CONSUMERS ENERGY CO - Annual Report: 2014 (Form 10-K)

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

x          ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2014

OR

 

o             TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from_____to_____

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

				Name of Each Exchange
Registrant		Title of Class		on Which Registered
CMS Energy Corporation		Common Stock, $0.01 par value		New York Stock Exchange
Consumers Energy Company		Cumulative Preferred Stock, $100 par value: $4.50 Series		New York Stock Exchange

 

Securities registered pursuant to Section 12(g) of the Act:  None

 

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

CMS Energy Corporation:  Yes x  No o  Consumers Energy Company:  Yes x  No o

 

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

CMS Energy Corporation:  Yes o  No x  Consumers Energy Company:  Yes o  No x

 

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 x  No o  Consumers Energy Company:  Yes x  No o

 

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

CMS Energy Corporation:  Yes x  No o  Consumers Energy Company:  Yes x  No o

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

CMS Energy Corporation:  Large accelerated filer x  Accelerated filer o  Non-Accelerated filer o  Smaller reporting company o

 

(Do not check if a smaller reporting company)

 

Consumers Energy Company:  Large accelerated filer o  Accelerated filer o  Non-Accelerated filer x  Smaller reporting company o

 

(Do not check if a smaller reporting 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 o  No x  Consumers Energy Company:  Yes o  No x

 

The aggregate market value of CMS Energy voting and non-voting common equity held by non-affiliates was $8.538 billion for the 274,085,598 CMS Energy Common Stock shares outstanding on June 30, 2014 based on the closing sale price of $31.15 for CMS Energy Common Stock, as reported by the New York Stock Exchange on such date.  There were no shares of Consumers common equity held by non-affiliates as of June 30, 2014.

 

There were 276,264,146 shares of CMS Energy Common Stock outstanding on January 12, 2015, including 803,551 shares owned by Consumers Energy Company.  On January 12, 2015, CMS Energy held all 84,108,789 outstanding shares of common equity of Consumers.  Documents incorporated by reference in Part III:  CMS Energy’s proxy statement and Consumers’ information statement relating to the 2015 Annual Meeting of Shareholders to be held May 1, 2015.

 

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CMS Energy Corporation

Consumers Energy Company

 

Annual Reports on Form 10-K to the Securities and Exchange Commission for the Year Ended

December 31, 2014

 

TABLE OF CONTENTS

 

		Page
Glossary		3
Filing Format		10
Forward-Looking Statements and Information		10
PART I:
Item 1.	Business	13
Item 1A.	Risk Factors	31
Item 1B.	Unresolved Staff Comments	43
Item 2.	Properties	43
Item 3.	Legal Proceedings	43
Item 4.	Mine Safety Disclosures	43
PART II:
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	44
Item 6.	Selected Financial Data	45
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	45
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 8.	Financial Statements and Supplementary Data	47
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	158
Item 9A.	Controls and Procedures	158
Item 9B.	Other Information	160
PART III:
Item 10.	Directors, Executive Officers and Corporate Governance	160
Item 11.	Executive Compensation	161
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	161
Item 13.	Certain Relationships and Related Transactions, and Director Independence	161
Item 14.	Principal Accountant Fees and Services	161
PART IV:
Item 15.	Exhibits and Financial Statement Schedules	163

 

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GLOSSARY

 

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

 

2008 Energy Law		Comprehensive energy reform package enacted in Michigan in 2008
ABATE		Association of Businesses Advocating Tariff Equity
ABO		Accumulated benefit obligation; the liabilities of a pension plan based on service and pay to date, which differs from the PBO in that it does not reflect expected future salary increases
AFUDC		Allowance for borrowed and equity funds used during construction
ANR		ANR Pipeline Company, a non-affiliated company
AOCI		Accumulated other comprehensive income (loss)
ARO		Asset retirement obligation
ASU		Financial Accounting Standards Board Accounting Standards Update
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
Big Rock		Big Rock Point nuclear power plant, formerly owned by Consumers
Btu		British thermal unit
CAIR		The Clean Air Interstate Rule
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
CAO		Chief Accounting Officer
Cash Balance Pension Plan		Cash balance pension plan of CMS Energy and Consumers
CCR		Coal combustion residual
CEO		Chief Executive Officer

 

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CERCLA		Comprehensive Environmental Response, Compensation, and Liability Act of 1980
CFO		Chief Financial Officer
city-gate contract		An arrangement made for the point at which a local distribution company physically receives gas from a supplier or pipeline
Clean Air Act		Federal Clean Air Act of 1963, as amended
Clean Water Act		Federal Water Pollution Control Act of 1972, as amended
CMS Capital		CMS Capital, L.L.C., a wholly owned subsidiary of CMS Energy
CMS Energy		CMS Energy Corporation and its consolidated subsidiaries, unless otherwise noted; the parent of Consumers and CMS Enterprises
CMS Enterprises		CMS Enterprises Company, a wholly owned subsidiary of CMS Energy
CMS ERM		CMS Energy Resource Management Company, formerly known as CMS MST, a wholly owned subsidiary of CMS Enterprises
CMS Field Services		CMS Field Services, Inc., a former wholly owned subsidiary of CMS Gas Transmission
CMS Gas Transmission		CMS Gas Transmission Company, a wholly owned subsidiary of CMS Enterprises
CMS Land		CMS Land Company, a wholly owned subsidiary of CMS Capital
CMS MST		CMS Marketing, Services and Trading Company, a wholly owned subsidiary of CMS Enterprises, whose name was changed to CMS ERM in 2004
Consumers		Consumers Energy Company and its consolidated subsidiaries, unless otherwise noted; a wholly owned subsidiary of CMS Energy
Consumers 2014 Securitization Funding		Consumers 2014 Securitization Funding LLC, a wholly owned consolidated bankruptcy-remote subsidiary of Consumers and special-purpose entity organized for the sole purpose of purchasing and owning Securitization property, issuing Securitization bonds, and pledging its interest in Securitization property to a trustee to collateralize the Securitization bonds

 

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Consumers Funding		Consumers Funding LLC, a wholly owned consolidated bankruptcy-remote subsidiary of Consumers and special-purpose entity organized for the sole purpose of purchasing and owning Securitization property, issuing Securitization bonds, and pledging its interest in Securitization property to a trustee to collateralize the Securitization bonds
CSAPR		The Cross-State Air Pollution Rule
DB Pension Plan		Defined benefit pension plan of CMS Energy and Consumers, including certain present and former affiliates and subsidiaries
DB SERP		Defined Benefit Supplemental Executive Retirement Plan
DCCP		Defined Company Contribution Plan
DC SERP		Defined Contribution 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
DOE		U.S. Department of Energy
DTE Electric		DTE Electric Company, a non-affiliated company
DTE Gas		DTE Gas Company, a non-affiliated company
EBITDA		Earnings before interest, taxes, depreciation, and amortization
EGWP		Employer Group Waiver Plan
EnerBank		EnerBank USA, a wholly owned subsidiary of CMS Capital
Entergy		Entergy Corporation, a non-affiliated company
Environmental Mitigation Projects		Environmentally beneficial projects that a party agrees to undertake as part of the settlement of an enforcement action, but which the party is not otherwise legally required to perform
EPA		U.S. Environmental Protection Agency
EPS		Earnings per share
Exchange Act		Securities Exchange Act of 1934
FDIC		Federal Deposit Insurance Corporation

 

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FERC		The Federal Energy Regulatory Commission
First Mortgage Bond Indenture		The indenture dated as of September 1, 1945 between Consumers and The Bank of New York Mellon, as Trustee, as amended and supplemented
FLI Liquidating Trust		Trust formed in Missouri bankruptcy court to accomplish the liquidation of Farmland Industries, Inc., a non-affiliated entity
FMB		First mortgage bond
FOV		Finding of Violation
FTR		Financial transmission right
GAAP		U.S. Generally Accepted Accounting Principles
GCC		Gas Customer Choice, which allows gas customers to purchase gas from alternative suppliers
GCR		Gas cost recovery
Genesee		Genesee Power Station Limited Partnership, a VIE in which HYDRA-CO Enterprises, Inc., a wholly owned subsidiary of CMS Enterprises, has a 50 percent interest
Grayling		Grayling Generating Station Limited Partnership, a VIE in which HYDRA-CO Enterprises, Inc., a wholly owned subsidiary of CMS Enterprises, has a 50 percent interest
Great Lakes Gas Transmission		Great Lakes Gas Transmission Limited Partnership, a non-affiliated company
GWh		Gigawatt-hour, a unit of energy equal to one billion watt-hours
Health Care Acts		Comprehensive health care reform enacted in 2010, comprising the Patient Protection and Affordable Care Act and the related Health Care and Education Reconciliation Act
IRS		Internal Revenue Service
kilovolts		Thousand volts, a unit used to measure the difference in electrical pressure along a current
kVA		Thousand volt-amperes, a unit used to reflect the electrical power capacity rating of equipment or a system
kWh		Kilowatt-hour, a unit of energy equal to one thousand watt-hours
LIBOR		The London Interbank Offered Rate

 

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Ludington		Ludington pumped-storage plant, jointly owned by Consumers and DTE Electric
MATS		Mercury and Air Toxics Standards, which limit mercury, acid gases, and other toxic pollution from coal-fueled and oil-fueled power plants
MBT		Michigan Business Tax
mcf		Thousand cubic feet
MCIT		Michigan Corporate Income Tax
MCV Facility		A 1,647 MW natural gas-fueled, combined-cycle cogeneration facility operated by the MCV Partnership
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
MDEQ		Michigan Department of Environmental Quality
MDL		A pending multi-district litigation case in Nevada arising out of several consolidated cases
MGP		Manufactured gas plant
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 owners in MISO must request approval to mothball a unit, and MISO then evaluates the request for reliability impacts
MPSC		Michigan Public Service Commission
MRV		Market-related value of plan assets
MW		Megawatt, a unit of power equal to one million watts
MWh		Megawatt-hour, a unit of energy equal to one million watt-hours
NAAQS		National Ambient Air Quality Standards
NAV		Net asset value

 

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NERC		The North American Electric Reliability Corporation, a non-affiliated company responsible for developing and enforcing reliability standards, monitoring the bulk power system, and educating and certifying industry personnel
NOV		Notice of Violation
NPDES		National Pollutant Discharge Elimination System, a permit system for regulating point sources of pollution under the Clean Water Act
NREPA		Part 201 of the Michigan Natural Resources and Environmental Protection Act, a statute that covers environmental activities including remediation
NSR		New Source Review, a construction-permitting program under the Clean Air Act
NYMEX		The New York Mercantile Exchange
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
Palisades		Palisades nuclear power plant, sold by Consumers to Entergy in 2007
Panhandle		Panhandle Eastern Pipe Line Company, a former wholly owned subsidiary of CMS Gas Transmission
PBO		Projected benefit obligation
PCB		Polychlorinated biphenyl
PISP		Performance Incentive Stock Plan
PPA		Power purchase agreement
PSCR		Power supply cost recovery
PSD		Prevention of Significant Deterioration
REC		Renewable energy credit established under the 2008 Energy Law
ReliabilityFirst Corporation		ReliabilityFirst Corporation, a non-affiliated company responsible for the preservation and enhancement of bulk power system reliability and security
Renewable Operating Permit		Michigan’s Title V permitting program under the Clean Air Act
Resource Conservation and Recovery Act		Federal Resource Conservation and Recovery Act of 1976

 

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RMRR		Routine maintenance, repair, and replacement
ROA		Retail Open Access, which allows electric generation customers to choose alternative electric suppliers pursuant to a Michigan statute enacted in 2000
S&P		Standard & Poor’s Financial Services LLC
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
Sherman Act		Sherman Antitrust Act of 1890
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
T.E.S. Filer City		T.E.S. Filer City Station Limited Partnership, a VIE in which HYDRA-CO Enterprises, Inc., a wholly owned subsidiary of CMS Enterprises, has a 50 percent interest
Title V		A federal program under the Clean Air Act designed to standardize air quality permits and the permitting process for major sources of emissions across the U.S.
Trunkline		Trunkline Gas Company, LLC, a non-affiliated company and wholly owned subsidiary of Panhandle
USW		United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO-CLC
UWUA		Utility Workers Union of America, AFL-CIO
VEBA trust		Voluntary employees’ beneficiary association trusts accounts established specifically to set aside employer-contributed assets to pay for future expenses of the OPEB Plan
VIE		Variable interest entity

 

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FILING FORMAT

 

This combined Form 10-K is separately filed by CMS Energy and Consumers.  Information in this combined Form 10-K 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, 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, 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.

 

FORWARD-LOOKING STATEMENTS AND INFORMATION

 

This Form 10-K and other written and oral statements that CMS Energy and Consumers make 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 new regulation by the MPSC or 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;

 

·                 changes in the performance of or regulations applicable to MISO, Michigan Electric Transmission Company, 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 changes in applicable laws, rules, regulations, principles, or practices, or in their interpretation, including those related to energy policy and ROA, gas pipeline safety, the environment, regulation or deregulation, health care reforms (including the Health Care Acts), taxes, accounting matters, climate change, air emissions, 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;

 

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

 

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·                 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 investment performance of the assets of CMS Energy’s and Consumers’ pension and benefit plans, the discount rates 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;

 

·                 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, including municipal bankruptcy filings;

 

·                 loss of customer demand for electric generation supply to alternative energy suppliers or to increased use of distributed generation;

 

·                 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 in wholesale power markets without price restrictions;

 

·                 the impact of credit markets, economic conditions, and any new banking 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 future prices of electricity, natural gas, and other energy-related commodities;

 

·                 factors affecting development of electric generation projects and gas and electric 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, and government approvals;

 

·                 factors affecting operations, such as costs and availability of personnel, equipment, and materials, unusual weather conditions, catastrophic weather-related damage, scheduled or unscheduled equipment outages, maintenance or repairs, environmental incidents, equipment failures, and electric transmission and distribution or gas pipeline system constraints;

 

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·                 potential disruption to, interruption of, or other impacts on facilities, utility infrastructure, or operations due to accidents, explosions, physical disasters, vandalism, 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 rail or vessel transport of coal and pipeline transport of natural gas;

 

·                 potential costs, lost revenues, 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;

 

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

 

·                 the ability to implement technology, including Smart Energy, successfully;

 

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

 

·                 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 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 compliance policies, regulatory violations, and other business 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, including a possible future requirement to comply with International Financial Reporting Standards, which differ from GAAP in various ways, including the present lack of special accounting treatment for regulated activities; and

 

·                 other matters that may be disclosed from time to time in CMS Energy’s and Consumers’ SEC filings, or in other publicly issued 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 Item 1A. Risk Factors; Item 8. Financial Statements and Supplementary Data, MD&A — Outlook; and Item 8. Financial Statements and Supplementary Data, Notes to the Consolidated Financial Statements — Note 3, Regulatory Matters and Note 4, Contingencies and Commitments.

 

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PART I

 

ITEM 1. BUSINESS

 

GENERAL

 

CMS ENERGY

 

CMS Energy was formed as a corporation in Michigan in 1987 and is an energy company operating primarily in Michigan.  It is the parent holding company of several subsidiaries, including Consumers, an electric and gas utility, and CMS Enterprises, primarily a domestic independent power producer.  Consumers serves individuals and businesses operating in the alternative energy, automotive, chemical, metal, and food products industries, as well as a diversified group of other industries.  CMS Enterprises, through its subsidiaries and equity investments, is engaged primarily in independent power production and owns power generation facilities fueled mostly by natural gas and biomass.

 

CMS Energy manages its businesses by the nature of services each provides, and operates principally in three business segments:  electric utility, gas utility, and enterprises, its non-utility operations and investments.  Consumers’ consolidated operations account for substantially all of CMS Energy’s total assets, income, and operating revenue.  CMS Energy’s consolidated operating revenue was $7.2 billion in 2014, $6.6 billion in 2013, and $6.3 billion in 2012.

 

For further information about operating revenue, income, and assets and liabilities attributable to all of CMS Energy’s business segments and operations, see Item 8. Financial Statements and Supplementary Data, CMS Energy’s Selected Financial Information, Consolidated Financial Statements, and Notes to the Consolidated Financial Statements.

 

CONSUMERS

 

Consumers has served Michigan customers since 1886.  Consumers was incorporated in Maine in 1910 and became a Michigan corporation in 1968.  Consumers owns and operates electric distribution and generation facilities and gas transmission, storage, and distribution facilities.  It provides electricity and/or natural gas to 6.6 million of Michigan’s 10 million residents.  Consumers’ rates and certain other aspects of its business are subject to the jurisdiction of the MPSC and FERC, as described in “CMS Energy and Consumers Regulation” in this Item 1.

 

Consumers’ consolidated operating revenue was $6.8 billion in 2014, $6.3 billion in 2013, and $6.0 billion in 2012.  For further information about operating revenue, income, and assets and liabilities attributable to Consumers’ electric and gas utility operations, see Item 8. Financial Statements and Supplementary Data, Consumers’ Selected Financial Information, Consolidated Financial Statements, and Notes to the Consolidated Financial Statements.

 

Consumers owns its principal properties in fee, except that most electric lines and gas mains are located below public roads or on land owned by others and are accessed by Consumers through easements and other rights.  Almost all of Consumers’ properties are subject to the lien of its First Mortgage Bond Indenture.  For additional information on Consumers’ properties, see Consumers Electric Utility — Electric Utility Properties and Consumers Gas Utility — Gas Utility Properties in the “Business Segments” section of this Item 1.

 

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In 2014, Consumers served 1.8 million electric customers and 1.7 million gas customers in Michigan’s Lower Peninsula.  Presented in the following map is Consumers’ service territory:

 

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BUSINESS SEGMENTS

 

CONSUMERS ELECTRIC UTILITY

 

Electric Utility Operations:  Consumers’ electric utility operations, which include the generation, purchase, distribution, and sale of electricity, generated operating revenue of $4.4 billion in 2014, $4.2 billion in 2013, and $4.0 billion in 2012.  Consumers’ electric utility customer base consists of a mix of primarily residential, commercial, and diversified industrial customers in Michigan’s Lower Peninsula.

 

Presented in the following illustration is Consumers’ 2014 electric utility operating revenue of $4.4 billion by customer class:

 

 

Consumers’ electric utility operations are not dependent on a single customer, or even a few customers, and the loss of any one or even a few of Consumers’ largest customers is not reasonably likely to have a material adverse effect on Consumers’ financial condition.

 

In 2014, Consumers’ electric deliveries were 38 billion kWh, which included ROA deliveries of four billion kWh, resulting in net bundled sales of 34 billion kWh.  In 2013, Consumers’ electric deliveries were 37 billion kWh, which included ROA deliveries of four billion kWh, resulting in net bundled sales of 33 billion kWh.

 

Consumers’ electric utility operations are seasonal.  The consumption of electric energy typically increases in the summer months, due primarily to the use of air conditioners and other cooling equipment.

 

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Presented in the following illustration are Consumers’ monthly weather-adjusted electric deliveries (deliveries adjusted to reflect normal weather conditions) to its customers, including ROA deliveries, during 2014 and 2013:

 

 

Consumers’ 2014 summer peak demand was 7,498 MW, which included ROA demand of 591 MW.  For the 2013-2014 winter period, Consumers’ peak demand was 5,960 MW, which included ROA demand of 452 MW.  As required by MISO reserve margin requirements, Consumers owns or controls, through long-term PPAs and short-term capacity purchases, capacity required to supply its projected firm peak load and necessary reserve margin for summer 2015.

 

Electric Utility Properties:  Consumers’ distribution system consists of:

 

·                 434 miles of high-voltage distribution radial lines operating at 120 kilovolts or above;

·                 4,261 miles of high-voltage distribution overhead lines operating at 23 kilovolts, 46 kilovolts, and 69 kilovolts;

·                 18 miles of high-voltage distribution underground lines operating at 23 kilovolts and 46 kilovolts;

·                 56,022 miles of electric distribution overhead lines;

·                 10,304 miles of underground distribution lines; and

·                 substations with an aggregate transformer capacity of 24 million kVA.

 

Consumers is interconnected to the interstate high-voltage electric transmission system owned by Michigan Electric Transmission Company, LLC, a non-affiliated company, and operated by MISO.  Consumers is also interconnected to neighboring utilities and to other transmission systems.

 

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Presented in the following table are details about Consumers’ electric generating system at December 31, 2014:

 

		Number of Units and		2014 Generation Capacity	1	2014 Net Generation
Name and Location (Michigan)		Year Entered Service		(MW)		(GWh)
Coal generation
J.H. Campbell 1 & 2 – West Olive		2 Units, 1962-1967		611		3,525
J.H. Campbell 3 – West Olive2		1 Unit, 1980		751		4,681
B.C. Cobb 4 & 5 – Muskegon3		2 Units, 1956-1957		307		1,889
D.E. Karn 1 & 2 – Essexville		2 Units, 1959-1961		508		2,059
J.C. Weadock 7 & 8 – Essexville3		2 Units, 1955-1958		289		1,711
J.R. Whiting 1-3 – Erie3		3 Units, 1952-1953		317		1,819
Total coal generation				2,783		15,684
Oil/Gas steam generation
B.C. Cobb 1-3 – Muskegon4		3 Units, 1999-2000		-		-
D.E. Karn 3 & 4 – Essexville5		2 Units, 1975-1977		1,204		-
Zeeland (combined cycle) – Zeeland		1 Unit, 2002		520		1,847
Total oil/gas steam generation				1,724		1,847
Hydroelectric
Conventional hydro generation – various locations		35 Units, 1906-1949		77		457
Ludington – Ludington		6 Units, 1973		955	6	(300	)7
Total hydroelectric				1,032		157
Gas/Oil combustion turbine
Various plants – various locations8		11 Units, 1966-1971		38		13
Zeeland (simple cycle) – Zeeland		2 Units, 2001		320		152
Total gas/oil combustion turbine				358		165
Wind generation
Lake Winds® Energy Park – Mason County		56 Turbines, 2012		16		270
Cross Winds® Energy Park – Tuscola County		62 Turbines, 2014		-		21
Total wind generation				16		291
Total owned generation				5,913		18,144
Purchased and interchange power9				2,863	10	17,232	11
Total supply				8,776		35,376
Generation and transmission use/loss						1,759
Total net bundled sales						33,617

 

1    Represents each plant’s electric generation capacity during the summer months, except for Cross Winds® Energy Park, which began operation in December 2014.

 

2    Represents Consumers’ share of the capacity of the J.H. Campbell 3 unit, net of the 6.69-percent ownership interest of the Michigan Public Power Agency and Wolverine Power Supply Cooperative, Inc.

 

3    Consumers plans to retire these seven smaller coal-fueled generating units by April 2016.

 

4    B.C. Cobb 1-3 were coal-fueled units that were retired and subsequently converted to natural gas-fueled units.  B.C. Cobb 1-3 were placed back into service in the years indicated and mothballed in 2009.  Consumers plans to retire these units by June 2015.

 

5    D.E. Karn 3 & 4 were mothballed in October 2014.  Consumers plans to return these units to service in June 2015.

 

6    Represents Consumers’ 51-percent share of the capacity of Ludington.  DTE Electric holds the remaining 49-percent ownership interest.

 

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7    Represents Consumers’ share of net pumped-storage generation.  The pumped-storage facility consumes electricity to pump water during off-peak hours for storage in order to generate electricity later during peak-demand hours.

 

8    Includes eight units that were mothballed beginning on various dates between October 2010 and October 2014.

 

9    Includes purchases from the MISO capacity and energy markets, and long-term PPAs.

 

10 Includes 1,240 MW of purchased contract capacity from the MCV Facility and 778 MW of purchased contract capacity from Palisades.

 

11 Includes 2,384 GWh of purchased energy from the MCV Facility and 5,974 GWh of purchased energy from Palisades.

 

Consumers’ generation capacity is a measure of the maximum electric output that Consumers has available to meet peak load requirements.  As shown in the following illustration, Consumers’ 2014 generation capacity of 8,776 MW, including purchased capacity of 2,863 MW, relied on a variety of fuel sources:

 

 

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Electric Utility Supply:  Presented in the following table are the sources of Consumers’ electric supply over the last five years:

 

										GWh
Years Ended December 31		2014		2013		2012		2011		2010
Owned generation
Coal		15,684		15,951		14,027		15,468		17,879
Gas		2,012		1,415		3,003		1,912		1,043
Renewable energy		748		704		433		425		365
Oil		-		4		6		7		21
Net pumped storage1		(300	)	(371	)	(295	)	(365	)	(366	)
Total owned generation		18,144		17,703		17,174		17,447		18,942
Purchased and interchange power
Purchased renewable energy2		2,366		2,250		1,435		1,587		1,582
Purchased generation – other2		10,073		10,871		13,104		11,087		10,421
Net interchange power3		4,793		3,656		4,151		6,825		6,045
Total purchased and interchange power		17,232		16,777		18,690		19,499		18,048
Total supply		35,376		34,480		35,864		36,946		36,990

 

1    Represents Consumers’ share of net pumped-storage generation.  The pumped-storage facility consumes electricity to pump water during off-peak hours for storage in order to generate electricity later during peak-demand hours.

 

2    Includes purchases from long-term PPAs.

 

3    Includes purchases from the MISO energy market and seasonal purchases.

 

During 2014, Consumers acquired 49 percent of the electricity it provided to customers through long-term PPAs and the MISO energy market.  Consumers offers its generation into the MISO energy market on a day-ahead and real-time basis and bids for power in the market to serve the demand of its customers.  Consumers is a net purchaser of power and supplements its generation capability with purchases from the MISO energy market to meet its customers’ needs during peak demand periods.

 

At December 31, 2014, Consumers had unrecognized future commitments (amounts for which, in accordance with GAAP, liabilities have not been recorded on its balance sheet) to purchase capacity and energy under long-term PPAs with various generating plants.  These contracts require monthly capacity payments based on the plants’ availability or deliverability.  The payments for 2015 through 2036 are estimated to total $11.1 billion and, for each of the next five years, range from $1.0 billion to $1.1 billion annually.  These amounts may vary depending on plant availability and fuel costs.  For further information about Consumers’ future capacity and energy purchase obligations, see Item 8. Financial Statements and Supplementary Data, MD&A – Capital Resources and Liquidity and Note 4, Contingencies and Commitments – Contractual Commitments.

 

During 2014, 44 percent of the energy Consumers provided to customers was generated by its coal-fueled generating units, which burned nine million tons of coal and produced a combined total of 15,684 GWh of electricity.

 

In order to obtain the coal it needs, Consumers enters into physical coal supply contracts.  At December 31, 2014, Consumers had contracts to purchase coal through 2017; payment obligations under these contracts totaled $178 million.  Most of Consumers’ rail-supplied coal contracts have fixed prices, although some contain market-based pricing.  Consumers’ vessel-supplied coal contracts have fixed base prices that are adjusted monthly to reflect changes to the fuel cost of vessel transportation.  At December 31, 2014, Consumers had 88 percent of its 2015 expected coal requirements under contract, as well as a 36-day supply of coal on hand.

 

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In conjunction with its coal supply contracts, Consumers leases a fleet of rail cars and has transportation contracts with various companies to provide rail and vessel services for delivery of purchased coal to Consumers’ generating facilities.  Consumers’ coal transportation contracts expire through 2019; payment obligations under these contracts totaled $430 million at December 31, 2014.

 

During 2014, six percent of the energy Consumers provided to customers was generated by natural gas-fueled generating units, which burned 15 bcf of natural gas and produced a combined total of 2,012 GWh of electricity.

 

In order to obtain the gas it needs for electric generation fuel, Consumers’ electric utility purchases gas from the market near the time of consumption, at prices that allow it to compete in the electric wholesale market.  For D.E. Karn, units 3 and 4, and the Zeeland plant, Consumers purchases gas from the market and transports the gas to the facilities on a firm basis.  For its smaller combustion turbines, Consumers’ electric utility purchases and transports gas to its facilities as a bundled-rate tariff customer of either the gas utility or DTE Gas.

 

Presented in the following table is the cost per million Btu of all fuels consumed, which fluctuates with the mix of fuel used.

 

											Cost Per Million Btu
Years Ended December 31		2014			2013			2012			2011			2010
Coal		$	2.72		$	2.90		$	2.98		$	2.94		$	2.51
Gas		7.19			4.68			3.16			4.95			5.57
Oil		20.16			19.47			19.08			18.55			10.98
Weighted-average fuel cost		$	3.17		$	3.07		$	3.05		$	3.18		$	2.71

 

Electric Utility Competition:  Consumers’ electric utility business is subject to actual and potential competition from many sources, in both the wholesale and retail markets, as well as in electric generation, electric delivery, and retail services.

 

A Michigan statute enacted in 2000 allowed electric customers in Consumers’ service territory to buy electric generation service from alternative electric suppliers.  The 2008 Energy Law revised the statute by limiting alternative electric supply to ten percent of Consumers’ weather-adjusted retail sales for the preceding calendar year.  At December 31, 2014, Consumers’ electric deliveries under the ROA program were at the ten-percent limit and alternative electric suppliers were providing 771 MW of electric generation service to 308 ROA customers.

 

In December 2013, a bill was introduced to the Michigan House of Representatives that, if enacted, would have revised the 2008 Energy Law by removing the ten-percent limit and allowing all of Consumers’ electric customers to take service from an alternative electric supplier.  The bill also proposed to deregulate electric generation service in Michigan within two years.  No action was taken prior to the end of the legislative session on this bill or on a similar bill introduced to the Michigan Senate.  Consumers is unable to predict whether similar bills might be introduced during 2015.

 

In recent years, the Michigan legislature has conducted hearings on the subject of energy competition.  If the ROA limit were increased or if electric generation service in Michigan were deregulated, it could have a material adverse effect on Consumers’ financial results and operations.

 

Consumers also has competition or potential competition from:

 

·                 industrial customers relocating all or a portion of their production capacity outside of Consumers’ service territory for economic reasons;

·                 municipalities owning or operating competing electric delivery systems; and

·                 customer self-generation.

 

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Consumers addresses this competition by monitoring activity in adjacent geographical areas, by providing non-energy services and value to customers through Consumers’ rates and service, and by offering tariff-based incentives that support economic development.

 

CONSUMERS GAS UTILITY

 

Gas Utility Operations:  Consumers’ gas utility operations, which include the purchase, transmission, storage, distribution, and sale of natural gas, generated operating revenue of $2.4 billion in 2014, $2.1 billion in 2013, and $2.0 billion in 2012.  Consumers’ gas utility customer base consists of a mix of primarily residential, commercial, and diversified industrial customers in Michigan’s Lower Peninsula.

 

Presented in the following illustration is Consumers’ 2014 gas utility operating revenue of $2.4 billion by customer class:

 

 

Consumers’ gas utility operations are not dependent on a single customer, or even a few customers, and the loss of any one or even a few of Consumers’ largest customers is not reasonably likely to have a material adverse effect on Consumers’ financial condition.

 

In 2014, deliveries of natural gas, including off-system transportation deliveries, through Consumers’ pipeline and distribution network, totaled 373 bcf, which included GCC deliveries of 65 bcf.  In 2013, deliveries of natural gas, including off-system transportation deliveries, through Consumers’ pipeline and distribution network, totaled 352 bcf, which included GCC deliveries of 63 bcf.  Consumers’ gas utility operations are seasonal.  Consumers injects natural gas into storage during the summer months for use during the winter months when the demand for natural gas is higher.  Peak demand occurs in the winter due to colder temperatures and the resulting use of natural gas as a heating fuel.  During 2014, 43 percent of the natural gas supplied to all customers during the winter months was supplied from storage.

 

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Presented in the following illustration are Consumers’ monthly weather-adjusted gas deliveries (deliveries adjusted to reflect normal weather conditions) to its customers, including GCC deliveries, during 2014 and 2013:

 

 

Gas Utility Properties:  Consumers’ gas distribution and transmission system consists of:

 

·                 27,169 miles of distribution mains;

·                 1,685 miles of transmission lines;

·                 seven compressor stations with a total of 168,721 installed and available horsepower; and

·                 15 gas storage fields with a total storage capacity of 309 bcf and a working gas volume of 151 bcf.

 

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Gas Utility Supply:  In 2014, Consumers purchased 68 percent of the gas it delivered from U.S. producers and six percent from Canadian producers.  The remaining 26 percent was purchased from authorized GCC suppliers and delivered by Consumers to customers in the GCC program.  Presented in the following illustration are the supply arrangements for the gas Consumers delivered to GCC and GCR customers during 2014:

 

 

Firm gas transportation or firm city-gate contracts are those that define a fixed amount, price, and delivery time frame.  Consumers’ firm gas transportation contracts are with ANR, Great Lakes Gas Transmission, Panhandle, and Trunkline.  Under these contracts, Consumers purchases and transports gas to Michigan for ultimate delivery to its customers.  Consumers’ firm gas transportation contracts expire through 2023 and provide for the delivery of 61 percent of Consumers’ total gas supply requirements.  Consumers purchases the balance of its required gas supply under firm city-gate contracts and through authorized suppliers under the GCC program.

 

Gas Utility Competition:  Competition exists in various aspects of Consumers’ gas utility business.  Competition comes from GCC and from alternative fuels and energy sources, such as propane, oil, and electricity.

 

ENTERPRISES SEGMENT – NON-UTILITY OPERATIONS AND INVESTMENTS

 

CMS Energy’s enterprises segment, through various subsidiaries and certain equity investments, is engaged primarily in domestic independent power production and the marketing of independent power production.  The enterprises segment’s operating revenue was $299 million in 2014, $181 million in 2013, and $183 million in 2012.

 

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Independent Power Production:  At December 31, 2014, CMS Energy had ownership interests in independent power plants totaling 1,135 MW or 1,035 net MW.  (Net MW reflects that portion of the capacity relating to CMS Energy’s ownership interests.)  Presented in the following table are CMS Energy’s interests in independent power plants at December 31, 2014:

 

						Capacity Under		Energy Under
		Primary		Capacity		Long-Term		Long-Term		Ownership
Location		Fuel Type		(MW)		Contract (%)		Contract (%)		Interest (%)
Dearborn, Michigan		Natural gas		710		34		49		100
Gaylord, Michigan		Natural gas		156		42		-		100
Comstock, Michigan		Natural gas		68		42		-		100
Filer City, Michigan		Coal and biomass		73		100		100		50
Flint, Michigan		Biomass		40		88		88		50
Grayling, Michigan		Biomass		38		92		92		50
New Bern, North Carolina		Biomass		50		100		100		50
Total				1,135

 

The operating revenue from independent power production was $18 million in 2014, $17 million in 2013, and $16 million in 2012.  CMS Energy’s independent power production business faces competition from generators, marketers and brokers, and utilities marketing power in the wholesale market.

 

Energy Resource Management:  CMS ERM purchases and sells energy commodities in support of CMS Energy’s generating facilities with a focus on optimizing CMS Energy’s independent power production portfolio.  In 2014, CMS ERM marketed 19 bcf of natural gas and 4,681 GWh of electricity.  Electricity marketed by CMS ERM was generated by independent power production of the enterprises segment and unrelated third parties.  CMS ERM’s operating revenue was $281 million in 2014, $164 million in 2013, and $167 million in 2012.

 

OTHER BUSINESSES

 

EnerBank:  EnerBank is a Utah state-chartered, FDIC-insured industrial bank providing unsecured consumer installment loans for financing home improvements.  EnerBank’s operating revenue was $80 million in 2014, $64 million in 2013, and $57 million in 2012.

 

CMS ENERGY AND CONSUMERS REGULATION

 

CMS Energy, Consumers, and their subsidiaries are subject to regulation by various federal, state, and local governmental agencies, including those described in the following sections.

 

FERC

 

FERC has exercised limited jurisdiction over several independent power plants and exempt wholesale generators in which CMS Enterprises has ownership interests, as well as over CMS ERM, CMS Gas Transmission, and DIG.  FERC’s jurisdiction includes, among other things, acquisitions, operations, disposals of certain assets and facilities, services provided and rates charged, and conduct among affiliates.  FERC also has limited jurisdiction over holding company matters with respect to CMS Energy.  FERC, in connection with NERC and with regional reliability organizations, also regulates generation owners and operators, load serving entities, purchase and sale entities, and others with regard to reliability of the bulk power system.

 

FERC regulates limited aspects of Consumers’ gas business, principally compliance with FERC capacity release rules, shipping rules, the prohibition against certain buy/sell transactions, and the price-reporting rule.

 

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FERC also regulates certain aspects of Consumers’ electric operations, including compliance with FERC accounting rules, wholesale and transmission rates, operation of licensed hydroelectric generating plants, transfers of certain facilities, corporate mergers, and issuances of securities.

 

MPSC

 

Consumers is subject to the jurisdiction of the MPSC, which regulates public utilities in Michigan with respect to retail utility rates, accounting, utility services, certain facilities, certain asset transfers, corporate mergers, and other matters.

 

The Michigan Attorney General, ABATE, the MPSC Staff, and certain other parties typically participate in MPSC proceedings concerning Consumers.  The Michigan Attorney General, ABATE, and others often appeal significant MPSC orders.

 

Rate Proceedings:  For information regarding open rate proceedings, see Item 8. Financial Statements and Supplementary Data, MD&A — Outlook and Notes to the Consolidated Financial Statements — Note 3, Regulatory Matters.

 

OTHER REGULATION

 

The U.S. Secretary of Energy regulates imports and exports of natural gas and has delegated various aspects of this jurisdiction to FERC and the DOE’s Office of Fossil Fuels.

 

The U.S. Department of Transportation Office of Pipeline Safety regulates the safety and security of gas pipelines through the Natural Gas Pipeline Safety Act of 1968 and subsequent laws.

 

EnerBank is regulated by the Utah Department of Financial Institutions and the FDIC.

 

ENERGY LEGISLATION

 

CMS Energy, Consumers, and their subsidiaries are subject to various legislative-driven matters, including Michigan’s 2008 Energy Law.  This law requires that at least ten percent of Consumers’ electric sales volume come from renewable energy sources by the end of 2015, and includes requirements for specific capacity additions.  The 2008 Energy Law also requires Consumers to prepare an energy optimization plan and achieve annual sales reduction targets through at least 2015.  The targets increase annually, with the goal of achieving a 5.6 percent reduction in customers’ electricity use and a 3.9 percent reduction in customers’ natural gas use by December 31, 2015.  The 2008 Energy Law allows electric customers in Consumers’ service territory to buy electric generation service from alternative electric suppliers in an aggregate amount up to ten percent of Consumers’ weather-adjusted retail sales of the preceding calendar year.  For additional information regarding Consumers’ renewable energy and energy optimization plans and electric ROA, see Item 8. Financial Statements and Supplementary Data, MD&A — Outlook.

 

CMS ENERGY AND CONSUMERS ENVIRONMENTAL COMPLIANCE

 

CMS Energy, Consumers, and their subsidiaries are subject to various federal, state, and local regulations for environmental quality, including air and water quality, solid waste management, and other matters.  Consumers expects to recover costs to comply with environmental regulations in customer rates, but cannot guarantee this result.  For additional information concerning environmental matters, see Item 1A. Risk Factors and Item 8. Financial Statements and Supplementary Data, Notes to the Consolidated Financial Statements — Note 4, Contingencies and Commitments.

 

CMS Energy has recorded a significant liability for its subsidiaries’ obligations associated with Bay Harbor and Consumers has recorded a significant liability for its obligations at a number of MGP sites.

 

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For additional information, see Item 1A. Risk Factors and Item 8. Financial Statements and Supplementary Data, Notes to the Consolidated Financial Statements — Note 4, Contingencies and Commitments.

 

Air:  Consumers continues to install state-of-the-art emissions control equipment at its electric generating plants.  Consumers estimates that it will incur expenditures of $258 million from 2015 through 2019 to comply with present and future federal and state environmental regulations that will require extensive reductions in nitrogen oxides, sulfur dioxides, particulate matter, and mercury emissions.  Consumers’ estimate may increase if additional or more stringent laws or regulations are adopted or implemented regarding greenhouse gases, including carbon dioxide.

 

Solid Waste Disposal:  Costs related to the construction, operation, and closure of solid waste disposal facilities for coal ash are significant.  Consumers’ solid waste disposal areas are regulated under Michigan’s solid waste rules.  Consumers has converted all of its fly ash handling systems to dry systems.  All of Consumers’ ash facilities have programs designed to protect the environment and are subject to quarterly MDEQ inspections.  In December 2014, the EPA issued new federal regulations for ash disposal areas.  Consumers’ preliminary estimate of capital expenditures to comply with future regulations relating to ash disposal is $252 million from 2015 through 2019, but this estimate could change significantly.

 

Water:  Consumers uses substantial amounts of water to operate and cool its electric generating plants.  Water discharge quality is regulated and administered by the MDEQ under the federal NPDES program.  To comply with such regulation, Consumers’ facilities have discharge monitoring programs.  Consumers expects the EPA to issue final federal regulations for wastewater discharges from electric generating plants in 2015.  Consumers’ preliminary estimate of expenditures to comply with these expected regulations is $152 million from 2015 through 2019.

 

In 2014, the EPA finalized its cooling water intake rule, which requires Consumers to evaluate the biological impact of its cooling water intake systems and ensure that it is using the best technology available to minimize adverse environmental impacts.  Consumers’ preliminary estimate of expenditures to comply with these regulations is $100 million from 2015 through 2019.

 

CMS Energy retained environmental remediation obligations for the collection and treatment of leachate at Bay Harbor after selling its interests in the development in 2002.  CMS Energy’s estimate of expenditures on long-term liquid disposal and operating and maintenance costs at Bay Harbor is $29 million from 2015 through 2019.

 

For further information concerning estimated capital expenditures related to air, solid waste disposal, and water see Item 8. Financial Statements and Supplementary Data, MD&A — Outlook, “Consumers Electric Utility Business Outlook and Uncertainties — Electric Environmental Outlook.”

 

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INSURANCE

 

CMS Energy and its subsidiaries, including Consumers, maintain insurance coverage generally similar to comparable companies in the same lines of business.  The insurance policies are subject to terms, conditions, limitations, and exclusions that might not fully compensate CMS Energy or Consumers for all losses.  A portion of each loss is generally assumed by CMS Energy or Consumers in the form of deductibles and self-insured retentions that, in some cases, are substantial.  As CMS Energy or Consumers renews its policies, it is possible that some of the present insurance coverage may not be renewed or obtainable on commercially reasonable terms due to restrictive insurance markets.

 

CMS Energy’s and Consumers’ present insurance program does not cover the risks of certain environmental costs, such as the cleanup of sites owned by CMS Energy or Consumers, or claims for the long-term storage or disposal of pollutants or for air pollution.

 

EMPLOYEES

 

Presented in the following table are the number of employees of CMS Energy and Consumers:

December 31		2014		2013		2012
CMS Energy, including Consumers
Full-time employees		7,704		7,736		7,487
Part-time employees		43		45		54
Total employees1		7,747		7,781		7,541
Consumers
Full-time employees		7,369		7,410		7,188
Part-time employees		19		25		33
Total employees2		7,388		7,435		7,221

 

1    Excluding seasonal employees, 7,714 at December 31, 2014, 7,460 at December 31, 2013, and 7,503 at December 31, 2012.

 

2    Excluding seasonal employees, 7,355 at December 31, 2014, 7,114 at December 31, 2013, and 7,183 at December 31, 2012.

 

Consumers has a seasonal workforce that peaked at 394 employees during 2014, 321 employees during 2013, and 38 employees during 2012.

 

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CMS ENERGY EXECUTIVE OFFICERS (AS OF FEBRUARY 1, 2015)

Name		Age		Position		Period
John G. Russell		57		President, CEO, and Director of CMS Energy		5/2010 – Present
				President, CEO, and Director of Consumers		5/2010 – Present
				Chairman of the Board, President, CEO, and Director
				of CMS Enterprises		5/2010 – Present
				President and Chief Operating Officer of Consumers		10/2004 – 5/2010
Thomas J. Webb		62		Executive Vice President and CFO of CMS Energy		8/2002 – Present
				Executive Vice President and CFO of Consumers		8/2002 – Present
				Executive Vice President, CFO, and Director of CMS Enterprises		8/2002 – Present
John M. Butler		50		Senior Vice President of CMS Enterprises		9/2006 – Present
				Senior Vice President of CMS Energy		7/2006 – Present
				Senior Vice President of Consumers		7/2006 – Present
David G. Mengebier		57		Senior Vice President and Chief Compliance Officer
				of CMS Energy		11/2006 – Present
				Senior Vice President and Chief Compliance Officer of Consumers		11/2006 – Present
				Senior Vice President of CMS Enterprises		3/2003 – Present
Catherine M. Reynolds		57		Senior Vice President, General Counsel, and Director
				of CMS Enterprises		1/2014 – Present
				Senior Vice President and General Counsel of CMS Energy		10/2013 – Present
				Senior Vice President and General Counsel of Consumers		10/2013 – Present
				Vice President, Deputy General Counsel, and Corporate Secretary
				of CMS Energy		1/2012 – 10/2013
				Vice President, Deputy General Counsel, and Corporate Secretary
				of Consumers		1/2012 – 10/2013
				Vice President and Corporate Secretary of CMS Energy		9/2006 – 1/2012
				Vice President and Corporate Secretary of Consumers		9/2006 – 1/2012
				Vice President and Secretary of CMS Enterprises		9/2006 – 1/2014
Glenn P. Barba		49		Vice President, Controller, and CAO of CMS Enterprises		11/2007 – Present
				Vice President, Controller, and CAO of CMS Energy		2/2003 – Present
				Vice President, Controller, and CAO of Consumers		1/2003 – Present

 

There are no family relationships among executive officers and directors of CMS Energy.  The term of office of each of the executive officers extends to the first meeting of the Board of Directors of CMS Energy after the next annual election of Directors of CMS Energy (scheduled to be held on May 1, 2015).

 

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CONSUMERS EXECUTIVE OFFICERS (AS OF FEBRUARY 1, 2015)

Name		Age		Position		Period
John G. Russell		57		President, CEO, and Director of CMS Energy		5/2010 – Present
				President, CEO, and Director of Consumers		5/2010 – Present
				Chairman of the Board, President, CEO, and Director
				of CMS Enterprises		5/2010 – Present
				President and Chief Operating Officer of Consumers		10/2004 – 5/2010
Thomas J. Webb		62		Executive Vice President and CFO of CMS Energy		8/2002 – Present
				Executive Vice President and CFO of Consumers		8/2002 – Present
				Executive Vice President, CFO, and Director of CMS Enterprises		8/2002 – Present
John M. Butler		50		Senior Vice President of CMS Enterprises		9/2006 – Present
				Senior Vice President of CMS Energy		7/2006 – Present
				Senior Vice President of Consumers		7/2006 – Present
David G. Mengebier		57		Senior Vice President and Chief Compliance Officer
				of CMS Energy		11/2006 – Present
				Senior Vice President and Chief Compliance Officer of Consumers		11/2006 – Present
				Senior Vice President of CMS Enterprises		3/2003 – Present
Jackson L. Hanson		58		Senior Vice President of Consumers		5/2010 – Present
				Vice President of Consumers		11/2006 – 5/2010
Daniel J. Malone		54		Senior Vice President of Consumers		5/2010 – Present
				Vice President of Consumers		6/2008 – 5/2010
Catherine M. Reynolds		57		Senior Vice President, General Counsel, and Director
				of CMS Enterprises		1/2014 – Present
				Senior Vice President and General Counsel of CMS Energy		10/2013 – Present
				Senior Vice President and General Counsel of Consumers		10/2013 – Present
				Vice President, Deputy General Counsel, and Corporate Secretary
				of CMS Energy		1/2012 – 10/2013
				Vice President, Deputy General Counsel, and Corporate Secretary
				of Consumers		1/2012 – 10/2013
				Vice President and Corporate Secretary of CMS Energy		9/2006 – 1/2012
				Vice President and Corporate Secretary of Consumers		9/2006 – 1/2012
				Vice President and Secretary of CMS Enterprises		9/2006 – 1/2014
Glenn P. Barba		49		Vice President, Controller, and CAO of CMS Enterprises		11/2007 – Present
				Vice President, Controller, and CAO of CMS Energy		2/2003 – Present
				Vice President, Controller, and CAO of Consumers		1/2003 – Present
Patricia K. Poppe1		46		Vice President of Consumers		1/2011 – Present
Ronn J. Rasmussen		58		Vice President of Consumers		11/2006 – Present

 

1    Prior to joining Consumers, Ms. Poppe was the director of regulated marketing for energy optimization at DTE Energy Company, a non-affiliated diversified energy company.  She also worked as a director of DTE Energy Company’s North Region Power Plants.

 

There are no family relationships among executive officers and directors of Consumers.  The term of office of each of the executive officers extends to the first meeting of the Board of Directors of Consumers after the next annual election of Directors of Consumers (scheduled to be held on May 1, 2015).

 

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