UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~September 30, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from _____to_____



Commission File Number	Registrant; State of Incorporation; Address; and Telephone Number	IRS Employer Identification No.
1-9513	CMS ENERGY CORPORATION	38-2726431

(A Michigan Corporation)

One Energy Plaza, Jackson, Michigan 49201

(517) 788‑0550



1-5611	CONSUMERS ENERGY COMPANY	38-0442310

(A Michigan Corporation)

One Energy Plaza, Jackson, Michigan 49201

(517) 788‑0550



Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
CMS Energy Corporation Common Stock, $0.01 par value	CMS	New York Stock Exchange
CMS Energy Corporation 5.625% Junior Subordinated Notes due 2078	CMSA	New York Stock Exchange
CMS Energy Corporation 5.875% Junior Subordinated Notes due 2078	CMSC	New York Stock Exchange
CMS Energy Corporation 5.875% Junior Subordinated Notes due 2079	CMSD	New York Stock Exchange
Consumers Energy Company Cumulative Preferred Stock, $100 par value: $4.50 Series	CMS-PB	New York Stock Exchange



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
CMS Energy Corporation:	Yes	☒	No	☐	Consumers Energy Company:	Yes	☒	No	☐



Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
CMS Energy Corporation:	Yes	☒	No	☐	Consumers Energy Company:	Yes	☒	No	☐



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.
CMS Energy Corporation:		Consumers Energy Company:
Large accelerated filer	☒	Large accelerated filer	☐
Non‑accelerated filer	☐	Non‑accelerated filer	☒
Accelerated filer	☐	Accelerated filer	☐
Smaller reporting company	☐	Smaller reporting company	☐
Emerging growth company	☐	Emerging growth company	☐



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
CMS Energy Corporation:	☐	Consumers Energy Company:	☐



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act).
CMS Energy Corporation:	Yes	☐	No	☒	Consumers Energy Company:	Yes	☐	No	☒



Indicate the number of shares outstanding of each of the issuer’s classes of common stock at ~~April 6,~~October 8, 2020:
CMS Energy Corporation:
CMS Energy Common Stock, $0.01 par value (including 12,322 shares owned by Consumers Energy)	~~286,221,472~~286,334,466
Consumers Energy Company:
Consumers Common Stock, $10 par value, privately held by CMS Energy Corporation	84,108,789

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CMS Energy Corporation

Consumers Energy Company

Quarterly Reports on Form 10‑Q to the Securities and Exchange Commission for the Period Ended ~~March 31,~~September 30, 2020

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Glossary

Certain terms used in the text and financial statements are defined below.

2016 Energy Law

Michigan’s Public Acts 341 and 342 of 2016, which became effective in April 2017

2019 Form 10‑K

Each of CMS Energy’s and Consumers’ Annual Report on Form 10‑K for the year ended December 31, 2019

ABATE

The Association of Businesses Advocating Tariff Equity

AOCI

Accumulated other comprehensive income (loss)

ARO

Asset retirement obligation

ASU

Financial Accounting Standards Board Accounting Standards Update

Aviator Wind

Aviator Wind, LLC, a VIE in which Aviator Wind Equity Holdings holds a Class B membership interest

Aviator Wind Equity Holdings

Aviator Wind Equity Holdings, LLC, a VIE in which Grand River Wind, LLC, a wholly owned subsidiary of CMS Enterprises, has a 51‑percent interest

Bay Harbor

A residential/commercial real estate area located near Petoskey, Michigan, in which CMS Energy sold its interest in 2002

bcf

Billion cubic feet

~~CARES Act~~

~~Coronavirus Aid, Relief, and Economic Security Act of 2020~~

Cantera Gas Company

Cantera Gas Company LLC, a non‑affiliated company, formerly known as CMS Field Services

Cantera Natural Gas, Inc.

Cantera Natural Gas, Inc., a non‑affiliated company that purchased CMS Field Services

CARES Act

Coronavirus Aid, Relief, and Economic Security Act of 2020

CCR

Coal combustion residual

CDC

U.S. Centers for Disease Control and Prevention

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CEO

Chief Executive Officer

CERCLA

The Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended

CFO

Chief Financial Officer

Clean Air Act

Federal Clean Air Act of 1963, as amended

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Clean Energy Plan

Consumers’ long‑term strategy for delivering clean, reliable, and affordable energy to its customers through the increased use of energy efficiency and customer demand management programs, additional renewable energy generation, and conservation voltage reduction

Clean Water Act

Federal Water Pollution Control Act of 1972, as amended

CMS Energy

CMS Energy Corporation and its consolidated subsidiaries, unless otherwise noted; the parent of Consumers, CMS Enterprises, and EnerBank

CMS Enterprises

CMS Enterprises Company, a wholly owned subsidiary of CMS Energy

CMS Field Services

CMS Field Services, Inc., a former wholly owned subsidiary of CMS Gas Transmission Company, a wholly owned subsidiary of CMS Enterprises

CMS Land

CMS Land Company, a wholly owned subsidiary of CMS Capital, L.L.C., a wholly owned subsidiary of CMS Energy

CMS MST

CMS Marketing, Services and Trading Company, a wholly owned subsidiary of CMS Enterprises, whose name was changed to CMS Energy Resource Management Company in 2004

Consumers

Consumers Energy Company and its consolidated subsidiaries, unless otherwise noted; a wholly owned subsidiary of CMS Energy

COVID‑19

Coronavirus disease 2019, a respiratory illness that was declared a pandemic in March 2020 and to which public and private agencies have responded by instituting social-distancing and other measures designed to slow the spread of the disease

CSAPR

The Cross‑State Air Pollution Rule of 2011, as amended

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DB Pension Plan A

Defined benefit pension plan of CMS Energy and Consumers, including certain present and former affiliates and subsidiaries, created as of December 31, 2017 for active employees who were covered under the defined benefit pension plan that closed in 2005

DB Pension Plans

Defined benefit pension plans of CMS Energy and Consumers, including certain present and former affiliates and subsidiaries

DB SERP

Defined Benefit Supplemental Executive Retirement Plan

DIG

Dearborn Industrial Generation, L.L.C., a wholly owned subsidiary of Dearborn Industrial Energy, L.L.C., a wholly owned subsidiary of CMS Energy

Dodd‑Frank Act

Dodd‑Frank Wall Street Reform and Consumer Protection Act of 2010

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~~EBITDA~~

~~Earnings before interest, taxes, depreciation, and amortization~~

EGLE

The Michigan Department of Environment, Great Lakes, and Energy, formerly known as the Michigan Department of Environmental Quality

EnerBank

EnerBank USA, a wholly owned subsidiary of CMS Capital, L.L.C., a wholly owned subsidiary of CMS Energy

energy waste reduction

The reduction of energy consumption through energy efficiency and demand‑side energy conservation, as established under the 2016 Energy Law

EPA

U.S. Environmental Protection Agency

EPS

Earnings per share

Exchange Act

Securities Exchange Act of 1934

FDIC

Federal Deposit Insurance Corporation

FERC

The Federal Energy Regulatory Commission

FICO

Fair ~~Issac~~Isaac Corporation, a non-affiliated company providing data analytic services, with a focus on credit scoring services

FTR

Financial transmission right

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GAAP

U.S. Generally Accepted Accounting Principles

GCR

Gas cost recovery

IRP

Integrated resource plan

IRS

Internal Revenue Service

kWh

Kilowatt‑hour, a unit of energy equal to one thousand watt‑hours

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LIBOR

The London Interbank Offered Rate

Ludington

Ludington pumped-storage plant, jointly owned by Consumers and DTE Electric Company, a non‑affiliated company

MATS

Mercury and Air Toxics Standards, which limit mercury, acid gases, and other toxic pollution from coal‑fueled and oil‑fueled power plants

MCV Partnership

Midland Cogeneration Venture Limited Partnership

MCV PPA

PPA between Consumers and the MCV Partnership

MD&A

Management’s Discussion and Analysis of Financial Condition and Results of Operations

METC

Michigan Electric Transmission Company, LLC, a non‑affiliated company

MGP

Manufactured gas plant

Michigan Mercury Rule

Michigan Air Pollution Control Rules of 2009, as amended, Part 15: Emission Limitations and Prohibitions—Mercury

MISO

Midcontinent Independent System Operator, Inc.

mothball

To place a generating unit into a state of extended reserve shutdown in which the unit is inactive and unavailable for service for a specified period, during which the unit can be brought back into service after receiving appropriate notification and completing any necessary maintenance or other work; generation

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owners in MISO must request approval to mothball a unit, and MISO then evaluates the request for reliability impacts

MPSC

Michigan Public Service Commission

Megawatt, a unit of power equal to one million watts

NAAQS

National Ambient Air Quality Standards

NPDES

National Pollutant Discharge Elimination System, a permit system for regulating point sources of pollution under the Clean Water Act

NREPA

Part 201 of Michigan’s Natural Resources and Environmental Protection Act of 1994, as amended

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NSR

New Source Review, a construction‑permitting program under the Clean Air Act

OPEB

Other Post‑Employment Benefits

OPEB Plan

Postretirement health care and life insurance plans of CMS Energy and Consumers, including certain present and former affiliates and subsidiaries

OSHA

Occupational Safety and Health Administration

PCB

Polychlorinated biphenyl

PHMSA

The U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration

PPA

Power purchase agreement

PSCR

Power supply cost recovery

PURPA

The Public Utility Regulatory Policies Act of 1978

RCRA

The Federal Resource Conservation and Recovery Act of 1976

REC

Renewable energy credit

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ROA

Retail Open Access, which allows electric generation customers to choose alternative electric suppliers pursuant to Michigan’s Public Acts 141 and 142 of 2000, as amended

SEC

U.S. Securities and Exchange Commission

securitization

A financing method authorized by statute and approved by the MPSC which allows a utility to sell its right to receive a portion of the rate payments received from its customers for the repayment of securitization bonds issued by a special‑purpose entity affiliated with such utility

Smart Energy

Consumers’ Smart Energy grid modernization project, which includes the installation of smart meters that transmit and receive data, a two‑way communications network, and modifications to Consumers’ existing information technology system to manage the data and enable changes to key business processes

TCJA

Tax Cuts and Jobs Act of 2017

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UWUA

Utility Workers Union of America, AFL-CIO

VIE

Variable interest entity

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Filing Format

This combined Form 10‑Q is separately filed by CMS Energy and Consumers. Information in this combined Form 10‑Q relating to each individual registrant is filed by such registrant on its own behalf. Consumers makes no representation regarding information relating to any other companies affiliated with CMS Energy other than its own subsidiaries. None of CMS Energy, CMS Enterprises, EnerBank, nor any of CMS Energy’s other subsidiaries (other than Consumers) has any obligation in respect of Consumers’ debt securities and holders of such debt securities should not consider the financial resources or results of operations of CMS Energy, CMS Enterprises, EnerBank, nor any of CMS Energy’s other subsidiaries (other than Consumers and its own subsidiaries (in relevant circumstances)) in making a decision with respect to Consumers’ debt securities. Similarly, neither Consumers nor any other subsidiary of CMS Energy has any obligation in respect of debt securities of CMS Energy.

This report should be read in its entirety. No one section of this report deals with all aspects of the subject matter of this report. This report should be read in conjunction with the consolidated financial statements and related notes and with MD&A included in the 2019 Form 10‑K.

Available Information

CMS Energy’s internet address is www.cmsenergy.com. CMS Energy routinely posts important information on its website and considers the Investor Relations section, www.cmsenergy.com/investor‑relations, a channel of distribution. Information contained on CMS Energy’s website is not incorporated herein.

Forward‑Looking Statements and Information

This Form 10‑Q and other CMS Energy and Consumers disclosures may contain forward‑looking statements as defined by the Private Securities Litigation Reform Act of 1995. The use of “might,” “may,” “could,” “should,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “projects,” “forecasts,” “predicts,” “assumes,” and other similar words is intended to identify forward‑looking statements that involve risk and uncertainty. This discussion of potential risks and uncertainties is designed to highlight important factors that may impact CMS Energy’s and Consumers’ businesses and financial outlook. CMS Energy and Consumers have no obligation to update or revise forward‑looking statements regardless of whether new information, future events, or any other factors affect the information contained in the statements. These forward‑looking statements are subject to various factors that could cause CMS Energy’s and Consumers’ actual results to differ materially from the results anticipated in these statements. These factors include, but are not limited to, the following, all of which are potentially significant:

the impact of the COVID‑19 pandemic and the related economic disruption on CMS Energy’s and Consumers’ revenues, expenses, uncollectible accounts, energy efficiency programs, pension funding, PSCR and GCR costs, capital investment programs, cash flows, liquidity, maintenance of existing assets, and other operating expenses

the impact of new regulation by the MPSC, FERC, and other applicable governmental proceedings and regulations, including any associated impact on electric or gas rates or rate structures

potentially adverse regulatory treatment or failure to receive timely regulatory orders affecting Consumers that are or could come before the MPSC, FERC, or other governmental authorities

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changes in the performance of or regulations applicable to MISO, METC, pipelines, railroads, vessels, or other service providers that CMS Energy, Consumers, or any of their affiliates rely on to serve their customers

the adoption of ~~federal or state laws or regulations~~ or challenges to federal or state laws or regulations or changes in applicable laws, rules, regulations, principles, or practices, or in their interpretation, such as those related to energy policy, ROA, ~~and~~ PURPA, infrastructure integrity or security, gas pipeline safety, gas pipeline capacity, energy waste reduction, the environment, regulation or deregulation, reliability, health care reforms (including comprehensive health care reform enacted in 2010), taxes, accounting matters, climate change, air emissions, renewable energy, ~~potential effects of~~ the Dodd‑Frank Act, and other business issues that could have an impact on CMS Energy’s, Consumers’, or any of their affiliates’ businesses or financial results

factors affecting operations, such as costs and availability of personnel, equipment, and materials; weather conditions; natural disasters; catastrophic weather‑related damage; scheduled or unscheduled equipment outages; maintenance or repairs; environmental incidents; failures of equipment or materials; electric transmission and distribution or gas pipeline system constraints; interconnection requirements; political and social unrest; general strikes; the government and/or paramilitary response to political or social events; and changes in trade policies or regulations

~~increases in demand for renewable energy by customers seeking to meet sustainability goals~~

the ability of Consumers to execute its cost‑reduction strategies

potentially adverse regulatory or legal interpretations or decisions regarding environmental matters, or delayed regulatory treatment or permitting decisions that are or could come before EGLE, the EPA, and/or the U.S. Army Corps of Engineers, and potential environmental remediation costs associated with these interpretations or decisions, including those that may affect Consumers’ routine maintenance, repair, and replacement classification under NSR regulations

changes in energy markets, including availability and price of electric capacity and the timing and extent of changes in commodity prices and availability and deliverability of coal, natural gas, natural gas liquids, electricity, oil, and certain related products

the price of CMS Energy common stock, the credit ratings of CMS Energy and Consumers, capital and financial market conditions, and the effect of these market conditions on CMS Energy’s and Consumers’ interest costs and access to the capital markets, including availability of financing to CMS Energy, Consumers, or any of their affiliates

the potential effects of a future transition from LIBOR to an alternative reference interest rate in the credit and capital markets

the investment performance of the assets of CMS Energy’s and Consumers’ pension and benefit plans, the discount rates, mortality assumptions, and future medical costs used in calculating the plans’ obligations, and the resulting impact on future funding requirements

the impact of the economy, particularly in Michigan, and potential future volatility in the financial and credit markets on CMS Energy’s, Consumers’, or any of their affiliates’ revenues, ability to collect accounts receivable from customers, or cost and availability of capital

changes in the economic and financial viability of CMS Energy’s and Consumers’ suppliers, customers, and other counterparties and the continued ability of these third parties, including those in bankruptcy, to meet their obligations to CMS Energy and Consumers

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population changes in the geographic areas where CMS Energy and Consumers conduct business

national, regional, and local economic, competitive, and regulatory policies, conditions, and developments

loss of customer demand for electric generation supply to alternative electric suppliers, increased use of distributed generation, or energy waste reduction and storage

increases in demand for renewable energy by customers seeking to meet sustainability goals

adverse consequences of employee, director, or third‑party fraud or non‑compliance with codes of conduct or with laws or regulations

federal regulation of electric sales and transmission of electricity, including periodic re‑examination by federal regulators of CMS Energy’s and Consumers’ market‑based sales authorizations

the impact of credit markets, economic conditions, increased competition, and any new banking and consumer protection regulations on EnerBank

the availability, cost, coverage, and terms of insurance, the stability of insurance providers, and the ability of Consumers to recover the costs of any insurance from customers

the effectiveness of CMS Energy’s and Consumers’ risk management policies, procedures, and strategies, including strategies to hedge risk related to interest rates and future prices of electricity, natural gas, and other energy‑related commodities

factors affecting development of electric generation projects and gas and electric transmission and distribution infrastructure replacement, conversion, and expansion projects, including factors related to project site identification, construction material pricing, schedule delays, availability of qualified construction personnel, permitting, acquisition of property rights, and government approvals

potential disruption to, interruption of, or other impacts on facilities, utility infrastructure, operations, or backup systems due to accidents, explosions, physical disasters, global pandemics, cyber incidents, vandalism, civil unrest, war, or terrorism, and the ability to obtain or maintain insurance coverage for these events

changes or disruption in fuel supply, including but not limited to supplier bankruptcy and delivery disruptions

potential costs, lost revenues, reputational harm, or other consequences resulting from misappropriation of assets or sensitive information, corruption of data, or operational disruption in connection with a cyber attack or other cyber incident

potential disruption to, interruption or failure of, or other impacts on information technology backup or disaster recovery systems

technological developments in energy production, storage, delivery, usage, and metering

the ability to implement technology successfully

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the impact of CMS Energy’s and Consumers’ integrated business software system and its effects on their operations, including utility customer billing and collections

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adverse consequences resulting from any past, present, or future assertion of indemnity or warranty claims associated with assets and businesses previously owned by CMS Energy or Consumers, including claims resulting from attempts by foreign or domestic governments to assess taxes on or to impose environmental liability associated with past operations or transactions

the outcome, cost, and other effects of any legal or administrative claims, proceedings, investigations, or settlements

the reputational impact on CMS Energy and Consumers of operational incidents, violations of corporate policies, regulatory violations, inappropriate use of social media, and other events

restrictions imposed by various financing arrangements and regulatory requirements on the ability of Consumers and other subsidiaries of CMS Energy to transfer funds to CMS Energy in the form of cash dividends, loans, or advances

earnings volatility resulting from the application of fair value accounting to certain energy commodity contracts or interest rate contracts

changes in financial or regulatory accounting principles or policies (e.g., the adoption of the hypothetical liquidation at book value method of accounting for certain non‑regulated renewable energy projects)

other matters that may be disclosed from time to time in CMS Energy’s and Consumers’ SEC filings, or in other public documents

All forward‑looking statements should be considered in the context of the risk and other factors described above and as detailed from time to time in CMS Energy’s and Consumers’ SEC filings. For additional details regarding these and other uncertainties, see Part I—Item 1. Financial Statements—MD&A—Outlook and Notes to the Unaudited Consolidated Financial Statements—Note 2, Regulatory Matters and Note 3, Contingencies and Commitments; and Part II—Item 1A. Risk Factors.

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Part I—Financial Information

Item 1. Financial Statements

Index to Financial Statements



Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
CMS Energy Consolidated Financial Statements		4448
Consolidated Statements of Income (Unaudited)		4448
Consolidated Statements of Comprehensive Income (Unaudited)		4549
Consolidated Statements of Cash Flows (Unaudited)		4751
Consolidated Balance Sheets (Unaudited)		4852
Consolidated Statements of Changes in Equity (Unaudited)		5054
Consumers Consolidated Financial Statements		5256
Consolidated Statements of Income (Unaudited)		5256
Consolidated Statements of Comprehensive Income (Unaudited)		5357
Consolidated Statements of Cash Flows (Unaudited)		5559
Consolidated Balance Sheets (Unaudited)		5660
Consolidated Statements of Changes in Equity (Unaudited)		5862
Notes to the Unaudited Consolidated Financial Statements		5963
1:	New Accounting Standards	5963
2:	Regulatory Matters	6064
3:	Contingencies and Commitments	6064
4:	Financings and Capitalization	6670
5:	Fair Value Measurements	6873
6:	Financial Instruments	7075
7:	Notes Receivable	7176
8:	Retirement Benefits	7378
9:	Income Taxes	7480
10:	Earnings Per Share—CMS Energy	7581
11:	Revenue	7682
12:	Cash and Cash Equivalents	7987
13:	Reportable Segments	8087
14:	Asset Sale and Exit Activities	8390
15:	Purchase of Variable Interest Entity	90

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CMS Energy Corporation

Consumers Energy Company

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This MD&A is a combined report of CMS Energy and Consumers.

Executive Overview

CMS Energy is an energy company operating primarily in Michigan. It is the parent holding company of several subsidiaries, including Consumers, an electric and gas utility; CMS Enterprises, primarily a domestic independent power producer and marketer; and EnerBank, an industrial bank located in Utah. Consumers’ electric utility operations include the generation, purchase, transmission, distribution, and sale of electricity, and Consumers’ gas utility operations include the purchase, transmission, storage, distribution, and sale of natural gas. Consumers’ customer base consists of a mix of residential, commercial, and diversified industrial customers. CMS Enterprises, through its subsidiaries and equity investments, is engaged in domestic independent power production, including the development and operation of renewable generation, and the marketing of independent power production. EnerBank provides primarily unsecured, fixed-rate installment loans throughout the U.S. to finance home improvements.

CMS Energy and Consumers manage their businesses by the nature of services each provides. CMS Energy operates principally in four business segments: electric utility; gas utility; enterprises, its non‑utility operations and investments; and EnerBank. Consumers operates principally in two business segments: electric utility and gas utility. CMS Energy’s and Consumers’ businesses are affected primarily by:

regulation and regulatory matters

state and federal legislation

economic conditions

weather

energy commodity prices

interest rates

their securities’ credit ratings

COVID‑19 Pandemic

CMS Energy and Consumers ~~are responding~~continue to arespond to the public health emergency caused by the COVID‑19 pandemic by instituting and maintaining measures consistent with guidance provided by local, state, and federal agencies. CMS Energy and Consumers maintain over 60 departmental business continuity plans; these plans were reviewed and enhanced in early 2020 to ensure readiness for the COVID-19 pandemic. CMS Energy and Consumers ~~have taken~~continue to take steps to protect the safety of employees, customers, and contractors, and have executed their business continuity plans to ensure the continued delivery of critical energy services. Additionally, CMS Energy and Consumers have mitigated the potential impact of the pandemic on their liquidity by ~~recently~~ completing financing transactions and reducing the need for additional external ~~funding for the remainder of the year.~~funding.

The COVID‑19 pandemic is a ~~rapidly~~continually evolving situation. As a result of the pandemic, ~~In the near term,~~ Consumers has experienced a decline in electric deliveries to commercial and industrial customers, ~~and anticipates~~ ~~increased~~ offset partially by an

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increase in deliveries to residential customers. It has also experienced increased uncollectible accounts andworkforce-related ~~costs, miscellaneous~~ expenses, ~~above amounts in general rates, and~~among other ~~one-time costs~~cost increases directly attributable to the pandemic. Consumers anticipates that these trends will continue in the ~~future as a result of the pandemic.~~near term. In April 2020, the MPSC issued an order authorizing Consumers to defer incremental uncollectible accounts expense associated with the ~~pandemic and requesting comments on utility accounting for other COVID‑19-related expenses and COVID‑19-related impacts to regulatory activities.~~pandemic.

Additionally, EnerBank ~~has experienced~~ anticipates it could experience slower lending growth, ~~and~~ ~~anticipates~~ higher loan write-offs, and increased loan modifications in the future as a result of the pandemic. The companies cannot predict the long-term impact of the pandemic on their ~~liquidity, financial condition,~~business, results of operations, ~~cash flows, or~~financial condition, capital investment ~~program.~~program, liquidity, and cash flows. More detailed discussion of the near-term impacts of and future uncertainties related to the COVID‑19 pandemic can be found throughout this MD&A and in Part II—Item 1A. Risk Factors.

The Triple Bottom Line

CMS Energy’s and Consumers’ purpose is to achieve world class performance while delivering hometown service. In support of this purpose, the companies employ the “Consumers Energy Way,” a lean operating model designed to improve safety, quality, cost, delivery, and employee morale.

CMS Energy and Consumers measure their progress toward the purpose by considering their impact on the “triple bottom line” of people, planet, and profit, which is underpinned by performance; this consideration takes into account not only the economic value that the companies create for customers and investors, but also their responsibility to social and environmental goals. The triple bottom line balances the interests of the companies’ employees, customers, suppliers, regulators, creditors, Michigan’s residents, the investment community, and other stakeholders, and it reflects the broader societal impacts of the companies’ activities.

Consumers’ Sustainability Report, which is available to the public, describes the company’s progress toward world class performance measured in the areas of people, planet, and profit.

People: The people element of the triple bottom line represents CMS Energy’s and Consumers’ commitment to their employees, their customers, the residents of local communities in which the companies do business, and other stakeholders.

The safety of employees, customers, and the general public is a priority of CMS Energy and Consumers. Accordingly, CMS Energy and Consumers have worked to integrate a set of safety principles into their business operations and culture. These principles include complying with applicable safety, health, and security regulations and implementing programs and processes aimed at continually improving safety and security conditions. Over the last ten years, Consumers’ OSHA recordable incident rate has decreased by over 63 percent.

In response to the COVID‑19 pandemic, CMS Energy and Consumers have issued a response plan that is focused on the health and safety of their co-workers, customers, and communities. CMS Energy and Consumers have aligned with safety and health guidelines from the CDC, ~~guidelines~~OSHA, and ~~executive orders issued by Michigan’s governor~~the Michigan Department of Health and Human Services in order to protect their employees, customers, and contractors

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~~protect their employees, customers, and contractors~~ to ensure the continued delivery of critical energy services. To align with, and in addition to, these guidelines, CMS Energy and Consumers have:

secured the supply chain necessary to provide front-line workers with appropriate personal protective equipment and cleaning supplies

when necessary, sequestered employees with critical roles at generating plants, gas compression facilities, and electric control rooms

implemented a 14‑day paid self-quarantine requirement for employees who are exhibiting symptoms of COVID-19 or who have come into contact with a person suspected to have COVID‑19

prohibited business-related international travel and instituted a mandatory ten‑day work remote period for employees who return from personal travel to heavily impacted areas

required employees to work remotely when possible

when necessary, reduced service at 13 direct payment offices to drop box and drive-through services only

initially adjusted work to focus on emergent and critical activities such as electric outages, gas leaks, and other public safety and reliability work; as work

~~implemented a 14‑day self-quarantine requirement for employees who~~ restrictions have ~~come into contact~~gradually lifted in Michigan, the companies have resumed normal work with ~~a person suspected to have COVID‑19~~

~~prohibited business-related international and domestic travel, and instituted a mandatory 14‑day work remote period for employees who return from personal travel to impacted areas~~

~~required employees to work remotely when possible~~

~~reduced service at 13 direct payment offices to drop box and drive-through services only~~safety measures in place

contracted a chief medical officer to guide the companies’ response and provide rapid support and supplies for the workforce

limited access to company facilities, enhanced cleaning protocols, and established a mask-wearing policy

offered additional paid leave to employees to alleviate child care-related burdens and implemented other interim workforce policies to offer flexibility and reduce employee concerns

In response to the pandemic, CMS Energy and Consumers ~~have also~~initially suspended shut-offs of service for non-payment and extended payment protection plans for low-income and senior customers. CMS Energy and Consumers slowly began resuming shut-offs of service for non-payment in late July 2020 for commercial and industrial customers ~~through June 1, 2020.~~and in October 2020 for residential customers. CMS Energy and Consumers remain committed to assisting customers impacted by the pandemic. In September 2020, Consumers announced that it will provide $12 million to help Michigan residents and small businesses who are experiencing difficulty paying their energy bill due to the pandemic.

CMS Energy and Consumers also place a high priority on customer value and on providing a hometown customer experience. Consumers’ customer-driven investment program is aimed at improving safety and increasing electric and gas reliability, which has resulted in measurable improvements in customer satisfaction.

Central to Consumers’ commitment to its customers are the initiatives it has undertaken to keep electricity and natural gas affordable, including:

replacement of coal-fueled generation and PPAs with a cost-efficient mix of renewable energy and energy waste reduction and demand response programs

targeted infrastructure investment to reduce maintenance costs and improve reliability and safety ~~and to reduce maintenance costs~~

supply chain optimization

information and control system efficiencies

employee and retiree health care cost sharing

workforce productivity enhancements

In addition, Consumers’ gas commodity costs declined by 62 percent from 2009 through 2019, due not only to a decrease in market prices but also to Consumers’ improvements to its gas infrastructure and

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optimization of its gas purchasing and storage strategy. These gas commodity savings are passed on to customers.

Planet: The planet element of the triple bottom line represents CMS Energy’s and Consumers’ commitment to protect the environment. This commitment extends beyond compliance with various state and federal environmental, health, and safety laws and regulations. Management considers climate change and other environmental risks in the companies’ strategy development, business planning, and enterprise risk management processes.

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CMS Energy and Consumers continue to focus on opportunities to protect the environment and to reduce their carbon footprint. As a result of actions already taken by CMS Energy and Consumers, the companies have:

decreased their combined percentage of electric supply (self-generated and purchased) from coal by 18 percentage points since 2015

reduced carbon dioxide emissions by over 35 percent since 2005

reduced the amount of water used to generate electricity by over 35 percent since 2012

reduced landfill waste disposal by over 1.3 million tons since 1992

reduced methane emissions by 12 percent since 2012

Additionally, over the last 20 years, Consumers has reduced its sulfur dioxide, nitrogen oxide, particulate matter, and mercury emissions by over 90 percent.

The 2016 Energy Law:

raised the renewable energy standard to 12.5 percent in 2019 and 15 percent in 2021; Consumers met the 12.5-percent requirement in 2019 with a combination of newly generated RECs and previously generated RECs carried over from prior years

established a goal of 35 percent combined renewable energy and energy waste reduction by 2025; Consumers has achieved 22 percent of the combined renewable energy and energy waste reduction goal through 2019

authorized incentives for demand response programs and expanded existing incentives for energy efficiency programs, referring to the combined initiatives as energy waste reduction programs

established an integrated planning process for new generation resources

In 2019, the MPSC approved the IRP that Consumers filed in 2018, which details its Clean Energy Plan. Under its Clean Energy Plan, Consumers will meet the requirements of the 2016 Energy Law using its clean and lean strategy, which focuses on increasing the generation of renewable energy, helping customers use less energy, and offering demand response programs to reduce demand during critical peak times. Further, Consumers plans to replace its coal-fueled generation predominantly with investment in renewable energy, which will enable Consumers to meet and exceed the 2016 Energy Law renewable energy requirements and fulfill increasing customer demand for renewable energy. Through its Clean Energy Plan, Consumers expects to reduce carbon emissions of its owned generation by more than 90 percent from its 2005 levels by 2040. Additionally, the Clean Energy Plan will allow Consumers to achieve a breakthrough goal of at least 50 percent combined renewable energy and energy waste reduction by 2030.

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Presented in the following illustration is Consumers’ 2019 capacity portfolio and its future capacity portfolio as projected in the IRP. This illustration includes the effects of purchased capacity and energy waste reduction and uses the nameplate capacity of renewable energy sources:

~~The Clean Energy~~In September 2020, Michigan’s Governor signed an executive order creating the Michigan Healthy Climate Plan, ~~lays the foundation~~which outlines goals for ~~Consumers’ recently announced goal~~Michigan to achieve economy-wide net-zero greenhouse gas emissions and to be carbon neutral by 2050. The executive order aims for a 28-percent reduction below 2005 levels of greenhouse gas emissions by 2025. Consumers has already surpassed the 28-percent reduction milestone in its electric business and previously announced, in February 2020, a goal of achieving net‑zero carbon emissions by 2040. As part of this net-zero goal, ~~which was announced in February 2020,~~ Consumers will significantly reduce its carbon emissions from its electric business and offset any remaining emissions through strategies including, but not limited to, carbon sequestration, landfill methane capture, and large-scale tree planting. The goal includes not only emissions from Consumers’ owned generation, but also emissions from the generation of power purchased through long-term PPAs and from the MISO energy market.

In addition to Consumers’ efforts to reduce the electric utility’s carbon footprint, it is also making efforts to reduce the gas utility’s methane footprint. In October 2019, Consumers set a goal of net‑zero methane emissions from its natural gas delivery system by 2030. Consumers’ Methane Reduction Plan, released in November 2019, outlines its plan to reach this net-zero emissions goal. Consumers plans to reduce methane emissions from its system by about 80 percent by accelerating the replacement of aging pipe,

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rehabilitating or retiring outdated infrastructure, and adopting new technologies and practices. The remaining emissions will be eliminated by purchasing and/or producing renewable natural gas.

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Additionally, to advance its environmental stewardship in Michigan and to minimize the impact of future regulations, Consumers announced the following five‑year targets during 2018:

to reduce its water use by one billion gallons; during 2018 and 2019, Consumers reduced its water usage by over 400 million gallons

to reduce the amount of waste taken to landfills by 35 percent; during 2018 and 2019, Consumers reduced its waste to landfills by 10ten percent

to enhance, restore, or protect 5,000 acres of land; during 2018 and 2019, Consumers enhanced, restored, or protected over 2,200 acres of land

CMS Energy, through CMS Enterprises, continues to pursue further opportunities for the development of renewable generation projects. In ~~recent years,~~July 2020, CMS Enterprises ~~completed the development of and now operates~~purchased an ownership interest in Aviator Wind, a 525‑MW wind generation project in Coke County, Texas. The project was completed and ~~three solar generation projects.~~became operational in September 2020.

CMS Energy and Consumers are monitoring numerous legislative, policy, and regulatory initiatives, including those to regulate greenhouse gases, and related litigation. While CMS Energy and Consumers cannot predict the outcome of these matters, which could have a material effect on the companies, they intend to continue to move forward with their clean and lean strategy.

Profit: The profit element of the triple bottom line represents CMS Energy’s and Consumers’ commitment to meeting their financial objectives and providing economic development opportunities and benefits in the communities in which they do business. CMS Energy’s and Consumers’ financial strength allows them to maintain solid investment-grade credit ratings and thereby reduce funding costs for the benefit of customers and investors, to preserve and create jobs, and to reinvest in the communities they serve.

For the ~~three~~nine months ended ~~March 31,~~September 30, 2020, CMS Energy’s net income available to common stockholders was ~~$243~~$597 million, and diluted EPS were ~~$0.85.~~$2.09. This compares with net income available to common stockholders of ~~$213~~$513 million and diluted EPS of ~~$0.75~~$1.81 for the ~~three~~nine months ended ~~March 31,~~September 30, 2019. In 2020, the benefits from electric and gas rate increases, higher electric sales due primarily to favorable weather, and lower ~~service restoration costs,~~operating and ~~increased income tax benefits~~maintenance expenses were offset partially by lower ~~electric and~~ gas sales due primarily to unfavorable weather ~~and~~in the first quarter, higher depreciation and ~~property tax expense.~~amortization, and the absence of a 2019 gain on sale of transmission assets. A more detailed discussion of the factors affecting CMS Energy’s and Consumers’ performance can be found in the Results of Operations section that follows this Executive Overview.

Consumers has experienced and anticipates it will continue to experience a decline in electric deliveries to commercial and industrial customers in the near term as a result of the COVID‑19 ~~pandemic, but cannot predict the impact on full-year 2020 electric and gas deliveries at this time.~~pandemic. Over the ~~long term,~~next five years, Consumers expects weather-normalized electric deliveries ~~over the next five years~~ to decrease slightly and weather‑normalized gas deliveries to remain stable. This outlook reflects the effects of energy waste reduction programs offset largely by modest growth in electric and gas demand.

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Performance: Impacting the Triple Bottom Line

CMS Energy and Consumers remain committed to achieving world class performance while delivering hometown ~~service. Leveraging~~service and positively impacting the triple bottom line of people, planet, and profit. During 2020, CMS Energy and Consumers:

realized over $100 million in cost reductions by leveraging the Consumers Energy Way ~~CMS Energy~~ and ~~Consumers accomplished the following during 2019:~~through other initiatives

~~received approval of Consumers’ IRP, which supports~~named a Chief Diversity Officer responsible for setting and monitoring the companies’ ~~clean~~diversity, equity, and inclusion strategy

announced a new parental leave policy for employees, allowing six months of paid leave to mothers and four months of paid leave to a nonbirthing parent

pledged to join five other energy ~~goals~~

~~launched~~companies in facilitating the construction of a ~~three-year~~Midwest electric vehicle ~~pilot program~~

~~committed to invest $7.5 billion in Michigan businesses over the next five years; of that amount,$1.5 billion will be invested in diverse suppliers~~

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~~completed the deployment of automated gas meters in areas where Consumers provides only natural gas to customers, allowing for drive-by meter reading~~

ranked the highest in customer satisfaction among large natural gas providers in the Midwest, according to a residential customer satisfaction study conducted by J.D. Power, a global marketing information companycharging network

CMS Energy and Consumers will continue to utilize the Consumers Energy Way to enable them to achieve world class performance and positively impact the triple bottom line. Consumers’ investment plan and the regulatory environment in which it operates also drive its ability to impact the triple bottom line.

Investment Plan: Consumers expects to make capital investments of $25 billion over the next ten years. Over the next five years, Consumers expects to make significant expenditures on infrastructure upgrades and replacements and electric supply projects. While it has a large number of potential investment opportunities that would add customer value, Consumers has prioritized its spending based on the criteria of enhancing public safety, increasing reliability, maintaining affordability for its customers, and advancing its environmental stewardship. Consumers’ investment program is expected to result in annual rate-base growth of six to eight percent. This rate-base growth, together with cost-control measures, should allow Consumers to maintain affordable customer prices.

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Presented in the following illustration are planned capital expenditures of $12.2 billion that Consumers expects to make from 2020 through 2024:

Of this amount, Consumers plans to spend $9.4 billion over the next five years to maintain and upgrade its gas infrastructure and electric distribution systems in order to enhance safety and reliability, improve customer satisfaction, and reduce energy waste on those systems. The gas infrastructure projects comprise $5.0 billion to sustain deliverability and enhance pipeline integrity and safety. These projects, which involve replacement of mains and services and enhancement of transmission and storage systems, should reduce the minor quantity of methane emissions released as gas is transported. The electric distribution projects comprise $4.4 billion to strengthen circuits and substations and replace poles. Consumers also expects to spend $2.8 billion on electric supply projects, primarily new renewable generation. In response

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to the COVID‑19 pandemic, Consumers has rescheduled some capital investment projects, but has not made any changes to its long-term capital investment program at this time.

Regulation: Regulatory matters are a key aspect of Consumers’ business, particularly rate cases and regulatory proceedings before the MPSC, which permit recovery of new investments while helping to ensure that customer rates are fair and affordable. Important regulatory events and developments not already discussed are summarized below.

•

2019 Gas Rate Case: In December 2019, Consumers filed an application with the MPSC seeking an annual rate increase of $245 million, based on a 10.5 percent authorized return on equity. In May 2020, Consumers reduced its requested annual rate increase to $229 million. In September 2020, the MPSC approved a settlement agreement authorizing an annual rate increase of $144 million, based on a 9.9 percent authorized return on equity, effective October 1, 2020. As part of that agreement, Consumers agreed not to file a new gas rate case prior to December 2021. The ~~filing~~MPSC also ~~seeks approval~~approved the continuation of a revenue decoupling mechanism, ~~that would~~which annually ~~reconcile~~reconciles Consumers’ actual weather-normalized non-fuel revenues with the revenues approved by the MPSC.

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•

2020 Electric Rate Case: In February 2020, Consumers filed an application with the MPSC seeking an annual rate increase of $244 million, based on a 10.5 percent authorized return on equity. In July 2020, Consumers reduced its requested annual rate increase to $230 million. The filing also seeks approval to recover $13 million associated with Consumers’ deferral of depreciation and property tax expense and the overall rate of return on distribution-related capital investments exceeding certain threshold amounts. Additionally, the filing seeks approval of a method of recovering amounts earned under the financial compensation mechanism approved by the MPSC in Consumers’ IRP. This mechanism allows Consumers to earn a financial incentive on PPAs approved by the MPSC after January 1, 2019. Consumers also proposes in the filing a new distributed generation tariff to replace the current net metering tariff, pursuant to the 2016 Energy Law.

Looking Forward

CMS Energy and Consumers will continue to consider the impact on the triple bottom line of people, planet, and profit in their daily operations as well as in their long-term strategic decisions. Consumers will continue to seek fair and timely regulatory treatment that will support its customer-driven investment plan, while pursuing cost-control measures that will allow it to maintain sustainable customer base rates. The Consumers Energy Way is an important means of realizing CMS Energy’s and Consumers’ purpose of achieving world class performance while delivering hometown service.

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Results of Operations

CMS Energy Consolidated Results of Operations


In Millions, Except Per Share Amounts	In Millions, Except Per Share Amounts												In Millions, Except Per Share Amounts
Three Months Ended March 31	2020				2019				Change
													Three Months Ended												Nine Months Ended
September 30													2020				2019				Change				2020				2019				Change
Net Income Available to Common Stockholders		$	243			$	213			$	30			$	218			$	207			$	11			$	597			$	513			$	84
Basic Earnings Per Average Common Share		$	0.86			$	0.75			$	0.11			$	0.76			$	0.73			$	0.03			$	2.10			$	1.81			$	0.29
Diluted Earnings Per Average Common Share		$	0.85			$	0.75			$	0.10			$	0.76			$	0.73			$	0.03			$	2.09			$	1.81			$	0.28

In Millions	In Millions												In Millions
Three Months Ended March 31	2020				2019				Change
													Three Months Ended												Nine Months Ended
September 30													2020				2019				Change				2020				2019				Change
Electric utility		$	118			$	105			$	13			$	226			$	223			$	3			$	463			$	418			$	45
Gas utility		117				121				(4		)		4				(10		)		14				162				119				43
Enterprises¹		20				7				13				13				7				6				34				30				4
EnerBank¹		14				11				3				12				11				1				34				32				2
Corporate interest and other¹		(26		)		(31		)		5				(37		)		(24		)		(13		)		(96		)		(86		)		(10		)
Net Income Available to Common Stockholders		$	243			$	213			$	30			$	218			$	207			$	11			$	597			$	513			$	84

Presented in the following table are specific after-tax changes to net income available to common stockholders for the three and nine months ended ~~March 31,~~September 30, 2020 versus 2019:

Higher earnings from the Aviator Wind project⁴

Increased income tax benefit due to restoring previously sequestered alternative minimum tax credits¹

Implementation of new credit losses standard⁵

Consumers Electric Utility Results of Operations

Presented in the following table are the detailed changes to the electric utility’s net income available to common stockholders for the three months ended ~~March 31,~~September 30, 2020 versus 2019 (amounts are presented ~~pre-tax,~~pre‑tax, with the exception of income tax changes):

Electric deliveries¹ and rate increases

Retention benefits related to D.E. Karn²

Lower tax expense due primarily to research and development tax credits³

Presented in the following table are the detailed changes to the electric utility’s net income available to common stockholders for the nine months ended September 30, 2020 versus 2019 (amounts are presented pre‑tax, with the exception of income tax changes):



In Millions
Nine Months Ended September 30, 2019				$	418
Reasons for the change
Electric deliveries¹ and rate increases
Higher sales due primarily to favorable weather and sales mix, offset partially by lower deliveries to commercial and industrial customers	$	22
Rate increase, including return on higher renewable capital spending	18
Lower other revenues	(6		)
				$	34
Maintenance and other operating expenses
Lower distribution, transmission, and generation expenses	29
Lower service restoration costs	18
Higher mutual insurance distribution	7
Absence of 2019 gain on sale of transmission assets	(34		)
Retention benefits related to D.E. Karn²	(11		)
Absence of favorable 2019 litigation settlement	(8		)
Voluntary separation plan expenses	(6		)
Lower maintenance and other operating expenses	29
				24
Depreciation and amortization
Increased plant in service, reflecting higher capital spending				(21		)
General taxes
Higher property tax, reflecting higher capital spending				(8		)
Other income, net of expenses
Lower OPEB expenses	11
Higher other income, net of expenses	1
				12
Interest charges				(7		)
Income taxes
Lower tax expense due primarily to research and development tax credits³	7
Higher electric utility pre-tax earnings	(4		)
Lower other income taxes	8
				11
Nine Months Ended September 30, 2020				$	463

Consumers Gas Utility Results of Operations

Presented in the following table are the detailed changes to the gas utility’s net income available to common stockholders for the three months ended ~~March 31,~~September 30, 2020 versus 2019 (amounts are presented ~~pre-tax,~~pre‑tax, with the exception of income tax changes):

Gas deliveries¹ and rate increases

Lower tax expense due primarily to research and development tax credits²

See Note 3, Contingencies and Commitments.

Presented in the following table are the detailed changes to the gas utility’s net income available to common stockholders for the nine months ended September 30, 2020 versus 2019 (amounts are presented pre‑tax, with the exception of income tax changes):



In Millions
Nine Months Ended September 30, 2019				$	119
Reasons for the change
Gas deliveries¹ and rate increases
Rate increase	$	97
Lower sales due primarily to unfavorable weather	(52		)
Disallowance of incremental gas purchased during the Ray Compressor Station fire²	(7		)
Lower energy waste reduction program revenues	(4		)
Other revenues	11
				$	45
Maintenance and other operating expenses
Lower distribution, transmission, and compression expenses	23
Lower energy waste reduction program costs	4
Voluntary separation plan expenses	(4		)
Lower maintenance and other operating expenses	17
				40
Depreciation and amortization
Increased plant in service, reflecting higher capital spending				(15		)
General taxes
Higher property tax, reflecting higher capital spending				(9		)
Other income, net of expenses
Lower OPEB expenses	10
Lower other income, net of expenses	(4		)
				6
Interest charges				(15		)
Income taxes
Higher gas utility pre-tax earnings	(13		)
Lower tax expense due primarily to research and development tax credits³	1
Lower other income taxes	3
				(9		)
Nine Months Ended September 30, 2020				$	162

See Note 3, Contingencies and Commitments.

Enterprises Results of Operations

Presented in the following table are the detailed after-tax changes to the enterprises segment’s net income available to common stockholders for the three months ended ~~March 31,~~September 30, 2020 versus 2019:

In Millions
Three Months Ended March 31, 2019 $ 7
Reasons for the change
Higher earnings due primarily to improved receivables management and lower operations and maintenance costs $ 7
Increased income tax benefit due primarily to production tax credits and restoring previously sequestered alternative minimum tax credits 6
Three Months Ended March 31, 2020 $ 20



In Millions
Three Months Ended September 30, 2019	$	7
Reason for the change
Higher earnings from the Aviator Wind project¹	$	6
Three Months Ended September 30, 2020	$	13

Presented in the following table are the detailed after-tax changes to the enterprises segment’s net income available to common stockholders for the nine months ended September 30, 2020 versus 2019:



In Millions
Nine Months Ended September 30, 2019	$	30
Reasons for the change
Higher earnings due primarily to improved receivables management	$	6
Higher earnings from the Aviator Wind project¹	6
Increased income tax benefit due to restoring previously sequestered alternative minimum tax credits²	4
Absence of 2019 gain on sale of transmission equipment	(12		)
Nine Months Ended September 30, 2020	$	34

EnerBank Results of Operations

Presented in the following table are the detailed after-tax changes to EnerBank’s net income available to common stockholders for the three months ended ~~March 31,~~September 30, 2020 versus 2019:

In Millions
Three Months Ended March 31, 2019 $ 11
Reasons for the change
Higher earnings based on growth in consumer lending in prior periods $ 3
Three Months Ended March 31, 2020 $ 14



In Millions
Three Months Ended September 30, 2019	$	11
Reason for the change
Higher earnings due primarily to growth in consumer lending	$	5
Implementation of new credit losses standard¹	(4		)
Three Months Ended September 30, 2020	$	12

Presented in the following table are the detailed after-tax changes to EnerBank’s net income available to common stockholders for the nine months ended September 30, 2020 versus 2019:



In Millions
Nine Months Ended September 30, 2019	$	32
Reasons for the change
Higher earnings due primarily to growth in consumer lending	$	13
Implementation of new credit losses standard¹	(11		)
Nine Months Ended September 30, 2020	$	34

Corporate Interest and Other Results of Operations

Presented in the following table are the detailed after-tax changes to corporate interest and other results for the three months ended ~~March 31,~~September 30, 2020 versus 2019:

In Millions
Three Months Ended March 31, 2019 $ (31 )
Reasons for the change
Increased income tax benefit due to restoring previously sequestered alternative minimum tax credits $ 5
Lower administrative and other expenses 3
Higher fixed charges due to higher debt (3 )
Three Months Ended March 31, 2020 $ (26 )



In Millions
Three Months Ended September 30, 2019	$	(24	)
Reasons for the change
Higher fixed charges due to higher debt	$	(5	)
Absence of 2019 tax benefits recognized as a result of asset sales	(4		)
Lower income tax benefit due primarily to lower production tax credits	(4		)
Three Months Ended September 30, 2020	$	(37	)

Presented in the following table are the detailed after-tax changes to corporate interest and other results for the nine months ended September 30, 2020 versus 2019:



In Millions
Nine Months Ended September 30, 2019	$	(86	)
Reasons for the change
Higher income tax benefit due to restoring previously sequestered alternative minimum tax credits¹	$	5
Higher fixed charges due to higher debt	(10		)
Absence of 2019 tax benefits recognized as a result of asset sales	(4		)
Other income tax and expenses	(1		)
Nine Months Ended September 30, 2020	$	(96	)

Cash Position, Investing, and Financing

At ~~March 31,~~September 30, 2020, CMS Energy had ~~$861~~$558 million of consolidated cash and cash equivalents, which included ~~$27~~$39 million of restricted cash and cash equivalents. At ~~March 31,~~September 30, 2020, Consumers had ~~$628~~$223 million of consolidated cash and cash equivalents, which included $24 million of restricted cash and cash equivalents.

Operating Activities

Presented in the following table are specific components of the changes to net cash provided by operating activities for the ~~three~~nine months ended ~~March 31,~~September 30, 2020 versus 2019:

Non‑cash transactions¹

Favorable impact of changes in core working capital,²due primarily to higher collections on gas deliveries in 2020

Favorable impact of changes in core working capital,²due primarily to lower vendor payments, offset partially by lower customer receipts

Non-cash transactions¹

Favorable impact of changes in core working capital,²due primarily to higher collections on gas deliveries in 2020

Favorable impact of changes in core working capital,²due primarily to lower vendor payments, offset partially by lower customer receipts

Investing Activities

Presented in the following table are specific components of net cash used in investing activities for the ~~three~~nine months ended ~~March 31,~~September 30, 2020 versus 2019:

Financing Activities

Presented in the following table are specific components of net cash provided by ~~(used in)~~ financing activities for the ~~three~~nine months ended ~~March 31,~~September 30, 2020 versus 2019:

Capital Resources and Liquidity

CMS Energy uses dividends and tax‑sharing payments from its subsidiaries and external financing and capital transactions to invest in its utility and non‑utility businesses, retire debt, pay dividends, and fund its other obligations. The ability of CMS Energy’s subsidiaries, including Consumers, to pay dividends to CMS Energy depends upon each subsidiary’s revenues, earnings, cash needs, and other factors. In addition, Consumers’ ability to pay dividends is restricted by certain terms included in its debt covenants and articles of incorporation and potentially by FERC requirements and provisions under the Federal Power Act and the Natural Gas Act. For additional details on Consumers’ dividend restrictions, see Note 4, Financings and Capitalization—Dividend Restrictions. For the ~~three~~nine months ended ~~March 31,~~September 30, 2020, Consumers paid ~~$219~~$449 million in dividends on its common stock to CMS Energy.

Consumers uses cash flows generated from operations and external financing transactions, as well as stockholder contributions from CMS Energy, to fund capital expenditures, retire debt, pay dividends, and fund its other obligations. Consumers also uses these sources of funding to contribute to its employee benefit plans.

CMS Energy and Consumers expect to have sufficient liquidity to fund their commitments despite potential material uncertainties that may impact their cash management and financing strategies as a result of the COVID‑19 pandemic. CMS Energy and Consumers rely on the capital markets to fund their robust capital plan and those markets have faced significant strain. CMS Energy ~~executed~~ and ~~funded a~~

$300 million term loan facility in February 2020 and settled $100 million of its $250 million contracted forward equity in March 2020, which reduces CMS Energy’s need for external funding for the remainder of the year. Furthermore, Consumers ~~issued $575 million of first mortgage bonds in March 2020. These transactions mitigate~~have mitigated the potential impact of the ~~COVID‑19~~ pandemic on ~~CMS Energy’s~~their liquidity by completing financing transactions and ~~Consumers’ funding needs.In April 2020, Consumers redeemed $100 million of first mortgage bonds due in October 2020.With this transaction, CMS Energy and Consumers have no remaining outstanding debt maturing in 2020.~~reducing the need for additional external funding. For more information on CMS Energy’s and Consumers’ financing transactions, see Note 4, Financings and Capitalization.

Barring any sustained market dislocations or disruptions, CMS Energy and Consumers expect to continue to have ready access to the financial and capital markets and will continue to explore possibilities to take advantage of market opportunities as they arise with respect to future funding needs. If access to these markets were to diminish or otherwise become restricted, CMS Energy and Consumers would implement contingency plans to address debt maturities, which could include reduced capital spending. The COVID‑19 pandemic is a ~~rapidly~~continually evolving situation and CMS Energy and Consumers cannot predict the ultimate impact it will have on their ~~liquidity,~~ debt covenants, ~~financial condition,~~business, results of operations, orfinancial condition, capital investment ~~program.~~program, liquidity, and cash flows.

As a result of a provision in the TCJA, as amended by the ~~recently enacted~~ CARES Act, CMS Energy ~~will recover~~recovered all of its remaining alternative minimum tax credits in 2020. CMS Energy utilized $7 million of these credits on its 2019 consolidated tax return, and ~~will receive~~received the remaining $69 million through a cash refund. The CARES Act also provides for the deferral of payroll taxes, which will allow CMS Energy and Consumers to defer remittance of $40 million of payroll taxes in 2020; half of the deferred amount will be due at the end of 2021 and the other half will be due at the end of 2022.

In 2018 and 2020, CMS Energy entered into an equity offering ~~program~~programs under which it may sell, from time to time, shares of CMS Energy common ~~stock having an aggregate sales price of up to $250 million.~~stock. Under ~~this program,~~both programs, CMS Energy may sell its common stock in privately negotiated transactions, in “at the market” offerings, through forward sales transactions or otherwise. ~~At March 31, 2020,~~During 2018 and 2019, CMS ~~Energy’s remaining~~Energy entered into forward sales contracts ~~had~~having an aggregate sales price of ~~$150~~$250 million, the maximum allowed under the 2018 program. Under the 2020 program, CMS Energy may sell shares of its common stock having an aggregate sales price of up to $500 million. In September 2020, CMS Energy entered into a forward sales contract having an aggregate sale price of $52 million.

These contracts allow CMS Energy to either physically settle the contracts by issuing shares of its common stock at the then‑applicable forward sale price specified by the agreement or net settle the contracts through the delivery or receipt of cash or shares. CMS Energy may settle the contracts at any time through their maturity dates, and presently intends to physically settle the contracts by delivering shares of its common stock. For more information on the forward sale contracts, see Note 4, Financings and Capitalization—Issuance of Common Stock.

At ~~March 31,~~September 30, 2020, CMS Energy had ~~$521~~$545 million of its revolving credit facility available and Consumers had $1.1 billion available under its revolving credit facilities. CMS Energy and Consumers use these credit facilities for general working capital purposes and to issue letters of credit. An additional source of liquidity is Consumers’ commercial paper program, which allows Consumers to issue, in one or more placements, up to $500 million in the aggregate in commercial paper notes with maturities of up to 365 days at market interest rates. These issuances are supported by Consumers’ revolving credit facilities. 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 ~~March 31,~~September 30, 2020, there were no commercial paper notes outstanding under this program. For additional details on CMS Energy’s and Consumers’ revolving credit facilities and commercial paper program, see Note 4, Financings and Capitalization.

Certain of CMS Energy’s and Consumers’ credit agreements, debt indentures, and other facilities contain covenants that require CMS Energy and Consumers to maintain certain financial ratios, as defined therein. At ~~March 31,~~September 30, 2020, no default had occurred with respect to any financial covenants contained in

CMS Energy’s and Consumers’ credit agreements, debt indentures, or other facilities. CMS Energy and Consumers were each in compliance with these covenants as of ~~March 31,~~September 30, 2020, as presented in the following table:



	~~March 31,~~September 30, 2020
Credit Agreement, Indenture, or Facility	Limit		Actual
CMS Energy, parent only
Debt to ~~EBITDA¹~~Capital¹	<	~~6.25~~0.70 to 1.0	~~5.1~~0.60 to 1.0
Consumers
Debt to Capital²	<	0.65 to 1.0	~~0.49~~0.48 to 1.0

Applies to CMSEnergy’s $550 million revolving credit agreement and $300 million term loan credit agreement. In April2020, amendments to these agreements changed the required financial covenant from a leverage ratio to a capitalization ratio.

Components of CMS Energy’s and Consumers’ cash management plan include controlling operating expenses and capital expenditures and evaluating market conditions for financing and refinancing opportunities. CMS Energy’s and Consumers’ present level of cash and expected cash flows from operating activities, together with access to sources of liquidity, are anticipated to be sufficient to fund the companies’ contractual obligations for 2020 and beyond.

Off-Balance-Sheet Arrangements

CMS Energy, Consumers, and certain of their subsidiaries enter into various arrangements in the normal course of business to facilitate commercial transactions with third parties. These arrangements include indemnities, surety bonds, letters of credit, and financial and performance guarantees. Additionally, CMS Energy has entered into forward sales contracts to sell its common stock in order to invest in its utility and non-utility businesses; as of ~~March 31,~~September 30, 2020, these contracts have an aggregate sales price of ~~$150~~$195 million and mature in 2021. For additional details on the companies’ indemnity and guarantee arrangements, see Note 3, Contingencies and Commitments—Guarantees. For additional details on letters of credit and CMS Energy’s forward sales contracts, see Note 4, Financings and Capitalization.

Several business trends and uncertainties may affect CMS Energy’s and Consumers’ financial condition and results of operations. These trends and uncertainties could have a material impact on CMS Energy’s and Consumers’ consolidated income, cash flows, or financial position. For additional details regarding these and other uncertainties, see Forward-Looking Statements and Information; Note 2, Regulatory Matters; Note 3, Contingencies and Commitments; and Part II—Item 1A. Risk Factors.

Consumers Electric Utility Outlook and Uncertainties

Clean Energy Plan: In 2019, the MPSC approved the IRP that Consumers filed in 2018, which details its Clean Energy Plan. Through its Clean Energy Plan, Consumers expects to reduce carbon emissions of its

owned generation by more than 90 percent from its 2005 levels by 2040 and eliminate the use of coal to generate electricity by 2040. The Clean Energy Plan also provides the foundation for Consumers’ ~~recently announced~~ goal to achieve ~~net-zero~~net‑zero carbon emissions by 2040. Under this net-zero goal, Consumers plans

to eliminate the impact of carbon emissions created by the electricity it generates or purchases for customers.

Specifically, the Clean Energy Plan provides for:

the retirement of the D.E. Karn 1 & 2 coal-fueled generating units, totaling 503 MW, in 2023

Under the Clean Energy Plan, Consumers will replace the capacity to be retired with:

Consumers will competitively bid new capacity and at least 50 percent of the new capacity will be built and owned by third parties; the remainder will be owned and operated by Consumers. In support of its Clean Energy Plan, Consumers issued ~~a request~~requests for proposals in September 2019 and July 2020, each to acquire up to 300 MW of new capacity from projects to be operational in Michigan’s Lower Peninsula by May ~~2022.~~2023. Specifically, Consumers solicited offers to enter into PPAs with or purchase solar generation projects ranging in size from 20 MW to 150 MW and to enter into PPAs with PURPA qualifying facilities up to 20 MW. Any contracts entered into as a result of the request for proposals would be subject to MPSC approval.

Renewable Energy Plan: The 2016 Energy Law raised the renewable energy standard to 15 percent in 2021, with an interim target of 12.5 percent in 2019. Consumers met the interim target for 2019 and ~~will demonstrate~~demonstrated its compliance ~~by filing~~in the 2019 renewable energy cost reconciliation filed with the MPSC in ~~June~~July 2020. Consumers is required to submit RECs, which represent proof that the associated electricity was generated from a renewable energy resource, in an amount equal to at least the required percentage of Consumers’ electric sales volume each year. Under its renewable energy plan, Consumers expects to meet its renewable energy requirement each year with a combination of newly generated RECs and previously generated RECs carried over from prior years.

Under Consumers’ renewable energy plan, the MPSC has approved the acquisition of up to 525 MW of new wind generation projects and authorized Consumers to earn a 10.7 percent return on equity on any projects approved by the MPSC. Specifically, the MPSC has approved the following:

Consumers has received force majeure notifications from the turbine supplier ~~and engineering, procurement, and construction contractors~~ for the ~~two~~150-MW wind generation

~~projects. As~~the 166-MW wind generation project. These notifications cited the COVID-19 pandemic as a force majeure event. At this time, construction activities continue and Consumers does not anticipate any changes to the projects’ expected commercial operation dates, overall ~~cost,~~costs, or ability to qualify for production tax credits, but Consumers cannot predict the ultimate impact of the force majeure notifications.

Electric Customer Deliveries and Revenue: Consumers’ electric customer deliveries are seasonal and largely dependent on Michigan’s economy. The consumption of electric energy typically increases in the summer months, due primarily to the use of air conditioners and other cooling equipment. In addition, Consumers’ electric rates, which follow a seasonal rate design, are higher in the summer months than in the remaining months of the year. ~~Beginning in June 2020, electric residential customers will transition to~~

As a result of the COVID-19 pandemic, Consumers has delayed implementation of a summer peak time-of-use rate ~~that~~for electric residential customers, originally planned to begin in June 2020. The summer peak time-of-use rate will allow ~~them~~customers to take advantage of lower-cost energy during off-peak times during the summer months. ~~Thus, customers~~Customers could reduce their electric bills by shifting their consumption from ~~on-peak~~on‑peak to ~~off-peak~~off‑peak times. The MPSC approved delaying implementation of the summer peak time-of-use rate to 2021, recognizing that more customers may be at home during the pandemic and may not have the same opportunities to manage peak power consumption.

~~As a result of~~In response to the COVID‑19 pandemic, ~~on March 23, 2020,~~ Michigan’s Governor issued anvarious executive ~~order~~orders requiring all non-essential businesses to close temporarily and Michigan residents to stay home ~~until~~during the period from March 23, 2020 to June 8, 2020. Subsequent executive orders gradually eased restrictions. In October 2020, the Michigan Supreme Court issued an opinion that limits the governor’s authority to issue executive orders relating to the COVID-19 pandemic. Subsequently, the Michigan Department of Health and Human Services and other governmental entities issued replacement orders and Michigan’s Governor has been working with the State Legislature to pass bills covering previous executive orders. Presently, most businesses are now open at limited capacity and with safety measures in place.

During the period from April ~~13, 2020; this order has since been extended to May 15,~~1, 2020 ~~and amended in scope to allow some additional business and personal activities. Since~~through September 30, 2020, a period covering the ~~issuance~~majority of the ~~order, Consumers has experienced declines in~~pandemic to date, weather-normalized ~~commercial and industrial demand of over 20~~electric deliveries were approximately seven percent ~~compared to~~lower than deliveries during the same period ~~of 2019. These declines, however, have been offset partially by residential load, which has increased by over five percent over the same period. While Consumers anticipates~~in 2019, due mainly to a decline in ~~electric~~ deliveries to commercial and industrial customers of approximately 14 percent. This decline, however, was offset partially by an increase of approximately eight percent in ~~the near term as a result of the COVID‑19 pandemic, it~~deliveries to residential customers. Consumers cannot predict the long-term impact onof the COVID-19 pandemic, but anticipates a decline of less than ten percent in deliveries to commercial and industrial customers for the full-year 2020 ~~deliveries at this time.~~compared to 2019.

In response to the pandemic, Consumers ~~has~~initially suspended shut-offs of service for non-payment and extended payment protection plans for low-income and senior customers. Consumers slowly began resuming shut-offs of service for non-payment in late July 2020 for commercial and industrial customers ~~through June 1, 2020. In light of the expected economic impacts of the pandemic,~~and in October 2020 for residential customers. Consumers has experienced and anticipates it will continue to experience increased uncollectible accounts in the near term, but cannot predict the long-term impact of the pandemic on Michigan’s economy or its customers.

Over the ~~long term,~~next five years, Consumers expects weather-normalized electric deliveries ~~over the next five years~~ to decrease slightly. This outlook reflects the effects of energy waste reduction programs and appliance efficiency standards offset largely by modest growth in electric demand. Actual delivery levels will depend on:

Electric ROA: Michigan law allows electric customers in Consumers’ service territory to buy electric generation service from alternative electric suppliers in an aggregate amount capped at ten percent, with certain exceptions. At ~~March 31,~~September 30, 2020, electric deliveries under the ROA program were at the ~~ten-percent~~ten‑percent limit. Of Consumers’ 1.8 million electric customers, fewer than 300, or 0.02 percent, purchased electric generation service under the ROA program.

The 2016 Energy Law established a path to ensure that forward capacity is secured for all electric customers in Michigan, including customers served by alternative electric suppliers under ROA. The new law also authorized the MPSC to ensure that alternative electric suppliers have procured enough capacity to cover their anticipated capacity requirements for the four-year forward period. In 2017, the MPSC issued an order establishing a state reliability mechanism for Consumers. Under this mechanism, beginning June 1, 2018, if an alternative electric supplier does not demonstrate that it has procured its capacity requirements for the four-year forward period, its customers will pay a set charge to the utility for capacity that is not provided by the alternative electric supplier. All alternative electric suppliers have

demonstrated that they have procured their capacity requirements through the MISO planning year beginning June 1, 2023.

During 2017, the MPSC issued orders finding that it has statutory authority to determine and implement a local clearing requirement, which requires all electric suppliers to demonstrate that a portion of the capacity procured to serve customers during peak demand times is located in the MISO footprint in Michigan’s Lower Peninsula. In 2018, the Michigan Court of Appeals issued a decision that the MPSC does not have statutory authority to implement such a requirement for individual alternative electric suppliers. ~~The MPSC and Consumers filed applications for leave to appeal the Court of Appeals’ decision to the Michigan Supreme Court.~~ In April 2020, the Michigan Supreme Court issued a unanimous opinion reversing the Court of Appeals’ decision and determined that the 2016 Energy Law authorizes the MPSC to implement a local clearing requirement on individual alternative electric suppliers. The Michigan Supreme Court remanded the case to the Court of Appeals to consider a procedural challenge previously undecided by the Court of Appeals; this challenge concerns the process that the MPSC used in 2017 to consider a local clearing requirement and does not affect the substance of the MPSC’s authority to implement a local clearing requirement for future planning periods. In April 2020, ABATE filed a motion for rehearing of the Michigan Supreme Court’s ~~decision.~~decision; the Michigan Supreme Court denied ABATE’s motion in May 2020. In June 2020, the Michigan Court of Appeals issued a letter resubmitting the case for its consideration of the Michigan Supreme Court’s remand of the procedural issue.

In September 2020, ABATE and another intervenor filed a complaint against the MPSC in the U.S. District Court for the Eastern District of Michigan challenging the constitutionality of a local clearing requirement. The complaint requests the federal court to issue a permanent injunction prohibiting the MPSC from implementing a local clearing requirement on individual electric providers. Consumers ~~will~~plans to file a ~~response~~motion to ~~oppose~~intervene and defend the ~~motion.~~local clearing requirement in that federal litigation.

Electric Rate Matters: Rate matters are critical to Consumers’ electric utility business. For additional details on rate matters, see Note 2, Regulatory ~~Matters.~~Matters and Note 3, Contingencies and Commitments.

2020 Electric Rate Case: In February 2020, Consumers filed an application with the MPSC seeking an annual rate increase of $244 million, based on a 10.5 percent authorized return on equity and a projected twelve-month period ending December 31, 2021. The filing requests authority to recover new investment in distribution system reliability and technology enhancements. In July 2020, Consumers reduced its requested annual rate increase to $230 million. Presented in the following table are the components of the revised requested increase in revenue:

The filing also seeks approval to recover $13 million associated with Consumers’ deferral of depreciation and property tax expense and the overall rate of return on distribution-related capital investments exceeding certain threshold amounts. This deferred accounting treatment was approved by the MPSC in January 2019.

Additionally, the filing seeks approval of a method of recovering amounts earned under the financial compensation mechanism approved by the MPSC in Consumers’ IRP. This mechanism allows Consumers to earn a financial incentive on PPAs approved by the MPSC after January 1, 2019. In the filing, Consumers requests recovery of $3 million, beginning in January 2021, for incentives earned and to be earned on PPA payments during 2019 through 2021.

Consumers also proposes in the filing a new distributed generation tariff to replace the current net metering tariff, pursuant to the 2016 Energy Law. The proposed distributed generation tariff is consistent

with other distributed generation tariffs already approved by the MPSC and would substantially reduce the subsidies paid by non-distributed generation customers under the current net metering program.

Depreciation Rate Case: In July 2020, Consumers filed a depreciation case related to Ludington, requesting to increase depreciation expense, and its recovery of that expense, by $17 million annually.

Electric Environmental Outlook: Consumers’ operations are subject to various state and federal environmental laws and regulations. Consumers estimates that it will incur capital expenditures of $275 million from 2020 through 2024 to continue to comply with RCRA, the Clean Water Act, the Clean Air Act, and numerous state and federal environmental regulations. Consumers expects to recover these costs in customer rates, but cannot guarantee this result. Consumers’ primary environmental compliance focus includes, but is not limited to, the following matters.

Air Quality: Multiple air quality regulations apply, or may apply, to Consumers.

CSAPR, which became effective in 2015, requires Michigan and many other states to improve air quality by reducing power plant emissions that, according to EPA computer models, contribute to ground‑level ozone and fine particle pollution in other downwind states. In 2016, the EPA finalized new ozone season standards for CSAPR, which became effective in 2017. ~~Any~~In October 2020, in response to a court-ordered remand due to litigation, ~~or remand to~~ the EPA proposed a revised CSAPR rule to reflect updated emission reductions from electric generating units in 12 states, including Michigan. The EPA intends to finalize the rule by

March 2021, and has made provisions for program implementation by May 2021, with continued emission reductions through 2024. Consumers is ~~not expected to impact Consumers’~~evaluating its emission compliance strategy ~~as Consumers expects its emissions~~for existing units based on the proposed number of allowances allocated to ~~be within the CSAPR allowance allocations.~~Michigan for 2021 through 2024.

In 2012, the EPA published emission standards for electric generating units, known as MATS, based on Section 112 of the Clean Air Act. Under MATS, all of Consumers’ existing coal‑fueled electric generating units were required to add additional controls for hazardous air pollutants. Consumers met the ~~extended~~ deadline ~~of April 2016~~ for five coal‑fueled units and two oil/gas‑fueled units it continues to operate and retired its seven remaining coal‑fueled units. In addition, ~~in 2018,~~ the EPA ~~proposed~~recently finalized changes to the supporting analysis used to ~~justify~~enact MATS, but did not ~~propose~~make any changes to the MATS regulations. ~~Any~~These changes ~~resulting from litigation or rulemaking are expected to be minor and should~~do not impact Consumers’ MATS compliance ~~strategy. If~~strategy because, if the MATS regulations were repealed, Consumers would then be required to comply with the Michigan Mercury Rule, which has similar requirements to MATS. In addition, Consumers must comply with emission limits in its ~~settlement agreement with the EPA entered into in 2014~~renewable operating permits concerning opacity and NSR, which has similar emission requirements to MATS.

In 2015, the EPA lowered the NAAQS for ozone. The ~~new~~2015 ozone NAAQS ~~will make~~made it more difficult to construct or modify power plants and other emission sources in areas of the country that have not met the ~~new~~2015 ozone standard. In ~~April~~ 2018, the EPA designated certain areas of Michigan as not meeting the ~~new standard with an August 2018 effective date.~~ozone standard. None of Consumers’ fossil‑fuel‑fired generating units are located in these areas. Some of Consumers’ compressor stations are located in areas impacted by the rule, but Consumers expects only minor permitting impacts if those units are modified in the future. In August 2020, the EPA proposed to retain the 2015 NAAQS for ozone, but has not finalized this proposal. Consumers does not expect that any litigation involving NAAQS for ozone will have a material adverse impact on its generating assets.

Consumers’ strategy to comply with air quality regulations, including CSAPR, NAAQS, and MATS, as well as its legal obligations, involved the installation and operation of emission control equipment at some facilities and the suspension of operations at others; however, Consumers continues to evaluate these rules in conjunction with other EPA and EGLE rulemakings, litigation, and congressional action. This evaluation could result in:

Greenhouse Gases: There have been numerous legislative and regulatory initiatives at the state, regional, national, and international levels that involve the potential regulation of greenhouse gases. Consumers continues to monitor and comment on these initiatives and to follow litigation involving greenhouse gases.

In 2015, the EPA finalized new rules pursuant to Section 111(b) of the Clean Air Act to limit carbon dioxide emissions from new electric generating units, as well as modified or reconstructed electric generating units. New coal‑fueled units would not be able to meet this limit without installing carbon dioxide control equipment using such methods as carbon capture and sequestration.

In 2018, the EPA proposed a revised Section 111(b) regulation to replace the 2015 standard rule limiting carbon dioxide emissions from new electric generating units, citing limited availability and high costs of carbon capture and sequestration equipment as reasons to change the 2015 rule. The revised Section 111(b) regulation ~~requires~~would require new coal‑fueled generating units to meet a highly efficient steam

cycle performance standard. If finalized, Consumers does not expect this proposal to change its existing environmental strategy.

In 2019, the EPA finalized the Affordable Clean Energy rule. The rule requires individual states to evaluate coal-fueled power plants for heat‑rate improvements that could increase overall plant efficiency. The evaluations to be performed by the State of Michigan ~~under the final rule~~ may require Consumers to make heat-rate improvements at its ~~remaining coal-fueled units~~J.H. Campbell plant beginning in the mid‑2020s. This rule is presently being litigated. Consumers cannot evaluate the potential impact of the rule until the State of Michigan completes its evaluations.

In 2015, a group of 195 countries, including the U.S., finalized the Paris Agreement, which governs carbon dioxide reduction measures beginning in 2020. Although the U.S. has begun the process of withdrawing from the Paris Agreement, it has stated a desire to renegotiate a new agreement in the future. At this time, Consumers does not expect any adverse changes to its environmental strategy as a result of these events.

In September 2020, Michigan’s Governor signed an executive order creating the Michigan Healthy Climate Plan, which outlines goals for Michigan to achieve economy-wide net-zero greenhouse gas emissions and to be carbon neutral by 2050. The executive order aims for a 28-percent reduction below 2005 levels of greenhouse gas emissions by 2025. Consumers has already surpassed the 28-percent reduction milestone in its electric business and previously announced, in February 2020, a goal of achieving net‑zero carbon emissions by 2040. The order directs EGLE to develop and oversee an action plan for achieving these goals. In addition, the Governor established the Council on Climate Solutions, an advisory group of key stakeholders to be appointed by the Governor that will assist EGLE in implementing the plan. These goals are aspirational in nature and any changes in law or regulation to achieve these goals would need to be approved by Michigan Legislature or the relevant regulatory agency. The MPSC has requested comments from utilities and other stakeholders on how the Governor’s goal should be incorporated into future IRP filings. Consumers does not expect any adverse changes to its environmental strategy as a result of these events.

While Consumers cannot predict the outcome of changes in U.S. policy or of other legislative or regulatory initiatives involving the potential regulation of greenhouse gases, it intends to continue to move forward with its Clean Energy Plan, its present net-zero carbon reduction goal, and its emphasis on supply diversity. Consumers will continue to monitor regulatory and legislative activity and related litigation regarding greenhouse gas emissions standards that may affect electric generating units.

~~Severe~~Increased frequency of severe weather events, ~~and~~including those due to climate change, ~~associated with increasing levels of greenhouse gases~~ could ~~affect~~materially impact Consumers’ facilities, ~~and~~ energy sales, and ~~could have a material impact on its future~~ results of operations. Consumers is unable to predict these events or their financial impact; however, Consumers ~~plans for adverse weather and~~ evaluates the ~~possible~~potential physical impacts of climate change on its operations, including increased storm activity, increased rainfall, and higher lake and river levels. Consumers is taking steps to ~~reduce its potential impact.~~mitigate these risks as appropriate.

Litigation, international treaties, federal laws and regulations (including regulations by the EPA), and state laws and regulations, if enacted or ratified, could ultimately require Consumers to replace equipment, install additional emission control equipment, purchase emission allowances or credits, curtail operations, arrange for alternative sources of supply, mothball or retire facilities that generate certain emissions, pursue energy efficiency or demand response measures more swiftly, or take other steps to manage or lower the emission of greenhouse gases. Although associated capital or operating costs relating to greenhouse gas regulation or legislation could be material and cost recovery cannot be assured, Consumers expects to recover these costs and capital expenditures in rates consistent with the recovery of other reasonable costs of complying with environmental laws and regulations.

CCRs: In 2015, the EPA published a final rule regulating CCRs under RCRA. The final rule adopts minimum standards for beneficially reusing and disposing of non‑hazardous CCRs. The rule establishes new minimum requirements for site location, groundwater monitoring, flood protection, storm water design, fugitive dust control, and public disclosure of information, including any groundwater protection standard exceedances. The rule also sets out conditions under which CCR units would be forced to cease receiving CCR and non‑CCR wastewater and initiate closure based on the inability to achieve minimum safety standards, meet a location standard, or meet minimum groundwater standards. Consumers has aligned with EGLE on closure plans for each of its unlined ash ponds to ensure coordination between federal and state requirements. The unlined ash ponds have ceased operation and, where applicable, have been replaced with double-lined ash ponds or concrete tanks. Significant closure work has been completed at the remaining ash ponds.

Due to litigation, many aspects of the 2015 CCR rule have been remanded to the EPA, which has resulted in various new rulemakings. These new rulemakings are now in litigation. Continued litigation will add uncertainty around requirements for compliance and state permit programs.

Separately, Congress passed legislation in 2016 allowing participating states to develop permitting programs for CCRs under RCRA. In 2018, the Michigan Legislature adopted a permitting program, which requires the EPA’s authorization. This program should reduce costly, duplicative oversight over CCRs and provide local oversight to CCR issues unique to Michigan. In April 2020, EGLE submitted ~~the state CCR~~a regulatory package for Michigan’s permit program ~~application to Michigan’s Attorney General in June 2019 for review and signature. The Attorney General signed the application in March 2020. EGLE is preparing the final package for submission~~ to the ~~EPA.~~EPA for its review. Federal rulemaking challenges may delay EPA approval of the Michigan permitting program.

Consumers has aligned with EGLE on closure plans for all of its coal ash disposal sites, including those subject to the EPA’s 2015 CCR rule, and adjusted its recorded ARO accordingly. Consumers has historically been authorized to recover in electric rates costs related to coal ash disposal sites.

Water: Multiple water-related regulations apply, or may apply, to Consumers.

The EPA regulates cooling water intake systems of existing electric generating plants under Section 316(b) of the Clean Water Act and the corresponding rules that were revised in 2014. The rules are aimed at reducing alleged harmful impacts on aquatic organisms, such as fish. In 2018, Consumers submitted to EGLE for approval all required studies and recommended plans to comply with Section 316(b), but has not yet received final approval.

In 2015, the EPA released its final effluent limitation guidelines for steam electric generating plants. These guidelines, which are presently being litigated, set stringent new requirements for the discharge from electric generating units into wastewater streams. ~~In 2017,~~The EPA published a final rule in October 2020, with an effective date of December 2020, relaxing the ~~EPA announced that it will undertake a rulemaking~~2015 guidelines related to ~~replace specific portions~~the discharge of ~~the~~wastewater streams from electric generating units. The rule ~~and proposed delaying~~also extends the compliance ~~start dates for two years, but maintained~~deadline from the ~~compliance~~ end ~~dates. Additional rulemaking began in November 2019 and will continue in 2020.~~of 2023 to the end of 2025, which would need to be agreed upon by EGLE through the NPDES permitting process. Consumers does not expect any adverse changes to its environmental strategy as a result of ~~any~~these revisions to the rule.

In recent years, the EPA and the U.S. Army Corps of Engineers have proposed rules redefining “Waters of the United States,” which defines the scope of federal jurisdiction under the Clean Water Act, and other changes to the Clean Water Act regulations. For example, the EPA recently finalized a rule repealing the 2015 definition of “Waters of the United States” and, in January 2020, released a rule with its new definition. ~~These rules are presently being, or are likely to be, litigated.~~

~~A final~~The new definition ~~would change~~narrows the scope of ~~water~~federal jurisdiction and ~~wetlands regulations under~~reduces the ~~Clean Water Act. The EPA has delegated~~frequency of dual jurisdiction in states with authority to ~~manage~~regulate the same waters; Michigan ~~wetlands program to EGLE for a large portion~~

of Consumers’ service territory, but dual jurisdiction exists between the EPA and the U.S. Army Corps of Engineers in some locations in Michigan. As a result, regardless of the ultimate outcome of the EPA’s rules, Consumers expects to continue to operate under Michigan’s wetlands regulations, and under the applicable state and federal water jurisdictional regulations. Thus,is one such state. Consumers does not expect ~~any material~~ adverse changes to its environmental strategy as a result of ~~these events, but under an expanded federal~~the new definition, ~~could experience permitting delays for infrastructure projects where dual jurisdiction exists.~~which is presently being litigated in multiple jurisdictions.

Many of Consumers’ facilities maintain NPDES permits, which are renewed every five years and are vital to the facilities’ operations. Failure of EGLE to renew any NPDES permit, a successful appeal against a permit, a change in the interpretation or scope of NPDES permitting, or onerous terms contained in a permit could have a significant detrimental effect on the operations of a facility.

Other Matters: Other electric environmental matters could have a material impact on Consumers’ outlook. For additional details on other electric environmental matters, see Note 3, Contingencies and Commitments—Consumers Electric Utility Contingencies—Electric Environmental Matters.

Retention Incentive Program: In October 2019, Consumers announced a retention incentive program to ensure necessary staffing at the D.E. Karn generating complex through the anticipated retirement of the coal-fueled generating units. Based on the number of employees that have chosen to participate, the aggregate cost of the program through 2023 is estimated to be $35 million. Consumers expects to recognize up to $15 million of expense related to retention benefits in 2020. Consumers is seeking recovery of these costs from customers in its 2020 electric rate case. For additional details on this program, see Note 14, Asset Sale and Exit Activities.

Consumers Gas Utility Outlook and Uncertainties

Gas Deliveries: Consumers’ gas customer deliveries are seasonal. The peak demand for natural gas typically occurs in the winter due to colder temperatures and the resulting use of natural gas as heating fuel.

Consumers does not anticipate that the COVID‑19 pandemic will have a material impact on near-term gas deliveries, but cannot predict the impact on full-year 2020 deliveries at this time. ~~In light of the expected economic impacts of the pandemic,~~ Consumers has experienced and anticipates it will continue to experience increased uncollectible accounts in the near term, but cannot predict the long-term impact of the pandemic on Michigan’s economy or its customers.

Over the ~~long term,~~next five years, Consumers expects weather‑normalized gas deliveries ~~over the next five years~~ to remain stable relative to 2019. This outlook reflects modest growth in gas demand offset by the predicted effects of energy efficiency and conservation. Actual delivery levels from year to year may vary from this expectation as a result of:

Gas Rate Matters: Rate matters are critical to Consumers’ gas utility business. For additional details on rate matters, see Note 2, Regulatory ~~Matters.~~Matters and Note 3, Contingencies and Commitments.

2019 Gas Rate Case: In December 2019, Consumers filed an application with the MPSC seeking an annual rate increase of $245 million, based on a 10.5 percent authorized return on equity and a projected twelve-month period ending September 30, 2021. In May 2020, Consumers reduced its requested annual rate increase to $229 million. In September 2020, the MPSC approved a settlement agreement authorizing an annual rate increase of $144 million, based on a 9.9 percent authorized return on equity, effective October 1, 2020. As part of that agreement, Consumers agreed not to file a new gas rate case prior to December 2021. The ~~filing requests authority to recover new infrastructure investment and related costs that will allow Consumers to improve system safety and reliability. Presented in~~MPSC also approved the ~~following table are the components of the requested increase in revenue:~~

In Millions
Projected Twelve-Month Period Ending September 30 2021
Components of the requested rate increase
Investment in rate base $ 126
Operating and maintenance costs 91
Cost of capital 26
Sales 2
Total $ 245

~~The filing also seeks approval~~continuation of a revenue decoupling mechanism, ~~that would~~which annually ~~reconcile~~reconciles Consumers’ actual weather-normalized non-fuel revenues with the revenues approved

by the ~~MPSC; similar to the mechanism previously approved by the MPSC, this~~MPSC. This reconciliation would ~~commence when the projected twelve-month period covered by the filing ends~~start in October 2021 and continue until the MPSC resets rates in a subsequent rate case.

Additionally, the MPSC authorized Consumers to accelerate:

the refund of a regulatory liability associated with the unprotected, non-property-related excess deferred income taxes resulting from the TCJA; Consumers was previously authorized to refund this through 2029

Under the settlement agreement approved by the MPSC, these benefits, which total $84 million, will now be passed through to customers by September 2022. For additional details, see Note 9, Income Taxes.

Gas Pipeline and Storage Integrity and Safety: In October 2019, PHMSA published a final rule that expands federal safety standards for gas transmission pipelines. To comply with the rule, Consumers will incur increased capital costs to install and remediate pipelines as well as increased operating and maintenance costs to expand inspections, maintenance, and monitoring of its existing pipelines. The requirements in the regulation ~~take~~took effect July 1, 2020, with various implementation phases over numerous years.

In February 2020, PHMSA finalized an interim rule it had published in 2016; this rule established minimum federal safety standards for underground natural gas storage facilities. To comply with the rule, Consumers incurred increased capital and operating and maintenance costs to expand inspections, maintenance, and monitoring of its underground gas storage facilities.

Although associated capital or operating and maintenance costs relating to these regulations could be material and cost recovery cannot be assured, Consumers expects to recover such costs and capital expenditures in rates consistent with the recovery of other reasonable costs of complying with laws and regulations. Consumers will continue to monitor gas safety regulations and ~~is implementing~~continue implementation of the American Petroleum Institute’s Recommended Practice 1173, Pipeline Safety Management Systems. This program ~~ensures~~minimizes gas system asset- and performance-related risks by ensuring that there are policies, procedures, work instructions, forms, and records in place to streamline adoption and deployment of any existing or future regulations.

Gas Environmental Outlook: Consumers expects to incur response activity costs at a number of sites, including 23 former MGP sites. For additional details, see Note 3, Contingencies and Commitments—Consumers Gas Utility Contingencies—Gas Environmental Matters.

Greenhouse Gases: Consumers is making voluntary efforts to reduce its gas utility’s methane emissions. In October 2019, Consumers set a goal of net‑zero methane emissions from its natural gas delivery system by 2030. Under its Methane Reduction Plan, Consumers plans to reduce methane emissions from its system by about 80 percent by accelerating the replacement of aging pipe, rehabilitating or retiring outdated infrastructure, and adopting new technologies and practices. The remaining emissions will be eliminated by purchasing and/or producing renewable natural gas.

There is ~~also~~ increasing interest at the federal, state, and local levels involving potential regulation of greenhouse gases or its ~~sources, which include methane emissions and carbon dioxide from Consumers’ gas utility.~~sources. Such regulation, if adopted, may involve requirements to reduce methane emissions from Consumers’ gas utility operations and carbon dioxide emissions from natural gas customer use. No such measures apply to Consumers at this time. Consumers continues to monitor these initiatives and comment as appropriate. Consumers cannot predict the impact of any potential future legislation or regulation on its gas utility.

Consumers Electric Utility and Gas Utility Outlook and Uncertainties

Energy Waste Reduction Plan: The 2016 Energy Law authorized incentives for demand response programs and expanded existing incentives for energy efficiency programs, referring to the combined initiatives as energy waste reduction programs. The 2016 Energy Law:

Additionally, the MPSC has approved the recovery of demand response costs and an associated financial incentive based on demand response target performance.

Under its energy waste reduction plan, Consumers provides its customers with incentives to reduce usage by offering energy audits, rebates and discounts on purchases of highly efficient appliances, and other incentives and programs. The COVID‑19 pandemic may impact Consumers’ ability to execute energy efficiency programs effectively and, accordingly, could affect Consumers’ ability to exceed its statutory savings targets and earn the maximum energy waste reduction incentive for 2020. Consumers cannot predict the ultimate financial impact of the pandemic on its 2020 energy waste reduction incentive.

~~COVID‑19 Costs Accounting Deferral:~~ In April 2020, the MPSC issued an order authorizing Consumers to defer uncollectible accounts expense incurred beginning March 24, 2020 that are in excess of the amount used to set existing rates. The order also requests that interested parties submit comments by the end of April 2020 regarding utility accounting for COVID‑19-related expenses and COVID‑19-related impacts to regulatory activities.

Enterprises Outlook and Uncertainties

CMS Energy’s primary focus with respect to its enterprises businesses is to maximize the value of generating assets, its share of which represents ~~1,234~~1,502 MW of capacity, and to pursue opportunities for the development of renewable generation projects.

In July 2020, CMS Enterprises purchased an ownership interest in Aviator Wind, a 525‑MW wind generation project in Coke County, Texas. The project was completed and became operational in September 2020. Of the project’s 525‑MW nameplate capacity, 420 MW has been committed under long-term PPAs. For additional details, see Note 15, Purchase of Variable Interest Entity.

The enterprises segment’s assets may be affected by environmental laws and regulations. The ~~new~~2015 ozone NAAQS ~~will make~~made it more difficult to construct or modify power plants and other emission sources in areas of the country that have not met the ~~new~~2015 ozone standard. In ~~April~~ 2018, the EPA designated certain areas of Michigan as not meeting the ~~new standard with an August 2018 effective date.~~ozone standard. The enterprises segment’s DIG plant located in Dearborn, Michigan is in one such area and, as a result, would be subject to additional permitting restrictions in the event of any future modifications. For additional details regarding the new ozone NAAQS, see Consumers Electric Utility Outlook and Uncertainties—Electric Environmental Outlook.

Trends, uncertainties, and other matters related to the enterprises segment that could have a material impact on CMS Energy’s consolidated income, cash flows, or financial position include:

For additional details regarding the enterprises segment’s uncertainties, see Note 3, Contingencies and Commitments.

EnerBank Outlook and Uncertainties

EnerBank is a Utah state-chartered, FDIC-insured industrial bank providing primarily unsecured, fixed-rate installment loans throughout the U.S. to finance home improvements. The carrying value of EnerBank’s loan portfolio was ~~$2.4~~$2.9 billion at ~~March 31,~~September 30, 2020. The 12‑month rolling average net default rate on loans held by EnerBank was ~~1.3~~1.2 percent at ~~March 31,~~September 30, 2020.

As a result of the COVID‑19 pandemic, EnerBank has instituted new payment accommodations for current customers and has experienced slower lending growth, offset slightly by market share gains as a result of new customers shifting from competitors. EnerBank cannot predict the longer-term impacts of the pandemic, but could experience higher For additional details regarding EnerBank’s loan write-offs, increased loan modifications, and slower lending growth. EnerBank expects lending growth of up to five percent in 2020; lending growth could be higher if EnerBank continues to experience customers shifting from competitors. Over the long term, EnerBank expects lending growth to average nine percent annually over the next five years.portfolio, see Note 7, Notes Receivable.

EnerBank’s loan portfolio was funded primarily by certificates of deposit of ~~$2.4~~$2.8 billion at ~~March 31,~~September 30, 2020. CMS Energy is required both by law and by contract to provide financial support, including infusing additional capital, to ensure that EnerBank satisfies mandated capital requirements and has sufficient liquidity to operate. With its self-funding plan, EnerBank has exceeded these requirements historically and exceeded them as of ~~March 31,~~September 30, 2020. ~~For additional details regarding EnerBank’s~~

With its loan portfolio ~~see Note 7, Notes Receivable.~~funded by certificates of deposit, EnerBank has not had to rely on access to the financial and capital markets in order to fund loan growth during the COVID-19 pandemic. As a result, EnerBank has experienced market share gains as new customers have transitioned from less financially stable competitors. Accordingly, EnerBank has experienced increased lending growth in recent months and expects this trend to continue during the remainder of 2020. Over the next five years, EnerBank expects lending growth to average approximately seven percent annually.

In response to the COVID‑19 pandemic, and consistent with FDIC guidance, EnerBank offered new payment accommodations for current qualifying customers. EnerBank cannot predict the longer-term impacts of the pandemic, but could experience slower lending growth, higher loan write-offs, and increased loan modifications.

Other Outlook and Uncertainties

Employee Separation Program: In December 2019, CMS Energy and Consumers announced a voluntary separation program for non‑union employees. For the ~~three~~nine months ended ~~March 31,~~September 30, 2020, CMS Energy and Consumers recorded an after-tax charge of $8 million related to the program, under which 140 employees accepted and were approved for early separation. As a result of the program, CMS Energy and Consumers expect to benefit from future cost savings, as employee staffing levels will

be better matched to workload demand, which reflects the companies’ ongoing workforce productivity improvements.

Union Contract: The present UWUA agreement for operating, maintenance, and construction employees ~~expires~~expired in June 2020. ~~Consumers has suspended in-person negotiations due to the COVID‑19 pandemic; however, Consumers executed an~~A new agreement ~~with the UWUA to reach a tentative agreement within two weeks once the in-person restrictions are lifted. The tentative agreement would then need to be~~was reached and ratified by UWUA ~~members. If a ratified tentative agreement cannot be reached with the UWUA by June 2020, the~~members in October 2020. This agreement provides ~~for~~ a ~~one‑month extension to July 1, 2020 and a three‑percent general~~three-percent pay increase to operating, maintenance, and construction employees effective on June 1, ~~2020 to the UWUA membership.~~2020.

Litigation: CMS Energy, Consumers, and certain of their subsidiaries are named as parties in various litigation matters, as well as in administrative proceedings before various courts and governmental agencies, arising in the ordinary course of business. For additional details regarding these and other legal matters, see Note 2, Regulatory Matters and Note 3, Contingencies and Commitments.

CMS Energy and Consumers provide retirement pension benefits to certain employees under non‑contributory DB Pension Plans, and they provide postretirement health and life benefits to qualifying retired employees under an OPEB Plan.

In September 2020, CMS Energy and Consumers determined it was probable that 2020 lump-sum payments to retired employees under DB Pension Plan A would exceed the plan’s service cost and interest cost components of net periodic cost for the year. These lump-sum payments constitute pension plan liability settlements; once such settlements meet the service and interest cost threshold, recognition in earnings is required. As a result, in accordance with GAAP, CMS Energy, including Consumers, performed a remeasurement of DB Pension Plan A as of August 31, 2020. For additional details on the pension settlement, see Note 8, Retirement Benefits.

Presented in the following table are estimates of costs and cash contributions through 2022 for the DB Pension Plans and OPEB Plan. Projected pension costs increased, and OPEB credits decreased, from December 31, 2019 mainly due to lower discount rate assumptions as of August 31, 2020. Actual future costs and 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.



In Millions
	DB Pension Plans						OPEB Plan
	Cost			Contribution¹			Credit				Contribution
CMS Energy, including Consumers
2020		$	34		$	531		$	(92	)		$	—
2021		40			—			(83		)		—
2022		32			—			(84		)		—
Consumers²
2020		$	34		$	518		$	(86	)		$	—
2021		42			—			(77		)		—
2022		34			—			(78		)		—

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¹	Contribution occurred in January 2020.


²	Consumers’ pension and OPEB costs are recoverable through its general ratemaking process.

4347

Table of Contents

CMS Energy Corporation

Consolidated Statements of Income (Unaudited)


In Millions, Except Per Share Amounts	In Millions, Except Per Share Amounts								In Millions, Except Per Share Amounts
Three Months Ended March 31	2020				2019
									Three Months Ended								Nine Months Ended
September 30									2020				2019				2020				2019
Operating Revenue		$	1,864			$	2,059			$	1,575			$	1,546			$	4,882			$	5,050

Operating Expenses
Fuel for electric generation		103				142				108				130				274				391
Purchased and interchange power		357				378				430				413				1,149				1,147
Purchased power – related parties		18				18				13				19				45				53
Cost of gas sold		273				404				35				35				390				545
Maintenance and other operating expenses		315				354				317				313				983				1,010
Depreciation and amortization		316				298				228				215				767				729
General taxes		114				106				75				70				264				247
Total operating expenses		1,496				1,700				1,206				1,195				3,872				4,122

Operating Income		368				359				369				351				1,010				928

Other Income (Expense)
Interest income		1				1				1				2				3				5
Interest income – related parties		7				—				0				0				7				0
Allowance for equity funds used during construction		1				2				1				2				4				7
Income (loss) from equity method investees		3				(1		)
Income from equity method investees										0				5				1				6
Nonoperating retirement benefits, net		31				23				29				22				90				68
Other income		—				1				1				0				3				3
Other expense		(4		)		(3		)		(4		)		0				(9		)		(8		)
Total other income		39				23				28				31				99				81

Interest Charges
Interest on long-term debt		116				106				124				111				361				327
Interest expense – related parties		3				—				3				3				9				6
Other interest expense		19				16				17				20				53				55
Allowance for borrowed funds used during construction		(1		)		(1		)		(1		)		(1		)		(2		)		(3		)
Total interest charges		137				121				143				133				421				385

Income Before Income Taxes		270				261				254				249				688				624
Income Tax Expense		27				48				44				42				98				110

Net Income										210				207				590				514
Income (Loss) Attributable to Noncontrolling Interests										(8		)		0				(7		)		1

Net Income Available to Common Stockholders		$	243			$	213			$	218			$	207			$	597			$	513

Basic Earnings Per Average Common Share		$	0.86			$	0.75			$	0.76			$	0.73			$	2.10			$	1.81
Diluted Earnings Per Average Common Share		$	0.85			$	0.75			$	0.76			$	0.73			$	2.09			$	1.81

The accompanying notes are an integral part of these statements.

CMS Energy Corporation

Consolidated Statements of Comprehensive Income (Unaudited)

The accompanying notes are an integral part of these statements.

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CMS Energy Corporation

Consolidated Statements of Cash Flows (Unaudited)

The accompanying notes are an integral part of these statements.

CMS Energy Corporation

Consolidated Balance Sheets (Unaudited)

Commitments and Contingencies (Notes 2 and 3)

The accompanying notes are an integral part of these statements.

Table of Contents

CMS Energy Corporation

Consolidated Statements of Changes in Equity (Unaudited)

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In Millions, Except Per Share Amounts
	Three Months Ended							Nine Months Ended
September 30	2020				2019			2020				2019

Noncontrolling Interests
At beginning of period		37				37			37				37
Impact of purchase and consolidation of VIE		101				0			101				0
Sale of membership interest in VIE to tax equity investor		417				0			417				0
Contribution from noncontrolling interest		31				0			31				0
Income (loss) attributable to noncontrolling interests		(8		)		0			(7		)		1
Distributions and other changes in noncontrolling interests		0				0			(1		)		(1		)
At end of period		578				37			578				37

Total Equity at End of Period		$	5,898			$	4,994		$	5,898			$	4,994

Dividends Declared Per Common Share		$	0.4075			$	0.3825		$	1.2225			$	1.1475

The accompanying notes are an integral part of these statements.

Consumers Energy Company



Glossary		2
Filing Format		8
Available Information		8
Forward-Looking Statements and Information		8
Part I—Financial Information		13
Item 1.	Financial Statements	13
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8391
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	8391
Item 4.	Controls and Procedures	8392
Part II—Other Information		8492
Item 1.	Legal Proceedings	8492
Item 1A.	Risk Factors	8492
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8594
Item 3.	Defaults Upon Senior Securities	8694
Item 4.	Mine Safety Disclosures	8694
Item 5.	Other Information	8694
Item 6.	Exhibits	8795
Signatures		8996


In Millions	In Millions				In Millions
CMS Energy, including Consumers
Three Months Ended March 31, 2019		$	(675	)
Nine Months Ended September 30, 2019						$	(2,212	)
Reasons for the change
Higher capital expenditures		$	(42	)		$	(127	)
Changes in EnerBank notes receivable, reflecting slower growth in consumer lending in 2020		42
Changes in EnerBank notes receivable, reflecting growth in consumer lending						(152		)
Lower purchases of notes receivable by EnerBank		113				290
Other investing activities, primarily lower costs to retire property		3
Three Months Ended March 31, 2020		$	(559	)
Absence of 2019 proceeds from sale of transmission equipment						(96		)
Other investing activities, primarily higher costs to retire property						(1		)
Nine Months Ended September 30, 2020						$	(2,298	)
Consumers
Three Months Ended March 31, 2019		$	(502	)
Nine Months Ended September 30, 2019						$	(1,583	)
Reasons for the change
Higher capital expenditures		$	(44	)		$	(36	)
Other investing activities, primarily lower costs to retire property		4
Three Months Ended March 31, 2020		$	(542	)
Absence of 2019 proceeds from sale of transmission equipment						(76		)
Other investing activities, primarily higher costs to retire property						(5		)
Nine Months Ended September 30, 2020						$	(1,700	)


In Millions	In Millions				In Millions
CMS Energy, including Consumers
Three Months Ended March 31, 2019		$	150
Nine Months Ended September 30, 2019						$	1,075
Reasons for the change
Higher debt issuances		$	205			$	277
Lower debt retirements		788
Higher debt retirements						(124		)
Changes in EnerBank certificates of deposit, reflecting lower borrowings		(158		)		(166		)
Higher repayments under Consumers’ commercial paper program		(23		)
Lower repayments under Consumers’ commercial paper program						7
Higher issuances of common stock, primarily the settlement of an equity forward sale contract		98				98
Higher payments of dividends on common stock		(8		)		(25		)
Other financing activities, primarily lower debt issuance costs		10
Three Months Ended March 31, 2020		$	1,062
Proceeds from the sale of membership interest in VIE to tax equity investor						417
Contribution from noncontrolling interest						31
Other financing activities, primarily higher debt prepayment costs and lower customer advances for construction, offset partially by lower debt issuance costs						(35		)
Nine Months Ended September 30, 2020						$	1,555
Consumers
Three Months Ended March 31, 2019		$	(109	)
Nine Months Ended September 30, 2019						$	560
Reasons for the change
Higher debt issuances		$	873			$	610
Lower debt retirements		215
Higher repayments under Consumers’ commercial paper program		(23		)
Higher debt retirements						(245		)
Lower repayments under Consumers’ commercial paper program						7
Lower stockholder contribution from CMS Energy						(25		)
Higher payments of dividends on common stock		(47		)		(53		)
Other financing activities, primarily higher debt issuance costs		(5		)
Three Months Ended March 31, 2020		$	904
Other financing activities, primarily higher debt prepayment costs and lower customer advances for construction						(44		)
Nine Months Ended September 30, 2020						$	810


In Millions	In Millions								In Millions
Three Months Ended March 31	2020				2019
Nine Months Ended September 30									2020				2019
Cash Flows from Operating Activities
Net income		$	243			$	213			$	590			$	514
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		316				298				767				729
Deferred income taxes and investment tax credits		67				43				140				89
Pension contributions		(531		)		—				(531		)		0
Other non-cash operating activities and reconciling adjustments		9				16				24				(11		)
Cash provided by (used in) changes in assets and liabilities
Accounts and notes receivable and accrued revenue		(17		)		(61		)		218				297
Inventories		171				209				(34		)		(49		)
Accounts payable and accrued rate refunds		(54		)		(89		)		29				(82		)
Other current and non-current assets and liabilities		(3		)		(12		)		(59		)		(92		)
Net cash provided by operating activities		201				617				1,144				1,395

Cash Flows from Investing Activities
Capital expenditures (excludes assets placed under finance lease)		(523		)		(481		)		(1,697		)		(1,570		)
Increase in EnerBank notes receivable		(4		)		(46		)		(480		)		(328		)
Purchase of notes receivable by EnerBank		(8		)		(121		)		(17		)		(307		)
Proceeds from sale of transmission equipment										0				96
Cost to retire property and other investing activities		(24		)		(27		)		(104		)		(103		)
Net cash used in investing activities		(559		)		(675		)		(2,298		)		(2,212		)

Cash Flows from Financing Activities
Proceeds from issuance of debt		1,198				993				2,353				2,076
Retirement of debt		(2		)		(790		)		(1,294		)		(1,170		)
Increase (decrease) in EnerBank certificates of deposit		(7		)		151
Increase in EnerBank certificates of deposit										456				622
Decrease in notes payable		(90		)		(67		)		(90		)		(97		)
Issuance of common stock, net of issuance costs		101				3				107				9
Payment of dividends on common stock		(116		)		(108		)
Payment of dividends on common and preferred stock										(351		)		(326		)
Proceeds from the sale of membership interest in VIE to tax equity investor										417				0
Contribution from noncontrolling interest										31				0
Other financing costs		(22		)		(32		)		(74		)		(39		)
Net cash provided by financing activities		1,062				150				1,555				1,075

Net Increase in Cash and Cash Equivalents, Including Restricted Amounts		704				92				401				258
Cash and Cash Equivalents, Including Restricted Amounts, Beginning of Period		157				175				157				175

Cash and Cash Equivalents, Including Restricted Amounts, End of Period		$	861			$	267			$	558			$	433

Other Non-cash Investing and Financing Activities
Non-cash transactions
Capital expenditures not paid		$	95			$	99			$	140			$	135

													ASSETS
In Millions	In Millions						In Millions
	March 31 2020			December 31 2019			September 30 2020			December 31 2019
Current Assets
Cash and cash equivalents		$	834		$	140		$	519		$	140
Restricted cash and cash equivalents		27			17			39			17
Accounts receivable and accrued revenue, less allowance of $22 in 2020 and $20 in 2019		884			886
Notes receivable, less allowance of $33 in both periods		241			223
Notes receivable held for sale		—			19
Accounts receivable and accrued revenue, less allowance of $30 in 2020 and $20 in 2019								648			886
Notes receivable, less allowance of $35 in 2020 and $33 in 2019								272			242
Accounts and notes receivable – related parties		25			17			21			17
Accrued gas revenue		1			—
Inventories at average cost
Gas in underground storage		225			399			420			399
Materials and supplies		143			140			154			140
Generating plant fuel stock		66			66			65			66
Deferred property taxes		246			305			199			305
Regulatory assets		24			33			9			33
Prepayments and other current assets		101			86			148			86
Total current assets		2,817			2,331			2,494			2,331

Plant, Property, and Equipment
Plant, property, and equipment, gross		25,675			25,390			27,036			25,390
Less accumulated depreciation and amortization		7,563			7,360			7,845			7,360
Plant, property, and equipment, net		18,112			18,030			19,191			18,030
Construction work in progress		1,032			896			1,439			896
Total plant, property, and equipment		19,144			18,926			20,630			18,926

Other Non-current Assets
Regulatory assets		2,465			2,489			2,745			2,489
Accounts and notes receivable, less allowance of $66 in 2020 and $- in 2019		2,226			2,281
Accounts and notes receivable, less allowance of $81 in 2020 and $- in 2019								2,655			2,281
Investments		72			71			68			71
Other		723			739			688			739
Total other non-current assets		5,486			5,580			6,156			5,580

Total Assets		$	27,447		$	26,837		$	29,280		$	26,837


¹	Prior period amounts have been reclassified to reflect changes in segment reporting.


¹	Deliveries to end-use customers were ~~8.8~~10.1 billion kWh in 2020 and ~~9.2~~2019.


¹	Deliveries to end-use customers were 26.9 billion kWh in 2020 and 27.9 billion kWh in 2019.


¹	Deliveries to end-use customers were ~~120~~27 bcf in 2020 and ~~142~~26 bcf in 2019.


¹	Deliveries to end-use customers were 194 bcf in 2020 and 217 bcf in 2019.


¹	Non‑cash transactions comprise depreciation and amortization, changes in deferred income taxes and investment tax credits, and other non‑cash operating activities and reconciling adjustments.


²	Core working capital comprises accounts receivable, notes receivable, accrued revenue, inventories, accounts payable, and accrued rate refunds.


²	Applies to Consumers’ $850 million and $250 million revolving credit agreements, its $30 million ~~and $35 million reimbursement agreements,~~letter of credit agreement, and its $300 million term loan credit agreement.



In Millions
Projected Twelve-Month Period Ending September 30	2021
Components of the requested rate increase
Investment in rate base	$	126
Operating and maintenance costs	91
Cost of capital	26
Sales	2
Total	$	245

																	LIABILITIES AND EQUITY
In Millions	In Millions								In Millions
	March 31 2020				December 31 2019				September 30 2020				December 31 2019
Current Liabilities
Current portion of long-term debt, finance leases, and other financing		$	1,721			$	1,130			$	1,799			$	1,130
Notes payable		—				90				0				90
Accounts payable		490				622				662				622
Accounts payable – related parties		7				13				5				13
Accrued rate refunds		42				35				28				35
Accrued interest		100				104				108				104
Accrued taxes		330				437				128				437
Regulatory liabilities		88				87				69				87
Other current liabilities		162				186				193				186
Total current liabilities		2,940				2,704				2,992				2,704

Non-current Liabilities
Long-term debt		12,545				11,951				13,275				11,951
Non-current portion of finance leases and other financing		71				76				61				76
Regulatory liabilities		3,807				3,742				3,796				3,742
Postretirement benefits		141				674				382				674
Asset retirement obligations		485				477				510				477
Deferred investment tax credit		119				120				116				120
Deferred income taxes		1,722				1,655				1,821				1,655
Other non-current liabilities		395				383				429				383
Total non-current liabilities		19,285				19,078				20,390				19,078

Commitments and Contingencies (Notes 2 and 3)

Equity
Common stockholders’ equity
Common stock, authorized 350.0 shares; outstanding 286.2 shares in 2020 and 283.9 shares in 2019		3				3
Common stock, authorized 350.0 shares; outstanding 286.3 shares in 2020 and 283.9 shares in 2019										3				3
Other paid-in capital		5,207				5,113				5,225				5,113
Accumulated other comprehensive loss		(76		)		(73		)		(79		)		(73		)
Retained earnings (accumulated deficit)		51				(25		)		171				(25		)
Total common stockholders’ equity		5,185				5,018				5,320				5,018
Noncontrolling interests		37				37				578				37
Total equity		5,222				5,055				5,898				5,055

Total Liabilities and Equity		$	27,447			$	26,837			$	29,280			$	26,837


²	This obligation comprises a guarantee provided by Consumers 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.


	Principal (In Millions)			Interest Rate		Issuance Date	Maturity Date	Principal (In Millions)			Interest Rate		Issuance Date	Maturity Date
CMS Energy, parent only
Term loan facility¹		$	300	variable		February	February 2021		$	300	variable		February	February 2021
Junior subordinated notes²									500		4.750	%	May	June 2050
Total CMS Energy, parent only		$	300						$	800
Consumers
Term loan facility²		$	300	variable		January	January 2021
Term loan facility³									$	300	variable		January	January 2021
First mortgage bonds		575		3.50	%	March	August 2051		575		3.500	%	March	August 2051
First mortgage bonds									525		2.500	%	May	May 2060
First mortgage bonds⁴									134		variable		May	May 2070
Total Consumers		$	875						$	1,534
Total CMS Energy		$	1,175						$	2,334


¹	At ~~March 31,~~September 30, 2020, the interest rate on the balance of this term loan facility was ~~1.572~~0.606 percent, based on an interest rate of ~~six‑month~~one-week LIBOR plus 0.500 percent.


²	These unsecured obligations rank subordinate and junior in right of payment to all of CMSEnergy’s existing and future senior indebtedness. On June 1, 2030, and every five years thereafter, the notes will reset to an interest rate equal to the five-year treasury rate plus 4.116 percent.


⁴	The variable-rate bonds bear interest quarterly at a rate of three-month LIBOR minus 0.300 percent, subject to a 0‑percent floor (zero percent at September 30, 2020).



	Principal (In Millions)			Interest Rate		Retirement Date	Maturity Date
Consumers
First mortgage bonds		$	100	3.770	%	April	October 2020
First mortgage bonds		250		5.300	%	June	September 2022
First mortgage bonds		375		2.850	%	September	May 2022
Total Consumers		$	725
Total CMS Energy		$	725


¹	~~The weighted-average interest rate for outstanding borrowings under CMS Energy’s revolving~~This letter of credit facility ~~was~~is available to Aviator Wind Equity Holdings. For information regarding the acquisition of Aviator Wind Equity Holdings, see ~~1.887 percent~~Note 15, Purchase of Variable Interest Entity ~~at March 31, 2020.~~.


²	Under this facility, $8 million is available solely for the purpose of issuing letters of credit. Obligations under this facility are secured by the collateral accounts with the lending bank.


³	Obligations under these facilities are secured by first mortgage bonds of Consumers.


								Forward Price Per Share
Contract Date	Maturity Date	Number of Shares	Initial Forward Price Per Share			Maturity Date	Number of Shares	Initial			September 30, 2020
November 20, 2018	March 31, 2021	777,899		$	50.91	March 31, 2021	777,899		$	50.91		$	48.83
February 21, 2019	March 31, 2021	2,083,340		52.27		March 31, 2021	2,083,340		52.27			50.39
September 15, 2020						December 31, 2021	846,759		$	61.06		$	61.04


¹	All assets and liabilities were classified as Level 1 with the exception of derivative contracts, which were classified as Level 2 or Level 3.


¹	Includes current portion of long-term accounts receivable of $12 million at September 30, 2020 and $13 million at ~~March 31, 2020 and~~ December 31, 2019.


²	Includes current portion of notes receivable of ~~$241~~$272 million at ~~March 31,~~September 30, 2020 and $242 million at December 31, 2019. For further details, see Note 7, Notes Receivable.


³	Includes current portion of long‑term debt of ~~$1.7~~$1.8 billion at ~~March 31,~~September 30, 2020 and $1.1 billion at December 31, 2019.


⁴	Includes current portion of long‑term payables of $3$6 million at ~~March 31,~~September 30, 2020 and $1 million at December 31, 2019.



~~In Millions~~
~~Three Months Ended March 31~~	~~2020~~
~~Balance at beginning of period~~		$	33
~~Effects of new accounting standard¹~~		62
~~Provisions for loan losses~~		13
~~Charge-offs~~		~~(11~~		)
~~Recoveries~~		2
~~Balance at end of period~~		$	99


²	In March 2020, CMS Energy finalized a study of research and development tax credits for tax years 2012 through 2018. As a result, for the ~~three~~nine months ended ~~March 31,~~September 30, 2020, CMS Energy, including Consumers, recognized a $9 million increase in the credit, net of reserves for uncertain tax positions. Of this amount, $8 million was recognized at Consumers.


³	In January 2020, the IRS issued a decision restoring alternative minimum tax credit refunds sequestered in years prior to 2018. As a result, for the three months ended March 31, 2020, CMS Energy recognized a $9 million income tax benefit for sequestered amounts related to its 2017 tax return. CMS Energy received the refund in April 2020.


¹	Amounts include a portion of Consumers’ other common assets attributable to both the electric and gas utility businesses.


¹	Includes $4 million for the three months ended September 30, 2020.