incurred in excess of amounts recovered through the PSCR process.
Renewable Energy Grant: In 2013, Consumers received a $69 million renewable energy grant for Lake Winds® Energy Park, which began operations in 2012. This grant reduces Consumers’ cost of complying with Michigan’s renewable portfolio standard and, accordingly, reduces the overall renewable energy surcharge to be collected from customers. The regulatory liability recorded for the grant will be amortized over the life of Lake Winds® Energy Park.
Consumers Electric Utility
2016 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. In October 2017, the MPSC approved a settlement agreement that resulted in a $17 million refund to customers during December 2017. Consumers had recorded this amount as a reserve for customer refunds at December 31, 2016.
2017 Electric Rate Case: In March 2017, Consumers filed an application with the MPSC seeking an annual rate increase of $173 million, based on a 10.5 percent authorized return on equity. The filing requested authority to recover new investment in system reliability, environmental compliance, and technology enhancements. In September 2017, Consumers reduced its requested annual rate increase to $148 million. Presented in the following table are the components of the requested increase in revenue:
|
|
||||
|
In Millions |
||||
|
Components of the rate increase |
||||
|
Investment in rate base |
$ |
45 | ||
|
Operating and maintenance costs |
42 | |||
|
Gross margin |
42 | |||
|
Cost of capital |
28 | |||
|
Working capital |
(9) | |||
|
Total |
$ |
148 | ||
In October 2017, Consumers self‑implemented an annual rate increase of $130 million, subject to refund with interest and potential penalties. Consumers had collected $32 million under these self-implemented rates at December 31, 2017. In January 2018, an administrative law judge issued a proposal for decision with a recommended annual rate increase of $30 million. Consumers has estimated and recorded a reserve for customer refunds at December 31, 2017 that it believes is adequate. A final order is expected by the end of March 2018.
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 returned 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.
Sale of Coal-Fueled Generating Units: In October 2017, Consumers completed the sale of its retired B.C. Cobb and J.R. Whiting coal-fueled electric generating units to Forsite. Under the terms of the agreement, which the MPSC approved in September 2017, Consumers transferred the generating units and associated land to Forsite and agreed to pay Forsite $63 million to decommission the units and perform cleanup activities at the sites. Consumers securitized the generating units in 2014; thus, the carrying value of the assets was zero. Upon the closing of the sale, Consumers recorded a liability of $63 million with an offsetting reduction to its cost of removal regulatory liability. Additionally, Consumers removed from its consolidated balance sheets a $16 million ARO related to asbestos removal and the offsetting $16 million ARO regulatory asset.
Consumers Gas Utility
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, based on a 10.1 percent authorized return on equity, 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. The investment recovery surcharge will remain in effect until rates are reset in a subsequent general rate case.
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.
Power Supply Cost Recovery and Gas Cost Recovery
The PSCR and GCR ratemaking processes are designed to allow Consumers to recover all of its power supply and purchased natural gas costs if incurred under reasonable and prudent policies and practices. The MPSC reviews these costs, policies, and practices in annual plan and reconciliation proceedings. Consumers adjusts its PSCR and GCR billing charges monthly in order to minimize the underrecovery or overrecovery amount in the annual reconciliations. Underrecoveries represent probable future revenues that will be recovered from customers; overrecoveries represent previously collected revenues that will be refunded to customers.
Presented in the following table are the liabilities for PSCR and GCR overrecoveries reflected on Consumers’ consolidated balance sheets:
|
|
|||||||
|
In Millions |
|||||||
|
December 31 |
2017 | 2016 | |||||
|
Liabilities |
|||||||
|
PSCR overrecoveries |
$ |
27 |
$ |
8 | |||
|
GCR overrecoveries |
6 | 13 | |||||
|
Accrued rate refunds |
$ |
33 |
$ |
21 | |||
PSCR Plans and Reconciliations: In March 2016, Consumers filed its 2015 PSCR reconciliation, requesting full recovery of $1.9 billion of power costs and authorization to reflect in its 2016 PSCR plan the overrecovery of $6 million. Subsequently, Consumers revised its filing to reflect an overrecovery of $12 million. In February 2018, the MPSC issued an order approving recovery of $1.9 billion of power costs and directing Consumers to reflect in its 2016 PSCR plan an overrecovery of $21 million. At December 31, 2017, Consumers had a recorded reserve for the PSCR overrecovery that it considers adequate.
In March 2017, Consumers filed its 2016 PSCR reconciliation, requesting full recovery of $1.9 billion of power costs and authorization to reflect in its 2017 PSCR plan the underrecovery of $9 million.
In February 2018, the MPSC issued an order in Consumers’ 2017 PSCR plan, revising the 2017 PSCR factor that Consumers self-implemented beginning in January 2017.
GCR Plans and Reconciliations: In March 2017, the MPSC issued an order in Consumers’ 2015-2016 GCR reconciliation, approving full recovery of $0.5 billion of gas costs and authorizing Consumers to reflect in its 2016-2017 GCR plan the overrecovery of $2 million.
In June 2017, Consumers filed its 2016-2017 GCR reconciliation, requesting full recovery of $0.5 billion of gas costs and authorization to reflect in its 2017-2018 GCR plan the overrecovery of $2 million.
In July 2017, the MPSC issued an order in Consumers’ 2017-2018 GCR plan, authorizing the 2017-2018 GCR factor that Consumers self-implemented beginning in April 2017.
3:Regulatory Matters
Regulatory matters are critical to Consumers. The Michigan Attorney General, ABATE, the MPSC Staff, and certain other parties typically participate in MPSC proceedings concerning Consumers, such as Consumers’ rate cases and PSCR and GCR processes. These parties often challenge various aspects of those proceedings, including the prudence of Consumers’ policies and practices, and seek cost disallowances and other relief. The parties also have appealed significant MPSC orders. Depending upon the specific issues, the outcomes of rate cases and proceedings, including judicial proceedings challenging MPSC orders or other actions, could negatively affect CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. Consumers cannot predict the outcome of these proceedings.
There are multiple appeals pending that involve various issues concerning cost recovery from customers, the adequacy of the record evidence supporting the recovery of Smart Energy investments, and other matters. Consumers is unable to predict the outcome of these appeals.
Regulatory Assets and Liabilities
Consumers is subject to the actions of the MPSC and FERC and therefore prepares its consolidated financial statements in accordance with the provisions of regulatory accounting. A utility must apply regulatory accounting when its rates are designed to recover specific costs of providing regulated services. Under regulatory accounting, Consumers records regulatory assets or liabilities for certain transactions that would have been treated as expense or revenue by non‑regulated businesses.
Presented in the following table are the regulatory assets and liabilities on Consumers’ consolidated balance sheets:
|
|
||||||||
|
In Millions |
||||||||
|
December 31 |
End of Recovery |
2017 | 2016 | |||||
|
Regulatory assets |
||||||||
|
Current |
||||||||
|
Energy waste reduction plan incentive1 |
2018 |
$ |
18 |
$ |
17 | |||
|
Other |
2018 | 2 |
- |
|||||
|
Total current regulatory assets |
$ |
20 |
$ |
17 | ||||
|
Non-current |
||||||||
|
Postretirement benefits2 |
various |
$ |
1,028 |
$ |
1,373 | |||
|
Securitized costs3 |
2029 | 298 | 323 | |||||
|
ARO4 |
various |
161 | 166 | |||||
|
MGP sites4 |
various |
142 | 139 | |||||
|
Unamortized loss on reacquired debt4 |
various |
53 | 54 | |||||
|
Energy waste reduction plan4 |
various |
39 | 1 | |||||
|
Energy waste reduction plan incentive1 |
2019 | 31 | 18 | |||||
|
Gas storage inventory adjustments4 |
various |
10 | 14 | |||||
|
Other |
various |
2 | 3 | |||||
|
Total non-current regulatory assets |
$ |
1,764 |
$ |
2,091 | ||||
|
Total regulatory assets |
$ |
1,784 |
$ |
2,108 | ||||
|
Regulatory liabilities |
||||||||
|
Current |
||||||||
|
Income taxes, net |
2018 |
$ |
52 |
$ |
64 | |||
|
Other |
2018 | 28 | 31 | |||||
|
Total current regulatory liabilities |
$ |
80 |
$ |
95 | ||||
|
Non-current |
||||||||
|
Cost of removal |
various |
$ |
1,844 |
$ |
1,809 | |||
|
Income taxes, net |
various |
1,564 | 7 | |||||
|
Postretirement benefits |
various |
135 |
- |
|||||
|
Renewable energy plan |
2028 | 56 | 83 | |||||
|
Renewable energy grant |
2043 | 56 | 58 | |||||
|
ARO |
various |
50 | 62 | |||||
|
Energy waste reduction plan |
various |
- |
11 | |||||
|
Other |
various |
10 | 11 | |||||
|
Total non-current regulatory liabilities |
$ |
3,715 |
$ |
2,041 | ||||
|
Total regulatory liabilities |
$ |
3,795 |
$ |
2,136 | ||||
1These regulatory assets have arisen from an alternative revenue program and are not associated with incurred costs or capital investments. Therefore, the MPSC has provided for recovery without a return.
2This regulatory asset is offset partially by liabilities. The net amount is included in rate base, thereby providing a return.
3The MPSC has authorized a specific return on this regulatory asset.
4These regulatory assets represent incurred costs for which the MPSC has provided, or Consumers expects, recovery without a return on investment.
Regulatory Assets
Energy Waste Reduction Plan Incentive: In 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.
Consumers also exceeded its statutory savings targets in 2017, achieved certain other goals, and will request the MPSC’s approval to collect $31 million, the maximum performance incentive, in the energy waste reduction reconciliation to be filed in 2018. Consumers recognized incentive revenue under this program of $31 million in 2017.
Postretirement Benefits: As part of the ratemaking process, the MPSC allows Consumers to recover the costs of postretirement benefits. Accordingly, Consumers defers the net impact of actuarial losses and gains as well as prior service costs and credits associated with postretirement benefits as a regulatory asset or liability. The asset or liability will decrease as the deferred items are amortized and recognized as components of net periodic benefit cost. For details about the amortization periods, see Note 12, Retirement Benefits.
Securitized Costs: In 2013, the MPSC issued a securitization financing order authorizing Consumers to issue securitization bonds in order to finance the recovery of the remaining book value of seven smaller coal-fueled electric generating units that Consumers retired in April 2016 and three smaller natural gas-fueled electric generating units that Consumers retired in 2015. Upon receipt of the MPSC’s order, Consumers removed the book value of the ten units from plant, property, and equipment and recorded this amount as a regulatory asset. Consumers is amortizing the regulatory asset over the life of the related securitization bonds, which it issued through a subsidiary in 2014. For additional details regarding the securitization bonds, see Note 5, Financings and Capitalization.
ARO: The recovery of the underlying asset investments and related removal and monitoring costs of recorded AROs is approved by the MPSC in depreciation rate cases. Consumers records a regulatory asset and a regulatory liability for timing differences between the recognition of AROs for financial reporting purposes and the recovery of these costs from customers. The recovery period approximates the useful life of the assets to be removed.
MGP Sites: Consumers is incurring environmental remediation and other response activity costs at 23 former MGP facilities. The MPSC allows Consumers to recover from its natural gas customers over a ten-year period the costs incurred to remediate the MGP sites.
Unamortized Loss on Reacquired Debt: Under regulatory accounting, any unamortized discount, premium, or expense related to debt redeemed with the proceeds of new debt is capitalized and amortized over the life of the new debt.
Energy Waste Reduction Plan: The MPSC allows Consumers to collect surcharges from customers to fund its energy waste reduction plan. The amount of spending incurred in excess of surcharges collected is recorded as a regulatory asset and amortized as surcharges are collected from customers over the plan period. The amount of surcharges collected in excess of spending incurred is recorded as a regulatory liability and amortized as costs are incurred.
Gas Storage Inventory Adjustments: Consumers incurs inventory expenses related to the loss of gas from its natural gas storage fields. The MPSC allows Consumers to recover these costs from its natural gas customers over a five-year period.
Regulatory Liabilities
Income Taxes, Net: Consumers records regulatory assets and liabilities to reflect the difference between deferred income taxes recognized for financial reporting purposes and amounts previously reflected in Consumers’ rates. This net balance will decrease over the remaining life of the related temporary differences and flow through current income tax benefit.
At December 31, 2017, Consumers measured its deferred tax assets and liabilities using the 21 percent federal tax rate enacted in the TCJA. Due to the lower corporate tax rate, Consumers reduced its net deferred tax liabilities associated with its utility book-tax temporary differences by $1.6 billion and recorded an offsetting regulatory liability. For additional details on the TCJA, see Note 14, Income Taxes.
Cost of Removal: The MPSC allows Consumers to collect amounts from customers to fund future asset removal activities. This regulatory liability is reduced as costs of removal are incurred. The refund period of this regulatory liability approximates the useful life of the assets to be removed.
Renewable Energy Plan: Consumers has collected surcharges to fund its renewable energy plan. Amounts not yet spent under the plan are recorded as a regulatory liability, which is amortized as incremental costs are incurred to operate and depreciate Consumers’ renewable generation facilities and to purchase RECs under renewable energy purchase agreements. Incremental costs represent costs incurred in excess of amounts recovered through the PSCR process.
Renewable Energy Grant: In 2013, Consumers received a $69 million renewable energy grant for Lake Winds® Energy Park, which began operations in 2012. This grant reduces Consumers’ cost of complying with Michigan’s renewable portfolio standard and, accordingly, reduces the overall renewable energy surcharge to be collected from customers. The regulatory liability recorded for the grant will be amortized over the life of Lake Winds® Energy Park.
Consumers Electric Utility
2016 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. In October 2017, the MPSC approved a settlement agreement that resulted in a $17 million refund to customers during December 2017. Consumers had recorded this amount as a reserve for customer refunds at December 31, 2016.
2017 Electric Rate Case: In March 2017, Consumers filed an application with the MPSC seeking an annual rate increase of $173 million, based on a 10.5 percent authorized return on equity. The filing requested authority to recover new investment in system reliability, environmental compliance, and technology enhancements. In September 2017, Consumers reduced its requested annual rate increase to $148 million. Presented in the following table are the components of the requested increase in revenue:
|
|
||||
|
In Millions |
||||
|
Components of the rate increase |
||||
|
Investment in rate base |
$ |
45 | ||
|
Operating and maintenance costs |
42 | |||
|
Gross margin |
42 | |||
|
Cost of capital |
28 | |||
|
Working capital |
(9) | |||
|
Total |
$ |
148 | ||
In October 2017, Consumers self‑implemented an annual rate increase of $130 million, subject to refund with interest and potential penalties. Consumers had collected $32 million under these self-implemented rates at December 31, 2017. In January 2018, an administrative law judge issued a proposal for decision with a recommended annual rate increase of $30 million. Consumers has estimated and recorded a reserve for customer refunds at December 31, 2017 that it believes is adequate. A final order is expected by the end of March 2018.
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 returned 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.
Sale of Coal-Fueled Generating Units: In October 2017, Consumers completed the sale of its retired B.C. Cobb and J.R. Whiting coal-fueled electric generating units to Forsite. Under the terms of the agreement, which the MPSC approved in September 2017, Consumers transferred the generating units and associated land to Forsite and agreed to pay Forsite $63 million to decommission the units and perform cleanup activities at the sites. Consumers securitized the generating units in 2014; thus, the carrying value of the assets was zero. Upon the closing of the sale, Consumers recorded a liability of $63 million with an offsetting reduction to its cost of removal regulatory liability. Additionally, Consumers removed from its consolidated balance sheets a $16 million ARO related to asbestos removal and the offsetting $16 million ARO regulatory asset.
Consumers Gas Utility
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, based on a 10.1 percent authorized return on equity, 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. The investment recovery surcharge will remain in effect until rates are reset in a subsequent general rate case.
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.
Power Supply Cost Recovery and Gas Cost Recovery
The PSCR and GCR ratemaking processes are designed to allow Consumers to recover all of its power supply and purchased natural gas costs if incurred under reasonable and prudent policies and practices. The MPSC reviews these costs, policies, and practices in annual plan and reconciliation proceedings. Consumers adjusts its PSCR and GCR billing charges monthly in order to minimize the underrecovery or overrecovery amount in the annual reconciliations. Underrecoveries represent probable future revenues that will be recovered from customers; overrecoveries represent previously collected revenues that will be refunded to customers.
Presented in the following table are the liabilities for PSCR and GCR overrecoveries reflected on Consumers’ consolidated balance sheets:
|
|
|||||||
|
In Millions |
|||||||
|
December 31 |
2017 | 2016 | |||||
|
Liabilities |
|||||||
|
PSCR overrecoveries |
$ |
27 |
$ |
8 | |||
|
GCR overrecoveries |
6 | 13 | |||||
|
Accrued rate refunds |
$ |
33 |
$ |
21 | |||
PSCR Plans and Reconciliations: In March 2016, Consumers filed its 2015 PSCR reconciliation, requesting full recovery of $1.9 billion of power costs and authorization to reflect in its 2016 PSCR plan the overrecovery of $6 million. Subsequently, Consumers revised its filing to reflect an overrecovery of $12 million. In February 2018, the MPSC issued an order approving recovery of $1.9 billion of power costs and directing Consumers to reflect in its 2016 PSCR plan an overrecovery of $21 million. At December 31, 2017, Consumers had a recorded reserve for the PSCR overrecovery that it considers adequate.
In March 2017, Consumers filed its 2016 PSCR reconciliation, requesting full recovery of $1.9 billion of power costs and authorization to reflect in its 2017 PSCR plan the underrecovery of $9 million.
In February 2018, the MPSC issued an order in Consumers’ 2017 PSCR plan, revising the 2017 PSCR factor that Consumers self-implemented beginning in January 2017.
GCR Plans and Reconciliations: In March 2017, the MPSC issued an order in Consumers’ 2015-2016 GCR reconciliation, approving full recovery of $0.5 billion of gas costs and authorizing Consumers to reflect in its 2016-2017 GCR plan the overrecovery of $2 million.
In June 2017, Consumers filed its 2016-2017 GCR reconciliation, requesting full recovery of $0.5 billion of gas costs and authorization to reflect in its 2017-2018 GCR plan the overrecovery of $2 million.
In July 2017, the MPSC issued an order in Consumers’ 2017-2018 GCR plan, authorizing the 2017-2018 GCR factor that Consumers self-implemented beginning in April 2017.
|
|||
4:Contingencies and Commitments
CMS Energy and Consumers are involved in various matters that give rise to contingent liabilities. Depending on the specific issues, the resolution of these contingencies could negatively affect CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. In their disclosures of these matters, CMS Energy and Consumers provide an estimate of the possible loss or range of loss when such an estimate can be made. Disclosures that state that CMS Energy or Consumers cannot predict the outcome of a matter indicate that they are unable to estimate a possible loss or range of loss for the matter.
CMS Energy Contingencies
Gas Index Price Reporting Litigation: CMS Energy, along with CMS MST, CMS Field Services, Cantera Natural Gas, Inc., and Cantera Gas Company, were named as defendants in four class action lawsuits and one individual lawsuit arising as a result of alleged inaccurate natural gas price reporting to publications that report trade information. Allegations include price-fixing conspiracies, restraint of trade, and artificial inflation of natural gas retail prices in Kansas, Missouri, and Wisconsin. In December 2016, CMS Energy entities reached a settlement with the plaintiffs in the Kansas and Missouri class action cases for an amount that was not material to CMS Energy. In August 2017, the federal district court approved the settlement. The following provides more detail on the remaining cases in which CMS Energy or its affiliates were named as parties:
|
· |
In 2009, a class action complaint, Newpage Wisconsin System v. CMS ERM, et al., was filed in circuit court in Wood County, Wisconsin, against CMS Energy, CMS ERM, Cantera Gas Company, and others. The plaintiff is seeking full consideration damages, treble damages, costs, interest, and attorneys’ fees. |
|
· |
In 2005, J.P. Morgan Trust Company, N.A., in its capacity as trustee of the FLI Liquidating Trust, filed an action in Kansas state court against CMS Energy, CMS MST, CMS Field Services, and others. The complaint alleges various claims under the Kansas Restraint of Trade Act. The plaintiff is seeking statutory full consideration damages for its purchases of natural gas in 2000 and 2001, costs, and attorneys’ fees. |
After removal to federal court, the cases described above 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 filed in Kansas based on a release in a prior settlement involving similar allegations. The order of summary judgment has been appealed.
In March 2017, the federal district court denied plaintiffs’ motion for class certification in the two pending class action cases. 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 and costs. 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 December 31, 2017, CMS Energy had a recorded liability of $48 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 $61 million. CMS Energy expects to pay the following amounts for long-term liquid disposal and operating and maintenance costs in each of the next five years:
|
|
||||||||||||||||
|
In Millions |
||||||||||||||||
|
|
2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||
|
CMS Energy |
||||||||||||||||
|
Long-term liquid disposal and operating and maintenance costs |
$ |
5 |
$ |
4 |
$ |
4 |
$ |
4 |
$ |
4 | ||||||
CMS Energy’s estimate of response activity costs and the timing of expenditures could change if there are changes in circumstances or assumptions used in calculating the liability. Although a liability for its present estimate of remaining response activity costs has been recorded, CMS Energy cannot predict the ultimate financial impact or outcome of this matter.
Equatorial Guinea Tax Claim: In 2002, CMS Energy sold its oil, gas, and methanol investments in Equatorial Guinea. The government of Equatorial Guinea claims that, in connection with the sale, CMS Energy owes $152 million in taxes, plus substantial penalties and interest that could be up to the amount of the taxes claimed. In 2015, the matter was proceeding to formal arbitration; however, since then, the government of Equatorial Guinea has stopped communicating. CMS Energy has concluded that the government’s tax claim is without merit and will continue to contest the claim, but cannot predict the financial impact or outcome of the matter. An unfavorable outcome could have a material adverse effect on CMS Energy’s liquidity, financial condition, and results of operations.
Consumers Electric Utility Contingencies
Electric Environmental Matters: Consumers’ operations are subject to environmental laws and regulations. Historically, Consumers has generally been able to recover, in customer rates, the costs to operate its facilities in compliance with these laws and regulations.
Cleanup and Solid Waste: Consumers expects to incur remediation and other response activity costs at a number of sites under the NREPA. Consumers believes that these costs should be recoverable in rates, but cannot guarantee that outcome. Consumers estimates that its liability for NREPA sites for which it can estimate a range of loss will be between $3 million and $4 million. At December 31, 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 December 31, 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.
MCV PPA: In December 2017, the MCV Partnership initiated arbitration against Consumers, asserting a breach of contract associated with the MCV PPA. Under this PPA, Consumers pays the MCV Partnership a fixed energy charge based on Consumers’ annual average baseload coal generating plant operating and maintenance cost, fuel inventory, and administrative and general expenses. The MCV Partnership asserts that Consumers should have installed pollution control equipment on coal-fueled electric generating units years before they were retired. The MCV Partnership also asserts that Consumers should have installed pollution control equipment earlier on its remaining coal-fueled electric generating units. The assertion claims that these changes would have increased Consumers’ costs to operate and maintain the facilities and, thereby, the fixed energy charge paid to the MCV Partnership. Additionally, the MCV Partnership claims that Consumers improperly characterized certain costs included in the calculation of the fixed energy charge.
The claim estimates damages and interest in excess of $270 million, the majority of which is related to the claim on the installation of pollution control equipment. Consumers believes that the MCV Partnership’s claim is without merit, but cannot predict the financial impact or outcome of the matter.
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 December 31, 2017, Consumers had a recorded liability of $88 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 $96 million. Consumers expects to pay the following amounts for remediation and other response activity costs in each of the next five years:
|
|
||||||||||||||||
|
In Millions |
||||||||||||||||
|
|
2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||
|
Consumers |
||||||||||||||||
|
Remediation and other response activity costs |
$ |
17 |
$ |
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 December 31, 2017, Consumers had a regulatory asset of $142 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 December 31, 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 December 31, 2017:
|
|
||||||||||
|
In Millions |
||||||||||
|
|
Maximum |
Carrying |
||||||||
|
Guarantee Description |
Issue Date |
Expiration Date |
Obligation |
Amount |
||||||
|
CMS Energy, including Consumers |
||||||||||
|
Indemnity obligations from stock and |
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. For additional details on this guarantee, see Note 20, Variable Interest Entities.
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 3, 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.
Contractual Commitments
Purchase Obligations: Purchase obligations arise from long-term contracts for the purchase of commodities and related services, and construction and service agreements. The commodities and related services include long-term PPAs, natural gas and associated transportation, and coal and associated transportation. Related-party PPAs are between Consumers and certain affiliates of CMS Enterprises. Presented in the following table are CMS Energy’s and Consumers’ contractual purchase obligations at December 31, 2017 for each of the periods shown:
|
|
||||||||||||||||||||||
|
In Millions |
||||||||||||||||||||||
|
|
Payments Due |
|||||||||||||||||||||
|
|
Total |
2018 | 2019 | 2020 | 2021 | 2022 |
Beyond |
|||||||||||||||
|
CMS Energy, including Consumers |
||||||||||||||||||||||
|
Total PPAs |
$ |
9,159 |
$ |
1,042 |
$ |
1,048 |
$ |
1,064 |
$ |
1,063 |
$ |
795 |
$ |
4,147 | ||||||||
|
Other |
2,026 | 891 | 541 | 186 | 61 | 56 | 291 | |||||||||||||||
|
Consumers |
||||||||||||||||||||||
|
PPAs |
||||||||||||||||||||||
|
MCV PPA |
$ |
2,621 |
$ |
350 |
$ |
348 |
$ |
346 |
$ |
335 |
$ |
339 |
$ |
903 | ||||||||
|
Palisades PPA |
1,647 | 367 | 378 | 388 | 400 | 114 |
- |
|||||||||||||||
|
Related-party PPAs |
1,546 | 87 | 87 | 94 | 96 | 100 | 1,082 | |||||||||||||||
|
Other PPAs |
3,345 | 238 | 235 | 236 | 232 | 242 | 2,162 | |||||||||||||||
|
Total PPAs |
$ |
9,159 |
$ |
1,042 |
$ |
1,048 |
$ |
1,064 |
$ |
1,063 |
$ |
795 |
$ |
4,147 | ||||||||
|
Other |
1,787 | 859 | 511 | 156 | 48 | 44 | 169 | |||||||||||||||
MCV PPA: Consumers has a 35‑year PPA that began in 1990 with the MCV Partnership to purchase 1,240 MW of electricity. The MCV PPA, as amended and restated, provides for:
|
· |
a capacity charge of $10.14 per MWh of available capacity |
|
· |
a fixed energy charge based on Consumers’ annual average baseload coal generating plant operating and maintenance cost, fuel inventory, and administrative and general expenses |
|
· |
a variable energy charge based on the MCV Partnership’s cost of production when the plant is dispatched |
|
· |
a $5 million annual contribution by the MCV Partnership to a renewable resources program |
|
· |
an option for Consumers to extend the MCV PPA for five years or purchase the MCV Facility at the conclusion of the MCV PPA’s term in March 2025 |
Capacity and energy charges under the MCV PPA were $321 million in 2017, $305 million in 2016, and $282 million in 2015.
Palisades PPA: Consumers has a PPA expiring in 2022 with Entergy to purchase virtually all of the capacity and energy produced by Palisades, up to the annual average capacity of 798 MW. For all delivered energy, the Palisades PPA has escalating capacity and variable energy charges. Total capacity and energy charges under the Palisades PPA were $366 million in 2017, $363 million in 2016, and $352 million in 2015. For further details about Palisades, see Note 10, Leases and Palisades Financing.
Other PPAs: Consumers has PPAs expiring through 2036 with various counterparties. The majority of the PPAs have capacity and energy charges for delivered energy. Capacity and energy charges under these PPAs were $349 million in 2017, $348 million in 2016, and $347 million in 2015.
4:Contingencies and Commitments
CMS Energy and Consumers are involved in various matters that give rise to contingent liabilities. Depending on the specific issues, the resolution of these contingencies could negatively affect CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. In their disclosures of these matters, CMS Energy and Consumers provide an estimate of the possible loss or range of loss when such an estimate can be made. Disclosures that state that CMS Energy or Consumers cannot predict the outcome of a matter indicate that they are unable to estimate a possible loss or range of loss for the matter.
CMS Energy Contingencies
Gas Index Price Reporting Litigation: CMS Energy, along with CMS MST, CMS Field Services, Cantera Natural Gas, Inc., and Cantera Gas Company, were named as defendants in four class action lawsuits and one individual lawsuit arising as a result of alleged inaccurate natural gas price reporting to publications that report trade information. Allegations include price-fixing conspiracies, restraint of trade, and artificial inflation of natural gas retail prices in Kansas, Missouri, and Wisconsin. In December 2016, CMS Energy entities reached a settlement with the plaintiffs in the Kansas and Missouri class action cases for an amount that was not material to CMS Energy. In August 2017, the federal district court approved the settlement. The following provides more detail on the remaining cases in which CMS Energy or its affiliates were named as parties:
|
· |
In 2009, a class action complaint, Newpage Wisconsin System v. CMS ERM, et al., was filed in circuit court in Wood County, Wisconsin, against CMS Energy, CMS ERM, Cantera Gas Company, and others. The plaintiff is seeking full consideration damages, treble damages, costs, interest, and attorneys’ fees. |
|
· |
In 2005, J.P. Morgan Trust Company, N.A., in its capacity as trustee of the FLI Liquidating Trust, filed an action in Kansas state court against CMS Energy, CMS MST, CMS Field Services, and others. The complaint alleges various claims under the Kansas Restraint of Trade Act. The plaintiff is seeking statutory full consideration damages for its purchases of natural gas in 2000 and 2001, costs, and attorneys’ fees. |
After removal to federal court, the cases described above 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 filed in Kansas based on a release in a prior settlement involving similar allegations. The order of summary judgment has been appealed.
In March 2017, the federal district court denied plaintiffs’ motion for class certification in the two pending class action cases. 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 and costs. 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 December 31, 2017, CMS Energy had a recorded liability of $48 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 $61 million. CMS Energy expects to pay the following amounts for long-term liquid disposal and operating and maintenance costs in each of the next five years:
|
|
||||||||||||||||
|
In Millions |
||||||||||||||||
|
|
2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||
|
CMS Energy |
||||||||||||||||
|
Long-term liquid disposal and operating and maintenance costs |
$ |
5 |
$ |
4 |
$ |
4 |
$ |
4 |
$ |
4 | ||||||
CMS Energy’s estimate of response activity costs and the timing of expenditures could change if there are changes in circumstances or assumptions used in calculating the liability. Although a liability for its present estimate of remaining response activity costs has been recorded, CMS Energy cannot predict the ultimate financial impact or outcome of this matter.
Equatorial Guinea Tax Claim: In 2002, CMS Energy sold its oil, gas, and methanol investments in Equatorial Guinea. The government of Equatorial Guinea claims that, in connection with the sale, CMS Energy owes $152 million in taxes, plus substantial penalties and interest that could be up to the amount of the taxes claimed. In 2015, the matter was proceeding to formal arbitration; however, since then, the government of Equatorial Guinea has stopped communicating. CMS Energy has concluded that the government’s tax claim is without merit and will continue to contest the claim, but cannot predict the financial impact or outcome of the matter. An unfavorable outcome could have a material adverse effect on CMS Energy’s liquidity, financial condition, and results of operations.
Consumers Electric Utility Contingencies
Electric Environmental Matters: Consumers’ operations are subject to environmental laws and regulations. Historically, Consumers has generally been able to recover, in customer rates, the costs to operate its facilities in compliance with these laws and regulations.
Cleanup and Solid Waste: Consumers expects to incur remediation and other response activity costs at a number of sites under the NREPA. Consumers believes that these costs should be recoverable in rates, but cannot guarantee that outcome. Consumers estimates that its liability for NREPA sites for which it can estimate a range of loss will be between $3 million and $4 million. At December 31, 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 December 31, 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.
MCV PPA: In December 2017, the MCV Partnership initiated arbitration against Consumers, asserting a breach of contract associated with the MCV PPA. Under this PPA, Consumers pays the MCV Partnership a fixed energy charge based on Consumers’ annual average baseload coal generating plant operating and maintenance cost, fuel inventory, and administrative and general expenses. The MCV Partnership asserts that Consumers should have installed pollution control equipment on coal-fueled electric generating units years before they were retired. The MCV Partnership also asserts that Consumers should have installed pollution control equipment earlier on its remaining coal-fueled electric generating units. The assertion claims that these changes would have increased Consumers’ costs to operate and maintain the facilities and, thereby, the fixed energy charge paid to the MCV Partnership. Additionally, the MCV Partnership claims that Consumers improperly characterized certain costs included in the calculation of the fixed energy charge.
The claim estimates damages and interest in excess of $270 million, the majority of which is related to the claim on the installation of pollution control equipment. Consumers believes that the MCV Partnership’s claim is without merit, but cannot predict the financial impact or outcome of the matter.
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 December 31, 2017, Consumers had a recorded liability of $88 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 $96 million. Consumers expects to pay the following amounts for remediation and other response activity costs in each of the next five years:
|
|
||||||||||||||||
|
In Millions |
||||||||||||||||
|
|
2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||
|
Consumers |
||||||||||||||||
|
Remediation and other response activity costs |
$ |
17 |
$ |
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 December 31, 2017, Consumers had a regulatory asset of $142 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 December 31, 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 December 31, 2017:
|
|
||||||||||
|
In Millions |
||||||||||
|
|
Maximum |
Carrying |
||||||||
|
Guarantee Description |
Issue Date |
Expiration Date |
Obligation |
Amount |
||||||
|
CMS Energy, including Consumers |
||||||||||
|
Indemnity obligations from stock and |
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. For additional details on this guarantee, see Note 20, Variable Interest Entities.
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 3, 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.
Contractual Commitments
Purchase Obligations: Purchase obligations arise from long-term contracts for the purchase of commodities and related services, and construction and service agreements. The commodities and related services include long-term PPAs, natural gas and associated transportation, and coal and associated transportation. Related-party PPAs are between Consumers and certain affiliates of CMS Enterprises. Presented in the following table are CMS Energy’s and Consumers’ contractual purchase obligations at December 31, 2017 for each of the periods shown:
|
|
||||||||||||||||||||||
|
In Millions |
||||||||||||||||||||||
|
|
Payments Due |
|||||||||||||||||||||
|
|
Total |
2018 | 2019 | 2020 | 2021 | 2022 |
Beyond |
|||||||||||||||
|
CMS Energy, including Consumers |
||||||||||||||||||||||
|
Total PPAs |
$ |
9,159 |
$ |
1,042 |
$ |
1,048 |
$ |
1,064 |
$ |
1,063 |
$ |
795 |
$ |
4,147 | ||||||||
|
Other |
2,026 | 891 | 541 | 186 | 61 | 56 | 291 | |||||||||||||||
|
Consumers |
||||||||||||||||||||||
|
PPAs |
||||||||||||||||||||||
|
MCV PPA |
$ |
2,621 |
$ |
350 |
$ |
348 |
$ |
346 |
$ |
335 |
$ |
339 |
$ |
903 | ||||||||
|
Palisades PPA |
1,647 | 367 | 378 | 388 | 400 | 114 |
- |
|||||||||||||||
|
Related-party PPAs |
1,546 | 87 | 87 | 94 | 96 | 100 | 1,082 | |||||||||||||||
|
Other PPAs |
3,345 | 238 | 235 | 236 | 232 | 242 | 2,162 | |||||||||||||||
|
Total PPAs |
$ |
9,159 |
$ |
1,042 |
$ |
1,048 |
$ |
1,064 |
$ |
1,063 |
$ |
795 |
$ |
4,147 | ||||||||
|
Other |
1,787 | 859 | 511 | 156 | 48 | 44 | 169 | |||||||||||||||
MCV PPA: Consumers has a 35‑year PPA that began in 1990 with the MCV Partnership to purchase 1,240 MW of electricity. The MCV PPA, as amended and restated, provides for:
|
· |
a capacity charge of $10.14 per MWh of available capacity |
|
· |
a fixed energy charge based on Consumers’ annual average baseload coal generating plant operating and maintenance cost, fuel inventory, and administrative and general expenses |
|
· |
a variable energy charge based on the MCV Partnership’s cost of production when the plant is dispatched |
|
· |
a $5 million annual contribution by the MCV Partnership to a renewable resources program |
|
· |
an option for Consumers to extend the MCV PPA for five years or purchase the MCV Facility at the conclusion of the MCV PPA’s term in March 2025 |
Capacity and energy charges under the MCV PPA were $321 million in 2017, $305 million in 2016, and $282 million in 2015.
Palisades PPA: Consumers has a PPA expiring in 2022 with Entergy to purchase virtually all of the capacity and energy produced by Palisades, up to the annual average capacity of 798 MW. For all delivered energy, the Palisades PPA has escalating capacity and variable energy charges. Total capacity and energy charges under the Palisades PPA were $366 million in 2017, $363 million in 2016, and $352 million in 2015. For further details about Palisades, see Note 10, Leases and Palisades Financing.
Other PPAs: Consumers has PPAs expiring through 2036 with various counterparties. The majority of the PPAs have capacity and energy charges for delivered energy. Capacity and energy charges under these PPAs were $349 million in 2017, $348 million in 2016, and $347 million in 2015.
|
|||
5:Financings and Capitalization
Presented in the following table is CMS Energy’s long-term debt at December 31:
|
|
||||||||||
|
In Millions |
||||||||||
|
|
Interest Rate |
Maturity |
2017 | 2016 | ||||||
|
CMS Energy, including Consumers |
||||||||||
|
CMS Energy, parent only |
||||||||||
|
Senior notes |
8.750 | 2019 |
$ |
100 |
$ |
300 | ||||
|
|
6.250 | 2020 | 300 | 300 | ||||||
|
|
5.050 | 2022 | 300 | 300 | ||||||
|
|
3.875 | 2024 | 250 | 250 | ||||||
|
|
3.600 | 2025 | 250 | 250 | ||||||
|
|
3.000 | 2026 | 300 | 300 | ||||||
|
|
2.950 | 2027 | 275 | 275 | ||||||
|
|
3.450 | 2027 | 350 |
- |
||||||
|
|
4.700 | 2043 | 250 | 250 | ||||||
|
|
4.875 | 2044 | 300 | 300 | ||||||
|
Total senior notes |
$ |
2,675 |
$ |
2,525 | ||||||
|
Term loan facility |
variable |
1 |
2019 | 180 | 180 | |||||
|
Term loan facility |
variable |
2 |
2018 | 225 |
- |
|||||
|
EnerBank |
||||||||||
|
Certificates of deposit |
1.76 |
3 |
2018-2026 |
1,245 | 1,198 | |||||
|
Consumers |
5,940 | 5,661 | ||||||||
|
Total principal amount outstanding |
$ |
10,265 |
$ |
9,564 | ||||||
|
Current amounts |
(1,081) | (864) | ||||||||
|
Net unamortized discounts |
(14) | (15) | ||||||||
|
Unamortized issuance costs |
(47) | (45) | ||||||||
|
Total long-term debt |
$ |
9,123 |
$ |
8,640 | ||||||
1Outstanding borrowings bear interest at an annual interest rate of LIBOR plus 0.80 percent (2.37 percent at December 31, 2017).
2Outstanding borrowings bear interest at an annual interest rate of LIBOR plus 0.68 percent (2.28 percent at December 31, 2017).
3The weighted-average interest rate for EnerBank’s certificates of deposit was 1.76 percent at December 31, 2017 and 1.51 percent at December 31, 2016. EnerBank’s primary deposit product consists of brokered certificates of deposit with varying maturities and having a face value of $1,000.
Presented in the following table is Consumers’ long-term debt at December 31:
|
|
||||||||||
|
In Millions |
||||||||||
|
|
Interest Rate |
Maturity |
2017 | 2016 | ||||||
|
Consumers |
||||||||||
|
First mortgage bonds1 |
5.150 | 2017 |
$ |
- |
$ |
250 | ||||
|
|
3.210 | 2017 |
- |
100 | ||||||
|
|
5.650 | 2018 | 250 | 250 | ||||||
|
|
6.125 | 2019 | 350 | 350 | ||||||
|
|
6.700 | 2019 | 500 | 500 | ||||||
|
|
5.650 | 2020 | 300 | 300 | ||||||
|
|
3.770 | 2020 | 100 | 100 | ||||||
|
|
5.300 | 2022 | 250 | 250 | ||||||
|
|
2.850 | 2022 | 375 | 375 | ||||||
|
|
3.375 | 2023 | 325 | 325 | ||||||
|
|
3.190 | 2024 | 52 | 52 | ||||||
|
|
3.125 | 2024 | 250 | 250 | ||||||
|
|
3.390 | 2027 | 35 | 35 | ||||||
|
|
3.180 | 2032 | 100 |
- |
||||||
|
|
5.800 | 2035 | 175 | 175 | ||||||
|
|
3.520 | 2037 | 335 |
- |
||||||
|
|
6.170 | 2040 | 50 | 50 | ||||||
|
|
4.970 | 2040 | 50 | 50 | ||||||
|
|
4.310 | 2042 | 263 | 263 | ||||||
|
|
3.950 | 2043 | 425 | 425 | ||||||
|
|
4.100 | 2045 | 250 | 250 | ||||||
|
|
3.250 | 2046 | 450 | 450 | ||||||
|
|
3.950 | 2047 | 350 |
- |
||||||
|
|
3.860 | 2052 | 50 |
- |
||||||
|
|
4.350 | 2064 | 250 | 250 | ||||||
|
Total first mortgage bonds |
$ |
5,535 |
$ |
5,050 | ||||||
|
Securitization bonds |
2.913 |
2 |
2020-2029 |
3 |
302 | 328 | ||||
|
Senior notes |
6.875 | 2018 |
- |
180 | ||||||
|
Tax-exempt pollution control revenue bonds |
various |
2018-2035 |
103 | 103 | ||||||
|
Total principal amount outstanding |
$ |
5,940 |
$ |
5,661 | ||||||
|
Current amounts |
(343) | (375) | ||||||||
|
Net unamortized discounts |
(8) | (8) | ||||||||
|
Unamortized issuance costs |
(28) | (25) | ||||||||
|
Total long-term debt |
$ |
5,561 |
$ |
5,253 | ||||||
1The weighted-average interest rate for Consumers’ first mortgage bonds was 4.44 percent at December 31, 2017 and 4.57 percent at December 31, 2016.
2The weighted-average interest rate for Consumers’ securitization bonds issued through its subsidiary Consumers 2014 Securitization Funding was 2.91 percent at December 31, 2017 and 2.79 percent at December 31, 2016.
3Principal and interest payments are made semiannually.
Financings: Presented in the following table is a summary of major long-term debt transactions during the year ended December 31, 2017:
|
|
||||||||
|
|
Principal |
Issue/Retirement |
||||||
|
|
(In Millions) |
Interest Rate |
Date |
Maturity Date |
||||
|
Debt issuances |
||||||||
|
CMS Energy, parent only |
||||||||
|
Senior notes |
$ |
350 | 3.450 |
% |
February 2017 |
August 2027 |
||
|
Term loan facility1 |
225 |
variable |
December 2017 |
December 2018 |
||||
|
Total CMS Energy, parent only |
$ |
575 | ||||||
|
Consumers |
||||||||
|
First mortgage bonds |
$ |
350 | 3.950 |
% |
February 2017 |
July 2047 |
||
|
First mortgage bonds |
40 | 3.180 |
September 2017 |
September 2032 |
||||
|
First mortgage bonds |
125 | 3.520 |
September 2017 |
September 2037 |
||||
|
First mortgage bonds |
20 | 3.860 |
September 2017 |
September 2052 |
||||
|
First mortgage bonds |
60 | 3.180 |
November 2017 |
November 2032 |
||||
|
First mortgage bonds |
210 | 3.520 |
November 2017 |
November 2037 |
||||
|
First mortgage bonds |
30 | 3.860 |
November 2017 |
November 2052 |
||||
|
Total Consumers |
$ |
835 | ||||||
|
Total CMS Energy |
$ |
1,410 | ||||||
|
Debt retirements |
||||||||
|
CMS Energy, parent only |
||||||||
|
Senior notes2 |
$ |
200 | 8.750 |
% |
December 2017 |
June 2019 |
||
|
Total CMS Energy, parent only |
$ |
200 | ||||||
|
Consumers |
||||||||
|
First mortgage bonds |
$ |
250 | 5.150 |
% |
February 2017 |
February 2017 |
||
|
Senior notes |
180 | 6.875 |
September 2017 |
March 2018 |
||||
|
First mortgage bonds |
100 | 3.210 |
October 2017 |
October 2017 |
||||
|
Total Consumers |
$ |
530 | ||||||
|
Total CMS Energy |
$ |
730 | ||||||
1Outstanding borrowings bear interest at an annual interest rate of LIBOR plus 0.68 percent (2.28 percent at December 31, 2017). CMS Energy used these proceeds to retire $200 million of the 8.75 percent senior notes due June 2019.
2CMS Energy retired this debt at a premium and recorded a loss on extinguishment of $18 million in other expense on its consolidated statements of income.
First Mortgage Bonds: Consumers secures its first mortgage bonds by a mortgage and lien on substantially all of its property. Consumers’ ability to issue first mortgage bonds is restricted by certain provisions in the First Mortgage Bond Indenture and the need for regulatory approvals under federal law. Restrictive issuance provisions in the First Mortgage Bond Indenture include achieving a two-times interest coverage ratio and having sufficient unfunded net property additions.
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.
Regulatory Authorization for Financings: Consumers is required to maintain FERC authorization for financings. Its current authorization terminates on June 30, 2019. Any long-term issuances during the authorization period are exempt from FERC’s competitive bidding and negotiated placement requirements.
Securitization Bonds: Certain regulatory assets held by Consumers’ subsidiary, Consumers 2014 Securitization Funding, collateralize Consumers’ securitization bonds. The bondholders have no recourse to Consumers’ assets except for those held by the subsidiary that issued the bonds. Consumers collects securitization surcharges to cover the principal and interest on the bonds as well as certain other qualified costs. The surcharges collected are remitted to a trustee and are not available to creditors of Consumers or creditors of Consumers’ affiliates other than the subsidiary that issued the bonds.
Debt Maturities: At December 31, 2017, the aggregate annual contractual maturities for long-term debt for the next five years were:
|
|
||||||||||||||||
|
In Millions |
||||||||||||||||
|
|
2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||
|
CMS Energy, including Consumers |
||||||||||||||||
|
Long-term debt |
$ |
1,081 |
$ |
1,428 |
$ |
905 |
$ |
178 |
$ |
1,039 | ||||||
|
Consumers |
||||||||||||||||
|
Long-term debt |
$ |
343 |
$ |
876 |
$ |
426 |
$ |
27 |
$ |
653 | ||||||
Revolving Credit Facilities: The following secured revolving credit facilities with banks were available at December 31, 2017:
|
|
|||||||||||||
|
In Millions |
|||||||||||||
|
|
Amount of |
Amount |
Letters of Credit |
Amount |
|||||||||
|
Expiration Date |
Facility |
Borrowed |
Outstanding |
Available |
|||||||||
|
CMS Energy, parent only |
|||||||||||||
|
May 27, 20221,2 |
$ |
550 |
$ |
- |
$ |
6 |
$ |
544 | |||||
|
Consumers3 |
|||||||||||||
|
May 27, 20222 |
$ |
650 |
$ |
- |
$ |
7 |
$ |
643 | |||||
|
November 23, 20194 |
250 |
- |
20 | 230 | |||||||||
|
September 9, 20195 |
30 |
- |
30 |
- |
|||||||||
1During the year ended December 31, 2017, CMS Energy’s average borrowings totaled $21 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 these facilities are secured by first mortgage bonds of Consumers.
4In November 2017, the expiration date of this revolving credit agreement was extended from November 2018 to November 2019.
5In 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 of the facilities. At December 31, 2017, $170 million of commercial paper notes with a weighted-average annual interest rate of 1.69 percent were outstanding under this program and were recorded as current notes payable on the consolidated balance sheets of CMS Energy and Consumers.
Dividend Restrictions: At December 31, 2017, payment of dividends by CMS Energy on its common stock was limited to $4.4 billion under provisions of the Michigan Business Corporation Act of 1972.
Under the provisions of its articles of incorporation, at December 31, 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 year ended December 31, 2017, Consumers paid $522 million in dividends on its common stock to CMS Energy.
Capitalization: The authorized capital stock of CMS Energy consists of:
|
· |
10 million shares of CMS Energy Preferred Stock, par value $0.01 per share |
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. In 2017, CMS Energy issued 1,494,371 shares of common stock under this program at an average price of $47.31, resulting in net proceeds of $70 million.
Preferred Stock of Subsidiary: Presented in the following table are details about Consumers’ preferred stock outstanding, which is traded on the New York Stock Exchange under the symbol CMS‑PB:
|
|
||||||||||||||
|
|
Optional |
Number of |
Balance |
|||||||||||
|
|
Redemption |
Shares |
Outstanding |
|||||||||||
|
|
Series |
Price |
Outstanding |
(In Millions) |
||||||||||
|
December 31 |
2017 | 2016 | ||||||||||||
|
Cumulative, $100 par value, authorized |
$ |
4.50 |
$ |
110.00 | 373,148 |
$ |
37 |
$ |
37 | |||||
5:Financings and Capitalization
Presented in the following table is CMS Energy’s long-term debt at December 31:
|
|
||||||||||
|
In Millions |
||||||||||
|
|
Interest Rate |
Maturity |
2017 | 2016 | ||||||
|
CMS Energy, including Consumers |
||||||||||
|
CMS Energy, parent only |
||||||||||
|
Senior notes |
8.750 | 2019 |
$ |
100 |
$ |
300 | ||||
|
|
6.250 | 2020 | 300 | 300 | ||||||
|
|
5.050 | 2022 | 300 | 300 | ||||||
|
|
3.875 | 2024 | 250 | 250 | ||||||
|
|
3.600 | 2025 | 250 | 250 | ||||||
|
|
3.000 | 2026 | 300 | 300 | ||||||
|
|
2.950 | 2027 | 275 | 275 | ||||||
|
|
3.450 | 2027 | 350 |
- |
||||||
|
|
4.700 | 2043 | 250 | 250 | ||||||
|
|
4.875 | 2044 | 300 | 300 | ||||||
|
Total senior notes |
$ |
2,675 |
$ |
2,525 | ||||||
|
Term loan facility |
variable |
1 |
2019 | 180 | 180 | |||||
|
Term loan facility |
variable |
2 |
2018 | 225 |
- |
|||||
|
EnerBank |
||||||||||
|
Certificates of deposit |
1.76 |
3 |
2018-2026 |
1,245 | 1,198 | |||||
|
Consumers |
5,940 | 5,661 | ||||||||
|
Total principal amount outstanding |
$ |
10,265 |
$ |
9,564 | ||||||
|
Current amounts |
(1,081) | (864) | ||||||||
|
Net unamortized discounts |
(14) | (15) | ||||||||
|
Unamortized issuance costs |
(47) | (45) | ||||||||
|
Total long-term debt |
$ |
9,123 |
$ |
8,640 | ||||||
1Outstanding borrowings bear interest at an annual interest rate of LIBOR plus 0.80 percent (2.37 percent at December 31, 2017).
2Outstanding borrowings bear interest at an annual interest rate of LIBOR plus 0.68 percent (2.28 percent at December 31, 2017).
3The weighted-average interest rate for EnerBank’s certificates of deposit was 1.76 percent at December 31, 2017 and 1.51 percent at December 31, 2016. EnerBank’s primary deposit product consists of brokered certificates of deposit with varying maturities and having a face value of $1,000.
Presented in the following table is Consumers’ long-term debt at December 31:
|
|
||||||||||
|
In Millions |
||||||||||
|
|
Interest Rate |
Maturity |
2017 | 2016 | ||||||
|
Consumers |
||||||||||
|
First mortgage bonds1 |
5.150 | 2017 |
$ |
- |
$ |
250 | ||||
|
|
3.210 | 2017 |
- |
100 | ||||||
|
|
5.650 | 2018 | 250 | 250 | ||||||
|
|
6.125 | 2019 | 350 | 350 | ||||||
|
|
6.700 | 2019 | 500 | 500 | ||||||
|
|
5.650 | 2020 | 300 | 300 | ||||||
|
|
3.770 | 2020 | 100 | 100 | ||||||
|
|
5.300 | 2022 | 250 | 250 | ||||||
|
|
2.850 | 2022 | 375 | 375 | ||||||
|
|
3.375 | 2023 | 325 | 325 | ||||||
|
|
3.190 | 2024 | 52 | 52 | ||||||
|
|
3.125 | 2024 | 250 | 250 | ||||||
|
|
3.390 | 2027 | 35 | 35 | ||||||
|
|
3.180 | 2032 | 100 |
- |
||||||
|
|
5.800 | 2035 | 175 | 175 | ||||||
|
|
3.520 | 2037 | 335 |
- |
||||||
|
|
6.170 | 2040 | 50 | 50 | ||||||
|
|
4.970 | 2040 | 50 | 50 | ||||||
|
|
4.310 | 2042 | 263 | 263 | ||||||
|
|
3.950 | 2043 | 425 | 425 | ||||||
|
|
4.100 | 2045 | 250 | 250 | ||||||
|
|
3.250 | 2046 | 450 | 450 | ||||||
|
|
3.950 | 2047 | 350 |
- |
||||||
|
|
3.860 | 2052 | 50 |
- |
||||||
|
|
4.350 | 2064 | 250 | 250 | ||||||
|
Total first mortgage bonds |
$ |
5,535 |
$ |
5,050 | ||||||
|
Securitization bonds |
2.913 |
2 |
2020-2029 |
3 |
302 | 328 | ||||
|
Senior notes |
6.875 | 2018 |
- |
180 | ||||||
|
Tax-exempt pollution control revenue bonds |
various |
2018-2035 |
103 | 103 | ||||||
|
Total principal amount outstanding |
$ |
5,940 |
$ |
5,661 | ||||||
|
Current amounts |
(343) | (375) | ||||||||
|
Net unamortized discounts |
(8) | (8) | ||||||||
|
Unamortized issuance costs |
(28) | (25) | ||||||||
|
Total long-term debt |
$ |
5,561 |
$ |
5,253 | ||||||
1The weighted-average interest rate for Consumers’ first mortgage bonds was 4.44 percent at December 31, 2017 and 4.57 percent at December 31, 2016.
2The weighted-average interest rate for Consumers’ securitization bonds issued through its subsidiary Consumers 2014 Securitization Funding was 2.91 percent at December 31, 2017 and 2.79 percent at December 31, 2016.
3Principal and interest payments are made semiannually.
Financings: Presented in the following table is a summary of major long-term debt transactions during the year ended December 31, 2017:
|
|
||||||||
|
|
Principal |
Issue/Retirement |
||||||
|
|
(In Millions) |
Interest Rate |
Date |
Maturity Date |
||||
|
Debt issuances |
||||||||
|
CMS Energy, parent only |
||||||||
|
Senior notes |
$ |
350 | 3.450 |
% |
February 2017 |
August 2027 |
||
|
Term loan facility1 |
225 |
variable |
December 2017 |
December 2018 |
||||
|
Total CMS Energy, parent only |
$ |
575 | ||||||
|
Consumers |
||||||||
|
First mortgage bonds |
$ |
350 | 3.950 |
% |
February 2017 |
July 2047 |
||
|
First mortgage bonds |
40 | 3.180 |
September 2017 |
September 2032 |
||||
|
First mortgage bonds |
125 | 3.520 |
September 2017 |
September 2037 |
||||
|
First mortgage bonds |
20 | 3.860 |
September 2017 |
September 2052 |
||||
|
First mortgage bonds |
60 | 3.180 |
November 2017 |
November 2032 |
||||
|
First mortgage bonds |
210 | 3.520 |
November 2017 |
November 2037 |
||||
|
First mortgage bonds |
30 | 3.860 |
November 2017 |
November 2052 |
||||
|
Total Consumers |
$ |
835 | ||||||
|
Total CMS Energy |
$ |
1,410 | ||||||
|
Debt retirements |
||||||||
|
CMS Energy, parent only |
||||||||
|
Senior notes2 |
$ |
200 | 8.750 |
% |
December 2017 |
June 2019 |
||
|
Total CMS Energy, parent only |
$ |
200 | ||||||
|
Consumers |
||||||||
|
First mortgage bonds |
$ |
250 | 5.150 |
% |
February 2017 |
February 2017 |
||
|
Senior notes |
180 | 6.875 |
September 2017 |
March 2018 |
||||
|
First mortgage bonds |
100 | 3.210 |
October 2017 |
October 2017 |
||||
|
Total Consumers |
$ |
530 | ||||||
|
Total CMS Energy |
$ |
730 | ||||||
1Outstanding borrowings bear interest at an annual interest rate of LIBOR plus 0.68 percent (2.28 percent at December 31, 2017). CMS Energy used these proceeds to retire $200 million of the 8.75 percent senior notes due June 2019.
2CMS Energy retired this debt at a premium and recorded a loss on extinguishment of $18 million in other expense on its consolidated statements of income.
First Mortgage Bonds: Consumers secures its first mortgage bonds by a mortgage and lien on substantially all of its property. Consumers’ ability to issue first mortgage bonds is restricted by certain provisions in the First Mortgage Bond Indenture and the need for regulatory approvals under federal law. Restrictive issuance provisions in the First Mortgage Bond Indenture include achieving a two-times interest coverage ratio and having sufficient unfunded net property additions.
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.
Regulatory Authorization for Financings: Consumers is required to maintain FERC authorization for financings. Its current authorization terminates on June 30, 2019. Any long-term issuances during the authorization period are exempt from FERC’s competitive bidding and negotiated placement requirements.
Securitization Bonds: Certain regulatory assets held by Consumers’ subsidiary, Consumers 2014 Securitization Funding, collateralize Consumers’ securitization bonds. The bondholders have no recourse to Consumers’ assets except for those held by the subsidiary that issued the bonds. Consumers collects securitization surcharges to cover the principal and interest on the bonds as well as certain other qualified costs. The surcharges collected are remitted to a trustee and are not available to creditors of Consumers or creditors of Consumers’ affiliates other than the subsidiary that issued the bonds.
Debt Maturities: At December 31, 2017, the aggregate annual contractual maturities for long-term debt for the next five years were:
|
|
||||||||||||||||
|
In Millions |
||||||||||||||||
|
|
2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||
|
CMS Energy, including Consumers |
||||||||||||||||
|
Long-term debt |
$ |
1,081 |
$ |
1,428 |
$ |
905 |
$ |
178 |
$ |
1,039 | ||||||
|
Consumers |
||||||||||||||||
|
Long-term debt |
$ |
343 |
$ |
876 |
$ |
426 |
$ |
27 |
$ |
653 | ||||||
Revolving Credit Facilities: The following secured revolving credit facilities with banks were available at December 31, 2017:
|
|
|||||||||||||
|
In Millions |
|||||||||||||
|
|
Amount of |
Amount |
Letters of Credit |
Amount |
|||||||||
|
Expiration Date |
Facility |
Borrowed |
Outstanding |
Available |
|||||||||
|
CMS Energy, parent only |
|||||||||||||
|
May 27, 20221,2 |
$ |
550 |
$ |
- |
$ |
6 |
$ |
544 | |||||
|
Consumers3 |
|||||||||||||
|
May 27, 20222 |
$ |
650 |
$ |
- |
$ |
7 |
$ |
643 | |||||
|
November 23, 20194 |
250 |
- |
20 | 230 | |||||||||
|
September 9, 20195 |
30 |
- |
30 |
- |
|||||||||
1During the year ended December 31, 2017, CMS Energy’s average borrowings totaled $21 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 these facilities are secured by first mortgage bonds of Consumers.
4In November 2017, the expiration date of this revolving credit agreement was extended from November 2018 to November 2019.
5In 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 of the facilities. At December 31, 2017, $170 million of commercial paper notes with a weighted-average annual interest rate of 1.69 percent were outstanding under this program and were recorded as current notes payable on the consolidated balance sheets of CMS Energy and Consumers.
Dividend Restrictions: At December 31, 2017, payment of dividends by CMS Energy on its common stock was limited to $4.4 billion under provisions of the Michigan Business Corporation Act of 1972.
Under the provisions of its articles of incorporation, at December 31, 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 year ended December 31, 2017, Consumers paid $522 million in dividends on its common stock to CMS Energy.
Capitalization: The authorized capital stock of CMS Energy consists of:
|
· |
10 million shares of CMS Energy Preferred Stock, par value $0.01 per share |
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. In 2017, CMS Energy issued 1,494,371 shares of common stock under this program at an average price of $47.31, resulting in net proceeds of $70 million.
Preferred Stock of Subsidiary: Presented in the following table are details about Consumers’ preferred stock outstanding, which is traded on the New York Stock Exchange under the symbol CMS‑PB:
|
|
||||||||||||||
|
|
Optional |
Number of |
Balance |
|||||||||||
|
|
Redemption |
Shares |
Outstanding |
|||||||||||
|
|
Series |
Price |
Outstanding |
(In Millions) |
||||||||||
|
December 31 |
2017 | 2016 | ||||||||||||
|
Cumulative, $100 par value, authorized |
$ |
4.50 |
$ |
110.00 | 373,148 |
$ |
37 |
$ |
37 | |||||
|
|||
6:Fair Value Measurements
Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. When measuring fair value, CMS Energy and Consumers are required to incorporate all assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. A fair value hierarchy prioritizes inputs used to measure fair value according to their observability in the market. The three levels of the fair value hierarchy are as follows:
|
· |
Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities. |
|
· |
Level 2 inputs are observable, market-based inputs, other than Level 1 prices. Level 2 inputs may include quoted prices for similar assets or liabilities in active markets, quoted prices in inactive markets, and inputs derived from or corroborated by observable market data. |
|
· |
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 |
||||||||||||||
|
December 31 |
2017 | 2016 | 2017 | 2016 | ||||||||||||
|
Assets1 |
||||||||||||||||
|
Cash equivalents |
$ |
74 |
$ |
44 |
$ |
- |
$ |
- |
||||||||
|
Restricted cash equivalents |
17 | 19 | 17 | 19 | ||||||||||||
|
CMS Energy common stock |
- |
- |
21 | 33 | ||||||||||||
|
Nonqualified deferred |
14 | 12 | 10 | 8 | ||||||||||||
|
DB SERP |
||||||||||||||||
|
Cash equivalents |
5 | 3 | 4 | 2 | ||||||||||||
|
Debt securities |
141 |
- |
102 |
- |
||||||||||||
|
Mutual funds |
- |
141 |
- |
102 | ||||||||||||
|
Derivative instruments |
||||||||||||||||
|
Commodity contracts |
1 | 1 | 1 | 1 | ||||||||||||
|
Total |
$ |
252 |
$ |
220 |
$ |
155 |
$ |
165 | ||||||||
|
Liabilities1 |
||||||||||||||||
|
Nonqualified deferred |
$ |
14 |
$ |
12 |
$ |
10 |
$ |
8 | ||||||||
|
Derivative instruments |
||||||||||||||||
|
Commodity contracts |
1 |
- |
- |
- |
||||||||||||
|
Total |
$ |
15 |
$ |
12 |
$ |
10 |
$ |
8 | ||||||||
1All assets and liabilities were classified as Level 1 with the exception of 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 the amount 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. During 2017, CMS Energy and Consumers sold the mutual fund securities and used the proceeds to purchase U.S. Treasury debt securities. CMS Energy and Consumers value the U.S. Treasury debt securities at their daily quoted market prices. Prior to the sale, the DB SERP mutual funds held primarily fixed-income instruments of varying maturities. 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 7, 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 derivatives classified as Level 3 are FTRs held by Consumers. Due to the lack of quoted pricing information, Consumers determines the fair value of its FTRs based on Consumers’ average historical settlements. There was no significant activity within the Level 3 category of financial assets and liabilities during the years presented.
6:Fair Value Measurements
Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. When measuring fair value, CMS Energy and Consumers are required to incorporate all assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. A fair value hierarchy prioritizes inputs used to measure fair value according to their observability in the market. The three levels of the fair value hierarchy are as follows:
|
· |
Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities. |
|
· |
Level 2 inputs are observable, market-based inputs, other than Level 1 prices. Level 2 inputs may include quoted prices for similar assets or liabilities in active markets, quoted prices in inactive markets, and inputs derived from or corroborated by observable market data. |
|
· |
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 |
||||||||||||||
|
December 31 |
2017 | 2016 | 2017 | 2016 | ||||||||||||
|
Assets1 |
||||||||||||||||
|
Cash equivalents |
$ |
74 |
$ |
44 |
$ |
- |
$ |
- |
||||||||
|
Restricted cash equivalents |
17 | 19 | 17 | 19 | ||||||||||||
|
CMS Energy common stock |
- |
- |
21 | 33 | ||||||||||||
|
Nonqualified deferred |
14 | 12 | 10 | 8 | ||||||||||||
|
DB SERP |
||||||||||||||||
|
Cash equivalents |
5 | 3 | 4 | 2 | ||||||||||||
|
Debt securities |
141 |
- |
102 |
- |
||||||||||||
|
Mutual funds |
- |
141 |
- |
102 | ||||||||||||
|
Derivative instruments |
||||||||||||||||
|
Commodity contracts |
1 | 1 | 1 | 1 | ||||||||||||
|
Total |
$ |
252 |
$ |
220 |
$ |
155 |
$ |
165 | ||||||||
|
Liabilities1 |
||||||||||||||||
|
Nonqualified deferred |
$ |
14 |
$ |
12 |
$ |
10 |
$ |
8 | ||||||||
|
Derivative instruments |
||||||||||||||||
|
Commodity contracts |
1 |
- |
- |
- |
||||||||||||
|
Total |
$ |
15 |
$ |
12 |
$ |
10 |
$ |
8 | ||||||||
1All assets and liabilities were classified as Level 1 with the exception of 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 the amount 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. During 2017, CMS Energy and Consumers sold the mutual fund securities and used the proceeds to purchase U.S. Treasury debt securities. CMS Energy and Consumers value the U.S. Treasury debt securities at their daily quoted market prices. Prior to the sale, the DB SERP mutual funds held primarily fixed-income instruments of varying maturities. 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 7, 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 derivatives classified as Level 3 are FTRs held by Consumers. Due to the lack of quoted pricing information, Consumers determines the fair value of its FTRs based on Consumers’ average historical settlements. There was no significant activity within the Level 3 category of financial assets and liabilities during the years presented.
|
|||
7:Financial Instruments
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 6, Fair Value Measurements.
|
|
||||||||||||||||||||||||||||||||
|
In Millions |
||||||||||||||||||||||||||||||||
|
|
December 31, 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 |
$ |
21 |
$ |
21 |
$ |
- |
$ |
- |
$ |
21 |
$ |
22 |
$ |
22 |
$ |
- |
$ |
- |
$ |
22 | ||||||||||||
|
Notes |
1,371 | 1,464 |
- |
- |
1,464 | 1,326 | 1,415 |
- |
- |
1,415 | ||||||||||||||||||||||
|
Securities held |
16 | 16 |
- |
16 |
- |
13 | 13 |
- |
13 |
- |
||||||||||||||||||||||
|
Liabilities |
||||||||||||||||||||||||||||||||
|
Long-term |
10,204 | 10,715 |
- |
9,363 | 1,352 | 9,504 | 9,953 |
- |
8,990 | 963 | ||||||||||||||||||||||
|
Long-term |
27 | 26 |
- |
- |
26 | 17 | 17 |
- |
- |
17 | ||||||||||||||||||||||
|
Consumers |
||||||||||||||||||||||||||||||||
|
Assets |
||||||||||||||||||||||||||||||||
|
Long-term |
$ |
21 |
$ |
21 |
$ |
- |
$ |
- |
$ |
21 |
$ |
22 |
$ |
22 |
$ |
- |
$ |
- |
$ |
22 | ||||||||||||
|
Notes |
17 | 17 |
- |
- |
17 | 45 | 45 |
- |
- |
45 | ||||||||||||||||||||||
|
Liabilities |
||||||||||||||||||||||||||||||||
|
Long-term |
5,904 | 6,236 |
- |
4,883 | 1,353 | 5,628 | 5,903 |
- |
4,940 | 963 | ||||||||||||||||||||||
1Includes current accounts receivable of $14 million at December 31, 2017 and $12 million at December 31, 2016.
2Includes current portion of notes receivable of $200 million at December 31, 2017 and $219 million at December 31, 2016.
3Includes current portion of long-term debt of $1.1 billion at December 31, 2017 and $864 million at December 31, 2016.
4Includes current portion of long-term payables of $3 million at December 31, 2017 and $1 million at December 31, 2016.
5Includes current portion of notes receivable of $17 million at December 31, 2017 and $29 million at December 31, 2016.
6Includes current portion of long-term debt of $343 million at December 31, 2017 and $375 million at December 31, 2016.
At CMS Energy, notes receivable consisted primarily of EnerBank’s fixed-rate installment loans. EnerBank estimated 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 estimated 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 calculated market yields and prices for the debt using a matrix method incorporating 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 were excluded from the fair value measurements of long-term debt. At December 31, 2017 and 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 |
||||||||||||||||||||||||||
|
|
December 31, 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 |
||||||||||||||||||||||||||
|
Debt securities |
$ |
141 |
$ |
- |
- |
$ |
141 |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
|||||||||||
|
Mutual funds |
- |
- |
- |
- |
141 |
- |
- |
141 | ||||||||||||||||||
|
Held to maturity |
||||||||||||||||||||||||||
|
Debt securities |
16 |
- |
- |
16 | 13 |
- |
- |
13 | ||||||||||||||||||
|
Consumers |
||||||||||||||||||||||||||
|
Available for sale |
||||||||||||||||||||||||||
|
DB SERP |
||||||||||||||||||||||||||
|
Debt securities |
$ |
102 |
$ |
- |
$ |
- |
$ |
102 |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
||||||||||
|
Mutual funds |
- |
- |
- |
- |
102 |
- |
- |
102 | ||||||||||||||||||
|
CMS Energy |
2 | 19 |
- |
21 | 4 | 29 |
- |
33 | ||||||||||||||||||
The DB SERP debt securities classified as available for sale at December 31, 2017 were U.S. Treasury debt securities with maturities ranging from one to ten years. The DB SERP mutual funds classified as available for sale at December 31, 2016 held primarily fixed-income instruments of varying maturities. Debt securities classified as held to maturity consisted primarily of mortgage-backed securities and Utah Housing Corporation bonds held by EnerBank.
Presented in the following table is a summary of the sales activity for CMS Energy’s and Consumers’ investment securities:
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Proceeds from sales of investment securities |
$ |
145 |
$ |
6 |
$ |
3 | ||||
|
Consumers |
||||||||||
|
Proceeds from sales of investment securities |
$ |
105 |
$ |
4 |
$ |
2 | ||||
The sales proceeds for all periods represent sales of investments that were held within the DB SERP and classified as available for sale. During 2017, CMS Energy and Consumers sold the mutual fund securities and used the proceeds to purchase U.S. Treasury debt securities. CMS Energy reclassified gains of $2 million ($1 million, net of tax) from AOCI and included this amount in other income on the consolidated statements of income. This amount included Consumers’ gains of $2 million ($1 million, net of tax). During 2016 and 2015, realized gains and losses on the sales were immaterial for CMS Energy and Consumers.
Consumers recognized a gain of $14 million in 2017 and $9 million in 2015 from transferring shares of CMS Energy common stock to its related charitable foundation. The gains reflected the excess of fair value over cost of the stock donated and were recorded in other income on Consumers’ consolidated statements of income. The gains were eliminated on CMS Energy’s consolidated statements of income. Consumers did not transfer shares in 2016.
7:Financial Instruments
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 6, Fair Value Measurements.
|
|
||||||||||||||||||||||||||||||||
|
In Millions |
||||||||||||||||||||||||||||||||
|
|
December 31, 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 |
$ |
21 |
$ |
21 |
$ |
- |
$ |
- |
$ |
21 |
$ |
22 |
$ |
22 |
$ |
- |
$ |
- |
$ |
22 | ||||||||||||
|
Notes |
1,371 | 1,464 |
- |
- |
1,464 | 1,326 | 1,415 |
- |
- |
1,415 | ||||||||||||||||||||||
|
Securities held |
16 | 16 |
- |
16 |
- |
13 | 13 |
- |
13 |
- |
||||||||||||||||||||||
|
Liabilities |
||||||||||||||||||||||||||||||||
|
Long-term |
10,204 | 10,715 |
- |
9,363 | 1,352 | 9,504 | 9,953 |
- |
8,990 | 963 | ||||||||||||||||||||||
|
Long-term |
27 | 26 |
- |
- |
26 | 17 | 17 |
- |
- |
17 | ||||||||||||||||||||||
|
Consumers |
||||||||||||||||||||||||||||||||
|
Assets |
||||||||||||||||||||||||||||||||
|
Long-term |
$ |
21 |
$ |
21 |
$ |
- |
$ |
- |
$ |
21 |
$ |
22 |
$ |
22 |
$ |
- |
$ |
- |
$ |
22 | ||||||||||||
|
Notes |
17 | 17 |
- |
- |
17 | 45 | 45 |
- |
- |
45 | ||||||||||||||||||||||
|
Liabilities |
||||||||||||||||||||||||||||||||
|
Long-term |
5,904 | 6,236 |
- |
4,883 | 1,353 | 5,628 | 5,903 |
- |
4,940 | 963 | ||||||||||||||||||||||
1Includes current accounts receivable of $14 million at December 31, 2017 and $12 million at December 31, 2016.
2Includes current portion of notes receivable of $200 million at December 31, 2017 and $219 million at December 31, 2016.
3Includes current portion of long-term debt of $1.1 billion at December 31, 2017 and $864 million at December 31, 2016.
4Includes current portion of long-term payables of $3 million at December 31, 2017 and $1 million at December 31, 2016.
5Includes current portion of notes receivable of $17 million at December 31, 2017 and $29 million at December 31, 2016.
6Includes current portion of long-term debt of $343 million at December 31, 2017 and $375 million at December 31, 2016.
At CMS Energy, notes receivable consisted primarily of EnerBank’s fixed-rate installment loans. EnerBank estimated 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 estimated 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 calculated market yields and prices for the debt using a matrix method incorporating 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 were excluded from the fair value measurements of long-term debt. At December 31, 2017 and 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 |
||||||||||||||||||||||||||
|
|
December 31, 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 |
||||||||||||||||||||||||||
|
Debt securities |
$ |
141 |
$ |
- |
- |
$ |
141 |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
|||||||||||
|
Mutual funds |
- |
- |
- |
- |
141 |
- |
- |
141 | ||||||||||||||||||
|
Held to maturity |
||||||||||||||||||||||||||
|
Debt securities |
16 |
- |
- |
16 | 13 |
- |
- |
13 | ||||||||||||||||||
|
Consumers |
||||||||||||||||||||||||||
|
Available for sale |
||||||||||||||||||||||||||
|
DB SERP |
||||||||||||||||||||||||||
|
Debt securities |
$ |
102 |
$ |
- |
$ |
- |
$ |
102 |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
||||||||||
|
Mutual funds |
- |
- |
- |
- |
102 |
- |
- |
102 | ||||||||||||||||||
|
CMS Energy |
2 | 19 |
- |
21 | 4 | 29 |
- |
33 | ||||||||||||||||||
The DB SERP debt securities classified as available for sale at December 31, 2017 were U.S. Treasury debt securities with maturities ranging from one to ten years. The DB SERP mutual funds classified as available for sale at December 31, 2016 held primarily fixed-income instruments of varying maturities. Debt securities classified as held to maturity consisted primarily of mortgage-backed securities and Utah Housing Corporation bonds held by EnerBank.
Presented in the following table is a summary of the sales activity for CMS Energy’s and Consumers’ investment securities:
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Proceeds from sales of investment securities |
$ |
145 |
$ |
6 |
$ |
3 | ||||
|
Consumers |
||||||||||
|
Proceeds from sales of investment securities |
$ |
105 |
$ |
4 |
$ |
2 | ||||
The sales proceeds for all periods represent sales of investments that were held within the DB SERP and classified as available for sale. During 2017, CMS Energy and Consumers sold the mutual fund securities and used the proceeds to purchase U.S. Treasury debt securities. CMS Energy reclassified gains of $2 million ($1 million, net of tax) from AOCI and included this amount in other income on the consolidated statements of income. This amount included Consumers’ gains of $2 million ($1 million, net of tax). During 2016 and 2015, realized gains and losses on the sales were immaterial for CMS Energy and Consumers.
Consumers recognized a gain of $14 million in 2017 and $9 million in 2015 from transferring shares of CMS Energy common stock to its related charitable foundation. The gains reflected the excess of fair value over cost of the stock donated and were recorded in other income on Consumers’ consolidated statements of income. The gains were eliminated on CMS Energy’s consolidated statements of income. Consumers did not transfer shares in 2016.
|
|||
Presented in the following table are details of CMS Energy’s and Consumers’ current and non‑current notes receivable:
|
|
|||||||
|
In Millions |
|||||||
|
December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
Current |
|||||||
|
EnerBank notes receivable, net of allowance for loan losses |
$ |
178 |
$ |
151 | |||
|
EnerBank notes receivable held for sale |
2 | 39 | |||||
|
Michigan tax settlement |
20 | 29 | |||||
|
Non-current |
|||||||
|
EnerBank notes receivable |
1,171 | 1,088 | |||||
|
Michigan tax settlement |
- |
19 | |||||
|
Total notes receivable |
$ |
1,371 |
$ |
1,326 | |||
|
Consumers |
|||||||
|
Current |
|||||||
|
Michigan tax settlement |
$ |
17 |
$ |
29 | |||
|
Non-current |
|||||||
|
Michigan tax settlement |
- |
16 | |||||
|
Total notes receivable |
$ |
17 |
$ |
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. During 2017, EnerBank completed sales of notes receivable, receiving proceeds of $52 million and recording immaterial gains.
Unearned income associated with loan fees was $84 million at December 31, 2017 and 2016. Unearned income associated with loan fees for notes receivable held for sale was $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.
Presented in the following table are the changes in the allowance for loan losses:
|
|
|||||||
|
In Millions |
|||||||
|
Years Ended December 31 |
2017 | 2016 | |||||
|
Balance at beginning of period |
$ |
16 |
$ |
9 | |||
|
Charge-offs |
(19) | (14) | |||||
|
Recoveries |
3 | 2 | |||||
|
Provision for loan losses |
20 | 19 | |||||
|
Balance at end of period |
$ |
20 |
$ |
16 | |||
Loans that are 30 days or more past due are considered delinquent. The balance of EnerBank’s delinquent consumer loans was $14 million at December 31, 2017 and $11 million at December 31, 2016.
At December 31, 2017 and 2016, $1 million of EnerBank’s loans had been modified as troubled debt restructurings.
Presented in the following table are details of CMS Energy’s and Consumers’ current and non‑current notes receivable:
|
|
|||||||
|
In Millions |
|||||||
|
December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
Current |
|||||||
|
EnerBank notes receivable, net of allowance for loan losses |
$ |
178 |
$ |
151 | |||
|
EnerBank notes receivable held for sale |
2 | 39 | |||||
|
Michigan tax settlement |
20 | 29 | |||||
|
Non-current |
|||||||
|
EnerBank notes receivable |
1,171 | 1,088 | |||||
|
Michigan tax settlement |
- |
19 | |||||
|
Total notes receivable |
$ |
1,371 |
$ |
1,326 | |||
|
Consumers |
|||||||
|
Current |
|||||||
|
Michigan tax settlement |
$ |
17 |
$ |
29 | |||
|
Non-current |
|||||||
|
Michigan tax settlement |
- |
16 | |||||
|
Total notes receivable |
$ |
17 |
$ |
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. During 2017, EnerBank completed sales of notes receivable, receiving proceeds of $52 million and recording immaterial gains.
Unearned income associated with loan fees was $84 million at December 31, 2017 and 2016. Unearned income associated with loan fees for notes receivable held for sale was $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.
Presented in the following table are the changes in the allowance for loan losses:
|
|
|||||||
|
In Millions |
|||||||
|
Years Ended December 31 |
2017 | 2016 | |||||
|
Balance at beginning of period |
$ |
16 |
$ |
9 | |||
|
Charge-offs |
(19) | (14) | |||||
|
Recoveries |
3 | 2 | |||||
|
Provision for loan losses |
20 | 19 | |||||
|
Balance at end of period |
$ |
20 |
$ |
16 | |||
Loans that are 30 days or more past due are considered delinquent. The balance of EnerBank’s delinquent consumer loans was $14 million at December 31, 2017 and $11 million at December 31, 2016.
At December 31, 2017 and 2016, $1 million of EnerBank’s loans had been modified as troubled debt restructurings.
|
|||
9:Plant, Property, and Equipment
Presented in the following table are details of CMS Energy’s and Consumers’ plant, property, and equipment:
|
|
||||||||||
|
In Millions |
||||||||||
|
December 31 |
Estimated |
2017 | 2016 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Plant, property, and equipment, gross |
||||||||||
|
Consumers |
3 |
- |
125 |
$ |
22,318 |
$ |
20,838 | |||
|
Enterprises |
||||||||||
|
Independent power production |
3 |
- |
35 | 163 | 141 | |||||
|
Other |
3 |
- |
5 | 4 | 16 | |||||
|
Other |
1 |
- |
7 | 21 | 15 | |||||
|
Plant, property, and equipment, gross |
$ |
22,506 |
$ |
21,010 | ||||||
|
Construction work in progress |
765 | 761 | ||||||||
|
Accumulated depreciation and amortization |
(6,510) | (6,056) | ||||||||
|
Total plant, property, and equipment1 |
$ |
16,761 |
$ |
15,715 | ||||||
|
Consumers |
||||||||||
|
Plant, property, and equipment, gross |
||||||||||
|
Electric |
||||||||||
|
Generation |
22 |
- |
125 |
$ |
6,025 |
$ |
5,900 | |||
|
Distribution |
20 |
- |
75 | 7,603 | 7,149 | |||||
|
Transmission |
46 |
- |
75 | 66 | 59 | |||||
|
Other |
5 |
- |
50 | 1,229 | 1,137 | |||||
|
Assets under capital leases and financing obligation2 |
298 | 295 | ||||||||
|
Gas |
||||||||||
|
Distribution |
20 |
- |
85 | 4,182 | 3,806 | |||||
|
Transmission |
17 |
- |
75 | 1,278 | 1,124 | |||||
|
Underground storage facilities3 |
27 |
- |
75 | 842 | 630 | |||||
|
Other |
5 |
- |
50 | 764 | 708 | |||||
|
Capital leases2 |
14 | 15 | ||||||||
|
Other non-utility property |
3 |
- |
51 | 17 | 15 | |||||
|
Plant, property, and equipment, gross |
$ |
22,318 |
$ |
20,838 | ||||||
|
Construction work in progress |
753 | 759 | ||||||||
|
Accumulated depreciation and amortization |
(6,441) | (5,994) | ||||||||
|
Total plant, property, and equipment1 |
$ |
16,630 |
$ |
15,603 | ||||||
1For the year ended December 31, 2017, Consumers’ plant additions were $1.7 billion and plant retirements were $214 million. For the year ended December 31, 2016, Consumers’ plant additions were $2.3 billion and plant retirements were $285 million.
2For information regarding the amortization terms of Consumers’ assets under capital leases and financing obligation, see Note 10, Leases and Palisades Financing.
3Underground storage includes base natural gas of $26 million at December 31, 2017 and 2016. Base natural gas is not subject to depreciation.
Capitalization: CMS Energy and Consumers record plant, property, and equipment at original cost when placed into service. The cost includes labor, material, applicable taxes, overhead such as pension and other benefits, and AFUDC, if applicable. Consumers’ plant, property, and equipment is generally recoverable through its general rate making process.
With the exception of utility property for which the remaining book value has been securitized, mothballed utility property stays in rate base and continues to be depreciated at the same rate as before the mothball period. When utility property is retired or otherwise disposed of in the ordinary course of business, Consumers records the original cost to accumulated depreciation, along with associated cost of removal, net of salvage. CMS Energy and Consumers recognize gains or losses on the retirement or disposal of non‑regulated assets in income. Consumers records cost of removal collected from customers, but not spent, as a regulatory liability.
Software: CMS Energy and Consumers capitalize the costs to purchase and develop internal-use computer software. These costs are expensed evenly over the estimated useful life of the internal-use computer software. If computer software is integral to computer hardware, then its cost is capitalized and depreciated with the hardware.
AFUDC: Consumers capitalizes AFUDC on regulated major construction projects, except pollution control facilities on its fossil-fuel-fired power plants. AFUDC represents the estimated cost of debt and authorized return-on-equity funds used to finance construction additions. Consumers records the offsetting credit as a reduction of interest for the amount representing the borrowed funds component and as other income for the equity funds component on the consolidated statements of income. When construction is completed and the property is placed in service, Consumers depreciates and recovers the capitalized AFUDC from customers over the life of the related asset. Presented in the following table are Consumers’ average AFUDC capitalization rates:
|
|
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
Electric |
6.8 |
% |
7.3 |
% |
7.6 |
% |
||||
|
Gas |
6.0 |
% |
6.2 |
% |
6.2 |
% |
||||
Assets Under Capital Leases and Financing Obligation: Presented in the following table are further details about changes in Consumers’ assets under capital leases and financing obligation:
|
|
|||||||
|
In Millions |
|||||||
|
Years Ended December 31 |
2017 | 2016 | |||||
|
Consumers |
|||||||
|
Balance at beginning of period |
$ |
310 |
$ |
300 | |||
|
Additions |
3 | 13 | |||||
|
Net retirements and other adjustments |
(1) | (3) | |||||
|
Balance at end of period |
$ |
312 |
$ |
310 | |||
Assets under capital leases and financing obligation are presented as gross amounts. Accumulated amortization of assets under capital leases and financing obligation was $193 million at December 31, 2017 and $172 million at December 31, 2016 for Consumers.
Depreciation and Amortization: Presented in the following table are further details about CMS Energy’s and Consumers’ accumulated depreciation and amortization:
|
|
|||||||
|
In Millions |
|||||||
|
December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
Utility plant assets |
$ |
6,439 |
$ |
5,993 | |||
|
Non-utility plant assets |
71 | 63 | |||||
|
Consumers |
|||||||
|
Utility plant assets |
$ |
6,439 |
$ |
5,993 | |||
|
Non-utility plant assets |
2 | 1 | |||||
Consumers depreciates utility property on an asset-group basis, in which it applies a single MPSC-approved depreciation rate to the gross investment in a particular class of property within the electric and gas segments. Consumers performs depreciation studies periodically to determine appropriate group lives. Presented in the following table are the composite depreciation rates for Consumers’ segment properties:
|
|
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
Electric utility property |
3.9 |
% |
3.9 |
% |
3.5 |
% |
||||
|
Gas utility property |
2.9 | 2.9 | 2.8 | |||||||
|
Other property |
10.0 | 9.8 | 8.7 | |||||||
CMS Energy and Consumers record property repairs and minor property replacement as maintenance expense. CMS Energy and Consumers record planned major maintenance activities as operating expense unless the cost represents the acquisition of additional long-lived assets or the replacement of an existing long-lived asset.
Presented in the following table are the components of CMS Energy’s and Consumers’ depreciation and amortization expense:
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Depreciation expense – plant, property, and equipment |
$ |
739 |
$ |
687 |
$ |
591 | ||||
|
Amortization expense |
||||||||||
|
Software |
114 | 96 | 70 | |||||||
|
Other intangible assets |
3 | 3 | 4 | |||||||
|
Securitized regulatory assets |
25 | 25 | 83 | |||||||
|
Other regulatory assets |
- |
- |
2 | |||||||
|
Total depreciation and amortization expense |
$ |
881 |
$ |
811 |
$ |
750 | ||||
|
Consumers |
||||||||||
|
Depreciation expense – plant, property, and equipment |
$ |
732 |
$ |
680 |
$ |
586 | ||||
|
Amortization expense |
||||||||||
|
Software |
112 | 95 | 69 | |||||||
|
Other intangible assets |
3 | 3 | 4 | |||||||
|
Securitized regulatory assets |
25 | 25 | 83 | |||||||
|
Other regulatory assets |
- |
- |
2 | |||||||
|
Total depreciation and amortization expense |
$ |
872 |
$ |
803 |
$ |
744 | ||||
Presented in the following table is CMS Energy’s and Consumers’ estimated amortization expense on intangible assets for each of the next five years:
|
|
||||||||||||||||
|
In Millions |
||||||||||||||||
|
|
2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||
|
CMS Energy, including Consumers |
||||||||||||||||
|
Intangible asset amortization expense |
$ |
131 |
$ |
139 |
$ |
135 |
$ |
124 |
$ |
109 | ||||||
|
Consumers |
||||||||||||||||
|
Intangible assets amortization expense |
$ |
129 |
$ |
137 |
$ |
133 |
$ |
123 |
$ |
108 | ||||||
Intangible Assets: Included in net plant, property, and equipment are intangible assets. Presented in the following table are details about CMS Energy’s and Consumers’ intangible assets:
|
|
|||||||||||||||||||
|
In Millions |
|||||||||||||||||||
|
|
December 31, 2017 |
December 31, 2016 |
|||||||||||||||||
|
Description |
Amortization |
Gross Cost1 |
Accumulated |
Gross Cost1 |
Accumulated |
||||||||||||||
|
CMS Energy, including Consumers |
|||||||||||||||||||
|
Software development |
1 |
- |
15 |
$ |
950 |
$ |
481 |
$ |
853 |
$ |
367 | ||||||||
|
Rights of way |
50 |
- |
85 | 162 | 50 | 155 | 48 | ||||||||||||
|
Franchises and consents |
5 |
- |
30 | 14 | 8 | 15 | 8 | ||||||||||||
|
Leasehold improvements |
various2 |
9 | 7 | 7 | 6 | ||||||||||||||
|
Other intangibles |
various |
23 | 15 | 22 | 15 | ||||||||||||||
|
Total |
$ |
1,158 |
$ |
561 |
$ |
1,052 |
$ |
444 | |||||||||||
|
Consumers |
|||||||||||||||||||
|
Software development |
3 |
- |
15 |
$ |
937 |
$ |
475 |
$ |
845 |
$ |
363 | ||||||||
|
Rights of way |
50 |
- |
85 | 162 | 50 | 155 | 48 | ||||||||||||
|
Franchises and consents |
5 |
- |
30 | 14 | 8 | 15 | 8 | ||||||||||||
|
Leasehold improvements |
various2 |
9 | 7 | 7 | 6 | ||||||||||||||
|
Other intangibles |
various |
21 | 15 | 21 | 15 | ||||||||||||||
|
Total |
$ |
1,143 |
$ |
555 |
$ |
1,043 |
$ |
440 | |||||||||||
1For the year ended December 31, 2017, Consumers’ intangible asset additions were $100 million and there were no retirements. For the year ended December 31, 2016, Consumers’ intangible asset additions were $141 million and intangible asset retirements were $23 million.
2Leasehold improvements are amortized over the life of the lease, which may change whenever the lease is renewed or extended.
Jointly Owned Regulated Utility Facilities
Presented in the following table are Consumers’ investments in jointly owned regulated utility facilities at December 31, 2017:
|
|
||||||||||||
|
In Millions, Except Ownership Share |
||||||||||||
|
|
J.H. Campbell Unit 3 |
Ludington |
Other |
|||||||||
|
Ownership share |
93.3 |
% |
51.0 |
% |
various |
|||||||
|
Utility plant in service |
$ |
1,655 |
$ |
354 |
$ |
217 | ||||||
|
Accumulated depreciation |
(592) | (151) | (69) | |||||||||
|
Construction work in progress |
30 | 142 | 6 | |||||||||
|
Net investment |
$ |
1,093 |
$ |
345 |
$ |
154 | ||||||
Consumers includes its share of the direct expenses of the jointly owned plants in operating expenses. Consumers shares operation, maintenance, and other expenses of these jointly owned utility facilities in proportion to each participant’s undivided ownership interest. Consumers is required to provide only its share of financing for the jointly owned utility facilities.
9:Plant, Property, and Equipment
Presented in the following table are details of CMS Energy’s and Consumers’ plant, property, and equipment:
|
|
||||||||||
|
In Millions |
||||||||||
|
December 31 |
Estimated |
2017 | 2016 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Plant, property, and equipment, gross |
||||||||||
|
Consumers |
3 |
- |
125 |
$ |
22,318 |
$ |
20,838 | |||
|
Enterprises |
||||||||||
|
Independent power production |
3 |
- |
35 | 163 | 141 | |||||
|
Other |
3 |
- |
5 | 4 | 16 | |||||
|
Other |
1 |
- |
7 | 21 | 15 | |||||
|
Plant, property, and equipment, gross |
$ |
22,506 |
$ |
21,010 | ||||||
|
Construction work in progress |
765 | 761 | ||||||||
|
Accumulated depreciation and amortization |
(6,510) | (6,056) | ||||||||
|
Total plant, property, and equipment1 |
$ |
16,761 |
$ |
15,715 | ||||||
|
Consumers |
||||||||||
|
Plant, property, and equipment, gross |
||||||||||
|
Electric |
||||||||||
|
Generation |
22 |
- |
125 |
$ |
6,025 |
$ |
5,900 | |||
|
Distribution |
20 |
- |
75 | 7,603 | 7,149 | |||||
|
Transmission |
46 |
- |
75 | 66 | 59 | |||||
|
Other |
5 |
- |
50 | 1,229 | 1,137 | |||||
|
Assets under capital leases and financing obligation2 |
298 | 295 | ||||||||
|
Gas |
||||||||||
|
Distribution |
20 |
- |
85 | 4,182 | 3,806 | |||||
|
Transmission |
17 |
- |
75 | 1,278 | 1,124 | |||||
|
Underground storage facilities3 |
27 |
- |
75 | 842 | 630 | |||||
|
Other |
5 |
- |
50 | 764 | 708 | |||||
|
Capital leases2 |
14 | 15 | ||||||||
|
Other non-utility property |
3 |
- |
51 | 17 | 15 | |||||
|
Plant, property, and equipment, gross |
$ |
22,318 |
$ |
20,838 | ||||||
|
Construction work in progress |
753 | 759 | ||||||||
|
Accumulated depreciation and amortization |
(6,441) | (5,994) | ||||||||
|
Total plant, property, and equipment1 |
$ |
16,630 |
$ |
15,603 | ||||||
1For the year ended December 31, 2017, Consumers’ plant additions were $1.7 billion and plant retirements were $214 million. For the year ended December 31, 2016, Consumers’ plant additions were $2.3 billion and plant retirements were $285 million.
2For information regarding the amortization terms of Consumers’ assets under capital leases and financing obligation, see Note 10, Leases and Palisades Financing.
3Underground storage includes base natural gas of $26 million at December 31, 2017 and 2016. Base natural gas is not subject to depreciation.
Capitalization: CMS Energy and Consumers record plant, property, and equipment at original cost when placed into service. The cost includes labor, material, applicable taxes, overhead such as pension and other benefits, and AFUDC, if applicable. Consumers’ plant, property, and equipment is generally recoverable through its general rate making process.
With the exception of utility property for which the remaining book value has been securitized, mothballed utility property stays in rate base and continues to be depreciated at the same rate as before the mothball period. When utility property is retired or otherwise disposed of in the ordinary course of business, Consumers records the original cost to accumulated depreciation, along with associated cost of removal, net of salvage. CMS Energy and Consumers recognize gains or losses on the retirement or disposal of non‑regulated assets in income. Consumers records cost of removal collected from customers, but not spent, as a regulatory liability.
Software: CMS Energy and Consumers capitalize the costs to purchase and develop internal-use computer software. These costs are expensed evenly over the estimated useful life of the internal-use computer software. If computer software is integral to computer hardware, then its cost is capitalized and depreciated with the hardware.
AFUDC: Consumers capitalizes AFUDC on regulated major construction projects, except pollution control facilities on its fossil-fuel-fired power plants. AFUDC represents the estimated cost of debt and authorized return-on-equity funds used to finance construction additions. Consumers records the offsetting credit as a reduction of interest for the amount representing the borrowed funds component and as other income for the equity funds component on the consolidated statements of income. When construction is completed and the property is placed in service, Consumers depreciates and recovers the capitalized AFUDC from customers over the life of the related asset. Presented in the following table are Consumers’ average AFUDC capitalization rates:
|
|
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
Electric |
6.8 |
% |
7.3 |
% |
7.6 |
% |
||||
|
Gas |
6.0 |
% |
6.2 |
% |
6.2 |
% |
||||
Assets Under Capital Leases and Financing Obligation: Presented in the following table are further details about changes in Consumers’ assets under capital leases and financing obligation:
|
|
|||||||
|
In Millions |
|||||||
|
Years Ended December 31 |
2017 | 2016 | |||||
|
Consumers |
|||||||
|
Balance at beginning of period |
$ |
310 |
$ |
300 | |||
|
Additions |
3 | 13 | |||||
|
Net retirements and other adjustments |
(1) | (3) | |||||
|
Balance at end of period |
$ |
312 |
$ |
310 | |||
Assets under capital leases and financing obligation are presented as gross amounts. Accumulated amortization of assets under capital leases and financing obligation was $193 million at December 31, 2017 and $172 million at December 31, 2016 for Consumers.
Depreciation and Amortization: Presented in the following table are further details about CMS Energy’s and Consumers’ accumulated depreciation and amortization:
|
|
|||||||
|
In Millions |
|||||||
|
December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
Utility plant assets |
$ |
6,439 |
$ |
5,993 | |||
|
Non-utility plant assets |
71 | 63 | |||||
|
Consumers |
|||||||
|
Utility plant assets |
$ |
6,439 |
$ |
5,993 | |||
|
Non-utility plant assets |
2 | 1 | |||||
Consumers depreciates utility property on an asset-group basis, in which it applies a single MPSC-approved depreciation rate to the gross investment in a particular class of property within the electric and gas segments. Consumers performs depreciation studies periodically to determine appropriate group lives. Presented in the following table are the composite depreciation rates for Consumers’ segment properties:
|
|
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
Electric utility property |
3.9 |
% |
3.9 |
% |
3.5 |
% |
||||
|
Gas utility property |
2.9 | 2.9 | 2.8 | |||||||
|
Other property |
10.0 | 9.8 | 8.7 | |||||||
CMS Energy and Consumers record property repairs and minor property replacement as maintenance expense. CMS Energy and Consumers record planned major maintenance activities as operating expense unless the cost represents the acquisition of additional long-lived assets or the replacement of an existing long-lived asset.
Presented in the following table are the components of CMS Energy’s and Consumers’ depreciation and amortization expense:
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Depreciation expense – plant, property, and equipment |
$ |
739 |
$ |
687 |
$ |
591 | ||||
|
Amortization expense |
||||||||||
|
Software |
114 | 96 | 70 | |||||||
|
Other intangible assets |
3 | 3 | 4 | |||||||
|
Securitized regulatory assets |
25 | 25 | 83 | |||||||
|
Other regulatory assets |
- |
- |
2 | |||||||
|
Total depreciation and amortization expense |
$ |
881 |
$ |
811 |
$ |
750 | ||||
|
Consumers |
||||||||||
|
Depreciation expense – plant, property, and equipment |
$ |
732 |
$ |
680 |
$ |
586 | ||||
|
Amortization expense |
||||||||||
|
Software |
112 | 95 | 69 | |||||||
|
Other intangible assets |
3 | 3 | 4 | |||||||
|
Securitized regulatory assets |
25 | 25 | 83 | |||||||
|
Other regulatory assets |
- |
- |
2 | |||||||
|
Total depreciation and amortization expense |
$ |
872 |
$ |
803 |
$ |
744 | ||||
Presented in the following table is CMS Energy’s and Consumers’ estimated amortization expense on intangible assets for each of the next five years:
|
|
||||||||||||||||
|
In Millions |
||||||||||||||||
|
|
2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||
|
CMS Energy, including Consumers |
||||||||||||||||
|
Intangible asset amortization expense |
$ |
131 |
$ |
139 |
$ |
135 |
$ |
124 |
$ |
109 | ||||||
|
Consumers |
||||||||||||||||
|
Intangible assets amortization expense |
$ |
129 |
$ |
137 |
$ |
133 |
$ |
123 |
$ |
108 | ||||||
Intangible Assets: Included in net plant, property, and equipment are intangible assets. Presented in the following table are details about CMS Energy’s and Consumers’ intangible assets:
|
|
|||||||||||||||||||
|
In Millions |
|||||||||||||||||||
|
|
December 31, 2017 |
December 31, 2016 |
|||||||||||||||||
|
Description |
Amortization |
Gross Cost1 |
Accumulated |
Gross Cost1 |
Accumulated |
||||||||||||||
|
CMS Energy, including Consumers |
|||||||||||||||||||
|
Software development |
1 |
- |
15 |
$ |
950 |
$ |
481 |
$ |
853 |
$ |
367 | ||||||||
|
Rights of way |
50 |
- |
85 | 162 | 50 | 155 | 48 | ||||||||||||
|
Franchises and consents |
5 |
- |
30 | 14 | 8 | 15 | 8 | ||||||||||||
|
Leasehold improvements |
various2 |
9 | 7 | 7 | 6 | ||||||||||||||
|
Other intangibles |
various |
23 | 15 | 22 | 15 | ||||||||||||||
|
Total |
$ |
1,158 |
$ |
561 |
$ |
1,052 |
$ |
444 | |||||||||||
|
Consumers |
|||||||||||||||||||
|
Software development |
3 |
- |
15 |
$ |
937 |
$ |
475 |
$ |
845 |
$ |
363 | ||||||||
|
Rights of way |
50 |
- |
85 | 162 | 50 | 155 | 48 | ||||||||||||
|
Franchises and consents |
5 |
- |
30 | 14 | 8 | 15 | 8 | ||||||||||||
|
Leasehold improvements |
various2 |
9 | 7 | 7 | 6 | ||||||||||||||
|
Other intangibles |
various |
21 | 15 | 21 | 15 | ||||||||||||||
|
Total |
$ |
1,143 |
$ |
555 |
$ |
1,043 |
$ |
440 | |||||||||||
1For the year ended December 31, 2017, Consumers’ intangible asset additions were $100 million and there were no retirements. For the year ended December 31, 2016, Consumers’ intangible asset additions were $141 million and intangible asset retirements were $23 million.
2Leasehold improvements are amortized over the life of the lease, which may change whenever the lease is renewed or extended.
Jointly Owned Regulated Utility Facilities
Presented in the following table are Consumers’ investments in jointly owned regulated utility facilities at December 31, 2017:
|
|
||||||||||||
|
In Millions, Except Ownership Share |
||||||||||||
|
|
J.H. Campbell Unit 3 |
Ludington |
Other |
|||||||||
|
Ownership share |
93.3 |
% |
51.0 |
% |
various |
|||||||
|
Utility plant in service |
$ |
1,655 |
$ |
354 |
$ |
217 | ||||||
|
Accumulated depreciation |
(592) | (151) | (69) | |||||||||
|
Construction work in progress |
30 | 142 | 6 | |||||||||
|
Net investment |
$ |
1,093 |
$ |
345 |
$ |
154 | ||||||
Consumers includes its share of the direct expenses of the jointly owned plants in operating expenses. Consumers shares operation, maintenance, and other expenses of these jointly owned utility facilities in proportion to each participant’s undivided ownership interest. Consumers is required to provide only its share of financing for the jointly owned utility facilities.
|
|||
10:Leases and Palisades Financing
CMS Energy and Consumers lease various assets, including railcars, service vehicles, gas pipeline capacity, and buildings. In addition, CMS Energy and Consumers account for a number of their PPAs as capital and operating leases.
Operating leases for coal-carrying railcars have original lease terms ranging from two to 15 years, expiring without extension provisions over the next six years and with extension provisions over the next nine years. These leases contain fair market value extension and buyout provisions. Capital leases for Consumers’ vehicle fleet operations have a maximum term of 120 months with some having end-of-lease rental adjustment clauses based on the proceeds received from the sale or disposition of the vehicles, and others having fair market value purchase options.
Consumers has capital leases for gas transportation pipelines to the D.E. Karn generating complex and Zeeland. The capital lease for the gas transportation pipeline into the D.E. Karn generating complex has a term of 15 years with a provision to extend the contract from month to month. The remaining term of the contract was four years at December 31, 2017. The capital lease for the gas transportation pipeline to Zeeland was extended in 2017 for five years pursuant to a renewal provision in the contract, with additional renewal provisions of five to ten years. The remaining terms of Consumers’ long-term PPAs accounted for as leases range between one and 15 years. Most of these PPAs contain provisions at the end of the initial contract terms to renew the agreements annually.
Presented in the following table are Consumers’ minimum lease expense and contingent rental expense. For each of the years ended December 31, 2017, 2016, and 2015, all of CMS Energy’s minimum lease expense and contingent rental expense were attributable to Consumers.
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
Consumers |
||||||||||
|
Minimum operating lease expense |
||||||||||
|
PPAs |
$ |
5 |
$ |
6 |
$ |
6 | ||||
|
Other agreements |
15 | 14 | 19 | |||||||
|
Contingent rental expense1 |
96 | 82 | 82 | |||||||
1Contingent rental expense is related to capital and operating lease PPAs and is based on delivery of energy and capacity in excess of minimum lease payments.
Consumers is authorized by the MPSC to record operating lease payments as operating expense and recover the total cost from customers.
Presented in the following table are the minimum annual rental commitments under Consumers’ non‑cancelable leases at December 31, 2017. All of CMS Energy’s non‑cancelable leases at December 31, 2017 were attributable to Consumers.
|
|
||||||||||
|
In Millions |
||||||||||
|
|
Capital Leases |
Palisades |
Operating Leases |
|||||||
|
Consumers |
||||||||||
|
2018 |
$ |
15 |
$ |
16 |
$ |
15 | ||||
|
2019 |
15 | 15 | 9 | |||||||
|
2020 |
12 | 14 | 9 | |||||||
|
2021 |
12 | 14 | 9 | |||||||
|
2022 |
8 | 3 | 4 | |||||||
|
2023 and thereafter |
21 |
- |
7 | |||||||
|
Total minimum lease payments |
$ |
83 |
$ |
62 |
$ |
53 | ||||
|
Less imputed interest |
25 | 7 | ||||||||
|
Present value of net minimum lease payments |
$ |
58 |
$ |
55 | ||||||
|
Less current portion |
9 | 13 | ||||||||
|
Non-current portion |
$ |
49 |
$ |
42 | ||||||
Palisades Financing
In 2007, Consumers sold Palisades to Entergy and entered into a 15‑year PPA to purchase virtually all of the capacity and energy produced by Palisades, up to the annual average capacity of 798 MW. Consumers accounted for this transaction as a financing because of its continuing involvement with Palisades through security provided to Entergy for the PPA obligation and other arrangements. Palisades has therefore remained on Consumers’ consolidated balance sheets and Consumers has continued to depreciate it. At the time of the sale, Consumers recorded the sales proceeds as a financing obligation, and has subsequently recorded a portion of the payments under the PPA as interest expense and as a reduction of the financing obligation. Total amortization and interest charges under the financing were $17 million for the year ended December 31, 2017, $17 million for the year ended December 31, 2016, and $18 million for the year ended December 31, 2015. At December 31, 2017, the Palisades asset and financing obligation both had a balance of $55 million.
In December 2016, Consumers agreed to pay Entergy $172 million to terminate their PPA in May 2018, contingent upon the MPSC’s approval. In September 2017, the MPSC issued an order authorizing Consumers to recover only $137 million of the $172 million termination payment. As a result, Consumers and Entergy agreed not to terminate the PPA, which is now expected to continue until April 2022 under its original terms.
10:Leases and Palisades Financing
CMS Energy and Consumers lease various assets, including railcars, service vehicles, gas pipeline capacity, and buildings. In addition, CMS Energy and Consumers account for a number of their PPAs as capital and operating leases.
Operating leases for coal-carrying railcars have original lease terms ranging from two to 15 years, expiring without extension provisions over the next six years and with extension provisions over the next nine years. These leases contain fair market value extension and buyout provisions. Capital leases for Consumers’ vehicle fleet operations have a maximum term of 120 months with some having end-of-lease rental adjustment clauses based on the proceeds received from the sale or disposition of the vehicles, and others having fair market value purchase options.
Consumers has capital leases for gas transportation pipelines to the D.E. Karn generating complex and Zeeland. The capital lease for the gas transportation pipeline into the D.E. Karn generating complex has a term of 15 years with a provision to extend the contract from month to month. The remaining term of the contract was four years at December 31, 2017. The capital lease for the gas transportation pipeline to Zeeland was extended in 2017 for five years pursuant to a renewal provision in the contract, with additional renewal provisions of five to ten years. The remaining terms of Consumers’ long-term PPAs accounted for as leases range between one and 15 years. Most of these PPAs contain provisions at the end of the initial contract terms to renew the agreements annually.
Presented in the following table are Consumers’ minimum lease expense and contingent rental expense. For each of the years ended December 31, 2017, 2016, and 2015, all of CMS Energy’s minimum lease expense and contingent rental expense were attributable to Consumers.
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
Consumers |
||||||||||
|
Minimum operating lease expense |
||||||||||
|
PPAs |
$ |
5 |
$ |
6 |
$ |
6 | ||||
|
Other agreements |
15 | 14 | 19 | |||||||
|
Contingent rental expense1 |
96 | 82 | 82 | |||||||
1Contingent rental expense is related to capital and operating lease PPAs and is based on delivery of energy and capacity in excess of minimum lease payments.
Consumers is authorized by the MPSC to record operating lease payments as operating expense and recover the total cost from customers.
Presented in the following table are the minimum annual rental commitments under Consumers’ non‑cancelable leases at December 31, 2017. All of CMS Energy’s non‑cancelable leases at December 31, 2017 were attributable to Consumers.
|
|
||||||||||
|
In Millions |
||||||||||
|
|
Capital Leases |
Palisades |
Operating Leases |
|||||||
|
Consumers |
||||||||||
|
2018 |
$ |
15 |
$ |
16 |
$ |
15 | ||||
|
2019 |
15 | 15 | 9 | |||||||
|
2020 |
12 | 14 | 9 | |||||||
|
2021 |
12 | 14 | 9 | |||||||
|
2022 |
8 | 3 | 4 | |||||||
|
2023 and thereafter |
21 |
- |
7 | |||||||
|
Total minimum lease payments |
$ |
83 |
$ |
62 |
$ |
53 | ||||
|
Less imputed interest |
25 | 7 | ||||||||
|
Present value of net minimum lease payments |
$ |
58 |
$ |
55 | ||||||
|
Less current portion |
9 | 13 | ||||||||
|
Non-current portion |
$ |
49 |
$ |
42 | ||||||
Palisades Financing
In 2007, Consumers sold Palisades to Entergy and entered into a 15‑year PPA to purchase virtually all of the capacity and energy produced by Palisades, up to the annual average capacity of 798 MW. Consumers accounted for this transaction as a financing because of its continuing involvement with Palisades through security provided to Entergy for the PPA obligation and other arrangements. Palisades has therefore remained on Consumers’ consolidated balance sheets and Consumers has continued to depreciate it. At the time of the sale, Consumers recorded the sales proceeds as a financing obligation, and has subsequently recorded a portion of the payments under the PPA as interest expense and as a reduction of the financing obligation. Total amortization and interest charges under the financing were $17 million for the year ended December 31, 2017, $17 million for the year ended December 31, 2016, and $18 million for the year ended December 31, 2015. At December 31, 2017, the Palisades asset and financing obligation both had a balance of $55 million.
In December 2016, Consumers agreed to pay Entergy $172 million to terminate their PPA in May 2018, contingent upon the MPSC’s approval. In September 2017, the MPSC issued an order authorizing Consumers to recover only $137 million of the $172 million termination payment. As a result, Consumers and Entergy agreed not to terminate the PPA, which is now expected to continue until April 2022 under its original terms.
|
|||
11:Asset Retirement Obligations
CMS Energy and Consumers record the fair value of the cost to remove assets at the end of their useful lives, if there is a legal obligation to remove them. If a reasonable estimate of fair value cannot be made in the period in which the ARO is incurred, such as for assets with indeterminate lives, the liability is recognized when a reasonable estimate of fair value can be made. CMS Energy and Consumers have not recorded liabilities for assets that have immaterial cumulative disposal costs, such as substation batteries.
CMS Energy and Consumers calculate the fair value of ARO liabilities using an expected present-value technique that reflects assumptions about costs and inflation, and uses a credit-adjusted risk-free rate to discount the expected cash flows. CMS Energy’s ARO liabilities are primarily at Consumers. As a regulated entity, Consumers defers the effects of any changes in assumptions on the fair values of its ARO liabilities, adjusting the associated regulatory assets or liabilities rather than recognizing such effects in earnings.
Presented below are the categories of assets that CMS Energy and Consumers have legal obligations to remove at the end of their useful lives and for which they have an ARO liability recorded:
|
|
|||
|
Company and ARO Description |
In-Service Date |
Long-Lived Assets |
|
|
CMS Energy, including Consumers |
|||
|
Closure of gas treating plant and gas wells |
Various |
Gas transmission and storage |
|
|
Closure of coal ash disposal areas |
Various |
Generating plants coal ash areas |
|
|
Gas distribution cut, purge, and cap |
Various |
Gas distribution mains and services |
|
|
Asbestos abatement |
1973 |
Electric and gas utility plant |
|
|
Closure of renewable generation assets |
Various |
Wind and solar generation facilities |
|
|
Consumers |
|||
|
Closure of coal ash disposal areas |
Various |
Generating plants coal ash areas |
|
|
Gas distribution cut, purge, and cap |
Various |
Gas distribution mains and services |
|
|
Asbestos abatement |
1973 |
Electric and gas utility plant |
|
|
Closure of renewable generation assets |
Various |
Wind and solar generation facilities |
No assets have been restricted for purposes of settling AROs.
Presented in the following tables are the changes in CMS Energy’s and Consumers’ ARO liabilities:
|
|
|||||||||||||||||||
|
In Millions |
|||||||||||||||||||
|
|
ARO |
ARO |
|||||||||||||||||
|
|
Liability |
Cash flow |
Liability |
||||||||||||||||
|
Company and ARO Description |
12/31/2016 |
Incurred |
Settled |
Accretion |
Revisions |
12/31/2017 |
|||||||||||||
|
CMS Energy, including Consumers |
|||||||||||||||||||
|
Consumers |
$ |
446 |
$ |
5 |
$ |
(45) |
$ |
23 |
$ |
- |
$ |
429 | |||||||
|
Gas treating plant and gas wells |
1 |
- |
- |
- |
- |
1 | |||||||||||||
|
Total CMS Energy |
$ |
447 |
$ |
5 |
$ |
(45) |
$ |
23 |
$ |
- |
$ |
430 | |||||||
|
Consumers |
|||||||||||||||||||
|
Coal ash disposal areas |
$ |
201 |
$ |
- |
$ |
(18) |
$ |
8 |
$ |
- |
$ |
191 | |||||||
|
Gas distribution cut, purge, and cap |
182 | 3 | (11) | 12 |
- |
186 | |||||||||||||
|
Asbestos abatement |
56 |
- |
(16) | 2 |
- |
42 | |||||||||||||
|
Renewable generation assets |
7 | 2 |
- |
1 |
- |
10 | |||||||||||||
|
Total Consumers |
$ |
446 |
$ |
5 |
$ |
(45) |
$ |
23 |
$ |
- |
$ |
429 | |||||||
|
|
|||||||||||||||||||
|
In Millions |
|||||||||||||||||||
|
|
ARO |
ARO |
|||||||||||||||||
|
|
Liability |
Cash flow |
Liability |
||||||||||||||||
|
Company and ARO Description |
12/31/2015 |
Incurred |
Settled |
Accretion |
Revisions |
12/31/2016 |
|||||||||||||
|
CMS Energy, including Consumers |
|||||||||||||||||||
|
Consumers |
$ |
438 |
$ |
3 |
$ |
(18) |
$ |
23 |
$ |
- |
$ |
446 | |||||||
|
Gas treating plant and gas wells |
1 |
- |
- |
- |
- |
1 | |||||||||||||
|
Total CMS Energy |
$ |
439 |
$ |
3 |
$ |
(18) |
$ |
23 |
$ |
- |
$ |
447 | |||||||
|
Consumers |
|||||||||||||||||||
|
Coal ash disposal areas |
$ |
200 |
$ |
- |
$ |
(8) |
$ |
9 |
$ |
- |
$ |
201 | |||||||
|
Gas distribution cut, purge, and cap |
178 | 2 | (9) | 11 |
- |
182 | |||||||||||||
|
Asbestos abatement |
54 |
- |
(1) | 3 |
- |
56 | |||||||||||||
|
Renewable generation assets |
6 | 1 |
- |
- |
- |
7 | |||||||||||||
|
Total Consumers |
$ |
438 |
$ |
3 |
$ |
(18) |
$ |
23 |
$ |
- |
$ |
446 | |||||||
11:Asset Retirement Obligations
CMS Energy and Consumers record the fair value of the cost to remove assets at the end of their useful lives, if there is a legal obligation to remove them. If a reasonable estimate of fair value cannot be made in the period in which the ARO is incurred, such as for assets with indeterminate lives, the liability is recognized when a reasonable estimate of fair value can be made. CMS Energy and Consumers have not recorded liabilities for assets that have immaterial cumulative disposal costs, such as substation batteries.
CMS Energy and Consumers calculate the fair value of ARO liabilities using an expected present-value technique that reflects assumptions about costs and inflation, and uses a credit-adjusted risk-free rate to discount the expected cash flows. CMS Energy’s ARO liabilities are primarily at Consumers. As a regulated entity, Consumers defers the effects of any changes in assumptions on the fair values of its ARO liabilities, adjusting the associated regulatory assets or liabilities rather than recognizing such effects in earnings.
Presented below are the categories of assets that CMS Energy and Consumers have legal obligations to remove at the end of their useful lives and for which they have an ARO liability recorded:
|
|
|||
|
Company and ARO Description |
In-Service Date |
Long-Lived Assets |
|
|
CMS Energy, including Consumers |
|||
|
Closure of gas treating plant and gas wells |
Various |
Gas transmission and storage |
|
|
Closure of coal ash disposal areas |
Various |
Generating plants coal ash areas |
|
|
Gas distribution cut, purge, and cap |
Various |
Gas distribution mains and services |
|
|
Asbestos abatement |
1973 |
Electric and gas utility plant |
|
|
Closure of renewable generation assets |
Various |
Wind and solar generation facilities |
|
|
Consumers |
|||
|
Closure of coal ash disposal areas |
Various |
Generating plants coal ash areas |
|
|
Gas distribution cut, purge, and cap |
Various |
Gas distribution mains and services |
|
|
Asbestos abatement |
1973 |
Electric and gas utility plant |
|
|
Closure of renewable generation assets |
Various |
Wind and solar generation facilities |
No assets have been restricted for purposes of settling AROs.
Presented in the following tables are the changes in CMS Energy’s and Consumers’ ARO liabilities:
|
|
|||||||||||||||||||
|
In Millions |
|||||||||||||||||||
|
|
ARO |
ARO |
|||||||||||||||||
|
|
Liability |
Cash flow |
Liability |
||||||||||||||||
|
Company and ARO Description |
12/31/2016 |
Incurred |
Settled |
Accretion |
Revisions |
12/31/2017 |
|||||||||||||
|
CMS Energy, including Consumers |
|||||||||||||||||||
|
Consumers |
$ |
446 |
$ |
5 |
$ |
(45) |
$ |
23 |
$ |
- |
$ |
429 | |||||||
|
Gas treating plant and gas wells |
1 |
- |
- |
- |
- |
1 | |||||||||||||
|
Total CMS Energy |
$ |
447 |
$ |
5 |
$ |
(45) |
$ |
23 |
$ |
- |
$ |
430 | |||||||
|
Consumers |
|||||||||||||||||||
|
Coal ash disposal areas |
$ |
201 |
$ |
- |
$ |
(18) |
$ |
8 |
$ |
- |
$ |
191 | |||||||
|
Gas distribution cut, purge, and cap |
182 | 3 | (11) | 12 |
- |
186 | |||||||||||||
|
Asbestos abatement |
56 |
- |
(16) | 2 |
- |
42 | |||||||||||||
|
Renewable generation assets |
7 | 2 |
- |
1 |
- |
10 | |||||||||||||
|
Total Consumers |
$ |
446 |
$ |
5 |
$ |
(45) |
$ |
23 |
$ |
- |
$ |
429 | |||||||
|
|
|||||||||||||||||||
|
In Millions |
|||||||||||||||||||
|
|
ARO |
ARO |
|||||||||||||||||
|
|
Liability |
Cash flow |
Liability |
||||||||||||||||
|
Company and ARO Description |
12/31/2015 |
Incurred |
Settled |
Accretion |
Revisions |
12/31/2016 |
|||||||||||||
|
CMS Energy, including Consumers |
|||||||||||||||||||
|
Consumers |
$ |
438 |
$ |
3 |
$ |
(18) |
$ |
23 |
$ |
- |
$ |
446 | |||||||
|
Gas treating plant and gas wells |
1 |
- |
- |
- |
- |
1 | |||||||||||||
|
Total CMS Energy |
$ |
439 |
$ |
3 |
$ |
(18) |
$ |
23 |
$ |
- |
$ |
447 | |||||||
|
Consumers |
|||||||||||||||||||
|
Coal ash disposal areas |
$ |
200 |
$ |
- |
$ |
(8) |
$ |
9 |
$ |
- |
$ |
201 | |||||||
|
Gas distribution cut, purge, and cap |
178 | 2 | (9) | 11 |
- |
182 | |||||||||||||
|
Asbestos abatement |
54 |
- |
(1) | 3 |
- |
56 | |||||||||||||
|
Renewable generation assets |
6 | 1 |
- |
- |
- |
7 | |||||||||||||
|
Total Consumers |
$ |
438 |
$ |
3 |
$ |
(18) |
$ |
23 |
$ |
- |
$ |
446 | |||||||
|
|||
12:Retirement Benefits
Benefit Plans: CMS Energy and Consumers provide pension, OPEB, and other retirement benefits to employees under a number of different plans. These plans include:
|
· |
non‑contributory, qualified DB Pension Plans (closed to new non‑union participants as of July 1, 2003 and closed to new union participants as of September 1, 2005) |
|
· |
a non‑contributory, qualified DCCP for employees hired on or after July 1, 2003 |
|
· |
benefits to certain management employees under a non‑contributory, nonqualified DB SERP (closed to new participants as of March 31, 2006) |
|
· |
a non‑contributory, nonqualified DC SERP for certain management employees hired or promoted on or after April 1, 2006 |
|
· |
a contributory, qualified defined contribution 401(k) plan |
|
· |
health care and life insurance benefits under an OPEB Plan |
DB Pension Plans: Participants in the pension plans include present and former employees of CMS Energy and Consumers, including certain present and former affiliates and subsidiaries. Pension plan trust assets are not distinguishable by company. Effective December 31, 2017, CMS Energy’s and Consumers’ then-existing pension plan was amended to include only retired and former employees already covered; this amended plan is referred to as DB Pension Plan B. Also effective December 31, 2017, active employees were moved to a newly created pension plan, referred to as DB Pension Plan A, whose benefits mirror those provided under DB Pension Plan B. Maintaining separate plans for the two groups will allow CMS Energy and Consumers to employ a more targeted investment strategy and will provide additional opportunities to mitigate risk and volatility.
DCCP: CMS Energy and Consumers provide an employer contribution to the DCCP 401(k) plan for employees hired on or after July 1, 2003. The contribution ranges from five to seven percent of base pay, depending on years of service. Employees are not required to contribute in order to receive the plan’s employer contribution. DCCP expense for CMS Energy, including Consumers, was $23 million for the year ended December 31, 2017, $20 million for the year ended December 31, 2016, and $16 million for the year ended December 31, 2015. DCCP expense for Consumers was $22 million for the year ended December 31, 2017, $19 million for the year ended December 31, 2016, and $16 million for the year ended December 31, 2015.
DB SERP: The DB SERP is a nonqualified plan as defined by the Internal Revenue Code. DB SERP benefits are paid from a rabbi trust established in 1988. The trust assets are not considered plan assets under ASC 715. DB SERP rabbi trust earnings are taxable. Presented in the following table are the fair values of trust assets, ABO, and contributions for CMS Energy’s and Consumers’ DB SERP:
|
|
|||||||
|
In Millions |
|||||||
|
Years Ended December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
Trust assets |
$ |
146 |
$ |
144 | |||
|
ABO |
149 | 143 | |||||
|
Contributions |
7 |
- |
|||||
|
Consumers |
|||||||
|
Trust assets |
$ |
106 |
$ |
104 | |||
|
ABO |
107 | 101 | |||||
|
Contributions |
6 |
- |
|||||
DC SERP: On April 1, 2006, CMS Energy and Consumers implemented a DC SERP and froze further new participation in the DB SERP. The DC SERP provides participants benefits ranging from 5 percent to 15 percent of total compensation. The DC SERP requires a minimum of five years of participation before vesting. CMS Energy’s and Consumers’ contributions to the plan, if any, are placed in a grantor trust. For CMS Energy and Consumers, trust assets were $5 million at December 31, 2017 and $3 million at December 31, 2016. DC SERP assets are included in other non‑current assets on CMS Energy’s and Consumers’ consolidated balance sheets. CMS Energy’s and Consumers’ DC SERP expense was $1 million for the year ended December 31, 2017 and less than $1 million for each of the years ended December 31, 2016 and 2015.
401(k) Plan: The 401(k) plan employer match equals 100 percent of eligible contributions up to the first three percent of an employee’s wages and 50 percent of eligible contributions up to the next two percent of an employee’s wages. The total 401(k) plan cost for CMS Energy, including Consumers, was $26 million for the year ended December 31, 2017, $24 million for the year ended December 31, 2016, and $19 million for the year ended December 31, 2015. The total 401(k) plan cost for Consumers was $25 million for the year ended December 31, 2017, $23 million for the year ended December 31, 2016, and $19 million for the year ended December 31, 2015.
OPEB Plan: Participants in the OPEB Plan include all regular full-time employees covered by the employee health care plan on the day before retirement from either CMS Energy or Consumers at age 55 or older with at least ten full years of applicable continuous service. Regular full-time employees who qualify for disability retirement under the DB Pension Plans or are disabled and covered by the DCCP and who have 15 years of applicable continuous service may also participate in the OPEB Plan. Retiree health care costs were based on the assumption that costs would increase 7.50 percent in 2018 and 7.00 percent in 2017 for those under 65 and would increase 8.00 percent in 2018 and 7.75 percent in 2017 for those over 65. The rate of increase was assumed to decline to 4.75 percent by 2027 and thereafter for all retirees.
In November 2017, CMS Energy and Consumers approved certain amendments to the OPEB Plan. Under these amendments, effective January 1, 2019, certain Medicare-eligible retirees will purchase health care plans from private Medicare exchanges. CMS Energy and Consumers performed a remeasurement of the OPEB Plan as of October 31, 2017, resulting in a significant reduction in the benefit obligation.
The assumptions used in the health care cost-trend rate affect service, interest, and PBO costs. Presented in the following table are the effects of a one-percentage-point change in the health care cost-trend assumption:
|
|
|||||||
|
In Millions |
|||||||
|
|
One Percentage |
One Percentage |
|||||
|
Year Ended December 31, 2017 |
Point Increase |
Point Decrease |
|||||
|
CMS Energy, including Consumers |
|||||||
|
Effect on total service and interest cost component |
$ |
2 |
$ |
(2) | |||
|
Effect on PBO |
32 | (28) | |||||
|
Consumers |
|||||||
|
Effect on total service and interest cost component |
$ |
2 |
$ |
(2) | |||
|
Effect on PBO |
30 | (27) | |||||
Assumptions: Presented in the following table are the weighted-average assumptions used in CMS Energy’s and Consumers’ retirement benefits plans to determine benefit obligations and net periodic benefit cost:
|
|
||||||||||
|
December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Weighted average for benefit obligations1 |
||||||||||
|
Discount rate2 |
||||||||||
|
DB Pension Plan A3 |
3.78 |
% |
||||||||
|
DB Pension Plan B3 |
3.64 | |||||||||
|
DB SERP |
3.65 | 4.16 |
% |
4.43 |
% |
|||||
|
OPEB Plan |
3.74 | 4.49 | 4.70 | |||||||
|
Rate of compensation increase |
||||||||||
|
DB Pension Plan A3 |
3.50 | |||||||||
|
DB SERP |
5.50 | 5.50 | 5.50 | |||||||
|
Weighted average for net periodic benefit cost1 |
||||||||||
|
Service cost discount rate2,4 |
||||||||||
|
DB Pension Plans |
4.53 | 4.79 | 4.10 | |||||||
|
DB SERP |
4.51 | 4.87 | 4.10 | |||||||
|
OPEB Plan |
4.89 | 4.75 | 4.30 | |||||||
|
Interest cost discount rate2,4 |
||||||||||
|
DB Pension Plans |
3.56 | 3.66 | 4.10 | |||||||
|
DB SERP |
3.51 | 3.64 | 4.10 | |||||||
|
OPEB Plan |
3.79 | 3.89 | 4.30 | |||||||
|
Expected long-term rate of return on plan assets5 |
||||||||||
|
DB Pension Plans |
7.25 | 7.25 | 7.50 | |||||||
|
OPEB Plan |
7.25 | 7.25 | 7.25 | |||||||
|
Rate of compensation increase |
||||||||||
|
DB Pension Plans |
3.60 | 3.00 | 3.00 | |||||||
|
DB SERP |
5.50 | 5.50 | 5.50 | |||||||
1The mortality assumption for benefit obligations was based on the RP-2014 mortality table, with projection scales MP-2017 for 2017, MP-2016 for 2016, and MP-2015 for 2015. The mortality assumption for net periodic benefit cost for 2017, 2016, and 2015 was based on the RP-2014 mortality table, with projection scales MP-2016 for 2017, MP-2015 for 2016, and MP-2014 for 2015.
2The discount rate reflects the rate at which benefits could be effectively settled and is equal to the equivalent single rate resulting from a yield-curve analysis. This analysis incorporated the projected benefit payments specific to CMS Energy’s and Consumers’ DB Pension Plans and OPEB Plan and the yields on high-quality corporate bonds rated Aa or better.
3Effective December 31, 2017, CMS Energy’s and Consumers’ existing defined benefit pension plan was amended to include only retired or inactive employees; this amended plan is referred to as DB Pension Plan B. Active employees were moved to a newly created pension plan, referred to as DB Pension Plan A. The discount rate used to measure the existing plan was 4.30 percent at December 31, 2016 and 4.52 percent at December 31, 2015. The weighted-average rate of compensation increase used to measure the existing plan was 3.60 percent at December 31, 2016 and 3.00 percent at December 31, 2015.
4In January 2016, CMS Energy and Consumers changed the method they use to determine the discount rate used to calculate the service cost and interest cost components of net periodic benefit costs for the DB Pension and OPEB Plans. Historically, the discount rate used for this purpose represented a single weighted-average rate derived from the yield curve used to determine the benefit obligation. CMS Energy and Consumers have elected to use instead a full-yield-curve approach in the estimation of service cost and interest cost; this approach is more accurate in that it applies individual spot rates along the yield curve to future projected benefit payments based on the time of payment.
5CMS Energy and Consumers determined the long-term rate of return using historical market returns, the present and expected future economic environment, the capital market principles of risk and return, and the expert opinions of individuals and firms with financial market knowledge. CMS Energy and Consumers considered the asset allocation of the portfolio in forecasting the future expected total return of the portfolio. The goal was to determine a long-term rate of return that could be incorporated into the planning of future cash flow requirements in conjunction with the change in the liability. Annually, CMS Energy and Consumers review for reasonableness and appropriateness the forecasted returns for various classes of assets used to construct an expected return model. CMS Energy’s and Consumers’ expected long-term rate of return on the assets of the DB Pension Plans was 7.25 percent in 2017. The actual return (loss) on the assets of the DB Pension Plans was 18.0 percent in 2017, 8.0 percent in 2016, and (2.0) percent in 2015.
Costs: 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 Plans and DB SERP |
OPEB Plan |
||||||||||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | 2017 | 2016 | 2015 | ||||||||||||||
|
CMS Energy, including Consumers |
||||||||||||||||||||
|
Net periodic cost (credit) |
||||||||||||||||||||
|
Service cost |
$ |
45 |
$ |
42 |
$ |
50 |
$ |
19 |
$ |
18 |
$ |
25 | ||||||||
|
Interest cost |
93 | 90 | 108 | 51 | 46 | 58 | ||||||||||||||
|
Expected return on plan assets |
(153) | (147) | (138) | (90) | (85) | (91) | ||||||||||||||
|
Amortization of: |
||||||||||||||||||||
|
Net loss |
82 | 71 | 97 | 29 | 21 | 21 | ||||||||||||||
|
Prior service cost (credit) |
5 | 4 | 1 | (40) | (41) | (41) | ||||||||||||||
|
Net periodic cost (credit) |
$ |
72 |
$ |
60 |
$ |
118 |
$ |
(31) |
$ |
(41) |
$ |
(28) | ||||||||
|
Consumers |
||||||||||||||||||||
|
Net periodic cost (credit) |
||||||||||||||||||||
|
Service cost |
$ |
44 |
$ |
41 |
$ |
49 |
$ |
19 |
$ |
17 |
$ |
25 | ||||||||
|
Interest cost |
90 | 87 | 103 | 49 | 45 | 56 | ||||||||||||||
|
Expected return on plan assets |
(149) | (143) | (134) | (84) | (80) | (86) | ||||||||||||||
|
Amortization of: |
||||||||||||||||||||
|
Net loss |
79 | 68 | 93 | 29 | 22 | 22 | ||||||||||||||
|
Prior service cost (credit) |
4 | 4 | 1 | (39) | (40) | (40) | ||||||||||||||
|
Net periodic cost (credit) |
$ |
68 |
$ |
57 |
$ |
112 |
$ |
(26) |
$ |
(36) |
$ |
(23) | ||||||||
Presented in the following table are the estimated net loss and prior service cost (credit) that will be amortized into net periodic benefit cost in 2018 from or to the associated regulatory asset (liability) and AOCI:
|
|
|||||||
|
In Millions |
|||||||
|
|
DB Pension Plans |
OPEB Plan |
|||||
|
CMS Energy, including Consumers |
|||||||
|
Regulatory asset (liability) |
$ |
75 |
$ |
(49) | |||
|
AOCI |
2 | (2) | |||||
|
Consumers |
|||||||
|
Regulatory asset (liability) |
$ |
75 |
$ |
(49) | |||
CMS Energy and Consumers amortize net gains and losses in excess of ten percent of the greater of the PBO or the MRV over the average remaining service period for DB Pension Plan A and the OPEB Plan and, beginning in 2018, over average remaining life expectancy of participants for DB Pension Plan B. The estimated period of amortization of gains and losses for CMS Energy and Consumers was nine years for DB Pension Plan A and 20 years for DB Pension Plan B for the year ended December 31, 2017. The estimated period of amortization of gains and losses for CMS Energy and Consumers was ten years for the DB Pension Plans for the years ended December 31, 2016 and 2015. For the OPEB Plan, the estimated amortization period was 11 years for the years ended December 31, 2017 and 2016 and 13 years for the year ended December 31, 2015.
Prior service cost (credit) amortization is established in the year in which the prior service cost (credit) first occurred, and is based on the same amortization period for all future years until the prior service cost (credit) is fully amortized. CMS Energy and Consumers had new prior service credits for OPEB in 2017 and 2015 and a new prior service cost for the DB Pension Plans in 2015. The estimated period of amortization of these new prior service costs (credits) for CMS Energy and Consumers is ten years.
CMS Energy and Consumers determine the MRV for the assets of the DB Pension Plans as the fair value of plan assets on the measurement date, adjusted by the gains or losses that will not be admitted into the MRV until future years. CMS Energy and Consumers reflect each year’s gain or loss in the MRV in equal amounts over a five-year period beginning on the date the original amount was determined. CMS Energy and Consumers determine the MRV for OPEB Plan assets as the fair value of assets on the measurement date.
Reconciliations: Presented in the following table are reconciliations of the funded status of CMS Energy’s and Consumers’ retirement benefits plans with their retirement benefits plans’ liabilities:
|
|
|||||||||||||||||||||
|
In Millions |
|||||||||||||||||||||
|
|
DB Pension Plans |
DB SERP |
OPEB Plan |
||||||||||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||
|
CMS Energy, including Consumers |
|||||||||||||||||||||
|
Benefit obligation at beginning of |
$ |
2,562 |
$ |
2,403 |
$ |
151 |
$ |
150 |
$ |
1,408 |
$ |
1,227 | |||||||||
|
Service cost |
45 | 42 |
- |
- |
19 | 18 | |||||||||||||||
|
Interest cost |
88 | 85 | 5 | 5 | 51 | 46 | |||||||||||||||
|
Plan amendments |
- |
- |
- |
- |
(309) |
- |
|||||||||||||||
|
Actuarial (gain) loss |
241 |
1 |
196 |
1 |
7 | 4 | (24) |
1 |
171 |
1 |
|||||||||||
|
Benefits paid |
(156) | (164) | (9) | (8) | (48) | (54) | |||||||||||||||
|
Benefit obligation at end of period |
$ |
2,780 |
$ |
2,562 |
$ |
154 |
$ |
151 |
$ |
1,097 |
$ |
1,408 | |||||||||
|
Plan assets at fair value at |
$ |
2,101 |
$ |
2,013 |
$ |
- |
$ |
- |
$ |
1,264 |
$ |
1,208 | |||||||||
|
Actual return on plan assets |
360 | 152 |
- |
- |
203 | 109 | |||||||||||||||
|
Company contribution |
- |
100 | 9 | 8 |
- |
- |
|||||||||||||||
|
Actual benefits paid |
(156) | (164) | (9) | (8) | (47) | (53) | |||||||||||||||
|
Plan assets at fair value at end |
$ |
2,305 |
$ |
2,101 |
$ |
- |
$ |
- |
$ |
1,420 |
$ |
1,264 | |||||||||
|
Funded status |
$ |
(475) |
2 |
$ |
(461) |
2 |
$ |
(154) |
$ |
(151) |
$ |
323 |
$ |
(144) | |||||||
|
Consumers |
|||||||||||||||||||||
|
Benefit obligation at beginning of |
$ |
109 |
$ |
106 |
$ |
1,365 |
$ |
1,188 | |||||||||||||
|
Service cost |
- |
- |
19 | 17 | |||||||||||||||||
|
Interest cost |
4 | 4 | 49 | 45 | |||||||||||||||||
|
Plan amendments |
- |
- |
(303) |
- |
|||||||||||||||||
|
Actuarial (gain) loss |
5 | 4 | (31) |
1 |
167 |
1 |
|||||||||||||||
|
Benefits paid |
(6) | (5) | (46) | (52) | |||||||||||||||||
|
Benefit obligation at end of period |
$ |
112 |
$ |
109 |
$ |
1,053 |
$ |
1,365 | |||||||||||||
|
Plan assets at fair value at |
$ |
- |
$ |
- |
$ |
1,184 |
$ |
1,133 | |||||||||||||
|
Actual return on plan assets |
- |
- |
190 | 103 | |||||||||||||||||
|
Company contribution |
6 | 5 |
- |
- |
|||||||||||||||||
|
Actual benefits paid |
(6) | (5) | (45) | (52) | |||||||||||||||||
|
Plan assets at fair value at end |
$ |
- |
$ |
- |
$ |
1,329 |
$ |
1,184 | |||||||||||||
|
Funded status |
$ |
(112) |
$ |
(109) |
$ |
276 |
$ |
(181) | |||||||||||||
1The actuarial loss for 2017 for the DB Pension Plans was primarily the result of lowering the discount rates. The actuarial gain for 2017 for the OPEB Plan was primarily the result of better claim experience in calculating the plan’s funded status. The actuarial loss for 2016 was primarily the result of claims, experience, and lowering the discount rates used in calculating the plans’ funded status.
2At December 31, 2017, $455 million of the total funded status of the DB Pension Plans was attributable to Consumers, based on an allocation of expenses. At December 31, 2016, $441 million of the total funded status of the DB Pension Plans was attributable to Consumers, based on an allocation of expenses.
Presented in the following table is the classification of CMS Energy’s and Consumers’ retirement benefit plans’ assets and liabilities:
|
|
|||||||
|
In Millions |
|||||||
|
December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
Non-current assets |
|||||||
|
DB Pension Plans |
$ |
143 |
$ |
- |
|||
|
OPEB Plan |
323 |
- |
|||||
|
Current liabilities |
|||||||
|
DB SERP |
9 | 8 | |||||
|
Non-current liabilities |
|||||||
|
DB Pension Plans |
618 | 461 | |||||
|
DB SERP |
145 | 143 | |||||
|
OPEB Plan |
- |
144 | |||||
|
Consumers |
|||||||
|
Non-current assets |
|||||||
|
DB Pension Plans |
$ |
147 |
$ |
- |
|||
|
OPEB Plan |
276 |
- |
|||||
|
Current liabilities |
|||||||
|
DB SERP |
7 | 5 | |||||
|
Non-current liabilities |
|||||||
|
DB Pension Plans |
602 | 441 | |||||
|
DB SERP |
105 | 104 | |||||
|
OPEB Plan |
- |
181 | |||||
The ABO for the DB Pension Plans was $2.4 billion at December 31, 2017 and $2.3 billion at December 31, 2016. Presented in the following table is information related to the defined benefit pension plan for which the PBO and the ABO exceed plan assets:
|
|
|||||||
|
In Millions |
|||||||
|
December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
PBO |
$ |
1,511 |
$ |
2,562 | |||
|
ABO |
1,164 | 2,250 | |||||
|
Fair value of plan assets |
893 | 2,101 | |||||
Items Not Yet Recognized as a Component of Net Periodic Benefit Cost: Presented in the following table are the amounts recognized in regulatory assets, regulatory liabilities, and AOCI that have not been recognized as components of net periodic benefit cost. For additional details on regulatory assets and liabilities, see Note 3, Regulatory Matters.
|
|
||||||||||||||
|
In Millions |
||||||||||||||
|
|
DB Pension Plans |
OPEB Plan |
||||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2017 | 2016 | ||||||||||
|
CMS Energy, including Consumers |
||||||||||||||
|
Regulatory assets (liabilities) |
||||||||||||||
|
Net loss |
$ |
1,017 |
$ |
1,062 |
$ |
316 |
$ |
483 | ||||||
|
Prior service cost (credit) |
11 | 15 | (451) | (187) | ||||||||||
|
Regulatory assets (liabilities) |
$ |
1,028 |
$ |
1,077 |
$ |
(135) |
$ |
296 | ||||||
|
AOCI |
||||||||||||||
|
Net loss (gain) |
97 | 93 | (6) | (8) | ||||||||||
|
Prior service cost (credit) |
1 | 1 | (12) | (6) | ||||||||||
|
Total amounts recognized in regulatory assets |
$ |
1,126 |
$ |
1,171 |
$ |
(153) |
$ |
282 | ||||||
|
Consumers |
||||||||||||||
|
Regulatory assets (liabilities) |
||||||||||||||
|
Net loss |
$ |
1,017 |
$ |
1,062 |
$ |
316 |
$ |
483 | ||||||
|
Prior service cost (credit) |
11 | 15 | (451) | (187) | ||||||||||
|
Regulatory assets (liabilities) |
$ |
1,028 |
$ |
1,077 |
$ |
(135) |
$ |
296 | ||||||
|
AOCI |
||||||||||||||
|
Net loss |
36 | 33 |
- |
- |
||||||||||
|
Total amounts recognized in regulatory assets |
$ |
1,064 |
$ |
1,110 |
$ |
(135) |
$ |
296 | ||||||
Plan Assets: Presented in the following tables are the fair values of the assets of CMS Energy’s DB Pension Plans and OPEB Plan, by asset category and by level within the fair value hierarchy. For additional details regarding the fair value hierarchy, see Note 6, Fair Value Measurements.
|
|
||||||||||||||||||||
|
In Millions |
||||||||||||||||||||
|
|
DB Pension Plans |
|||||||||||||||||||
|
|
December 31, 2017 |
December 31, 2016 |
||||||||||||||||||
|
|
Total |
Level 1 |
Level 2 |
Total |
Level 1 |
Level 2 |
||||||||||||||
|
CMS Energy, including Consumers |
||||||||||||||||||||
|
Cash and short-term |
$ |
21 |
$ |
21 |
$ |
- |
$ |
110 |
$ |
110 |
$ |
- |
||||||||
|
U.S. government and |
4 |
- |
4 | 1 |
- |
1 | ||||||||||||||
|
Corporate debt |
336 |
- |
336 | 266 |
- |
266 | ||||||||||||||
|
State and municipal bonds |
9 |
- |
9 | 9 |
- |
9 | ||||||||||||||
|
Foreign corporate bonds |
31 |
- |
31 | 25 |
- |
25 | ||||||||||||||
|
Mutual funds |
662 | 662 |
- |
571 | 571 |
- |
||||||||||||||
|
|
$ |
1,063 |
$ |
683 |
$ |
380 |
$ |
982 |
$ |
681 |
$ |
301 | ||||||||
|
Pooled funds |
1,242 | 1,119 | ||||||||||||||||||
|
Total |
$ |
2,305 |
$ |
2,101 | ||||||||||||||||
|
|
||||||||||||||||||||
|
In Millions |
||||||||||||||||||||
|
|
OPEB Plan |
|||||||||||||||||||
|
|
December 31, 2017 |
December 31, 2016 |
||||||||||||||||||
|
|
Total |
Level 1 |
Level 2 |
Total |
Level 1 |
Level 2 |
||||||||||||||
|
CMS Energy, including Consumers |
||||||||||||||||||||
|
Cash and short-term |
$ |
16 |
$ |
16 |
$ |
- |
$ |
39 |
$ |
39 |
$ |
- |
||||||||
|
U.S. government and |
1 |
- |
1 |
- |
- |
- |
||||||||||||||
|
Corporate debt |
50 |
- |
50 | 38 |
- |
38 | ||||||||||||||
|
State and municipal bonds |
1 |
- |
1 | 1 |
- |
1 | ||||||||||||||
|
Foreign corporate bonds |
4 |
- |
4 | 4 |
- |
4 | ||||||||||||||
|
Common stocks |
40 | 40 |
- |
44 | 44 |
- |
||||||||||||||
|
Mutual funds |
647 | 647 |
- |
563 | 563 |
- |
||||||||||||||
|
|
$ |
759 |
$ |
703 |
$ |
56 |
$ |
689 |
$ |
646 |
$ |
43 | ||||||||
|
Pooled funds |
661 | 575 | ||||||||||||||||||
|
Total |
$ |
1,420 |
$ |
1,264 | ||||||||||||||||
Cash and Short-Term Investments: Cash and short-term investments consist of money market funds with daily liquidity.
U.S. Government and Agencies Securities: U.S. government and agencies securities consist of U.S. Treasury notes and other debt securities backed by the U.S. government and related agencies. These securities are valued based on quoted market prices.
Corporate Debt: Corporate debt investments consist of investment grade bonds of U.S. issuers from diverse industries. These securities are valued based on quoted market prices, when available, or yields available on comparable securities of issuers with similar credit ratings.
State and Municipal Bonds: State and municipal bonds are valued using a matrix-pricing model that incorporates Level 2 market-based information. The fair value of the bonds is derived from various observable inputs, including benchmark yields, reported securities trades, broker/dealer quotes, bond ratings, and general information on market movements for investment grade state and municipal securities normally considered by market participants when pricing such debt securities.
Foreign Corporate Bonds: Foreign corporate debt securities are valued based on quoted market prices, when available, or on yields available on comparable securities of issuers with similar credit ratings.
Common Stocks: Common stocks in the OPEB Plan consist of equity securities with low transaction costs that are actively managed and tracked by the S&P 500 Index. These securities are valued at their quoted closing prices.
Mutual Funds: Mutual funds represent shares in registered investment companies that are priced based on the daily quoted net asset values that are publicly available and are the basis for transactions to buy or sell shares in the funds.
Pooled Funds: Pooled funds include both common and collective trust funds as well as special funds that contain only employee benefit plan assets from two or more unrelated benefit plans. These funds primarily consist of U.S. and foreign equity securities, but also include U.S. and foreign fixed-income securities and alternative investments. Since these investments are valued at their net asset value as a practical expedient, they are not classified in the fair value hierarchy.
Asset Allocations: Presented in the following table are the investment components of the assets of CMS Energy’s DB Pension Plans and OPEB Plan as of December 31, 2017:
|
|
|||||||
|
|
DB Pension Plans |
OPEB Plan |
|||||
|
Equity securities |
55 |
% |
52 |
% |
|||
|
Fixed-income securities |
30 | 25 | |||||
|
Alternative-strategy investments |
15 | 23 | |||||
|
|
100 |
% |
100 |
% |
|||
|
1 |
|
CMS Energy’s target asset allocation for the assets of the DB Pension Plans is 53 percent equity, 41 percent fixed income, and 6 percent alternative-strategy investments. This target asset allocation is expected to continue to maximize the long-term return on plan assets, while maintaining a prudent level of risk. The level of acceptable risk is a function of the liabilities of the plan. Equity investments are diversified mostly across the S&P 500 Index, with lesser allocations to the S&P MidCap and SmallCap Indexes and Foreign Equity Funds. Fixed-income investments are diversified across investment grade instruments of government and corporate issuers as well as high-yield and global bond funds. Alternative strategies are diversified across absolute return investment approaches and global tactical asset allocation. CMS Energy uses annual liability measurements, quarterly portfolio reviews, and periodic asset/liability studies to evaluate the need for adjustments to the portfolio allocation.
CMS Energy established union and non‑union VEBA trusts to fund future retiree health and life insurance benefits. These trusts are funded through the ratemaking process for Consumers and through direct contributions from the non‑utility subsidiaries. CMS Energy’s target asset allocation for the health trusts is 50 percent equity, 30 percent fixed income, and 20 percent alternative-strategy investments. CMS Energy’s target asset allocation for the life trusts is 42 percent equity, 28 percent fixed income, and 30 percent alternative-strategy investments. These target allocations are expected to continue to maximize the long-term return on plan assets, while maintaining a prudent level of risk. The level of acceptable risk is a function of the liabilities of the plans. Equity investments are diversified mostly across the S&P 500 Index, with lesser allocations to the S&P SmallCap Index and Foreign Equity Funds. Fixed-income investments are diversified across investment grade instruments of government and corporate issuers. Alternative strategies are diversified across absolute return investment approaches and global tactical asset allocation. CMS Energy uses annual liability measurements, quarterly portfolio reviews, and periodic asset/liability studies to evaluate the need for adjustments to the portfolio allocation.
Contributions: Presented in the following table are the contributions to CMS Energy’s and Consumers’ OPEB Plan and DB Pension Plans:
|
|
|||||||
|
In Millions |
|||||||
|
Years Ended December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
OPEB Plan |
$ |
- |
$ |
- |
|||
|
DB Pension Plans |
- |
100 | |||||
|
Consumers |
|||||||
|
OPEB Plan |
$ |
- |
$ |
- |
|||
|
DB Pension Plans |
- |
93 | |||||
Contributions comprise required amounts and discretionary contributions. Neither CMS Energy nor Consumers plans to contribute to the OPEB Plan or DB Pension Plans in 2018. Actual future contributions will depend on future investment performance, discount rates, and various factors related to the participants of the DB Pension Plans and OPEB Plan. CMS Energy and Consumers will, at a minimum, contribute to the plans as needed to comply with federal funding requirements.
Benefit Payments: Presented in the following table are the expected benefit payments for each of the next five years and the five-year period thereafter:
|
|
||||||||||
|
In Millions |
||||||||||
|
|
DB Pension Plans |
DB SERP |
OPEB Plan |
|||||||
|
CMS Energy, including Consumers |
||||||||||
|
2018 |
$ |
157 |
$ |
10 |
$ |
56 | ||||
|
2019 |
163 | 10 | 58 | |||||||
|
2020 |
168 | 10 | 60 | |||||||
|
2021 |
169 | 10 | 62 | |||||||
|
2022 |
170 | 10 | 62 | |||||||
|
2023-2027 |
457 | 47 | 312 | |||||||
|
Consumers |
||||||||||
|
2018 |
$ |
153 |
$ |
7 |
$ |
54 | ||||
|
2019 |
159 | 7 | 55 | |||||||
|
2020 |
163 | 7 | 57 | |||||||
|
2021 |
164 | 7 | 59 | |||||||
|
2022 |
166 | 7 | 60 | |||||||
|
2023-2027 |
457 | 32 | 298 | |||||||
Collective Bargaining Agreements: At December 31, 2017, unions represented 38 percent of CMS Energy’s employees and 40 percent of Consumers’ employees. The UWUA represents Consumers’ operating, maintenance, construction, and call center employees. The USW represents Zeeland employees. Union contracts expire in 2020.
12:Retirement Benefits
Benefit Plans: CMS Energy and Consumers provide pension, OPEB, and other retirement benefits to employees under a number of different plans. These plans include:
|
· |
non‑contributory, qualified DB Pension Plans (closed to new non‑union participants as of July 1, 2003 and closed to new union participants as of September 1, 2005) |
|
· |
a non‑contributory, qualified DCCP for employees hired on or after July 1, 2003 |
|
· |
benefits to certain management employees under a non‑contributory, nonqualified DB SERP (closed to new participants as of March 31, 2006) |
|
· |
a non‑contributory, nonqualified DC SERP for certain management employees hired or promoted on or after April 1, 2006 |
|
· |
a contributory, qualified defined contribution 401(k) plan |
|
· |
health care and life insurance benefits under an OPEB Plan |
DB Pension Plans: Participants in the pension plans include present and former employees of CMS Energy and Consumers, including certain present and former affiliates and subsidiaries. Pension plan trust assets are not distinguishable by company. Effective December 31, 2017, CMS Energy’s and Consumers’ then-existing pension plan was amended to include only retired and former employees already covered; this amended plan is referred to as DB Pension Plan B. Also effective December 31, 2017, active employees were moved to a newly created pension plan, referred to as DB Pension Plan A, whose benefits mirror those provided under DB Pension Plan B. Maintaining separate plans for the two groups will allow CMS Energy and Consumers to employ a more targeted investment strategy and will provide additional opportunities to mitigate risk and volatility.
DCCP: CMS Energy and Consumers provide an employer contribution to the DCCP 401(k) plan for employees hired on or after July 1, 2003. The contribution ranges from five to seven percent of base pay, depending on years of service. Employees are not required to contribute in order to receive the plan’s employer contribution. DCCP expense for CMS Energy, including Consumers, was $23 million for the year ended December 31, 2017, $20 million for the year ended December 31, 2016, and $16 million for the year ended December 31, 2015. DCCP expense for Consumers was $22 million for the year ended December 31, 2017, $19 million for the year ended December 31, 2016, and $16 million for the year ended December 31, 2015.
DB SERP: The DB SERP is a nonqualified plan as defined by the Internal Revenue Code. DB SERP benefits are paid from a rabbi trust established in 1988. The trust assets are not considered plan assets under ASC 715. DB SERP rabbi trust earnings are taxable. Presented in the following table are the fair values of trust assets, ABO, and contributions for CMS Energy’s and Consumers’ DB SERP:
|
|
|||||||
|
In Millions |
|||||||
|
Years Ended December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
Trust assets |
$ |
146 |
$ |
144 | |||
|
ABO |
149 | 143 | |||||
|
Contributions |
7 |
- |
|||||
|
Consumers |
|||||||
|
Trust assets |
$ |
106 |
$ |
104 | |||
|
ABO |
107 | 101 | |||||
|
Contributions |
6 |
- |
|||||
DC SERP: On April 1, 2006, CMS Energy and Consumers implemented a DC SERP and froze further new participation in the DB SERP. The DC SERP provides participants benefits ranging from 5 percent to 15 percent of total compensation. The DC SERP requires a minimum of five years of participation before vesting. CMS Energy’s and Consumers’ contributions to the plan, if any, are placed in a grantor trust. For CMS Energy and Consumers, trust assets were $5 million at December 31, 2017 and $3 million at December 31, 2016. DC SERP assets are included in other non‑current assets on CMS Energy’s and Consumers’ consolidated balance sheets. CMS Energy’s and Consumers’ DC SERP expense was $1 million for the year ended December 31, 2017 and less than $1 million for each of the years ended December 31, 2016 and 2015.
401(k) Plan: The 401(k) plan employer match equals 100 percent of eligible contributions up to the first three percent of an employee’s wages and 50 percent of eligible contributions up to the next two percent of an employee’s wages. The total 401(k) plan cost for CMS Energy, including Consumers, was $26 million for the year ended December 31, 2017, $24 million for the year ended December 31, 2016, and $19 million for the year ended December 31, 2015. The total 401(k) plan cost for Consumers was $25 million for the year ended December 31, 2017, $23 million for the year ended December 31, 2016, and $19 million for the year ended December 31, 2015.
OPEB Plan: Participants in the OPEB Plan include all regular full-time employees covered by the employee health care plan on the day before retirement from either CMS Energy or Consumers at age 55 or older with at least ten full years of applicable continuous service. Regular full-time employees who qualify for disability retirement under the DB Pension Plans or are disabled and covered by the DCCP and who have 15 years of applicable continuous service may also participate in the OPEB Plan. Retiree health care costs were based on the assumption that costs would increase 7.50 percent in 2018 and 7.00 percent in 2017 for those under 65 and would increase 8.00 percent in 2018 and 7.75 percent in 2017 for those over 65. The rate of increase was assumed to decline to 4.75 percent by 2027 and thereafter for all retirees.
In November 2017, CMS Energy and Consumers approved certain amendments to the OPEB Plan. Under these amendments, effective January 1, 2019, certain Medicare-eligible retirees will purchase health care plans from private Medicare exchanges. CMS Energy and Consumers performed a remeasurement of the OPEB Plan as of October 31, 2017, resulting in a significant reduction in the benefit obligation.
The assumptions used in the health care cost-trend rate affect service, interest, and PBO costs. Presented in the following table are the effects of a one-percentage-point change in the health care cost-trend assumption:
|
|
|||||||
|
In Millions |
|||||||
|
|
One Percentage |
One Percentage |
|||||
|
Year Ended December 31, 2017 |
Point Increase |
Point Decrease |
|||||
|
CMS Energy, including Consumers |
|||||||
|
Effect on total service and interest cost component |
$ |
2 |
$ |
(2) | |||
|
Effect on PBO |
32 | (28) | |||||
|
Consumers |
|||||||
|
Effect on total service and interest cost component |
$ |
2 |
$ |
(2) | |||
|
Effect on PBO |
30 | (27) | |||||
Assumptions: Presented in the following table are the weighted-average assumptions used in CMS Energy’s and Consumers’ retirement benefits plans to determine benefit obligations and net periodic benefit cost:
|
|
||||||||||
|
December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Weighted average for benefit obligations1 |
||||||||||
|
Discount rate2 |
||||||||||
|
DB Pension Plan A3 |
3.78 |
% |
||||||||
|
DB Pension Plan B3 |
3.64 | |||||||||
|
DB SERP |
3.65 | 4.16 |
% |
4.43 |
% |
|||||
|
OPEB Plan |
3.74 | 4.49 | 4.70 | |||||||
|
Rate of compensation increase |
||||||||||
|
DB Pension Plan A3 |
3.50 | |||||||||
|
DB SERP |
5.50 | 5.50 | 5.50 | |||||||
|
Weighted average for net periodic benefit cost1 |
||||||||||
|
Service cost discount rate2,4 |
||||||||||
|
DB Pension Plans |
4.53 | 4.79 | 4.10 | |||||||
|
DB SERP |
4.51 | 4.87 | 4.10 | |||||||
|
OPEB Plan |
4.89 | 4.75 | 4.30 | |||||||
|
Interest cost discount rate2,4 |
||||||||||
|
DB Pension Plans |
3.56 | 3.66 | 4.10 | |||||||
|
DB SERP |
3.51 | 3.64 | 4.10 | |||||||
|
OPEB Plan |
3.79 | 3.89 | 4.30 | |||||||
|
Expected long-term rate of return on plan assets5 |
||||||||||
|
DB Pension Plans |
7.25 | 7.25 | 7.50 | |||||||
|
OPEB Plan |
7.25 | 7.25 | 7.25 | |||||||
|
Rate of compensation increase |
||||||||||
|
DB Pension Plans |
3.60 | 3.00 | 3.00 | |||||||
|
DB SERP |
5.50 | 5.50 | 5.50 | |||||||
1The mortality assumption for benefit obligations was based on the RP-2014 mortality table, with projection scales MP-2017 for 2017, MP-2016 for 2016, and MP-2015 for 2015. The mortality assumption for net periodic benefit cost for 2017, 2016, and 2015 was based on the RP-2014 mortality table, with projection scales MP-2016 for 2017, MP-2015 for 2016, and MP-2014 for 2015.
2The discount rate reflects the rate at which benefits could be effectively settled and is equal to the equivalent single rate resulting from a yield-curve analysis. This analysis incorporated the projected benefit payments specific to CMS Energy’s and Consumers’ DB Pension Plans and OPEB Plan and the yields on high-quality corporate bonds rated Aa or better.
3Effective December 31, 2017, CMS Energy’s and Consumers’ existing defined benefit pension plan was amended to include only retired or inactive employees; this amended plan is referred to as DB Pension Plan B. Active employees were moved to a newly created pension plan, referred to as DB Pension Plan A. The discount rate used to measure the existing plan was 4.30 percent at December 31, 2016 and 4.52 percent at December 31, 2015. The weighted-average rate of compensation increase used to measure the existing plan was 3.60 percent at December 31, 2016 and 3.00 percent at December 31, 2015.
4In January 2016, CMS Energy and Consumers changed the method they use to determine the discount rate used to calculate the service cost and interest cost components of net periodic benefit costs for the DB Pension and OPEB Plans. Historically, the discount rate used for this purpose represented a single weighted-average rate derived from the yield curve used to determine the benefit obligation. CMS Energy and Consumers have elected to use instead a full-yield-curve approach in the estimation of service cost and interest cost; this approach is more accurate in that it applies individual spot rates along the yield curve to future projected benefit payments based on the time of payment.
5CMS Energy and Consumers determined the long-term rate of return using historical market returns, the present and expected future economic environment, the capital market principles of risk and return, and the expert opinions of individuals and firms with financial market knowledge. CMS Energy and Consumers considered the asset allocation of the portfolio in forecasting the future expected total return of the portfolio. The goal was to determine a long-term rate of return that could be incorporated into the planning of future cash flow requirements in conjunction with the change in the liability. Annually, CMS Energy and Consumers review for reasonableness and appropriateness the forecasted returns for various classes of assets used to construct an expected return model. CMS Energy’s and Consumers’ expected long-term rate of return on the assets of the DB Pension Plans was 7.25 percent in 2017. The actual return (loss) on the assets of the DB Pension Plans was 18.0 percent in 2017, 8.0 percent in 2016, and (2.0) percent in 2015.
Costs: 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 Plans and DB SERP |
OPEB Plan |
||||||||||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | 2017 | 2016 | 2015 | ||||||||||||||
|
CMS Energy, including Consumers |
||||||||||||||||||||
|
Net periodic cost (credit) |
||||||||||||||||||||
|
Service cost |
$ |
45 |
$ |
42 |
$ |
50 |
$ |
19 |
$ |
18 |
$ |
25 | ||||||||
|
Interest cost |
93 | 90 | 108 | 51 | 46 | 58 | ||||||||||||||
|
Expected return on plan assets |
(153) | (147) | (138) | (90) | (85) | (91) | ||||||||||||||
|
Amortization of: |
||||||||||||||||||||
|
Net loss |
82 | 71 | 97 | 29 | 21 | 21 | ||||||||||||||
|
Prior service cost (credit) |
5 | 4 | 1 | (40) | (41) | (41) | ||||||||||||||
|
Net periodic cost (credit) |
$ |
72 |
$ |
60 |
$ |
118 |
$ |
(31) |
$ |
(41) |
$ |
(28) | ||||||||
|
Consumers |
||||||||||||||||||||
|
Net periodic cost (credit) |
||||||||||||||||||||
|
Service cost |
$ |
44 |
$ |
41 |
$ |
49 |
$ |
19 |
$ |
17 |
$ |
25 | ||||||||
|
Interest cost |
90 | 87 | 103 | 49 | 45 | 56 | ||||||||||||||
|
Expected return on plan assets |
(149) | (143) | (134) | (84) | (80) | (86) | ||||||||||||||
|
Amortization of: |
||||||||||||||||||||
|
Net loss |
79 | 68 | 93 | 29 | 22 | 22 | ||||||||||||||
|
Prior service cost (credit) |
4 | 4 | 1 | (39) | (40) | (40) | ||||||||||||||
|
Net periodic cost (credit) |
$ |
68 |
$ |
57 |
$ |
112 |
$ |
(26) |
$ |
(36) |
$ |
(23) | ||||||||
Presented in the following table are the estimated net loss and prior service cost (credit) that will be amortized into net periodic benefit cost in 2018 from or to the associated regulatory asset (liability) and AOCI:
|
|
|||||||
|
In Millions |
|||||||
|
|
DB Pension Plans |
OPEB Plan |
|||||
|
CMS Energy, including Consumers |
|||||||
|
Regulatory asset (liability) |
$ |
75 |
$ |
(49) | |||
|
AOCI |
2 | (2) | |||||
|
Consumers |
|||||||
|
Regulatory asset (liability) |
$ |
75 |
$ |
(49) | |||
CMS Energy and Consumers amortize net gains and losses in excess of ten percent of the greater of the PBO or the MRV over the average remaining service period for DB Pension Plan A and the OPEB Plan and, beginning in 2018, over average remaining life expectancy of participants for DB Pension Plan B. The estimated period of amortization of gains and losses for CMS Energy and Consumers was nine years for DB Pension Plan A and 20 years for DB Pension Plan B for the year ended December 31, 2017. The estimated period of amortization of gains and losses for CMS Energy and Consumers was ten years for the DB Pension Plans for the years ended December 31, 2016 and 2015. For the OPEB Plan, the estimated amortization period was 11 years for the years ended December 31, 2017 and 2016 and 13 years for the year ended December 31, 2015.
Prior service cost (credit) amortization is established in the year in which the prior service cost (credit) first occurred, and is based on the same amortization period for all future years until the prior service cost (credit) is fully amortized. CMS Energy and Consumers had new prior service credits for OPEB in 2017 and 2015 and a new prior service cost for the DB Pension Plans in 2015. The estimated period of amortization of these new prior service costs (credits) for CMS Energy and Consumers is ten years.
CMS Energy and Consumers determine the MRV for the assets of the DB Pension Plans as the fair value of plan assets on the measurement date, adjusted by the gains or losses that will not be admitted into the MRV until future years. CMS Energy and Consumers reflect each year’s gain or loss in the MRV in equal amounts over a five-year period beginning on the date the original amount was determined. CMS Energy and Consumers determine the MRV for OPEB Plan assets as the fair value of assets on the measurement date.
Reconciliations: Presented in the following table are reconciliations of the funded status of CMS Energy’s and Consumers’ retirement benefits plans with their retirement benefits plans’ liabilities:
|
|
|||||||||||||||||||||
|
In Millions |
|||||||||||||||||||||
|
|
DB Pension Plans |
DB SERP |
OPEB Plan |
||||||||||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||
|
CMS Energy, including Consumers |
|||||||||||||||||||||
|
Benefit obligation at beginning of |
$ |
2,562 |
$ |
2,403 |
$ |
151 |
$ |
150 |
$ |
1,408 |
$ |
1,227 | |||||||||
|
Service cost |
45 | 42 |
- |
- |
19 | 18 | |||||||||||||||
|
Interest cost |
88 | 85 | 5 | 5 | 51 | 46 | |||||||||||||||
|
Plan amendments |
- |
- |
- |
- |
(309) |
- |
|||||||||||||||
|
Actuarial (gain) loss |
241 |
1 |
196 |
1 |
7 | 4 | (24) |
1 |
171 |
1 |
|||||||||||
|
Benefits paid |
(156) | (164) | (9) | (8) | (48) | (54) | |||||||||||||||
|
Benefit obligation at end of period |
$ |
2,780 |
$ |
2,562 |
$ |
154 |
$ |
151 |
$ |
1,097 |
$ |
1,408 | |||||||||
|
Plan assets at fair value at |
$ |
2,101 |
$ |
2,013 |
$ |
- |
$ |
- |
$ |
1,264 |
$ |
1,208 | |||||||||
|
Actual return on plan assets |
360 | 152 |
- |
- |
203 | 109 | |||||||||||||||
|
Company contribution |
- |
100 | 9 | 8 |
- |
- |
|||||||||||||||
|
Actual benefits paid |
(156) | (164) | (9) | (8) | (47) | (53) | |||||||||||||||
|
Plan assets at fair value at end |
$ |
2,305 |
$ |
2,101 |
$ |
- |
$ |
- |
$ |
1,420 |
$ |
1,264 | |||||||||
|
Funded status |
$ |
(475) |
2 |
$ |
(461) |
2 |
$ |
(154) |
$ |
(151) |
$ |
323 |
$ |
(144) | |||||||
|
Consumers |
|||||||||||||||||||||
|
Benefit obligation at beginning of |
$ |
109 |
$ |
106 |
$ |
1,365 |
$ |
1,188 | |||||||||||||
|
Service cost |
- |
- |
19 | 17 | |||||||||||||||||
|
Interest cost |
4 | 4 | 49 | 45 | |||||||||||||||||
|
Plan amendments |
- |
- |
(303) |
- |
|||||||||||||||||
|
Actuarial (gain) loss |
5 | 4 | (31) |
1 |
167 |
1 |
|||||||||||||||
|
Benefits paid |
(6) | (5) | (46) | (52) | |||||||||||||||||
|
Benefit obligation at end of period |
$ |
112 |
$ |
109 |
$ |
1,053 |
$ |
1,365 | |||||||||||||
|
Plan assets at fair value at |
$ |
- |
$ |
- |
$ |
1,184 |
$ |
1,133 | |||||||||||||
|
Actual return on plan assets |
- |
- |
190 | 103 | |||||||||||||||||
|
Company contribution |
6 | 5 |
- |
- |
|||||||||||||||||
|
Actual benefits paid |
(6) | (5) | (45) | (52) | |||||||||||||||||
|
Plan assets at fair value at end |
$ |
- |
$ |
- |
$ |
1,329 |
$ |
1,184 | |||||||||||||
|
Funded status |
$ |
(112) |
$ |
(109) |
$ |
276 |
$ |
(181) | |||||||||||||
1The actuarial loss for 2017 for the DB Pension Plans was primarily the result of lowering the discount rates. The actuarial gain for 2017 for the OPEB Plan was primarily the result of better claim experience in calculating the plan’s funded status. The actuarial loss for 2016 was primarily the result of claims, experience, and lowering the discount rates used in calculating the plans’ funded status.
2At December 31, 2017, $455 million of the total funded status of the DB Pension Plans was attributable to Consumers, based on an allocation of expenses. At December 31, 2016, $441 million of the total funded status of the DB Pension Plans was attributable to Consumers, based on an allocation of expenses.
Presented in the following table is the classification of CMS Energy’s and Consumers’ retirement benefit plans’ assets and liabilities:
|
|
|||||||
|
In Millions |
|||||||
|
December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
Non-current assets |
|||||||
|
DB Pension Plans |
$ |
143 |
$ |
- |
|||
|
OPEB Plan |
323 |
- |
|||||
|
Current liabilities |
|||||||
|
DB SERP |
9 | 8 | |||||
|
Non-current liabilities |
|||||||
|
DB Pension Plans |
618 | 461 | |||||
|
DB SERP |
145 | 143 | |||||
|
OPEB Plan |
- |
144 | |||||
|
Consumers |
|||||||
|
Non-current assets |
|||||||
|
DB Pension Plans |
$ |
147 |
$ |
- |
|||
|
OPEB Plan |
276 |
- |
|||||
|
Current liabilities |
|||||||
|
DB SERP |
7 | 5 | |||||
|
Non-current liabilities |
|||||||
|
DB Pension Plans |
602 | 441 | |||||
|
DB SERP |
105 | 104 | |||||
|
OPEB Plan |
- |
181 | |||||
The ABO for the DB Pension Plans was $2.4 billion at December 31, 2017 and $2.3 billion at December 31, 2016. Presented in the following table is information related to the defined benefit pension plan for which the PBO and the ABO exceed plan assets:
|
|
|||||||
|
In Millions |
|||||||
|
December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
PBO |
$ |
1,511 |
$ |
2,562 | |||
|
ABO |
1,164 | 2,250 | |||||
|
Fair value of plan assets |
893 | 2,101 | |||||
Items Not Yet Recognized as a Component of Net Periodic Benefit Cost: Presented in the following table are the amounts recognized in regulatory assets, regulatory liabilities, and AOCI that have not been recognized as components of net periodic benefit cost. For additional details on regulatory assets and liabilities, see Note 3, Regulatory Matters.
|
|
||||||||||||||
|
In Millions |
||||||||||||||
|
|
DB Pension Plans |
OPEB Plan |
||||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2017 | 2016 | ||||||||||
|
CMS Energy, including Consumers |
||||||||||||||
|
Regulatory assets (liabilities) |
||||||||||||||
|
Net loss |
$ |
1,017 |
$ |
1,062 |
$ |
316 |
$ |
483 | ||||||
|
Prior service cost (credit) |
11 | 15 | (451) | (187) | ||||||||||
|
Regulatory assets (liabilities) |
$ |
1,028 |
$ |
1,077 |
$ |
(135) |
$ |
296 | ||||||
|
AOCI |
||||||||||||||
|
Net loss (gain) |
97 | 93 | (6) | (8) | ||||||||||
|
Prior service cost (credit) |
1 | 1 | (12) | (6) | ||||||||||
|
Total amounts recognized in regulatory assets |
$ |
1,126 |
$ |
1,171 |
$ |
(153) |
$ |
282 | ||||||
|
Consumers |
||||||||||||||
|
Regulatory assets (liabilities) |
||||||||||||||
|
Net loss |
$ |
1,017 |
$ |
1,062 |
$ |
316 |
$ |
483 | ||||||
|
Prior service cost (credit) |
11 | 15 | (451) | (187) | ||||||||||
|
Regulatory assets (liabilities) |
$ |
1,028 |
$ |
1,077 |
$ |
(135) |
$ |
296 | ||||||
|
AOCI |
||||||||||||||
|
Net loss |
36 | 33 |
- |
- |
||||||||||
|
Total amounts recognized in regulatory assets |
$ |
1,064 |
$ |
1,110 |
$ |
(135) |
$ |
296 | ||||||
Plan Assets: Presented in the following tables are the fair values of the assets of CMS Energy’s DB Pension Plans and OPEB Plan, by asset category and by level within the fair value hierarchy. For additional details regarding the fair value hierarchy, see Note 6, Fair Value Measurements.
|
|
||||||||||||||||||||
|
In Millions |
||||||||||||||||||||
|
|
DB Pension Plans |
|||||||||||||||||||
|
|
December 31, 2017 |
December 31, 2016 |
||||||||||||||||||
|
|
Total |
Level 1 |
Level 2 |
Total |
Level 1 |
Level 2 |
||||||||||||||
|
CMS Energy, including Consumers |
||||||||||||||||||||
|
Cash and short-term |
$ |
21 |
$ |
21 |
$ |
- |
$ |
110 |
$ |
110 |
$ |
- |
||||||||
|
U.S. government and |
4 |
- |
4 | 1 |
- |
1 | ||||||||||||||
|
Corporate debt |
336 |
- |
336 | 266 |
- |
266 | ||||||||||||||
|
State and municipal bonds |
9 |
- |
9 | 9 |
- |
9 | ||||||||||||||
|
Foreign corporate bonds |
31 |
- |
31 | 25 |
- |
25 | ||||||||||||||
|
Mutual funds |
662 | 662 |
- |
571 | 571 |
- |
||||||||||||||
|
|
$ |
1,063 |
$ |
683 |
$ |
380 |
$ |
982 |
$ |
681 |
$ |
301 | ||||||||
|
Pooled funds |
1,242 | 1,119 | ||||||||||||||||||
|
Total |
$ |
2,305 |
$ |
2,101 | ||||||||||||||||
|
|
||||||||||||||||||||
|
In Millions |
||||||||||||||||||||
|
|
OPEB Plan |
|||||||||||||||||||
|
|
December 31, 2017 |
December 31, 2016 |
||||||||||||||||||
|
|
Total |
Level 1 |
Level 2 |
Total |
Level 1 |
Level 2 |
||||||||||||||
|
CMS Energy, including Consumers |
||||||||||||||||||||
|
Cash and short-term |
$ |
16 |
$ |
16 |
$ |
- |
$ |
39 |
$ |
39 |
$ |
- |
||||||||
|
U.S. government and |
1 |
- |
1 |
- |
- |
- |
||||||||||||||
|
Corporate debt |
50 |
- |
50 | 38 |
- |
38 | ||||||||||||||
|
State and municipal bonds |
1 |
- |
1 | 1 |
- |
1 | ||||||||||||||
|
Foreign corporate bonds |
4 |
- |
4 | 4 |
- |
4 | ||||||||||||||
|
Common stocks |
40 | 40 |
- |
44 | 44 |
- |
||||||||||||||
|
Mutual funds |
647 | 647 |
- |
563 | 563 |
- |
||||||||||||||
|
|
$ |
759 |
$ |
703 |
$ |
56 |
$ |
689 |
$ |
646 |
$ |
43 | ||||||||
|
Pooled funds |
661 | 575 | ||||||||||||||||||
|
Total |
$ |
1,420 |
$ |
1,264 | ||||||||||||||||
Cash and Short-Term Investments: Cash and short-term investments consist of money market funds with daily liquidity.
U.S. Government and Agencies Securities: U.S. government and agencies securities consist of U.S. Treasury notes and other debt securities backed by the U.S. government and related agencies. These securities are valued based on quoted market prices.
Corporate Debt: Corporate debt investments consist of investment grade bonds of U.S. issuers from diverse industries. These securities are valued based on quoted market prices, when available, or yields available on comparable securities of issuers with similar credit ratings.
State and Municipal Bonds: State and municipal bonds are valued using a matrix-pricing model that incorporates Level 2 market-based information. The fair value of the bonds is derived from various observable inputs, including benchmark yields, reported securities trades, broker/dealer quotes, bond ratings, and general information on market movements for investment grade state and municipal securities normally considered by market participants when pricing such debt securities.
Foreign Corporate Bonds: Foreign corporate debt securities are valued based on quoted market prices, when available, or on yields available on comparable securities of issuers with similar credit ratings.
Common Stocks: Common stocks in the OPEB Plan consist of equity securities with low transaction costs that are actively managed and tracked by the S&P 500 Index. These securities are valued at their quoted closing prices.
Mutual Funds: Mutual funds represent shares in registered investment companies that are priced based on the daily quoted net asset values that are publicly available and are the basis for transactions to buy or sell shares in the funds.
Pooled Funds: Pooled funds include both common and collective trust funds as well as special funds that contain only employee benefit plan assets from two or more unrelated benefit plans. These funds primarily consist of U.S. and foreign equity securities, but also include U.S. and foreign fixed-income securities and alternative investments. Since these investments are valued at their net asset value as a practical expedient, they are not classified in the fair value hierarchy.
Asset Allocations: Presented in the following table are the investment components of the assets of CMS Energy’s DB Pension Plans and OPEB Plan as of December 31, 2017:
|
|
|||||||
|
|
DB Pension Plans |
OPEB Plan |
|||||
|
Equity securities |
55 |
% |
52 |
% |
|||
|
Fixed-income securities |
30 | 25 | |||||
|
Alternative-strategy investments |
15 | 23 | |||||
|
|
100 |
% |
100 |
% |
|||
|
1 |
|
CMS Energy’s target asset allocation for the assets of the DB Pension Plans is 53 percent equity, 41 percent fixed income, and 6 percent alternative-strategy investments. This target asset allocation is expected to continue to maximize the long-term return on plan assets, while maintaining a prudent level of risk. The level of acceptable risk is a function of the liabilities of the plan. Equity investments are diversified mostly across the S&P 500 Index, with lesser allocations to the S&P MidCap and SmallCap Indexes and Foreign Equity Funds. Fixed-income investments are diversified across investment grade instruments of government and corporate issuers as well as high-yield and global bond funds. Alternative strategies are diversified across absolute return investment approaches and global tactical asset allocation. CMS Energy uses annual liability measurements, quarterly portfolio reviews, and periodic asset/liability studies to evaluate the need for adjustments to the portfolio allocation.
CMS Energy established union and non‑union VEBA trusts to fund future retiree health and life insurance benefits. These trusts are funded through the ratemaking process for Consumers and through direct contributions from the non‑utility subsidiaries. CMS Energy’s target asset allocation for the health trusts is 50 percent equity, 30 percent fixed income, and 20 percent alternative-strategy investments. CMS Energy’s target asset allocation for the life trusts is 42 percent equity, 28 percent fixed income, and 30 percent alternative-strategy investments. These target allocations are expected to continue to maximize the long-term return on plan assets, while maintaining a prudent level of risk. The level of acceptable risk is a function of the liabilities of the plans. Equity investments are diversified mostly across the S&P 500 Index, with lesser allocations to the S&P SmallCap Index and Foreign Equity Funds. Fixed-income investments are diversified across investment grade instruments of government and corporate issuers. Alternative strategies are diversified across absolute return investment approaches and global tactical asset allocation. CMS Energy uses annual liability measurements, quarterly portfolio reviews, and periodic asset/liability studies to evaluate the need for adjustments to the portfolio allocation.
Contributions: Presented in the following table are the contributions to CMS Energy’s and Consumers’ OPEB Plan and DB Pension Plans:
|
|
|||||||
|
In Millions |
|||||||
|
Years Ended December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
OPEB Plan |
$ |
- |
$ |
- |
|||
|
DB Pension Plans |
- |
100 | |||||
|
Consumers |
|||||||
|
OPEB Plan |
$ |
- |
$ |
- |
|||
|
DB Pension Plans |
- |
93 | |||||
Contributions comprise required amounts and discretionary contributions. Neither CMS Energy nor Consumers plans to contribute to the OPEB Plan or DB Pension Plans in 2018. Actual future contributions will depend on future investment performance, discount rates, and various factors related to the participants of the DB Pension Plans and OPEB Plan. CMS Energy and Consumers will, at a minimum, contribute to the plans as needed to comply with federal funding requirements.
Benefit Payments: Presented in the following table are the expected benefit payments for each of the next five years and the five-year period thereafter:
|
|
||||||||||
|
In Millions |
||||||||||
|
|
DB Pension Plans |
DB SERP |
OPEB Plan |
|||||||
|
CMS Energy, including Consumers |
||||||||||
|
2018 |
$ |
157 |
$ |
10 |
$ |
56 | ||||
|
2019 |
163 | 10 | 58 | |||||||
|
2020 |
168 | 10 | 60 | |||||||
|
2021 |
169 | 10 | 62 | |||||||
|
2022 |
170 | 10 | 62 | |||||||
|
2023-2027 |
457 | 47 | 312 | |||||||
|
Consumers |
||||||||||
|
2018 |
$ |
153 |
$ |
7 |
$ |
54 | ||||
|
2019 |
159 | 7 | 55 | |||||||
|
2020 |
163 | 7 | 57 | |||||||
|
2021 |
164 | 7 | 59 | |||||||
|
2022 |
166 | 7 | 60 | |||||||
|
2023-2027 |
457 | 32 | 298 | |||||||
Collective Bargaining Agreements: At December 31, 2017, unions represented 38 percent of CMS Energy’s employees and 40 percent of Consumers’ employees. The UWUA represents Consumers’ operating, maintenance, construction, and call center employees. The USW represents Zeeland employees. Union contracts expire in 2020.
|
|||
13:Stock-Based Compensation
CMS Energy and Consumers provide a PISP to officers, employees, and non‑employee directors based on their contributions to the successful management of the company. The PISP has a ten-year term, expiring in May 2024.
In 2017, all awards were in the form of restricted stock or restricted stock units. The PISP also allows for unrestricted common stock, stock options, stock appreciation rights, phantom shares, performance units, and incentive options, none of which was granted in 2017, 2016, or 2015.
Shares awarded or subject to stock options, phantom shares, or performance units may not exceed 6.5 million shares from June 2014 through May 2024, nor may such awards to any recipient exceed 500,000 shares in any calendar year. CMS Energy and Consumers may issue awards of up to 4,342,829 shares of common stock under the PISP as of December 31, 2017. Shares for which payment or exercise is in cash, as well as shares that expire, terminate, or are canceled or forfeited, may be awarded or granted again under the PISP.
All awards under the PISP vest fully upon death. Upon a change of control of CMS Energy or termination under an officer separation agreement, the awards will vest in accordance with specific officer agreements. If stated in the award, for restricted stock recipients who terminate employment due to retirement or disability, a pro-rata portion of the award will vest upon termination, with any market-based award also contingent upon the outcome of the market condition and any performance-based award contingent upon the outcome of the performance condition. The pro-rata portion is equal to the portion of the service period served between the award grant date and the employee’s termination date. The remaining portion of the awards will be forfeited. All awards for directors vest fully upon retirement. Restricted shares may be forfeited if employment terminates for any other reason or if the minimum service requirements are not met, as described in the award document.
Restricted Stock Awards: Restricted stock awards for employees under the PISP are in the form of performance-based, market-based, and time-lapse restricted stock. Award recipients receive shares of CMS Energy common stock that have dividend and voting rights. The dividends on time-lapse restricted stock are paid in cash or in CMS Energy common stock. The dividends on performance-based and market-based restricted stock are paid in restricted shares equal to the value of the dividends. These additional restricted shares are subject to the same vesting conditions as the underlying restricted stock shares.
Performance-based restricted stock vesting is contingent on meeting at least a 36‑month service requirement and a performance condition. The performance condition is based on an adjusted measure of CMS Energy’s EPS growth relative to a peer group over a three-year period. The awards granted in 2017, 2016, and 2015 require a 38‑month service period. Market-based restricted stock vesting is generally contingent on meeting a three-year service requirement and a market condition. The market condition is based on a comparison of CMS Energy’s total shareholder return with the median total shareholder return of a peer group over the same three-year period. Depending on the outcome of the performance condition or the market condition, a recipient may earn a total award ranging from zero to 200 percent of the initial grant. Time-lapse restricted stock generally vests after a service period of three years.
Restricted Stock Units: In 2017, 2016, and 2015, CMS Energy and Consumers granted restricted stock units to certain non‑employee directors who elected to defer their restricted stock awards. The restricted stock units generally vest after a service period of one year or, if earlier, at the next annual meeting. The restricted stock units will be distributed to the recipients as shares in accordance with the directors’ deferral agreements. Restricted stock units do not have voting rights, but do have dividend rights. In lieu of cash dividend payments, the dividends on restricted stock units are paid in additional units equal to the value of the dividends. These additional restricted stock units are subject to the same vesting and distribution conditions as the underlying restricted stock units. No restricted stock units were forfeited during 2017.
Presented in the following tables is the activity for restricted stock and restricted stock units under the PISP:
|
|
||||||||||||
|
|
CMS Energy, including Consumers |
Consumers |
||||||||||
|
Year Ended December 31, 2017 |
Number of |
Weighted-Average |
Number of |
Weighted-Average |
||||||||
|
Nonvested at beginning of period |
1,387,597 |
$ |
32.44 | 1,328,631 |
$ |
32.41 | ||||||
|
Granted |
||||||||||||
|
Restricted stock |
722,215 | 28.61 | 691,052 | 28.67 | ||||||||
|
Restricted stock units |
12,388 | 41.98 | 11,970 | 41.97 | ||||||||
|
Vested |
||||||||||||
|
Restricted stock |
(819,795) | 19.53 | (787,039) | 19.56 | ||||||||
|
Restricted stock units |
(15,638) | 38.37 | (15,199) | 38.37 | ||||||||
|
Forfeited – restricted stock |
(93,501) | 39.19 | (84,293) | 39.19 | ||||||||
|
Nonvested at end of period |
1,193,266 |
$ |
38.48 | 1,145,122 |
$ |
38.50 | ||||||
|
|
|||||
|
Year Ended December 31, 2017 |
CMS Energy, including |
Consumers |
|||
|
Granted |
|||||
|
Time-lapse awards |
164,640 | 159,260 | |||
|
Market-based awards |
157,064 | 149,870 | |||
|
Performance-based awards |
157,064 | 149,870 | |||
|
Restricted stock units |
11,444 | 11,055 | |||
|
Dividends on market-based awards |
24,137 | 22,976 | |||
|
Dividends on performance-based awards |
22,894 | 21,791 | |||
|
Dividends on restricted stock units |
944 | 915 | |||
|
Additional market-based shares based on achievement of condition |
113,079 | 107,823 | |||
|
Additional performance-based shares based on achievement of condition |
83,337 | 79,462 | |||
|
Total granted |
734,603 | 703,022 |
CMS Energy and Consumers charge the fair value of the restricted stock awards to expense over the required service period and charge the fair value of the restricted stock units to expense immediately. For performance-based awards, CMS Energy and Consumers estimate the number of shares expected to vest at the end of the performance period based on the probable achievement of the performance objective. Performance-based and market-based restricted stock awards have graded vesting features for retirement-eligible employees, and CMS Energy and Consumers recognize expense for those awards on a graded vesting schedule over the required service period. Expense for performance-based and market-based restricted stock awards for non‑retirement-eligible employees and time-lapse awards is recognized on a straight-line basis over the required service period.
The fair value of performance-based and time-lapse restricted stock and restricted stock units is based on the price of CMS Energy’s common stock on the grant date. The fair value of market-based restricted stock awards is calculated on the grant date using a Monte Carlo simulation. CMS Energy and Consumers base expected volatilities on the historical volatility of the price of CMS Energy common stock. The risk-free rate for valuation of the market-based restricted stock awards was based on the three-year U.S. Treasury yield at the award grant date.
Presented in the following table are the most important assumptions used to estimate the fair value of the market-based restricted stock awards:
|
|
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
Expected volatility |
18.0 |
% |
16.7 |
% |
14.1 |
% |
||||
|
Expected dividend yield |
3.0 | 3.2 | 3.3 | |||||||
|
Risk-free rate |
1.5 | 1.0 | 0.8 | |||||||
Presented in the following table is the weighted-average grant-date fair value of all awards under the PISP:
|
|
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Weighted-average grant-date fair value per share |
||||||||||
|
Restricted stock granted |
$ |
28.61 |
$ |
31.74 |
$ |
36.84 | ||||
|
Restricted stock units granted |
41.98 | 39.12 | 34.25 | |||||||
|
Consumers |
||||||||||
|
Weighted-average grant-date fair value per share |
||||||||||
|
Restricted stock granted |
$ |
28.67 |
$ |
31.77 |
$ |
36.83 | ||||
|
Restricted stock units granted |
41.97 | 39.12 | 34.25 | |||||||
Presented in the following table are amounts related to restricted stock awards and restricted stock units:
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Fair value of shares that vested during the year |
$ |
37 |
$ |
31 |
$ |
29 | ||||
|
Compensation expense recognized |
17 | 16 | 20 | |||||||
|
Income tax benefit recognized |
7 | 7 | 8 | |||||||
|
Consumers |
||||||||||
|
Fair value of shares that vested during the year |
$ |
35 |
$ |
30 |
$ |
28 | ||||
|
Compensation expense recognized |
16 | 16 | 19 | |||||||
|
Income tax benefit recognized |
7 | 6 | 7 | |||||||
At December 31, 2017, $18 million of total unrecognized compensation cost was related to restricted stock for CMS Energy, including Consumers, and $17 million of total unrecognized compensation cost was related to restricted stock for Consumers. CMS Energy and Consumers expect to recognize this cost over a weighted-average period of two years.
13:Stock-Based Compensation
CMS Energy and Consumers provide a PISP to officers, employees, and non‑employee directors based on their contributions to the successful management of the company. The PISP has a ten-year term, expiring in May 2024.
In 2017, all awards were in the form of restricted stock or restricted stock units. The PISP also allows for unrestricted common stock, stock options, stock appreciation rights, phantom shares, performance units, and incentive options, none of which was granted in 2017, 2016, or 2015.
Shares awarded or subject to stock options, phantom shares, or performance units may not exceed 6.5 million shares from June 2014 through May 2024, nor may such awards to any recipient exceed 500,000 shares in any calendar year. CMS Energy and Consumers may issue awards of up to 4,342,829 shares of common stock under the PISP as of December 31, 2017. Shares for which payment or exercise is in cash, as well as shares that expire, terminate, or are canceled or forfeited, may be awarded or granted again under the PISP.
All awards under the PISP vest fully upon death. Upon a change of control of CMS Energy or termination under an officer separation agreement, the awards will vest in accordance with specific officer agreements. If stated in the award, for restricted stock recipients who terminate employment due to retirement or disability, a pro-rata portion of the award will vest upon termination, with any market-based award also contingent upon the outcome of the market condition and any performance-based award contingent upon the outcome of the performance condition. The pro-rata portion is equal to the portion of the service period served between the award grant date and the employee’s termination date. The remaining portion of the awards will be forfeited. All awards for directors vest fully upon retirement. Restricted shares may be forfeited if employment terminates for any other reason or if the minimum service requirements are not met, as described in the award document.
Restricted Stock Awards: Restricted stock awards for employees under the PISP are in the form of performance-based, market-based, and time-lapse restricted stock. Award recipients receive shares of CMS Energy common stock that have dividend and voting rights. The dividends on time-lapse restricted stock are paid in cash or in CMS Energy common stock. The dividends on performance-based and market-based restricted stock are paid in restricted shares equal to the value of the dividends. These additional restricted shares are subject to the same vesting conditions as the underlying restricted stock shares.
Performance-based restricted stock vesting is contingent on meeting at least a 36‑month service requirement and a performance condition. The performance condition is based on an adjusted measure of CMS Energy’s EPS growth relative to a peer group over a three-year period. The awards granted in 2017, 2016, and 2015 require a 38‑month service period. Market-based restricted stock vesting is generally contingent on meeting a three-year service requirement and a market condition. The market condition is based on a comparison of CMS Energy’s total shareholder return with the median total shareholder return of a peer group over the same three-year period. Depending on the outcome of the performance condition or the market condition, a recipient may earn a total award ranging from zero to 200 percent of the initial grant. Time-lapse restricted stock generally vests after a service period of three years.
Restricted Stock Units: In 2017, 2016, and 2015, CMS Energy and Consumers granted restricted stock units to certain non‑employee directors who elected to defer their restricted stock awards. The restricted stock units generally vest after a service period of one year or, if earlier, at the next annual meeting. The restricted stock units will be distributed to the recipients as shares in accordance with the directors’ deferral agreements. Restricted stock units do not have voting rights, but do have dividend rights. In lieu of cash dividend payments, the dividends on restricted stock units are paid in additional units equal to the value of the dividends. These additional restricted stock units are subject to the same vesting and distribution conditions as the underlying restricted stock units. No restricted stock units were forfeited during 2017.
Presented in the following tables is the activity for restricted stock and restricted stock units under the PISP:
|
|
||||||||||||
|
|
CMS Energy, including Consumers |
Consumers |
||||||||||
|
Year Ended December 31, 2017 |
Number of |
Weighted-Average |
Number of |
Weighted-Average |
||||||||
|
Nonvested at beginning of period |
1,387,597 |
$ |
32.44 | 1,328,631 |
$ |
32.41 | ||||||
|
Granted |
||||||||||||
|
Restricted stock |
722,215 | 28.61 | 691,052 | 28.67 | ||||||||
|
Restricted stock units |
12,388 | 41.98 | 11,970 | 41.97 | ||||||||
|
Vested |
||||||||||||
|
Restricted stock |
(819,795) | 19.53 | (787,039) | 19.56 | ||||||||
|
Restricted stock units |
(15,638) | 38.37 | (15,199) | 38.37 | ||||||||
|
Forfeited – restricted stock |
(93,501) | 39.19 | (84,293) | 39.19 | ||||||||
|
Nonvested at end of period |
1,193,266 |
$ |
38.48 | 1,145,122 |
$ |
38.50 | ||||||
|
|
|||||
|
Year Ended December 31, 2017 |
CMS Energy, including |
Consumers |
|||
|
Granted |
|||||
|
Time-lapse awards |
164,640 | 159,260 | |||
|
Market-based awards |
157,064 | 149,870 | |||
|
Performance-based awards |
157,064 | 149,870 | |||
|
Restricted stock units |
11,444 | 11,055 | |||
|
Dividends on market-based awards |
24,137 | 22,976 | |||
|
Dividends on performance-based awards |
22,894 | 21,791 | |||
|
Dividends on restricted stock units |
944 | 915 | |||
|
Additional market-based shares based on achievement of condition |
113,079 | 107,823 | |||
|
Additional performance-based shares based on achievement of condition |
83,337 | 79,462 | |||
|
Total granted |
734,603 | 703,022 |
CMS Energy and Consumers charge the fair value of the restricted stock awards to expense over the required service period and charge the fair value of the restricted stock units to expense immediately. For performance-based awards, CMS Energy and Consumers estimate the number of shares expected to vest at the end of the performance period based on the probable achievement of the performance objective. Performance-based and market-based restricted stock awards have graded vesting features for retirement-eligible employees, and CMS Energy and Consumers recognize expense for those awards on a graded vesting schedule over the required service period. Expense for performance-based and market-based restricted stock awards for non‑retirement-eligible employees and time-lapse awards is recognized on a straight-line basis over the required service period.
The fair value of performance-based and time-lapse restricted stock and restricted stock units is based on the price of CMS Energy’s common stock on the grant date. The fair value of market-based restricted stock awards is calculated on the grant date using a Monte Carlo simulation. CMS Energy and Consumers base expected volatilities on the historical volatility of the price of CMS Energy common stock. The risk-free rate for valuation of the market-based restricted stock awards was based on the three-year U.S. Treasury yield at the award grant date.
Presented in the following table are the most important assumptions used to estimate the fair value of the market-based restricted stock awards:
|
|
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
Expected volatility |
18.0 |
% |
16.7 |
% |
14.1 |
% |
||||
|
Expected dividend yield |
3.0 | 3.2 | 3.3 | |||||||
|
Risk-free rate |
1.5 | 1.0 | 0.8 | |||||||
Presented in the following table is the weighted-average grant-date fair value of all awards under the PISP:
|
|
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Weighted-average grant-date fair value per share |
||||||||||
|
Restricted stock granted |
$ |
28.61 |
$ |
31.74 |
$ |
36.84 | ||||
|
Restricted stock units granted |
41.98 | 39.12 | 34.25 | |||||||
|
Consumers |
||||||||||
|
Weighted-average grant-date fair value per share |
||||||||||
|
Restricted stock granted |
$ |
28.67 |
$ |
31.77 |
$ |
36.83 | ||||
|
Restricted stock units granted |
41.97 | 39.12 | 34.25 | |||||||
Presented in the following table are amounts related to restricted stock awards and restricted stock units:
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Fair value of shares that vested during the year |
$ |
37 |
$ |
31 |
$ |
29 | ||||
|
Compensation expense recognized |
17 | 16 | 20 | |||||||
|
Income tax benefit recognized |
7 | 7 | 8 | |||||||
|
Consumers |
||||||||||
|
Fair value of shares that vested during the year |
$ |
35 |
$ |
30 |
$ |
28 | ||||
|
Compensation expense recognized |
16 | 16 | 19 | |||||||
|
Income tax benefit recognized |
7 | 6 | 7 | |||||||
At December 31, 2017, $18 million of total unrecognized compensation cost was related to restricted stock for CMS Energy, including Consumers, and $17 million of total unrecognized compensation cost was related to restricted stock for Consumers. CMS Energy and Consumers expect to recognize this cost over a weighted-average period of two years.
|
|||
14:Income Taxes
CMS Energy and its subsidiaries file a consolidated U.S. federal income tax return as well as a Michigan Corporate Income Tax return for the unitary business group and various other state unitary group combined income tax returns. Income taxes are allocated based on each company’s separate taxable income in accordance with the CMS Energy tax sharing agreement.
In December 2017, President Trump signed the TCJA, which changed existing federal tax law and included numerous provisions that affect businesses. Provisions significantly impacting CMS Energy and Consumers include:
|
· |
Repeal of the alternative minimum tax along with a provision requiring companies to recover alternative minimum tax credit carryforwards over the next four years |
|
· |
Limitation on the use of net operating loss carryforwards arising after December 31, 2017 to 80 percent of a company’s taxable income with an indefinite carryforward |
|
· |
A provision allowing companies to expense 100 percent of the cost of certain property when placed in service |
|
· |
A requirement to use a normalization method of accounting for excess tax reserves associated with public utility property |
As a rate-regulated utility, Consumers is excluded from certain provisions of the TCJA, including those allowing companies to expense 100 percent of the cost of certain property acquired after September 27, 2017 and limiting the amount companies may deduct for net interest expense.
Substantially all of the tax law changes enacted by the TCJA are effective for taxable years beginning after December 31, 2017. Under GAAP (ASC 740), however, companies must recognize the effects of a tax law change in the period of enactment. The staff of the SEC issued guidance in Staff Accounting Bulletin No. 118 that clarifies accounting for income taxes under ASC 740 if information is not yet available or complete and provides for up to a one-year period in which to complete the required analyses and accounting for the impacts of the TCJA. CMS Energy and Consumers have made reasonable estimates in measuring and accounting for the effects of the TCJA, which have been reflected in the December 31, 2017 financial statements. Given expected changes to U.S. Treasury regulations, interpretations of the TCJA by the U.S. Treasury, interpretations of the application of ASC 740, and the companies’ analysis of their historical records, these estimates could change.
Presented in the following table is the difference between actual income tax expense on continuing operations and income tax expense computed by applying the statutory U.S. federal income tax rate:
|
|
|||||||||||||
|
In Millions, Except Tax Rate |
|||||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | ||||||||||
|
CMS Energy, including Consumers |
|||||||||||||
|
Income from continuing operations before income taxes |
$ |
886 |
$ |
826 |
$ |
796 | |||||||
|
|
|||||||||||||
|
Income tax expense at statutory rate |
310 | 289 | 279 | ||||||||||
|
Increase (decrease) in income taxes from: |
|||||||||||||
|
Impact of the TCJA |
148 |
- |
- |
||||||||||
|
State and local income taxes, net of federal effect1 |
26 | 37 | 39 | ||||||||||
|
Accelerated flow-through of regulatory tax benefits2 |
(39) | (39) | (39) | ||||||||||
|
Employee share-based awards |
(6) | (7) |
- |
||||||||||
|
Other, net |
(15) | (7) | (8) | ||||||||||
|
Income tax expense |
$ |
424 |
$ |
273 |
$ |
271 | |||||||
|
Effective tax rate |
47.9 |
% |
33.1 |
% |
34.0 |
% |
|||||||
|
Consumers |
|||||||||||||
|
Income from continuing operations before income taxes |
$ |
971 |
$ |
936 |
$ |
896 | |||||||
|
|
|||||||||||||
|
Income tax expense at statutory rate |
340 | 328 | 314 | ||||||||||
|
Increase (decrease) in income taxes from: |
|||||||||||||
|
Impact of the TCJA |
33 |
- |
- |
||||||||||
|
State and local income taxes, net of federal effect1 |
30 | 44 | 42 | ||||||||||
|
Accelerated flow-through of regulatory tax benefits2 |
(39) | (39) | (39) | ||||||||||
|
Employee share-based awards |
(6) | (6) |
- |
||||||||||
|
Other, net |
(19) | (7) | (15) | ||||||||||
|
Income tax expense |
$ |
339 |
$ |
320 |
$ |
302 | |||||||
|
Effective tax rate |
34.9 |
% |
34.2 |
% |
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, including Consumers, recorded a $14 million income tax benefit in 2017. The $14 million income tax benefit was net of reserves for uncertain tax positions and primarily attributable to Consumers.
2In 2013, the MPSC issued an order authorizing Consumers to accelerate the flow-through to electric and gas customers of certain income tax benefits associated primarily with the cost of removal of plant placed in service before 1993. Consumers implemented this regulatory treatment beginning in 2014. This change, which also accelerates Consumers’ recognition of the income tax benefits, reduced Consumers’ income tax expense by $39 million for each of the years ended December 31, 2017, 2016, and 2015.
Presented in the following table are the significant components of income tax expense on continuing operations:
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Current income taxes |
||||||||||
|
Federal |
$ |
- |
$ |
- |
$ |
- |
||||
|
State and local |
6 | 9 | 24 | |||||||
|
|
$ |
6 |
$ |
9 |
$ |
24 | ||||
|
Deferred income taxes |
||||||||||
|
Federal |
$ |
368 |
$ |
200 |
$ |
192 | ||||
|
State and local |
36 | 47 | 36 | |||||||
|
|
$ |
404 |
$ |
247 |
$ |
228 | ||||
|
Deferred income tax credit |
14 | 17 | 19 | |||||||
|
Tax expense |
$ |
424 |
$ |
273 |
$ |
271 | ||||
|
Consumers |
||||||||||
|
Current income taxes |
||||||||||
|
Federal |
$ |
159 |
$ |
9 |
$ |
66 | ||||
|
State and local |
17 | 22 | 32 | |||||||
|
|
$ |
176 |
$ |
31 |
$ |
98 | ||||
|
Deferred income taxes |
||||||||||
|
Federal |
$ |
120 |
$ |
227 |
$ |
153 | ||||
|
State and local |
29 | 45 | 32 | |||||||
|
|
$ |
149 |
$ |
272 |
$ |
185 | ||||
|
Deferred income tax credit |
14 | 17 | 19 | |||||||
|
Tax expense |
$ |
339 |
$ |
320 |
$ |
302 | ||||
At CMS Energy, including Consumers, the impact of the TCJA was a $148 million increase in deferred income tax expense for the year ended December 31, 2017. At Consumers, the impact was a $33 million increase in deferred income tax expense. The TCJA had no impact on current income tax expense.
Presented in the following table are the principal components of deferred income tax assets (liabilities) recognized:
|
|
|||||||
|
In Millions |
|||||||
|
December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
Deferred income tax assets |
|||||||
|
Tax loss and credit carryforwards |
$ |
453 |
$ |
871 | |||
|
Net regulatory tax liability |
411 | 27 | |||||
|
Reserves and accruals |
40 | 69 | |||||
|
Total deferred income tax assets |
$ |
904 |
$ |
967 | |||
|
Valuation allowance |
(15) | (5) | |||||
|
Total deferred income tax assets, net of valuation reserves |
$ |
889 |
$ |
962 | |||
|
Deferred income tax liabilities |
|||||||
|
Plant, property, and equipment |
$ |
(1,891) |
$ |
(2,902) | |||
|
Employee benefits |
(96) | (158) | |||||
|
Securitized costs |
(71) | (118) | |||||
|
Gas inventory |
(37) | (65) | |||||
|
Other |
(63) | (6) | |||||
|
Total deferred income tax liabilities |
$ |
(2,158) |
$ |
(3,249) | |||
|
Total net deferred income tax liabilities |
$ |
(1,269) |
$ |
(2,287) | |||
|
Consumers |
|||||||
|
Deferred income tax assets |
|||||||
|
Net regulatory tax liability |
$ |
411 |
$ |
27 | |||
|
Tax loss and credit carryforwards |
101 | 190 | |||||
|
Reserves and accruals |
21 | 37 | |||||
|
Total deferred income tax assets |
$ |
533 |
$ |
254 | |||
|
Deferred income tax liabilities |
|||||||
|
Plant, property, and equipment |
$ |
(1,901) |
$ |
(2,924) | |||
|
Employee benefits |
(105) | (181) | |||||
|
Securitized costs |
(71) | (118) | |||||
|
Gas inventory |
(37) | (65) | |||||
|
Other |
(59) | (8) | |||||
|
Total deferred income tax liabilities |
$ |
(2,173) |
$ |
(3,296) | |||
|
Total net deferred income tax liabilities |
$ |
(1,640) |
$ |
(3,042) | |||
Deferred tax assets and liabilities are recognized for the estimated future tax effect of temporary differences between the tax basis of assets or liabilities and the reported amounts on CMS Energy’s and Consumers’ consolidated financial statements. At December 31, 2017, CMS Energy and Consumers remeasured their deferred tax assets and liabilities and related valuation allowances using the 21 percent federal tax rate enacted in the TCJA. To reflect the lower corporate tax rate, Consumers reduced its net deferred tax liabilities associated with its utility book-tax temporary differences by $1.6 billion. Of this amount, Consumers recognized deferred tax expense of $33 million related to non-recoverable net deferred tax assets, with the remaining amount being recorded as a net regulatory tax liability.
Presented in the following table are the components of the net regulatory tax liability recorded at Consumers related to the TCJA:
|
|
||||
|
In Millions |
||||
|
December 31 |
2017 | |||
|
Consumers |
||||
|
Plant, property, and equipment (subject to normalization1) |
$ |
1,781 | ||
|
All other, net (not subject to normalization1) |
(193) | |||
|
Net regulatory tax liability |
$ |
1,588 | ||
1Relates to deferred taxes arising from accelerated tax depreciation on assets in rate base that are governed by normalization provisions of the U.S. Internal Revenue Code. These normalization provisions generally require that customer rate refunds associated with changes in deferred taxes be returned to customers over the remaining average service life of the associated assets. Consumers will collect from customers the portion not subject to normalization over a period to be determined in a future regulatory proceeding. Consumers cannot predict the impact of orders from the MPSC related to the treatment of regulatory balances not subject to amortization.
In addition to the amounts recorded at Consumers, CMS Energy reduced its net deferred tax assets associated with its non-utility book-tax temporary differences by $239 million. In total, CMS Energy, including Consumers, reduced its net deferred tax liabilities by $1.3 billion.
Presented in the following table are the tax loss and credit carryforwards at December 31, 2017:
|
|
||||||||
|
In Millions |
||||||||
|
|
Gross Amount |
Tax Attribute |
Expiration |
|||||
|
CMS Energy, including Consumers |
||||||||
|
Federal net operating loss carryforward |
$ |
855 |
$ |
179 |
2028 – 2036 |
|||
|
Local net operating loss carryforwards |
487 | 5 |
2023 – 2036 |
|||||
|
Alternative minimum tax credits |
137 | 137 |
Not applicable |
|||||
|
General business credits |
130 | 130 |
2018 – 2037 |
|||||
|
Charitable contribution carryover |
8 | 2 | 2021 | |||||
|
Total tax attributes |
$ |
453 | ||||||
|
Consumers |
||||||||
|
Federal net operating loss carryforward |
$ |
309 |
$ |
65 |
2028 – 2036 |
|||
|
General business credits |
34 | 34 |
2032 – 2037 |
|||||
|
Charitable contribution carryover |
8 | 2 | 2021 | |||||
|
Total tax attributes |
$ |
101 | ||||||
CMS Energy has provided a valuation allowance of $2 million for the local tax loss carryforward, and $3 million for general business credits. The TCJA repealed the corporate alternative minimum tax and requires companies to recover (through offsets of regular tax and through cash refunds) all alternative minimum tax credits over the next four years. To reflect policy enacted by the federal Budget Control Act of 2011, CMS Energy has provided a valuation allowance of $10 million for sequestration of cash refunds of alternative minimum tax credits. Additionally, at December 31, 2017, CMS Energy reclassified $124 million of alternative minimum tax credits to a current receivable, net of a charge of $9 million for sequestration.
CMS Energy and Consumers expect to utilize fully their tax loss and credit carryforwards for which no valuation allowance has been provided. It is reasonably possible that further adjustments will be made to the valuation allowances within one year.
Presented in the following table is a reconciliation of the beginning and ending amount of uncertain tax benefits:
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Balance at beginning of period |
$ |
5 |
$ |
6 |
$ |
5 | ||||
|
Additions for current-year tax positions |
10 |
- |
1 | |||||||
|
Additions for prior-year tax positions |
- |
- |
1 | |||||||
|
Reductions for prior-year tax positions |
(1) |
- |
(1) | |||||||
|
Settlements |
- |
(1) |
- |
|||||||
|
Balance at end of period |
$ |
14 |
$ |
5 |
$ |
6 | ||||
|
Consumers |
||||||||||
|
Balance at beginning of period |
$ |
5 |
$ |
6 |
$ |
5 | ||||
|
Additions for current-year tax positions |
17 |
- |
1 | |||||||
|
Additions for prior-year tax positions |
- |
- |
1 | |||||||
|
Reductions for prior-year tax positions |
(1) |
- |
(1) | |||||||
|
Settlements |
- |
(1) |
- |
|||||||
|
Balance at end of period |
$ |
21 |
$ |
5 |
$ |
6 | ||||
If recognized, all of these uncertain tax benefits would affect CMS Energy’s and Consumers’ annual effective tax rates in future years.
CMS Energy and Consumers recognize accrued interest and penalties, where applicable, as part of income tax expense. CMS Energy, including Consumers, recognized no interest or penalties for the years ended December 31, 2017, 2016, or 2015.
The amount of income taxes paid is subject to ongoing audits by federal, state, local, and foreign tax authorities, which can result in proposed assessments. CMS Energy’s federal income tax returns for 2014 and subsequent years remain subject to examination by the IRS. CMS Energy’s Michigan Corporate Income Tax and Michigan Business Tax returns for 2008 and subsequent years, excluding 2012, remain subject to examination by the State of Michigan. CMS Energy’s and Consumers’ estimate of the potential outcome for any uncertain tax issue is highly judgmental. CMS Energy and Consumers believe that their accrued tax liabilities at December 31, 2017 were adequate for all years.
14:Income Taxes
CMS Energy and its subsidiaries file a consolidated U.S. federal income tax return as well as a Michigan Corporate Income Tax return for the unitary business group and various other state unitary group combined income tax returns. Income taxes are allocated based on each company’s separate taxable income in accordance with the CMS Energy tax sharing agreement.
In December 2017, President Trump signed the TCJA, which changed existing federal tax law and included numerous provisions that affect businesses. Provisions significantly impacting CMS Energy and Consumers include:
|
· |
Repeal of the alternative minimum tax along with a provision requiring companies to recover alternative minimum tax credit carryforwards over the next four years |
|
· |
Limitation on the use of net operating loss carryforwards arising after December 31, 2017 to 80 percent of a company’s taxable income with an indefinite carryforward |
|
· |
A provision allowing companies to expense 100 percent of the cost of certain property when placed in service |
|
· |
A requirement to use a normalization method of accounting for excess tax reserves associated with public utility property |
As a rate-regulated utility, Consumers is excluded from certain provisions of the TCJA, including those allowing companies to expense 100 percent of the cost of certain property acquired after September 27, 2017 and limiting the amount companies may deduct for net interest expense.
Substantially all of the tax law changes enacted by the TCJA are effective for taxable years beginning after December 31, 2017. Under GAAP (ASC 740), however, companies must recognize the effects of a tax law change in the period of enactment. The staff of the SEC issued guidance in Staff Accounting Bulletin No. 118 that clarifies accounting for income taxes under ASC 740 if information is not yet available or complete and provides for up to a one-year period in which to complete the required analyses and accounting for the impacts of the TCJA. CMS Energy and Consumers have made reasonable estimates in measuring and accounting for the effects of the TCJA, which have been reflected in the December 31, 2017 financial statements. Given expected changes to U.S. Treasury regulations, interpretations of the TCJA by the U.S. Treasury, interpretations of the application of ASC 740, and the companies’ analysis of their historical records, these estimates could change.
Presented in the following table is the difference between actual income tax expense on continuing operations and income tax expense computed by applying the statutory U.S. federal income tax rate:
|
|
|||||||||||||
|
In Millions, Except Tax Rate |
|||||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | ||||||||||
|
CMS Energy, including Consumers |
|||||||||||||
|
Income from continuing operations before income taxes |
$ |
886 |
$ |
826 |
$ |
796 | |||||||
|
|
|||||||||||||
|
Income tax expense at statutory rate |
310 | 289 | 279 | ||||||||||
|
Increase (decrease) in income taxes from: |
|||||||||||||
|
Impact of the TCJA |
148 |
- |
- |
||||||||||
|
State and local income taxes, net of federal effect1 |
26 | 37 | 39 | ||||||||||
|
Accelerated flow-through of regulatory tax benefits2 |
(39) | (39) | (39) | ||||||||||
|
Employee share-based awards |
(6) | (7) |
- |
||||||||||
|
Other, net |
(15) | (7) | (8) | ||||||||||
|
Income tax expense |
$ |
424 |
$ |
273 |
$ |
271 | |||||||
|
Effective tax rate |
47.9 |
% |
33.1 |
% |
34.0 |
% |
|||||||
|
Consumers |
|||||||||||||
|
Income from continuing operations before income taxes |
$ |
971 |
$ |
936 |
$ |
896 | |||||||
|
|
|||||||||||||
|
Income tax expense at statutory rate |
340 | 328 | 314 | ||||||||||
|
Increase (decrease) in income taxes from: |
|||||||||||||
|
Impact of the TCJA |
33 |
- |
- |
||||||||||
|
State and local income taxes, net of federal effect1 |
30 | 44 | 42 | ||||||||||
|
Accelerated flow-through of regulatory tax benefits2 |
(39) | (39) | (39) | ||||||||||
|
Employee share-based awards |
(6) | (6) |
- |
||||||||||
|
Other, net |
(19) | (7) | (15) | ||||||||||
|
Income tax expense |
$ |
339 |
$ |
320 |
$ |
302 | |||||||
|
Effective tax rate |
34.9 |
% |
34.2 |
% |
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, including Consumers, recorded a $14 million income tax benefit in 2017. The $14 million income tax benefit was net of reserves for uncertain tax positions and primarily attributable to Consumers.
2In 2013, the MPSC issued an order authorizing Consumers to accelerate the flow-through to electric and gas customers of certain income tax benefits associated primarily with the cost of removal of plant placed in service before 1993. Consumers implemented this regulatory treatment beginning in 2014. This change, which also accelerates Consumers’ recognition of the income tax benefits, reduced Consumers’ income tax expense by $39 million for each of the years ended December 31, 2017, 2016, and 2015.
Presented in the following table are the significant components of income tax expense on continuing operations:
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Current income taxes |
||||||||||
|
Federal |
$ |
- |
$ |
- |
$ |
- |
||||
|
State and local |
6 | 9 | 24 | |||||||
|
|
$ |
6 |
$ |
9 |
$ |
24 | ||||
|
Deferred income taxes |
||||||||||
|
Federal |
$ |
368 |
$ |
200 |
$ |
192 | ||||
|
State and local |
36 | 47 | 36 | |||||||
|
|
$ |
404 |
$ |
247 |
$ |
228 | ||||
|
Deferred income tax credit |
14 | 17 | 19 | |||||||
|
Tax expense |
$ |
424 |
$ |
273 |
$ |
271 | ||||
|
Consumers |
||||||||||
|
Current income taxes |
||||||||||
|
Federal |
$ |
159 |
$ |
9 |
$ |
66 | ||||
|
State and local |
17 | 22 | 32 | |||||||
|
|
$ |
176 |
$ |
31 |
$ |
98 | ||||
|
Deferred income taxes |
||||||||||
|
Federal |
$ |
120 |
$ |
227 |
$ |
153 | ||||
|
State and local |
29 | 45 | 32 | |||||||
|
|
$ |
149 |
$ |
272 |
$ |
185 | ||||
|
Deferred income tax credit |
14 | 17 | 19 | |||||||
|
Tax expense |
$ |
339 |
$ |
320 |
$ |
302 | ||||
At CMS Energy, including Consumers, the impact of the TCJA was a $148 million increase in deferred income tax expense for the year ended December 31, 2017. At Consumers, the impact was a $33 million increase in deferred income tax expense. The TCJA had no impact on current income tax expense.
Presented in the following table are the principal components of deferred income tax assets (liabilities) recognized:
|
|
|||||||
|
In Millions |
|||||||
|
December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
Deferred income tax assets |
|||||||
|
Tax loss and credit carryforwards |
$ |
453 |
$ |
871 | |||
|
Net regulatory tax liability |
411 | 27 | |||||
|
Reserves and accruals |
40 | 69 | |||||
|
Total deferred income tax assets |
$ |
904 |
$ |
967 | |||
|
Valuation allowance |
(15) | (5) | |||||
|
Total deferred income tax assets, net of valuation reserves |
$ |
889 |
$ |
962 | |||
|
Deferred income tax liabilities |
|||||||
|
Plant, property, and equipment |
$ |
(1,891) |
$ |
(2,902) | |||
|
Employee benefits |
(96) | (158) | |||||
|
Securitized costs |
(71) | (118) | |||||
|
Gas inventory |
(37) | (65) | |||||
|
Other |
(63) | (6) | |||||
|
Total deferred income tax liabilities |
$ |
(2,158) |
$ |
(3,249) | |||
|
Total net deferred income tax liabilities |
$ |
(1,269) |
$ |
(2,287) | |||
|
Consumers |
|||||||
|
Deferred income tax assets |
|||||||
|
Net regulatory tax liability |
$ |
411 |
$ |
27 | |||
|
Tax loss and credit carryforwards |
101 | 190 | |||||
|
Reserves and accruals |
21 | 37 | |||||
|
Total deferred income tax assets |
$ |
533 |
$ |
254 | |||
|
Deferred income tax liabilities |
|||||||
|
Plant, property, and equipment |
$ |
(1,901) |
$ |
(2,924) | |||
|
Employee benefits |
(105) | (181) | |||||
|
Securitized costs |
(71) | (118) | |||||
|
Gas inventory |
(37) | (65) | |||||
|
Other |
(59) | (8) | |||||
|
Total deferred income tax liabilities |
$ |
(2,173) |
$ |
(3,296) | |||
|
Total net deferred income tax liabilities |
$ |
(1,640) |
$ |
(3,042) | |||
Deferred tax assets and liabilities are recognized for the estimated future tax effect of temporary differences between the tax basis of assets or liabilities and the reported amounts on CMS Energy’s and Consumers’ consolidated financial statements. At December 31, 2017, CMS Energy and Consumers remeasured their deferred tax assets and liabilities and related valuation allowances using the 21 percent federal tax rate enacted in the TCJA. To reflect the lower corporate tax rate, Consumers reduced its net deferred tax liabilities associated with its utility book-tax temporary differences by $1.6 billion. Of this amount, Consumers recognized deferred tax expense of $33 million related to non-recoverable net deferred tax assets, with the remaining amount being recorded as a net regulatory tax liability.
Presented in the following table are the components of the net regulatory tax liability recorded at Consumers related to the TCJA:
|
|
||||
|
In Millions |
||||
|
December 31 |
2017 | |||
|
Consumers |
||||
|
Plant, property, and equipment (subject to normalization1) |
$ |
1,781 | ||
|
All other, net (not subject to normalization1) |
(193) | |||
|
Net regulatory tax liability |
$ |
1,588 | ||
1Relates to deferred taxes arising from accelerated tax depreciation on assets in rate base that are governed by normalization provisions of the U.S. Internal Revenue Code. These normalization provisions generally require that customer rate refunds associated with changes in deferred taxes be returned to customers over the remaining average service life of the associated assets. Consumers will collect from customers the portion not subject to normalization over a period to be determined in a future regulatory proceeding. Consumers cannot predict the impact of orders from the MPSC related to the treatment of regulatory balances not subject to amortization.
In addition to the amounts recorded at Consumers, CMS Energy reduced its net deferred tax assets associated with its non-utility book-tax temporary differences by $239 million. In total, CMS Energy, including Consumers, reduced its net deferred tax liabilities by $1.3 billion.
Presented in the following table are the tax loss and credit carryforwards at December 31, 2017:
|
|
||||||||
|
In Millions |
||||||||
|
|
Gross Amount |
Tax Attribute |
Expiration |
|||||
|
CMS Energy, including Consumers |
||||||||
|
Federal net operating loss carryforward |
$ |
855 |
$ |
179 |
2028 – 2036 |
|||
|
Local net operating loss carryforwards |
487 | 5 |
2023 – 2036 |
|||||
|
Alternative minimum tax credits |
137 | 137 |
Not applicable |
|||||
|
General business credits |
130 | 130 |
2018 – 2037 |
|||||
|
Charitable contribution carryover |
8 | 2 | 2021 | |||||
|
Total tax attributes |
$ |
453 | ||||||
|
Consumers |
||||||||
|
Federal net operating loss carryforward |
$ |
309 |
$ |
65 |
2028 – 2036 |
|||
|
General business credits |
34 | 34 |
2032 – 2037 |
|||||
|
Charitable contribution carryover |
8 | 2 | 2021 | |||||
|
Total tax attributes |
$ |
101 | ||||||
CMS Energy has provided a valuation allowance of $2 million for the local tax loss carryforward, and $3 million for general business credits. The TCJA repealed the corporate alternative minimum tax and requires companies to recover (through offsets of regular tax and through cash refunds) all alternative minimum tax credits over the next four years. To reflect policy enacted by the federal Budget Control Act of 2011, CMS Energy has provided a valuation allowance of $10 million for sequestration of cash refunds of alternative minimum tax credits. Additionally, at December 31, 2017, CMS Energy reclassified $124 million of alternative minimum tax credits to a current receivable, net of a charge of $9 million for sequestration.
CMS Energy and Consumers expect to utilize fully their tax loss and credit carryforwards for which no valuation allowance has been provided. It is reasonably possible that further adjustments will be made to the valuation allowances within one year.
Presented in the following table is a reconciliation of the beginning and ending amount of uncertain tax benefits:
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Balance at beginning of period |
$ |
5 |
$ |
6 |
$ |
5 | ||||
|
Additions for current-year tax positions |
10 |
- |
1 | |||||||
|
Additions for prior-year tax positions |
- |
- |
1 | |||||||
|
Reductions for prior-year tax positions |
(1) |
- |
(1) | |||||||
|
Settlements |
- |
(1) |
- |
|||||||
|
Balance at end of period |
$ |
14 |
$ |
5 |
$ |
6 | ||||
|
Consumers |
||||||||||
|
Balance at beginning of period |
$ |
5 |
$ |
6 |
$ |
5 | ||||
|
Additions for current-year tax positions |
17 |
- |
1 | |||||||
|
Additions for prior-year tax positions |
- |
- |
1 | |||||||
|
Reductions for prior-year tax positions |
(1) |
- |
(1) | |||||||
|
Settlements |
- |
(1) |
- |
|||||||
|
Balance at end of period |
$ |
21 |
$ |
5 |
$ |
6 | ||||
If recognized, all of these uncertain tax benefits would affect CMS Energy’s and Consumers’ annual effective tax rates in future years.
CMS Energy and Consumers recognize accrued interest and penalties, where applicable, as part of income tax expense. CMS Energy, including Consumers, recognized no interest or penalties for the years ended December 31, 2017, 2016, or 2015.
The amount of income taxes paid is subject to ongoing audits by federal, state, local, and foreign tax authorities, which can result in proposed assessments. CMS Energy’s federal income tax returns for 2014 and subsequent years remain subject to examination by the IRS. CMS Energy’s Michigan Corporate Income Tax and Michigan Business Tax returns for 2008 and subsequent years, excluding 2012, remain subject to examination by the State of Michigan. CMS Energy’s and Consumers’ estimate of the potential outcome for any uncertain tax issue is highly judgmental. CMS Energy and Consumers believe that their accrued tax liabilities at December 31, 2017 were adequate for all years.
|
|||
16:Other Income and Other Expense
Presented in the following table are the components of other income and other expense at CMS Energy and Consumers:
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Other income |
||||||||||
|
Fee income |
$ |
- |
$ |
6 |
$ |
9 | ||||
|
All other |
6 | 2 | 1 | |||||||
|
Total other income – CMS Energy |
$ |
6 |
$ |
8 |
$ |
10 | ||||
|
Consumers |
||||||||||
|
Other income |
||||||||||
|
Gain on CMS Energy common stock |
$ |
14 |
$ |
- |
$ |
9 | ||||
|
Fee income |
- |
6 | 9 | |||||||
|
All other |
3 | 2 | 1 | |||||||
|
Total other income – Consumers |
$ |
17 |
$ |
8 |
$ |
19 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Other expense |
||||||||||
|
Donations |
$ |
(31) |
$ |
(23) |
$ |
(1) | ||||
|
Civic and political expenditures |
(27) | (21) | (10) | |||||||
|
Loss on reacquired and extinguished debt |
(18) | (18) |
- |
|||||||
|
Unrealized investment loss |
- |
(5) |
- |
|||||||
|
All other |
- |
(8) | (6) | |||||||
|
Total other expense – CMS Energy |
$ |
(76) |
$ |
(75) |
$ |
(17) | ||||
|
Consumers |
||||||||||
|
Other expense |
||||||||||
|
Donations |
$ |
(31) |
$ |
(23) |
$ |
(1) | ||||
|
Civic and political expenditures |
(27) | (21) | (10) | |||||||
|
Unrealized investment loss |
- |
(4) |
- |
|||||||
|
All other |
- |
(7) | (6) | |||||||
|
Total other expense – Consumers |
$ |
(58) |
$ |
(55) |
$ |
(17) | ||||
16:Other Income and Other Expense
Presented in the following table are the components of other income and other expense at CMS Energy and Consumers:
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Other income |
||||||||||
|
Fee income |
$ |
- |
$ |
6 |
$ |
9 | ||||
|
All other |
6 | 2 | 1 | |||||||
|
Total other income – CMS Energy |
$ |
6 |
$ |
8 |
$ |
10 | ||||
|
Consumers |
||||||||||
|
Other income |
||||||||||
|
Gain on CMS Energy common stock |
$ |
14 |
$ |
- |
$ |
9 | ||||
|
Fee income |
- |
6 | 9 | |||||||
|
All other |
3 | 2 | 1 | |||||||
|
Total other income – Consumers |
$ |
17 |
$ |
8 |
$ |
19 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Other expense |
||||||||||
|
Donations |
$ |
(31) |
$ |
(23) |
$ |
(1) | ||||
|
Civic and political expenditures |
(27) | (21) | (10) | |||||||
|
Loss on reacquired and extinguished debt |
(18) | (18) |
- |
|||||||
|
Unrealized investment loss |
- |
(5) |
- |
|||||||
|
All other |
- |
(8) | (6) | |||||||
|
Total other expense – CMS Energy |
$ |
(76) |
$ |
(75) |
$ |
(17) | ||||
|
Consumers |
||||||||||
|
Other expense |
||||||||||
|
Donations |
$ |
(31) |
$ |
(23) |
$ |
(1) | ||||
|
Civic and political expenditures |
(27) | (21) | (10) | |||||||
|
Unrealized investment loss |
- |
(4) |
- |
|||||||
|
All other |
- |
(7) | (6) | |||||||
|
Total other expense – Consumers |
$ |
(58) |
$ |
(55) |
$ |
(17) | ||||
|
|||
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 |
|||||||
|
December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
Cash and cash equivalents |
$ |
182 |
$ |
235 | |||
|
Restricted cash and cash equivalents |
17 | 19 | |||||
|
Other non-current assets |
5 | 3 | |||||
|
Cash and cash equivalents, including restricted amounts |
$ |
204 |
$ |
257 | |||
|
Consumers |
|||||||
|
Cash and cash equivalents |
$ |
44 |
$ |
131 | |||
|
Restricted cash and cash equivalents |
17 | 19 | |||||
|
Other non-current assets |
4 | 2 | |||||
|
Cash and cash equivalents, including restricted amounts |
$ |
65 |
$ |
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 6, Fair Value Measurements and Note 12, Retirement Benefits for more information regarding the DB SERP.
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 |
|||||||
|
December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
Cash and cash equivalents |
$ |
182 |
$ |
235 | |||
|
Restricted cash and cash equivalents |
17 | 19 | |||||
|
Other non-current assets |
5 | 3 | |||||
|
Cash and cash equivalents, including restricted amounts |
$ |
204 |
$ |
257 | |||
|
Consumers |
|||||||
|
Cash and cash equivalents |
$ |
44 |
$ |
131 | |||
|
Restricted cash and cash equivalents |
17 | 19 | |||||
|
Other non-current assets |
4 | 2 | |||||
|
Cash and cash equivalents, including restricted amounts |
$ |
65 |
$ |
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 6, Fair Value Measurements and Note 12, Retirement Benefits for more information regarding the DB SERP.
|
|||
18:Reportable Segments
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.
Accounting policies for CMS Energy’s and Consumers’ segments are as described in Note 1, Significant Accounting Policies. The consolidated financial statements reflect the assets, liabilities, revenues, and expenses of the individual segments when appropriate. Accounts are allocated among the segments when common accounts are attributable to more than one segment. The allocations are based on certain measures of business activities, such as revenue, labor dollars, customers, other operating and maintenance expense, construction expense, leased property, taxes, or functional surveys. For example, customer receivables are allocated based on revenue, and pension provisions are allocated based on labor dollars.
Inter-segment sales and transfers are accounted for at current market prices and are eliminated in consolidated net income available to common stockholders by segment.
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 in domestic independent power production, the marketing of independent power production, and the development of renewable generation |
CMS Energy presents EnerBank, corporate interest and other expenses, and Consumers’ other consolidated entities 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 |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Operating revenue |
||||||||||
|
Electric utility |
$ |
4,448 |
$ |
4,379 |
$ |
4,249 | ||||
|
Gas utility |
1,774 | 1,685 | 1,916 | |||||||
|
Enterprises |
229 | 215 | 190 | |||||||
|
Other reconciling items |
132 | 120 | 101 | |||||||
|
Total operating revenue – CMS Energy |
$ |
6,583 |
$ |
6,399 |
$ |
6,456 | ||||
|
Consumers |
||||||||||
|
Operating revenue |
||||||||||
|
Electric utility |
$ |
4,448 |
$ |
4,379 |
$ |
4,249 | ||||
|
Gas utility |
1,774 | 1,685 | 1,916 | |||||||
|
Total operating revenue – Consumers |
$ |
6,222 |
$ |
6,064 |
$ |
6,165 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Depreciation and amortization |
||||||||||
|
Electric utility |
$ |
654 |
$ |
603 |
$ |
567 | ||||
|
Gas utility |
218 | 200 | 177 | |||||||
|
Enterprises |
6 | 5 | 4 | |||||||
|
Other reconciling items |
3 | 3 | 2 | |||||||
|
Total depreciation and amortization – CMS Energy |
$ |
881 |
$ |
811 |
$ |
750 | ||||
|
Consumers |
||||||||||
|
Depreciation and amortization |
||||||||||
|
Electric utility |
$ |
654 |
$ |
603 |
$ |
567 | ||||
|
Gas utility |
218 | 200 | 177 | |||||||
|
Total depreciation and amortization – Consumers |
$ |
872 |
$ |
803 |
$ |
744 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Income from equity method investees1 |
||||||||||
|
Enterprises |
$ |
15 |
$ |
13 |
$ |
14 | ||||
|
Total income from equity method investees – CMS Energy |
$ |
15 |
$ |
13 |
$ |
14 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Interest charges |
||||||||||
|
Electric utility |
$ |
201 |
$ |
196 |
$ |
178 | ||||
|
Gas utility |
74 | 72 | 71 | |||||||
|
Enterprises |
- |
1 |
- |
|||||||
|
Other reconciling items |
163 | 166 | 147 | |||||||
|
Total interest charges – CMS Energy |
$ |
438 |
$ |
435 |
$ |
396 | ||||
|
Consumers |
||||||||||
|
Interest charges |
||||||||||
|
Electric utility |
$ |
201 |
$ |
196 |
$ |
178 | ||||
|
Gas utility |
74 | 72 | 71 | |||||||
|
Other reconciling items |
1 |
- |
1 | |||||||
|
Total interest charges – Consumers |
$ |
276 |
$ |
268 |
$ |
250 | ||||
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Income tax expense (benefit) |
||||||||||
|
Electric utility |
$ |
245 |
$ |
246 |
$ |
224 | ||||
|
Gas utility |
96 | 74 | 78 | |||||||
|
Enterprises |
72 | 10 | 3 | |||||||
|
Other reconciling items |
11 | (57) | (34) | |||||||
|
Total income tax expense – CMS Energy |
$ |
424 |
$ |
273 |
$ |
271 | ||||
|
Consumers |
||||||||||
|
Income tax expense (benefit) |
||||||||||
|
Electric utility |
$ |
245 |
$ |
246 |
$ |
224 | ||||
|
Gas utility |
96 | 74 | 78 | |||||||
|
Other reconciling items |
(2) |
- |
- |
|||||||
|
Total income tax expense – Consumers |
$ |
339 |
$ |
320 |
$ |
302 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Net income (loss) available to common stockholders |
||||||||||
|
Electric utility |
$ |
455 |
$ |
458 |
$ |
437 | ||||
|
Gas utility |
173 | 155 | 154 | |||||||
|
Enterprises |
(27) | 17 | 4 | |||||||
|
Other reconciling items |
(141) | (79) | (72) | |||||||
|
Total net income available to common stockholders – |
$ |
460 |
$ |
551 |
$ |
523 | ||||
|
Consumers |
||||||||||
|
Net income available to common stockholder |
||||||||||
|
Electric utility |
$ |
455 |
$ |
458 |
$ |
437 | ||||
|
Gas utility |
173 | 155 | 154 | |||||||
|
Other reconciling items |
2 | 1 | 1 | |||||||
|
Total net income available to common stockholder – |
$ |
630 |
$ |
614 |
$ |
592 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Plant, property, and equipment, gross |
||||||||||
|
Electric utility2 |
$ |
15,221 |
$ |
14,540 |
$ |
13,059 | ||||
|
Gas utility2 |
7,080 | 6,283 | 5,723 | |||||||
|
Enterprises |
167 | 157 | 120 | |||||||
|
Other reconciling items |
38 | 30 | 41 | |||||||
|
Total plant, property, and equipment, gross – CMS Energy |
$ |
22,506 |
$ |
21,010 |
$ |
18,943 | ||||
|
Consumers |
||||||||||
|
Plant, property, and equipment, gross |
||||||||||
|
Electric utility2 |
$ |
15,221 |
$ |
14,540 |
$ |
13,059 | ||||
|
Gas utility2 |
7,080 | 6,283 | 5,723 | |||||||
|
Other reconciling items |
17 | 15 | 15 | |||||||
|
Total plant, property, and equipment, gross – Consumers |
$ |
22,318 |
$ |
20,838 |
$ |
18,797 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Investments in equity method investees1 |
||||||||||
|
Enterprises |
$ |
64 |
$ |
62 |
$ |
61 | ||||
|
Other reconciling items |
- |
3 | 3 | |||||||
|
Total investments in equity method investees – CMS Energy |
$ |
64 |
$ |
65 |
$ |
64 | ||||
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Total assets |
||||||||||
|
Electric utility2 |
$ |
13,906 |
$ |
13,429 |
$ |
12,660 | ||||
|
Gas utility2 |
7,139 | 6,446 | 5,912 | |||||||
|
Enterprises |
342 | 269 | 270 | |||||||
|
Other reconciling items |
1,663 | 1,478 | 1,457 | |||||||
|
Total assets – CMS Energy |
$ |
23,050 |
$ |
21,622 |
$ |
20,299 | ||||
|
Consumers |
||||||||||
|
Total assets |
||||||||||
|
Electric utility2 |
$ |
13,907 |
$ |
13,430 |
$ |
12,660 | ||||
|
Gas utility2 |
7,139 | 6,446 | 5,912 | |||||||
|
Other reconciling items |
53 | 70 | 63 | |||||||
|
Total assets – Consumers |
$ |
21,099 |
$ |
19,946 |
$ |
18,635 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Capital expenditures3 |
||||||||||
|
Electric utility |
$ |
882 |
$ |
1,007 |
$ |
1,136 | ||||
|
Gas utility |
800 | 611 | 558 | |||||||
|
Enterprises |
33 | 10 | 44 | |||||||
|
Other reconciling items |
7 | 5 | 3 | |||||||
|
Total capital expenditures – CMS Energy |
$ |
1,722 |
$ |
1,633 |
$ |
1,741 | ||||
|
Consumers |
||||||||||
|
Capital expenditures3 |
||||||||||
|
Electric utility |
$ |
882 |
$ |
1,007 |
$ |
1,136 | ||||
|
Gas utility |
800 | 611 | 558 | |||||||
|
Other reconciling items |
1 |
- |
- |
|||||||
|
Total capital expenditures – Consumers |
$ |
1,683 |
$ |
1,618 |
$ |
1,694 | ||||
1Consumers had no significant equity method investments.
2Amounts include a portion of Consumers’ other common assets attributable to both the electric and gas utility businesses.
3Amounts include purchase of capital lease additions. Amounts also include a portion of Consumers’ capital expenditures for plant and equipment attributable to both the electric and gas utility businesses.
18:Reportable Segments
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.
Accounting policies for CMS Energy’s and Consumers’ segments are as described in Note 1, Significant Accounting Policies. The consolidated financial statements reflect the assets, liabilities, revenues, and expenses of the individual segments when appropriate. Accounts are allocated among the segments when common accounts are attributable to more than one segment. The allocations are based on certain measures of business activities, such as revenue, labor dollars, customers, other operating and maintenance expense, construction expense, leased property, taxes, or functional surveys. For example, customer receivables are allocated based on revenue, and pension provisions are allocated based on labor dollars.
Inter-segment sales and transfers are accounted for at current market prices and are eliminated in consolidated net income available to common stockholders by segment.
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 in domestic independent power production, the marketing of independent power production, and the development of renewable generation |
CMS Energy presents EnerBank, corporate interest and other expenses, and Consumers’ other consolidated entities 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 |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Operating revenue |
||||||||||
|
Electric utility |
$ |
4,448 |
$ |
4,379 |
$ |
4,249 | ||||
|
Gas utility |
1,774 | 1,685 | 1,916 | |||||||
|
Enterprises |
229 | 215 | 190 | |||||||
|
Other reconciling items |
132 | 120 | 101 | |||||||
|
Total operating revenue – CMS Energy |
$ |
6,583 |
$ |
6,399 |
$ |
6,456 | ||||
|
Consumers |
||||||||||
|
Operating revenue |
||||||||||
|
Electric utility |
$ |
4,448 |
$ |
4,379 |
$ |
4,249 | ||||
|
Gas utility |
1,774 | 1,685 | 1,916 | |||||||
|
Total operating revenue – Consumers |
$ |
6,222 |
$ |
6,064 |
$ |
6,165 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Depreciation and amortization |
||||||||||
|
Electric utility |
$ |
654 |
$ |
603 |
$ |
567 | ||||
|
Gas utility |
218 | 200 | 177 | |||||||
|
Enterprises |
6 | 5 | 4 | |||||||
|
Other reconciling items |
3 | 3 | 2 | |||||||
|
Total depreciation and amortization – CMS Energy |
$ |
881 |
$ |
811 |
$ |
750 | ||||
|
Consumers |
||||||||||
|
Depreciation and amortization |
||||||||||
|
Electric utility |
$ |
654 |
$ |
603 |
$ |
567 | ||||
|
Gas utility |
218 | 200 | 177 | |||||||
|
Total depreciation and amortization – Consumers |
$ |
872 |
$ |
803 |
$ |
744 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Income from equity method investees1 |
||||||||||
|
Enterprises |
$ |
15 |
$ |
13 |
$ |
14 | ||||
|
Total income from equity method investees – CMS Energy |
$ |
15 |
$ |
13 |
$ |
14 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Interest charges |
||||||||||
|
Electric utility |
$ |
201 |
$ |
196 |
$ |
178 | ||||
|
Gas utility |
74 | 72 | 71 | |||||||
|
Enterprises |
- |
1 |
- |
|||||||
|
Other reconciling items |
163 | 166 | 147 | |||||||
|
Total interest charges – CMS Energy |
$ |
438 |
$ |
435 |
$ |
396 | ||||
|
Consumers |
||||||||||
|
Interest charges |
||||||||||
|
Electric utility |
$ |
201 |
$ |
196 |
$ |
178 | ||||
|
Gas utility |
74 | 72 | 71 | |||||||
|
Other reconciling items |
1 |
- |
1 | |||||||
|
Total interest charges – Consumers |
$ |
276 |
$ |
268 |
$ |
250 | ||||
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Income tax expense (benefit) |
||||||||||
|
Electric utility |
$ |
245 |
$ |
246 |
$ |
224 | ||||
|
Gas utility |
96 | 74 | 78 | |||||||
|
Enterprises |
72 | 10 | 3 | |||||||
|
Other reconciling items |
11 | (57) | (34) | |||||||
|
Total income tax expense – CMS Energy |
$ |
424 |
$ |
273 |
$ |
271 | ||||
|
Consumers |
||||||||||
|
Income tax expense (benefit) |
||||||||||
|
Electric utility |
$ |
245 |
$ |
246 |
$ |
224 | ||||
|
Gas utility |
96 | 74 | 78 | |||||||
|
Other reconciling items |
(2) |
- |
- |
|||||||
|
Total income tax expense – Consumers |
$ |
339 |
$ |
320 |
$ |
302 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Net income (loss) available to common stockholders |
||||||||||
|
Electric utility |
$ |
455 |
$ |
458 |
$ |
437 | ||||
|
Gas utility |
173 | 155 | 154 | |||||||
|
Enterprises |
(27) | 17 | 4 | |||||||
|
Other reconciling items |
(141) | (79) | (72) | |||||||
|
Total net income available to common stockholders – |
$ |
460 |
$ |
551 |
$ |
523 | ||||
|
Consumers |
||||||||||
|
Net income available to common stockholder |
||||||||||
|
Electric utility |
$ |
455 |
$ |
458 |
$ |
437 | ||||
|
Gas utility |
173 | 155 | 154 | |||||||
|
Other reconciling items |
2 | 1 | 1 | |||||||
|
Total net income available to common stockholder – |
$ |
630 |
$ |
614 |
$ |
592 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Plant, property, and equipment, gross |
||||||||||
|
Electric utility2 |
$ |
15,221 |
$ |
14,540 |
$ |
13,059 | ||||
|
Gas utility2 |
7,080 | 6,283 | 5,723 | |||||||
|
Enterprises |
167 | 157 | 120 | |||||||
|
Other reconciling items |
38 | 30 | 41 | |||||||
|
Total plant, property, and equipment, gross – CMS Energy |
$ |
22,506 |
$ |
21,010 |
$ |
18,943 | ||||
|
Consumers |
||||||||||
|
Plant, property, and equipment, gross |
||||||||||
|
Electric utility2 |
$ |
15,221 |
$ |
14,540 |
$ |
13,059 | ||||
|
Gas utility2 |
7,080 | 6,283 | 5,723 | |||||||
|
Other reconciling items |
17 | 15 | 15 | |||||||
|
Total plant, property, and equipment, gross – Consumers |
$ |
22,318 |
$ |
20,838 |
$ |
18,797 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Investments in equity method investees1 |
||||||||||
|
Enterprises |
$ |
64 |
$ |
62 |
$ |
61 | ||||
|
Other reconciling items |
- |
3 | 3 | |||||||
|
Total investments in equity method investees – CMS Energy |
$ |
64 |
$ |
65 |
$ |
64 | ||||
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Total assets |
||||||||||
|
Electric utility2 |
$ |
13,906 |
$ |
13,429 |
$ |
12,660 | ||||
|
Gas utility2 |
7,139 | 6,446 | 5,912 | |||||||
|
Enterprises |
342 | 269 | 270 | |||||||
|
Other reconciling items |
1,663 | 1,478 | 1,457 | |||||||
|
Total assets – CMS Energy |
$ |
23,050 |
$ |
21,622 |
$ |
20,299 | ||||
|
Consumers |
||||||||||
|
Total assets |
||||||||||
|
Electric utility2 |
$ |
13,907 |
$ |
13,430 |
$ |
12,660 | ||||
|
Gas utility2 |
7,139 | 6,446 | 5,912 | |||||||
|
Other reconciling items |
53 | 70 | 63 | |||||||
|
Total assets – Consumers |
$ |
21,099 |
$ |
19,946 |
$ |
18,635 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Capital expenditures3 |
||||||||||
|
Electric utility |
$ |
882 |
$ |
1,007 |
$ |
1,136 | ||||
|
Gas utility |
800 | 611 | 558 | |||||||
|
Enterprises |
33 | 10 | 44 | |||||||
|
Other reconciling items |
7 | 5 | 3 | |||||||
|
Total capital expenditures – CMS Energy |
$ |
1,722 |
$ |
1,633 |
$ |
1,741 | ||||
|
Consumers |
||||||||||
|
Capital expenditures3 |
||||||||||
|
Electric utility |
$ |
882 |
$ |
1,007 |
$ |
1,136 | ||||
|
Gas utility |
800 | 611 | 558 | |||||||
|
Other reconciling items |
1 |
- |
- |
|||||||
|
Total capital expenditures – Consumers |
$ |
1,683 |
$ |
1,618 |
$ |
1,694 | ||||
1Consumers had no significant equity method investments.
2Amounts include a portion of Consumers’ other common assets attributable to both the electric and gas utility businesses.
3Amounts include purchase of capital lease additions. Amounts also include a portion of Consumers’ capital expenditures for plant and equipment attributable to both the electric and gas utility businesses.
|
|||
19:Related-Party Transactions—Consumers
Consumers enters into a number of transactions with related parties. These transactions include:
|
· |
payments to and from CMS Energy related to parent company overhead costs |
|
· |
investment in CMS Energy common stock |
Transactions involving power supply purchases from certain affiliates of CMS Enterprises are based on avoided costs under PURPA, state law, and competitive bidding. The payment of parent company overhead costs is based on the use of accepted industry allocation methodologies. These payments are for costs that occur in the normal course of business.
Presented in the following table is Consumers’ expense recorded from related-party transactions for the years ended December 31:
|
|
|||||||||||
|
In Millions |
|||||||||||
|
Description |
Related Party |
2017 | 2016 | 2015 | |||||||
|
Purchases of capacity and energy |
Affiliates of CMS Enterprises |
$ |
90 |
$ |
88 |
$ |
83 | ||||
Amounts payable to related parties for purchased power and other services were $27 million at December 31, 2017 and $24 million at December 31, 2016. Accounts receivable from related parties were $2 million at December 31, 2017 and $9 million at December 31, 2016.
Consumers owned shares of CMS Energy common stock with a fair value of $21 million at December 31, 2017 and $33 million at December 31, 2016. For additional details on Consumers’ investment in CMS Energy common stock, see Note 7, Financial Instruments.
In January 2018, Consumers renewed a short-term credit agreement with CMS Energy, permitting Consumers to borrow up to $300 million. At December 31, 2017, there were no outstanding loans under the agreement.
|
|||
CMS Energy has variable interests in T.E.S. Filer City, Grayling, Genesee, and Craven. CMS Energy is not the primary beneficiary of any of these partnerships because decision making is shared among unrelated parties, and no one party has the ability to direct activities, such as operations and maintenance, plant dispatch, and fuel strategy, that most significantly impact the entities’ economic performance. The partners must agree on all major decisions for each of the partnerships.
Presented in the following table is information about these partnerships:
|
|
|||||
|
Name (Ownership Interest) |
Nature of the Entity |
Financing of Partnership |
|||
|
T.E.S. Filer City (50%) |
Coal-fueled power generator |
Line of credit secured by T.E.S. Filer City’s coal inventory |
|||
|
|
|||||
|
Grayling (50%) |
Wood waste-fueled power generator |
The partnership has no debt. |
|||
|
|
|||||
|
Genesee (50%) |
Wood waste-fueled power generator |
Sale of revenue bonds that mature in 2021 and bear interest at fixed rates. The debt is non-recourse to the partners and secured by a CMS Energy guarantee capped at $3 million annually. |
|||
|
|
|||||
|
Craven (50%) |
Wood waste-fueled power generator |
Line of credit secured by Craven’s property, plant, and equipment |
CMS Energy has operating and management contracts with Grayling, Genesee, and Craven. Additionally, Consumers is the primary purchaser of power from T.E.S. Filer City, Grayling, and Genesee through long-term PPAs. Consumers also has reduced dispatch agreements with Grayling and Genesee, which allow these facilities to be dispatched based on the market price of power compared with the cost of production of the plants. This results in fuel cost savings that each partnership shares with Consumers’ customers.
CMS Energy’s investment in these partnerships is included in investments on its consolidated balance sheets in the amount of $64 million as of December 31, 2017 and $62 million as of December 31, 2016. The creditors of these partnerships do not have recourse to the general credit of CMS Energy or Consumers, except through a guarantee provided by CMS Energy of $3 million annually. CMS Energy has deferred collections on certain receivables owed by Genesee. CMS Energy’s maximum exposure to loss from these receivables is $9 million. Consumers has not provided any financial or other support during the periods presented that was not previously contractually required.
|
|||
21:Quarterly Financial and Common Stock Information (Unaudited)
|
|
|||||||||||||
|
In Millions, Except Per Share Amounts and Stock Prices |
|||||||||||||
|
|
2017 |
||||||||||||
|
Quarters Ended |
March 31 |
June 30 |
Sept 30 |
Dec 31 |
|||||||||
|
CMS Energy, including Consumers |
|||||||||||||
|
Operating revenue |
$ |
1,829 |
$ |
1,449 |
$ |
1,527 |
$ |
1,778 | |||||
|
Operating income |
388 | 241 | 330 | 379 | |||||||||
|
Net income (loss) |
199 | 93 | 172 | (2) | |||||||||
|
Income attributable to noncontrolling interests |
- |
1 |
- |
1 | |||||||||
|
Net income (loss) available to common stockholders |
199 | 92 | 172 | (3) | |||||||||
|
Basic earnings (loss) per average common share1 |
0.71 | 0.33 | 0.61 | (0.01) | |||||||||
|
Diluted earnings (loss) per average common share1 |
0.71 | 0.33 | 0.61 | (0.01) | |||||||||
|
Common stock prices2 |
|||||||||||||
|
High |
45.28 | 48.25 | 49.10 | 50.55 | |||||||||
|
Low |
41.51 | 44.82 | 45.57 | 45.97 | |||||||||
|
Consumers |
|||||||||||||
|
Operating revenue |
$ |
1,737 |
$ |
1,362 |
$ |
1,437 |
$ |
1,686 | |||||
|
Operating income |
359 | 222 | 308 | 363 | |||||||||
|
Net income |
211 | 104 | 181 | 136 | |||||||||
|
Preferred stock dividends |
- |
1 |
- |
1 | |||||||||
|
Net income available to common stockholder |
211 | 103 | 181 | 135 | |||||||||
|
|
|||||||||||||
|
In Millions, Except Per Share Amounts and Stock Prices |
|||||||||||||
|
|
2016 |
||||||||||||
|
Quarters Ended |
March 31 |
June 30 |
Sept 30 |
Dec 31 |
|||||||||
|
CMS Energy, including Consumers |
|||||||||||||
|
Operating revenue |
$ |
1,801 |
$ |
1,371 |
$ |
1,587 |
$ |
1,640 | |||||
|
Operating income3 |
326 | 275 | 375 | 280 | |||||||||
|
Net income |
164 | 125 | 186 | 78 | |||||||||
|
Income attributable to noncontrolling interests |
- |
1 |
- |
1 | |||||||||
|
Net income available to common stockholders |
164 | 124 | 186 | 77 | |||||||||
|
Basic earnings per average common share1 |
0.59 | 0.45 | 0.67 | 0.28 | |||||||||
|
Diluted earnings per average common share1 |
0.59 | 0.45 | 0.67 | 0.28 | |||||||||
|
Common stock prices2 |
|||||||||||||
|
High |
42.44 | 45.86 | 46.17 | 42.15 | |||||||||
|
Low |
35.61 | 39.38 | 41.31 | 39.49 | |||||||||
|
Consumers |
|||||||||||||
|
Operating revenue |
$ |
1,723 |
$ |
1,293 |
$ |
1,498 |
$ |
1,550 | |||||
|
Operating income3 |
308 | 254 | 356 | 279 | |||||||||
|
Net income |
172 | 132 | 195 | 117 | |||||||||
|
Preferred stock dividends |
- |
1 |
- |
1 | |||||||||
|
Net income available to common stockholder |
172 | 131 | 195 | 116 | |||||||||
1The sum of the quarters may not equal annual EPS due to changes in the number of shares outstanding.
2Based on New York Stock Exchange composite transactions.
3Prior period amounts have been adjusted as required to reflect the implementation of ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. For further details on the adoption of this standard, see Note 2, New Accounting Standards.
21:Quarterly Financial and Common Stock Information (Unaudited)
|
|
|||||||||||||
|
In Millions, Except Per Share Amounts and Stock Prices |
|||||||||||||
|
|
2017 |
||||||||||||
|
Quarters Ended |
March 31 |
June 30 |
Sept 30 |
Dec 31 |
|||||||||
|
CMS Energy, including Consumers |
|||||||||||||
|
Operating revenue |
$ |
1,829 |
$ |
1,449 |
$ |
1,527 |
$ |
1,778 | |||||
|
Operating income |
388 | 241 | 330 | 379 | |||||||||
|
Net income (loss) |
199 | 93 | 172 | (2) | |||||||||
|
Income attributable to noncontrolling interests |
- |
1 |
- |
1 | |||||||||
|
Net income (loss) available to common stockholders |
199 | 92 | 172 | (3) | |||||||||
|
Basic earnings (loss) per average common share1 |
0.71 | 0.33 | 0.61 | (0.01) | |||||||||
|
Diluted earnings (loss) per average common share1 |
0.71 | 0.33 | 0.61 | (0.01) | |||||||||
|
Common stock prices2 |
|||||||||||||
|
High |
45.28 | 48.25 | 49.10 | 50.55 | |||||||||
|
Low |
41.51 | 44.82 | 45.57 | 45.97 | |||||||||
|
Consumers |
|||||||||||||
|
Operating revenue |
$ |
1,737 |
$ |
1,362 |
$ |
1,437 |
$ |
1,686 | |||||
|
Operating income |
359 | 222 | 308 | 363 | |||||||||
|
Net income |
211 | 104 | 181 | 136 | |||||||||
|
Preferred stock dividends |
- |
1 |
- |
1 | |||||||||
|
Net income available to common stockholder |
211 | 103 | 181 | 135 | |||||||||
|
|
|||||||||||||
|
In Millions, Except Per Share Amounts and Stock Prices |
|||||||||||||
|
|
2016 |
||||||||||||
|
Quarters Ended |
March 31 |
June 30 |
Sept 30 |
Dec 31 |
|||||||||
|
CMS Energy, including Consumers |
|||||||||||||
|
Operating revenue |
$ |
1,801 |
$ |
1,371 |
$ |
1,587 |
$ |
1,640 | |||||
|
Operating income3 |
326 | 275 | 375 | 280 | |||||||||
|
Net income |
164 | 125 | 186 | 78 | |||||||||
|
Income attributable to noncontrolling interests |
- |
1 |
- |
1 | |||||||||
|
Net income available to common stockholders |
164 | 124 | 186 | 77 | |||||||||
|
Basic earnings per average common share1 |
0.59 | 0.45 | 0.67 | 0.28 | |||||||||
|
Diluted earnings per average common share1 |
0.59 | 0.45 | 0.67 | 0.28 | |||||||||
|
Common stock prices2 |
|||||||||||||
|
High |
42.44 | 45.86 | 46.17 | 42.15 | |||||||||
|
Low |
35.61 | 39.38 | 41.31 | 39.49 | |||||||||
|
Consumers |
|||||||||||||
|
Operating revenue |
$ |
1,723 |
$ |
1,293 |
$ |
1,498 |
$ |
1,550 | |||||
|
Operating income3 |
308 | 254 | 356 | 279 | |||||||||
|
Net income |
172 | 132 | 195 | 117 | |||||||||
|
Preferred stock dividends |
- |
1 |
- |
1 | |||||||||
|
Net income available to common stockholder |
172 | 131 | 195 | 116 | |||||||||
1The sum of the quarters may not equal annual EPS due to changes in the number of shares outstanding.
2Based on New York Stock Exchange composite transactions.
3Prior period amounts have been adjusted as required to reflect the implementation of ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. For further details on the adoption of this standard, see Note 2, New Accounting Standards.
|
|||
Schedule I – Condensed Financial Information of Registrant
CMS Energy—Parent Company
Condensed Statements of Income
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
|
||||||||||
|
Operating Expenses |
||||||||||
|
Other operating expenses |
$ |
(9) |
$ |
(14) |
$ |
(8) | ||||
|
Total operating expenses |
(9) | (14) | (8) | |||||||
|
|
||||||||||
|
Operating Loss |
(9) | (14) | (8) | |||||||
|
|
||||||||||
|
Other Income (Expense) |
||||||||||
|
Equity earnings of subsidiaries |
633 | 660 | 625 | |||||||
|
Nonoperating retirement benefits, net |
(1) | (1) | (1) | |||||||
|
Interest income |
1 | 1 | 1 | |||||||
|
Other income |
2 |
- |
- |
|||||||
|
Other expense |
(31) | (19) | (9) | |||||||
|
Total other income |
604 | 641 | 616 | |||||||
|
|
||||||||||
|
Interest Charges |
||||||||||
|
Interest on long-term debt |
143 | 150 | 134 | |||||||
|
Intercompany interest expense and other |
3 | 1 | 3 | |||||||
|
Total interest charges |
146 | 151 | 137 | |||||||
|
|
||||||||||
|
Income Before Income Taxes |
449 | 476 | 471 | |||||||
|
Income Tax Benefit |
(11) | (75) | (52) | |||||||
|
|
||||||||||
|
Net Income Available to Common Stockholders |
$ |
460 |
$ |
551 |
$ |
523 | ||||
|
|
||||||||||
|
The accompanying notes are an integral part of these statements. |
||||||||||
Schedule I – Condensed Financial Information of Registrant (Continued)
CMS Energy—Parent Company
Condensed Statements of Cash Flows
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
|
||||||||||
|
Cash Flows from Operating Activities |
||||||||||
|
Net cash provided by operating activities |
$ |
433 |
$ |
422 |
$ |
209 | ||||
|
|
||||||||||
|
Cash Flows from Investing Activities |
||||||||||
|
Investment in subsidiaries |
(447) | (275) | (150) | |||||||
|
Net cash used in investing activities |
(447) | (275) | (150) | |||||||
|
|
||||||||||
|
Cash Flows from Financing Activities |
||||||||||
|
Proceeds from issuance of debt |
799 | 603 | 349 | |||||||
|
Issuance of common stock |
83 | 72 | 43 | |||||||
|
Retirement of long-term debt |
(425) | (530) | (100) | |||||||
|
Debt prepayment costs |
(18) | (18) |
- |
|||||||
|
Payment of dividends on common stock |
(375) | (345) | (320) | |||||||
|
Debt issuance costs and financing fees |
(3) | (5) | (3) | |||||||
|
Change in notes payable |
(47) | 76 | (28) | |||||||
|
Net cash provided by (used in) financing activities |
14 | (147) | (59) | |||||||
|
|
||||||||||
|
Net Increase in Cash and Cash Equivalents, Including Restricted Amounts |
- |
- |
- |
|||||||
|
Cash and Cash Equivalents, Including Restricted Amounts, Beginning of Period |
- |
- |
- |
|||||||
|
|
||||||||||
|
Cash and Cash Equivalents, Including Restricted Amounts, |
$ |
- |
$ |
- |
$ |
- |
||||
|
|
||||||||||
|
The accompanying notes are an integral part of these statements. |
||||||||||
Schedule I – Condensed Financial Information of Registrant (Continued)
CMS Energy—Parent Company
|
|
|||||||
|
ASSETS |
|||||||
|
In Millions |
|||||||
|
December 31 |
2017 | 2016 | |||||
|
|
|||||||
|
Current Assets |
|||||||
|
Notes and accrued interest receivable |
$ |
5 |
$ |
2 | |||
|
Accounts receivable, including intercompany and related parties |
7 | 7 | |||||
|
Federal income tax receivable |
77 |
- |
|||||
|
Accrued taxes |
57 | 51 | |||||
|
Prepayments and other current assets |
1 | 1 | |||||
|
Total current assets |
147 | 61 | |||||
|
|
|||||||
|
Other Non-current Assets |
|||||||
|
Notes receivable |
- |
3 | |||||
|
Deferred income taxes |
269 | 366 | |||||
|
Investments in subsidiaries |
7,202 | 6,674 | |||||
|
Other investments – DB SERP |
25 | 26 | |||||
|
Other |
2 | 4 | |||||
|
Total other non-current assets |
7,498 | 7,073 | |||||
|
|
|||||||
|
Total Assets |
$ |
7,645 |
$ |
7,134 | |||
|
|
|||||||
|
LIABILITIES AND EQUITY |
|||||||
|
In Millions |
|||||||
|
December 31 |
2017 | 2016 | |||||
|
|
|||||||
|
Current Liabilities |
|||||||
|
Current portion of long-term debt |
$ |
225 |
$ |
- |
|||
|
Accounts and notes payable, including intercompany and related parties |
87 | 141 | |||||
|
Accrued interest, including intercompany |
34 | 28 | |||||
|
Other current liabilities |
5 | 10 | |||||
|
Total current liabilities |
351 | 179 | |||||
|
|
|||||||
|
Non-current Liabilities |
|||||||
|
Long-term debt |
2,830 | 2,678 | |||||
|
Postretirement benefits |
21 | 21 | |||||
|
Other non-current liabilities |
2 | 3 | |||||
|
Total non-current liabilities |
2,853 | 2,702 | |||||
|
|
|||||||
|
Equity |
|||||||
|
Common stockholders’ equity |
4,441 | 4,253 | |||||
|
|
|||||||
|
Total Liabilities and Equity |
$ |
7,645 |
$ |
7,134 | |||
|
|
|||||||
|
The accompanying notes are an integral part of these statements. |
|||||||
Schedule I – Condensed Financial Information of Registrant (Continued)
CMS Energy—Parent Company
Notes to the Condensed Financial Statements
1:Basis of Presentation
CMS Energy’s condensed financial statements have been prepared on a parent-only basis. In accordance with Rule 12‑04 of Regulation S‑X, these parent-only financial statements do not include all of the information and notes required by GAAP for annual financial statements, and therefore these parent-only financial statements and other information included should be read in conjunction with CMS Energy’s audited consolidated financial statements contained within Item 8. Financial Statements and Supplementary Data.
2:Guarantees
CMS Energy has issued guarantees with a maximum potential obligation of $334 million on behalf of some of its wholly owned subsidiaries and related parties. CMS Energy’s maximum potential obligation consists primarily of potential payments:
|
· |
to third parties in support of non‑recourse revenue bonds issued by Genesee |
|
· |
to the MDEQ on behalf of CMS Land and CMS Capital, for environmental remediation obligations at Bay Harbor |
|
· |
to the U.S. Department of Energy on behalf of Consumers, in connection with Consumers’ 2011 settlement agreement with the U.S. Department of Energy regarding damages resulting from the department’s failure to accept spent nuclear fuel from nuclear power plants formerly owned by Consumers |
The expiry dates of these guarantees vary, depending upon contractual provisions or upon the statute of limitations under the relevant governing law.
|
|||
Schedule II – Valuation and Qualifying Accounts and Reserves
Years Ended December 31, 2017, 2016, and 2015
|
|
||||||||||||||||
|
In Millions |
||||||||||||||||
|
Description |
Balance at |
Charged to |
Charged to |
Deductions |
Balance at |
|||||||||||
|
|
||||||||||||||||
|
Allowance for uncollectible accounts1 |
||||||||||||||||
|
2017 |
$ |
24 |
$ |
29 |
$ |
- |
$ |
33 |
$ |
20 | ||||||
|
2016 |
28 | 31 |
- |
35 | 24 | |||||||||||
|
2015 |
40 | 50 |
- |
62 | 28 | |||||||||||
|
|
||||||||||||||||
|
Deferred tax valuation allowance |
||||||||||||||||
|
2017 |
$ |
5 |
$ |
10 |
$ |
- |
$ |
- |
$ |
15 | ||||||
|
2016 |
4 | 1 |
- |
- |
5 | |||||||||||
|
2015 |
2 | 3 | (1) |
- |
4 | |||||||||||
|
|
||||||||||||||||
|
Allowance for notes receivable1 |
||||||||||||||||
|
2017 |
$ |
16 |
$ |
20 |
$ |
- |
$ |
16 |
$ |
20 | ||||||
|
2016 |
9 | 19 |
- |
12 | 16 | |||||||||||
|
2015 |
8 | 8 |
- |
7 | 9 | |||||||||||
1Deductions represent write-offs of uncollectible accounts, net of recoveries.
Years Ended December 31, 2017, 2016, and 2015
|
|
||||||||||||||||
|
In Millions |
||||||||||||||||
|
Description |
Balance at |
Charged to |
Charged to |
Deductions |
Balance at |
|||||||||||
|
|
||||||||||||||||
|
Allowance for uncollectible accounts1 |
||||||||||||||||
|
2017 |
$ |
24 |
$ |
29 |
$ |
- |
$ |
33 |
$ |
20 | ||||||
|
2016 |
28 | 31 |
- |
35 | 24 | |||||||||||
|
2015 |
39 | 50 |
- |
61 | 28 | |||||||||||
|
|
||||||||||||||||
|
Deferred tax valuation allowance |
||||||||||||||||
|
2017 |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
||||||
|
2016 |
- |
- |
- |
- |
- |
|||||||||||
|
2015 |
1 |
- |
(1) |
- |
- |
|||||||||||
1Deductions represent write-offs of uncollectible accounts, net of recoveries.
Schedule II – Valuation and Qualifying Accounts and Reserves
Years Ended December 31, 2017, 2016, and 2015
|
|
||||||||||||||||
|
In Millions |
||||||||||||||||
|
Description |
Balance at |
Charged to |
Charged to |
Deductions |
Balance at |
|||||||||||
|
|
||||||||||||||||
|
Allowance for uncollectible accounts1 |
||||||||||||||||
|
2017 |
$ |
24 |
$ |
29 |
$ |
- |
$ |
33 |
$ |
20 | ||||||
|
2016 |
28 | 31 |
- |
35 | 24 | |||||||||||
|
2015 |
40 | 50 |
- |
62 | 28 | |||||||||||
|
|
||||||||||||||||
|
Deferred tax valuation allowance |
||||||||||||||||
|
2017 |
$ |
5 |
$ |
10 |
$ |
- |
$ |
- |
$ |
15 | ||||||
|
2016 |
4 | 1 |
- |
- |
5 | |||||||||||
|
2015 |
2 | 3 | (1) |
- |
4 | |||||||||||
|
|
||||||||||||||||
|
Allowance for notes receivable1 |
||||||||||||||||
|
2017 |
$ |
16 |
$ |
20 |
$ |
- |
$ |
16 |
$ |
20 | ||||||
|
2016 |
9 | 19 |
- |
12 | 16 | |||||||||||
|
2015 |
8 | 8 |
- |
7 | 9 | |||||||||||
1Deductions represent write-offs of uncollectible accounts, net of recoveries.
Years Ended December 31, 2017, 2016, and 2015
|
|
||||||||||||||||
|
In Millions |
||||||||||||||||
|
Description |
Balance at |
Charged to |
Charged to |
Deductions |
Balance at |
|||||||||||
|
|
||||||||||||||||
|
Allowance for uncollectible accounts1 |
||||||||||||||||
|
2017 |
$ |
24 |
$ |
29 |
$ |
- |
$ |
33 |
$ |
20 | ||||||
|
2016 |
28 | 31 |
- |
35 | 24 | |||||||||||
|
2015 |
39 | 50 |
- |
61 | 28 | |||||||||||
|
|
||||||||||||||||
|
Deferred tax valuation allowance |
||||||||||||||||
|
2017 |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
||||||
|
2016 |
- |
- |
- |
- |
- |
|||||||||||
|
2015 |
1 |
- |
(1) |
- |
- |
|||||||||||
1Deductions represent write-offs of uncollectible accounts, net of recoveries.
|
|||
Principles of Consolidation: CMS Energy and Consumers prepare their consolidated financial statements in conformity with GAAP. CMS Energy’s consolidated financial statements comprise CMS Energy, Consumers, CMS Enterprises, and all other entities in which CMS Energy has a controlling financial interest or is the primary beneficiary. Consumers’ consolidated financial statements comprise Consumers and all other entities in which it has a controlling financial interest or is the primary beneficiary. CMS Energy uses the equity method of accounting for investments in companies and partnerships that are not consolidated, where they have significant influence over operations and financial policies but are not the primary beneficiary. CMS Energy and Consumers eliminate intercompany transactions and balances.
Use of Estimates: CMS Energy and Consumers are required to make estimates using assumptions that may affect reported amounts and disclosures. Actual results could differ from those estimates.
Revenue Recognition Policy: CMS Energy and Consumers recognize revenue from deliveries of electricity and natural gas, and from the transportation, processing, and storage of natural gas, when services are provided. CMS Energy and Consumers record unbilled revenue for the estimated amount of energy delivered to customers but not yet billed. CMS Energy and Consumers record sales tax net and exclude it from revenue. CMS Energy recognizes revenue on sales of marketed electricity, natural gas, and other energy products at delivery.
Alternative-Revenue Program: The energy waste reduction incentive mechanism provides a financial incentive if the energy savings of Consumers’ customers exceed annual targets established by the MPSC. The maximum incentive that Consumers may earn under this mechanism is 20 percent of the amount it spends on energy waste reduction programs. Consumers accounts for this program as an alternative-revenue program that meets the criteria for recognizing revenue related to the incentive as soon as energy savings exceed the annual targets established by the MPSC.
Self-Implemented Rates: The 2016 Energy Law, which became effective in April 2017, eliminated utilities’ self-implementation of rates under general rate cases, but provided for more timely processing of general rate cases. Consumers filed an electric rate case in March 2017, prior to the effective date of that law, and as result was allowed to self-implement new energy rates in October 2017, subject to refund with interest and potential penalties. Consumers recognized revenue associated with self-implemented rates, but recorded a provision for revenue subject to refund because it considered it probable that it would be required to refund a portion of its self-implemented rates.
EnerBank: EnerBank provides four types of unsecured consumer installment loans: same-as-cash, zero interest, reduced interest, and traditional. Under EnerBank’s same-as-cash programs, authorized contractors pay EnerBank a fee to provide a borrower with the option to pay off the loan interest-free during the same-as-cash period. EnerBank recognizes the fee on a straight-line basis over the same-as-cash period, which typically ranges from three to 24 months. If a borrower does not exercise its option to pay off its loan interest-free during the same-as-cash period, EnerBank charges the borrower accrued interest at the loan’s contractual rate on the outstanding balance from the origination date. Under the zero interest and reduced interest programs, authorized contractors pay EnerBank a fee to provide a borrower with no interest or reduced rates of interest for the entire term of the loan. EnerBank recognizes the fee using the interest method over the term of the loan, which ranges from one to 12 years. Unearned income associated with the fees is recorded as a reduction to notes receivable on CMS Energy’s consolidated balance sheets.
EnerBank recognizes interest income using the interest method and amortizes loan origination fees, net of certain direct origination costs, over the loan term. EnerBank ceases recognizing interest income when a loan loss is confirmed or when a loan becomes 120 days past due, at which time the loan principal is charged against the allowance for loan losses. At that time, EnerBank recognizes any interest accrued but not received for such loan losses as a reversal of interest income.
The loan fees and interest income earned by EnerBank are reported as operating revenue on CMS Energy’s consolidated statements of income.
Accounts Receivable: Accounts receivable comprise trade receivables and unbilled receivables. CMS Energy and Consumers record their accounts receivable at cost, which approximates fair value. CMS Energy and Consumers establish an allowance for uncollectible accounts based on historical losses, management’s assessment of existing economic conditions, customer trends, and other factors. CMS Energy and Consumers assess late payment fees on trade receivables based on contractual past-due terms established with customers. CMS Energy and Consumers charge off accounts deemed uncollectible to operating expense. Unbilled receivables, which are recorded as accounts receivable on CMS Energy’s and Consumers’ consolidated balance sheets, were $481 million at December 31, 2017 and $361 million at December 31, 2016.
Contingencies: CMS Energy and Consumers record estimated liabilities for contingencies on their consolidated financial statements when it is probable that a liability has been incurred and when the amount of loss can be reasonably estimated. For environmental remediation projects in which the timing of estimated expenditures is considered reliably determinable, CMS Energy and Consumers record the liability at its net present value, using a discount rate equal to the interest rate on monetary assets that are essentially risk-free and have maturities comparable to that of the environmental liability. CMS Energy and Consumers expense legal fees as incurred; fees incurred but not yet billed are accrued based on estimates of work performed.
Debt Issuance Costs, Discounts, Premiums, and Refinancing Costs: Upon the issuance of long-term debt, CMS Energy and Consumers defer issuance costs, discounts, and premiums and amortize those amounts over the terms of the associated debt. Debt issuance costs are presented as a direct deduction from the carrying amount of long-term debt on the balance sheet. Upon the refinancing of long-term debt, Consumers, as a regulated entity, defers any remaining unamortized issuance costs, discounts, and premiums associated with the refinanced debt and amortizes those amounts over the term of the newly issued debt. For the non‑regulated portions of CMS Energy’s business, any remaining unamortized issuance costs, discounts, and premiums associated with extinguished debt are charged to earnings.
Derivative Instruments: In order to support ongoing operations, CMS Energy and Consumers enter into contracts for the future purchase and sale of various commodities, such as electricity, natural gas, and coal. These forward contracts are generally long-term in nature and result in physical delivery of the commodity at a contracted price. Most of these contracts are not subject to derivative accounting for one or more of the following reasons:
|
· |
they do not have a notional amount (that is, a number of units specified in a derivative instrument, such as MWh of electricity or bcf of natural gas) |
|
· |
they qualify for the normal purchases and sales exception |
|
· |
there is not an active market for the commodity |
Consumers’ coal purchase contracts are not derivatives because there is not an active market for the coal it purchases. If an active market for coal develops in the future, some of these contracts may qualify as derivatives. Since Consumers is subject to regulatory accounting, the resulting fair value gains and losses would be deferred as regulatory assets or liabilities and would not affect net income.
Consumers also uses FTRs to manage price risk related to electricity transmission congestion. An FTR is a financial instrument that entitles its holder to receive compensation or requires its holder to remit payment for congestion-related transmission charges. Consumers accounts for FTRs as derivatives. All changes in fair value associated with FTRs are deferred as regulatory assets and liabilities until the instruments are settled.
CMS Energy and Consumers record derivative contracts that do not qualify for the normal purchases and sales exception at fair value on their consolidated balance sheets. Each reporting period, the resulting asset or liability is adjusted to reflect any change in the fair value of the contract. Since none of CMS Energy’s or Consumers’ derivatives has been designated as an accounting hedge, all changes in fair value are either reported in earnings or deferred as regulatory assets or liabilities. For details regarding CMS Energy’s and Consumers’ derivative instruments recorded at fair value, see Note 6, Fair Value Measurements.
Earnings Per Share: CMS Energy calculates basic and diluted EPS using the weighted-average number of shares of common stock and dilutive potential common stock outstanding during the period. Potential common stock, for purposes of determining diluted EPS, includes the effects of nonvested stock awards and contingently convertible securities. CMS Energy computes the effect on potential common stock using the treasury stock method or the if‑converted method, as applicable. Diluted EPS excludes the impact of antidilutive securities, which are those securities resulting in an increase in EPS or a decrease in loss per share. For EPS computations, see Note 15, Earnings Per Share—CMS Energy.
Financial Instruments: CMS Energy and Consumers record debt and equity securities classified as available for sale at fair value as determined from quoted market prices or other observable, market-based inputs. Unrealized gains and losses resulting from changes in fair value of these securities are determined on a specific-identification basis. CMS Energy and Consumers report unrealized gains and losses on these securities, net of tax, in equity as part of AOCI, except that unrealized losses determined to be other than temporary are reported in earnings. For additional details regarding financial instruments, see Note 7, Financial Instruments.
Impairment of Long-Lived Assets and Equity Method Investments: CMS Energy and Consumers perform tests of impairment if certain triggering events occur or if there has been a decline in value that may be other than temporary.
CMS Energy and Consumers evaluate long-lived assets held in use for impairment by calculating the undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. If the undiscounted future cash flows are less than the carrying amount, CMS Energy and Consumers recognize an impairment loss equal to the amount by which the carrying amount exceeds the fair value. CMS Energy and Consumers estimate the fair value of the asset using quoted market prices, market prices of similar assets, or discounted future cash flow analyses.
CMS Energy also assesses equity method investments for impairment whenever there has been a decline in value that is other than temporary. This assessment requires CMS Energy to determine the fair value of the equity method investment. CMS Energy determines fair value using valuation methodologies, including discounted cash flows, and assesses the ability of the investee to sustain an earnings capacity that justifies the carrying amount of the investment. CMS Energy records an impairment if the fair value is less than the carrying amount and the decline in value is considered to be other than temporary.
Inventory: CMS Energy and Consumers use the weighted-average cost method for valuing working gas, recoverable base gas in underground storage facilities, and materials and supplies inventory. CMS Energy and Consumers also use this method for valuing coal inventory, and they classify these amounts as generating plant fuel stock on their consolidated balance sheets.
CMS Energy and Consumers account for RECs and emission allowances as inventory and use the weighted-average cost method to remove amounts from inventory. RECs and emission allowances are used to satisfy compliance obligations related to the generation of power. CMS Energy and Consumers classify these amounts within other assets on their consolidated balance sheets.
CMS Energy and Consumers evaluate inventory for impairment as required to ensure that its carrying value does not exceed the lower of cost or net realizable value.
MISO Transactions: MISO requires the submission of hourly day-ahead and real-time bids and offers for energy at locations across the MISO region. CMS Energy and Consumers account for MISO transactions on a net hourly basis in each of the real-time and day-ahead markets, netted across all MISO energy market locations. CMS Energy and Consumers record net hourly purchases in purchased and interchange power and net hourly sales in operating revenue on their consolidated statements of income. They record net billing adjustments upon receipt of settlement statements, record accruals for future net purchases and sales adjustments based on historical experience, and reconcile accruals to actual expenses and sales upon receipt of settlement statements.
Property Taxes: Property taxes are based on the taxable value of Consumers’ real and personal property assessed by local taxing authorities. Consumers records property tax expense over the fiscal year of the taxing authority for which the taxes are levied. The deferred property tax balance represents the amount of Consumers’ accrued property tax that will be recognized over future governmental fiscal periods.
Renewable Energy Grant: In 2013, Consumers received a renewable energy cash grant for Lake Winds® Energy Park under Section 1603 of the American Recovery and Reinvestment Tax Act of 2009. Upon receipt of the grant, Consumers recorded a regulatory liability, which Consumers is amortizing over the life of Lake Winds® Energy Park. Consumers presents the amortization as a reduction to maintenance and other operating expenses on its consolidated statements of income. Consumers recorded the deferred income taxes related to the grant as a reduction of the book basis of Lake Winds® Energy Park.
Principles of Consolidation: CMS Energy and Consumers prepare their consolidated financial statements in conformity with GAAP. CMS Energy’s consolidated financial statements comprise CMS Energy, Consumers, CMS Enterprises, and all other entities in which CMS Energy has a controlling financial interest or is the primary beneficiary. Consumers’ consolidated financial statements comprise Consumers and all other entities in which it has a controlling financial interest or is the primary beneficiary. CMS Energy uses the equity method of accounting for investments in companies and partnerships that are not consolidated, where they have significant influence over operations and financial policies but are not the primary beneficiary. CMS Energy and Consumers eliminate intercompany transactions and balances.
Use of Estimates: CMS Energy and Consumers are required to make estimates using assumptions that may affect reported amounts and disclosures. Actual results could differ from those estimates.
Revenue Recognition Policy: CMS Energy and Consumers recognize revenue from deliveries of electricity and natural gas, and from the transportation, processing, and storage of natural gas, when services are provided. CMS Energy and Consumers record unbilled revenue for the estimated amount of energy delivered to customers but not yet billed. CMS Energy and Consumers record sales tax net and exclude it from revenue. CMS Energy recognizes revenue on sales of marketed electricity, natural gas, and other energy products at delivery.
Alternative-Revenue Program: The energy waste reduction incentive mechanism provides a financial incentive if the energy savings of Consumers’ customers exceed annual targets established by the MPSC. The maximum incentive that Consumers may earn under this mechanism is 20 percent of the amount it spends on energy waste reduction programs. Consumers accounts for this program as an alternative-revenue program that meets the criteria for recognizing revenue related to the incentive as soon as energy savings exceed the annual targets established by the MPSC.
Self-Implemented Rates: The 2016 Energy Law, which became effective in April 2017, eliminated utilities’ self-implementation of rates under general rate cases, but provided for more timely processing of general rate cases. Consumers filed an electric rate case in March 2017, prior to the effective date of that law, and as result was allowed to self-implement new energy rates in October 2017, subject to refund with interest and potential penalties. Consumers recognized revenue associated with self-implemented rates, but recorded a provision for revenue subject to refund because it considered it probable that it would be required to refund a portion of its self-implemented rates.
Accounts Receivable: Accounts receivable comprise trade receivables and unbilled receivables. CMS Energy and Consumers record their accounts receivable at cost, which approximates fair value. CMS Energy and Consumers establish an allowance for uncollectible accounts based on historical losses, management’s assessment of existing economic conditions, customer trends, and other factors. CMS Energy and Consumers assess late payment fees on trade receivables based on contractual past-due terms established with customers. CMS Energy and Consumers charge off accounts deemed uncollectible to operating expense. Unbilled receivables, which are recorded as accounts receivable on CMS Energy’s and Consumers’ consolidated balance sheets, were $481 million at December 31, 2017 and $361 million at December 31, 2016.
Contingencies: CMS Energy and Consumers record estimated liabilities for contingencies on their consolidated financial statements when it is probable that a liability has been incurred and when the amount of loss can be reasonably estimated. For environmental remediation projects in which the timing of estimated expenditures is considered reliably determinable, CMS Energy and Consumers record the liability at its net present value, using a discount rate equal to the interest rate on monetary assets that are essentially risk-free and have maturities comparable to that of the environmental liability. CMS Energy and Consumers expense legal fees as incurred; fees incurred but not yet billed are accrued based on estimates of work performed.
Debt Issuance Costs, Discounts, Premiums, and Refinancing Costs: Upon the issuance of long-term debt, CMS Energy and Consumers defer issuance costs, discounts, and premiums and amortize those amounts over the terms of the associated debt. Debt issuance costs are presented as a direct deduction from the carrying amount of long-term debt on the balance sheet. Upon the refinancing of long-term debt, Consumers, as a regulated entity, defers any remaining unamortized issuance costs, discounts, and premiums associated with the refinanced debt and amortizes those amounts over the term of the newly issued debt. For the non‑regulated portions of CMS Energy’s business, any remaining unamortized issuance costs, discounts, and premiums associated with extinguished debt are charged to earnings.
Derivative Instruments: In order to support ongoing operations, CMS Energy and Consumers enter into contracts for the future purchase and sale of various commodities, such as electricity, natural gas, and coal. These forward contracts are generally long-term in nature and result in physical delivery of the commodity at a contracted price. Most of these contracts are not subject to derivative accounting for one or more of the following reasons:
|
· |
they do not have a notional amount (that is, a number of units specified in a derivative instrument, such as MWh of electricity or bcf of natural gas) |
|
· |
they qualify for the normal purchases and sales exception |
|
· |
there is not an active market for the commodity |
Consumers’ coal purchase contracts are not derivatives because there is not an active market for the coal it purchases. If an active market for coal develops in the future, some of these contracts may qualify as derivatives. Since Consumers is subject to regulatory accounting, the resulting fair value gains and losses would be deferred as regulatory assets or liabilities and would not affect net income.
Consumers also uses FTRs to manage price risk related to electricity transmission congestion. An FTR is a financial instrument that entitles its holder to receive compensation or requires its holder to remit payment for congestion-related transmission charges. Consumers accounts for FTRs as derivatives. All changes in fair value associated with FTRs are deferred as regulatory assets and liabilities until the instruments are settled.
CMS Energy and Consumers record derivative contracts that do not qualify for the normal purchases and sales exception at fair value on their consolidated balance sheets. Each reporting period, the resulting asset or liability is adjusted to reflect any change in the fair value of the contract. Since none of CMS Energy’s or Consumers’ derivatives has been designated as an accounting hedge, all changes in fair value are either reported in earnings or deferred as regulatory assets or liabilities. For details regarding CMS Energy’s and Consumers’ derivative instruments recorded at fair value, see Note 6, Fair Value Measurements.
Financial Instruments: CMS Energy and Consumers record debt and equity securities classified as available for sale at fair value as determined from quoted market prices or other observable, market-based inputs. Unrealized gains and losses resulting from changes in fair value of these securities are determined on a specific-identification basis. CMS Energy and Consumers report unrealized gains and losses on these securities, net of tax, in equity as part of AOCI, except that unrealized losses determined to be other than temporary are reported in earnings. For additional details regarding financial instruments, see Note 7, Financial Instruments.
Impairment of Long-Lived Assets and Equity Method Investments: CMS Energy and Consumers perform tests of impairment if certain triggering events occur or if there has been a decline in value that may be other than temporary.
CMS Energy and Consumers evaluate long-lived assets held in use for impairment by calculating the undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. If the undiscounted future cash flows are less than the carrying amount, CMS Energy and Consumers recognize an impairment loss equal to the amount by which the carrying amount exceeds the fair value. CMS Energy and Consumers estimate the fair value of the asset using quoted market prices, market prices of similar assets, or discounted future cash flow analyses.
Inventory: CMS Energy and Consumers use the weighted-average cost method for valuing working gas, recoverable base gas in underground storage facilities, and materials and supplies inventory. CMS Energy and Consumers also use this method for valuing coal inventory, and they classify these amounts as generating plant fuel stock on their consolidated balance sheets.
CMS Energy and Consumers account for RECs and emission allowances as inventory and use the weighted-average cost method to remove amounts from inventory. RECs and emission allowances are used to satisfy compliance obligations related to the generation of power. CMS Energy and Consumers classify these amounts within other assets on their consolidated balance sheets.
CMS Energy and Consumers evaluate inventory for impairment as required to ensure that its carrying value does not exceed the lower of cost or net realizable value.
MISO Transactions: MISO requires the submission of hourly day-ahead and real-time bids and offers for energy at locations across the MISO region. CMS Energy and Consumers account for MISO transactions on a net hourly basis in each of the real-time and day-ahead markets, netted across all MISO energy market locations. CMS Energy and Consumers record net hourly purchases in purchased and interchange power and net hourly sales in operating revenue on their consolidated statements of income. They record net billing adjustments upon receipt of settlement statements, record accruals for future net purchases and sales adjustments based on historical experience, and reconcile accruals to actual expenses and sales upon receipt of settlement statements.
Property Taxes: Property taxes are based on the taxable value of Consumers’ real and personal property assessed by local taxing authorities. Consumers records property tax expense over the fiscal year of the taxing authority for which the taxes are levied. The deferred property tax balance represents the amount of Consumers’ accrued property tax that will be recognized over future governmental fiscal periods.
Renewable Energy Grant: In 2013, Consumers received a renewable energy cash grant for Lake Winds® Energy Park under Section 1603 of the American Recovery and Reinvestment Tax Act of 2009. Upon receipt of the grant, Consumers recorded a regulatory liability, which Consumers is amortizing over the life of Lake Winds® Energy Park. Consumers presents the amortization as a reduction to maintenance and other operating expenses on its consolidated statements of income. Consumers recorded the deferred income taxes related to the grant as a reduction of the book basis of Lake Winds® Energy Park.
|
|||
Unearned income associated with loan fees was $84 million at December 31, 2017 and 2016. Unearned income associated with loan fees for notes receivable held for sale was $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.
|
|||
CMS Energy and Consumers record the fair value of the cost to remove assets at the end of their useful lives, if there is a legal obligation to remove them. If a reasonable estimate of fair value cannot be made in the period in which the ARO is incurred, such as for assets with indeterminate lives, the liability is recognized when a reasonable estimate of fair value can be made. CMS Energy and Consumers have not recorded liabilities for assets that have immaterial cumulative disposal costs, such as substation batteries.
CMS Energy and Consumers calculate the fair value of ARO liabilities using an expected present-value technique that reflects assumptions about costs and inflation, and uses a credit-adjusted risk-free rate to discount the expected cash flows. CMS Energy’s ARO liabilities are primarily at Consumers. As a regulated entity, Consumers defers the effects of any changes in assumptions on the fair values of its ARO liabilities, adjusting the associated regulatory assets or liabilities rather than recognizing such effects in earnings.
CMS Energy and Consumers record the fair value of the cost to remove assets at the end of their useful lives, if there is a legal obligation to remove them. If a reasonable estimate of fair value cannot be made in the period in which the ARO is incurred, such as for assets with indeterminate lives, the liability is recognized when a reasonable estimate of fair value can be made. CMS Energy and Consumers have not recorded liabilities for assets that have immaterial cumulative disposal costs, such as substation batteries.
CMS Energy and Consumers calculate the fair value of ARO liabilities using an expected present-value technique that reflects assumptions about costs and inflation, and uses a credit-adjusted risk-free rate to discount the expected cash flows. CMS Energy’s ARO liabilities are primarily at Consumers. As a regulated entity, Consumers defers the effects of any changes in assumptions on the fair values of its ARO liabilities, adjusting the associated regulatory assets or liabilities rather than recognizing such effects in earnings.
|
|||
CMS Energy and its subsidiaries file a consolidated U.S. federal income tax return as well as a Michigan Corporate Income Tax return for the unitary business group and various other state unitary group combined income tax returns. Income taxes are allocated based on each company’s separate taxable income in accordance with the CMS Energy tax sharing agreement.
CMS Energy and its subsidiaries file a consolidated U.S. federal income tax return as well as a Michigan Corporate Income Tax return for the unitary business group and various other state unitary group combined income tax returns. Income taxes are allocated based on each company’s separate taxable income in accordance with the CMS Energy tax sharing agreement.
|
|||
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.
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.
|
|||
|
|
||||||||
|
In Millions |
||||||||
|
December 31 |
End of Recovery |
2017 | 2016 | |||||
|
Regulatory assets |
||||||||
|
Current |
||||||||
|
Energy waste reduction plan incentive1 |
2018 |
$ |
18 |
$ |
17 | |||
|
Other |
2018 | 2 |
- |
|||||
|
Total current regulatory assets |
$ |
20 |
$ |
17 | ||||
|
Non-current |
||||||||
|
Postretirement benefits2 |
various |
$ |
1,028 |
$ |
1,373 | |||
|
Securitized costs3 |
2029 | 298 | 323 | |||||
|
ARO4 |
various |
161 | 166 | |||||
|
MGP sites4 |
various |
142 | 139 | |||||
|
Unamortized loss on reacquired debt4 |
various |
53 | 54 | |||||
|
Energy waste reduction plan4 |
various |
39 | 1 | |||||
|
Energy waste reduction plan incentive1 |
2019 | 31 | 18 | |||||
|
Gas storage inventory adjustments4 |
various |
10 | 14 | |||||
|
Other |
various |
2 | 3 | |||||
|
Total non-current regulatory assets |
$ |
1,764 |
$ |
2,091 | ||||
|
Total regulatory assets |
$ |
1,784 |
$ |
2,108 | ||||
|
Regulatory liabilities |
||||||||
|
Current |
||||||||
|
Income taxes, net |
2018 |
$ |
52 |
$ |
64 | |||
|
Other |
2018 | 28 | 31 | |||||
|
Total current regulatory liabilities |
$ |
80 |
$ |
95 | ||||
|
Non-current |
||||||||
|
Cost of removal |
various |
$ |
1,844 |
$ |
1,809 | |||
|
Income taxes, net |
various |
1,564 | 7 | |||||
|
Postretirement benefits |
various |
135 |
- |
|||||
|
Renewable energy plan |
2028 | 56 | 83 | |||||
|
Renewable energy grant |
2043 | 56 | 58 | |||||
|
ARO |
various |
50 | 62 | |||||
|
Energy waste reduction plan |
various |
- |
11 | |||||
|
Other |
various |
10 | 11 | |||||
|
Total non-current regulatory liabilities |
$ |
3,715 |
$ |
2,041 | ||||
|
Total regulatory liabilities |
$ |
3,795 |
$ |
2,136 | ||||
1These regulatory assets have arisen from an alternative revenue program and are not associated with incurred costs or capital investments. Therefore, the MPSC has provided for recovery without a return.
2This regulatory asset is offset partially by liabilities. The net amount is included in rate base, thereby providing a return.
3The MPSC has authorized a specific return on this regulatory asset.
4These regulatory assets represent incurred costs for which the MPSC has provided, or Consumers expects, recovery without a return on investment.
|
|
|||||||
|
In Millions |
|||||||
|
December 31 |
2017 | 2016 | |||||
|
Liabilities |
|||||||
|
PSCR overrecoveries |
$ |
27 |
$ |
8 | |||
|
GCR overrecoveries |
6 | 13 | |||||
|
Accrued rate refunds |
$ |
33 |
$ |
21 | |||
|
|
||||
|
In Millions |
||||
|
Components of the rate increase |
||||
|
Investment in rate base |
$ |
45 | ||
|
Operating and maintenance costs |
42 | |||
|
Gross margin |
42 | |||
|
Cost of capital |
28 | |||
|
Working capital |
(9) | |||
|
Total |
$ |
148 | ||
|
|||
|
|
||||||||||
|
In Millions |
||||||||||
|
|
Maximum |
Carrying |
||||||||
|
Guarantee Description |
Issue Date |
Expiration Date |
Obligation |
Amount |
||||||
|
CMS Energy, including Consumers |
||||||||||
|
Indemnity obligations from stock and |
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. For additional details on this guarantee, see Note 20, Variable Interest Entities.
|
|
||||||||||||||||||||||
|
In Millions |
||||||||||||||||||||||
|
|
Payments Due |
|||||||||||||||||||||
|
|
Total |
2018 | 2019 | 2020 | 2021 | 2022 |
Beyond |
|||||||||||||||
|
CMS Energy, including Consumers |
||||||||||||||||||||||
|
Total PPAs |
$ |
9,159 |
$ |
1,042 |
$ |
1,048 |
$ |
1,064 |
$ |
1,063 |
$ |
795 |
$ |
4,147 | ||||||||
|
Other |
2,026 | 891 | 541 | 186 | 61 | 56 | 291 | |||||||||||||||
|
Consumers |
||||||||||||||||||||||
|
PPAs |
||||||||||||||||||||||
|
MCV PPA |
$ |
2,621 |
$ |
350 |
$ |
348 |
$ |
346 |
$ |
335 |
$ |
339 |
$ |
903 | ||||||||
|
Palisades PPA |
1,647 | 367 | 378 | 388 | 400 | 114 |
- |
|||||||||||||||
|
Related-party PPAs |
1,546 | 87 | 87 | 94 | 96 | 100 | 1,082 | |||||||||||||||
|
Other PPAs |
3,345 | 238 | 235 | 236 | 232 | 242 | 2,162 | |||||||||||||||
|
Total PPAs |
$ |
9,159 |
$ |
1,042 |
$ |
1,048 |
$ |
1,064 |
$ |
1,063 |
$ |
795 |
$ |
4,147 | ||||||||
|
Other |
1,787 | 859 | 511 | 156 | 48 | 44 | 169 | |||||||||||||||
|
|
||||||||||
|
In Millions |
||||||||||
|
|
Maximum |
Carrying |
||||||||
|
Guarantee Description |
Issue Date |
Expiration Date |
Obligation |
Amount |
||||||
|
CMS Energy, including Consumers |
||||||||||
|
Indemnity obligations from stock and |
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. For additional details on this guarantee, see Note 20, Variable Interest Entities.
|
|
||||||||||||||||||||||
|
In Millions |
||||||||||||||||||||||
|
|
Payments Due |
|||||||||||||||||||||
|
|
Total |
2018 | 2019 | 2020 | 2021 | 2022 |
Beyond |
|||||||||||||||
|
CMS Energy, including Consumers |
||||||||||||||||||||||
|
Total PPAs |
$ |
9,159 |
$ |
1,042 |
$ |
1,048 |
$ |
1,064 |
$ |
1,063 |
$ |
795 |
$ |
4,147 | ||||||||
|
Other |
2,026 | 891 | 541 | 186 | 61 | 56 | 291 | |||||||||||||||
|
Consumers |
||||||||||||||||||||||
|
PPAs |
||||||||||||||||||||||
|
MCV PPA |
$ |
2,621 |
$ |
350 |
$ |
348 |
$ |
346 |
$ |
335 |
$ |
339 |
$ |
903 | ||||||||
|
Palisades PPA |
1,647 | 367 | 378 | 388 | 400 | 114 |
- |
|||||||||||||||
|
Related-party PPAs |
1,546 | 87 | 87 | 94 | 96 | 100 | 1,082 | |||||||||||||||
|
Other PPAs |
3,345 | 238 | 235 | 236 | 232 | 242 | 2,162 | |||||||||||||||
|
Total PPAs |
$ |
9,159 |
$ |
1,042 |
$ |
1,048 |
$ |
1,064 |
$ |
1,063 |
$ |
795 |
$ |
4,147 | ||||||||
|
Other |
1,787 | 859 | 511 | 156 | 48 | 44 | 169 | |||||||||||||||
|
|
||||||||||||||||
|
In Millions |
||||||||||||||||
|
|
2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||
|
Consumers |
||||||||||||||||
|
Remediation and other response activity costs |
$ |
17 |
$ |
18 |
$ |
10 |
$ |
18 |
$ |
7 | ||||||
|
|
||||||||||||||||
|
In Millions |
||||||||||||||||
|
|
2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||
|
CMS Energy |
||||||||||||||||
|
Long-term liquid disposal and operating and maintenance costs |
$ |
5 |
$ |
4 |
$ |
4 |
$ |
4 |
$ |
4 | ||||||
|
|||
|
|
||||||||||
|
In Millions |
||||||||||
|
|
Interest Rate |
Maturity |
2017 | 2016 | ||||||
|
CMS Energy, including Consumers |
||||||||||
|
CMS Energy, parent only |
||||||||||
|
Senior notes |
8.750 | 2019 |
$ |
100 |
$ |
300 | ||||
|
|
6.250 | 2020 | 300 | 300 | ||||||
|
|
5.050 | 2022 | 300 | 300 | ||||||
|
|
3.875 | 2024 | 250 | 250 | ||||||
|
|
3.600 | 2025 | 250 | 250 | ||||||
|
|
3.000 | 2026 | 300 | 300 | ||||||
|
|
2.950 | 2027 | 275 | 275 | ||||||
|
|
3.450 | 2027 | 350 |
- |
||||||
|
|
4.700 | 2043 | 250 | 250 | ||||||
|
|
4.875 | 2044 | 300 | 300 | ||||||
|
Total senior notes |
$ |
2,675 |
$ |
2,525 | ||||||
|
Term loan facility |
variable |
1 |
2019 | 180 | 180 | |||||
|
Term loan facility |
variable |
2 |
2018 | 225 |
- |
|||||
|
EnerBank |
||||||||||
|
Certificates of deposit |
1.76 |
3 |
2018-2026 |
1,245 | 1,198 | |||||
|
Consumers |
5,940 | 5,661 | ||||||||
|
Total principal amount outstanding |
$ |
10,265 |
$ |
9,564 | ||||||
|
Current amounts |
(1,081) | (864) | ||||||||
|
Net unamortized discounts |
(14) | (15) | ||||||||
|
Unamortized issuance costs |
(47) | (45) | ||||||||
|
Total long-term debt |
$ |
9,123 |
$ |
8,640 | ||||||
1Outstanding borrowings bear interest at an annual interest rate of LIBOR plus 0.80 percent (2.37 percent at December 31, 2017).
2Outstanding borrowings bear interest at an annual interest rate of LIBOR plus 0.68 percent (2.28 percent at December 31, 2017).
3The weighted-average interest rate for EnerBank’s certificates of deposit was 1.76 percent at December 31, 2017 and 1.51 percent at December 31, 2016. EnerBank’s primary deposit product consists of brokered certificates of deposit with varying maturities and having a face value of $1,000.
|
|
||||||||
|
|
Principal |
Issue/Retirement |
||||||
|
|
(In Millions) |
Interest Rate |
Date |
Maturity Date |
||||
|
Debt issuances |
||||||||
|
CMS Energy, parent only |
||||||||
|
Senior notes |
$ |
350 | 3.450 |
% |
February 2017 |
August 2027 |
||
|
Term loan facility1 |
225 |
variable |
December 2017 |
December 2018 |
||||
|
Total CMS Energy, parent only |
$ |
575 | ||||||
|
Consumers |
||||||||
|
First mortgage bonds |
$ |
350 | 3.950 |
% |
February 2017 |
July 2047 |
||
|
First mortgage bonds |
40 | 3.180 |
September 2017 |
September 2032 |
||||
|
First mortgage bonds |
125 | 3.520 |
September 2017 |
September 2037 |
||||
|
First mortgage bonds |
20 | 3.860 |
September 2017 |
September 2052 |
||||
|
First mortgage bonds |
60 | 3.180 |
November 2017 |
November 2032 |
||||
|
First mortgage bonds |
210 | 3.520 |
November 2017 |
November 2037 |
||||
|
First mortgage bonds |
30 | 3.860 |
November 2017 |
November 2052 |
||||
|
Total Consumers |
$ |
835 | ||||||
|
Total CMS Energy |
$ |
1,410 | ||||||
|
Debt retirements |
||||||||
|
CMS Energy, parent only |
||||||||
|
Senior notes2 |
$ |
200 | 8.750 |
% |
December 2017 |
June 2019 |
||
|
Total CMS Energy, parent only |
$ |
200 | ||||||
|
Consumers |
||||||||
|
First mortgage bonds |
$ |
250 | 5.150 |
% |
February 2017 |
February 2017 |
||
|
Senior notes |
180 | 6.875 |
September 2017 |
March 2018 |
||||
|
First mortgage bonds |
100 | 3.210 |
October 2017 |
October 2017 |
||||
|
Total Consumers |
$ |
530 | ||||||
|
Total CMS Energy |
$ |
730 | ||||||
1Outstanding borrowings bear interest at an annual interest rate of LIBOR plus 0.68 percent (2.28 percent at December 31, 2017). CMS Energy used these proceeds to retire $200 million of the 8.75 percent senior notes due June 2019.
2CMS Energy retired this debt at a premium and recorded a loss on extinguishment of $18 million in other expense on its consolidated statements of income.
|
|
||||||||||||||||
|
In Millions |
||||||||||||||||
|
|
2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||
|
CMS Energy, including Consumers |
||||||||||||||||
|
Long-term debt |
$ |
1,081 |
$ |
1,428 |
$ |
905 |
$ |
178 |
$ |
1,039 | ||||||
|
Consumers |
||||||||||||||||
|
Long-term debt |
$ |
343 |
$ |
876 |
$ |
426 |
$ |
27 |
$ |
653 | ||||||
|
|
|||||||||||||
|
In Millions |
|||||||||||||
|
|
Amount of |
Amount |
Letters of Credit |
Amount |
|||||||||
|
Expiration Date |
Facility |
Borrowed |
Outstanding |
Available |
|||||||||
|
CMS Energy, parent only |
|||||||||||||
|
May 27, 20221,2 |
$ |
550 |
$ |
- |
$ |
6 |
$ |
544 | |||||
|
Consumers3 |
|||||||||||||
|
May 27, 20222 |
$ |
650 |
$ |
- |
$ |
7 |
$ |
643 | |||||
|
November 23, 20194 |
250 |
- |
20 | 230 | |||||||||
|
September 9, 20195 |
30 |
- |
30 |
- |
|||||||||
1During the year ended December 31, 2017, CMS Energy’s average borrowings totaled $21 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 these facilities are secured by first mortgage bonds of Consumers.
4In November 2017, the expiration date of this revolving credit agreement was extended from November 2018 to November 2019.
5In June 2017, the expiration date of this letter of credit reimbursement agreement was extended from May 2018 to September 2019.
|
|
||||||||||
|
In Millions |
||||||||||
|
|
Interest Rate |
Maturity |
2017 | 2016 | ||||||
|
Consumers |
||||||||||
|
First mortgage bonds1 |
5.150 | 2017 |
$ |
- |
$ |
250 | ||||
|
|
3.210 | 2017 |
- |
100 | ||||||
|
|
5.650 | 2018 | 250 | 250 | ||||||
|
|
6.125 | 2019 | 350 | 350 | ||||||
|
|
6.700 | 2019 | 500 | 500 | ||||||
|
|
5.650 | 2020 | 300 | 300 | ||||||
|
|
3.770 | 2020 | 100 | 100 | ||||||
|
|
5.300 | 2022 | 250 | 250 | ||||||
|
|
2.850 | 2022 | 375 | 375 | ||||||
|
|
3.375 | 2023 | 325 | 325 | ||||||
|
|
3.190 | 2024 | 52 | 52 | ||||||
|
|
3.125 | 2024 | 250 | 250 | ||||||
|
|
3.390 | 2027 | 35 | 35 | ||||||
|
|
3.180 | 2032 | 100 |
- |
||||||
|
|
5.800 | 2035 | 175 | 175 | ||||||
|
|
3.520 | 2037 | 335 |
- |
||||||
|
|
6.170 | 2040 | 50 | 50 | ||||||
|
|
4.970 | 2040 | 50 | 50 | ||||||
|
|
4.310 | 2042 | 263 | 263 | ||||||
|
|
3.950 | 2043 | 425 | 425 | ||||||
|
|
4.100 | 2045 | 250 | 250 | ||||||
|
|
3.250 | 2046 | 450 | 450 | ||||||
|
|
3.950 | 2047 | 350 |
- |
||||||
|
|
3.860 | 2052 | 50 |
- |
||||||
|
|
4.350 | 2064 | 250 | 250 | ||||||
|
Total first mortgage bonds |
$ |
5,535 |
$ |
5,050 | ||||||
|
Securitization bonds |
2.913 |
2 |
2020-2029 |
3 |
302 | 328 | ||||
|
Senior notes |
6.875 | 2018 |
- |
180 | ||||||
|
Tax-exempt pollution control revenue bonds |
various |
2018-2035 |
103 | 103 | ||||||
|
Total principal amount outstanding |
$ |
5,940 |
$ |
5,661 | ||||||
|
Current amounts |
(343) | (375) | ||||||||
|
Net unamortized discounts |
(8) | (8) | ||||||||
|
Unamortized issuance costs |
(28) | (25) | ||||||||
|
Total long-term debt |
$ |
5,561 |
$ |
5,253 | ||||||
1The weighted-average interest rate for Consumers’ first mortgage bonds was 4.44 percent at December 31, 2017 and 4.57 percent at December 31, 2016.
2The weighted-average interest rate for Consumers’ securitization bonds issued through its subsidiary Consumers 2014 Securitization Funding was 2.91 percent at December 31, 2017 and 2.79 percent at December 31, 2016.
3Principal and interest payments are made semiannually.
|
|
||||||||
|
|
Principal |
Issue/Retirement |
||||||
|
|
(In Millions) |
Interest Rate |
Date |
Maturity Date |
||||
|
Debt issuances |
||||||||
|
CMS Energy, parent only |
||||||||
|
Senior notes |
$ |
350 | 3.450 |
% |
February 2017 |
August 2027 |
||
|
Term loan facility1 |
225 |
variable |
December 2017 |
December 2018 |
||||
|
Total CMS Energy, parent only |
$ |
575 | ||||||
|
Consumers |
||||||||
|
First mortgage bonds |
$ |
350 | 3.950 |
% |
February 2017 |
July 2047 |
||
|
First mortgage bonds |
40 | 3.180 |
September 2017 |
September 2032 |
||||
|
First mortgage bonds |
125 | 3.520 |
September 2017 |
September 2037 |
||||
|
First mortgage bonds |
20 | 3.860 |
September 2017 |
September 2052 |
||||
|
First mortgage bonds |
60 | 3.180 |
November 2017 |
November 2032 |
||||
|
First mortgage bonds |
210 | 3.520 |
November 2017 |
November 2037 |
||||
|
First mortgage bonds |
30 | 3.860 |
November 2017 |
November 2052 |
||||
|
Total Consumers |
$ |
835 | ||||||
|
Total CMS Energy |
$ |
1,410 | ||||||
|
Debt retirements |
||||||||
|
CMS Energy, parent only |
||||||||
|
Senior notes2 |
$ |
200 | 8.750 |
% |
December 2017 |
June 2019 |
||
|
Total CMS Energy, parent only |
$ |
200 | ||||||
|
Consumers |
||||||||
|
First mortgage bonds |
$ |
250 | 5.150 |
% |
February 2017 |
February 2017 |
||
|
Senior notes |
180 | 6.875 |
September 2017 |
March 2018 |
||||
|
First mortgage bonds |
100 | 3.210 |
October 2017 |
October 2017 |
||||
|
Total Consumers |
$ |
530 | ||||||
|
Total CMS Energy |
$ |
730 | ||||||
1Outstanding borrowings bear interest at an annual interest rate of LIBOR plus 0.68 percent (2.28 percent at December 31, 2017). CMS Energy used these proceeds to retire $200 million of the 8.75 percent senior notes due June 2019.
2CMS Energy retired this debt at a premium and recorded a loss on extinguishment of $18 million in other expense on its consolidated statements of income.
|
|
||||||||||||||||
|
In Millions |
||||||||||||||||
|
|
2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||
|
CMS Energy, including Consumers |
||||||||||||||||
|
Long-term debt |
$ |
1,081 |
$ |
1,428 |
$ |
905 |
$ |
178 |
$ |
1,039 | ||||||
|
Consumers |
||||||||||||||||
|
Long-term debt |
$ |
343 |
$ |
876 |
$ |
426 |
$ |
27 |
$ |
653 | ||||||
|
|
|||||||||||||
|
In Millions |
|||||||||||||
|
|
Amount of |
Amount |
Letters of Credit |
Amount |
|||||||||
|
Expiration Date |
Facility |
Borrowed |
Outstanding |
Available |
|||||||||
|
CMS Energy, parent only |
|||||||||||||
|
May 27, 20221,2 |
$ |
550 |
$ |
- |
$ |
6 |
$ |
544 | |||||
|
Consumers3 |
|||||||||||||
|
May 27, 20222 |
$ |
650 |
$ |
- |
$ |
7 |
$ |
643 | |||||
|
November 23, 20194 |
250 |
- |
20 | 230 | |||||||||
|
September 9, 20195 |
30 |
- |
30 |
- |
|||||||||
1During the year ended December 31, 2017, CMS Energy’s average borrowings totaled $21 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 these facilities are secured by first mortgage bonds of Consumers.
4In November 2017, the expiration date of this revolving credit agreement was extended from November 2018 to November 2019.
5In June 2017, the expiration date of this letter of credit reimbursement agreement was extended from May 2018 to September 2019.
|
|
||||||||||||||
|
|
Optional |
Number of |
Balance |
|||||||||||
|
|
Redemption |
Shares |
Outstanding |
|||||||||||
|
|
Series |
Price |
Outstanding |
(In Millions) |
||||||||||
|
December 31 |
2017 | 2016 | ||||||||||||
|
Cumulative, $100 par value, authorized |
$ |
4.50 |
$ |
110.00 | 373,148 |
$ |
37 |
$ |
37 | |||||
|
|||
|
|
||||||||||||||||
|
In Millions |
||||||||||||||||
|
|
CMS Energy, including Consumers |
Consumers |
||||||||||||||
|
December 31 |
2017 | 2016 | 2017 | 2016 | ||||||||||||
|
Assets1 |
||||||||||||||||
|
Cash equivalents |
$ |
74 |
$ |
44 |
$ |
- |
$ |
- |
||||||||
|
Restricted cash equivalents |
17 | 19 | 17 | 19 | ||||||||||||
|
CMS Energy common stock |
- |
- |
21 | 33 | ||||||||||||
|
Nonqualified deferred |
14 | 12 | 10 | 8 | ||||||||||||
|
DB SERP |
||||||||||||||||
|
Cash equivalents |
5 | 3 | 4 | 2 | ||||||||||||
|
Debt securities |
141 |
- |
102 |
- |
||||||||||||
|
Mutual funds |
- |
141 |
- |
102 | ||||||||||||
|
Derivative instruments |
||||||||||||||||
|
Commodity contracts |
1 | 1 | 1 | 1 | ||||||||||||
|
Total |
$ |
252 |
$ |
220 |
$ |
155 |
$ |
165 | ||||||||
|
Liabilities1 |
||||||||||||||||
|
Nonqualified deferred |
$ |
14 |
$ |
12 |
$ |
10 |
$ |
8 | ||||||||
|
Derivative instruments |
||||||||||||||||
|
Commodity contracts |
1 |
- |
- |
- |
||||||||||||
|
Total |
$ |
15 |
$ |
12 |
$ |
10 |
$ |
8 | ||||||||
1All assets and liabilities were classified as Level 1 with the exception of commodity contracts, which were classified as Level 3.
|
|
||||||||||||||||
|
In Millions |
||||||||||||||||
|
|
CMS Energy, including Consumers |
Consumers |
||||||||||||||
|
December 31 |
2017 | 2016 | 2017 | 2016 | ||||||||||||
|
Assets1 |
||||||||||||||||
|
Cash equivalents |
$ |
74 |
$ |
44 |
$ |
- |
$ |
- |
||||||||
|
Restricted cash equivalents |
17 | 19 | 17 | 19 | ||||||||||||
|
CMS Energy common stock |
- |
- |
21 | 33 | ||||||||||||
|
Nonqualified deferred |
14 | 12 | 10 | 8 | ||||||||||||
|
DB SERP |
||||||||||||||||
|
Cash equivalents |
5 | 3 | 4 | 2 | ||||||||||||
|
Debt securities |
141 |
- |
102 |
- |
||||||||||||
|
Mutual funds |
- |
141 |
- |
102 | ||||||||||||
|
Derivative instruments |
||||||||||||||||
|
Commodity contracts |
1 | 1 | 1 | 1 | ||||||||||||
|
Total |
$ |
252 |
$ |
220 |
$ |
155 |
$ |
165 | ||||||||
|
Liabilities1 |
||||||||||||||||
|
Nonqualified deferred |
$ |
14 |
$ |
12 |
$ |
10 |
$ |
8 | ||||||||
|
Derivative instruments |
||||||||||||||||
|
Commodity contracts |
1 |
- |
- |
- |
||||||||||||
|
Total |
$ |
15 |
$ |
12 |
$ |
10 |
$ |
8 | ||||||||
1All assets and liabilities were classified as Level 1 with the exception of commodity contracts, which were classified as Level 3.
|
|||
|
|
||||||||||||||||||||||||||||||||
|
In Millions |
||||||||||||||||||||||||||||||||
|
|
December 31, 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 |
$ |
21 |
$ |
21 |
$ |
- |
$ |
- |
$ |
21 |
$ |
22 |
$ |
22 |
$ |
- |
$ |
- |
$ |
22 | ||||||||||||
|
Notes |
1,371 | 1,464 |
- |
- |
1,464 | 1,326 | 1,415 |
- |
- |
1,415 | ||||||||||||||||||||||
|
Securities held |
16 | 16 |
- |
16 |
- |
13 | 13 |
- |
13 |
- |
||||||||||||||||||||||
|
Liabilities |
||||||||||||||||||||||||||||||||
|
Long-term |
10,204 | 10,715 |
- |
9,363 | 1,352 | 9,504 | 9,953 |
- |
8,990 | 963 | ||||||||||||||||||||||
|
Long-term |
27 | 26 |
- |
- |
26 | 17 | 17 |
- |
- |
17 | ||||||||||||||||||||||
|
Consumers |
||||||||||||||||||||||||||||||||
|
Assets |
||||||||||||||||||||||||||||||||
|
Long-term |
$ |
21 |
$ |
21 |
$ |
- |
$ |
- |
$ |
21 |
$ |
22 |
$ |
22 |
$ |
- |
$ |
- |
$ |
22 | ||||||||||||
|
Notes |
17 | 17 |
- |
- |
17 | 45 | 45 |
- |
- |
45 | ||||||||||||||||||||||
|
Liabilities |
||||||||||||||||||||||||||||||||
|
Long-term |
5,904 | 6,236 |
- |
4,883 | 1,353 | 5,628 | 5,903 |
- |
4,940 | 963 | ||||||||||||||||||||||
1Includes current accounts receivable of $14 million at December 31, 2017 and $12 million at December 31, 2016.
2Includes current portion of notes receivable of $200 million at December 31, 2017 and $219 million at December 31, 2016.
3Includes current portion of long-term debt of $1.1 billion at December 31, 2017 and $864 million at December 31, 2016.
4Includes current portion of long-term payables of $3 million at December 31, 2017 and $1 million at December 31, 2016.
5Includes current portion of notes receivable of $17 million at December 31, 2017 and $29 million at December 31, 2016.
6Includes current portion of long-term debt of $343 million at December 31, 2017 and $375 million at December 31, 2016.
|
|
||||||||||||||||||||||||||
|
In Millions |
||||||||||||||||||||||||||
|
|
December 31, 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 |
||||||||||||||||||||||||||
|
Debt securities |
$ |
141 |
$ |
- |
- |
$ |
141 |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
|||||||||||
|
Mutual funds |
- |
- |
- |
- |
141 |
- |
- |
141 | ||||||||||||||||||
|
Held to maturity |
||||||||||||||||||||||||||
|
Debt securities |
16 |
- |
- |
16 | 13 |
- |
- |
13 | ||||||||||||||||||
|
Consumers |
||||||||||||||||||||||||||
|
Available for sale |
||||||||||||||||||||||||||
|
DB SERP |
||||||||||||||||||||||||||
|
Debt securities |
$ |
102 |
$ |
- |
$ |
- |
$ |
102 |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
||||||||||
|
Mutual funds |
- |
- |
- |
- |
102 |
- |
- |
102 | ||||||||||||||||||
|
CMS Energy |
2 | 19 |
- |
21 | 4 | 29 |
- |
33 | ||||||||||||||||||
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Proceeds from sales of investment securities |
$ |
145 |
$ |
6 |
$ |
3 | ||||
|
Consumers |
||||||||||
|
Proceeds from sales of investment securities |
$ |
105 |
$ |
4 |
$ |
2 | ||||
|
|
||||||||||||||||||||||||||||||||
|
In Millions |
||||||||||||||||||||||||||||||||
|
|
December 31, 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 |
$ |
21 |
$ |
21 |
$ |
- |
$ |
- |
$ |
21 |
$ |
22 |
$ |
22 |
$ |
- |
$ |
- |
$ |
22 | ||||||||||||
|
Notes |
1,371 | 1,464 |
- |
- |
1,464 | 1,326 | 1,415 |
- |
- |
1,415 | ||||||||||||||||||||||
|
Securities held |
16 | 16 |
- |
16 |
- |
13 | 13 |
- |
13 |
- |
||||||||||||||||||||||
|
Liabilities |
||||||||||||||||||||||||||||||||
|
Long-term |
10,204 | 10,715 |
- |
9,363 | 1,352 | 9,504 | 9,953 |
- |
8,990 | 963 | ||||||||||||||||||||||
|
Long-term |
27 | 26 |
- |
- |
26 | 17 | 17 |
- |
- |
17 | ||||||||||||||||||||||
|
Consumers |
||||||||||||||||||||||||||||||||
|
Assets |
||||||||||||||||||||||||||||||||
|
Long-term |
$ |
21 |
$ |
21 |
$ |
- |
$ |
- |
$ |
21 |
$ |
22 |
$ |
22 |
$ |
- |
$ |
- |
$ |
22 | ||||||||||||
|
Notes |
17 | 17 |
- |
- |
17 | 45 | 45 |
- |
- |
45 | ||||||||||||||||||||||
|
Liabilities |
||||||||||||||||||||||||||||||||
|
Long-term |
5,904 | 6,236 |
- |
4,883 | 1,353 | 5,628 | 5,903 |
- |
4,940 | 963 | ||||||||||||||||||||||
1Includes current accounts receivable of $14 million at December 31, 2017 and $12 million at December 31, 2016.
2Includes current portion of notes receivable of $200 million at December 31, 2017 and $219 million at December 31, 2016.
3Includes current portion of long-term debt of $1.1 billion at December 31, 2017 and $864 million at December 31, 2016.
4Includes current portion of long-term payables of $3 million at December 31, 2017 and $1 million at December 31, 2016.
5Includes current portion of notes receivable of $17 million at December 31, 2017 and $29 million at December 31, 2016.
6Includes current portion of long-term debt of $343 million at December 31, 2017 and $375 million at December 31, 2016.
|
|
||||||||||||||||||||||||||
|
In Millions |
||||||||||||||||||||||||||
|
|
December 31, 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 |
||||||||||||||||||||||||||
|
Debt securities |
$ |
141 |
$ |
- |
- |
$ |
141 |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
|||||||||||
|
Mutual funds |
- |
- |
- |
- |
141 |
- |
- |
141 | ||||||||||||||||||
|
Held to maturity |
||||||||||||||||||||||||||
|
Debt securities |
16 |
- |
- |
16 | 13 |
- |
- |
13 | ||||||||||||||||||
|
Consumers |
||||||||||||||||||||||||||
|
Available for sale |
||||||||||||||||||||||||||
|
DB SERP |
||||||||||||||||||||||||||
|
Debt securities |
$ |
102 |
$ |
- |
$ |
- |
$ |
102 |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
||||||||||
|
Mutual funds |
- |
- |
- |
- |
102 |
- |
- |
102 | ||||||||||||||||||
|
CMS Energy |
2 | 19 |
- |
21 | 4 | 29 |
- |
33 | ||||||||||||||||||
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Proceeds from sales of investment securities |
$ |
145 |
$ |
6 |
$ |
3 | ||||
|
Consumers |
||||||||||
|
Proceeds from sales of investment securities |
$ |
105 |
$ |
4 |
$ |
2 | ||||
|
|||
|
|
|||||||
|
In Millions |
|||||||
|
December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
Current |
|||||||
|
EnerBank notes receivable, net of allowance for loan losses |
$ |
178 |
$ |
151 | |||
|
EnerBank notes receivable held for sale |
2 | 39 | |||||
|
Michigan tax settlement |
20 | 29 | |||||
|
Non-current |
|||||||
|
EnerBank notes receivable |
1,171 | 1,088 | |||||
|
Michigan tax settlement |
- |
19 | |||||
|
Total notes receivable |
$ |
1,371 |
$ |
1,326 | |||
|
Consumers |
|||||||
|
Current |
|||||||
|
Michigan tax settlement |
$ |
17 |
$ |
29 | |||
|
Non-current |
|||||||
|
Michigan tax settlement |
- |
16 | |||||
|
Total notes receivable |
$ |
17 |
$ |
45 | |||
|
|
|||||||
|
In Millions |
|||||||
|
Years Ended December 31 |
2017 | 2016 | |||||
|
Balance at beginning of period |
$ |
16 |
$ |
9 | |||
|
Charge-offs |
(19) | (14) | |||||
|
Recoveries |
3 | 2 | |||||
|
Provision for loan losses |
20 | 19 | |||||
|
Balance at end of period |
$ |
20 |
$ |
16 | |||
|
|
|||||||
|
In Millions |
|||||||
|
December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
Current |
|||||||
|
EnerBank notes receivable, net of allowance for loan losses |
$ |
178 |
$ |
151 | |||
|
EnerBank notes receivable held for sale |
2 | 39 | |||||
|
Michigan tax settlement |
20 | 29 | |||||
|
Non-current |
|||||||
|
EnerBank notes receivable |
1,171 | 1,088 | |||||
|
Michigan tax settlement |
- |
19 | |||||
|
Total notes receivable |
$ |
1,371 |
$ |
1,326 | |||
|
Consumers |
|||||||
|
Current |
|||||||
|
Michigan tax settlement |
$ |
17 |
$ |
29 | |||
|
Non-current |
|||||||
|
Michigan tax settlement |
- |
16 | |||||
|
Total notes receivable |
$ |
17 |
$ |
45 | |||
|
|||
|
|
||||||||||
|
In Millions |
||||||||||
|
December 31 |
Estimated |
2017 | 2016 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Plant, property, and equipment, gross |
||||||||||
|
Consumers |
3 |
- |
125 |
$ |
22,318 |
$ |
20,838 | |||
|
Enterprises |
||||||||||
|
Independent power production |
3 |
- |
35 | 163 | 141 | |||||
|
Other |
3 |
- |
5 | 4 | 16 | |||||
|
Other |
1 |
- |
7 | 21 | 15 | |||||
|
Plant, property, and equipment, gross |
$ |
22,506 |
$ |
21,010 | ||||||
|
Construction work in progress |
765 | 761 | ||||||||
|
Accumulated depreciation and amortization |
(6,510) | (6,056) | ||||||||
|
Total plant, property, and equipment1 |
$ |
16,761 |
$ |
15,715 | ||||||
|
Consumers |
||||||||||
|
Plant, property, and equipment, gross |
||||||||||
|
Electric |
||||||||||
|
Generation |
22 |
- |
125 |
$ |
6,025 |
$ |
5,900 | |||
|
Distribution |
20 |
- |
75 | 7,603 | 7,149 | |||||
|
Transmission |
46 |
- |
75 | 66 | 59 | |||||
|
Other |
5 |
- |
50 | 1,229 | 1,137 | |||||
|
Assets under capital leases and financing obligation2 |
298 | 295 | ||||||||
|
Gas |
||||||||||
|
Distribution |
20 |
- |
85 | 4,182 | 3,806 | |||||
|
Transmission |
17 |
- |
75 | 1,278 | 1,124 | |||||
|
Underground storage facilities3 |
27 |
- |
75 | 842 | 630 | |||||
|
Other |
5 |
- |
50 | 764 | 708 | |||||
|
Capital leases2 |
14 | 15 | ||||||||
|
Other non-utility property |
3 |
- |
51 | 17 | 15 | |||||
|
Plant, property, and equipment, gross |
$ |
22,318 |
$ |
20,838 | ||||||
|
Construction work in progress |
753 | 759 | ||||||||
|
Accumulated depreciation and amortization |
(6,441) | (5,994) | ||||||||
|
Total plant, property, and equipment1 |
$ |
16,630 |
$ |
15,603 | ||||||
1For the year ended December 31, 2017, Consumers’ plant additions were $1.7 billion and plant retirements were $214 million. For the year ended December 31, 2016, Consumers’ plant additions were $2.3 billion and plant retirements were $285 million.
2For information regarding the amortization terms of Consumers’ assets under capital leases and financing obligation, see Note 10, Leases and Palisades Financing.
3Underground storage includes base natural gas of $26 million at December 31, 2017 and 2016. Base natural gas is not subject to depreciation.
|
|
|||||||
|
In Millions |
|||||||
|
December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
Utility plant assets |
$ |
6,439 |
$ |
5,993 | |||
|
Non-utility plant assets |
71 | 63 | |||||
|
Consumers |
|||||||
|
Utility plant assets |
$ |
6,439 |
$ |
5,993 | |||
|
Non-utility plant assets |
2 | 1 | |||||
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Depreciation expense – plant, property, and equipment |
$ |
739 |
$ |
687 |
$ |
591 | ||||
|
Amortization expense |
||||||||||
|
Software |
114 | 96 | 70 | |||||||
|
Other intangible assets |
3 | 3 | 4 | |||||||
|
Securitized regulatory assets |
25 | 25 | 83 | |||||||
|
Other regulatory assets |
- |
- |
2 | |||||||
|
Total depreciation and amortization expense |
$ |
881 |
$ |
811 |
$ |
750 | ||||
|
Consumers |
||||||||||
|
Depreciation expense – plant, property, and equipment |
$ |
732 |
$ |
680 |
$ |
586 | ||||
|
Amortization expense |
||||||||||
|
Software |
112 | 95 | 69 | |||||||
|
Other intangible assets |
3 | 3 | 4 | |||||||
|
Securitized regulatory assets |
25 | 25 | 83 | |||||||
|
Other regulatory assets |
- |
- |
2 | |||||||
|
Total depreciation and amortization expense |
$ |
872 |
$ |
803 |
$ |
744 | ||||
|
|
||||||||||||||||
|
In Millions |
||||||||||||||||
|
|
2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||
|
CMS Energy, including Consumers |
||||||||||||||||
|
Intangible asset amortization expense |
$ |
131 |
$ |
139 |
$ |
135 |
$ |
124 |
$ |
109 | ||||||
|
Consumers |
||||||||||||||||
|
Intangible assets amortization expense |
$ |
129 |
$ |
137 |
$ |
133 |
$ |
123 |
$ |
108 | ||||||
|
|
|||||||||||||||||||
|
In Millions |
|||||||||||||||||||
|
|
December 31, 2017 |
December 31, 2016 |
|||||||||||||||||
|
Description |
Amortization |
Gross Cost1 |
Accumulated |
Gross Cost1 |
Accumulated |
||||||||||||||
|
CMS Energy, including Consumers |
|||||||||||||||||||
|
Software development |
1 |
- |
15 |
$ |
950 |
$ |
481 |
$ |
853 |
$ |
367 | ||||||||
|
Rights of way |
50 |
- |
85 | 162 | 50 | 155 | 48 | ||||||||||||
|
Franchises and consents |
5 |
- |
30 | 14 | 8 | 15 | 8 | ||||||||||||
|
Leasehold improvements |
various2 |
9 | 7 | 7 | 6 | ||||||||||||||
|
Other intangibles |
various |
23 | 15 | 22 | 15 | ||||||||||||||
|
Total |
$ |
1,158 |
$ |
561 |
$ |
1,052 |
$ |
444 | |||||||||||
|
Consumers |
|||||||||||||||||||
|
Software development |
3 |
- |
15 |
$ |
937 |
$ |
475 |
$ |
845 |
$ |
363 | ||||||||
|
Rights of way |
50 |
- |
85 | 162 | 50 | 155 | 48 | ||||||||||||
|
Franchises and consents |
5 |
- |
30 | 14 | 8 | 15 | 8 | ||||||||||||
|
Leasehold improvements |
various2 |
9 | 7 | 7 | 6 | ||||||||||||||
|
Other intangibles |
various |
21 | 15 | 21 | 15 | ||||||||||||||
|
Total |
$ |
1,143 |
$ |
555 |
$ |
1,043 |
$ |
440 | |||||||||||
1For the year ended December 31, 2017, Consumers’ intangible asset additions were $100 million and there were no retirements. For the year ended December 31, 2016, Consumers’ intangible asset additions were $141 million and intangible asset retirements were $23 million.
2Leasehold improvements are amortized over the life of the lease, which may change whenever the lease is renewed or extended.
|
|
||||||||||
|
In Millions |
||||||||||
|
December 31 |
Estimated |
2017 | 2016 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Plant, property, and equipment, gross |
||||||||||
|
Consumers |
3 |
- |
125 |
$ |
22,318 |
$ |
20,838 | |||
|
Enterprises |
||||||||||
|
Independent power production |
3 |
- |
35 | 163 | 141 | |||||
|
Other |
3 |
- |
5 | 4 | 16 | |||||
|
Other |
1 |
- |
7 | 21 | 15 | |||||
|
Plant, property, and equipment, gross |
$ |
22,506 |
$ |
21,010 | ||||||
|
Construction work in progress |
765 | 761 | ||||||||
|
Accumulated depreciation and amortization |
(6,510) | (6,056) | ||||||||
|
Total plant, property, and equipment1 |
$ |
16,761 |
$ |
15,715 | ||||||
|
Consumers |
||||||||||
|
Plant, property, and equipment, gross |
||||||||||
|
Electric |
||||||||||
|
Generation |
22 |
- |
125 |
$ |
6,025 |
$ |
5,900 | |||
|
Distribution |
20 |
- |
75 | 7,603 | 7,149 | |||||
|
Transmission |
46 |
- |
75 | 66 | 59 | |||||
|
Other |
5 |
- |
50 | 1,229 | 1,137 | |||||
|
Assets under capital leases and financing obligation2 |
298 | 295 | ||||||||
|
Gas |
||||||||||
|
Distribution |
20 |
- |
85 | 4,182 | 3,806 | |||||
|
Transmission |
17 |
- |
75 | 1,278 | 1,124 | |||||
|
Underground storage facilities3 |
27 |
- |
75 | 842 | 630 | |||||
|
Other |
5 |
- |
50 | 764 | 708 | |||||
|
Capital leases2 |
14 | 15 | ||||||||
|
Other non-utility property |
3 |
- |
51 | 17 | 15 | |||||
|
Plant, property, and equipment, gross |
$ |
22,318 |
$ |
20,838 | ||||||
|
Construction work in progress |
753 | 759 | ||||||||
|
Accumulated depreciation and amortization |
(6,441) | (5,994) | ||||||||
|
Total plant, property, and equipment1 |
$ |
16,630 |
$ |
15,603 | ||||||
1For the year ended December 31, 2017, Consumers’ plant additions were $1.7 billion and plant retirements were $214 million. For the year ended December 31, 2016, Consumers’ plant additions were $2.3 billion and plant retirements were $285 million.
2For information regarding the amortization terms of Consumers’ assets under capital leases and financing obligation, see Note 10, Leases and Palisades Financing.
3Underground storage includes base natural gas of $26 million at December 31, 2017 and 2016. Base natural gas is not subject to depreciation.
|
|
|||||||
|
In Millions |
|||||||
|
Years Ended December 31 |
2017 | 2016 | |||||
|
Consumers |
|||||||
|
Balance at beginning of period |
$ |
310 |
$ |
300 | |||
|
Additions |
3 | 13 | |||||
|
Net retirements and other adjustments |
(1) | (3) | |||||
|
Balance at end of period |
$ |
312 |
$ |
310 | |||
|
|
|||||||
|
In Millions |
|||||||
|
December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
Utility plant assets |
$ |
6,439 |
$ |
5,993 | |||
|
Non-utility plant assets |
71 | 63 | |||||
|
Consumers |
|||||||
|
Utility plant assets |
$ |
6,439 |
$ |
5,993 | |||
|
Non-utility plant assets |
2 | 1 | |||||
|
|
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
Electric utility property |
3.9 |
% |
3.9 |
% |
3.5 |
% |
||||
|
Gas utility property |
2.9 | 2.9 | 2.8 | |||||||
|
Other property |
10.0 | 9.8 | 8.7 | |||||||
|
|
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
Electric |
6.8 |
% |
7.3 |
% |
7.6 |
% |
||||
|
Gas |
6.0 |
% |
6.2 |
% |
6.2 |
% |
||||
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Depreciation expense – plant, property, and equipment |
$ |
739 |
$ |
687 |
$ |
591 | ||||
|
Amortization expense |
||||||||||
|
Software |
114 | 96 | 70 | |||||||
|
Other intangible assets |
3 | 3 | 4 | |||||||
|
Securitized regulatory assets |
25 | 25 | 83 | |||||||
|
Other regulatory assets |
- |
- |
2 | |||||||
|
Total depreciation and amortization expense |
$ |
881 |
$ |
811 |
$ |
750 | ||||
|
Consumers |
||||||||||
|
Depreciation expense – plant, property, and equipment |
$ |
732 |
$ |
680 |
$ |
586 | ||||
|
Amortization expense |
||||||||||
|
Software |
112 | 95 | 69 | |||||||
|
Other intangible assets |
3 | 3 | 4 | |||||||
|
Securitized regulatory assets |
25 | 25 | 83 | |||||||
|
Other regulatory assets |
- |
- |
2 | |||||||
|
Total depreciation and amortization expense |
$ |
872 |
$ |
803 |
$ |
744 | ||||
|
|
||||||||||||||||
|
In Millions |
||||||||||||||||
|
|
2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||
|
CMS Energy, including Consumers |
||||||||||||||||
|
Intangible asset amortization expense |
$ |
131 |
$ |
139 |
$ |
135 |
$ |
124 |
$ |
109 | ||||||
|
Consumers |
||||||||||||||||
|
Intangible assets amortization expense |
$ |
129 |
$ |
137 |
$ |
133 |
$ |
123 |
$ |
108 | ||||||
|
|
|||||||||||||||||||
|
In Millions |
|||||||||||||||||||
|
|
December 31, 2017 |
December 31, 2016 |
|||||||||||||||||
|
Description |
Amortization |
Gross Cost1 |
Accumulated |
Gross Cost1 |
Accumulated |
||||||||||||||
|
CMS Energy, including Consumers |
|||||||||||||||||||
|
Software development |
1 |
- |
15 |
$ |
950 |
$ |
481 |
$ |
853 |
$ |
367 | ||||||||
|
Rights of way |
50 |
- |
85 | 162 | 50 | 155 | 48 | ||||||||||||
|
Franchises and consents |
5 |
- |
30 | 14 | 8 | 15 | 8 | ||||||||||||
|
Leasehold improvements |
various2 |
9 | 7 | 7 | 6 | ||||||||||||||
|
Other intangibles |
various |
23 | 15 | 22 | 15 | ||||||||||||||
|
Total |
$ |
1,158 |
$ |
561 |
$ |
1,052 |
$ |
444 | |||||||||||
|
Consumers |
|||||||||||||||||||
|
Software development |
3 |
- |
15 |
$ |
937 |
$ |
475 |
$ |
845 |
$ |
363 | ||||||||
|
Rights of way |
50 |
- |
85 | 162 | 50 | 155 | 48 | ||||||||||||
|
Franchises and consents |
5 |
- |
30 | 14 | 8 | 15 | 8 | ||||||||||||
|
Leasehold improvements |
various2 |
9 | 7 | 7 | 6 | ||||||||||||||
|
Other intangibles |
various |
21 | 15 | 21 | 15 | ||||||||||||||
|
Total |
$ |
1,143 |
$ |
555 |
$ |
1,043 |
$ |
440 | |||||||||||
1For the year ended December 31, 2017, Consumers’ intangible asset additions were $100 million and there were no retirements. For the year ended December 31, 2016, Consumers’ intangible asset additions were $141 million and intangible asset retirements were $23 million.
2Leasehold improvements are amortized over the life of the lease, which may change whenever the lease is renewed or extended.
|
|
||||||||||||
|
In Millions, Except Ownership Share |
||||||||||||
|
|
J.H. Campbell Unit 3 |
Ludington |
Other |
|||||||||
|
Ownership share |
93.3 |
% |
51.0 |
% |
various |
|||||||
|
Utility plant in service |
$ |
1,655 |
$ |
354 |
$ |
217 | ||||||
|
Accumulated depreciation |
(592) | (151) | (69) | |||||||||
|
Construction work in progress |
30 | 142 | 6 | |||||||||
|
Net investment |
$ |
1,093 |
$ |
345 |
$ |
154 | ||||||
|
|||
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
Consumers |
||||||||||
|
Minimum operating lease expense |
||||||||||
|
PPAs |
$ |
5 |
$ |
6 |
$ |
6 | ||||
|
Other agreements |
15 | 14 | 19 | |||||||
|
Contingent rental expense1 |
96 | 82 | 82 | |||||||
1Contingent rental expense is related to capital and operating lease PPAs and is based on delivery of energy and capacity in excess of minimum lease payments.
|
|
||||||||||
|
In Millions |
||||||||||
|
|
Capital Leases |
Palisades |
Operating Leases |
|||||||
|
Consumers |
||||||||||
|
2018 |
$ |
15 |
$ |
16 |
$ |
15 | ||||
|
2019 |
15 | 15 | 9 | |||||||
|
2020 |
12 | 14 | 9 | |||||||
|
2021 |
12 | 14 | 9 | |||||||
|
2022 |
8 | 3 | 4 | |||||||
|
2023 and thereafter |
21 |
- |
7 | |||||||
|
Total minimum lease payments |
$ |
83 |
$ |
62 |
$ |
53 | ||||
|
Less imputed interest |
25 | 7 | ||||||||
|
Present value of net minimum lease payments |
$ |
58 |
$ |
55 | ||||||
|
Less current portion |
9 | 13 | ||||||||
|
Non-current portion |
$ |
49 |
$ |
42 | ||||||
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
Consumers |
||||||||||
|
Minimum operating lease expense |
||||||||||
|
PPAs |
$ |
5 |
$ |
6 |
$ |
6 | ||||
|
Other agreements |
15 | 14 | 19 | |||||||
|
Contingent rental expense1 |
96 | 82 | 82 | |||||||
1Contingent rental expense is related to capital and operating lease PPAs and is based on delivery of energy and capacity in excess of minimum lease payments.
|
|
||||||||||
|
In Millions |
||||||||||
|
|
Capital Leases |
Palisades |
Operating Leases |
|||||||
|
Consumers |
||||||||||
|
2018 |
$ |
15 |
$ |
16 |
$ |
15 | ||||
|
2019 |
15 | 15 | 9 | |||||||
|
2020 |
12 | 14 | 9 | |||||||
|
2021 |
12 | 14 | 9 | |||||||
|
2022 |
8 | 3 | 4 | |||||||
|
2023 and thereafter |
21 |
- |
7 | |||||||
|
Total minimum lease payments |
$ |
83 |
$ |
62 |
$ |
53 | ||||
|
Less imputed interest |
25 | 7 | ||||||||
|
Present value of net minimum lease payments |
$ |
58 |
$ |
55 | ||||||
|
Less current portion |
9 | 13 | ||||||||
|
Non-current portion |
$ |
49 |
$ |
42 | ||||||
|
|||
|
|
|||||||||||||||||||
|
In Millions |
|||||||||||||||||||
|
|
ARO |
ARO |
|||||||||||||||||
|
|
Liability |
Cash flow |
Liability |
||||||||||||||||
|
Company and ARO Description |
12/31/2016 |
Incurred |
Settled |
Accretion |
Revisions |
12/31/2017 |
|||||||||||||
|
CMS Energy, including Consumers |
|||||||||||||||||||
|
Consumers |
$ |
446 |
$ |
5 |
$ |
(45) |
$ |
23 |
$ |
- |
$ |
429 | |||||||
|
Gas treating plant and gas wells |
1 |
- |
- |
- |
- |
1 | |||||||||||||
|
Total CMS Energy |
$ |
447 |
$ |
5 |
$ |
(45) |
$ |
23 |
$ |
- |
$ |
430 | |||||||
|
Consumers |
|||||||||||||||||||
|
Coal ash disposal areas |
$ |
201 |
$ |
- |
$ |
(18) |
$ |
8 |
$ |
- |
$ |
191 | |||||||
|
Gas distribution cut, purge, and cap |
182 | 3 | (11) | 12 |
- |
186 | |||||||||||||
|
Asbestos abatement |
56 |
- |
(16) | 2 |
- |
42 | |||||||||||||
|
Renewable generation assets |
7 | 2 |
- |
1 |
- |
10 | |||||||||||||
|
Total Consumers |
$ |
446 |
$ |
5 |
$ |
(45) |
$ |
23 |
$ |
- |
$ |
429 | |||||||
|
|
|||||||||||||||||||
|
In Millions |
|||||||||||||||||||
|
|
ARO |
ARO |
|||||||||||||||||
|
|
Liability |
Cash flow |
Liability |
||||||||||||||||
|
Company and ARO Description |
12/31/2015 |
Incurred |
Settled |
Accretion |
Revisions |
12/31/2016 |
|||||||||||||
|
CMS Energy, including Consumers |
|||||||||||||||||||
|
Consumers |
$ |
438 |
$ |
3 |
$ |
(18) |
$ |
23 |
$ |
- |
$ |
446 | |||||||
|
Gas treating plant and gas wells |
1 |
- |
- |
- |
- |
1 | |||||||||||||
|
Total CMS Energy |
$ |
439 |
$ |
3 |
$ |
(18) |
$ |
23 |
$ |
- |
$ |
447 | |||||||
|
Consumers |
|||||||||||||||||||
|
Coal ash disposal areas |
$ |
200 |
$ |
- |
$ |
(8) |
$ |
9 |
$ |
- |
$ |
201 | |||||||
|
Gas distribution cut, purge, and cap |
178 | 2 | (9) | 11 |
- |
182 | |||||||||||||
|
Asbestos abatement |
54 |
- |
(1) | 3 |
- |
56 | |||||||||||||
|
Renewable generation assets |
6 | 1 |
- |
- |
- |
7 | |||||||||||||
|
Total Consumers |
$ |
438 |
$ |
3 |
$ |
(18) |
$ |
23 |
$ |
- |
$ |
446 | |||||||
|
|
|||||||||||||||||||
|
In Millions |
|||||||||||||||||||
|
|
ARO |
ARO |
|||||||||||||||||
|
|
Liability |
Cash flow |
Liability |
||||||||||||||||
|
Company and ARO Description |
12/31/2016 |
Incurred |
Settled |
Accretion |
Revisions |
12/31/2017 |
|||||||||||||
|
CMS Energy, including Consumers |
|||||||||||||||||||
|
Consumers |
$ |
446 |
$ |
5 |
$ |
(45) |
$ |
23 |
$ |
- |
$ |
429 | |||||||
|
Gas treating plant and gas wells |
1 |
- |
- |
- |
- |
1 | |||||||||||||
|
Total CMS Energy |
$ |
447 |
$ |
5 |
$ |
(45) |
$ |
23 |
$ |
- |
$ |
430 | |||||||
|
Consumers |
|||||||||||||||||||
|
Coal ash disposal areas |
$ |
201 |
$ |
- |
$ |
(18) |
$ |
8 |
$ |
- |
$ |
191 | |||||||
|
Gas distribution cut, purge, and cap |
182 | 3 | (11) | 12 |
- |
186 | |||||||||||||
|
Asbestos abatement |
56 |
- |
(16) | 2 |
- |
42 | |||||||||||||
|
Renewable generation assets |
7 | 2 |
- |
1 |
- |
10 | |||||||||||||
|
Total Consumers |
$ |
446 |
$ |
5 |
$ |
(45) |
$ |
23 |
$ |
- |
$ |
429 | |||||||
|
|
|||||||||||||||||||
|
In Millions |
|||||||||||||||||||
|
|
ARO |
ARO |
|||||||||||||||||
|
|
Liability |
Cash flow |
Liability |
||||||||||||||||
|
Company and ARO Description |
12/31/2015 |
Incurred |
Settled |
Accretion |
Revisions |
12/31/2016 |
|||||||||||||
|
CMS Energy, including Consumers |
|||||||||||||||||||
|
Consumers |
$ |
438 |
$ |
3 |
$ |
(18) |
$ |
23 |
$ |
- |
$ |
446 | |||||||
|
Gas treating plant and gas wells |
1 |
- |
- |
- |
- |
1 | |||||||||||||
|
Total CMS Energy |
$ |
439 |
$ |
3 |
$ |
(18) |
$ |
23 |
$ |
- |
$ |
447 | |||||||
|
Consumers |
|||||||||||||||||||
|
Coal ash disposal areas |
$ |
200 |
$ |
- |
$ |
(8) |
$ |
9 |
$ |
- |
$ |
201 | |||||||
|
Gas distribution cut, purge, and cap |
178 | 2 | (9) | 11 |
- |
182 | |||||||||||||
|
Asbestos abatement |
54 |
- |
(1) | 3 |
- |
56 | |||||||||||||
|
Renewable generation assets |
6 | 1 |
- |
- |
- |
7 | |||||||||||||
|
Total Consumers |
$ |
438 |
$ |
3 |
$ |
(18) |
$ |
23 |
$ |
- |
$ |
446 | |||||||
|
|||
|
|
|||||||
|
In Millions |
|||||||
|
Years Ended December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
Trust assets |
$ |
146 |
$ |
144 | |||
|
ABO |
149 | 143 | |||||
|
Contributions |
7 |
- |
|||||
|
Consumers |
|||||||
|
Trust assets |
$ |
106 |
$ |
104 | |||
|
ABO |
107 | 101 | |||||
|
Contributions |
6 |
- |
|||||
|
|
|||||||
|
In Millions |
|||||||
|
|
One Percentage |
One Percentage |
|||||
|
Year Ended December 31, 2017 |
Point Increase |
Point Decrease |
|||||
|
CMS Energy, including Consumers |
|||||||
|
Effect on total service and interest cost component |
$ |
2 |
$ |
(2) | |||
|
Effect on PBO |
32 | (28) | |||||
|
Consumers |
|||||||
|
Effect on total service and interest cost component |
$ |
2 |
$ |
(2) | |||
|
Effect on PBO |
30 | (27) | |||||
|
|
||||||||||
|
December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Weighted average for benefit obligations1 |
||||||||||
|
Discount rate2 |
||||||||||
|
DB Pension Plan A3 |
3.78 |
% |
||||||||
|
DB Pension Plan B3 |
3.64 | |||||||||
|
DB SERP |
3.65 | 4.16 |
% |
4.43 |
% |
|||||
|
OPEB Plan |
3.74 | 4.49 | 4.70 | |||||||
|
Rate of compensation increase |
||||||||||
|
DB Pension Plan A3 |
3.50 | |||||||||
|
DB SERP |
5.50 | 5.50 | 5.50 | |||||||
|
Weighted average for net periodic benefit cost1 |
||||||||||
|
Service cost discount rate2,4 |
||||||||||
|
DB Pension Plans |
4.53 | 4.79 | 4.10 | |||||||
|
DB SERP |
4.51 | 4.87 | 4.10 | |||||||
|
OPEB Plan |
4.89 | 4.75 | 4.30 | |||||||
|
Interest cost discount rate2,4 |
||||||||||
|
DB Pension Plans |
3.56 | 3.66 | 4.10 | |||||||
|
DB SERP |
3.51 | 3.64 | 4.10 | |||||||
|
OPEB Plan |
3.79 | 3.89 | 4.30 | |||||||
|
Expected long-term rate of return on plan assets5 |
||||||||||
|
DB Pension Plans |
7.25 | 7.25 | 7.50 | |||||||
|
OPEB Plan |
7.25 | 7.25 | 7.25 | |||||||
|
Rate of compensation increase |
||||||||||
|
DB Pension Plans |
3.60 | 3.00 | 3.00 | |||||||
|
DB SERP |
5.50 | 5.50 | 5.50 | |||||||
1The mortality assumption for benefit obligations was based on the RP-2014 mortality table, with projection scales MP-2017 for 2017, MP-2016 for 2016, and MP-2015 for 2015. The mortality assumption for net periodic benefit cost for 2017, 2016, and 2015 was based on the RP-2014 mortality table, with projection scales MP-2016 for 2017, MP-2015 for 2016, and MP-2014 for 2015.
2The discount rate reflects the rate at which benefits could be effectively settled and is equal to the equivalent single rate resulting from a yield-curve analysis. This analysis incorporated the projected benefit payments specific to CMS Energy’s and Consumers’ DB Pension Plans and OPEB Plan and the yields on high-quality corporate bonds rated Aa or better.
3Effective December 31, 2017, CMS Energy’s and Consumers’ existing defined benefit pension plan was amended to include only retired or inactive employees; this amended plan is referred to as DB Pension Plan B. Active employees were moved to a newly created pension plan, referred to as DB Pension Plan A. The discount rate used to measure the existing plan was 4.30 percent at December 31, 2016 and 4.52 percent at December 31, 2015. The weighted-average rate of compensation increase used to measure the existing plan was 3.60 percent at December 31, 2016 and 3.00 percent at December 31, 2015.
4In January 2016, CMS Energy and Consumers changed the method they use to determine the discount rate used to calculate the service cost and interest cost components of net periodic benefit costs for the DB Pension and OPEB Plans. Historically, the discount rate used for this purpose represented a single weighted-average rate derived from the yield curve used to determine the benefit obligation. CMS Energy and Consumers have elected to use instead a full-yield-curve approach in the estimation of service cost and interest cost; this approach is more accurate in that it applies individual spot rates along the yield curve to future projected benefit payments based on the time of payment.
5CMS Energy and Consumers determined the long-term rate of return using historical market returns, the present and expected future economic environment, the capital market principles of risk and return, and the expert opinions of individuals and firms with financial market knowledge. CMS Energy and Consumers considered the asset allocation of the portfolio in forecasting the future expected total return of the portfolio. The goal was to determine a long-term rate of return that could be incorporated into the planning of future cash flow requirements in conjunction with the change in the liability. Annually, CMS Energy and Consumers review for reasonableness and appropriateness the forecasted returns for various classes of assets used to construct an expected return model. CMS Energy’s and Consumers’ expected long-term rate of return on the assets of the DB Pension Plans was 7.25 percent in 2017. The actual return (loss) on the assets of the DB Pension Plans was 18.0 percent in 2017, 8.0 percent in 2016, and (2.0) percent in 2015.
|
|
||||||||||||||||||||
|
In Millions |
||||||||||||||||||||
|
|
DB Pension Plans and DB SERP |
OPEB Plan |
||||||||||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | 2017 | 2016 | 2015 | ||||||||||||||
|
CMS Energy, including Consumers |
||||||||||||||||||||
|
Net periodic cost (credit) |
||||||||||||||||||||
|
Service cost |
$ |
45 |
$ |
42 |
$ |
50 |
$ |
19 |
$ |
18 |
$ |
25 | ||||||||
|
Interest cost |
93 | 90 | 108 | 51 | 46 | 58 | ||||||||||||||
|
Expected return on plan assets |
(153) | (147) | (138) | (90) | (85) | (91) | ||||||||||||||
|
Amortization of: |
||||||||||||||||||||
|
Net loss |
82 | 71 | 97 | 29 | 21 | 21 | ||||||||||||||
|
Prior service cost (credit) |
5 | 4 | 1 | (40) | (41) | (41) | ||||||||||||||
|
Net periodic cost (credit) |
$ |
72 |
$ |
60 |
$ |
118 |
$ |
(31) |
$ |
(41) |
$ |
(28) | ||||||||
|
Consumers |
||||||||||||||||||||
|
Net periodic cost (credit) |
||||||||||||||||||||
|
Service cost |
$ |
44 |
$ |
41 |
$ |
49 |
$ |
19 |
$ |
17 |
$ |
25 | ||||||||
|
Interest cost |
90 | 87 | 103 | 49 | 45 | 56 | ||||||||||||||
|
Expected return on plan assets |
(149) | (143) | (134) | (84) | (80) | (86) | ||||||||||||||
|
Amortization of: |
||||||||||||||||||||
|
Net loss |
79 | 68 | 93 | 29 | 22 | 22 | ||||||||||||||
|
Prior service cost (credit) |
4 | 4 | 1 | (39) | (40) | (40) | ||||||||||||||
|
Net periodic cost (credit) |
$ |
68 |
$ |
57 |
$ |
112 |
$ |
(26) |
$ |
(36) |
$ |
(23) | ||||||||
|
|
|||||||
|
In Millions |
|||||||
|
|
DB Pension Plans |
OPEB Plan |
|||||
|
CMS Energy, including Consumers |
|||||||
|
Regulatory asset (liability) |
$ |
75 |
$ |
(49) | |||
|
AOCI |
2 | (2) | |||||
|
Consumers |
|||||||
|
Regulatory asset (liability) |
$ |
75 |
$ |
(49) | |||
|
|
|||||||||||||||||||||
|
In Millions |
|||||||||||||||||||||
|
|
DB Pension Plans |
DB SERP |
OPEB Plan |
||||||||||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||
|
CMS Energy, including Consumers |
|||||||||||||||||||||
|
Benefit obligation at beginning of |
$ |
2,562 |
$ |
2,403 |
$ |
151 |
$ |
150 |
$ |
1,408 |
$ |
1,227 | |||||||||
|
Service cost |
45 | 42 |
- |
- |
19 | 18 | |||||||||||||||
|
Interest cost |
88 | 85 | 5 | 5 | 51 | 46 | |||||||||||||||
|
Plan amendments |
- |
- |
- |
- |
(309) |
- |
|||||||||||||||
|
Actuarial (gain) loss |
241 |
1 |
196 |
1 |
7 | 4 | (24) |
1 |
171 |
1 |
|||||||||||
|
Benefits paid |
(156) | (164) | (9) | (8) | (48) | (54) | |||||||||||||||
|
Benefit obligation at end of period |
$ |
2,780 |
$ |
2,562 |
$ |
154 |
$ |
151 |
$ |
1,097 |
$ |
1,408 | |||||||||
|
Plan assets at fair value at |
$ |
2,101 |
$ |
2,013 |
$ |
- |
$ |
- |
$ |
1,264 |
$ |
1,208 | |||||||||
|
Actual return on plan assets |
360 | 152 |
- |
- |
203 | 109 | |||||||||||||||
|
Company contribution |
- |
100 | 9 | 8 |
- |
- |
|||||||||||||||
|
Actual benefits paid |
(156) | (164) | (9) | (8) | (47) | (53) | |||||||||||||||
|
Plan assets at fair value at end |
$ |
2,305 |
$ |
2,101 |
$ |
- |
$ |
- |
$ |
1,420 |
$ |
1,264 | |||||||||
|
Funded status |
$ |
(475) |
2 |
$ |
(461) |
2 |
$ |
(154) |
$ |
(151) |
$ |
323 |
$ |
(144) | |||||||
|
Consumers |
|||||||||||||||||||||
|
Benefit obligation at beginning of |
$ |
109 |
$ |
106 |
$ |
1,365 |
$ |
1,188 | |||||||||||||
|
Service cost |
- |
- |
19 | 17 | |||||||||||||||||
|
Interest cost |
4 | 4 | 49 | 45 | |||||||||||||||||
|
Plan amendments |
- |
- |
(303) |
- |
|||||||||||||||||
|
Actuarial (gain) loss |
5 | 4 | (31) |
1 |
167 |
1 |
|||||||||||||||
|
Benefits paid |
(6) | (5) | (46) | (52) | |||||||||||||||||
|
Benefit obligation at end of period |
$ |
112 |
$ |
109 |
$ |
1,053 |
$ |
1,365 | |||||||||||||
|
Plan assets at fair value at |
$ |
- |
$ |
- |
$ |
1,184 |
$ |
1,133 | |||||||||||||
|
Actual return on plan assets |
- |
- |
190 | 103 | |||||||||||||||||
|
Company contribution |
6 | 5 |
- |
- |
|||||||||||||||||
|
Actual benefits paid |
(6) | (5) | (45) | (52) | |||||||||||||||||
|
Plan assets at fair value at end |
$ |
- |
$ |
- |
$ |
1,329 |
$ |
1,184 | |||||||||||||
|
Funded status |
$ |
(112) |
$ |
(109) |
$ |
276 |
$ |
(181) | |||||||||||||
1The actuarial loss for 2017 for the DB Pension Plans was primarily the result of lowering the discount rates. The actuarial gain for 2017 for the OPEB Plan was primarily the result of better claim experience in calculating the plan’s funded status. The actuarial loss for 2016 was primarily the result of claims, experience, and lowering the discount rates used in calculating the plans’ funded status.
2At December 31, 2017, $455 million of the total funded status of the DB Pension Plans was attributable to Consumers, based on an allocation of expenses. At December 31, 2016, $441 million of the total funded status of the DB Pension Plans was attributable to Consumers, based on an allocation of expenses.
|
|
|||||||
|
In Millions |
|||||||
|
December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
Non-current assets |
|||||||
|
DB Pension Plans |
$ |
143 |
$ |
- |
|||
|
OPEB Plan |
323 |
- |
|||||
|
Current liabilities |
|||||||
|
DB SERP |
9 | 8 | |||||
|
Non-current liabilities |
|||||||
|
DB Pension Plans |
618 | 461 | |||||
|
DB SERP |
145 | 143 | |||||
|
OPEB Plan |
- |
144 | |||||
|
Consumers |
|||||||
|
Non-current assets |
|||||||
|
DB Pension Plans |
$ |
147 |
$ |
- |
|||
|
OPEB Plan |
276 |
- |
|||||
|
Current liabilities |
|||||||
|
DB SERP |
7 | 5 | |||||
|
Non-current liabilities |
|||||||
|
DB Pension Plans |
602 | 441 | |||||
|
DB SERP |
105 | 104 | |||||
|
OPEB Plan |
- |
181 | |||||
|
|
|||||||
|
In Millions |
|||||||
|
December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
PBO |
$ |
1,511 |
$ |
2,562 | |||
|
ABO |
1,164 | 2,250 | |||||
|
Fair value of plan assets |
893 | 2,101 | |||||
|
|
||||||||||||||
|
In Millions |
||||||||||||||
|
|
DB Pension Plans |
OPEB Plan |
||||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2017 | 2016 | ||||||||||
|
CMS Energy, including Consumers |
||||||||||||||
|
Regulatory assets (liabilities) |
||||||||||||||
|
Net loss |
$ |
1,017 |
$ |
1,062 |
$ |
316 |
$ |
483 | ||||||
|
Prior service cost (credit) |
11 | 15 | (451) | (187) | ||||||||||
|
Regulatory assets (liabilities) |
$ |
1,028 |
$ |
1,077 |
$ |
(135) |
$ |
296 | ||||||
|
AOCI |
||||||||||||||
|
Net loss (gain) |
97 | 93 | (6) | (8) | ||||||||||
|
Prior service cost (credit) |
1 | 1 | (12) | (6) | ||||||||||
|
Total amounts recognized in regulatory assets |
$ |
1,126 |
$ |
1,171 |
$ |
(153) |
$ |
282 | ||||||
|
Consumers |
||||||||||||||
|
Regulatory assets (liabilities) |
||||||||||||||
|
Net loss |
$ |
1,017 |
$ |
1,062 |
$ |
316 |
$ |
483 | ||||||
|
Prior service cost (credit) |
11 | 15 | (451) | (187) | ||||||||||
|
Regulatory assets (liabilities) |
$ |
1,028 |
$ |
1,077 |
$ |
(135) |
$ |
296 | ||||||
|
AOCI |
||||||||||||||
|
Net loss |
36 | 33 |
- |
- |
||||||||||
|
Total amounts recognized in regulatory assets |
$ |
1,064 |
$ |
1,110 |
$ |
(135) |
$ |
296 | ||||||
|
|
||||||||||||||||||||
|
In Millions |
||||||||||||||||||||
|
|
DB Pension Plans |
|||||||||||||||||||
|
|
December 31, 2017 |
December 31, 2016 |
||||||||||||||||||
|
|
Total |
Level 1 |
Level 2 |
Total |
Level 1 |
Level 2 |
||||||||||||||
|
CMS Energy, including Consumers |
||||||||||||||||||||
|
Cash and short-term |
$ |
21 |
$ |
21 |
$ |
- |
$ |
110 |
$ |
110 |
$ |
- |
||||||||
|
U.S. government and |
4 |
- |
4 | 1 |
- |
1 | ||||||||||||||
|
Corporate debt |
336 |
- |
336 | 266 |
- |
266 | ||||||||||||||
|
State and municipal bonds |
9 |
- |
9 | 9 |
- |
9 | ||||||||||||||
|
Foreign corporate bonds |
31 |
- |
31 | 25 |
- |
25 | ||||||||||||||
|
Mutual funds |
662 | 662 |
- |
571 | 571 |
- |
||||||||||||||
|
|
$ |
1,063 |
$ |
683 |
$ |
380 |
$ |
982 |
$ |
681 |
$ |
301 | ||||||||
|
Pooled funds |
1,242 | 1,119 | ||||||||||||||||||
|
Total |
$ |
2,305 |
$ |
2,101 | ||||||||||||||||
|
|
||||||||||||||||||||
|
In Millions |
||||||||||||||||||||
|
|
OPEB Plan |
|||||||||||||||||||
|
|
December 31, 2017 |
December 31, 2016 |
||||||||||||||||||
|
|
Total |
Level 1 |
Level 2 |
Total |
Level 1 |
Level 2 |
||||||||||||||
|
CMS Energy, including Consumers |
||||||||||||||||||||
|
Cash and short-term |
$ |
16 |
$ |
16 |
$ |
- |
$ |
39 |
$ |
39 |
$ |
- |
||||||||
|
U.S. government and |
1 |
- |
1 |
- |
- |
- |
||||||||||||||
|
Corporate debt |
50 |
- |
50 | 38 |
- |
38 | ||||||||||||||
|
State and municipal bonds |
1 |
- |
1 | 1 |
- |
1 | ||||||||||||||
|
Foreign corporate bonds |
4 |
- |
4 | 4 |
- |
4 | ||||||||||||||
|
Common stocks |
40 | 40 |
- |
44 | 44 |
- |
||||||||||||||
|
Mutual funds |
647 | 647 |
- |
563 | 563 |
- |
||||||||||||||
|
|
$ |
759 |
$ |
703 |
$ |
56 |
$ |
689 |
$ |
646 |
$ |
43 | ||||||||
|
Pooled funds |
661 | 575 | ||||||||||||||||||
|
Total |
$ |
1,420 |
$ |
1,264 | ||||||||||||||||
|
|
|||||||
|
|
DB Pension Plans |
OPEB Plan |
|||||
|
Equity securities |
55 |
% |
52 |
% |
|||
|
Fixed-income securities |
30 | 25 | |||||
|
Alternative-strategy investments |
15 | 23 | |||||
|
|
100 |
% |
100 |
% |
|||
|
|
|||||||
|
In Millions |
|||||||
|
Years Ended December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
OPEB Plan |
$ |
- |
$ |
- |
|||
|
DB Pension Plans |
- |
100 | |||||
|
Consumers |
|||||||
|
OPEB Plan |
$ |
- |
$ |
- |
|||
|
DB Pension Plans |
- |
93 | |||||
|
|
||||||||||
|
In Millions |
||||||||||
|
|
DB Pension Plans |
DB SERP |
OPEB Plan |
|||||||
|
CMS Energy, including Consumers |
||||||||||
|
2018 |
$ |
157 |
$ |
10 |
$ |
56 | ||||
|
2019 |
163 | 10 | 58 | |||||||
|
2020 |
168 | 10 | 60 | |||||||
|
2021 |
169 | 10 | 62 | |||||||
|
2022 |
170 | 10 | 62 | |||||||
|
2023-2027 |
457 | 47 | 312 | |||||||
|
Consumers |
||||||||||
|
2018 |
$ |
153 |
$ |
7 |
$ |
54 | ||||
|
2019 |
159 | 7 | 55 | |||||||
|
2020 |
163 | 7 | 57 | |||||||
|
2021 |
164 | 7 | 59 | |||||||
|
2022 |
166 | 7 | 60 | |||||||
|
2023-2027 |
457 | 32 | 298 | |||||||
|
|
|||||||
|
In Millions |
|||||||
|
Years Ended December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
Trust assets |
$ |
146 |
$ |
144 | |||
|
ABO |
149 | 143 | |||||
|
Contributions |
7 |
- |
|||||
|
Consumers |
|||||||
|
Trust assets |
$ |
106 |
$ |
104 | |||
|
ABO |
107 | 101 | |||||
|
Contributions |
6 |
- |
|||||
|
|
|||||||
|
In Millions |
|||||||
|
|
One Percentage |
One Percentage |
|||||
|
Year Ended December 31, 2017 |
Point Increase |
Point Decrease |
|||||
|
CMS Energy, including Consumers |
|||||||
|
Effect on total service and interest cost component |
$ |
2 |
$ |
(2) | |||
|
Effect on PBO |
32 | (28) | |||||
|
Consumers |
|||||||
|
Effect on total service and interest cost component |
$ |
2 |
$ |
(2) | |||
|
Effect on PBO |
30 | (27) | |||||
|
|
||||||||||
|
December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Weighted average for benefit obligations1 |
||||||||||
|
Discount rate2 |
||||||||||
|
DB Pension Plan A3 |
3.78 |
% |
||||||||
|
DB Pension Plan B3 |
3.64 | |||||||||
|
DB SERP |
3.65 | 4.16 |
% |
4.43 |
% |
|||||
|
OPEB Plan |
3.74 | 4.49 | 4.70 | |||||||
|
Rate of compensation increase |
||||||||||
|
DB Pension Plan A3 |
3.50 | |||||||||
|
DB SERP |
5.50 | 5.50 | 5.50 | |||||||
|
Weighted average for net periodic benefit cost1 |
||||||||||
|
Service cost discount rate2,4 |
||||||||||
|
DB Pension Plans |
4.53 | 4.79 | 4.10 | |||||||
|
DB SERP |
4.51 | 4.87 | 4.10 | |||||||
|
OPEB Plan |
4.89 | 4.75 | 4.30 | |||||||
|
Interest cost discount rate2,4 |
||||||||||
|
DB Pension Plans |
3.56 | 3.66 | 4.10 | |||||||
|
DB SERP |
3.51 | 3.64 | 4.10 | |||||||
|
OPEB Plan |
3.79 | 3.89 | 4.30 | |||||||
|
Expected long-term rate of return on plan assets5 |
||||||||||
|
DB Pension Plans |
7.25 | 7.25 | 7.50 | |||||||
|
OPEB Plan |
7.25 | 7.25 | 7.25 | |||||||
|
Rate of compensation increase |
||||||||||
|
DB Pension Plans |
3.60 | 3.00 | 3.00 | |||||||
|
DB SERP |
5.50 | 5.50 | 5.50 | |||||||
1The mortality assumption for benefit obligations was based on the RP-2014 mortality table, with projection scales MP-2017 for 2017, MP-2016 for 2016, and MP-2015 for 2015. The mortality assumption for net periodic benefit cost for 2017, 2016, and 2015 was based on the RP-2014 mortality table, with projection scales MP-2016 for 2017, MP-2015 for 2016, and MP-2014 for 2015.
2The discount rate reflects the rate at which benefits could be effectively settled and is equal to the equivalent single rate resulting from a yield-curve analysis. This analysis incorporated the projected benefit payments specific to CMS Energy’s and Consumers’ DB Pension Plans and OPEB Plan and the yields on high-quality corporate bonds rated Aa or better.
3Effective December 31, 2017, CMS Energy’s and Consumers’ existing defined benefit pension plan was amended to include only retired or inactive employees; this amended plan is referred to as DB Pension Plan B. Active employees were moved to a newly created pension plan, referred to as DB Pension Plan A. The discount rate used to measure the existing plan was 4.30 percent at December 31, 2016 and 4.52 percent at December 31, 2015. The weighted-average rate of compensation increase used to measure the existing plan was 3.60 percent at December 31, 2016 and 3.00 percent at December 31, 2015.
4In January 2016, CMS Energy and Consumers changed the method they use to determine the discount rate used to calculate the service cost and interest cost components of net periodic benefit costs for the DB Pension and OPEB Plans. Historically, the discount rate used for this purpose represented a single weighted-average rate derived from the yield curve used to determine the benefit obligation. CMS Energy and Consumers have elected to use instead a full-yield-curve approach in the estimation of service cost and interest cost; this approach is more accurate in that it applies individual spot rates along the yield curve to future projected benefit payments based on the time of payment.
5CMS Energy and Consumers determined the long-term rate of return using historical market returns, the present and expected future economic environment, the capital market principles of risk and return, and the expert opinions of individuals and firms with financial market knowledge. CMS Energy and Consumers considered the asset allocation of the portfolio in forecasting the future expected total return of the portfolio. The goal was to determine a long-term rate of return that could be incorporated into the planning of future cash flow requirements in conjunction with the change in the liability. Annually, CMS Energy and Consumers review for reasonableness and appropriateness the forecasted returns for various classes of assets used to construct an expected return model. CMS Energy’s and Consumers’ expected long-term rate of return on the assets of the DB Pension Plans was 7.25 percent in 2017. The actual return (loss) on the assets of the DB Pension Plans was 18.0 percent in 2017, 8.0 percent in 2016, and (2.0) percent in 2015.
|
|
||||||||||||||||||||
|
In Millions |
||||||||||||||||||||
|
|
DB Pension Plans and DB SERP |
OPEB Plan |
||||||||||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | 2017 | 2016 | 2015 | ||||||||||||||
|
CMS Energy, including Consumers |
||||||||||||||||||||
|
Net periodic cost (credit) |
||||||||||||||||||||
|
Service cost |
$ |
45 |
$ |
42 |
$ |
50 |
$ |
19 |
$ |
18 |
$ |
25 | ||||||||
|
Interest cost |
93 | 90 | 108 | 51 | 46 | 58 | ||||||||||||||
|
Expected return on plan assets |
(153) | (147) | (138) | (90) | (85) | (91) | ||||||||||||||
|
Amortization of: |
||||||||||||||||||||
|
Net loss |
82 | 71 | 97 | 29 | 21 | 21 | ||||||||||||||
|
Prior service cost (credit) |
5 | 4 | 1 | (40) | (41) | (41) | ||||||||||||||
|
Net periodic cost (credit) |
$ |
72 |
$ |
60 |
$ |
118 |
$ |
(31) |
$ |
(41) |
$ |
(28) | ||||||||
|
Consumers |
||||||||||||||||||||
|
Net periodic cost (credit) |
||||||||||||||||||||
|
Service cost |
$ |
44 |
$ |
41 |
$ |
49 |
$ |
19 |
$ |
17 |
$ |
25 | ||||||||
|
Interest cost |
90 | 87 | 103 | 49 | 45 | 56 | ||||||||||||||
|
Expected return on plan assets |
(149) | (143) | (134) | (84) | (80) | (86) | ||||||||||||||
|
Amortization of: |
||||||||||||||||||||
|
Net loss |
79 | 68 | 93 | 29 | 22 | 22 | ||||||||||||||
|
Prior service cost (credit) |
4 | 4 | 1 | (39) | (40) | (40) | ||||||||||||||
|
Net periodic cost (credit) |
$ |
68 |
$ |
57 |
$ |
112 |
$ |
(26) |
$ |
(36) |
$ |
(23) | ||||||||
|
|
|||||||
|
In Millions |
|||||||
|
|
DB Pension Plans |
OPEB Plan |
|||||
|
CMS Energy, including Consumers |
|||||||
|
Regulatory asset (liability) |
$ |
75 |
$ |
(49) | |||
|
AOCI |
2 | (2) | |||||
|
Consumers |
|||||||
|
Regulatory asset (liability) |
$ |
75 |
$ |
(49) | |||
|
|
|||||||||||||||||||||
|
In Millions |
|||||||||||||||||||||
|
|
DB Pension Plans |
DB SERP |
OPEB Plan |
||||||||||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||
|
CMS Energy, including Consumers |
|||||||||||||||||||||
|
Benefit obligation at beginning of |
$ |
2,562 |
$ |
2,403 |
$ |
151 |
$ |
150 |
$ |
1,408 |
$ |
1,227 | |||||||||
|
Service cost |
45 | 42 |
- |
- |
19 | 18 | |||||||||||||||
|
Interest cost |
88 | 85 | 5 | 5 | 51 | 46 | |||||||||||||||
|
Plan amendments |
- |
- |
- |
- |
(309) |
- |
|||||||||||||||
|
Actuarial (gain) loss |
241 |
1 |
196 |
1 |
7 | 4 | (24) |
1 |
171 |
1 |
|||||||||||
|
Benefits paid |
(156) | (164) | (9) | (8) | (48) | (54) | |||||||||||||||
|
Benefit obligation at end of period |
$ |
2,780 |
$ |
2,562 |
$ |
154 |
$ |
151 |
$ |
1,097 |
$ |
1,408 | |||||||||
|
Plan assets at fair value at |
$ |
2,101 |
$ |
2,013 |
$ |
- |
$ |
- |
$ |
1,264 |
$ |
1,208 | |||||||||
|
Actual return on plan assets |
360 | 152 |
- |
- |
203 | 109 | |||||||||||||||
|
Company contribution |
- |
100 | 9 | 8 |
- |
- |
|||||||||||||||
|
Actual benefits paid |
(156) | (164) | (9) | (8) | (47) | (53) | |||||||||||||||
|
Plan assets at fair value at end |
$ |
2,305 |
$ |
2,101 |
$ |
- |
$ |
- |
$ |
1,420 |
$ |
1,264 | |||||||||
|
Funded status |
$ |
(475) |
2 |
$ |
(461) |
2 |
$ |
(154) |
$ |
(151) |
$ |
323 |
$ |
(144) | |||||||
|
Consumers |
|||||||||||||||||||||
|
Benefit obligation at beginning of |
$ |
109 |
$ |
106 |
$ |
1,365 |
$ |
1,188 | |||||||||||||
|
Service cost |
- |
- |
19 | 17 | |||||||||||||||||
|
Interest cost |
4 | 4 | 49 | 45 | |||||||||||||||||
|
Plan amendments |
- |
- |
(303) |
- |
|||||||||||||||||
|
Actuarial (gain) loss |
5 | 4 | (31) |
1 |
167 |
1 |
|||||||||||||||
|
Benefits paid |
(6) | (5) | (46) | (52) | |||||||||||||||||
|
Benefit obligation at end of period |
$ |
112 |
$ |
109 |
$ |
1,053 |
$ |
1,365 | |||||||||||||
|
Plan assets at fair value at |
$ |
- |
$ |
- |
$ |
1,184 |
$ |
1,133 | |||||||||||||
|
Actual return on plan assets |
- |
- |
190 | 103 | |||||||||||||||||
|
Company contribution |
6 | 5 |
- |
- |
|||||||||||||||||
|
Actual benefits paid |
(6) | (5) | (45) | (52) | |||||||||||||||||
|
Plan assets at fair value at end |
$ |
- |
$ |
- |
$ |
1,329 |
$ |
1,184 | |||||||||||||
|
Funded status |
$ |
(112) |
$ |
(109) |
$ |
276 |
$ |
(181) | |||||||||||||
1The actuarial loss for 2017 for the DB Pension Plans was primarily the result of lowering the discount rates. The actuarial gain for 2017 for the OPEB Plan was primarily the result of better claim experience in calculating the plan’s funded status. The actuarial loss for 2016 was primarily the result of claims, experience, and lowering the discount rates used in calculating the plans’ funded status.
2At December 31, 2017, $455 million of the total funded status of the DB Pension Plans was attributable to Consumers, based on an allocation of expenses. At December 31, 2016, $441 million of the total funded status of the DB Pension Plans was attributable to Consumers, based on an allocation of expenses.
|
|
|||||||
|
In Millions |
|||||||
|
December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
Non-current assets |
|||||||
|
DB Pension Plans |
$ |
143 |
$ |
- |
|||
|
OPEB Plan |
323 |
- |
|||||
|
Current liabilities |
|||||||
|
DB SERP |
9 | 8 | |||||
|
Non-current liabilities |
|||||||
|
DB Pension Plans |
618 | 461 | |||||
|
DB SERP |
145 | 143 | |||||
|
OPEB Plan |
- |
144 | |||||
|
Consumers |
|||||||
|
Non-current assets |
|||||||
|
DB Pension Plans |
$ |
147 |
$ |
- |
|||
|
OPEB Plan |
276 |
- |
|||||
|
Current liabilities |
|||||||
|
DB SERP |
7 | 5 | |||||
|
Non-current liabilities |
|||||||
|
DB Pension Plans |
602 | 441 | |||||
|
DB SERP |
105 | 104 | |||||
|
OPEB Plan |
- |
181 | |||||
|
|
||||||||||||||
|
In Millions |
||||||||||||||
|
|
DB Pension Plans |
OPEB Plan |
||||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2017 | 2016 | ||||||||||
|
CMS Energy, including Consumers |
||||||||||||||
|
Regulatory assets (liabilities) |
||||||||||||||
|
Net loss |
$ |
1,017 |
$ |
1,062 |
$ |
316 |
$ |
483 | ||||||
|
Prior service cost (credit) |
11 | 15 | (451) | (187) | ||||||||||
|
Regulatory assets (liabilities) |
$ |
1,028 |
$ |
1,077 |
$ |
(135) |
$ |
296 | ||||||
|
AOCI |
||||||||||||||
|
Net loss (gain) |
97 | 93 | (6) | (8) | ||||||||||
|
Prior service cost (credit) |
1 | 1 | (12) | (6) | ||||||||||
|
Total amounts recognized in regulatory assets |
$ |
1,126 |
$ |
1,171 |
$ |
(153) |
$ |
282 | ||||||
|
Consumers |
||||||||||||||
|
Regulatory assets (liabilities) |
||||||||||||||
|
Net loss |
$ |
1,017 |
$ |
1,062 |
$ |
316 |
$ |
483 | ||||||
|
Prior service cost (credit) |
11 | 15 | (451) | (187) | ||||||||||
|
Regulatory assets (liabilities) |
$ |
1,028 |
$ |
1,077 |
$ |
(135) |
$ |
296 | ||||||
|
AOCI |
||||||||||||||
|
Net loss |
36 | 33 |
- |
- |
||||||||||
|
Total amounts recognized in regulatory assets |
$ |
1,064 |
$ |
1,110 |
$ |
(135) |
$ |
296 | ||||||
|
|
|||||||
|
In Millions |
|||||||
|
Years Ended December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
OPEB Plan |
$ |
- |
$ |
- |
|||
|
DB Pension Plans |
- |
100 | |||||
|
Consumers |
|||||||
|
OPEB Plan |
$ |
- |
$ |
- |
|||
|
DB Pension Plans |
- |
93 | |||||
|
|
||||||||||
|
In Millions |
||||||||||
|
|
DB Pension Plans |
DB SERP |
OPEB Plan |
|||||||
|
CMS Energy, including Consumers |
||||||||||
|
2018 |
$ |
157 |
$ |
10 |
$ |
56 | ||||
|
2019 |
163 | 10 | 58 | |||||||
|
2020 |
168 | 10 | 60 | |||||||
|
2021 |
169 | 10 | 62 | |||||||
|
2022 |
170 | 10 | 62 | |||||||
|
2023-2027 |
457 | 47 | 312 | |||||||
|
Consumers |
||||||||||
|
2018 |
$ |
153 |
$ |
7 |
$ |
54 | ||||
|
2019 |
159 | 7 | 55 | |||||||
|
2020 |
163 | 7 | 57 | |||||||
|
2021 |
164 | 7 | 59 | |||||||
|
2022 |
166 | 7 | 60 | |||||||
|
2023-2027 |
457 | 32 | 298 | |||||||
|
|||
|
|
||||||||||||
|
|
CMS Energy, including Consumers |
Consumers |
||||||||||
|
Year Ended December 31, 2017 |
Number of |
Weighted-Average |
Number of |
Weighted-Average |
||||||||
|
Nonvested at beginning of period |
1,387,597 |
$ |
32.44 | 1,328,631 |
$ |
32.41 | ||||||
|
Granted |
||||||||||||
|
Restricted stock |
722,215 | 28.61 | 691,052 | 28.67 | ||||||||
|
Restricted stock units |
12,388 | 41.98 | 11,970 | 41.97 | ||||||||
|
Vested |
||||||||||||
|
Restricted stock |
(819,795) | 19.53 | (787,039) | 19.56 | ||||||||
|
Restricted stock units |
(15,638) | 38.37 | (15,199) | 38.37 | ||||||||
|
Forfeited – restricted stock |
(93,501) | 39.19 | (84,293) | 39.19 | ||||||||
|
Nonvested at end of period |
1,193,266 |
$ |
38.48 | 1,145,122 |
$ |
38.50 | ||||||
|
|
|||||
|
Year Ended December 31, 2017 |
CMS Energy, including |
Consumers |
|||
|
Granted |
|||||
|
Time-lapse awards |
164,640 | 159,260 | |||
|
Market-based awards |
157,064 | 149,870 | |||
|
Performance-based awards |
157,064 | 149,870 | |||
|
Restricted stock units |
11,444 | 11,055 | |||
|
Dividends on market-based awards |
24,137 | 22,976 | |||
|
Dividends on performance-based awards |
22,894 | 21,791 | |||
|
Dividends on restricted stock units |
944 | 915 | |||
|
Additional market-based shares based on achievement of condition |
113,079 | 107,823 | |||
|
Additional performance-based shares based on achievement of condition |
83,337 | 79,462 | |||
|
Total granted |
734,603 | 703,022 |
|
|
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
Expected volatility |
18.0 |
% |
16.7 |
% |
14.1 |
% |
||||
|
Expected dividend yield |
3.0 | 3.2 | 3.3 | |||||||
|
Risk-free rate |
1.5 | 1.0 | 0.8 | |||||||
|
|
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Weighted-average grant-date fair value per share |
||||||||||
|
Restricted stock granted |
$ |
28.61 |
$ |
31.74 |
$ |
36.84 | ||||
|
Restricted stock units granted |
41.98 | 39.12 | 34.25 | |||||||
|
Consumers |
||||||||||
|
Weighted-average grant-date fair value per share |
||||||||||
|
Restricted stock granted |
$ |
28.67 |
$ |
31.77 |
$ |
36.83 | ||||
|
Restricted stock units granted |
41.97 | 39.12 | 34.25 | |||||||
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Fair value of shares that vested during the year |
$ |
37 |
$ |
31 |
$ |
29 | ||||
|
Compensation expense recognized |
17 | 16 | 20 | |||||||
|
Income tax benefit recognized |
7 | 7 | 8 | |||||||
|
Consumers |
||||||||||
|
Fair value of shares that vested during the year |
$ |
35 |
$ |
30 |
$ |
28 | ||||
|
Compensation expense recognized |
16 | 16 | 19 | |||||||
|
Income tax benefit recognized |
7 | 6 | 7 | |||||||
|
|
||||||||||||
|
|
CMS Energy, including Consumers |
Consumers |
||||||||||
|
Year Ended December 31, 2017 |
Number of |
Weighted-Average |
Number of |
Weighted-Average |
||||||||
|
Nonvested at beginning of period |
1,387,597 |
$ |
32.44 | 1,328,631 |
$ |
32.41 | ||||||
|
Granted |
||||||||||||
|
Restricted stock |
722,215 | 28.61 | 691,052 | 28.67 | ||||||||
|
Restricted stock units |
12,388 | 41.98 | 11,970 | 41.97 | ||||||||
|
Vested |
||||||||||||
|
Restricted stock |
(819,795) | 19.53 | (787,039) | 19.56 | ||||||||
|
Restricted stock units |
(15,638) | 38.37 | (15,199) | 38.37 | ||||||||
|
Forfeited – restricted stock |
(93,501) | 39.19 | (84,293) | 39.19 | ||||||||
|
Nonvested at end of period |
1,193,266 |
$ |
38.48 | 1,145,122 |
$ |
38.50 | ||||||
|
|
|||||
|
Year Ended December 31, 2017 |
CMS Energy, including |
Consumers |
|||
|
Granted |
|||||
|
Time-lapse awards |
164,640 | 159,260 | |||
|
Market-based awards |
157,064 | 149,870 | |||
|
Performance-based awards |
157,064 | 149,870 | |||
|
Restricted stock units |
11,444 | 11,055 | |||
|
Dividends on market-based awards |
24,137 | 22,976 | |||
|
Dividends on performance-based awards |
22,894 | 21,791 | |||
|
Dividends on restricted stock units |
944 | 915 | |||
|
Additional market-based shares based on achievement of condition |
113,079 | 107,823 | |||
|
Additional performance-based shares based on achievement of condition |
83,337 | 79,462 | |||
|
Total granted |
734,603 | 703,022 |
|
|
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
Expected volatility |
18.0 |
% |
16.7 |
% |
14.1 |
% |
||||
|
Expected dividend yield |
3.0 | 3.2 | 3.3 | |||||||
|
Risk-free rate |
1.5 | 1.0 | 0.8 | |||||||
|
|
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Weighted-average grant-date fair value per share |
||||||||||
|
Restricted stock granted |
$ |
28.61 |
$ |
31.74 |
$ |
36.84 | ||||
|
Restricted stock units granted |
41.98 | 39.12 | 34.25 | |||||||
|
Consumers |
||||||||||
|
Weighted-average grant-date fair value per share |
||||||||||
|
Restricted stock granted |
$ |
28.67 |
$ |
31.77 |
$ |
36.83 | ||||
|
Restricted stock units granted |
41.97 | 39.12 | 34.25 | |||||||
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Fair value of shares that vested during the year |
$ |
37 |
$ |
31 |
$ |
29 | ||||
|
Compensation expense recognized |
17 | 16 | 20 | |||||||
|
Income tax benefit recognized |
7 | 7 | 8 | |||||||
|
Consumers |
||||||||||
|
Fair value of shares that vested during the year |
$ |
35 |
$ |
30 |
$ |
28 | ||||
|
Compensation expense recognized |
16 | 16 | 19 | |||||||
|
Income tax benefit recognized |
7 | 6 | 7 | |||||||
|
|||
|
|
|||||||||||||
|
In Millions, Except Tax Rate |
|||||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | ||||||||||
|
CMS Energy, including Consumers |
|||||||||||||
|
Income from continuing operations before income taxes |
$ |
886 |
$ |
826 |
$ |
796 | |||||||
|
|
|||||||||||||
|
Income tax expense at statutory rate |
310 | 289 | 279 | ||||||||||
|
Increase (decrease) in income taxes from: |
|||||||||||||
|
Impact of the TCJA |
148 |
- |
- |
||||||||||
|
State and local income taxes, net of federal effect1 |
26 | 37 | 39 | ||||||||||
|
Accelerated flow-through of regulatory tax benefits2 |
(39) | (39) | (39) | ||||||||||
|
Employee share-based awards |
(6) | (7) |
- |
||||||||||
|
Other, net |
(15) | (7) | (8) | ||||||||||
|
Income tax expense |
$ |
424 |
$ |
273 |
$ |
271 | |||||||
|
Effective tax rate |
47.9 |
% |
33.1 |
% |
34.0 |
% |
|||||||
|
Consumers |
|||||||||||||
|
Income from continuing operations before income taxes |
$ |
971 |
$ |
936 |
$ |
896 | |||||||
|
|
|||||||||||||
|
Income tax expense at statutory rate |
340 | 328 | 314 | ||||||||||
|
Increase (decrease) in income taxes from: |
|||||||||||||
|
Impact of the TCJA |
33 |
- |
- |
||||||||||
|
State and local income taxes, net of federal effect1 |
30 | 44 | 42 | ||||||||||
|
Accelerated flow-through of regulatory tax benefits2 |
(39) | (39) | (39) | ||||||||||
|
Employee share-based awards |
(6) | (6) |
- |
||||||||||
|
Other, net |
(19) | (7) | (15) | ||||||||||
|
Income tax expense |
$ |
339 |
$ |
320 |
$ |
302 | |||||||
|
Effective tax rate |
34.9 |
% |
34.2 |
% |
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, including Consumers, recorded a $14 million income tax benefit in 2017. The $14 million income tax benefit was net of reserves for uncertain tax positions and primarily attributable to Consumers.
2In 2013, the MPSC issued an order authorizing Consumers to accelerate the flow-through to electric and gas customers of certain income tax benefits associated primarily with the cost of removal of plant placed in service before 1993. Consumers implemented this regulatory treatment beginning in 2014. This change, which also accelerates Consumers’ recognition of the income tax benefits, reduced Consumers’ income tax expense by $39 million for each of the years ended December 31, 2017, 2016, and 2015.
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Current income taxes |
||||||||||
|
Federal |
$ |
- |
$ |
- |
$ |
- |
||||
|
State and local |
6 | 9 | 24 | |||||||
|
|
$ |
6 |
$ |
9 |
$ |
24 | ||||
|
Deferred income taxes |
||||||||||
|
Federal |
$ |
368 |
$ |
200 |
$ |
192 | ||||
|
State and local |
36 | 47 | 36 | |||||||
|
|
$ |
404 |
$ |
247 |
$ |
228 | ||||
|
Deferred income tax credit |
14 | 17 | 19 | |||||||
|
Tax expense |
$ |
424 |
$ |
273 |
$ |
271 | ||||
|
Consumers |
||||||||||
|
Current income taxes |
||||||||||
|
Federal |
$ |
159 |
$ |
9 |
$ |
66 | ||||
|
State and local |
17 | 22 | 32 | |||||||
|
|
$ |
176 |
$ |
31 |
$ |
98 | ||||
|
Deferred income taxes |
||||||||||
|
Federal |
$ |
120 |
$ |
227 |
$ |
153 | ||||
|
State and local |
29 | 45 | 32 | |||||||
|
|
$ |
149 |
$ |
272 |
$ |
185 | ||||
|
Deferred income tax credit |
14 | 17 | 19 | |||||||
|
Tax expense |
$ |
339 |
$ |
320 |
$ |
302 | ||||
|
|
|||||||
|
In Millions |
|||||||
|
December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
Deferred income tax assets |
|||||||
|
Tax loss and credit carryforwards |
$ |
453 |
$ |
871 | |||
|
Net regulatory tax liability |
411 | 27 | |||||
|
Reserves and accruals |
40 | 69 | |||||
|
Total deferred income tax assets |
$ |
904 |
$ |
967 | |||
|
Valuation allowance |
(15) | (5) | |||||
|
Total deferred income tax assets, net of valuation reserves |
$ |
889 |
$ |
962 | |||
|
Deferred income tax liabilities |
|||||||
|
Plant, property, and equipment |
$ |
(1,891) |
$ |
(2,902) | |||
|
Employee benefits |
(96) | (158) | |||||
|
Securitized costs |
(71) | (118) | |||||
|
Gas inventory |
(37) | (65) | |||||
|
Other |
(63) | (6) | |||||
|
Total deferred income tax liabilities |
$ |
(2,158) |
$ |
(3,249) | |||
|
Total net deferred income tax liabilities |
$ |
(1,269) |
$ |
(2,287) | |||
|
Consumers |
|||||||
|
Deferred income tax assets |
|||||||
|
Net regulatory tax liability |
$ |
411 |
$ |
27 | |||
|
Tax loss and credit carryforwards |
101 | 190 | |||||
|
Reserves and accruals |
21 | 37 | |||||
|
Total deferred income tax assets |
$ |
533 |
$ |
254 | |||
|
Deferred income tax liabilities |
|||||||
|
Plant, property, and equipment |
$ |
(1,901) |
$ |
(2,924) | |||
|
Employee benefits |
(105) | (181) | |||||
|
Securitized costs |
(71) | (118) | |||||
|
Gas inventory |
(37) | (65) | |||||
|
Other |
(59) | (8) | |||||
|
Total deferred income tax liabilities |
$ |
(2,173) |
$ |
(3,296) | |||
|
Total net deferred income tax liabilities |
$ |
(1,640) |
$ |
(3,042) | |||
|
|
||||||||
|
In Millions |
||||||||
|
|
Gross Amount |
Tax Attribute |
Expiration |
|||||
|
CMS Energy, including Consumers |
||||||||
|
Federal net operating loss carryforward |
$ |
855 |
$ |
179 |
2028 – 2036 |
|||
|
Local net operating loss carryforwards |
487 | 5 |
2023 – 2036 |
|||||
|
Alternative minimum tax credits |
137 | 137 |
Not applicable |
|||||
|
General business credits |
130 | 130 |
2018 – 2037 |
|||||
|
Charitable contribution carryover |
8 | 2 | 2021 | |||||
|
Total tax attributes |
$ |
453 | ||||||
|
Consumers |
||||||||
|
Federal net operating loss carryforward |
$ |
309 |
$ |
65 |
2028 – 2036 |
|||
|
General business credits |
34 | 34 |
2032 – 2037 |
|||||
|
Charitable contribution carryover |
8 | 2 | 2021 | |||||
|
Total tax attributes |
$ |
101 | ||||||
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Balance at beginning of period |
$ |
5 |
$ |
6 |
$ |
5 | ||||
|
Additions for current-year tax positions |
10 |
- |
1 | |||||||
|
Additions for prior-year tax positions |
- |
- |
1 | |||||||
|
Reductions for prior-year tax positions |
(1) |
- |
(1) | |||||||
|
Settlements |
- |
(1) |
- |
|||||||
|
Balance at end of period |
$ |
14 |
$ |
5 |
$ |
6 | ||||
|
Consumers |
||||||||||
|
Balance at beginning of period |
$ |
5 |
$ |
6 |
$ |
5 | ||||
|
Additions for current-year tax positions |
17 |
- |
1 | |||||||
|
Additions for prior-year tax positions |
- |
- |
1 | |||||||
|
Reductions for prior-year tax positions |
(1) |
- |
(1) | |||||||
|
Settlements |
- |
(1) |
- |
|||||||
|
Balance at end of period |
$ |
21 |
$ |
5 |
$ |
6 | ||||
|
|
|||||||||||||
|
In Millions, Except Tax Rate |
|||||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | ||||||||||
|
CMS Energy, including Consumers |
|||||||||||||
|
Income from continuing operations before income taxes |
$ |
886 |
$ |
826 |
$ |
796 | |||||||
|
|
|||||||||||||
|
Income tax expense at statutory rate |
310 | 289 | 279 | ||||||||||
|
Increase (decrease) in income taxes from: |
|||||||||||||
|
Impact of the TCJA |
148 |
- |
- |
||||||||||
|
State and local income taxes, net of federal effect1 |
26 | 37 | 39 | ||||||||||
|
Accelerated flow-through of regulatory tax benefits2 |
(39) | (39) | (39) | ||||||||||
|
Employee share-based awards |
(6) | (7) |
- |
||||||||||
|
Other, net |
(15) | (7) | (8) | ||||||||||
|
Income tax expense |
$ |
424 |
$ |
273 |
$ |
271 | |||||||
|
Effective tax rate |
47.9 |
% |
33.1 |
% |
34.0 |
% |
|||||||
|
Consumers |
|||||||||||||
|
Income from continuing operations before income taxes |
$ |
971 |
$ |
936 |
$ |
896 | |||||||
|
|
|||||||||||||
|
Income tax expense at statutory rate |
340 | 328 | 314 | ||||||||||
|
Increase (decrease) in income taxes from: |
|||||||||||||
|
Impact of the TCJA |
33 |
- |
- |
||||||||||
|
State and local income taxes, net of federal effect1 |
30 | 44 | 42 | ||||||||||
|
Accelerated flow-through of regulatory tax benefits2 |
(39) | (39) | (39) | ||||||||||
|
Employee share-based awards |
(6) | (6) |
- |
||||||||||
|
Other, net |
(19) | (7) | (15) | ||||||||||
|
Income tax expense |
$ |
339 |
$ |
320 |
$ |
302 | |||||||
|
Effective tax rate |
34.9 |
% |
34.2 |
% |
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, including Consumers, recorded a $14 million income tax benefit in 2017. The $14 million income tax benefit was net of reserves for uncertain tax positions and primarily attributable to Consumers.
2In 2013, the MPSC issued an order authorizing Consumers to accelerate the flow-through to electric and gas customers of certain income tax benefits associated primarily with the cost of removal of plant placed in service before 1993. Consumers implemented this regulatory treatment beginning in 2014. This change, which also accelerates Consumers’ recognition of the income tax benefits, reduced Consumers’ income tax expense by $39 million for each of the years ended December 31, 2017, 2016, and 2015.
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Current income taxes |
||||||||||
|
Federal |
$ |
- |
$ |
- |
$ |
- |
||||
|
State and local |
6 | 9 | 24 | |||||||
|
|
$ |
6 |
$ |
9 |
$ |
24 | ||||
|
Deferred income taxes |
||||||||||
|
Federal |
$ |
368 |
$ |
200 |
$ |
192 | ||||
|
State and local |
36 | 47 | 36 | |||||||
|
|
$ |
404 |
$ |
247 |
$ |
228 | ||||
|
Deferred income tax credit |
14 | 17 | 19 | |||||||
|
Tax expense |
$ |
424 |
$ |
273 |
$ |
271 | ||||
|
Consumers |
||||||||||
|
Current income taxes |
||||||||||
|
Federal |
$ |
159 |
$ |
9 |
$ |
66 | ||||
|
State and local |
17 | 22 | 32 | |||||||
|
|
$ |
176 |
$ |
31 |
$ |
98 | ||||
|
Deferred income taxes |
||||||||||
|
Federal |
$ |
120 |
$ |
227 |
$ |
153 | ||||
|
State and local |
29 | 45 | 32 | |||||||
|
|
$ |
149 |
$ |
272 |
$ |
185 | ||||
|
Deferred income tax credit |
14 | 17 | 19 | |||||||
|
Tax expense |
$ |
339 |
$ |
320 |
$ |
302 | ||||
|
|
|||||||
|
In Millions |
|||||||
|
December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
Deferred income tax assets |
|||||||
|
Tax loss and credit carryforwards |
$ |
453 |
$ |
871 | |||
|
Net regulatory tax liability |
411 | 27 | |||||
|
Reserves and accruals |
40 | 69 | |||||
|
Total deferred income tax assets |
$ |
904 |
$ |
967 | |||
|
Valuation allowance |
(15) | (5) | |||||
|
Total deferred income tax assets, net of valuation reserves |
$ |
889 |
$ |
962 | |||
|
Deferred income tax liabilities |
|||||||
|
Plant, property, and equipment |
$ |
(1,891) |
$ |
(2,902) | |||
|
Employee benefits |
(96) | (158) | |||||
|
Securitized costs |
(71) | (118) | |||||
|
Gas inventory |
(37) | (65) | |||||
|
Other |
(63) | (6) | |||||
|
Total deferred income tax liabilities |
$ |
(2,158) |
$ |
(3,249) | |||
|
Total net deferred income tax liabilities |
$ |
(1,269) |
$ |
(2,287) | |||
|
Consumers |
|||||||
|
Deferred income tax assets |
|||||||
|
Net regulatory tax liability |
$ |
411 |
$ |
27 | |||
|
Tax loss and credit carryforwards |
101 | 190 | |||||
|
Reserves and accruals |
21 | 37 | |||||
|
Total deferred income tax assets |
$ |
533 |
$ |
254 | |||
|
Deferred income tax liabilities |
|||||||
|
Plant, property, and equipment |
$ |
(1,901) |
$ |
(2,924) | |||
|
Employee benefits |
(105) | (181) | |||||
|
Securitized costs |
(71) | (118) | |||||
|
Gas inventory |
(37) | (65) | |||||
|
Other |
(59) | (8) | |||||
|
Total deferred income tax liabilities |
$ |
(2,173) |
$ |
(3,296) | |||
|
Total net deferred income tax liabilities |
$ |
(1,640) |
$ |
(3,042) | |||
|
|
||||
|
In Millions |
||||
|
December 31 |
2017 | |||
|
Consumers |
||||
|
Plant, property, and equipment (subject to normalization1) |
$ |
1,781 | ||
|
All other, net (not subject to normalization1) |
(193) | |||
|
Net regulatory tax liability |
$ |
1,588 | ||
1Relates to deferred taxes arising from accelerated tax depreciation on assets in rate base that are governed by normalization provisions of the U.S. Internal Revenue Code. These normalization provisions generally require that customer rate refunds associated with changes in deferred taxes be returned to customers over the remaining average service life of the associated assets. Consumers will collect from customers the portion not subject to normalization over a period to be determined in a future regulatory proceeding. Consumers cannot predict the impact of orders from the MPSC related to the treatment of regulatory balances not subject to amortization.
|
|
||||||||
|
In Millions |
||||||||
|
|
Gross Amount |
Tax Attribute |
Expiration |
|||||
|
CMS Energy, including Consumers |
||||||||
|
Federal net operating loss carryforward |
$ |
855 |
$ |
179 |
2028 – 2036 |
|||
|
Local net operating loss carryforwards |
487 | 5 |
2023 – 2036 |
|||||
|
Alternative minimum tax credits |
137 | 137 |
Not applicable |
|||||
|
General business credits |
130 | 130 |
2018 – 2037 |
|||||
|
Charitable contribution carryover |
8 | 2 | 2021 | |||||
|
Total tax attributes |
$ |
453 | ||||||
|
Consumers |
||||||||
|
Federal net operating loss carryforward |
$ |
309 |
$ |
65 |
2028 – 2036 |
|||
|
General business credits |
34 | 34 |
2032 – 2037 |
|||||
|
Charitable contribution carryover |
8 | 2 | 2021 | |||||
|
Total tax attributes |
$ |
101 | ||||||
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Balance at beginning of period |
$ |
5 |
$ |
6 |
$ |
5 | ||||
|
Additions for current-year tax positions |
10 |
- |
1 | |||||||
|
Additions for prior-year tax positions |
- |
- |
1 | |||||||
|
Reductions for prior-year tax positions |
(1) |
- |
(1) | |||||||
|
Settlements |
- |
(1) |
- |
|||||||
|
Balance at end of period |
$ |
14 |
$ |
5 |
$ |
6 | ||||
|
Consumers |
||||||||||
|
Balance at beginning of period |
$ |
5 |
$ |
6 |
$ |
5 | ||||
|
Additions for current-year tax positions |
17 |
- |
1 | |||||||
|
Additions for prior-year tax positions |
- |
- |
1 | |||||||
|
Reductions for prior-year tax positions |
(1) |
- |
(1) | |||||||
|
Settlements |
- |
(1) |
- |
|||||||
|
Balance at end of period |
$ |
21 |
$ |
5 |
$ |
6 | ||||
|
|||
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Other income |
||||||||||
|
Fee income |
$ |
- |
$ |
6 |
$ |
9 | ||||
|
All other |
6 | 2 | 1 | |||||||
|
Total other income – CMS Energy |
$ |
6 |
$ |
8 |
$ |
10 | ||||
|
Consumers |
||||||||||
|
Other income |
||||||||||
|
Gain on CMS Energy common stock |
$ |
14 |
$ |
- |
$ |
9 | ||||
|
Fee income |
- |
6 | 9 | |||||||
|
All other |
3 | 2 | 1 | |||||||
|
Total other income – Consumers |
$ |
17 |
$ |
8 |
$ |
19 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Other expense |
||||||||||
|
Donations |
$ |
(31) |
$ |
(23) |
$ |
(1) | ||||
|
Civic and political expenditures |
(27) | (21) | (10) | |||||||
|
Loss on reacquired and extinguished debt |
(18) | (18) |
- |
|||||||
|
Unrealized investment loss |
- |
(5) |
- |
|||||||
|
All other |
- |
(8) | (6) | |||||||
|
Total other expense – CMS Energy |
$ |
(76) |
$ |
(75) |
$ |
(17) | ||||
|
Consumers |
||||||||||
|
Other expense |
||||||||||
|
Donations |
$ |
(31) |
$ |
(23) |
$ |
(1) | ||||
|
Civic and political expenditures |
(27) | (21) | (10) | |||||||
|
Unrealized investment loss |
- |
(4) |
- |
|||||||
|
All other |
- |
(7) | (6) | |||||||
|
Total other expense – Consumers |
$ |
(58) |
$ |
(55) |
$ |
(17) | ||||
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Other income |
||||||||||
|
Fee income |
$ |
- |
$ |
6 |
$ |
9 | ||||
|
All other |
6 | 2 | 1 | |||||||
|
Total other income – CMS Energy |
$ |
6 |
$ |
8 |
$ |
10 | ||||
|
Consumers |
||||||||||
|
Other income |
||||||||||
|
Gain on CMS Energy common stock |
$ |
14 |
$ |
- |
$ |
9 | ||||
|
Fee income |
- |
6 | 9 | |||||||
|
All other |
3 | 2 | 1 | |||||||
|
Total other income – Consumers |
$ |
17 |
$ |
8 |
$ |
19 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Other expense |
||||||||||
|
Donations |
$ |
(31) |
$ |
(23) |
$ |
(1) | ||||
|
Civic and political expenditures |
(27) | (21) | (10) | |||||||
|
Loss on reacquired and extinguished debt |
(18) | (18) |
- |
|||||||
|
Unrealized investment loss |
- |
(5) |
- |
|||||||
|
All other |
- |
(8) | (6) | |||||||
|
Total other expense – CMS Energy |
$ |
(76) |
$ |
(75) |
$ |
(17) | ||||
|
Consumers |
||||||||||
|
Other expense |
||||||||||
|
Donations |
$ |
(31) |
$ |
(23) |
$ |
(1) | ||||
|
Civic and political expenditures |
(27) | (21) | (10) | |||||||
|
Unrealized investment loss |
- |
(4) |
- |
|||||||
|
All other |
- |
(7) | (6) | |||||||
|
Total other expense – Consumers |
$ |
(58) |
$ |
(55) |
$ |
(17) | ||||
|
|||
|
|
|||||||
|
In Millions |
|||||||
|
December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
Cash and cash equivalents |
$ |
182 |
$ |
235 | |||
|
Restricted cash and cash equivalents |
17 | 19 | |||||
|
Other non-current assets |
5 | 3 | |||||
|
Cash and cash equivalents, including restricted amounts |
$ |
204 |
$ |
257 | |||
|
Consumers |
|||||||
|
Cash and cash equivalents |
$ |
44 |
$ |
131 | |||
|
Restricted cash and cash equivalents |
17 | 19 | |||||
|
Other non-current assets |
4 | 2 | |||||
|
Cash and cash equivalents, including restricted amounts |
$ |
65 |
$ |
152 | |||
|
|
|||||||
|
In Millions |
|||||||
|
December 31 |
2017 | 2016 | |||||
|
CMS Energy, including Consumers |
|||||||
|
Cash and cash equivalents |
$ |
182 |
$ |
235 | |||
|
Restricted cash and cash equivalents |
17 | 19 | |||||
|
Other non-current assets |
5 | 3 | |||||
|
Cash and cash equivalents, including restricted amounts |
$ |
204 |
$ |
257 | |||
|
Consumers |
|||||||
|
Cash and cash equivalents |
$ |
44 |
$ |
131 | |||
|
Restricted cash and cash equivalents |
17 | 19 | |||||
|
Other non-current assets |
4 | 2 | |||||
|
Cash and cash equivalents, including restricted amounts |
$ |
65 |
$ |
152 | |||
|
|||
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Operating revenue |
||||||||||
|
Electric utility |
$ |
4,448 |
$ |
4,379 |
$ |
4,249 | ||||
|
Gas utility |
1,774 | 1,685 | 1,916 | |||||||
|
Enterprises |
229 | 215 | 190 | |||||||
|
Other reconciling items |
132 | 120 | 101 | |||||||
|
Total operating revenue – CMS Energy |
$ |
6,583 |
$ |
6,399 |
$ |
6,456 | ||||
|
Consumers |
||||||||||
|
Operating revenue |
||||||||||
|
Electric utility |
$ |
4,448 |
$ |
4,379 |
$ |
4,249 | ||||
|
Gas utility |
1,774 | 1,685 | 1,916 | |||||||
|
Total operating revenue – Consumers |
$ |
6,222 |
$ |
6,064 |
$ |
6,165 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Depreciation and amortization |
||||||||||
|
Electric utility |
$ |
654 |
$ |
603 |
$ |
567 | ||||
|
Gas utility |
218 | 200 | 177 | |||||||
|
Enterprises |
6 | 5 | 4 | |||||||
|
Other reconciling items |
3 | 3 | 2 | |||||||
|
Total depreciation and amortization – CMS Energy |
$ |
881 |
$ |
811 |
$ |
750 | ||||
|
Consumers |
||||||||||
|
Depreciation and amortization |
||||||||||
|
Electric utility |
$ |
654 |
$ |
603 |
$ |
567 | ||||
|
Gas utility |
218 | 200 | 177 | |||||||
|
Total depreciation and amortization – Consumers |
$ |
872 |
$ |
803 |
$ |
744 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Income from equity method investees1 |
||||||||||
|
Enterprises |
$ |
15 |
$ |
13 |
$ |
14 | ||||
|
Total income from equity method investees – CMS Energy |
$ |
15 |
$ |
13 |
$ |
14 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Interest charges |
||||||||||
|
Electric utility |
$ |
201 |
$ |
196 |
$ |
178 | ||||
|
Gas utility |
74 | 72 | 71 | |||||||
|
Enterprises |
- |
1 |
- |
|||||||
|
Other reconciling items |
163 | 166 | 147 | |||||||
|
Total interest charges – CMS Energy |
$ |
438 |
$ |
435 |
$ |
396 | ||||
|
Consumers |
||||||||||
|
Interest charges |
||||||||||
|
Electric utility |
$ |
201 |
$ |
196 |
$ |
178 | ||||
|
Gas utility |
74 | 72 | 71 | |||||||
|
Other reconciling items |
1 |
- |
1 | |||||||
|
Total interest charges – Consumers |
$ |
276 |
$ |
268 |
$ |
250 | ||||
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Income tax expense (benefit) |
||||||||||
|
Electric utility |
$ |
245 |
$ |
246 |
$ |
224 | ||||
|
Gas utility |
96 | 74 | 78 | |||||||
|
Enterprises |
72 | 10 | 3 | |||||||
|
Other reconciling items |
11 | (57) | (34) | |||||||
|
Total income tax expense – CMS Energy |
$ |
424 |
$ |
273 |
$ |
271 | ||||
|
Consumers |
||||||||||
|
Income tax expense (benefit) |
||||||||||
|
Electric utility |
$ |
245 |
$ |
246 |
$ |
224 | ||||
|
Gas utility |
96 | 74 | 78 | |||||||
|
Other reconciling items |
(2) |
- |
- |
|||||||
|
Total income tax expense – Consumers |
$ |
339 |
$ |
320 |
$ |
302 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Net income (loss) available to common stockholders |
||||||||||
|
Electric utility |
$ |
455 |
$ |
458 |
$ |
437 | ||||
|
Gas utility |
173 | 155 | 154 | |||||||
|
Enterprises |
(27) | 17 | 4 | |||||||
|
Other reconciling items |
(141) | (79) | (72) | |||||||
|
Total net income available to common stockholders – |
$ |
460 |
$ |
551 |
$ |
523 | ||||
|
Consumers |
||||||||||
|
Net income available to common stockholder |
||||||||||
|
Electric utility |
$ |
455 |
$ |
458 |
$ |
437 | ||||
|
Gas utility |
173 | 155 | 154 | |||||||
|
Other reconciling items |
2 | 1 | 1 | |||||||
|
Total net income available to common stockholder – |
$ |
630 |
$ |
614 |
$ |
592 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Plant, property, and equipment, gross |
||||||||||
|
Electric utility2 |
$ |
15,221 |
$ |
14,540 |
$ |
13,059 | ||||
|
Gas utility2 |
7,080 | 6,283 | 5,723 | |||||||
|
Enterprises |
167 | 157 | 120 | |||||||
|
Other reconciling items |
38 | 30 | 41 | |||||||
|
Total plant, property, and equipment, gross – CMS Energy |
$ |
22,506 |
$ |
21,010 |
$ |
18,943 | ||||
|
Consumers |
||||||||||
|
Plant, property, and equipment, gross |
||||||||||
|
Electric utility2 |
$ |
15,221 |
$ |
14,540 |
$ |
13,059 | ||||
|
Gas utility2 |
7,080 | 6,283 | 5,723 | |||||||
|
Other reconciling items |
17 | 15 | 15 | |||||||
|
Total plant, property, and equipment, gross – Consumers |
$ |
22,318 |
$ |
20,838 |
$ |
18,797 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Investments in equity method investees1 |
||||||||||
|
Enterprises |
$ |
64 |
$ |
62 |
$ |
61 | ||||
|
Other reconciling items |
- |
3 | 3 | |||||||
|
Total investments in equity method investees – CMS Energy |
$ |
64 |
$ |
65 |
$ |
64 | ||||
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Total assets |
||||||||||
|
Electric utility2 |
$ |
13,906 |
$ |
13,429 |
$ |
12,660 | ||||
|
Gas utility2 |
7,139 | 6,446 | 5,912 | |||||||
|
Enterprises |
342 | 269 | 270 | |||||||
|
Other reconciling items |
1,663 | 1,478 | 1,457 | |||||||
|
Total assets – CMS Energy |
$ |
23,050 |
$ |
21,622 |
$ |
20,299 | ||||
|
Consumers |
||||||||||
|
Total assets |
||||||||||
|
Electric utility2 |
$ |
13,907 |
$ |
13,430 |
$ |
12,660 | ||||
|
Gas utility2 |
7,139 | 6,446 | 5,912 | |||||||
|
Other reconciling items |
53 | 70 | 63 | |||||||
|
Total assets – Consumers |
$ |
21,099 |
$ |
19,946 |
$ |
18,635 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Capital expenditures3 |
||||||||||
|
Electric utility |
$ |
882 |
$ |
1,007 |
$ |
1,136 | ||||
|
Gas utility |
800 | 611 | 558 | |||||||
|
Enterprises |
33 | 10 | 44 | |||||||
|
Other reconciling items |
7 | 5 | 3 | |||||||
|
Total capital expenditures – CMS Energy |
$ |
1,722 |
$ |
1,633 |
$ |
1,741 | ||||
|
Consumers |
||||||||||
|
Capital expenditures3 |
||||||||||
|
Electric utility |
$ |
882 |
$ |
1,007 |
$ |
1,136 | ||||
|
Gas utility |
800 | 611 | 558 | |||||||
|
Other reconciling items |
1 |
- |
- |
|||||||
|
Total capital expenditures – Consumers |
$ |
1,683 |
$ |
1,618 |
$ |
1,694 | ||||
1Consumers had no significant equity method investments.
2Amounts include a portion of Consumers’ other common assets attributable to both the electric and gas utility businesses.
3Amounts include purchase of capital lease additions. Amounts also include a portion of Consumers’ capital expenditures for plant and equipment attributable to both the electric and gas utility businesses.
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Operating revenue |
||||||||||
|
Electric utility |
$ |
4,448 |
$ |
4,379 |
$ |
4,249 | ||||
|
Gas utility |
1,774 | 1,685 | 1,916 | |||||||
|
Enterprises |
229 | 215 | 190 | |||||||
|
Other reconciling items |
132 | 120 | 101 | |||||||
|
Total operating revenue – CMS Energy |
$ |
6,583 |
$ |
6,399 |
$ |
6,456 | ||||
|
Consumers |
||||||||||
|
Operating revenue |
||||||||||
|
Electric utility |
$ |
4,448 |
$ |
4,379 |
$ |
4,249 | ||||
|
Gas utility |
1,774 | 1,685 | 1,916 | |||||||
|
Total operating revenue – Consumers |
$ |
6,222 |
$ |
6,064 |
$ |
6,165 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Depreciation and amortization |
||||||||||
|
Electric utility |
$ |
654 |
$ |
603 |
$ |
567 | ||||
|
Gas utility |
218 | 200 | 177 | |||||||
|
Enterprises |
6 | 5 | 4 | |||||||
|
Other reconciling items |
3 | 3 | 2 | |||||||
|
Total depreciation and amortization – CMS Energy |
$ |
881 |
$ |
811 |
$ |
750 | ||||
|
Consumers |
||||||||||
|
Depreciation and amortization |
||||||||||
|
Electric utility |
$ |
654 |
$ |
603 |
$ |
567 | ||||
|
Gas utility |
218 | 200 | 177 | |||||||
|
Total depreciation and amortization – Consumers |
$ |
872 |
$ |
803 |
$ |
744 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Income from equity method investees1 |
||||||||||
|
Enterprises |
$ |
15 |
$ |
13 |
$ |
14 | ||||
|
Total income from equity method investees – CMS Energy |
$ |
15 |
$ |
13 |
$ |
14 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Interest charges |
||||||||||
|
Electric utility |
$ |
201 |
$ |
196 |
$ |
178 | ||||
|
Gas utility |
74 | 72 | 71 | |||||||
|
Enterprises |
- |
1 |
- |
|||||||
|
Other reconciling items |
163 | 166 | 147 | |||||||
|
Total interest charges – CMS Energy |
$ |
438 |
$ |
435 |
$ |
396 | ||||
|
Consumers |
||||||||||
|
Interest charges |
||||||||||
|
Electric utility |
$ |
201 |
$ |
196 |
$ |
178 | ||||
|
Gas utility |
74 | 72 | 71 | |||||||
|
Other reconciling items |
1 |
- |
1 | |||||||
|
Total interest charges – Consumers |
$ |
276 |
$ |
268 |
$ |
250 | ||||
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Income tax expense (benefit) |
||||||||||
|
Electric utility |
$ |
245 |
$ |
246 |
$ |
224 | ||||
|
Gas utility |
96 | 74 | 78 | |||||||
|
Enterprises |
72 | 10 | 3 | |||||||
|
Other reconciling items |
11 | (57) | (34) | |||||||
|
Total income tax expense – CMS Energy |
$ |
424 |
$ |
273 |
$ |
271 | ||||
|
Consumers |
||||||||||
|
Income tax expense (benefit) |
||||||||||
|
Electric utility |
$ |
245 |
$ |
246 |
$ |
224 | ||||
|
Gas utility |
96 | 74 | 78 | |||||||
|
Other reconciling items |
(2) |
- |
- |
|||||||
|
Total income tax expense – Consumers |
$ |
339 |
$ |
320 |
$ |
302 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Net income (loss) available to common stockholders |
||||||||||
|
Electric utility |
$ |
455 |
$ |
458 |
$ |
437 | ||||
|
Gas utility |
173 | 155 | 154 | |||||||
|
Enterprises |
(27) | 17 | 4 | |||||||
|
Other reconciling items |
(141) | (79) | (72) | |||||||
|
Total net income available to common stockholders – |
$ |
460 |
$ |
551 |
$ |
523 | ||||
|
Consumers |
||||||||||
|
Net income available to common stockholder |
||||||||||
|
Electric utility |
$ |
455 |
$ |
458 |
$ |
437 | ||||
|
Gas utility |
173 | 155 | 154 | |||||||
|
Other reconciling items |
2 | 1 | 1 | |||||||
|
Total net income available to common stockholder – |
$ |
630 |
$ |
614 |
$ |
592 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Plant, property, and equipment, gross |
||||||||||
|
Electric utility2 |
$ |
15,221 |
$ |
14,540 |
$ |
13,059 | ||||
|
Gas utility2 |
7,080 | 6,283 | 5,723 | |||||||
|
Enterprises |
167 | 157 | 120 | |||||||
|
Other reconciling items |
38 | 30 | 41 | |||||||
|
Total plant, property, and equipment, gross – CMS Energy |
$ |
22,506 |
$ |
21,010 |
$ |
18,943 | ||||
|
Consumers |
||||||||||
|
Plant, property, and equipment, gross |
||||||||||
|
Electric utility2 |
$ |
15,221 |
$ |
14,540 |
$ |
13,059 | ||||
|
Gas utility2 |
7,080 | 6,283 | 5,723 | |||||||
|
Other reconciling items |
17 | 15 | 15 | |||||||
|
Total plant, property, and equipment, gross – Consumers |
$ |
22,318 |
$ |
20,838 |
$ |
18,797 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Investments in equity method investees1 |
||||||||||
|
Enterprises |
$ |
64 |
$ |
62 |
$ |
61 | ||||
|
Other reconciling items |
- |
3 | 3 | |||||||
|
Total investments in equity method investees – CMS Energy |
$ |
64 |
$ |
65 |
$ |
64 | ||||
|
|
||||||||||
|
In Millions |
||||||||||
|
Years Ended December 31 |
2017 | 2016 | 2015 | |||||||
|
CMS Energy, including Consumers |
||||||||||
|
Total assets |
||||||||||
|
Electric utility2 |
$ |
13,906 |
$ |
13,429 |
$ |
12,660 | ||||
|
Gas utility2 |
7,139 | 6,446 | 5,912 | |||||||
|
Enterprises |
342 | 269 | 270 | |||||||
|
Other reconciling items |
1,663 | 1,478 | 1,457 | |||||||
|
Total assets – CMS Energy |
$ |
23,050 |
$ |
21,622 |
$ |
20,299 | ||||
|
Consumers |
||||||||||
|
Total assets |
||||||||||
|
Electric utility2 |
$ |
13,907 |
$ |
13,430 |
$ |
12,660 | ||||
|
Gas utility2 |
7,139 | 6,446 | 5,912 | |||||||
|
Other reconciling items |
53 | 70 | 63 | |||||||
|
Total assets – Consumers |
$ |
21,099 |
$ |
19,946 |
$ |
18,635 | ||||
|
CMS Energy, including Consumers |
||||||||||
|
Capital expenditures3 |
||||||||||
|
Electric utility |
$ |
882 |
$ |
1,007 |
$ |
1,136 | ||||
|
Gas utility |
800 | 611 | 558 | |||||||
|
Enterprises |
33 | 10 | 44 | |||||||
|
Other reconciling items |
7 | 5 | 3 | |||||||
|
Total capital expenditures – CMS Energy |
$ |
1,722 |
$ |
1,633 |
$ |
1,741 | ||||
|
Consumers |
||||||||||
|
Capital expenditures3 |
||||||||||
|
Electric utility |
$ |
882 |
$ |
1,007 |
$ |
1,136 | ||||
|
Gas utility |
800 | 611 | 558 | |||||||
|
Other reconciling items |
1 |
- |
- |
|||||||
|
Total capital expenditures – Consumers |
$ |
1,683 |
$ |
1,618 |
$ |
1,694 | ||||
1Consumers had no significant equity method investments.
2Amounts include a portion of Consumers’ other common assets attributable to both the electric and gas utility businesses.
3Amounts include purchase of capital lease additions. Amounts also include a portion of Consumers’ capital expenditures for plant and equipment attributable to both the electric and gas utility businesses.
|
|||
|
|
|||||||||||
|
In Millions |
|||||||||||
|
Description |
Related Party |
2017 | 2016 | 2015 | |||||||
|
Purchases of capacity and energy |
Affiliates of CMS Enterprises |
$ |
90 |
$ |
88 |
$ |
83 | ||||
|
|||
|
|
|||||
|
Name (Ownership Interest) |
Nature of the Entity |
Financing of Partnership |
|||
|
T.E.S. Filer City (50%) |
Coal-fueled power generator |
Line of credit secured by T.E.S. Filer City’s coal inventory |
|||
|
|
|||||
|
Grayling (50%) |
Wood waste-fueled power generator |
The partnership has no debt. |
|||
|
|
|||||
|
Genesee (50%) |
Wood waste-fueled power generator |
Sale of revenue bonds that mature in 2021 and bear interest at fixed rates. The debt is non-recourse to the partners and secured by a CMS Energy guarantee capped at $3 million annually. |
|||
|
|
|||||
|
Craven (50%) |
Wood waste-fueled power generator |
Line of credit secured by Craven’s property, plant, and equipment |
|
|||
|
|
|||||||||||||
|
In Millions, Except Per Share Amounts and Stock Prices |
|||||||||||||
|
|
2017 |
||||||||||||
|
Quarters Ended |
March 31 |
June 30 |
Sept 30 |
Dec 31 |
|||||||||
|
CMS Energy, including Consumers |
|||||||||||||
|
Operating revenue |
$ |
1,829 |
$ |
1,449 |
$ |
1,527 |
$ |
1,778 | |||||
|
Operating income |
388 | 241 | 330 | 379 | |||||||||
|
Net income (loss) |
199 | 93 | 172 | (2) | |||||||||
|
Income attributable to noncontrolling interests |
- |
1 |
- |
1 | |||||||||
|
Net income (loss) available to common stockholders |
199 | 92 | 172 | (3) | |||||||||
|
Basic earnings (loss) per average common share1 |
0.71 | 0.33 | 0.61 | (0.01) | |||||||||
|
Diluted earnings (loss) per average common share1 |
0.71 | 0.33 | 0.61 | (0.01) | |||||||||
|
Common stock prices2 |
|||||||||||||
|
High |
45.28 | 48.25 | 49.10 | 50.55 | |||||||||
|
Low |
41.51 | 44.82 | 45.57 | 45.97 | |||||||||
|
Consumers |
|||||||||||||
|
Operating revenue |
$ |
1,737 |
$ |
1,362 |
$ |
1,437 |
$ |
1,686 | |||||
|
Operating income |
359 | 222 | 308 | 363 | |||||||||
|
Net income |
211 | 104 | 181 | 136 | |||||||||
|
Preferred stock dividends |
- |
1 |
- |
1 | |||||||||
|
Net income available to common stockholder |
211 | 103 | 181 | 135 | |||||||||
|
|
|||||||||||||
|
In Millions, Except Per Share Amounts and Stock Prices |
|||||||||||||
|
|
2016 |
||||||||||||
|
Quarters Ended |
March 31 |
June 30 |
Sept 30 |
Dec 31 |
|||||||||
|
CMS Energy, including Consumers |
|||||||||||||
|
Operating revenue |
$ |
1,801 |
$ |
1,371 |
$ |
1,587 |
$ |
1,640 | |||||
|
Operating income3 |
326 | 275 | 375 | 280 | |||||||||
|
Net income |
164 | 125 | 186 | 78 | |||||||||
|
Income attributable to noncontrolling interests |
- |
1 |
- |
1 | |||||||||
|
Net income available to common stockholders |
164 | 124 | 186 | 77 | |||||||||
|
Basic earnings per average common share1 |
0.59 | 0.45 | 0.67 | 0.28 | |||||||||
|
Diluted earnings per average common share1 |
0.59 | 0.45 | 0.67 | 0.28 | |||||||||
|
Common stock prices2 |
|||||||||||||
|
High |
42.44 | 45.86 | 46.17 | 42.15 | |||||||||
|
Low |
35.61 | 39.38 | 41.31 | 39.49 | |||||||||
|
Consumers |
|||||||||||||
|
Operating revenue |
$ |
1,723 |
$ |
1,293 |
$ |
1,498 |
$ |
1,550 | |||||
|
Operating income3 |
308 | 254 | 356 | 279 | |||||||||
|
Net income |
172 | 132 | 195 | 117 | |||||||||
|
Preferred stock dividends |
- |
1 |
- |
1 | |||||||||
|
Net income available to common stockholder |
172 | 131 | 195 | 116 | |||||||||
1The sum of the quarters may not equal annual EPS due to changes in the number of shares outstanding.
2Based on New York Stock Exchange composite transactions.
3Prior period amounts have been adjusted as required to reflect the implementation of ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. For further details on the adoption of this standard, see Note 2, New Accounting Standards.
|
|
|||||||||||||
|
In Millions, Except Per Share Amounts and Stock Prices |
|||||||||||||
|
|
2017 |
||||||||||||
|
Quarters Ended |
March 31 |
June 30 |
Sept 30 |
Dec 31 |
|||||||||
|
CMS Energy, including Consumers |
|||||||||||||
|
Operating revenue |
$ |
1,829 |
$ |
1,449 |
$ |
1,527 |
$ |
1,778 | |||||
|
Operating income |
388 | 241 | 330 | 379 | |||||||||
|
Net income (loss) |
199 | 93 | 172 | (2) | |||||||||
|
Income attributable to noncontrolling interests |
- |
1 |
- |
1 | |||||||||
|
Net income (loss) available to common stockholders |
199 | 92 | 172 | (3) | |||||||||
|
Basic earnings (loss) per average common share1 |
0.71 | 0.33 | 0.61 | (0.01) | |||||||||
|
Diluted earnings (loss) per average common share1 |
0.71 | 0.33 | 0.61 | (0.01) | |||||||||
|
Common stock prices2 |
|||||||||||||
|
High |
45.28 | 48.25 | 49.10 | 50.55 | |||||||||
|
Low |
41.51 | 44.82 | 45.57 | 45.97 | |||||||||
|
Consumers |
|||||||||||||
|
Operating revenue |
$ |
1,737 |
$ |
1,362 |
$ |
1,437 |
$ |
1,686 | |||||
|
Operating income |
359 | 222 | 308 | 363 | |||||||||
|
Net income |
211 | 104 | 181 | 136 | |||||||||
|
Preferred stock dividends |
- |
1 |
- |
1 | |||||||||
|
Net income available to common stockholder |
211 | 103 | 181 | 135 | |||||||||
|
|
|||||||||||||
|
In Millions, Except Per Share Amounts and Stock Prices |
|||||||||||||
|
|
2016 |
||||||||||||
|
Quarters Ended |
March 31 |
June 30 |
Sept 30 |
Dec 31 |
|||||||||
|
CMS Energy, including Consumers |
|||||||||||||
|
Operating revenue |
$ |
1,801 |
$ |
1,371 |
$ |
1,587 |
$ |
1,640 | |||||
|
Operating income3 |
326 | 275 | 375 | 280 | |||||||||
|
Net income |
164 | 125 | 186 | 78 | |||||||||
|
Income attributable to noncontrolling interests |
- |
1 |
- |
1 | |||||||||
|
Net income available to common stockholders |
164 | 124 | 186 | 77 | |||||||||
|
Basic earnings per average common share1 |
0.59 | 0.45 | 0.67 | 0.28 | |||||||||
|
Diluted earnings per average common share1 |
0.59 | 0.45 | 0.67 | 0.28 | |||||||||
|
Common stock prices2 |
|||||||||||||
|
High |
42.44 | 45.86 | 46.17 | 42.15 | |||||||||
|
Low |
35.61 | 39.38 | 41.31 | 39.49 | |||||||||
|
Consumers |
|||||||||||||
|
Operating revenue |
$ |
1,723 |
$ |
1,293 |
$ |
1,498 |
$ |
1,550 | |||||
|
Operating income3 |
308 | 254 | 356 | 279 | |||||||||
|
Net income |
172 | 132 | 195 | 117 | |||||||||
|
Preferred stock dividends |
- |
1 |
- |
1 | |||||||||
|
Net income available to common stockholder |
172 | 131 | 195 | 116 | |||||||||
1The sum of the quarters may not equal annual EPS due to changes in the number of shares outstanding.
2Based on New York Stock Exchange composite transactions.
3Prior period amounts have been adjusted as required to reflect the implementation of ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. For further details on the adoption of this standard, see Note 2, New Accounting Standards.
|
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