CONSUMERS ENERGY CO - Quarter Report: 2015 September (Form 10-Q)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2015
	OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from_____to_____

Commission	Registrant; State of Incorporation;	IRS Employer
File Number	Address; and Telephone Number	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

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 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 (Do not check if a smaller reporting company)	Smaller reporting company o
Consumers Energy Company:
Large accelerated filer o	Accelerated filer o
Non-Accelerated filer x (Do not check if a smaller reporting company)	Smaller reporting company o

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock at October 13, 2015:

CMS Energy Corporation:

CMS Energy Common Stock, $0.01 par value
(including 803,551 shares owned by Consumers Energy Company)		277,879,646

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

September 30, 2015

TABLE OF CONTENTS

		Page
Glossary		3
Filing Format		8
Available Information		8
Forward-Looking Statements and Information		8

PART I. Financial Information

Item 1.	Consolidated Financial Statements (Unaudited)
	CMS Energy Corporation	34
	Consumers Energy Company	42
	Notes to the Unaudited Consolidated Financial Statements	49
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	68
Item 4.	Controls and Procedures	68

PART II. Other Information

Item 1.	Legal Proceedings	68
Item 1A.	Risk Factors	68
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	69
Item 3.	Defaults Upon Senior Securities	69
Item 4.	Mine Safety Disclosures	69
Item 5.	Other Information	69
Item 6.	Exhibits	69
Signatures		70

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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

2014 Form 10-K		Each of CMS Energy’s and Consumers’ Annual Report on Form 10-K for the year ended December 31, 2014

ABATE		Association of Businesses Advocating Tariff Equity

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

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

CCR		Coal combustion residual

CEO		Chief Executive Officer

CERCLA		Comprehensive Environmental Response, Compensation, and Liability Act of 1980

CFO		Chief Financial Officer

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

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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

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

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

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

DTIA		Distribution-Transmission Interconnection Agreement dated April 1, 2001 between METC and Consumers, as amended

EBITDA		Earnings before interest, taxes, depreciation, and amortization

EnerBank		EnerBank USA, a wholly owned subsidiary of CMS Capital

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

FMB		First mortgage bond

FTR		Financial transmission right

GAAP		U.S. Generally Accepted Accounting Principles

GCR		Gas cost recovery

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Health Care Acts		Comprehensive health care reform enacted in March 2010, comprising the Patient Protection and Affordable Care Act and the related Health Care and Education Reconciliation Act

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

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

MD&A		Management’s Discussion and Analysis of Financial Condition and Results of Operations

MDEQ		Michigan Department of Environmental Quality

METC		Michigan Electric Transmission Company, LLC, a non-affiliated company

MGP		Manufactured gas plant

Michigan Mercury Rule		Michigan Air Pollution Control Rules, Part 15, Emission Limitations and Prohibitions – Mercury, addressing mercury emissions from coal-fueled electric generating units

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

MW		Megawatt, a unit of power equal to one million watts

NAAQS		National Ambient Air Quality Standards

NAV		Net asset value

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

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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

PCB		Polychlorinated biphenyl

PSCR		Power supply cost recovery

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

Resource Conservation and Recovery Act		Federal Resource Conservation and Recovery Act of 1976

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

SEC		U.S. Securities and Exchange Commission

Securitization		A financing method authorized by statute and approved by the MPSC that 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 the 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

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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

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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, 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.

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 2014 Form 10-K.

AVAILABLE INFORMATION

CMS Energy routinely posts important information on its website and considers the Investor Relations section, www.cmsenergy.com/investor-relations, a channel of distribution. This website information is not incorporated by reference 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 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, 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 changes in applicable laws, rules, regulations, principles, or practices, or in their interpretation, including those related to energy policy and ROA, gas pipeline safety, energy efficiency, the environment, regulation or deregulation, health care reforms (including the Health Care Acts), taxes, accounting matters,

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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;

· 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;

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· 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;

· 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 public documents.

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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. Consolidated Financial Statements (Unaudited) – Notes to the Unaudited Consolidated Financial Statements – Note 2, Regulatory Matters and Note 3, Contingencies and Commitments; Part I – Item 2. MD&A – Outlook; and Part II – Item 1A. Risk Factors.

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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, and CMS Enterprises, primarily a domestic independent power producer. Consumers’ electric utility operations include the generation, purchase, distribution, transmission, 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, owns and operates power generation facilities.

CMS Energy and Consumers manage their businesses by the nature of services each provides. CMS Energy operates principally in three business segments: electric utility; gas utility; and enterprises, its non-utility operations and investments. Consumers operates principally in two business segments: electric utility and gas utility.

CMS Energy and Consumers earn revenue and generate cash from operations by providing electric and natural gas utility services; electric distribution, transmission, and generation; gas transmission, storage, and distribution; and other energy-related services. Their businesses are affected primarily by:

· regulation and regulatory matters;

· economic conditions;

· weather;

· energy commodity prices;

· interest rates; and

· CMS Energy’s and Consumers’ securities’ credit ratings.

CMS Energy’s and Consumers’ business strategy emphasizes the key elements depicted below:

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Accountability is part of CMS Energy’s and Consumers’ corporate culture. CMS Energy and Consumers are committed to making the right choices to serve their customers safely and affordably and to acting responsibly as corporate citizens. CMS Energy and Consumers hold themselves accountable to the highest standards of safety, operational performance, and ethical behavior, and work diligently to comply with all laws, rules, and regulations that govern the electric and gas industry. Consumers’ 2015 Accountability Report, which is available to the public, provides an overview of Consumers’ efforts to continue meeting Michigan’s energy needs safely and efficiently, and highlights Consumers’ commitment to Michigan businesses, its corporate citizenship, and its role in reducing the state’s air emissions.

SAFE, EXCELLENT OPERATIONS

The safety of employees, customers, and the general public remains 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. From 2006 through 2014, Consumers achieved a 70 percent reduction in the annual number of recordable safety incidents.

CUSTOMER VALUE

Consumers is undertaking a number of initiatives that reflect its intensified customer focus. Consumers’ planned investments in reliability are aimed at improving safety, reducing customer outage frequency, reducing repetitive outages, and increasing customer satisfaction. Also, in order to minimize increases in customer base rates, Consumers has undertaken several additional initiatives to reduce costs through accelerated pension funding, employee and retiree health care cost sharing, negotiated labor agreements, information and control system efficiencies, and productivity improvements.

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UTILITY INVESTMENT

Consumers expects to make capital investments of about $15.5 billion from 2015 through 2024. This amount includes $7.8 billion through 2019, as presented in the following illustration:

		Electric base ($2.8 billion)
		Gas base ($1.7 billion)
		Gas reliability enhancements ($1.0 billion)
		Environmental ($0.8 billion)
		Electric reliability enhancements ($0.7 billion)
		Smart Energy ($0.5 billion)
		New gas-fueled generation ($0.2 billion)
		Decommissioning ($0.1 billion)

While Consumers has substantially more opportunities for capital investments that add customer value, Consumers has limited its capital investment program to those investments it believes are needed to provide safe, reliable, and efficient service to its customers. Consumers’ capital investment program is expected to result in annual rate base growth of five to seven percent while allowing Consumers to maintain sustainable customer base rate increases (excluding PSCR and GCR charges) at or below the rate of inflation.

Among the key components of Consumers’ investment program are projects that will enhance customer value. Consumers’ planned base capital investments of $4.5 billion represent projects to maintain Consumers’ system and comprise $2.8 billion at the electric utility to preserve reliability and capacity and $1.7 billion at the gas utility to sustain deliverability and enhance pipeline integrity. An additional $1.7 billion of planned reliability investments at Consumers are aimed at reducing outages and improving customer satisfaction; these investments comprise $0.7 billion at the electric utility to strengthen circuits and substations, replace poles, and upgrade Ludington and $1.0 billion at the gas utility to replace mains and enhance transmission and storage systems. Consumers also expects to spend $0.8 billion on environmental investments needed to comply with state and federal laws and regulations.

Consumers’ Smart Energy program also represents a major capital investment. The full-scale deployment of advanced metering infrastructure began in 2012 and is planned to continue through 2017. Consumers has spent $0.3 billion through 2014 on its Smart Energy program and expects to spend an additional $0.5 billion, following a phased approach, from 2015 through 2017.

Consumers also expects to spend $0.2 billion on new natural gas-fueled electric generation. The majority of this amount relates to an agreement that Consumers signed in 2013 to purchase a 540-MW natural gas-fueled electric generating plant located in Jackson, Michigan for $155 million. As provided for in the

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agreement, the purchase is subject to MPSC and other approvals. Consumers expects to close the purchase in late 2015 or early 2016.

REGULATION

Regulatory matters are a key aspect of CMS Energy’s and Consumers’ businesses, particularly Consumers’ rate cases and regulatory proceedings before the MPSC. In July 2015, Michigan Governor Rick Snyder appointed Norm Saari to serve on the three-member MPSC for a six-year term beginning in August 2015, replacing retiring Commissioner Greg White. Other important regulatory events and developments are summarized below.

· Electric Rate Case: Consumers filed a general electric rate case with the MPSC in December 2014, seeking an annual rate increase of $163 million, based on a 10.7 percent authorized return on equity. The filing also seeks approval of an investment recovery mechanism that would allow recovery of an additional $163 million in total for incremental investments that Consumers plans to make in 2016 and 2017 and $78 million for incremental investments planned in 2018, subject to reconciliation. In June 2015, Consumers self-implemented an annual rate increase of $110 million, subject to refund with interest.

· Gas Rate Case: In July 2015, Consumers filed an application with the MPSC seeking an annual rate increase of $85 million, based on a 10.7 percent authorized return on equity. The largest component of the request is an annual revenue requirement of $64 million related to new investments that will allow Consumers to strengthen infrastructure and improve system capacity and deliverability.

The filing also seeks approval of two rate adjustment mechanisms: one that would reconcile annually Consumers’ actual weather-adjusted nonfuel revenues with the revenues approved by the MPSC, and another that would allow recovery of an additional $147 million associated with investments to be made from January 2017 through December 2019, subject to reconciliation. These future investments would help to ensure adequate system capacity and deliverability.

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. At September 30, 2015, Consumers’ electric deliveries under the ROA program were at the ten-percent limit. Earlier this year, members of the Michigan Senate and House of Representatives introduced various bills related to ROA. These bills propose a range of changes to ROA, including eliminating ROA, maintaining the existing ROA program but imposing conditions on a customer’s return to utility service, and raising the ROA limit. Consumers is unable to predict the form and timing of any final legislation or whether other bills might be introduced in 2015. An increase to the ROA limit could negatively affect Consumers’ financial results and operations.

In March 2015, Michigan’s governor outlined several key goals for the state’s energy policy, with a focus on increasing the use of clean energy sources, reducing Michigan’s reliance on coal, deploying smart meters, investing in the power grid and pipeline system, eliminating energy waste, and ensuring affordable, reliable, and adaptable energy while protecting the environment. The governor also created the Michigan Agency for Energy, a single entity dedicated to providing all of state government the information and context needed to support Michigan’s energy priorities.

Environmental regulation is another area of importance for CMS Energy and Consumers, and they are monitoring numerous legislative and regulatory initiatives, including initiatives to regulate greenhouse gases, and related litigation. CMS Energy and Consumers believe that environmental laws and regulations related to their operations will continue to become more stringent and require them to make

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additional substantial capital expenditures for emissions control equipment, CCR disposal and storage, cooling water intake equipment, effluent treatment, and PCB remediation. Present and reasonably anticipated state and federal environmental statutes and regulations, including but not limited to the Clean Air Act, including the Clean Power Plan, as well as the Clean Water Act, the Resource Conservation and Recovery Act, and CERCLA, will continue to have a material effect on CMS Energy and Consumers.

FINANCIAL PERFORMANCE

For the nine months ended September 30, 2015, CMS Energy’s net income available to common stockholders was $417 million and diluted EPS were $1.51. This compares with net income available to common stockholders of $381 million and diluted EPS of $1.39 for the nine months ended September 30, 2014. Among the factors contributing to CMS Energy’s improved performance in 2015 were electric and gas rate increases, which were offset partially by higher depreciation and property taxes on new capital investments.

Consumers’ 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, while peak demand for natural gas occurs in the winter due to colder temperatures and the resulting use of natural gas as heating fuel. 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. 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.

Michigan is placed in the first quartile of states based on its strong economic growth since 2010. Consumers expects that the continued rise in industrial production will drive its electric deliveries to increase annually by about one-half to one percent on average through 2019. Excluding the impacts of energy efficiency programs, Consumers expects its electric deliveries to increase by about 1.5 to 2 percent annually through 2019. Consumers is projecting that its gas deliveries will remain stable through 2019. This outlook reflects growth in gas demand offset by energy efficiency and conservation.

As Consumers seeks to continue to receive fair and timely regulatory treatment, delivering customer value will remain a key strategic priority. In order to minimize increases in customer base rates, Consumers has set goals to achieve further annual productivity improvements. Additionally, Consumers will strive to give priority to capital investments that increase customer value or lower costs.

Consumers expects to continue to have sufficient borrowing capacity to fund its investment-based growth plans. CMS Energy also expects its sources of liquidity to remain sufficient to meet its cash requirements. To identify potential implications for CMS Energy’s and Consumers’ businesses and future financial needs, the companies will continue to monitor developments in the financial and credit markets, as well as government policy responses to those developments.

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RESULTS OF OPERATIONS

CMS ENERGY CONSOLIDATED RESULTS OF OPERATIONS

	In Millions, Except Per Share Amounts
	Three Months Ended						Nine Months Ended
September 30	2015		2014		Change		2015		2014		Change
Net Income Available to Common Stockholders	$	148	$	94	$	54	$	417	$	381	$	36
Basic Earnings Per Share	$	0.53	$	0.34	$	0.19	$	1.51	$	1.41	$	0.10
Diluted Earnings Per Share	$	0.53	$	0.34	$	0.19	$	1.51	$	1.39	$	0.12

	In Millions
	Three Months Ended								Nine Months Ended
September 30	2015			2014			Change		2015			2014			Change
Electric utility	$	166		$	128		$	38	$	342		$	326		$	16
Gas utility		(7	)		(9	)		2		115			121			(6	)
Enterprises		3			(7	)		10		10			(3	)		13
Corporate interest and other		(14	)		(18	)		4		(50	)		(63	)		13
Net Income Available to Common Stockholders	$	148		$	94		$	54	$	417		$	381		$	36

Presented in the following table are specific after-tax changes to net income available to common stockholders:

															In Millions
	September 30, 2015 better/(worse) than 2014
Reasons for the change	Three Months Ended								Nine Months Ended
Consumers electric utility and gas utility
Electric sales
Weather	$	20							$	7
Non-weather	1			$	21				2			$	9
Gas sales
Weather	(2		)						(17		)
Non-weather	(2		)	(4		)			5			(12		)
Electric rate increase				16								29
Gas rate increase				4								20
Operating and maintenance costs				10								15
Depreciation and property taxes				(7		)						(44		)
Employee benefit costs				(5		)						(19		)
Other				5			$	40				12			$	10
Enterprises
Absence of increase in Bay Harbor environmental liability							9								9
Subsidiary earnings							1								4
Corporate interest and other
Absence of early extinguishment of debt							-								8
EnerBank earnings							2								5
Other							2								-
Total change							$	54							$	36

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CONSUMERS ELECTRIC UTILITY RESULTS OF OPERATIONS

												In Millions
	Three Months Ended							Nine Months Ended
September 30	2015		2014		Change			2015		2014		Change
Net Income Available to Common Stockholders	$	166	$	128	$	38		$	342	$	326	$	16
Reasons for the change
Electric deliveries and rate increases					$	73						$	67
Power supply costs and related revenue					-							1
Other income, net of expenses					-							8
Maintenance and other operating expenses					3							-
Depreciation and amortization					(19		)					(47		)
General taxes					(2		)					(6		)
Interest charges					-							(8		)
Income taxes					(17		)					1
Total change					$	38						$	16

Following is a discussion of significant changes to net income available to common stockholders.

Electric deliveries and rate increases: For the three months ended September 30, 2015, electric delivery revenues increased $73 million compared with 2014. This change reflected a $41 million increase in sales due primarily to warmer weather in 2015, $30 million from a rate increase that Consumers self-implemented in June 2015, and a $2 million increase in other revenues. Deliveries to end-use customers were 10.1 billion kWh in 2015 and 9.6 billion kWh in 2014.

For the nine months ended September 30, 2015, electric delivery revenues increased $67 million compared with 2014. This change reflected a $24 million increase in sales due primarily to warmer weather in 2015, $38 million from a rate increase that Consumers self-implemented in June 2015, and a $5 million increase in other revenues. Deliveries to end-use customers were 28.4 billion kWh in 2015 and 28.3 billion kWh in 2014.

Other income, net of expenses: For the nine months ended September 30, 2015, other income, net of expenses, increased $8 million compared with 2014. This change was due to a $6 million gain related to a donation of CMS Energy stock by Consumers and the absence in 2015 of $2 million of other costs incurred in 2014. The gain was eliminated on CMS Energy’s consolidated statements of income.

Maintenance and other operating expenses: For the three months ended September 30, 2015, maintenance and other operating expenses decreased $3 million compared with 2014. This change reflected a $6 million decrease in forestry and other operating expenses and a $3 million decrease in service restoration costs, reflecting in part the increased capitalization of utility pole units, consistent with a change in regulatory treatment. These decreases were offset partially by $6 million of higher postretirement benefits expense.

For the nine months ended September 30, 2015, maintenance and other operating expenses were unchanged compared with 2014, reflecting $19 million of higher postretirement benefits expense offset by a $15 million reduction in service restoration costs and a $4 million decrease in other operating expenses. The reduction in service restoration costs was due primarily to the increased capitalization of utility pole units, consistent with a change in regulatory treatment.

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Depreciation and amortization: For the three months ended September 30, 2015, depreciation and amortization expense increased $19 million compared with 2014, and for the nine months ended September 30, 2015, depreciation and amortization expense increased $47 million compared with 2014. These increases were due primarily to increased plant in service and higher amortization of securitized assets.

General taxes: For the nine months ended September 30, 2015, general taxes increased $6 million compared with 2014 due to increased property taxes, reflecting higher capital spending.

Interest charges: For the nine months ended September 30, 2015, interest charges increased $8 million compared with 2014 due primarily to higher average debt levels.

Income taxes: For the three months ended September 30, 2015, income taxes increased $17 million compared with 2014. Of this increase, $22 million was attributable to higher electric utility earnings, which was offset partially by a $3 million benefit associated with Cross Winds® Energy Park production tax credits and $2 million in other tax-related items.

For the nine months ended September 30, 2015, income taxes decreased $1 million compared with 2014. This decrease reflected a $6 million benefit associated with Cross Winds® Energy Park production tax credits, offset partially by $5 million attributable to higher electric utility earnings.

CONSUMERS GAS UTILITY RESULTS OF OPERATIONS

														In Millions
	Three Months Ended									Nine Months Ended
September 30	2015			2014			Change			2015		2014		Change
Net Income (Loss) Available to Common Stockholders	$	(7	)	$	(9	)	$	2		$	115	$	121	$	(6	)
Reasons for the change
Gas deliveries and rate increases							$	2						$	23
Other income, net of expenses							-							4
Maintenance and other operating expenses							4							(11		)
Depreciation and amortization							(1		)					(15		)
General taxes							(1		)					(5		)
Interest charges							(1		)					(4		)
Income taxes							(1		)					2
Total change							$	2						$	(6	)

Following is a discussion of significant changes to net income available to common stockholders.

Gas deliveries and rate increases: For the three months ended September 30, 2015, gas delivery revenues increased $2 million compared with 2014. This change reflected $7 million from a January 2015 rate increase, offset partially by a $5 million decrease in sales. Deliveries to end-use customers were 27 bcf in 2015 and 29 bcf in 2014.

For the nine months ended September 30, 2015, gas delivery revenues increased $23 million compared with 2014. This change reflected $32 million from a January 2015 rate increase and a $2 million increase in other revenues. These increases were offset partially by an $11 million decrease in sales, due primarily to colder winter weather in 2014. Deliveries to end-use customers were 223 bcf in 2015 and 234 bcf in 2014.

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Other income, net of expenses: For the nine months ended September 30, 2015, other income, net of expenses, increased $4 million compared with 2014 due primarily to a gain related to a donation of CMS Energy stock by Consumers. The gain was eliminated on CMS Energy’s consolidated statements of income.

Maintenance and other operating expenses: For the three months ended September 30, 2015, maintenance and other operating expenses decreased $4 million compared with 2014. This change was due primarily to a $4 million reduction in uncollectible accounts expense and a $4 million decrease in other operating and maintenance expenses. These decreases were offset partially by a $4 million increase in postretirement benefits expense.

For the nine months ended September 30, 2015, maintenance and other operating expenses increased $11 million compared with 2014. This change was due to a $12 million increase in postretirement benefits expense and a $4 million increase in other operating and maintenance expenses, offset partially by a $5 million reduction in uncollectible accounts expense.

Depreciation and amortization: For the nine months ended September 30, 2015, depreciation and amortization expense increased $15 million compared with 2014 due primarily to increased plant in service.

General taxes: For the nine months ended September 30, 2015, general taxes increased $5 million compared with 2014 due to increased property taxes, reflecting higher capital spending.

Interest charges: For the nine months ended September 30, 2015, interest charges increased $4 million compared with 2014 due primarily to higher average debt levels.

Income taxes: For the nine months ended September 30, 2015, income taxes decreased $2 million compared with 2014 attributable primarily to lower gas utility earnings.

ENTERPRISES RESULTS OF OPERATIONS

													In Millions
	Three Months Ended							Nine Months Ended
September 30	2015		2014			Change		2015		2014			Change
Net Income (Loss) Available to Common Stockholders	$	3	$	(7	)	$	10	$	10	$	(3	)	$	13

For the three months ended September 30, 2015, net income of the enterprises segment increased $10 million compared with 2014, due primarily to the absence in 2015 of a $9 million after-tax increase in the environmental remediation liability associated with Bay Harbor.

For the nine months ended September 30, 2015, net income of the enterprises segment increased $13 million compared with 2014, due to the absence in 2015 of a $9 million after-tax increase in the environmental remediation liability associated with Bay Harbor, and a $4 million benefit resulting primarily from lower fuel costs, offset partially by higher costs associated with planned major maintenance.

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CORPORATE INTEREST AND OTHER RESULTS OF OPERATIONS

															In Millions
	Three Months Ended								Nine Months Ended
September 30	2015			2014			Change		2015			2014			Change
Net Income (Loss) Available to Common Stockholders	$	(14	)	$	(18	)	$	4	$	(50	)	$	(63	)	$	13

For the three months ended September 30, 2015, corporate interest and other net expenses decreased $4 million compared with 2014, due to $2 million of lower fixed charges on lower average debt levels in 2015 and $2 million of higher earnings at EnerBank.

For the nine months ended September 30, 2015, corporate interest and other net expenses decreased $13 million compared with 2014, due to the absence in 2015 of an $8 million loss on the early extinguishment of debt and $5 million of higher earnings at EnerBank.

CASH POSITION, INVESTING, AND FINANCING

At September 30, 2015, CMS Energy had $202 million of consolidated cash and cash equivalents, which included $52 million of restricted cash and cash equivalents. At September 30, 2015, Consumers had $95 million of consolidated cash and cash equivalents, which included $52 million of restricted cash and cash equivalents.

OPERATING ACTIVITIES

Presented in the following table are specific components of net cash provided by operating activities for the nine months ended September 30, 2015 and 2014:

							In Millions
Nine Months Ended September 30	2015			2014			Change
CMS Energy, including Consumers
Net income	$	418		$	382		$	36
Non-cash transactions1	898			762			136
	1,316			1,144			172
Changes in core working capital2	239			(64		)	303
Postretirement benefits contributions	(35		)	(5		)	(30		)
Changes in other assets and liabilities, net	(100		)	(113		)	13
Net cash provided by operating activities	$	1,420		$	962		$	458
Consumers
Net income	$	459		$	449		$	10
Non-cash transactions1	709			634			75
	1,168			1,083			85
Changes in core working capital2	244			(49		)	293
Postretirement benefits contributions	(33		)	(3		)	(30		)
Changes in other assets and liabilities, net	48			(83		)	131
Net cash provided by operating activities	$	1,427		$	948		$	479

1 Non-cash transactions comprise depreciation and amortization, changes in deferred income taxes, postretirement benefits expense, and other non-cash items.

2 Core working capital comprises accounts and notes receivable and accrued revenues (including accrued power supply and gas revenues), inventories, accounts payable, and accrued rate refunds.

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For the nine months ended September 30, 2015, net cash provided by operating activities at CMS Energy increased $458 million compared with 2014 and net cash provided by operating activities at Consumers increased $479 million compared with 2014. These changes were due primarily to gas purchases at lower prices, the absence of large increases in GCR and PSCR underrecoveries that were a result of severe winter weather in 2014, and higher net income, net of non-cash transactions. Lower income tax payments to CMS Energy also contributed to the improvement in 2015 at Consumers.

INVESTING ACTIVITIES

Presented in the following table are specific components of net cash used in investing activities for the nine months ended September 30, 2015 and 2014:

							In Millions
Nine Months Ended September 30	2015			2014			Change
CMS Energy, including Consumers
Capital expenditures	$	(1,102	)	$	(1,125	)	$	23
Increase in EnerBank notes receivable	(186		)	(164		)	(22		)
DB SERP fund contributions	(25		)	-			(25		)
Proceeds from the sale of EnerBank notes receivable	48			-			48
Costs to retire property and other	(75		)	(58		)	(17		)
Net cash used in investing activities	$	(1,340	)	$	(1,347	)	$	7
Consumers
Capital expenditures	$	(1,093	)	$	(1,123	)	$	30
DB SERP fund contributions	(17		)	-			(17		)
Costs to retire property and other	(76		)	(59		)	(17		)
Net cash used in investing activities	$	(1,186	)	$	(1,182	)	$	(4	)

For the nine months ended September 30, 2015, net cash used in investing activities at CMS Energy decreased $7 million compared with 2014 and net cash used in investing activities at Consumers increased $4 million compared with 2014. At CMS Energy, the change was due primarily to proceeds from the sale of EnerBank notes receivable and lower capital expenditures at Consumers, offset partially by DB SERP fund contributions and continued growth in EnerBank consumer lending. The change at Consumers was due primarily to DB SERP fund contributions and an increase in restricted cash related to surcharges collected to cover Securitization bonds that Consumers issued in 2014, offset partially by lower capital expenditures.

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FINANCING ACTIVITIES

Presented in the following table are specific components of net cash provided by (used in) financing activities for the nine months ended September 30, 2015 and 2014:

							In Millions
Nine Months Ended September 30	2015			2014			Change
CMS Energy, including Consumers
Payment of dividends on common and preferred stock	$	(241	)	$	(220	)	$	(21	)
Retirement of debt	(148		)	(488		)	340
Net increase in EnerBank certificates of deposit	135			147			(12		)
Issuance of debt	100			1,428			(1,328		)
Increase (decrease) in notes payable	8			(170		)	178
Other financing activities	9			9			-
Net cash provided by (used in) financing activities	$	(137	)	$	706		$	(843	)
Consumers
Payment of dividends on common and preferred stock	$	(360	)	$	(376	)	$	16
Retirement of debt	(48		)	(208		)	160
Stockholder contribution from CMS Energy, net	150			317			(167		)
Increase (decrease) in notes payable	8			(170		)	178
Issuance of debt	-			878			(878		)
Other financing activities	(19		)	(25		)	6
Net cash provided by (used in) financing activities	$	(269	)	$	416		$	(685	)

For the nine months ended September 30, 2015, net cash used in financing activities at CMS Energy increased $843 million compared with 2014 and net cash used in financing activities at Consumers increased $685 million compared with 2014. These changes were due primarily to a decrease in debt issuances, offset partially by a decrease in debt retirements and by lower repayments under Consumers’ commercial paper and accounts receivable sales programs. Lower stockholder contributions from CMS Energy also contributed to the increase in net cash used in financing activities in 2015 at Consumers.

CAPITAL RESOURCES AND LIQUIDITY

CMS Energy uses dividends 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 nine months ended September 30, 2015, Consumers paid $359 million in dividends on its common stock to CMS Energy.

In April 2015, CMS Energy renewed its continuous equity offering program. Under this program, CMS Energy may sell, from time to time in “at the market” offerings, common stock having an aggregate sales price of up to $100 million. CMS Energy issued common stock under the program and received net proceeds of $30 million through September 30, 2015. With these transactions, CMS Energy has completed its planned stock issuances under the program for 2015.

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, contribute to its employee benefit plans, and fund its other obligations. As a result of accelerated pension

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funding in recent years and several initiatives to reduce costs, Consumers anticipates continued strong cash flows from operating activities for the remainder of 2015.

Access to the financial and capital markets depends on CMS Energy’s and Consumers’ credit ratings and on market conditions. As evidenced by past financing transactions, CMS Energy and Consumers have had ready access to these markets. Barring major market dislocations or disruptions, CMS Energy and Consumers expect to continue to have ready access to the financial and capital markets. 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. Presented in the following table are CMS Energy’s and Consumers’ secured revolving credit facilities available at September 30, 2015:

					In Millions
	Amount of	Amount	Letters of Credit	Amount
	Facility	Borrowed	Outstanding	Available	Expiration Date
CMS Energy parent
Revolving credit facility1	$ 550	$ -	$ 3	$ 547	May 2020
Consumers
Revolving credit facility2	$ 650	$ -	$ 9	$ 641	May 2020
Revolving credit facility2	30	-	30	-	May 2018

1 Obligations under this facility are secured by Consumers common stock.

2 Obligations under this facility are secured by FMBs of Consumers.

CMS Energy and Consumers use these credit facilities for general working capital purposes and to issue letters of credit. Additional sources of liquidity are Consumers’ revolving accounts receivable sales program and its commercial paper program. Consumers’ revolving accounts receivable sales program allows it to transfer up to $250 million of eligible accounts receivable as a secured borrowing. At September 30, 2015, $250 million of accounts receivable were eligible and available for transfer under this program. Consumers’ commercial paper program allows Consumers to issue, in one or more placements, commercial paper notes with maturities of up to 365 days and that bear interest at fixed or floating rates. These issuances are supported by Consumers’ $650 million revolving credit facility and may have an aggregate principal amount outstanding of up to $500 million. While the amount of outstanding commercial paper does not reduce the revolving credit facility’s available capacity, Consumers would not issue commercial paper in an amount exceeding the available facility capacity. At September 30, 2015, $68 million of commercial paper notes were outstanding under this program.

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 September 30, 2015, 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 September 30, 2015, as presented in the following table:

	September 30, 2015
Description	Limit		Actual
CMS Energy parent1
Debt to EBITDA2	<	6.0 to 1.0	4.1 to 1.0
Consumers
Debt to Capital3	<	0.65 to 1.0	0.47 to 1.0

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1 In June 2015, CMS Energy replaced its $180 million term loan agreement with a new term loan agreement. Under the new agreement, CMS Energy is no longer required to calculate an interest coverage ratio.

2 Applies to CMS Energy’s $550 million revolving and $180 million term loan credit agreements.

3 Applies to Consumers’ $650 million and $30 million revolving credit agreements, $35 million and $68 million reimbursement agreements, and $250 million revolving accounts receivable sales agreement.

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 2015 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. Indemnities are usually agreements to reimburse a counterparty that may incur losses due to outside claims or breach of contract terms. The maximum payment that could be required under a number of these indemnity obligations is not estimable; the maximum obligation under indemnities for which such amounts were estimable was $143 million at September 30, 2015. While CMS Energy and Consumers believe it is unlikely that they will incur any material losses related to indemnities they have not recorded as liabilities, they cannot predict the impact of these contingent obligations on their liquidity and financial condition. For additional details on these and other guarantee arrangements, see Note 3, Contingencies and Commitments – Guarantees.

OUTLOOK

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 AND GAS UTILITY BUSINESS OUTLOOK AND UNCERTAINTIES

Energy Optimization Plan: The 2008 Energy Law requires Consumers to achieve cumulative reductions of 5.6 percent in customers’ electricity use and 3.9 percent in customers’ natural gas use by December 31, 2015. Under its energy optimization 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. At September 30, 2015, Consumers had achieved cumulative reductions of 6.5 percent in customers’ electricity use and 4.6 percent in customers’ natural gas use; the savings results will be certified at the end of the plan year by a third party.

Smart Energy: In 2012, Consumers began installing smart meters for electric residential and small business customers in western Michigan. Smart meters allow customers to monitor and manage their energy usage, which Consumers expects will help reduce demand during critical peak times, resulting in lower peak electric capacity requirements. In addition, Consumers is able to disconnect and reconnect service, read, and bill from smart meters remotely. Consumers will continue to add further functionality to its smart meters.

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As of September 30, 2015, Consumers had upgraded 686,000 electric customers in Michigan to smart meters. Consumers expects that it will have installed a total of 1.8 million smart meters throughout its service territory by the end of 2017. Of the customers scheduled for the upgrade, 0.5 percent have chosen not to participate in the smart meter program. Also as of September 30, 2015, Consumers had installed 2,800 communication modules on gas meters in areas where Consumers provides both electricity and natural gas to customers. Consumers expects that it will have installed a total of 600,000 communication modules on gas meters throughout its service territory by the end of 2017.

CONSUMERS ELECTRIC UTILITY BUSINESS OUTLOOK AND UNCERTAINTIES

Clean Energy Plan: Consumers continues to experience increasing demand for electricity due to Michigan’s recovering economy and increased use of air conditioning, consumer electronics, and other electric devices, offset partially by the predicted effects of energy efficiency and conservation. In order to address future capacity requirements and growing electric demand in Michigan, Consumers has a comprehensive clean energy plan designed to meet the short-term and long-term electricity needs of its customers through:

· energy efficiency;

· demand management;

· expanded use of renewable energy;

· construction or purchase of electric generating units;

· continued operation or upgrade of existing units; and

· purchases of short-term market capacity.

In 2013, Consumers signed an agreement to purchase a 540-MW natural gas-fueled electric generating plant located in Jackson, Michigan for $155 million from AlphaGen Power LLC and DPC Juniper, LLC, affiliates of JPMorgan Chase & Co. As provided for in the agreement, the purchase is subject to FERC, MPSC, and other approvals. Consumers received approval from FERC for the purchase in September 2014. Consumers expects to close the purchase in late 2015 or early 2016.

In January 2014, as a result of this planned purchase, Consumers announced plans to defer the development of its proposed 700-MW natural gas-fueled electric generating plant at its Thetford complex in Genesee County, Michigan, which Consumers estimated would have cost $700 million. The MDEQ granted an extension of the project’s air permit in January 2015. The permit will be void if Consumers does not start construction or obtain a further extension before July 2016.

Despite the planned retirement of seven smaller coal-fueled electric generating units in 2016, with the purchase of the natural gas-fueled electric generating plant, upgrades at Ludington, energy efficiency programs, and demand management programs, Consumers expects its existing resources to be adequate to meet the capacity requirements of its full-service customers for 2016 through 2020. As demand forecasts become more certain, Consumers may take additional actions to cover any remaining capacity requirements, including participation in the annual MISO planning resource auction.

Renewable Energy Plan: Consumers’ renewable energy plan details how Consumers expects to meet REC and capacity standards prescribed by the 2008 Energy Law. This law requires Consumers to submit RECs, which represent proof that the associated electricity was generated from a renewable energy resource in an amount equal to at least ten percent of Consumers’ electric sales volume (estimated to be 3.3 million RECs annually) in 2015 and each year thereafter. 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.

The 2008 Energy Law also requires Consumers to obtain 500 MW of new capacity from renewable energy resources by the end of 2015, either through generation resources owned by Consumers or through

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agreements to purchase capacity from other parties. Consumers met its renewable capacity requirement in December 2014, one year earlier than required, through construction of its Lake Winds® and Cross Winds® Energy Parks, with a combined nameplate capacity of 212 MW, and through agreements to purchase 298 MW of nameplate capacity from renewable energy suppliers. Additionally, in September 2015, Consumers signed a 15-year agreement to purchase renewable capacity, energy, and RECs from a 100-MW wind park to be constructed in Huron County, Michigan. The wind park is expected to be operational in late 2016.

Cross Winds® Energy Park qualifies for certain federal production tax credits that should reduce significantly the cost of complying with the renewable requirements of the 2008 Energy Law. Consumers expects to receive $100 million to $120 million of federal production tax credits, which will be realized over the first ten years of the wind project’s operation. These cost savings will be passed on to customers.

Electric Customer Deliveries and Revenue: Consumers’ electric customer deliveries are largely dependent on Michigan’s economy. Consumers expects weather-adjusted electric deliveries to be flat in 2015 compared with 2014.

Over the next five years, Consumers plans conservatively for average electric delivery growth of about one-half to one percent annually. This increase reflects growth in electric demand, offset partially by the predicted effects of energy efficiency programs and appliance efficiency standards. Actual delivery levels will depend on:

· energy conservation measures and results of energy efficiency programs;

· weather fluctuations; and

· Michigan’s economic conditions, including utilization, expansion, or contraction of manufacturing facilities, population trends, and housing activity.

Electric ROA: 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. At September 30, 2015, electric deliveries under the ROA program were at the ten-percent limit and alternative electric suppliers were providing 752 MW of generation service to ROA customers. Of Consumers’ 1.8 million electric customers, 305 customers, or 0.02 percent, purchased electric generation service under the ROA program.

2015 Michigan Energy Legislation: In March 2015, Michigan’s governor outlined several key goals for the state’s energy policy, with a focus on increasing the use of clean energy sources, reducing Michigan’s reliance on coal, deploying smart meters, investing in the power grid and pipeline system, eliminating energy waste, and ensuring affordable, reliable, and adaptable energy while protecting the environment. The governor also created the Michigan Agency for Energy, a single entity dedicated to providing all of state government the information and context needed to support Michigan’s energy priorities.

Earlier this year, members of the Michigan Senate and House of Representatives introduced various bills related to energy policy. The bills address renewable energy, energy efficiency, and changes to the regulatory process, such as eliminating the self-implementation of utility rates, revising net metering, and establishing an energy planning process to determine the need for new energy investment. These bills also propose a range of changes to ROA, including eliminating ROA, maintaining the existing ROA program but imposing conditions on a customer’s return to utility service, and raising the ROA limit. An increase to the ROA limit could negatively affect Consumers’ financial results and operations. Consumers is unable to predict the form and timing of any final legislation or whether other bills might be introduced in 2015.

Electric Transmission: In 2012, ReliabilityFirst Corporation informed Consumers that Consumers may not have been properly registered to meet certain NERC electric reliability standards. Consumers

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assessed its registration status, taking into consideration FERC’s December 2012 order on the definition of a bulk electric system, and decided to register as a transmission owner, transmission planner, and transmission operator. Consumers received approval from the MPSC in October 2014 and from FERC in April 2015 to reclassify $34 million of net plant assets from distribution to transmission. Consumers was registered under the NERC standards as a transmission owner, planner, and operator in October 2015. Consumers is actively pursuing FERC approval to begin earning transmission revenues under MISO’s transmission tariff.

In a separate matter, METC notified Consumers that the reclassified assets need to be conveyed by Consumers to METC under the terms of the DTIA. Consumers disagrees with METC’s interpretation of the provisions of the DTIA.

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

Electric Rate Design: In June 2014, Michigan’s governor signed legislation requiring the MPSC to explore alternative cost allocation and rate design methods that would promote affordable and competitive rates for all electric customers. In conjunction with this legislation, Consumers submitted to the MPSC a proposal for a new electric rate design in October 2014. In June 2015, the MPSC issued an order on Consumers’ proposal, authorizing a reallocation of annual costs among customer classes. This new allocation will better ensure that rates reflect the cost of service for each customer class and will have the effect of making rates for energy-intensive industrial customers more competitive, while keeping residential bills below the national average. The new rate design will go into effect on or before December 1, 2015.

Depreciation Rate Case: In June 2014, Consumers filed a depreciation case related to its electric and common utility property. In this case, Consumers requested an increase in depreciation expense, and its recovery of that expense, of $28 million annually. In May 2015, the MPSC approved a settlement agreement authorizing an increase in Consumers’ depreciation expense, and its recovery of that expense, of $6 million annually based on December 31, 2013 balances. The new depreciation rates will go into effect with a final order in Consumers’ electric rate case, which Consumers expects on or before December 1, 2015.

Electric Environmental Outlook: Consumers’ operations are subject to various state and federal environmental laws and regulations. Consumers estimates that it will incur expenditures of $0.8 billion from 2015 through 2019 to continue to comply with the Clean Air Act, Clean Water 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: In 2011, the EPA released CSAPR, a final replacement rule for CAIR, which requires Michigan and 27 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 2012, the U.S. Court of Appeals for the D.C. Circuit voided CSAPR and held that CAIR would remain in place until the EPA promulgated a new rule. This matter was appealed to the U.S. Supreme Court, which upheld and remanded the decision back to the D.C. Circuit for additional action in April 2014. The D.C. Circuit has reinstated CSAPR, effective January 2015, delaying the original CSAPR deadlines by three years. Several states and industry groups continued to challenge CSAPR in the D.C. Circuit. In July 2015, the D.C. Circuit denied the broader challenges and remanded CSAPR back to the EPA to address specific issues on some emission allocations. Consumers’ allocations did not change and Consumers expects its emissions to be within the CSAPR allowance allocations.

In 2012, the EPA published emission standards for electric generating units, based on Section 112 of the Clean Air Act, calling the final rule MATS. Under MATS, all of Consumers’ existing coal-fueled electric

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generating units are required to add additional controls for hazardous air pollutants. Consumers expects to meet the extended deadline of April 2016 for five coal-fueled units and two oil/gas-fueled units it intends to continue operating and plans to retire its seven remaining coal-fueled units by the extended deadline. MATS is presently being litigated, and in June 2015 the U.S. Supreme Court reversed and remanded the case back to the U.S. Court of Appeals for the D.C. Circuit. Numerous states and industry parties have filed motions to vacate the rule in its entirety, while other parties, including the EPA, have sought to have the matter remanded back to the EPA to cure any deficiencies while keeping the rule in effect. The Supreme Court’s decision does not presently impact Consumers’ MATS compliance strategy. In addition, Consumers must still comply with the Michigan Mercury Rule and with its settlement agreement with the EPA entered into in November 2014 concerning opacity and NSR.

In October 2015, the EPA released its new rule to lower the NAAQS for ozone. The new ozone NAAQS will make it more difficult to construct or modify power plants in many areas of the country, including some parts of Michigan, if the areas are designated to be in nonattainment of the new standard. Consumers is evaluating this rule to determine what, if any, effect it will have on its electric generating units.

Presently, Consumers’ strategy to comply with air quality regulations, including CSAPR, NAAQS, and MATS, involves the installation 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 rulemakings, litigation, and congressional action. This evaluation could result in:

· changes in environmental compliance costs related to Consumers’ coal-fueled power units;

· a change in the fuel mix at coal-fueled and oil-fueled power units;

· changes in how certain units are used; and

· the retirement, mothballing, or repowering with an alternative fuel of some of Consumers’ generating units.

Greenhouse Gases: There have been numerous legislative and regulatory initiatives at the state, regional, and national levels that involve the regulation of greenhouse gases. Consumers continues to monitor and comment on these initiatives and to follow litigation involving greenhouse gases. Consumers believes Congress may eventually pass greenhouse gas legislation, but is unable to predict the form and timing of any final legislation.

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

In October 2015, the EPA published final rules pursuant to Section 111(d) of the Clean Air Act to limit carbon dioxide emissions from existing electric generating units, calling the rules the “Clean Power Plan.” The rules will require a 32 percent nationwide reduction in carbon emissions from existing power plants by 2030 (based on 2005 levels). Initial state implementation plans are due by September 2016, but extensions are available until 2018. States choosing not to develop their own implementation plans will be subject to the federal plan.

Certain states, corporations, and industry groups initiated litigation opposing the proposed Clean Power Plan. In June 2015, the U.S. Court of Appeals for the D.C. Circuit dismissed this litigation without prejudice. In July and August 2015, other challenges were filed against the EPA and the Clean Power Plan in federal district court, and those suits were also dismissed. New legal challenges were filed

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upon publication of the rules in the Federal Register in October 2015. Michigan plans to file a state carbon implementation plan while litigation proceeds.

Consumers believes that its clean energy plan, its present carbon reduction target, and its emphasis on supply diversity position it favorably to deal with the impact of carbon regulation. Consumers cannot, however, predict the outcome of these EPA rules in court, or of Michigan’s implementation plan, which may not be submitted for EPA review and approval until 2018. Consumers will continue to monitor regulatory activity regarding greenhouse gas emissions standards that may affect electric generating units.

Litigation, as well as federal laws, EPA regulations regarding greenhouse gases, or similar treaties, state laws, or rules, if enacted or ratified, could require Consumers to replace equipment, install additional emission control equipment, purchase emission allowances, curtail operations, arrange for alternative sources of supply, 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 April 2015, the EPA published a final rule regulating CCRs, such as coal ash, under the Resource Conservation and Recovery Act. 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. The rule also sets out conditions under which CCR units would be forced to cease receiving CCR and non-CCR waste and initiate closure based on the inability to achieve minimum safety standards, meet a location standard, or meet minimum groundwater standards. For additional details regarding the impact of this rule on Consumers, see Note 3, Contingencies and Commitments – Consumers Electric Utility Contingencies, “Electric Environmental Matters” and Note 8, Asset Retirement Obligations.

Water: The EPA’s rule to regulate existing electric generating plant cooling water intake systems under Section 316(b) of the Clean Water Act became effective in October 2014. The rule is aimed at reducing alleged harmful impacts on fish and shellfish. Consumers does not expect any adverse changes to its environmental strategy as a result of the final rule. In September 2015, the EPA released a pre-publication copy of its final effluent limitation guidelines, which set stringent new requirements for the discharge of arsenic, mercury, selenium, and nitrogen from electric generating units into wastewater streams. Consumers is evaluating this rule and its potential impact on Consumers’ electric generating units.

In June 2015, the EPA and the U.S. Army Corps of Engineers published a final rule redefining “waters of the United States,” which designates the EPA’s jurisdiction under the Clean Water Act. Numerous states and other interested parties, including Michigan’s Attorney General, have filed suits in federal courts to block the rule, which was stayed in October 2015, and that litigation remains pending. Consumers does not expect any adverse changes to its environmental strategy as a result of the final rule.

Many of Consumers’ facilities maintain NPDES permits, which are valid for five years and vital to the facilities’ operations. Failure of the MDEQ to renew any NPDES permit, a successful appeal against a permit, or onerous terms contained in a permit could have a significant detrimental effect on the operations of a facility.

PCBs: In 2010, the EPA issued an Advance Notice of Proposed Rulemaking, indicating that it is considering a variety of regulatory actions with respect to PCBs. One approach would aim to phase out equipment containing PCBs by 2025. Another approach would eliminate an exemption for small equipment containing PCBs. To comply with any such regulatory actions, Consumers could incur

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substantial costs associated with existing electrical equipment potentially containing PCBs. A proposed rule is expected in 2016.

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.”

CONSUMERS GAS UTILITY BUSINESS OUTLOOK AND UNCERTAINTIES

Gas Deliveries: Consumers expects weather-adjusted gas deliveries in 2015 to increase by 1 to 1.5 percent compared with 2014. Over the next five years, Consumers plans conservatively for stable deliveries. 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 due to:

· weather fluctuations;

· use by power producers;

· availability and development of renewable energy sources;

· gas price changes;

· Michigan economic conditions, including population trends and housing activity;

· the price of competing energy sources or fuels; and

· energy efficiency and conservation impacts.

Gas Rate Case: In July 2015, Consumers filed an application with the MPSC seeking an annual rate increase of $85 million, based on a 10.7 percent authorized return on equity. The largest component of the request is an annual revenue requirement of $64 million related to new investments that will allow Consumers to strengthen infrastructure and improve system capacity and deliverability.

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.”

ENTERPRISES OUTLOOK AND UNCERTAINTIES

The primary focus with respect to CMS Energy’s non-utility businesses is to optimize cash flow and maximize the value of their assets.

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

· indemnity and environmental remediation obligations at Bay Harbor;

· obligations related to a tax claim from the government of Equatorial Guinea;

· the outcome of certain legal proceedings;

· impacts of declines in electricity prices on the profitability of the enterprises segment’s generating units;

· representations, warranties, and indemnities provided by CMS Energy in connection with previous sales of assets;

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· changes in commodity prices and interest rates on certain derivative contracts that do not qualify for hedge accounting and must be marked to market through earnings;

· changes in various environmental laws, regulations, principles, or practices, or in their interpretation; and

· economic conditions in Michigan, including population trends and housing activity.

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

OTHER OUTLOOK AND UNCERTAINTIES

EnerBank: EnerBank is a Utah state-chartered, FDIC-insured industrial bank providing unsecured consumer installment loans for financing home improvements. EnerBank represented three percent of CMS Energy’s net assets at September 30, 2015 and five percent of CMS Energy’s net income available to common stockholders for the nine months ended September 30, 2015. The carrying value of EnerBank’s loan portfolio was $1.1 billion at September 30, 2015. Its loan portfolio was funded primarily by certificates of deposit of $1.0 billion. The twelve-month rolling average default rate on loans held by EnerBank has remained stable at 0.6 percent at September 30, 2015. 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 September 30, 2015.

Union Contracts: The UWUA ratified new five-year agreements with Consumers for operating, maintenance, and construction employees in May 2015 and for call center employees in July 2015. The USW ratified a new five-year agreement with Consumers for Zeeland employees in September 2015.

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.

NEW ACCOUNTING STANDARDS

For details regarding new accounting standards issued but not yet effective, see Note 1, New Accounting Standards.

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CMS Energy Corporation

Consolidated Statements of Income

(Unaudited)

In Millions, Except Per Share Amounts
	Three Months Ended						Nine Months Ended
September 30	2015			2014			2015			2014

Operating Revenue	$	1,486		$	1,430		$	4,947		$	5,421

Operating Expenses
Fuel for electric generation	161			161			462			534
Purchased and interchange power	392			387			1,082			1,244
Purchased power – related parties	21			21			61			67
Cost of gas sold	52			86			754			1,107
Maintenance and other operating expenses	311			329			906			899
Depreciation and amortization	173			153			564			503
General taxes	59			57			200			188
Total operating expenses	1,169			1,194			4,029			4,542

Operating Income	317			236			918			879

Other Income (Expense)
Interest income	1			1			3			2
Allowance for equity funds used during construction	3			2			7			6
Income from equity method investees	4			4			9			11
Other income	2			2			8			8
Other expense	(3		)	(3		)	(11		)	(26		)
Total other income	7			6			16			1

Interest Charges
Interest on long-term debt	95			98			288			294
Other interest expense	7			4			20			12
Allowance for borrowed funds used during construction	(1		)	(1		)	(3		)	(3		)
Total interest charges	101			101			305			303

Income Before Income Taxes	223			141			629			577
Income Tax Expense	75			47			211			195

Net Income	148			94			418			382
Income Attributable to Noncontrolling Interests	-			-			1			1

Net Income Available to Common Stockholders	$	148		$	94		$	417		$	381

Basic Earnings Per Average Common Share	$	0.53		$	0.34		$	1.51		$	1.41
Diluted Earnings Per Average Common Share	$	0.53		$	0.34		$	1.51		$	1.39

Dividends Declared Per Common Share	$	0.29		$	0.27		$	0.87		$	0.81

The accompanying notes are an integral part of these statements.

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CMS Energy Corporation

Consolidated Statements of Comprehensive Income

(Unaudited)

										In Millions
	Three Months Ended						Nine Months Ended
September 30	2015			2014			2015			2014

Net Income	$	148		$	94		$	418		$	382

Retirement Benefits Liability
Amortization of net actuarial loss, net of tax of $1, $-, $3, and $1	2			1			4			2
Amortization of prior service credit, net of tax of $- for all periods	(1		)	(1		)	(1		)	(1		)

Investments
Unrealized loss on investments, net of tax of $1, $-, $1, and $-	(2		)	-			(3		)	-

Derivative Instruments
Reclassification adjustments included in net income, net of tax of $- for all periods	-			-			-			1

Other Comprehensive Income (Loss)	(1		)	-			-			2

Comprehensive Income	147			94			418			384

Comprehensive Income Attributable to Noncontrolling Interests	-			-			1			1

Comprehensive Income Attributable to CMS Energy	$	147		$	94		$	417		$	383

The accompanying notes are an integral part of these statements.

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CMS Energy Corporation

Consolidated Statements of Cash Flows

(Unaudited)

				In Millions
Nine Months Ended September 30	2015			2014

Cash Flows from Operating Activities
Net income	$	418		$	382
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	564			503
Deferred income taxes and investment tax credit	210			178
Postretirement benefits expense	68			17
Other non-cash operating activities	56			64
Postretirement benefits contributions	(35		)	(5		)
Cash provided by (used in) changes in assets and liabilities	-			-
Accounts receivable, notes receivable, and accrued revenue	219			111
Inventories	54			(161		)
Accounts payable and accrued refunds	(34		)	(14		)
Other current and non-current assets and liabilities	(100		)	(113		)
Net cash provided by operating activities	1,420			962

Cash Flows from Investing Activities
Capital expenditures (excludes assets placed under capital lease)	(1,102		)	(1,125		)
Cost to retire property	(60		)	(62		)
Increase in EnerBank notes receivable	(186		)	(164		)
Proceeds from the sale of EnerBank notes receivable	48			-
Other investing activities	(40		)	4
Net cash used in investing activities	(1,340		)	(1,347		)

Cash Flows from Financing Activities
Proceeds from issuance of debt	100			1,428
Net increase in EnerBank certificates of deposit	135			147
Issuance of common stock	40			40
Retirement of long-term debt	(148		)	(488		)
Payment of dividends on common and preferred stock	(241		)	(220		)
Increase (decrease) in notes payable	8			(170		)
Payment of capital lease obligations and other financing costs	(31		)	(31		)
Net cash provided by (used in) financing activities	(137		)	706

Net Increase (Decrease) in Cash and Cash Equivalents	(57		)	321

Cash and Cash Equivalents, Beginning of Period	207			172

Cash and Cash Equivalents, End of Period	$	150		$	493

Other non-cash investing and financing activities
Non-cash transactions
Capital expenditures not paid	$	147		$	168

The accompanying notes are an integral part of these statements.

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CMS Energy Corporation

Consolidated Balance Sheets

(Unaudited)

ASSETS
			In Millions
	September 30		December 31
	2015		2014

Current Assets
Cash and cash equivalents	$	150	$	207
Restricted cash and cash equivalents	52		37
Accounts receivable and accrued revenue, less allowances of $33 in 2015 and $40 in 2014	640		881
Notes receivable, less allowances of $9 in 2015 and $8 in 2014	119		98
Notes receivable held for sale	17		41
Accounts receivable – related parties	12		11
Accrued power supply and gas revenue	10		27
Inventories at average cost
Gas in underground storage	652		681
Materials and supplies	119		117
Generating plant fuel stock	92		120
Deferred income taxes	12		-
Deferred property taxes	141		216
Regulatory assets	20		89
Prepayments and other current assets	87		72
Total current assets	2,123		2,597

Plant, Property, and Equipment
Plant, property, and equipment, gross	18,547		17,721
Less accumulated depreciation and amortization	5,697		5,415
Plant, property, and equipment, net	12,850		12,306
Construction work in progress	1,310		1,106
Total plant, property, and equipment	14,160		13,412

Other Non-current Assets
Regulatory assets	1,870		1,956
Accounts and notes receivable	950		807
Investments	61		61
Other	288		352
Total other non-current assets	3,169		3,176

Total Assets	$	19,452	$	19,185

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LIABILITIES AND EQUITY
				In Millions
	September 30			December 31
	2015			2014

Current Liabilities
Current portion of long-term debt, capital leases, and financing obligation	$	741		$	540
Notes payable	68			60
Accounts payable	586			678
Accounts payable – related parties	8			10
Accrued rate refunds	20			6
Accrued interest	64			108
Accrued taxes	90			316
Deferred income taxes	-			66
Regulatory liabilities	81			67
Other current liabilities	130			163
Total current liabilities	1,788			2,014

Non-current Liabilities
Long-term debt	7,903			8,016
Non-current portion of capital leases and financing obligation	111			123
Regulatory liabilities	2,110			2,095
Postretirement benefits	847			872
Asset retirement obligations	419			340
Deferred investment tax credit	56			37
Deferred income taxes	1,980			1,682
Other non-current liabilities	299			299
Total non-current liabilities	13,725			13,464

Commitments and Contingencies (Notes 2 and 3)

Equity
Common stockholders’ equity
Common stock, authorized 350.0 shares; outstanding 277.1 shares in 2015 and 275.2 shares in 2014	3			3
Other paid-in capital	4,829			4,774
Accumulated other comprehensive loss	(49		)	(49		)
Accumulated deficit	(881		)	(1,058		)
Total common stockholders’ equity	3,902			3,670
Noncontrolling interests	37			37
Total equity	3,939			3,707

Total Liabilities and Equity	$	19,452		$	19,185

The accompanying notes are an integral part of these statements.

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CMS Energy Corporation

Consolidated Statements of Changes in Equity

(Unaudited)

										In Millions
	Three Months Ended						Nine Months Ended
September 30	2015			2014			2015			2014

Total Equity at Beginning of Period	$	3,855		$	3,682		$	3,707		$	3,491

Common Stock
At beginning and end of period	3			3			3			3

Other Paid-in Capital
At beginning of period	4,812			4,761			4,774			4,715
Common stock issued	17			7			56			52
Common stock repurchased	-			(1		)	(11		)	(7		)
Common stock reissued	-			-			10			-
Conversion option on convertible debt	-			-			-			7
At end of period	4,829			4,767			4,829			4,767

Accumulated Other Comprehensive Loss
At beginning of period	(48		)	(20		)	(49		)	(22		)
Retirement benefits liability
At beginning of period	(46		)	(20		)	(48		)	(21		)
Amortization of net actuarial loss	2			1			4			2
Amortization of prior service credit	(1		)	(1		)	(1		)	(1		)
At end of period	(45		)	(20		)	(45		)	(20		)
Investments
At beginning of period	(2		)	-			(1		)	-
Unrealized loss on investments	(2		)	-			(3		)	-
At end of period	(4		)	-			(4		)	-
Derivative instruments
At beginning of period	-			-			-			(1		)
Reclassification adjustments included in net income	-			-			-			1
At end of period	-			-			-			-
At end of period	(49		)	(20		)	(49		)	(20		)

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										In Millions
	Three Months Ended						Nine Months Ended
September 30	2015			2014			2015			2014

Accumulated Deficit
At beginning of period	(949		)	(1,099		)	(1,058		)	(1,242		)
Net income attributable to CMS Energy	148			94			417			381
Dividends declared on common stock	(80		)	(75		)	(240		)	(219		)
At end of period	(881		)	(1,080		)	(881		)	(1,080		)

Noncontrolling Interests
At beginning of period	37			37			37			37
Income attributable to noncontrolling interests	-			-			1			1
Distributions and other changes in noncontrolling interests	-			-			(1		)	(1		)
At end of period	37			37			37			37

Total Equity at End of Period	$	3,939		$	3,707		$	3,939		$	3,707

The accompanying notes are an integral part of these statements.

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Consumers Energy Company

Consolidated Statements of Income

(Unaudited)

										In Millions
	Three Months Ended						Nine Months Ended
September 30	2015			2014			2015			2014

Operating Revenue	$	1,417		$	1,359		$	4,726		$	5,128

Operating Expenses
Fuel for electric generation	138			137			381			455
Purchased and interchange power	389			382			1,072			1,214
Purchased power – related parties	21			21			61			67
Cost of gas sold	46			71			737			1,006
Maintenance and other operating expenses	289			296			845			834
Depreciation and amortization	172			152			560			498
General taxes	57			55			194			183
Total operating expenses	1,112			1,114			3,850			4,257

Operating Income	305			245			876			871

Other Income (Expense)
Interest income	1			1			3			2
Interest and dividend income – related parties	-			1			-			1
Allowance for equity funds used during construction	3			2			7			6
Other income	2			2			17			8
Other expense	(3		)	(3		)	(11		)	(13		)
Total other income	3			3			16			4

Interest Charges
Interest on long-term debt	62			62			188			180
Other interest expense	4			3			11			8
Allowance for borrowed funds used during construction	(1		)	(1		)	(3		)	(3		)
Total interest charges	65			64			196			185

Income Before Income Taxes	243			184			696			690
Income Tax Expense	83			65			237			241

Net Income	160			119			459			449
Preferred Stock Dividends	-			-			1			1

Net Income Available to Common Stockholder	$	160		$	119		$	458		$	448

The accompanying notes are an integral part of these statements.

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Consumers Energy Company

Consolidated Statements of Comprehensive Income

(Unaudited)

									In Millions
	Three Months Ended					Nine Months Ended
September 30	2015		2014			2015			2014

Net Income	$	160	$	119		$	459		$	449

Retirement Benefits Liability
Amortization of net actuarial loss, net of tax of $-, $-, $1, and $-	1		1			3			2

Investments
Unrealized gain (loss) on investments, net of tax of $-, $(1), $(1), and $1	-		(1		)	(2		)	2
Reclassification adjustments included in net income, net of tax of $-, $-, $(3), and $-	-		-			(5		)	-

Other Comprehensive Income (Loss)	1		-			(4		)	4

Comprehensive Income	$	161	$	119		$	455		$	453

The accompanying notes are an integral part of these statements.

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Consumers Energy Company

Consolidated Statements of Cash Flows

(Unaudited)

				In Millions
Nine Months Ended September 30	2015			2014

Cash Flows from Operating Activities
Net income	$	459		$	449
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	560			498
Deferred income taxes and investment tax credit	33			64
Postretirement benefits expense	68			18
Other non-cash operating activities	48			54
Postretirement benefits contributions	(33		)	(3		)
Cash provided by (used in) changes in assets and liabilities
Accounts receivable, notes receivable, and accrued revenue	221			120
Inventories	53			(163		)
Accounts payable and accrued refunds	(30		)	(6		)
Other current and non-current assets and liabilities	48			(83		)
Net cash provided by operating activities	1,427			948

Cash Flows from Investing Activities
Capital expenditures (excludes assets placed under capital lease)	(1,093		)	(1,123		)
Cost to retire property	(60		)	(62		)
Other investing activities	(33		)	3
Net cash used in investing activities	(1,186		)	(1,182		)

Cash Flows from Financing Activities
Proceeds from issuance of long-term debt	-			878
Retirement of long-term debt	(48		)	(208		)
Payment of dividends on common and preferred stock	(360		)	(376		)
Stockholder contribution	150			495
Return of stockholder contribution	-			(178		)
Increase (decrease) in notes payable	8			(170		)
Payment of capital lease obligations and other financing costs	(19		)	(25		)
Net cash provided by (used in) financing activities	(269		)	416

Net Increase (Decrease) in Cash and Cash Equivalents	(28		)	182

Cash and Cash Equivalents, Beginning of Period	71			18

Cash and Cash Equivalents, End of Period	$	43		$	200

Other non-cash investing and financing activities
Non-cash transactions
Capital expenditures not paid	$	147		$	168

The accompanying notes are an integral part of these statements.

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Consumers Energy Company

Consolidated Balance Sheets

(Unaudited)

ASSETS
			In Millions
	September 30		December 31
	2015		2014

Current Assets
Cash and cash equivalents	$	43	$	71
Restricted cash and cash equivalents	52		37
Accounts receivable and accrued revenue, less allowances of $33 in 2015 and $39 in 2014	627		863
Accounts receivable – related parties	1		1
Accrued power supply and gas revenue	10		27
Inventories at average cost
Gas in underground storage	652		681
Materials and supplies	114		113
Generating plant fuel stock	87		112
Deferred property taxes	141		216
Regulatory assets	20		89
Prepayments and other current assets	79		63
Total current assets	1,826		2,273

Plant, Property, and Equipment
Plant, property, and equipment, gross	18,400		17,580
Less accumulated depreciation and amortization	5,626		5,346
Plant, property, and equipment, net	12,774		12,234
Construction work in progress	1,305		1,103
Total plant, property, and equipment	14,079		13,337

Other Non-current Assets
Regulatory assets	1,870		1,956
Accounts and notes receivable	9		7
Investments	28		38
Other	165		236
Total other non-current assets	2,072		2,237

Total Assets	$	17,977	$	17,847

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LIABILITIES AND EQUITY
				In Millions
	September 30			December 31
	2015			2014

Current Liabilities
Current portion of long-term debt, capital leases, and financing obligation	$	283		$	145
Notes payable	68			60
Accounts payable	571			662
Accounts payable – related parties	11			12
Accrued rate refunds	20			6
Accrued interest	44			70
Accrued taxes	78			149
Deferred income taxes	59			80
Regulatory liabilities	81			67
Other current liabilities	100			135
Total current liabilities	1,315			1,386

Non-current Liabilities
Long-term debt	4,969			5,154
Non-current portion of capital leases and financing obligation	111			123
Regulatory liabilities	2,110			2,095
Postretirement benefits	770			793
Asset retirement obligations	418			339
Deferred investment tax credit	56			37
Deferred income taxes	2,467			2,406
Other non-current liabilities	239			237
Total non-current liabilities	11,140			11,184

Commitments and Contingencies (Notes 2 and 3)

Equity
Common stockholder’s equity
Common stock, authorized 125.0 shares; outstanding 84.1 shares for both periods	841			841
Other paid-in capital	3,724			3,574
Accumulated other comprehensive loss	(11		)	(7		)
Retained earnings	931			832
Total common stockholder’s equity	5,485			5,240
Preferred stock	37			37
Total equity	5,522			5,277

Total Liabilities and Equity	$	17,977		$	17,847

The accompanying notes are an integral part of these statements.

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Consumers Energy Company

Consolidated Statements of Changes in Equity

(Unaudited)

										In Millions
	Three Months Ended						Nine Months Ended
September 30	2015			2014			2015			2014

Total Equity at Beginning of Period	$	5,466		$	5,250		$	5,277		$	4,857

Common Stock
At beginning and end of period	841			841			841			841

Other Paid-in Capital
At beginning of period	3,724			3,572			3,574			3,257
Stockholder contribution	-			180			150			495
Return of stockholder contribution	-			(178		)	-			(178		)
At end of period	3,724			3,574			3,724			3,574

Accumulated Other Comprehensive Income (Loss)
At beginning of period	(12		)	2			(7		)	(2		)
Retirement benefits liability
At beginning of period	(24		)	(16		)	(26		)	(17		)
Amortization of net actuarial loss	1			1			3			2
At end of period	(23		)	(15		)	(23		)	(15		)
Investments
At beginning of period	12			18			19			15
Unrealized gain (loss) on investments	-			(1		)	(2		)	2
Reclassification adjustments included in net income	-			-			(5		)	-
At end of period	12			17			12			17
At end of period	(11		)	2			(11		)	2

Retained Earnings
At beginning of period	876			798			832			724
Net income	160			119			459			449
Dividends declared on common stock	(105		)	(120		)	(359		)	(375		)
Dividends declared on preferred stock	-			-			(1		)	(1		)
At end of period	931			797			931			797

Preferred Stock
At beginning and end of period	37			37			37			37

Total Equity at End of Period	$	5,522		$	5,251		$	5,522		$	5,251

The accompanying notes are an integral part of these statements.

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CMS Energy Corporation

Consumers Energy Company

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

These interim consolidated financial statements have been prepared by CMS Energy and Consumers in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. As a result, CMS Energy and Consumers have condensed or omitted certain information and note disclosures normally included in consolidated financial statements prepared in accordance with GAAP. CMS Energy and Consumers have reclassified certain prior period amounts to conform to the presentation in the current period. In management’s opinion, the unaudited information contained in this report reflects all adjustments of a normal recurring nature necessary to ensure the fair presentation of financial position, results of operations, and cash flows for the periods presented. The notes to the unaudited consolidated financial statements and the related unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the 2014 Form 10-K. Due to the seasonal nature of CMS Energy’s and Consumers’ operations, the results presented for this interim period are not necessarily indicative of results to be achieved for the fiscal year.

1: NEW ACCOUNTING STANDARDS

IMPLEMENTATION OF NEW ACCOUNTING STANDARDS

ASU 2015-13, Application of the Normal Purchases and Normal Sales Scope Exception to Certain Electricity Contracts within Nodal Energy Markets: This standard, which became effective in August 2015 for CMS Energy and Consumers, was intended to resolve diversity in practice regarding whether certain electricity contracts are eligible for the normal purchases and sales scope exception from derivative accounting. The standard clarifies that contracts that require transmission of electricity through a market with established price points at each node or hub location are eligible for the scope exception. Consumers applies the normal purchases and sales scope exception to many power purchase agreements that require transmission of electricity through the MISO market, which has price points at various node or hub locations. Since this standard clarifies that these contracts are eligible for the scope exception, which is consistent with Consumers’ treatment, the standard had no impact on CMS Energy’s or Consumers’ consolidated financial statements.

NEW ACCOUNTING STANDARDS NOT YET EFFECTIVE

ASU 2014-09, Revenue from Contracts with Customers: This standard, which will become effective January 1, 2018 for CMS Energy and Consumers, provides new guidance for recognizing revenue from contracts with customers. A primary objective of the standard is to provide a single, comprehensive revenue recognition model that will be applied across entities, industries, and capital markets. The new guidance will replace most of the existing revenue recognition requirements in GAAP, although certain guidance specific to rate-regulated utilities will be retained. Entities will have the option to apply the standard retrospectively to all prior periods presented, or to apply it retrospectively only to contracts existing at the effective date, with the cumulative effect of the standard recorded as an adjustment to beginning retained earnings. CMS Energy and Consumers are evaluating the impact of the standard on their consolidated financial statements.

ASU 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period: This standard, which will become effective January 1, 2016 for CMS Energy and Consumers, addresses stock awards with performance targets that can be met after an employee has completed the required service period. The standard was intended to resolve diversity in practice regarding the accounting treatment for this type of

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award. Under the new guidance, the probability of the performance target being met should be factored into compensation expense each period. This guidance is consistent with the accounting that CMS Energy and Consumers already apply to awards of this type. Therefore, CMS Energy and Consumers do not expect the standard to impact their consolidated financial statements.

ASU 2015-02, Amendments to the Consolidation Analysis: This standard, which will become effective January 1, 2016 for CMS Energy and Consumers, provides amended guidance on whether reporting entities should consolidate certain legal entities, including limited partnerships. CMS Energy and Consumers have assessed this standard and do not expect that it will result in any changes to their consolidation conclusions or have any impact on their consolidated income, cash flows, or financial position.

ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs: This standard, which will become effective January 1, 2016 for CMS Energy and Consumers, requires that debt issuance costs be presented as a direct deduction from the carrying amount of long-term debt on the balance sheet. Presently, debt issuance costs are reported as an asset. The new guidance aligns the presentation of debt issuance costs with debt discounts and premiums. The standard is to be applied retrospectively to all prior periods presented. At September 30, 2015, CMS Energy had $42 million of unamortized debt issuance costs, which included $22 million at Consumers. These amounts are recorded in other non-current assets on the consolidated balance sheets.

2: REGULATORY MATTERS

Regulatory matters are critical to Consumers. The Michigan Attorney General, ABATE, the MPSC Staff, and certain other parties typically participate in MPSC proceedings concerning Consumers, such as Consumers’ rate cases and PSCR and GCR processes. These parties often challenge various aspects of those proceedings, including the prudence of Consumers’ policies and practices, and seek cost disallowances and other relief. The parties also have appealed significant MPSC orders. Depending upon the specific issues, the outcomes of rate cases and proceedings, including judicial proceedings challenging MPSC orders or other actions, could negatively affect CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. Consumers cannot predict the outcome of these proceedings.

There are multiple appeals pending that involve various issues concerning cost allocation among customers, the allocation of refunds among customer groups, the adequacy of the record evidence supporting the recovery of Smart Energy investments, and other matters. Consumers is unable to predict the outcome of these appeals.

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Electric Rate Case: In December 2014, Consumers filed an application with the MPSC seeking an annual rate increase of $163 million, based on a 10.7 percent authorized return on equity. The filing requested authority to recover new investment in system reliability, environmental compliance, and technology enhancements. Presented in the following table are the components of the requested increase in revenue:

	In Millions
Components of the rate increase
Investment in rate base	$	185
Addition of natural gas-fueled electric generating plant		35
Operating and maintenance costs		26
Cost of capital		21
Working capital		6
Cost-reduction initiatives		(80	)
Gross margin		(30	)
Total	$	163

The filing also seeks approval of an investment recovery mechanism that would allow recovery of an additional $163 million in total for incremental investments that Consumers plans to make in 2016 and 2017 and $78 million for incremental investments planned in 2018, subject to reconciliation. These incremental investments would help to ensure continued system reliability, environmental compliance, and technology enhancements.

In June 2015, Consumers self-implemented an annual rate increase of $110 million, subject to refund with interest. Consumers expects a final order on or before December 1, 2015.

Gas Rate Case: In July 2014, Consumers filed an application with the MPSC seeking an annual rate increase of $88 million. The filing requested authority to recover new investments that will allow Consumers to improve system reliability, comply with regulations, and enhance technology.

In January 2015, the MPSC approved a settlement agreement authorizing a $45 million annual rate increase, based on a 10.3 percent authorized return on equity. This was Consumers’ first gas base rate increase since 2012.

Energy Optimization Plan Incentive: In September 2015, the MPSC approved a settlement agreement authorizing Consumers to collect $17 million during 2016 as an incentive for exceeding statutory targets under both its electric and gas optimization plans during 2014. Consumers recognized revenue under this program of $17 million in 2014.

3: CONTINGENCIES AND COMMITMENTS

CMS Energy and Consumers are involved in various matters that give rise to contingent liabilities. Depending on the specific issues, the resolution of these contingencies could negatively affect CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. In their disclosures of these matters, CMS Energy and Consumers provide an estimate of the possible loss or range of loss when such an estimate can be made. Disclosures that state that CMS Energy or Consumers cannot predict the outcome of a matter indicate that they are unable to estimate a possible loss or range of loss for the matter.

CMS ENERGY CONTINGENCIES

Gas Index Price Reporting Litigation: CMS Energy, along with CMS MST, CMS Field Services, Cantera Natural Gas, Inc., and Cantera Gas Company, have been named as defendants in five class action

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lawsuits arising as a result of alleged inaccurate natural gas price reporting to publications that report trade information. Allegations include manipulation of NYMEX natural gas futures and options prices, price-fixing conspiracies, restraint of trade, and artificial inflation of natural gas retail prices in Kansas, Missouri, and Wisconsin. Plaintiffs are making claims for the following: full consideration damages, treble damages, exemplary damages, costs, interest, and/or attorney fees.

After removal to federal court, all of the cases were transferred to a single federal district court pursuant to the multidistrict litigation process. In 2010 and 2011, all claims against CMS Energy defendants were dismissed by the district court based on FERC preemption. Plaintiffs filed appeals in all of the cases. The issues on appeal were whether the district court erred in dismissing the cases based on FERC preemption and denying the plaintiffs’ motions for leave to amend their complaints to add a federal Sherman Act antitrust claim. The plaintiffs did not appeal the dismissal of CMS Energy as a defendant in these cases, but other CMS Energy entities remain as defendants.

In 2013, the U.S. Court of Appeals for the Ninth Circuit reversed the district court decision and remanded the case to the district court judge for further proceedings. The appellate court found that FERC preemption does not apply under the facts of these cases. The appellate court affirmed the district court’s denial of leave to amend to add federal antitrust claims. The matter was appealed to the U.S. Supreme Court, which in April 2015 upheld the Ninth Circuit’s decision. The cases have been remanded back to the federal district court.

These cases involve complex facts, a large number of similarly situated defendants with different factual positions, and multiple jurisdictions. Presently, any estimate of liability would be highly speculative; the amount of CMS Energy’s possible loss would be based on widely varying models previously untested in this context. If the outcome after appeals is unfavorable, these cases could negatively affect CMS Energy’s liquidity, financial condition, and results of operations.

Bay Harbor: CMS Land retained environmental remediation obligations for the collection and treatment of leachate, a liquid consisting of water and other substances, at Bay Harbor after selling its interests in the development in 2002. Leachate is produced when water enters into cement kiln dust piles left over from former cement plant operations at the site. In 2012, CMS Land and the MDEQ finalized an agreement that established the final remedies and the future water quality criteria at the site. CMS Land has completed all construction necessary to implement the remedies required by the agreement and will continue to maintain and operate a system to discharge treated leachate into Little Traverse Bay under an NPDES permit issued in 2010. CMS Land is presently working with the MDEQ to renew this permit, which requires renewal every five years.

Various claims have been brought against CMS Land or its affiliates, including CMS Energy, alleging environmental damage to property, loss of property value, insufficient disclosure of environmental matters, breach of agreement relating to access, or other matters. CMS Land and other parties have received a demand for payment from the EPA in the amount of $8 million, plus interest. The EPA is seeking recovery under CERCLA of response costs allegedly incurred at Bay Harbor. These costs exceed what was agreed to in a 2005 order between CMS Land and the EPA, and CMS Land has communicated to the EPA that it does not believe that this is a valid claim. In August 2014, the EPA indicated that it intends to pursue the claim.

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CMS Energy has recorded a cumulative charge related to Bay Harbor of $247 million, which includes accretion expense. At September 30, 2015, CMS Energy had a recorded liability of $59 million for its remaining obligations. CMS Energy calculated this liability based on discounted projected costs, using a discount rate of 4.34 percent and an inflation rate of one percent on annual operating and maintenance costs. The undiscounted amount of the remaining obligation is $75 million. CMS Energy expects to pay the following amounts for long-term liquid disposal and operating and maintenance costs in 2015 and in each of the next four years:

In Millions
	2015		2016		2017		2018		2019
CMS Energy
Long-term liquid disposal and operating and maintenance costs	$	7	$	6	$	5	$	5	$	5

CMS Energy’s estimate of response activity costs and the timing of expenditures could change if there are changes in circumstances or assumptions used in calculating the liability. Although a liability for its present estimate of remaining response activity costs has been recorded, CMS Energy cannot predict the ultimate financial impact or outcome of this matter.

Equatorial Guinea Tax Claim: In 2002, CMS Energy sold its oil, gas, and methanol investments in Equatorial Guinea. The government of Equatorial Guinea claims that CMS Energy owes $142 million in taxes, plus significant penalties and interest, in connection with the sale. The matter is proceeding to formal arbitration. CMS Energy has concluded that the government’s tax claim is without merit and is contesting the claim, but cannot predict the financial impact or outcome of the matter. It is possible that the outcome could negatively affect CMS Energy’s liquidity, financial condition, and results of operations.

CONSUMERS ELECTRIC UTILITY CONTINGENCIES

Electric Environmental Matters: Consumers’ operations are subject to environmental laws and regulations. Historically, Consumers has generally been able to recover, in customer rates, the costs to operate its facilities in compliance with these laws and regulations.

Cleanup and Solid Waste: Consumers expects to incur remediation and other response activity costs at a number of sites under the NREPA. Consumers believes that these costs should be recoverable in rates, but cannot guarantee that outcome. Consumers estimates that its liability for NREPA sites for which it can estimate a range of loss will be between $5 million and $6 million. At September 30, 2015, Consumers had a recorded liability of $5 million, the minimum amount in the range of its estimated probable NREPA liability.

Consumers is a potentially responsible party at a number of contaminated sites administered under CERCLA. CERCLA liability is joint and several. In 2010, Consumers received official notification from the EPA that identified Consumers as a potentially responsible party for cleanup of PCBs at the Kalamazoo River CERCLA site. The notification claimed that the EPA has reason to believe that Consumers disposed of PCBs and arranged for the disposal and treatment of PCB-containing materials at portions of the site. In 2011, Consumers received a follow-up letter from the EPA requesting that Consumers agree to participate in a removal action plan along with several other companies for an area of lower Portage Creek, which is connected to the Kalamazoo River. All parties, including Consumers, that were asked to participate in the removal action plan declined to accept liability. Until further information is received from the EPA, Consumers is unable to estimate a range of potential liability for cleanup of the river.

Based on its experience, Consumers estimates that its share of the total liability for known CERCLA sites will be between $2 million and $8 million. Various factors, including the number of potentially

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responsible parties involved with each site, affect Consumers’ share of the total liability. At September 30, 2015, Consumers had a recorded liability of $2 million for its share of the total liability at these sites, the minimum amount in the range of its estimated probable CERCLA liability.

The timing of payments related to Consumers’ remediation and other response activities at its CERCLA and NREPA sites is uncertain. Consumers periodically reviews these cost estimates. Any significant change in the underlying assumptions, such as an increase in the number of sites, different remediation techniques, the nature and extent of contamination, and legal and regulatory requirements, could affect its estimates of NREPA and CERCLA liability.

Ludington PCB: In 1998, during routine maintenance activities, Consumers identified PCB as a component in certain paint, grout, and sealant materials at Ludington. Consumers removed part of the PCB material and replaced it with non-PCB material. Consumers has had several communications with the EPA regarding this matter. Consumers cannot predict the financial impact or outcome of this matter.

CCRs: In April 2015, the EPA published a final rule regulating CCRs, such as coal ash, under the Resource Conservation and Recovery Act. Consumers determined that this rule would require it to accelerate a minor amount of its planned capital and cost of removal expenditures at its coal-fueled units to meet compliance deadlines. These changes in timing did not impact Consumers’ previously recorded ARO liability for coal ash disposal areas.

Following the publication of the EPA rule, the MDEQ convened a workgroup of utilities and public stakeholders to evaluate the state’s approach to CCR regulation. The workgroup determined that more prescriptive state requirements should be established for certain categories of waste management facilities, such as coal ash surface impoundments. In September 2015, the MDEQ submitted a draft plan to the EPA in which it declared its intent to explicitly regulate these facilities under state laws, and the EPA responded, confirming that it agreed with the MDEQ’s regulatory approach.

The proposed changes to state regulations in the MDEQ’s draft plan clarified the EPA CCR rule closure plan requirements and provided Consumers with sufficient information to reasonably estimate an additional ARO liability. Accordingly, in September 2015, Consumers recorded a $68 million increase to its coal ash disposal ARO liability and a corresponding increase to plant, property, and equipment that will be amortized over the remaining lives of the facilities. For additional details on the ARO liability, see Note 8, Asset Retirement Obligations.

CONSUMERS GAS UTILITY CONTINGENCIES

Gas Environmental Matters: Consumers expects to incur remediation and other response activity costs at a number of sites under the NREPA. These sites include 23 former MGP facilities. Consumers operated the facilities on these sites for some part of their operating lives. For some of these sites, Consumers has no present ownership interest or may own only a portion of the original site.

At September 30, 2015, Consumers had a recorded liability of $112 million for its remaining obligations for these sites. This amount represents the present value of long-term projected costs, using a discount rate of 2.57 percent and an inflation rate of 2.5 percent. The undiscounted amount of the remaining obligation is $126 million. Consumers expects to pay the following amounts for remediation and other response activity costs in 2015 and in each of the next four years:

In Millions
	2015		2016		2017		2018		2019
Consumers
Remediation and other response activity costs	$	6	$	12	$	13	$	11	$	14

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Consumers periodically reviews these cost estimates and is presently considering changes to its remediation technique at certain sites that could lead to an increase in its cost estimates. Any significant change in the underlying assumptions, such as an increase in the number of sites, changes in remediation techniques, or legal and regulatory requirements, could affect Consumers’ estimates of annual response activity costs and the MGP liability.

Pursuant to orders issued by the MPSC, Consumers defers its MGP-related remediation costs and recovers them from its customers over a ten-year period. At September 30, 2015, Consumers had a regulatory asset of $143 million related to the MGP sites.

Consumers estimates that its liability to perform remediation and other response activities at NREPA sites other than the MGP sites could reach $3 million. At September 30, 2015, Consumers had a recorded liability of less than $1 million, the minimum amount in the range of its estimated probable liability.

GUARANTEES

Presented in the following table are CMS Energy’s and Consumers’ guarantees at September 30, 2015:

	In Millions
			Maximum			Carrying
Guarantee Description	Issue Date	Expiration Date	Obligation			Amount
CMS Energy, including Consumers
Indemnity obligations from asset sales and other agreements	Various	Various through August 2029	$	143	1	$	8
Guarantees	Various	Various through March 2021	51		2	-
Consumers
Indemnity obligations and other guarantees	Various	Various through August 2029	$	30	2	$	1

1 The majority of this amount arises from stock and asset sale agreements under which CMS Energy or a subsidiary of CMS Energy, other than Consumers, indemnified the purchaser for losses resulting from various matters, including claims related to tax disputes, claims related to power purchase agreements, and defects in title to the assets or stock sold to the purchaser by CMS Energy subsidiaries. Except for items described elsewhere in this Note, CMS Energy believes the likelihood of material loss to be remote for the indemnity obligations not recorded as liabilities.

2 In the normal course of business, CMS Energy and its subsidiaries have provided guarantees and other indemnities to counterparties to facilitate commercial transactions. If a counterparty incurs losses due to nonperformance or nonpayment under the contract terms, CMS Energy or one of its subsidiaries could be required to pay the counterparty.

CMS Energy, Consumers, and certain other subsidiaries of CMS Energy also enter into various agreements containing tax and other indemnity provisions for which they are unable to estimate the maximum potential obligation. These factors include unspecified exposure under certain agreements. CMS Energy and Consumers consider the likelihood that they would be required to perform or incur substantial losses related to these indemnities to be remote.

OTHER CONTINGENCIES

Michigan Sales and Use Tax Litigation: In 2010, the Michigan Department of Treasury finalized a sales and use tax audit of Consumers for the period from October 1, 1997 to December 31, 2004. It determined that Consumers’ electric and natural gas distribution equipment was not eligible for an industrial-processing exemption and therefore was subject to the use tax. Consumers paid the tax for the period from 1997 through 2004 and filed a claim in the Michigan Court of Claims disputing the tax

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determination. Consumers has continued to apply the industrial-processing exemption for the years subsequent to 2004.

Detroit Edison Company was also denied the tax exemption and filed a similar claim in the Michigan Court of Claims, which was subsequently appealed to the Michigan Supreme Court. In July 2015, the Michigan Supreme Court issued an opinion finding that Detroit Edison Company was eligible for a partial industrial-processing exemption on its electric distribution equipment. It remanded the case back to the Michigan Court of Claims. The results of this case could affect Consumers’ claim, which could result in a partial refund of taxes paid previously or an assessment of additional taxes and interest owed for the years subsequent to 2004. Consumers cannot estimate the amount or timing of any potential tax refunds or assessments, but considers the likelihood of a material unfavorable outcome to be remote.

Other: In addition to the matters disclosed in this Note and Note 2, Regulatory Matters, there are certain other lawsuits and administrative proceedings before various courts and governmental agencies arising in the ordinary course of business to which CMS Energy, Consumers, and certain other subsidiaries of CMS Energy are parties. These other lawsuits and proceedings may involve personal injury, property damage, contracts, environmental matters, federal and state taxes, rates, licensing, employment, and other matters. Further, CMS Energy and Consumers occasionally self-report certain regulatory non-compliance matters that may or may not eventually result in administrative proceedings. CMS Energy and Consumers believe that the outcome of any one of these proceedings will not have a material negative effect on their consolidated results of operations, financial condition, or liquidity.

4: FINANCINGS AND CAPITALIZATION

Debt Retirements: In October 2015, Consumers retired $50 million of 2.60 percent FMBs at maturity.

Revolving Credit Facilities: The following secured revolving credit facilities with banks were available at September 30, 2015:

	In Millions
					Letters of Credit
Expiration Date	Amount of Facility		Amount Borrowed		Outstanding		Amount Available
CMS Energy parent
May 27, 20201	$	550	$	-	$	3	$	547
Consumers
May 27, 20202	$	650	$	-	$	9	$	641
May 9, 20182	30		-		30		-

1 During the nine months ended September 30, 2015, CMS Energy’s average borrowings totaled $40 million with a weighted-average interest rate of 1.43 percent. Obligations under this facility are secured by Consumers common stock.

2 Obligations under this facility are secured by FMBs of Consumers.

Short-term Borrowings: Under Consumers’ revolving accounts receivable sales program, which will expire in November 2016, Consumers may transfer up to $250 million of accounts receivable, subject to certain eligibility requirements. These transactions are accounted for as short-term secured borrowings. At September 30, 2015, no accounts receivable had been transferred under the program.

In September 2014, Consumers entered into a commercial paper program. Under the program, Consumers may issue, in one or more placements, commercial paper notes with maturities of up to 365 days and that bear interest at fixed or floating rates. These issuances are supported by Consumers’ $650 million revolving credit facility and may have an aggregate principal amount outstanding of up to

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$500 million. While the amount of outstanding commercial paper does not reduce the revolver’s available capacity, Consumers would not issue commercial paper in an amount exceeding the available revolver capacity. At September 30, 2015, $68 million of commercial paper notes with a weighted-average annual interest rate of 0.52 percent were outstanding under this program.

Dividend Restrictions: At September 30, 2015, payment of dividends by CMS Energy on its common stock was limited to $3.9 billion under provisions of the Michigan Business Corporation Act of 1972.

Under the provisions of its articles of incorporation, at September 30, 2015, Consumers had $867 million of unrestricted retained earnings available to pay dividends on its common stock to CMS Energy. Provisions of the Federal Power Act and the Natural Gas Act appear to restrict dividends payable by Consumers to the amount of Consumers’ retained earnings. Several decisions from FERC suggest that under a variety of circumstances dividends from Consumers on its common stock would not be limited to amounts in Consumers’ retained earnings. Any decision by Consumers to pay dividends on its common stock in excess of retained earnings would be based on specific facts and circumstances and would be subject to a formal regulatory filing process.

For the nine months ended September 30, 2015, Consumers paid $359 million in dividends on its common stock to CMS Energy.

Issuance of Common Stock: In April 2015, CMS Energy renewed its continuous equity offering program. Under this program, CMS Energy may sell, from time to time in “at the market” offerings, common stock having an aggregate sales price of up to $100 million. Presented in the following table are the transactions that CMS Energy entered into under the program:

	Number of	Average		Proceeds
	Shares Issued	Price per Share		(In Millions)
April – May 2015	587,181	$	34.10	$	20
July 2015	301,429	33.10		10
Total	888,610	$	33.76	$	30

With these transactions, CMS Energy has completed its planned stock issuances under the program for 2015.

5: FAIR VALUE MEASUREMENTS

Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. When measuring fair value, CMS Energy and Consumers are required to incorporate all assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. A fair value hierarchy prioritizes inputs used to measure fair value according to their observability in the market. The three levels of the fair value hierarchy are as follows:

· Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

· Level 2 inputs are observable, market-based inputs, other than Level 1 prices. Level 2 inputs may include quoted prices for similar assets or liabilities in active markets, quoted prices in inactive markets, and inputs derived from or corroborated by observable market data.

· Level 3 inputs are unobservable inputs that reflect CMS Energy’s or Consumers’ own assumptions about how market participants would value their assets and liabilities.

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To the extent possible, CMS Energy and Consumers use quoted market prices or other observable market pricing data in valuing assets and liabilities measured at fair value. If this information is unavailable, they use market-corroborated data or reasonable estimates about market participant assumptions. CMS Energy and Consumers classify fair value measurements within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement in its entirety.

ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS

Presented in the following table are CMS Energy’s and Consumers’ assets and liabilities recorded at fair value on a recurring basis:

							In Millions
	CMS Energy, including Consumers				Consumers
	September 30		December 31		September 30		December 31
	2015		2014		2015		2014
Assets1
Cash equivalents	$	52	$	110	$	-	$	19
Restricted cash equivalents		52		38		52		38
CMS Energy common stock		-		-		28		38
Nonqualified deferred compensation plan assets		9		8		6		6
DB SERP
Cash equivalents		1		4		1		3
Mutual funds		147		127		105		90
Derivative instruments
Commodity contracts		3		2		2		2
Total	$	264	$	289	$	194	$	196
Liabilities1
Nonqualified deferred compensation plan liabilities	$	9	$	8	$	6	$	6
Derivative instruments
Commodity contracts		1		1		1		1
Total	$	10	$	9	$	7	$	7

1 All assets and liabilities were classified as Level 1 with the exception of some commodity contracts, which were classified as Level 2 or Level 3 and which were insignificant at September 30, 2015 and December 31, 2014.

Cash Equivalents: Cash equivalents and restricted cash equivalents consist of money market funds with daily liquidity.

Nonqualified Deferred Compensation Plan Assets and Liabilities: The nonqualified deferred compensation plan assets consist of mutual funds, which are valued using the daily quoted NAVs that are publicly available and are the basis for transactions to buy or sell shares in each fund. CMS Energy and Consumers value their nonqualified deferred compensation plan liabilities based on the fair values of the plan assets, as they reflect what is owed to the plan participants in accordance with their investment elections. CMS Energy and Consumers report the assets in other non-current assets and the liabilities in other non-current liabilities on their consolidated balance sheets.

DB SERP Assets: CMS Energy and Consumers value their DB SERP assets using a market approach that incorporates quoted market prices. The DB SERP cash equivalents consist of a money market fund with daily liquidity. The DB SERP invests in mutual funds that hold primarily fixed-income instruments of varying maturities. In order to meet their investment objectives, the funds hold investment-grade debt securities and may invest a portion of their assets in high-yield securities, foreign debt, and derivative

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instruments. CMS Energy and Consumers value these funds using the daily quoted NAVs that are publicly available and are the basis for transactions to buy or sell shares in each fund. CMS Energy and Consumers report their DB SERP assets in other non-current assets on their consolidated balance sheets. For additional details about DB SERP securities, see Note 6, Financial Instruments.

Derivative Instruments: CMS Energy and Consumers value their derivative instruments using either a market approach that incorporates information from market transactions, or an income approach that discounts future expected cash flows to a present value amount. CMS Energy values its exchange-traded derivative contracts based on Level 1 quoted prices and values other derivatives using Level 2 inputs, which include commodity forward prices and credit risk factors. CMS Energy and Consumers have classified certain derivatives as Level 3 since the fair value measurements incorporate assumptions that cannot be observed or confirmed through market transactions.

The majority of derivatives classified as Level 3 are FTRs held by Consumers. Consumers uses FTRs to manage price risk related to electricity transmission congestion. An FTR is a financial instrument that entitles its holder to receive compensation or requires its holder to remit payment for congestion-related transmission charges. Under regulatory accounting, all changes in fair value associated with FTRs are deferred as regulatory assets and liabilities until the instruments are settled. Due to the lack of quoted pricing information, Consumers determines the fair value of its FTRs based on Consumers’ average historical settlements.

ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS USING SIGNIFICANT LEVEL 3 INPUTS

Presented in the following table are reconciliations of changes in the fair values of Level 3 assets and liabilities at CMS Energy and Consumers:

In Millions
	Three Months Ended						Nine Months Ended
September 30	2015			2014			2015			2014
CMS Energy, including Consumers
Balance at beginning of period	$	3		$	1		$	1		$	4
Total gains (losses) offset through regulatory accounting	-			2			3			(16		)
Purchases	-			-			-			(1		)
Settlements	(1		)	(2		)	(2		)	14
Balance at end of period	$	2		$	1		$	2		$	1
Unrealized losses included in earnings relating to assets and liabilities still held at end of period1	$	(1	)	$	-		$	-		$	-
Consumers
Balance at beginning of period	$	3		$	1		$	1		$	4
Total gains (losses) offset through regulatory accounting	-			2			3			(16		)
Purchases	-			-			-			(1		)
Settlements	(1		)	(2		)	(2		)	14
Balance at end of period	$	2		$	1		$	2		$	1

1 CMS Energy records unrealized losses for Level 3 recurring fair value measurements in earnings as a component of maintenance and other operating expenses on its consolidated statements of income.

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6: FINANCIAL INSTRUMENTS

Presented in the following table are the carrying amounts and fair values, by level within the fair value hierarchy, of CMS Energy’s and Consumers’ financial instruments that are not recorded at fair value. The table does not include information on cash, cash equivalents, short-term accounts and notes receivable, short-term investments, and current liabilities since the carrying amounts of these items approximate their fair values because of their short-term nature. For information about assets and liabilities recorded at fair value and for additional details regarding the fair value hierarchy, see Note 5, Fair Value Measurements.

																			In Millions

	September 30, 2015										December 31, 2014
			Fair Value										Fair Value
	Carrying				Level						Carrying					Level
	Amount		Total		1		2		3		Amount		Total			1				2		3
CMS Energy, including Consumers

Securities held to maturity	$	12	$	12	$	-	$	12	$	-	$	11	$		11	$		-		$	11	$	-
Notes receivable1	1,077		1,150		-		-		1,150		938		995			-				-		995
Long-term debt2	8,623		9,229		-		8,211		1,018		8,535		9,285			-				8,252		1,033
Consumers
Long-term debt3	$	5,230	$	5,613	$	-	$	4,595	$	1,018	$	5,278	$	5,749		$	-			$	4,716	$	1,033

1 Includes current portion of notes receivable of $136 million at September 30, 2015 and $138 million at December 31, 2014.

2 Includes current portion of long-term debt of $720 million at September 30, 2015 and $519 million at December 31, 2014.

3 Includes current portion of long-term debt of $261 million at September 30, 2015 and $124 million at December 31, 2014.

Notes receivable consist of EnerBank’s fixed-rate installment loans. EnerBank estimates the fair value of these loans using a discounted cash flows technique that incorporates market interest rates as well as assumptions about the remaining life of the loans and credit risk.

CMS Energy and Consumers estimate the fair value of their long-term debt using quoted prices from market trades of the debt, if available. In the absence of quoted prices, CMS Energy and Consumers calculate market yields and prices for the debt using a matrix method that incorporates market data for similarly rated debt. Depending on the information available, other valuation techniques and models may be used that rely on assumptions that cannot be observed or confirmed through market transactions.

The effects of third-party credit enhancements are excluded from the fair value measurements of long-term debt. At September 30, 2015 and December 31, 2014, CMS Energy’s long-term debt included $103 million principal amount that was supported by third-party credit enhancements. This entire principal amount was at Consumers.

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Presented in the following table are CMS Energy’s and Consumers’ investment securities classified as available for sale or held to maturity:

													In Millions
	September 30, 2015								December 31, 2014
			Unrealized		Unrealized		Fair				Unrealized			Unrealized		Fair
	Cost		Gains		Losses		Value		Cost		Gains			Losses		Value
CMS Energy, including Consumers
Available for sale
DB SERP
Mutual funds	$	154	$	-	$	7	$	147	$	129	$	-		$	2	$	127
Held to maturity
Debt securities	12		-		-		12		11		-			-		11
Consumers
Available for sale
DB SERP
Mutual funds	$	109	$	-	$	4	$	105	$	92	$	-		$	2	$	90
CMS Energy common stock	4		24		-		28		5		33			-		38

The mutual funds classified as available for sale hold primarily fixed-income instruments of varying maturities. During the nine months ended September 30, 2015, CMS Energy contributed $25 million to the DB SERP, which included a contribution of $17 million by Consumers. Debt securities classified as held to maturity consist primarily of mortgage-backed securities and Utah Housing Corporation bonds held by EnerBank.

Consumers recognized a gain of $9 million in January 2015 associated with the transfer of shares of CMS Energy common stock to a related charitable foundation. The gain reflected the excess of fair value over cost of the stock donated and was recorded in other income on Consumers’ consolidated statements of income. The gain was eliminated on CMS Energy’s consolidated statements of income.

7: NOTES RECEIVABLE

Presented in the following table are details of CMS Energy’s current and non-current notes receivable:

			In Millions
	September 30, 2015		December 31, 2014
CMS Energy
Current
EnerBank notes receivable, net of allowance for loan losses	$	119	$	97
EnerBank notes receivable held for sale	17		41
Other	-		1
Non-current
EnerBank notes receivable, net of allowance for loan losses	941		800
Total notes receivable	$	1,077	$	939

EnerBank notes receivable are unsecured consumer installment loans for financing home improvements. EnerBank records its notes receivable at cost, less allowance for loan losses. In May 2015, EnerBank completed a sale of notes receivable, receiving proceeds of $48 million and recording an insignificant gain. At September 30, 2015, $17 million of notes receivable were classified as held for sale; the fair value of notes receivable held for sale exceeded their carrying value.

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The allowance for loan losses is a valuation allowance to reflect estimated credit losses. The allowance is increased by the provision for loan losses and decreased by loan charge-offs net of recoveries. Management estimates the allowance balance required by taking into consideration historical loan loss experience, the nature and volume of the portfolio, economic conditions, and other factors. Loan losses are charged against the allowance when the loss is confirmed, but no later than the point at which a loan becomes 120 days past due.

Loans that are 30 days or more past due are considered delinquent. The balance of EnerBank’s delinquent consumer loans was $6 million at September 30, 2015 and $5 million at December 31, 2014.

At September 30, 2015 and December 31, 2014, $1 million of EnerBank’s loans had been modified as troubled debt restructurings.

8: ASSET RETIREMENT OBLIGATIONS

In September 2015, Consumers increased its ARO liability for coal ash disposal areas. The increase was attributable to proposed changes in state regulations that provided Consumers with sufficient information to reasonably estimate an additional ARO liability associated with closure work at certain waste management facilities. For additional details, see Note 3, Contingencies and Commitments – Consumers Electric Utility Contingencies, “Electric Environmental Matters.” Presented in the following table are the changes in CMS Energy’s and Consumers’ ARO liabilities:

												In Millions
	ARO											ARO
	Liability									Cash flow		Liability
Company and ARO Description	12/31/2014		Incurred		Settled			Accretion		Revisions		9/30/2015
CMS Energy, including Consumers
Gas treating plant and gas wells	$	1	$	-	$	-		$	-	$	-	$	1
Consumers	339		-		(3		)	14		68		418
Total CMS Energy	$	340	$	-	$	(3	)	$	14	$	68	$	419
Consumers
Coal ash disposal areas	$	120	$	-	$	-		$	4	$	68	$	192
Asbestos abatement	51		-		-			2		-		53
Gas distribution cut, purge, and cap	162		-		(3		)	8		-		167
Wind parks	6		-		-			-		-		6
Total Consumers	$	339	$	-	$	(3	)	$	14	$	68	$	418

9: RETIREMENT BENEFITS

CMS Energy and Consumers provide pension, OPEB, and other retirement benefits to employees under a number of different plans.

Following amendments to the OPEB Plan in 2013, Consumers’ OPEB costs decreased substantially and, as a result, the OPEB Plan was fully funded at December 31, 2013. In September 2014, the MPSC approved a settlement agreement addressing Consumers’ OPEB Plan funding. In accordance with the settlement agreement, Consumers contributed $25 million to the plan in October 2014 and $29 million in February 2015. Consumers has suspended further contributions until the MPSC determines funding requirements in future general rate cases.

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Presented in the following table are the costs (credits) and other changes in plan assets and benefit obligations incurred in CMS Energy’s and Consumers’ retirement benefits plans:

In Millions
	DB Pension Plan												OPEB Plan
	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
September 30	2015			2014			2015			2014			2015			2014			2015			2014
CMS Energy, including Consumers
Net periodic cost (credit)
Service cost	$	13		$	10		$	37		$	30		$	7		$	5		$	19		$	15
Interest expense	26			24			77			74			14			14			43			42
Expected return on plan assets	(35		)	(33		)	(104		)	(101		)	(23		)	(22		)	(68		)	(66)
Amortization of:
Net loss	22			14			67			43			5			1			16			2
Prior service cost (credit)	-			-			1			1			(10		)	(10		)	(31		)	(31)
Net periodic cost (credit)	$	26		$	15		$	78		$	47		$	(7	)	$	(12	)	$	(21	)	$	(38)
Consumers
Net periodic cost (credit)
Service cost	$	12		$	10		$	36		$	30		$	7		$	5		$	19		$	15
Interest expense	25			24			74			72			14			13			42			40
Expected return on plan assets	(34		)	(33		)	(101		)	(99		)	(22		)	(20		)	(65		)	(62)
Amortization of:
Net loss	22			14			66			42			6			-			17			2
Prior service cost (credit)	-			-			1			1			(10		)	(10		)	(30		)	(30)
Net periodic cost (credit)	$	25		$	15		$	76		$	46		$	(5	)	$	(12	)	$	(17	)	$	(35)

10: INCOME TAXES

Presented in the following table is a reconciliation of the statutory U.S. federal income tax rate to the effective income tax rate from continuing operations, excluding noncontrolling interests:

Nine Months Ended September 30	2015		2014
CMS Energy, including Consumers
U.S. federal income tax rate	35.0	%	35.0	%
Increase (decrease) in income taxes from:
State and local income taxes, net of federal effect	4.8		4.9
Accelerated flow-through of regulatory tax benefits	(4.9	)	(5.3	)
Other, net	(1.3	)	(0.7	)
Effective tax rate	33.6	%	33.9	%
Consumers
U.S. federal income tax rate	35.0	%	35.0	%
Increase (decrease) in income taxes from:
State and local income taxes, net of federal effect	4.8		4.9
Accelerated flow-through of regulatory tax benefits	(4.2	)	(4.3	)
Other, net	(1.5	)	(0.7	)
Effective tax rate	34.1	%	34.9	%

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Prior to 2014, Consumers recognized the income tax benefits associated with the removal costs of plant placed in service before 1993 as payments were made and the tax benefits were flowed through to customers. In 2013, the MPSC issued an order authorizing Consumers to flow through to customers the income tax benefits on a straight-line basis over an accelerated period. This regulatory treatment, which Consumers implemented in January 2014, will accelerate the return of $209 million of income tax benefits over five years to electric customers and $260 million of income tax benefits over 12 years to gas customers. This treatment reduced Consumers’ income tax expense by $29 million for the nine months ended September 30, 2015 and by $30 million for the nine months ended September 30, 2014.

11: EARNINGS PER SHARE – CMS ENERGY

Presented in the following table are CMS Energy’s basic and diluted EPS computations based on income from continuing operations:

	In Millions, Except Per Share Amounts
	Three Months Ended				Nine Months Ended
September 30	2015		2014		2015		2014
Income available to common stockholders
Income from continuing operations	$	148	$	94	$	418	$	382
Less income attributable to noncontrolling interests	-		-		1		1
Income from continuing operations available to common stockholders – basic and diluted	$	148	$	94	$	417	$	381
Average common shares outstanding
Weighted-average shares – basic	276.0		274.0		275.4		269.4
Add dilutive contingently convertible securities	-		-		-		4.1
Add dilutive non-vested stock awards	0.9		0.7		0.9		0.7
Weighted-average shares – diluted	276.9		274.7		276.3		274.2
Income from continuing operations per average common share available to common stockholders
Basic	$	0.53	$	0.34	$	1.51	$	1.41
Diluted	0.53		0.34		1.51		1.39

CONTINGENTLY CONVERTIBLE SECURITIES

In June 2014, CMS Energy redeemed its remaining contingently convertible securities. For the periods those securities were outstanding, they diluted EPS to the extent that the conversion value of the securities, which was based on the average market price of CMS Energy common stock, exceeded their principal value.

NON-VESTED STOCK AWARDS

CMS Energy’s non-vested stock awards are composed of participating and non-participating securities. The participating securities accrue cash dividends when common stockholders receive dividends. Since the recipient is not required to return the dividends to CMS Energy if the recipient forfeits the award, the non-vested stock awards are considered participating securities. As such, the participating non-vested stock awards were included in the computation of basic EPS. The non-participating securities accrue stock dividends that vest concurrently with the stock award. If the recipient forfeits the award, the stock dividends accrued on the non-participating securities are also forfeited. Accordingly, the non-participating awards and stock dividends were included in the computation of diluted EPS, but not basic EPS.

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12: REPORTABLE SEGMENTS

Reportable segments consist of business units defined by the products and services they offer. CMS Energy and Consumers evaluate the performance of each segment based on its contribution to net income available to CMS Energy’s common stockholders.

CMS ENERGY

The reportable segments for CMS Energy are:

· electric utility, consisting of regulated activities associated with the generation, transmission, and distribution of electricity in Michigan;

· gas utility, consisting of regulated activities associated with the transportation, storage, and distribution of natural gas in Michigan; and

· enterprises, consisting of various subsidiaries engaging primarily in domestic independent power production.

CMS Energy presents EnerBank and corporate interest and other expenses within other reconciling items.

CONSUMERS

The reportable segments for Consumers are:

· electric utility, consisting of regulated activities associated with the generation, transmission, and distribution of electricity in Michigan; and

· gas utility, consisting of regulated activities associated with the transportation, storage, and distribution of natural gas in Michigan.

Consumers’ other consolidated entities are presented within other reconciling items.

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Presented in the following tables is financial information by reportable segment:

							In Millions
	Three Months Ended						Nine Months Ended
September 30	2015			2014			2015			2014
CMS Energy, including Consumers
Operating revenue
Electric utility	$	1,233		$	1,153		$	3,273		$	3,428
Gas utility	184			206			1,453			1,699
Enterprises	43			51			148			235
Other reconciling items	26			20			73			59
Total operating revenue – CMS Energy	$	1,486		$	1,430		$	4,947		$	5,421
Consumers
Operating revenue
Electric utility	$	1,233		$	1,153		$	3,273		$	3,428
Gas utility	184			206			1,453			1,699
Other reconciling items	-			-			-			1
Total operating revenue – Consumers	$	1,417		$	1,359		$	4,726		$	5,128
CMS Energy, including Consumers
Net income (loss) available to common stockholders
Electric utility	$	166		$	128		$	342		$	326
Gas utility	(7		)	(9		)	115			121
Enterprises	3			(7		)	10			(3		)
Other reconciling items	(14		)	(18		)	(50		)	(63		)
Total net income available to common stockholders – CMS Energy	$	148		$	94		$	417		$	381
Consumers
Net income available to common stockholder
Electric utility	$	166		$	128		$	342		$	326
Gas utility	(7		)	(9		)	115			121
Other reconciling items	1			-			1			1
Total net income available to common stockholder – Consumers	$	160		$	119		$	458		$	448

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		In Millions
	September 30, 2015	December 31, 2014
CMS Energy, including Consumers
Plant, property, and equipment, gross
Electric utility1	$ 12,803	$ 12,230
Gas utility1	5,582	5,335
Enterprises	121	115
Other reconciling items	41	41
Total plant, property, and equipment, gross – CMS Energy	$ 18,547	$ 17,721
Consumers
Plant, property, and equipment, gross
Electric utility1	$ 12,803	$ 12,230
Gas utility1	5,582	5,335
Other reconciling items	15	15
Total plant, property, and equipment, gross – Consumers	$ 18,400	$ 17,580
CMS Energy, including Consumers
Total assets
Electric utility1	$ 11,828	$ 11,582
Gas utility1	5,546	5,391
Enterprises	267	231
Other reconciling items	1,811	1,981
Total assets – CMS Energy	$ 19,452	$ 19,185
Consumers
Total assets
Electric utility1	$ 11,828	$ 11,582
Gas utility1	5,546	5,391
Other reconciling items	603	874
Total assets – Consumers	$ 17,977	$ 17,847

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

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to market risk as previously disclosed in Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk, in the 2014 Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

CMS ENERGY

Disclosure Controls and Procedures: CMS Energy’s management, with the participation of its CEO and CFO, has evaluated the effectiveness of its disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, CMS Energy’s CEO and CFO have concluded that, as of the end of such period, its disclosure controls and procedures are effective.

Internal Control Over Financial Reporting: There have not been any changes in CMS Energy’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

CONSUMERS

Disclosure Controls and Procedures: Consumers’ management, with the participation of its CEO and CFO, has evaluated the effectiveness of its disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, Consumers’ CEO and CFO have concluded that, as of the end of such period, its disclosure controls and procedures are effective.

Internal Control Over Financial Reporting: There have not been any changes in Consumers’ internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

CMS Energy and Consumers are parties to various lawsuits and regulatory matters in the ordinary course of business. For information regarding material legal proceedings, including updates to information reported under Part I – Item 3. Legal Proceedings, of the 2014 Form 10-K, see Part I – Item 1. Consolidated Financial Statements (Unaudited) – Notes to the Unaudited Consolidated Financial Statements – Note 2, Regulatory Matters and Note 3, Contingencies and Commitments.

ITEM 1A. RISK FACTORS

There have been no material changes to the Risk Factors as previously disclosed in Part I – Item 1A. Risk Factors, in the 2014 Form 10-K, which Risk Factors are incorporated herein by reference.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) Unregistered Sales of Equity Securities

None.

(c) Issuer Repurchases of Equity Securities

Presented in the following table are CMS Energy’s repurchases of equity securities for the three months ended September 30, 2015:


				Total Number of	Maximum Number of
				Shares Purchased as	Shares That May Yet Be
	Total Number	Average		Part of Publicly	Purchased Under Publicly
	of Shares	Price Paid		Announced Plans or	Announced Plans or
Period	Purchased1	per Share		Programs	Programs
July 1, 2015 to
July 31, 2015	1,844	$	32.19	-	-
August 1, 2015 to
August 31, 2015	-	-		-	-
September 1, 2015 to
September 30, 2015	1,727	32.15		-	-
Total	3,571	$	32.17	-	-

1 All of the common shares were repurchased to satisfy the minimum statutory income tax withholding obligation for common shares that have vested under the Performance Incentive Stock Plan. The value of shares repurchased is based on the market price on the vesting date.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

See CMS Energy’s and Consumers’ Exhibit Index included as the last part of this report, which is incorporated herein by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature for each undersigned company shall be deemed to relate only to matters having reference to such company or its subsidiary.

		CMS ENERGY CORPORATION
		(Registrant)


Dated: October 29, 2015	By:	/s/ Thomas J. Webb

		Thomas J. Webb
		Executive Vice President and
		Chief Financial Officer


		CONSUMERS ENERGY COMPANY
		(Registrant)


Dated: October 29, 2015	By:	/s/ Thomas J. Webb

		Thomas J. Webb
		Executive Vice President and
		Chief Financial Officer

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EXHIBITS

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CMS ENERGY’S AND CONSUMERS’ EXHIBIT INDEX

The agreements included as exhibits to this Form 10-Q filing are included solely to provide information regarding the terms of the agreements and are not intended to provide any other factual or disclosure information about CMS Energy, Consumers, or other parties to the agreements. The agreements may contain representations and warranties made by each of the parties to each of the agreements that were made exclusively for the benefit of the parties involved in each of the agreements and should not be treated as statements of fact. The representations and warranties were made as a way to allocate risk if one or more of those statements prove to be incorrect. The statements were qualified by disclosures of the parties to each of the agreements that may not be reflected in each of the agreements. The agreements may apply standards of materiality that are different than standards applied to other investors. Additionally, the statements were made as of the date of the agreements or as specified in the agreements and have not been updated. The representations and warranties may not describe the actual state of affairs of the parties to each agreement.

Additional information about CMS Energy and Consumers may be found in this filing, at www.cmsenergy.com, at www.consumersenergy.com, and through the SEC’s website at www.sec.gov.

Exhibits		Description
10.11	—	Amendment to the CMS Energy Deferred Salary Savings Plan effective January 1, 2016
12.1	—	Statement regarding computation of CMS Energy’s Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Dividends
12.2	—	Statement regarding computation of Consumers’ Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Dividends
31.1	—	CMS Energy’s certification of the CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	—	CMS Energy’s certification of the CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.3	—	Consumers’ certification of the CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.4	—	Consumers’ certification of the CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	—	CMS Energy’s certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	—	Consumers’ certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS2	—	XBRL Instance Document
101.SCH2	—	XBRL Taxonomy Extension Schema
101.CAL2	—	XBRL Taxonomy Extension Calculation Linkbase
101.DEF2	—	XBRL Taxonomy Extension Definition Linkbase
101.LAB2	—	XBRL Taxonomy Extension Labels Linkbase
101.PRE2	—	XBRL Taxonomy Extension Presentation Linkbase

1 Management contract or compensatory plan or arrangement.

2 The financial information contained in the XBRL-related information is “unaudited” and “unreviewed.”