Risk Factors Dashboard
Once a year, publicly traded companies issue a comprehensive report of their business, called a 10-K. A component mandated in the 10-K is the ‘Risk Factors’ section, where companies disclose any major potential risks that they may face. This dashboard highlights all major changes and additions in new 10K reports, allowing investors to quickly identify new potential risks and opportunities.
View risk factors by ticker
Search filings by term
Risk Factors - CMS
-New additions in green
-Changes in blue
-Hover to see similar sentence in last filing
Item 1A. Risk Factors; Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook; and Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 3, Regulatory Matters and Note 4, Contingencies and Commitments.
CMS Energy and Consumers have experienced no material cybersecurity incidents; however, future cybersecurity incidents could materially affect their business strategy, results of operations, or financial condition. For additional details regarding these and other uncertainties, see Item 1A. Risk Factors.Management’s Role: The Vice President of IT and Security and CIO has over 25 years of IT and security experience and, to enhance governance, reports to the Executive Vice President of Business Transformation and Chief Legal and Administrative Officer. Vice President of IT and Security and CIO is responsible for informing the CEO and other members of senior management, as necessary, about cybersecurity incidents, covering prevention, detection, mitigation, and remediation efforts as they are detected by the cybersecurity team. Cybersecurity incidents are managed using the companies’ standard process for critical events. In the event of such cybersecurity incidents, the Vice President of IT and Security and CIO communicates and collaborates with the officers of the companies and subject matter experts to address business continuity, contingency, and recovery plans. Senior management will notify the Board , including the Audit Committee, of any significant cybersecurity incidents.
16
Part I
Item 1. Business
General
CMS Energy
CMS Energy was formed as a corporation in Michigan in 1987 and is an energy company operating primarily in Michigan. It is the parent holding company of several subsidiaries, including Consumers, an electric and gas utility, and NorthStar Clean Energy, primarily a domestic independent power producer and marketer. Consumers’ customer base consists of a mix of primarily residential, commercial, and diversified industrial customers. NorthStar Clean Energy, through its subsidiaries and equity investments, is engaged in domestic independent power production, including the development and operation of renewable generation, and the marketing of independent power production.
CMS Energy manages its businesses by the nature of services each provides, and operates principally in three business segments: electric utility; gas utility; and NorthStar Clean Energy, its non‑utility operations and investments. Consumers’ consolidated operations account for the substantial majority of CMS Energy’s total assets, income, and operating revenue. CMS Energy’s consolidated operating revenue was $8.5 billion in 2025, and $7.5 billion in 2024 and 2023.
For further information about operating revenue, income, and assets and liabilities attributable to all of CMS Energy’s business segments and operations, see Item 8. Financial Statements and Supplementary Data—CMS Energy Consolidated Financial Statements and Notes to the Consolidated Financial Statements.
Consumers
Consumers has served Michigan customers since 1886. Consumers was incorporated in Maine in 1910 and became a Michigan corporation in 1968. Consumers owns and operates electric generation and distribution facilities and gas transmission, storage, and distribution facilities. It provides electricity and/or natural gas to 6.8 million of Michigan’s 10 million residents. Consumers’ rates and certain other aspects of its business are subject to the jurisdiction of the MPSC and FERC, as well as to NERC reliability standards, as described in CMS Energy and Consumers Regulation.
Consumers’ consolidated operating revenue was $8.1 billion in 2025, and $7.2 billion in 2024 and 2023. For further information about operating revenue, income, and assets and liabilities attributable to Consumers’ electric and gas utility operations, see Item 8. Financial Statements and Supplementary Data—Consumers Consolidated Financial Statements and Notes to the Consolidated Financial Statements.
Consumers owns its principal properties in fee, except that most electric lines, gas mains, and renewable generation projects are located below or adjacent to public roads or on land owned by others and are accessed by Consumers through easements, leases, and other rights. Almost all of Consumers’ properties are subject to the lien of its First Mortgage Bond Indenture. For additional information on Consumers’ properties, see Business Segments—Consumers Electric Utility—Electric Utility Properties and Consumers Gas Utility—Gas Utility Properties.
17
In 2025, Consumers served 1.9 million electric customers and 1.8 million gas customers in Michigan’s Lower Peninsula. Presented in the following map are Consumers’ service territories:
CMS Energy and Consumers—The Triple Bottom Line
For information regarding CMS Energy’s and Consumers’ purpose and impact on the “triple bottom line” of people, planet, and prosperity, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Executive Overview.
Business Segments
Consumers Electric Utility
Electric Utility Operations: Consumers’ electric utility operations, which include the generation, purchase, distribution, and sale of electricity, generated operating revenue of $5.6 billion in 2025, $5.1 billion in 2024, and $4.7 billion in 2023. Consumers’ electric utility customer base consists of a mix of primarily residential, commercial, and diversified industrial customers in Michigan’s Lower Peninsula.
18
Presented in the following illustration is Consumers’ 2025 electric utility operating revenue of $5.6 billion by customer class:
Consumers’ electric utility operations are not dependent on a single customer, or even a few customers, and the loss of any one or even a few of Consumers’ largest customers is not reasonably likely to have a material adverse effect on Consumers’ financial condition.
In 2025, Consumers’ electric deliveries were 37 billion kWh, which included ROA deliveries of 3 billion kWh, resulting in net bundled sales of 34 billion kWh.In 2024, Consumers’ electric deliveries were 37 billion kWh, which included ROA deliveries of four billion kWh, resulting in net bundled sales of 33 billion kWh. In 2024, Consumers’ electric deliveries were 37 billion kWh, which included ROA deliveries of 4 billion kWh, resulting in net bundled sales of 33 billion kWh. In 2023, Consumers’ electric deliveries were 36 billion kWh, which included ROA deliveries of three billion kWh, resulting in net bundled sales of 33 billion kWh.
Consumers’ electric utility operations are seasonal. The consumption of electric energy typically increases in the summer months, due primarily to the use of air conditioners and other cooling equipment.
19
Presented in the following illustration are Consumers’ monthly weather-normalized electric deliveries (deliveries adjusted to reflect normal weather conditions) to its customers, including ROA deliveries, during 2025 and 2024:
Consumers’ 2025 summer peak demand was 8,500 MW, which included ROA demand of 552 MW. For the 2024‑2025 winter season, Consumers’ peak demand was 5,755 MW, which included ROA demand of 449 MW. For the 2023-2024 winter season, Consumers’ peak demand was 5,594 MW, which included ROA demand of 410 MW. As required by MISO reserve margin requirements, Consumers owns or controls, through long‑term PPAs, short-term capacity purchases, and auction capacity purchases, all of the capacity required to supply its projected firm peak load and necessary reserve margin for summer 2026.
Electric Utility Properties: Consumers owns and operates electric generation and distribution facilities. For details about Consumers’ electric generation facilities, see the Electric Utility Generation and Supply Mix section that follows this Electric Utility Properties section. Consumers’ distribution system consists of:
•263 miles of high-voltage distribution overhead lines operating at 138 kV
•4 miles of high-voltage distribution underground lines operating at 138 kV
•4,619 miles of high-voltage distribution overhead lines operating at 46 kV and 69 kV
•18 miles of high-voltage distribution underground lines operating at 46 kV
•82,854 miles of electric distribution overhead lines
•10,027 miles of underground distribution lines
•1,102 substations with an aggregate transformer capacity of 29 million kVA
Consumers is interconnected to the interstate high-voltage electric transmission system owned by METC and operated by MISO. Consumers is also interconnected to neighboring utilities and to other transmission systems.
Electric Utility Generation and Supply Mix: Consumers’ Electric Supply Plan, its long-term strategy for delivering safe, reliable, affordable, clean, and equitable energy to its customers, is outlined in its integrated resource plan and incorporates Consumers’ Renewable Energy Plan. The Electric Supply Plan
20
is Consumers’ blueprint for compliance with Michigan’s 2023 Energy Law and for advancing sustainability objectives.
To meet these objectives, Consumers is executing a multi-faceted strategy. This strategy involves taking steps to end the use of coal, including the retirement of the D.E. Karn coal-fueled generating units, totaling 515 MW of nameplate capacity, in 2023 and obtaining MPSC approval to retire J.H. Campbell, totaling 1,407 MW of nameplate capacity. The retirement of J.H. Campbell is subject to temporary extensions under emergency orders issued by the U.S. Secretary of Energy. For a more detailed discussion of the emergency orders, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook—Consumers Electric Utility Outlook and Uncertainties—J. For additional information, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook—Consumers Electric Utility Outlook and Uncertainties. For additional information, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook—Consumers Electric Utility Outlook and Uncertainties. For additional information, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook—Consumers Electric Utility Outlook and Uncertainties. H. Campbell Emergency Orders and Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 3, Regulatory Matters.
To continue providing controllable sources of electricity to customers, Consumers purchased the Covert Generating Station, representing 1,200 MW of nameplate capacity, in 2023 and has solicited additional capacity from controllable sources of electricity to customers.
Consumers’ updates to its Renewable Energy Plan include up to 9,000 MW of both purchased and owned solar energy resources and up to 4,000 MW of wind energy resources. Coupled with updates to its integrated resource plan, these actions position Consumers to achieve 60‑percent renewable energy by 2035 and 100‑percent clean energy by 2040. For further information on Consumers’ progress towards reducing carbon emissions and towards meeting the requirements of the 2023 Energy Law, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Executive Overview and Outlook—Consumers Electric Utility Outlook and Uncertainties. These actions will enable Consumers to achieve 60 percent renewable energy by 2035 and 100 percent clean energy by 2040. For further information on Consumers’ progress towards reducing carbon emissions and towards meeting the requirements of the 2023 Energy Law, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Executive Overview and Outlook—Consumers Electric Utility Outlook and Uncertainties.
21
Presented in the following table are details about Consumers’ 2025 electric generation and supply mix:
22
1With the exception of wind and solar generation, the amount represents generation capacity during the summer months (planning year 2025 capacity as reported to MISO and limited by interconnection service limits). For wind and solar generation, the amount represents installed capacity. For wind and solar generation, the amount represents installed capacity during the summer months.
2Consumers planned to retire these generating units in May 2025. However, the retirement of J.H. Campbell is subject to temporary extensions under emergency orders issued by the U.S. Secretary of Energy. Under those emergency orders, Consumers has continued to operate these units for the benefit of MISO’s North and Central regions. Of the 7,320 GWh generated by these units during 2025, Consumers supplied 3,608 GWh of electricity to MISO in order to comply with the emergency orders. For a more detailed discussion of the emergency orders, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook—Consumers Electric Utility Outlook and Uncertainties—J. For additional information, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook—Consumers Electric Utility Outlook and Uncertainties. For additional information, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook—Consumers Electric Utility Outlook and Uncertainties. For additional information, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook—Consumers Electric Utility Outlook and Uncertainties. H. Campbell Emergency Orders and Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 3, Regulatory Matters.
3Represents Consumers’ share of the electric supply of the J.H. Campbell 3 unit, net of the 6.69‑percent ownership interest of the Michigan Public Power Agency and Wolverine Power, each a non‑affiliated company. Campbell 3 unit, net of the 6.69‑percent ownership interest of the Michigan Public Power Agency and Wolverine Power Supply Cooperative, Inc, each a non‑affiliated company.
4Represents Consumers’ 51‑percent share of the capacity of Ludington. DTE Electric holds the remaining 49‑percent ownership interest.
5Represents Consumers’ share of net pumped-storage generation. The pumped-storage facility consumes electricity to pump water during off-peak hours for storage in order to generate electricity later during peak‑demand hours.
6In 2025, Consumers entered an agreement to sell the 13 hydroelectric dams that comprise the 35 generating units. For a more detailed discussion of this transaction, see Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 20, Exit Activities and Asset Sales.
7Represents purchases under long-term PPAs, including capacity purchases.
8For information about Consumers’ long-term PPA related to the MCV Facility, see Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 4, Contingencies and Commitments—Contractual Commitments.
9Reflects net delivered energy from storage operations, after accounting for charging losses.
10Represents the net amount of generation offered to and purchased from the MISO energy market.
23
Presented in the following table are the sources of Consumers’ electric supply for the last three years:
1Represents Consumers’ share of net pumped-storage generation. During 2025, the pumped-storage facility consumed 1,351 GWh of electricity to pump water during off-peak hours for storage in order to generate 991 GWh of electricity later during peak-demand hours. During 2024, the pumped-storage facility consumed 1,721 GWh of electricity to pump water during off-peak hours for storage in order to generate 1,263 GWh of electricity later during peak-demand hours.
2Represents purchases under long-term PPAs, including capacity purchases.
3Reflects net delivered energy from storage operations, after accounting for charging losses.
4Represents the net amount of generation offered to and purchased from the MISO energy market.
During 2025, 41 percent of Consumers’ electric supply was generated by its natural gas‑fueled generating units, which burned 105 Bcf of natural gas and produced a combined total of 14,661 GWh of electricity.
In order to obtain the gas it needs for electric generation fuel, Consumers’ electric utility purchases gas from the market near the time of consumption, at prices that allow it to compete in the electric wholesale market. For the Covert Generating Station and Jackson and Zeeland plants, Consumers utilizes an agent that owns firm transportation rights to each plant to purchase gas from the market and transport the gas to the facilities. For units 3 & 4 of D.E. Karn, Consumers holds gas transportation contracts to transport to the plant gas that Consumers or an agent purchase from the market.
During 2025, Consumers acquired 32 percent of its electric supply through long-term PPAs and the MISO energy market.During 2024, Consumers acquired 29 percent of the electricity it provided to customers through long-term PPAs and the MISO energy market. Consumers offers its generation into the MISO energy market on a day-ahead and real‑time basis and bids for power in the market to serve the demand of its customers. Consumers supplements its generation capability with purchases from the MISO energy market.
At December 31, 2025, Consumers had future commitments to purchase capacity and energy under long‑term PPAs with various generating plants. These contracts require monthly capacity payments based on the plants’ availability or deliverability. The payments for 2026 through 2060 are estimated to total $17.0 billion and, for each of the next five years, range from $0.9 billion to $1.0 billion annually. The payments for 2025 through 2047 are estimated to total $7.0 billion and, for each of the next five years, $0.7 billion annually. These amounts may vary depending on plant availability and fuel costs. These amounts may vary depending 24Table of Contentson plant availability and fuel costs. For further information about
24
Consumers’ future capacity and energy purchase obligations, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources and Liquidity—Other Material Cash Requirements and Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 4, Contingencies and Commitments—Contractual Commitments.
During 2025, 20 percent of Consumers’ electric supply was generated by its coal-fueled generating units, which burned 4 million tons of coal and produced a combined total of 7,320 GWh of electricity.During 2024, 22 percent of the electric energy Consumers provided to customers was generated by its coal-fueled generating units, which burned four million tons of coal and produced a combined total of 7,932 GWh of electricity. Consumers planned to exit coal generation in 2025 but the retirement of J.H. Campbell is subject to temporary extensions under emergency orders issued by the U.S. Secretary of Energy. Of the 7,320 GWh generated by these units during 2025, Consumers supplied 3,608 GWh of electricity to MISO in order to comply with the emergency orders. For a more detailed discussion of the emergency orders, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook—Consumers Electric Utility Outlook and Uncertainties—J. For additional information, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook—Consumers Electric Utility Outlook and Uncertainties. For additional information, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook—Consumers Electric Utility Outlook and Uncertainties. For additional information, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook—Consumers Electric Utility Outlook and Uncertainties. H. Campbell Emergency Orders and Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 3, Regulatory Matters.
In order to obtain the coal it needs, Consumers has historically entered into physical coal supply contracts, leased a fleet of railcars, and secured transportation contracts with various companies to provide rail services for delivery of purchased coal to Consumers’ generating facilities. Following the emergency orders, Consumers was able to utilize relationships with existing suppliers in order to procure additional supply and maintain railcar leases and transportation contracts past the planned shutdown date of May 2025. At December 31, 2025, Consumers had future commitments to purchase and deliver coal for the remainder of the then-current emergency order, with options to extend these agreements if needed.
Electric Utility Competition: Consumers’ electric utility business is subject to actual and potential competition from many sources, in both the wholesale and retail markets, as well as in electric generation, electric delivery, and retail services.
Michigan law allows electric customers in Consumers’ service territory to buy electric generation service from alternative electric suppliers in an aggregate amount capped at 10 percent of Consumers’ sales, with certain exceptions. At December 31, 2025, electric deliveries under the ROA program were at the 10‑percent limit. Fewer than 300 of Consumers’ electric customers purchased electric generation service under the ROA program. For additional information, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook—Consumers Electric Utility Outlook and Uncertainties.
Consumers also faces competition or potential competition associated with data center expansion and industrial customer relocation outside of Consumers’ service territory for economic reasons; municipalities owning or operating competing electric delivery systems; and customer self-generation.Consumers also faces competition or potential competition associated with industrial customers relocating all or a portion of their production capacity outside of Consumers’ service territory for economic reasons; municipalities owning or operating competing electric delivery systems; and customer self-generation. Consumers addresses this competition in various ways, including:
•aggressively controlling operating, maintenance, power supply, and fuel costs and passing savings on to customers
•providing renewable energy options and energy waste reduction programs
•providing competitive rate-design options, particularly for large energy-intensive customers
•offering tariff-based incentives that support economic development
•monitoring activity in adjacent geographical areas
25
Consumers Gas Utility
Gas Utility Operations: Consumers’ gas utility operations, which include the purchase, transmission, storage, distribution, and sale of natural gas, generated operating revenue of $2.5 billion in 2025, $2.1 billion in 2024, and $2.4 billion in 2023. Consumers’ gas utility customer base consists of a mix of primarily residential, commercial, and diversified industrial customers in Michigan’s Lower Peninsula.
Presented in the following illustration is Consumers’ 2025 gas utility operating revenue of $2.5 billion by customer class:
Consumers’ gas utility operations are not dependent on a single customer, or even a few customers, and the loss of any one or even a few of Consumers’ largest customers is not reasonably likely to have a material adverse effect on Consumers’ financial condition.
In 2025, deliveries of natural gas through Consumers’ pipeline and distribution network, including off‑system transportation deliveries, totaled 396 Bcf, which included GCC deliveries of 31 Bcf. In 2024, deliveries of natural gas through Consumers’ pipeline and distribution network, including off-system transportation deliveries, totaled 362 Bcf, which included GCC deliveries of 27 Bcf. Consumers’ gas utility operations are seasonal. The consumption of natural gas increases in the winter, due primarily to colder temperatures and the resulting use of natural gas as heating fuel. Consumers injects natural gas into storage during the summer months for use during the winter months. During 2025, 46 percent of the natural gas supplied to all customers during the winter months was supplied from storage.
26
Presented in the following illustration are Consumers’ monthly weather-normalized natural gas deliveries (deliveries adjusted to reflect normal weather conditions) to its customers, including GCC deliveries, during 2025 and 2024:
Gas Utility Properties: Consumers’ gas transmission, storage, and distribution system consists of:
•2,337 miles of transmission lines
•14 gas storage fields with a total storage capacity of 300 Bcf and a working gas volume of 153 Bcf
•28,433 miles of distribution mains
•8 compressor stations with a total of 147,393 installed and available horsepower
Under its Methane Reduction Plan, Consumers has set a goal of net-zero methane emissions from its natural gas delivery system by 2030. Consumers plans to reduce methane emissions from its system by about 80 percent from 2012 baseline levels by accelerating the replacement of aging pipe, rehabilitating or retiring outdated infrastructure, and adopting new technologies and practices. The remaining emissions will likely be offset through clean fuel alternatives or nature-based carbon removal pathways. The remaining emissions will likely be offset by purchasing and/or producing renewable natural gas. The remaining emissions will likely be offset by purchasing and/or producing renewable natural gas.
Consumers has also set a goal to reduce customer greenhouse gas emissions by 25 percent by 2035. Consumers’ Natural Gas Delivery Plan, a rolling ten‑year investment plan to deliver safe, reliable, clean, and affordable natural gas to customers, outlines ways in which Consumers can make early progress toward these goals in a cost-effective manner, including energy waste reduction, carbon offsets, and renewable natural gas supply.
Consumers has already initiated work in these key areas by continuing to expand its energy waste reduction targets and by offering gas customers the ability to offset their carbon footprint associated with natural gas use by purchasing renewable natural gas and/or carbon credits associated with Michigan forest preservation. Consumers has renewable natural gas facilities under construction scheduled for commercial operation in 2026 and is monitoring regulatory developments and market conditions closely as part of its ongoing evaluation of the projects. For further information on Consumers’ progress towards its net-zero
27
methane emissions goal, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Executive Overview.
Gas Utility Supply: In 2025, Consumers purchased 86 percent of the gas it delivered to its full-service sales customers. The remaining 14 percent was purchased from authorized GCC suppliers and delivered by Consumers to customers in the GCC program. Presented in the following illustration are the supply arrangements for the gas Consumers delivered to GCC and GCR customers during 2025:
Firm city-gate and firm gas transportation contracts are those that define a fixed amount, price, and delivery time frame. Consumers’ firm gas transportation contracts are with Panhandle Eastern Pipe Line Company and Trunkline Gas Company, LLC, each a non‑affiliated company. Under these contracts, Consumers purchases and transports gas to Michigan for ultimate delivery to its customers. Consumers’ firm gas transportation contracts expire on various dates through 2028 with planned contract volumes providing 34 percent of Consumers’ total forecasted gas supply requirements for 2026. Consumers purchases the balance of its required gas supply under firm city-gate contracts and through authorized suppliers under the GCC program.
Gas Utility Competition: Competition exists in various aspects of Consumers’ gas utility business. Competition comes from GCC and transportation programs; system bypass by new and existing customers; and from alternative fuels and energy sources, such as propane, oil, and electricity. Competition comes from GCC and transportation programs; system bypass opportunities for new and existing customers; and from alternative fuels and energy sources, such as propane, oil, and electricity.
28
NorthStar Clean Energy—Non-utility Operations and Investments
NorthStar Clean Energy, through various subsidiaries and certain equity investments, is engaged in domestic independent power production, including the development and operation of renewable generation, and the marketing of independent power production. NorthStar Clean Energy’s operating revenue was $408 million in 2025, $316 million in 2024, and $297 million in 2023.
Independent Power Production: Presented in the following table is information about the independent power plants in which CMS Energy had an ownership interest at December 31, 2025:
1Represents the intended full-load sustained output of each plant. The amount of capacity relating to CMS Energy’s ownership interest was 1,665 MW and net generation relating to CMS Energy’s ownership interest was 6,018 GWh at December 31, 2025.
2This project began operations in December 2025.
3Represents a behind-the-meter system located on customer premises.
4NorthStar Clean Energy sold a noncontrolling interest in this plant in 2025. For additional details see Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 19, Variable Interest Entities.
The operating revenue from independent power production was $77 million in 2025, $69 million in 2024, and $64 million in 2023.
Energy Resource Management: CMS ERM purchases and sells energy commodities in support of NorthStar Clean Energy’s generating facilities with a focus on optimizing the independent power production portfolio. In 2025, CMS ERM marketed 2 Bcf of natural gas and 7,625 GWh of electricity. In 2024, CMS ERM marketed one Bcf of natural gas and 7,475 GWh of electricity. Electricity marketed by CMS ERM was generated by independent power production of NorthStar Clean
29
Energy and by unrelated third parties. CMS ERM’s operating revenue was $331 million in 2025, $247 million in 2024, and $233 million in 2023.
NorthStar Clean Energy Competition: NorthStar Clean Energy competes with other energy developers, energy retailers, and independent power producers. The needs of this market are driven by current electric demand and available generation, as well as projections of future electric demand and available generation.
CMS Energy and Consumers Regulation
CMS Energy, Consumers, and their subsidiaries are subject to regulation by various federal, state, and local governmental agencies, including those described in the following sections. Rate proceedings and other regulatory actions may affect operations and financial results. If CMS Energy, Consumers, or their subsidiaries failed to comply with applicable laws and regulations, they could become subject to fines, penalties, or disallowed costs, or be required to implement additional compliance, cleanup, or remediation programs, the cost of which could be material. For more information on the potential impacts of government regulation and rate proceedings affecting CMS Energy, Consumers, and their subsidiaries, see Item 1A. For more information on the potential impacts of government regulation affecting CMS Energy, Consumers, and their subsidiaries, see Item 1A. Risk Factors, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook, and Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 3, Regulatory Matters.
FERC and NERC
CMS Energy and its affiliates and subsidiaries are subject to regulation by FERC in a number of areas. FERC regulates certain aspects of Consumers’ electric business, including, but not limited to, compliance with FERC accounting rules, wholesale electric and transmission rates, operation of licensed hydroelectric generating plants, corporate mergers and the sale and purchase of certain assets, issuance of securities, and conduct among affiliates. FERC also regulates the tariff rules and procedures administered by MISO and other independent system operators/regional transmission organizations, including rules governing wholesale electric markets and interconnection of new generating facilities to the transmission system. FERC, in connection with NERC and with regional reliability organizations, also regulates generation and transmission owners and operators, load-serving entities, and others with regard to reliability of the bulk power system.
FERC also regulates limited aspects of Consumers’ gas business, principally compliance with FERC capacity release rules, shipping rules, the prohibition of certain buy/sell transactions, and the price-reporting rule.
FERC also regulates holding company matters, interlocking directorates, and other issues affecting CMS Energy. In addition, similar to FERC’s regulation of Consumers’ electric and gas businesses, FERC has jurisdiction over several independent power plants, PURPA-qualifying facilities, and exempt wholesale generators in which NorthStar Clean Energy has ownership interests, as well as over NorthStar Clean Energy itself, CMS ERM, CMS Gas Transmission, and DIG.
MPSC
Consumers is subject to the jurisdiction of the MPSC, which regulates public utilities in Michigan with respect to retail utility rates, accounting, utility services, certain facilities, certain asset transfers, corporate mergers, and other matters.
30
The Michigan Attorney General, ABATE, the MPSC Staff, residential customer advocacy groups, environmental organizations, and certain other parties typically participate in MPSC proceedings concerning Consumers. 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 and FERC orders.
Other Regulation
The U.S. Secretary of Energy regulates imports and exports of natural gas and has delegated various aspects of this jurisdiction to FERC and the DOE’s Office of Fossil Fuels. Additionally, the U.S. Secretary of Energy has the authority to issue emergency orders for power plants under section 202(c) of the Federal Power Act. This provision allows the U.S. Secretary of Energy to temporarily alter the operation of the electricity system during emergencies.
The U.S. Department of Transportation’s Office of Pipeline Safety regulates the safety and security of gas pipelines through the Natural Gas Pipeline Safety Act of 1968 and subsequent laws.
The Transportation Security Administration, an agency of the U.S. Department of Homeland Security, regulates certain activities related to the safety and security of natural gas pipelines.
Energy Legislation
In 2023, Michigan enacted the 2023 Energy Law, which among other things:
•increased the renewable energy standard from 15 percent to 50 percent by 2030 and 60 percent by 2035; renewable energy generated anywhere within MISO can be applied to meeting this standard, with certain limitations
•established a clean energy standard of 80 percent by 2035 and 100 percent by 2040; low- or zero‑carbon emitting resources, such as nuclear generation and natural gas generation coupled with carbon capture, qualify as clean energy sources under this standard
•authorized the MPSC to grant extensions of the clean energy or renewable energy standards deadlines if compliance is not practically feasible, would be excessively costly to customers, or would cause reliability issues
•increased the energy waste reduction requirement for electric utilities to achieve annual reductions in customers’ electricity use from the present 1‑percent reduction requirement to 1.5 percent beginning in 2026; beyond this requirement, the law set a goal of a 2‑percent reduction and required that such goal be incorporated in an electric utility’s integrated resource plan modeling scenarios
•increased the energy waste reduction requirement for gas utilities to achieve annual reductions in customers’ gas use from the present 0.75‑percent reduction requirement to 0.875 percent beginning in 2026
•enhanced existing incentives for energy efficiency programs and returns earned on new clean or renewable PPAs
•created a new energy storage standard, requiring electric utilities to file plans by 2029 to help achieve a statewide target of 2,500 MW
•expanded the statutory cap on distributed generation resources to 10 percent of the electric utility’s five‑year average peak load
•expanded the MPSC’s scope of considerations in integrated resource plans to include affordability, greenhouse gas emissions, environmental justice considerations, the effects on human health, and other environmental concerns
•provided the MPSC siting authority over large renewable energy projects
31
Consumers’ updates to its Renewable Energy Plan, which were approved by the MPSC in September 2025, and planned updates to its integrated resource plan in 2026 will serve as a blueprint to meeting the requirements of the 2023 Energy Law by focusing on increasing the generation of renewable energy, deploying energy storage, helping customers use less energy, and offering demand response programs to reduce demand during critical peak times.
CMS Energy and Consumers Environmental Strategy and Compliance
CMS Energy and Consumers are committed to protecting the environment; this commitment extends beyond compliance with applicable laws and regulations. Consumers’ Electric Supply Plan, its long-term strategy for delivering safe, reliable, affordable, clean, and equitable energy to its customers, is outlined in its integrated resource plan and incorporates Consumers’ Renewable Energy Plan. The Electric Supply Plan is Consumers’ blueprint for compliance with Michigan’s 2023 Energy Law and for advancing sustainability objectives. This plan positions Consumers to achieve 60‑percent renewable energy by 2035 and 100‑percent clean energy by 2040.
Under its Methane Reduction Plan, Consumers has set a goal of net-zero methane emissions from its natural gas delivery system by 2030. Consumers plans to reduce methane emissions from its system by about 80 percent from 2012 baseline levels by accelerating the replacement of aging pipe, rehabilitating or retiring outdated infrastructure, and adopting new technologies and practices. The remaining emissions will likely be offset through clean fuel alternatives or nature-based carbon removal pathways. The remaining emissions will likely be offset by purchasing and/or producing renewable natural gas. The remaining emissions will likely be offset by purchasing and/or producing renewable natural gas. For additional information on Consumers’ Methane Reduction Plan, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook—Consumers Gas Utility Outlook and Uncertainties—Gas Environmental Outlook.
Consumers has also set a goal to reduce customer greenhouse gas emissions by 25 percent by 2035. Consumers expects to meet this goal through carbon offset measures, renewable natural gas, energy efficiency and demand response programs, and the adoption of cost-effective emerging technologies once proven and commercially available.
CMS Energy’s and Consumers’ commitment to protecting the environment extends to advancing the principles of environmental justice in current and future operations. These principles center on protecting communities impacted by the companies’ operations, especially those communities that are most vulnerable and may have suffered disparate impacts of environmental harm.
Advancing environmental justice comes in a variety of forms. For example, Consumers has conducted an environmental justice analysis to help understand the environmental impacts of its clean energy transformation. Similarly, Consumers is using an environmental justice screening tool provided by the State of Michigan in the planning of improvements to the electric and gas distribution system, including prioritizing investments in more vulnerable communities.
A core tenet of environmental justice is inviting the input of the stakeholders in the local communities where CMS Energy and Consumers operate and invest. The companies are committed to maintaining a transparent dialogue when developing projects, whether in new or existing areas of operation.
CMS Energy, Consumers, and their subsidiaries are subject to various federal, state, and local environmental regulations for solid waste management, air and water quality, and other matters. Consumers expects to recover costs to comply with environmental regulations in customer rates but cannot guarantee this result. For additional information concerning environmental matters, see Item 1A. Risk Factors, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
32
Operations—Outlook, and Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 4, Contingencies and Commitments.
CMS Energy has recorded a $48 million liability for its subsidiaries’ obligations associated with Bay Harbor and Consumers has recorded a $59 million liability for its obligations at a number of former MGP sites. For additional information, see Item 1A. Risk Factors and Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 4, Contingencies and Commitments.
Costs related to the construction, operation, corrective action, and closure of solid waste disposal facilities for coal ash are significant. Consumers’ coal ash disposal areas are regulated under Michigan’s solid waste rules and by the EPA’s rules regulating CCRs. To address some of the requirements of these rules, Consumers has converted all of its fly ash handling systems to dry conveyance systems. In addition, Consumers’ ash facilities have programs designed to protect the environment and are subject to quarterly EGLE inspections. Consumers’ estimate of capital and cost of removal expenditures to comply with regulations relating to ash disposal is $241 million from 2026 through 2030. Consumers’ future costs to comply with solid waste disposal regulations may vary depending on future legislation, litigation, executive orders, treaties, or rulemaking. These costs may further increase if additional emergency orders necessitate continued operation of the J.H. Campbell plant beyond current expectations. Consumers intends to request recovery of any incremental costs through its ongoing cases before FERC. For additional information, see Item 8. Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 3, Regulatory Matters.
For further information concerning estimated capital expenditures related to environmental matters, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook—Consumers Electric Utility Outlook and Uncertainties—Electric Environmental Outlook.
Insurance
CMS Energy and its subsidiaries, including Consumers, maintain insurance coverage generally similar to comparable companies in the same lines of business. The insurance policies are subject to terms, conditions, limitations, and exclusions that might not fully compensate CMS Energy or Consumers for all losses. A portion of each loss is generally assumed by CMS Energy or Consumers in the form of deductibles and self-insured retentions that, in some cases, are substantial. As CMS Energy or Consumers renews its policies, it is possible that some of the present insurance coverage may not be renewed or obtainable on commercially reasonable terms due to restrictive insurance markets.
33
Human Capital
CMS Energy and Consumers employ a highly trained and skilled workforce comprised of union and non‑union employees. Presented in the following table are the number of employees of CMS Energy and Consumers:
At December 31, 2025, unions represented 44 percent of CMS Energy’s employees and 45 percent of Consumers’ employees. The UWUA represents Consumers’ and NorthStar Clean Energy’s operating, maintenance, construction employees and Consumers’ customer contact center employees. The USW represents Consumers’ Zeeland plant employees. The USW represents Zeeland plant employees. Consumers’ union agreements expire in 2030 and the majority of NorthStar Clean Energy’s represented employees have an agreement that expires in 2029.
The safety of co-workers, customers, and the general public is a priority of CMS Energy and Consumers. Accordingly, CMS Energy and Consumers have worked to integrate a set of safety principles into their business operations and culture. These principles include complying with applicable safety, health, and security regulations and implementing programs and processes aimed at continually improving safety and security conditions. On an annual basis, CMS Energy and Consumers set various safety goals tied to the OSHA recordable incident rate and to high-risk injuries. The companies’ OSHA recordable incident rate was 2.34 in 2025 and 1.71 in 2024. High-risk injuries encompass all recordable and non-recordable incidents with the potential for serious injury or fatality. The companies’ OSHA recordable incident rate was 1.71 in 2024 and 1.48 in 2023. The target recordable incident rate for 2025 is 1.00, which, if achieved, would place Consumers within the first quartile of its EEI peer group. In 2025, the companies recorded nine high-risk injuries, achieving their goal of less than 12 high-risk injuries. In 2024, the companies recorded 11 high-risk injuries, achieving their goal of less than 13 high-risk injuries. Beginning in 2026, the companies will utilize the serious injury incidence rate to measure and set safety goals. The target serious injury incidence rate for 2026 is 0.037, which, if achieved, would place Consumers within the second quartile of its EEI peer group.
Within the utility industry, there is strong competition for rare, high-demand talent, including those related to electric line work, renewable energy generation, technology, and data analytics. Within the utility industry, there is strong competition for rare, high-demand talent, including those related to electric line work, renewable energy generation, technology, and data analytics. In order to address this competition and to be able to meet their human capital needs, CMS Energy and Consumers provide compensation and benefits that are competitive with industry peers. Furthermore, CMS Energy and Consumers have developed a comprehensive talent strategy, the People Strategy, to attract, develop, and retain highly skilled co-workers. The strategy focuses on three areas, which are summarized below. The first two areas listed below focus on creating an environment that attracts and retains top talent and ensuring that all co-workers can thrive and contribute to the companies’ mission and purpose.
•Cultivating a Purpose-driven Culture: This goal aims to ensure all co-workers understand how their work contributes to CMS Energy’s and Consumers’ key strategic goals.
•Creating a Breakthrough Employee Experience: A breakthrough employee experience is one that instills pride and ownership in one’s work. To measure progress toward a breakthrough employee experience, CMS Energy and Consumers assess engagement, empowerment, and
34
diversity, equity, and inclusion efforts using the companies’ culture index. For the year ended December 31, 2025, the companies attained scores of:
◦75‑percent positive sentiment for engagement, up 3 percentage points from 2024
◦65‑percent positive sentiment for empowerment, no change from 2024
◦75‑percent positive sentiment for diversity, equity, and inclusion, up 2 percentage points from 2024
CMS Energy and Consumers aim to continuously improve these scores every year.
•Building Skill Sets at Scale: With an overarching goal of ensuring co-workers have the right skills to succeed, CMS Energy and Consumers measure progress in this area through achievement of workforce planning and hiring milestones and through a first-time skill attainment index to evaluate the effectiveness of training. CMS Energy and Consumers develop skill sets in co‑workers through a variety of means, including union apprenticeship programs and yearly trainings for newly required skills.
This talent strategy allows CMS Energy and Consumers to shape co-workers’ experience and enable leaders to coach and develop co‑workers, source talent, and anticipate and adjust to changing skill sets in the business environment.
Diversity, Equity, and Inclusion
As a part of their People Strategy, CMS Energy and Consumers employ a broad and holistic diversity, equity, and inclusion strategy focused on embracing differences and creating a sense of belonging for all co-workers. The strategy is aimed at integrating principles of equity and inclusion into every process and co‑worker experience. To measure their success, CMS Energy and Consumers utilize select questions in the annual engagement survey to create a diversity, equity, and inclusion index. For the year ended December 31, 2025, the diversity, equity, and inclusion index score was 75 percent.
CMS Energy and Consumers are committed to building an inclusive workplace that embraces the diverse makeup of the communities that they serve. The following table presents the composition of CMS Energy’s and Consumers’ workforce:
35
Co‑workers are also empowered to engage in business employee resource groups and events that encourage candid conversations around diversity, equity, and inclusion. These activities enhance personal growth, build stronger connections among co-workers, and contribute to a more inclusive workplace. There are eight business employee resource groups available to all co‑workers; these groups are:
•Women in Energy, working toward an inclusive place for all women in the fields they have chosen, from front line to management
•the Minority Advisory Panel, promoting a culture of diversity and inclusion among all racial and ethnic minorities through education, leadership, development, and networking
•the Veterans Advisory Panel, supporting former and active military personnel and assisting in recruiting and retaining veterans through career development
•Genergy, a multigenerational group designed to bridge the gap of learning, networking, and mentoring across the generations of the workforce
•the Pride Alliance of CMS Energy, promoting an inclusive environment that is safe, supportive, and respectful for lesbian, gay, bi-sexual, and transgender persons and allies
•Capable, aimed at removing barriers and creating pathways to meaningful work for co-workers of all abilities
•Interfaith, a space for co‑workers of all backgrounds to gather and celebrate their unique beliefs, creating an environment of understanding and respect for all faiths, religions, and spiritual beliefs, including those with no faith affiliation
•People and Planet Partners, empowering co-workers to drive social benefits for customers and communities and advance environmental improvements, reduce the companies’ environmental footprint, and support the companies’ planet goals
36
Information About CMS Energy’s and Consumers’ Executive Officers
Presented in the following table are the company positions held during the last five years for each of CMS Energy’s and Consumers’ executive officers as of February 10, 2026:
37
There are no family relationships among executive officers and directors of CMS Energy or Consumers. The list of directors and their biographies will be included in CMS Energy’s and Consumers’ definitive proxy statement for their 2026 Annual Meetings of Shareholders to be held May 8, 2026. The term of office of each of the executive officers extends to the first meeting of the Board after the next annual election of Directors of CMS Energy and Consumers (to be held on May 8, 2026).
38
Available Information
CMS Energy’s internet address is www.cmsenergy.com. CMS Energy routinely posts important information on its website and considers the Investor Relations section, www.cmsenergy.com/investor-relations, a channel of distribution for material information. Information contained on CMS Energy’s website is not incorporated herein. CMS Energy’s and Consumers’ annual reports on Form 10‑K, quarterly reports on Form 10‑Q, current reports on Form 8‑K, and any amendments to those reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act are accessible free of charge on CMS Energy’s website. These reports are available soon after they are electronically filed with the SEC. Also on CMS Energy’s website are CMS Energy’s and Consumers’:
•Corporate Governance Principles
•Articles of Incorporation
•Bylaws
•Charters and Codes of Conduct (including the Charters of the Audit Committee, Compensation and Human Resources Committee, Finance Committee, and Governance, Sustainability and Public Responsibility Committee, as well as the Employee, the Board, and Third Party Codes of Conduct)
CMS Energy will provide this information in print to any stockholder who requests it.
The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address is www.sec.gov.
Item 1A. Risk Factors
CMS Energy and Consumers are exposed to a variety of factors, often beyond their control, that are difficult to predict and that involve uncertainties that may materially adversely affect CMS Energy’s or Consumers’ business, liquidity, financial condition, or results of operations. Additional risks and uncertainties not presently known or that management believes to be immaterial may also adversely affect CMS Energy or Consumers. The risk factors described in the following sections, as well as the other information included in this report and in other documents filed with the SEC, should be considered carefully before making an investment in securities of CMS Energy or Consumers. Risk factors of Consumers are also risk factors of CMS Energy.
Investment/Financial Risks
CMS Energy depends on dividends from its subsidiaries to meet its debt service obligations.
Due to its holding company structure, CMS Energy depends on dividends from its subsidiaries to meet its debt service and other payment obligations. If sufficient dividends were not paid to CMS Energy by its subsidiaries, CMS Energy might not be able to generate the funds necessary to fulfill its payment obligations.
Consumers’ ability to pay dividends or acquire its own stock from CMS Energy is limited by restrictions contained in Consumers’ preferred stock provisions and potentially by other legal restrictions, such as certain terms in its articles of incorporation and FERC requirements.
39
CMS Energy has indebtedness that could limit its financial flexibility and its ability to meet its debt service obligations.
The level of CMS Energy’s present and future indebtedness could have several important effects on its future operations, including, among others, that:
•a significant portion of CMS Energy’s cash flow from operations could be dedicated to the payment of principal and interest on its indebtedness and would not be available for other purposes
•covenants contained in CMS Energy’s existing debt arrangements, which require it to meet certain financial tests, could affect its flexibility in planning for, and reacting to, changes in its business
•CMS Energy’s ability to obtain additional financing for working capital, capital expenditures, acquisitions, and general corporate and other purposes could become limited
•CMS Energy could be placed at a competitive disadvantage to its competitors that are less leveraged
•CMS Energy’s vulnerability to adverse economic and industry conditions could increase
•CMS Energy’s future credit ratings could fluctuate
CMS Energy’s ability to meet its debt service obligations and to reduce its total indebtedness will depend on its future performance, which will be subject to general economic conditions, industry cycles, changes in laws or regulatory decisions, and financial, business, and other factors affecting its operations, many of which are beyond its control. CMS Energy cannot make assurances that its businesses will continue to generate sufficient cash flow from operations to service its indebtedness, which could require CMS Energy to sell assets or obtain additional financing.
CMS Energy and Consumers have financing needs and could be unable to obtain bank financing or access the capital markets.
CMS Energy and Consumers rely on the capital markets, as well as on bank syndications, to meet their financial commitments and short-term liquidity needs not otherwise funded internally.
Disruptions in the capital and credit markets, or the inability to obtain required regulatory authorization for issuances of securities including debt, including as may be required from FERC, could adversely affect CMS Energy’s and Consumers’ access to liquidity needed for their businesses. Any liquidity disruption could require CMS Energy and Consumers to take measures to conserve cash including, but not limited to, deferring capital expenditures, changing commodity purchasing strategies to avoid collateral-posting requirements, and reducing or eliminating future share repurchases, dividend payments, or other discretionary uses of cash.
Entering into new financings is subject in part to capital market receptivity to utility industry securities in general and to CMS Energy’s and Consumers’ securities in particular. CMS Energy and Consumers continue to explore financing opportunities to supplement their respective financial strategies. These potential opportunities include refinancing and/or issuing new debt, issuing CMS Energy preferred stock and/or common equity, or entering into commercial paper, bank financing, and leasing arrangements. CMS Energy and Consumers cannot guarantee the capital markets’ acceptance of their securities. CMS Energy and Consumers may also, from time to time, repurchase (either in open market transactions or through privately negotiated transactions), redeem, or otherwise retire outstanding debt. Such activities, if any, will depend on prevailing market conditions, contractual restrictions, and other factors. The amounts involved may or may not be material.
40
Certain of CMS Energy’s and Consumers’ securities and those of their affiliates are rated by various credit rating agencies. A reduction or withdrawal of one or more of its credit ratings could have a material adverse impact on CMS Energy’s or Consumers’ ability to access capital on acceptable terms and maintain commodity lines of credit, could increase their cost of borrowing, and could cause CMS Energy or Consumers to reduce capital expenditures. If either or both were unable to maintain commodity lines of credit, CMS Energy or Consumers might have to post collateral or make prepayments to certain suppliers under existing contracts. Further, since Consumers provides dividends to CMS Energy, any adverse developments affecting Consumers that result in a lowering of its credit ratings could have an adverse effect on CMS Energy’s credit ratings.
Market performance and other changes could decrease the value of employee benefit plan assets, which then could require substantial funding.
The performance of various markets affects the value of assets that are held in trust to satisfy future obligations under CMS Energy’s and Consumers’ pension and postretirement benefit plans. CMS Energy and Consumers have significant obligations under these plans and hold significant assets in these trusts. These assets are subject to market fluctuations and will yield uncertain returns, which could fall below CMS Energy’s and Consumers’ forecasted return rates. A decline in the market value of the assets or a change in the level of interest rates used to measure the required minimum funding levels could significantly increase the funding requirements of these obligations. Also, changes in demographics, including an increased number of retirements or changes in life expectancy assumptions, could significantly increase the funding requirements of the obligations related to the pension and postretirement benefit plans.
Industry/Regulatory Risks
Changes to ROA could have a material adverse effect on CMS Energy’s and Consumers’ businesses.
Michigan law allows electric customers in Consumers’ service territory to buy electric generation service from alternative electric suppliers in an aggregate amount capped at 10 percent of Consumers’ sales, with certain exceptions. The proportion of Consumers’ electric deliveries under the ROA program and on the ROA waiting list is over 10 percent. Consumers’ rates are regulated by the MPSC, while alternative electric suppliers charge market-based rates, putting competitive pressure on Consumers’ electric supply. Groups are advocating for an ROA-like community solar program that allows third parties to sell directly to customers and offer them a regulated bill credit. Groups are advocating for an ROA-like community solar system that allows third parties to sell directly to customers and offer them a regulated bill credit. If the amount of ROA sales increased, this new ROA‑like community solar program were allowed, or electric generation service in Michigan were further deregulated, it could have a material adverse effect on CMS Energy and Consumers. If the ROA limit were increased, this new ROA-like community solar system were allowed, or electric generation service in Michigan were deregulated, it could have a material adverse effect on CMS Energy and Consumers.
FERC issued an advance notice of proposed rulemaking in response to the Secretary of the DOE’s direction to FERC to consider the advance notice of proposed rulemaking as a means to standardize and expedite interconnection procedures and agreements for large electric loads. If FERC asserts jurisdiction over the distribution components of large-load customers’ interconnections to the transmission system, or allows large-load customers to directly purchase electricity from wholesale markets, it could have a material adverse effect on CMS Energy and Consumers.
The creation of utilities by municipalities in Consumers’ service territory, or the impairment of Consumers’ franchise rights to serve customers in municipalities, could have a material adverse effect on CMS Energy’s and Consumers’ businesses.
Michigan law allows Consumers’ electric and natural gas utility businesses to serve customers pursuant to franchises granted by municipalities. Michigan law also allows municipalities to create, own, and operate
41
utilities. If one or more municipalities in Consumers’ service territory created a new or supplemental utility, or impaired the franchise under which Consumers serves customers in the municipality, it could have a material adverse effect on CMS Energy and Consumers.
Distributed energy resources could have a material adverse effect on CMS Energy’s and Consumers’ businesses.
Michigan law allows customers to use distributed energy resources for their electric energy needs. These distributed energy resources are connected to Consumers’ electric grid. The 2023 Energy Law increases the cap on Consumers’ distributed generation program to 10 percent of utilities’ peak loads. The 2023 Energy Law increases the cap on distributed generation to ten percent of utilities’ peak loads. It also specifies an inflow and outflow rate method that must be implemented by the MPSC. It also specifies an inflow and outflow rate method that must be implemented by the MPSC and provides federal funding for low-income distributed generation. FERC policy allows many customer-owned behind-the-meter and grid-connected distributed energy resources to participate in and receive revenue from wholesale electricity markets, as governed by evolving wholesale market rules subject to FERC oversight. Increased customer use of distributed energy resources could result in a reduction of Consumers’ electric sales. Third parties’ operations of distributed energy resources could also potentially have a negative impact on the stability of the grid. An increase in customers’ use of distributed energy resources, and the rate structure for distributed energy resources customers’ use of Consumers’ system and Consumers’ purchases of their excess generation, could have a material adverse effect on CMS Energy and Consumers.
CMS Energy and Consumers are subject to rate regulation, which could have a material adverse effect on financial results.
CMS Energy and Consumers are subject to rate regulation. Consumers’ electric and gas retail rates are set by the MPSC and cannot be changed without regulatory authorization. If rate regulators fail to provide adequate rate relief, it could have a material adverse effect on Consumers or Consumers’ plans for making significant capital investments. Additionally, increasing rates could result in additional regulatory scrutiny, regulatory or legislative actions, and increased competitive or political pressures, all of which could have a material adverse effect on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations.
Orders of the MPSC could limit recovery of costs of providing service. These orders could also result in adverse regulatory treatment of other matters. For example, MPSC orders could prevent or curtail Consumers from shutting off non‑paying customers, could prevent or limit the implementation of an electric or gas revenue mechanism, or could penalize Consumers for not meeting service and reliability standards. Regulators could face competitive or political pressures to avoid or limit rate increases for a number of reasons, including affordability concerns, economic downturn, reliability and economic justice concerns, or decreased customer base, among others. Regulators could face competitive or political pressures to avoid or limit rate increases for a number of reasons, including economic downturn in the state, reliability and economic justice concerns, or decreased customer base, among others.
FERC authorizes certain subsidiaries of CMS Energy, including Consumers, to sell wholesale electricity at market-based rates and to provide certain other wholesale electric services at rates and terms subject to FERC approval. Failure of these subsidiaries to maintain this FERC authority could have a material adverse effect on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. Electric transmission and natural gas pipeline rates paid by Consumers and other CMS Energy subsidiaries are also set by FERC, as are the tariff terms governing the participation of Consumers and other CMS Energy subsidiaries in FERC-regulated wholesale electricity markets operated by regional transmission organizations and independent system operators such as MISO and PJM. At least one CMS Energy subsidiary participates in the wholesale electricity markets operated by ERCOT, over which FERC has limited control.
Consumers also faces regulatory uncertainty resulting from the U.S. Secretary of Energy’s emergency orders issued under the Federal Power Act and associated DOE regulations, which direct continued
42
operation of the J.H. Campbell, as well as similar prior or future executive actions, including the January 2025 and April 2025 executive orders related to energy supply and reliability. The Federal Power Act, DOE regulations, and U.S. Secretary of Energy emergency orders all provide for cost recovery associated with continued operations, but there is not currently a FERC-approved MISO Tariff for recovery of compliance costs associated with the continued operation of J.H. Campbell, and continued operation of J.H. Campbell is not contemplated in Consumers’ current MPSC rates or rate filings at the MPSC. Consumers is pursuing cost recovery at FERC but cannot predict the outcome of those efforts or the impact of other executive actions.
The various risks associated with the MPSC and FERC regulation of CMS Energy’s and Consumers’ businesses, which include the risk of adverse decisions in any number of rate or regulatory proceedings before either agency, as well as judicial proceedings challenging any agency decisions, could have a material adverse effect on CMS Energy and Consumers. Changes to the tariffs or business practice manuals of certain wholesale market operators such as MISO, PJM, or ERCOT, or corresponding impacts such as interconnection delays for new electric generation or storage projects, could also have a material adverse effect on CMS Energy and Consumers. Changes to the tariffs or business practice manuals of certain wholesale market operators such as MISO, PJM, or ERCOT, or corresponding impacts 41Table of Contentssuch as interconnection delays for new electric generation or storage projects, could also have a material adverse effect on CMS Energy and Consumers.
Utility regulation, state or federal legislation, regulation, and compliance could have a material adverse effect on CMS Energy’s and Consumers’ businesses.Utility regulation, state or federal legislation, and compliance could have a material adverse effect on CMS Energy’s and Consumers’ businesses.
CMS Energy and certain of its subsidiaries, including Consumers, are subject to, or affected by, extensive utility regulation and state and federal legislation and regulation, including through application of policies and rules of numerous state and federal agencies and governmental entities.CMS Energy and certain of its subsidiaries, including Consumers, are subject to, or affected by, extensive utility regulation and state and federal legislation, including through application of policies and rules of numerous state and federal agencies and governmental entities. If it were determined that CMS Energy or Consumers failed to comply with applicable laws and regulations or with applicable tariff provisions, they could become subject to fines, penalties, refund or disgorgement orders, or disallowed costs, or be required to implement additional compliance, cleanup, or remediation programs, the cost of which could be material. CMS Energy and Consumers cannot predict the impact of new laws, rules, regulations, tariffs, principles, orders, or practices by federal or state agencies or wholesale electricity market operators, or challenges or changes to present laws, rules, regulations, tariffs, principles, orders, or practices and the interpretation of any adoption or change. CMS Energy and Consumers cannot predict the impact of new laws, rules, regulations, tariffs, principles, or practices by federal or state agencies or wholesale electricity market operators, or challenges or changes to present laws, rules, regulations, tariffs, principles, or practices and the interpretation of any adoption or change. Furthermore, any state or federal legislation, regulation, order, or other action concerning CMS Energy’s or Consumers’ operations could also have a material adverse effect. Furthermore, any state or federal legislation concerning CMS Energy’s or Consumers’ operations could also have a material adverse effect.
FERC, through NERC and its delegated regional entities, oversees reliability of certain portions of the electric grid. CMS Energy and Consumers cannot predict the impact of the DOE or FERC orders or actions of NERC and its regional entities on electric system reliability. CMS Energy and Consumers cannot predict the impact of FERC orders or actions of NERC and its regional entities on electric system reliability. Additionally, natural gas pipeline infrastructure has recently been under scrutiny following disruptions related to extreme weather and cyber incidents. Additional regulation in this area could adversely affect Consumers’ gas operations.
CMS Energy and Consumers have announced ambitious plans to reduce their impact on climate change and increase the reliability of their electric distribution system. Achieving these plans depends on numerous factors, many of which are outside of their control.
Consumers has announced a long-term strategy for delivering clean, reliable, resilient, and affordable energy, and other subsidiaries of CMS Energy have plans to develop and operate clean energy assets.Consumers has announced a long-term strategy for delivering clean, reliable, resilient, and affordable energy, including a plan to end the use of coal in owned generation in 2025, and other subsidiaries of CMS Energy have plans to develop and operate clean energy assets. The MPSC, FERC, other regulatory authorities, or other third parties may prohibit, delay, or impair some or all of CMS Energy’s and Consumers’ planned acquisitions or development of owned or purchased electric generation and storage capacity. Consumers’ planned electric generation capacity, including renewable generation or storage projects, may be adversely impacted by interconnection delays at MISO or in the footprints of other regional transmission organizations, and/or by interconnection costs. CMS Energy and Consumers and its contractors may be unable to acquire, site, construct timely, and/or permit generation and storage capacity, including some or all of the generation and storage capacity
43
proposed in Consumers’ plan. CMS Energy and Consumers’ ability to implement their plans may be affected by environmental regulations, global supply chain disruptions, import tariffs, and changes in the cost, availability, and supply of generation and storage capacity. While CMS Energy and Consumers continue to advocate for advances in commercially available technologies required to reduce or eliminate greenhouse gases on a cost-effective basis at scale, such advances are largely outside of CMS Energy’s and Consumers’ control. Advancements in technology related to items such as battery storage, carbon capture/storage, and electric vehicles may not become commercially available or economically feasible as projected. Customer programs such as energy efficiency and demand response may not realize the projected levels of customer participation.
Consumers has also announced its electric Reliability Roadmap. The Reliability Roadmap includes larger investments in grid hardening, distribution capacity, and automation to deliver better than median reliability to customers given increasingly severe weather and customer adoption of new technologies. The MPSC or other third parties may prohibit, delay, or impair the Reliability Roadmap and some or all of the associated capital investments. The MPSC or other third parties may prohibit, delay, or impair the Reliability Roadmap and some or all 42Table of Contentsof the associated capital investments. Consumers’ ability to implement its plan may be affected by global supply chain disruptions and/or workforce availability.
Consumers has also announced its Natural Gas Delivery Plan, a rolling ten‑year investment plan to deliver safe, reliable, clean, and affordable natural gas to customers. This plan includes accelerated infrastructure replacements, innovative leak detection technology, and process changes to reduce or eliminate methane emissions. The MPSC, FERC, U.S. Department of Transportation, other regulatory authorities, or other third parties may prohibit, delay, or impair the Natural Gas Delivery Plan and some or all of the associated capital investments. Consumers’ ability to implement its plan may be affected by environmental regulations, global supply chain disruptions, import tariffs, and changes in the cost, availability, and supply of natural gas or the ability to deliver natural gas to customers. Advancements in technology related to items such as renewable natural gas may not become commercially available or economically feasible as projected in Consumers’ plan.
CMS Energy and Consumers could suffer financial loss, reputational damage, litigation, or other negative repercussions if they are unable to achieve their ambitious plans.
Changes in taxation as well as the inherent difficulty in quantifying potential tax effects of business decisions could negatively impact CMS Energy and Consumers.
CMS Energy and Consumers are required to make judgments regarding the potential tax effects of various financial transactions and results of operations in order to estimate their obligations to taxing authorities. The tax obligations include income taxes, real estate taxes, sales and use taxes, employment-related taxes, and ongoing issues related to these tax matters. The judgments include determining reserves for potential adverse outcomes regarding tax positions that have been taken and may be subject to challenge by the IRS and/or other taxing authorities. Unfavorable settlements of any of the issues related to these reserves or other tax matters at CMS Energy or Consumers could have a material adverse effect. Additionally, changes in federal, state, or local tax rates or other changes in tax laws could have adverse impacts. In July 2025, President Trump signed the OBBBA into law. CMS Energy and Consumers evaluated the provisions of the OBBBA and concluded that the legislation is not expected to have a material impact on their respective financial statements. This conclusion is subject to change as additional guidance or interpretations become available.
44
CMS Energy and its subsidiaries, including Consumers, must comply with the Dodd-Frank Act and its related regulations.
The Dodd-Frank Act provides for regulation by the Commodity Futures Trading Commission of certain commodity-related contracts. Although CMS Energy, Consumers, and certain subsidiaries of NorthStar Clean Energy qualify for an end-user exception from mandatory clearing of commodity-related swaps, these regulations could affect the ability of these entities to participate in these markets and could add additional regulatory oversight over their contracting activities.
CMS Energy and Consumers could incur substantial costs to comply with environmental requirements.
CMS Energy and Consumers are subject to costly and stringent environmental regulations that may require additional significant capital expenditures for CCR disposal and storage, emission reductions, and PCB remediation. In addition, regulatory action on PFAS at the state and/or federal level could cause CMS Energy and Consumers to further test and remediate some sites if PFAS is present at certain levels. Present and reasonably anticipated state and federal environmental statutes and regulations will continue to have a material effect on CMS Energy and Consumers.
CMS Energy and Consumers have interests in fossil-fuel-fired power plants, other types of power plants, and natural gas systems that emit greenhouse gases.43Table of ContentsCMS Energy and Consumers have interests in fossil-fuel-fired power plants, other types of power plants, and natural gas systems that emit greenhouse gases. Federal, state, and local environmental laws, regulations and orders, as well as international accords and treaties, could require CMS Energy and Consumers to install additional equipment for emission controls, undertake heat-rate improvement projects, purchase carbon emissions allowances, curtail or extend operations, invest in generating capacity with fewer carbon dioxide emissions, or take other significant steps to manage or lower the emission of greenhouse gases. Federal, state, and local environmental laws and rules, as well as international accords and treaties, could require CMS Energy and Consumers to install additional equipment for emission controls, undertake heat-rate improvement projects, purchase carbon emissions allowances, curtail operations, invest in generating capacity with fewer carbon dioxide emissions, or take other significant steps to manage or lower the emission of greenhouse gases. Similarly, Consumers could be restricted from constructing natural gas infrastructure due to potential environmental regulations, which could require more costly alternatives.
The following risks related to climate change, emissions, and environmental regulations could also have a material adverse impact on CMS Energy and Consumers:
•a change in policy/regulation, regulators’ implementation of policy/regulation or litigation originated by third parties against CMS Energy or Consumers due to CMS Energy’s or Consumers’ greenhouse gas or other emissions or CCR disposal and storage
•impairment of CMS Energy’s or Consumers’ reputation due to their greenhouse gas or other emissions and public perception of their response to potential environmental regulations, rules, orders, and legislation
•weather that may affect customer demand, company operations, or company infrastructure, including catastrophic weather-related damage and extreme temperatures; natural disasters such as severe storms, floods, and droughts; fires; or smoke
•implementation of state or federal environmental justice requirements
Consumers expects to collect fully from its customers, through the ratemaking process, expenditures incurred to comply with environmental regulations, but cannot guarantee this outcome. There is not currently a FERC-approved MISO Tariff for recovery of compliance costs associated with the continued operation of J.H. Campbell, and continued operation of J.H. Campbell is not contemplated in Consumers’ current MPSC rates or rate filings at the MPSC. Consumers is pursuing cost recovery at FERC but cannot predict the outcome of those efforts or the impact of other executive actions. If Consumers were unable to recover these expenditures from customers in rates, CMS Energy or Consumers could be required to seek significant additional financing to fund these expenditures.
45
For additional information regarding compliance with environmental regulations, see Item 1. Business—CMS Energy and Consumers Environmental Strategy and Compliance and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook.
CMS Energy’s and Consumers’ businesses could be affected adversely by any delay in meeting environmental requirements.
A delay or failure by CMS Energy or Consumers to obtain or maintain any necessary environmental permits or approvals to satisfy any applicable environmental regulatory requirements or install emission or pollution control equipment could:
•prevent the construction of new facilities
•prevent the continued operation of and sale of energy from existing facilities
•modify the way in which a facility is operated
•prevent the suspension of operations at existing facilities
•prevent the modification of existing facilities
•result in significant additional costs, including fines or penalties
CMS Energy and Consumers expect to incur additional substantial costs related to environmental remediation of former sites.
Consumers expects to incur additional substantial costs related to the remediation of its former MGP sites and other response activity costs at a number of other former sites, including, but not limited to, sites of retired coal-fueled electric generating units and sites containing coal ash and related materials, under NREPA, RCRA, CERCLA and related state and federal regulations. Consumers believes these costs should be recoverable in rates but cannot guarantee that outcome.
Business/Operations Risks
There are risks associated with Consumers’ substantial capital investment program planned for the next five years.
Consumers’ planned investments include the construction or acquisition of electric generation, electric and gas infrastructure, conversions and expansions, environmental controls, electric grid automation technologies, and other electric and gas investments to upgrade delivery systems, as well as decommissioning of older facilities. The success of these capital investments depends on or could be affected by a variety of factors that include, but are not limited to:
•effective pre-acquisition evaluation of asset values, future operating costs, potential environmental and other liabilities, and other factors beyond Consumers’ control
•effective cost and schedule management of new capital projects
•availability of qualified construction personnel, both internal and contracted
•effective and timely contractor performance
•changes in commodity and other prices, applicable tariffs, and/or material and equipment availability
•governmental actions
•interconnection uncertainty, delays, and costs for electric generation projects
46
•operational performance
•changes in environmental, legislative, and regulatory requirements
•regulatory cost recovery
•inflation of labor rates and material and equipment prices
•supply chain disruptions and increased lead times
•barriers to accessing key materials for renewable projects (solar, battery, and other key equipment) created by geopolitical relations
It is possible that adverse events associated with these factors could have a material adverse effect on Consumers.
CMS Energy and Consumers could be affected adversely by legacy litigation and retained liabilities.
The agreements that CMS Energy and Consumers enter into for the sale of assets can include provisions whereby they are required to:
•retain specified preexisting liabilities, such as for taxes, pensions, or environmental conditions
•indemnify the buyers against specified risks, including the inaccuracy of representations and warranties that CMS Energy and Consumers make
•make payments to the buyers depending on the outcome of post-closing adjustments, litigation, audits, or other reviews, including claims resulting from attempts by foreign or domestic governments to assess taxes on past operations or transactions
Many of these contingent liabilities can remain open for extended periods of time after the sales are closed. Depending on the extent to which the buyers might ultimately seek to enforce their rights under these contractual provisions, and the resolution of any disputes concerning them, there could be a material adverse effect on CMS Energy’s or Consumers’ liquidity, financial condition, and results of operations.
Consumers is exposed to risks related to general economic conditions in its service territories.45Table of ContentsConsumers is exposed to risks related to general economic conditions in its service territories.
Consumers’ electric and gas utility businesses are affected by the economic conditions impacting the customers they serve. If the Michigan economy becomes sluggish or declines, Consumers could experience reduced demand for electricity or natural gas that could result in decreased earnings and cash flow. In addition, economic conditions in Consumers’ service territory affect its collections of accounts receivable and levels of lost or stolen gas.
Consumers is exposed to changes in customer usage that could impact financial results.
Technology advances, government incentives and subsidies, and regulatory decisions could increase the cost effectiveness of customer-owned methods of producing electricity and managing energy use resulting in reduced load, cross subsidization, and increased costs.
Customers could also reduce their consumption of electricity and natural gas through energy waste reduction programs. Similarly, customers could also reduce their consumption of natural gas through alternative technologies or fuels or through electrification.
CMS Energy’s and Consumers’ energy sales and operations are affected by seasonal factors and varying weather conditions from year to year.
CMS Energy’s and 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
47
resulting use of natural gas as heating fuel. Accordingly, CMS Energy’s and Consumers’ overall results may fluctuate substantially on a seasonal basis. Mild temperatures during the summer cooling season and winter heating season as well as the impact of extreme weather events on Consumers’ system could have a material adverse effect.
Demand for electricity associated with data center expansion could have a material effect on CMS Energy and Consumers.
Consumers’ utility operations are affected by new customers and load growth. Rapid expansion of data centers associated with increasing demand for cloud services, artificial intelligence, and other applications could lead to an unprecedented increase in demand for electric power in MISO and in Consumers’ service territory. Data center electric demand could require a rapid and significant increase in generation capacity and grid infrastructure in the MISO footprint as well as in Consumers’ service territory, which could have a material effect on CMS Energy and Consumers.
Alternatively, this rapid expansion of data centers and resulting increase in demand for electric power in MISO and in Consumers’ service territory may not develop as anticipated. Efforts to attract data center developers could be unsuccessful as other utilities and regions compete for these projects, which may limit future load growth. In addition, local zoning, permitting, land‑use constraints, and other external factors outside Consumers’ control could impede data center development. If these challenges arise and cannot be effectively mitigated, the anticipated benefits of data center load growth may not materialize. Further, even when data center customers enter into contracts to purchase utility service, there is a risk they may not fulfill their contractual or tariff obligations.
CMS Energy and Consumers are subject to information security risks, risks of unauthorized access to their systems, and technology failures.
In the regular course of business, CMS Energy and Consumers handle a range of sensitive confidential security and customer information. In addition, CMS Energy and Consumers operate in a highly regulated industry that requires the continued operation of sophisticated information and control technology systems and network infrastructure. Despite implementation of security measures, technology systems, including disaster recovery and backup systems, are vulnerable to failure, cyber attacks, unauthorized access, and being disabled. These events could impact the reliability of electric generation and electric and gas delivery and also subject CMS Energy and Consumers to financial harm. Cyber attacks, which include the use of malware, ransomware, computer viruses, and other means for disruption or unauthorized access against companies, including CMS Energy and Consumers, are increasing in frequency, scope, and potential impact. Cyber attacks, which include the use of malware, ransomware, computer viruses, and other means for disruption or 46Table of Contentsunauthorized access against companies, including CMS Energy and Consumers, are increasing in frequency, scope, and potential impact. While CMS Energy and Consumers have not been subject to cyber incidents that have had a material impact on their operations to date, their security measures in place may be insufficient to prevent a major cyber incident in the future. If technology systems, including disaster recovery and backup systems, were to fail or be breached, CMS Energy and Consumers might not be able to fulfill critical business functions, and sensitive confidential and proprietary data could be compromised. In addition, because CMS Energy’s and Consumers’ generation, transmission, and distribution systems are part of an interconnected system, a disruption caused by a cyber incident at another utility, electric generator, system operator, or commodity supplier could also adversely affect CMS Energy or Consumers.
A variety of technological tools and systems, including both company-owned IT and technological services provided by outside parties, support critical functions.A variety of technological tools and systems, including both company-owned information technology and technological services provided by outside parties, support critical functions. The failure of these technologies, including backup systems, or the inability of CMS Energy and Consumers to have these technologies supported, updated, expanded, or integrated into other technologies, could hinder their business operations.
48
CMS Energy’s and Consumers’ businesses have liability risks.
Assets, equipment, and personnel of CMS Energy and Consumers, including electric and gas delivery systems, power plants, gas infrastructure including storage facilities, wind energy or solar equipment, energy products, energy storage assets, vehicle fleets and equipment, other assets, or employees and contractors, could be involved in incidents, failures, or accidents that result in injury, loss of life, or property loss and damage to customers, employees, or the public. Although CMS Energy and Consumers have insurance coverage for many potential incidents (subject to deductibles, limitations, and self‑insurance amounts that could be material), depending upon the nature or severity of any incident, failure, or accident, CMS Energy or Consumers could suffer financial loss, reputational damage, and negative repercussions from regulatory agencies or other public authorities, even where there is no legal liability.
CMS Energy and Consumers are subject to risks that are beyond their control, including but not limited to natural disasters, civil unrest, terrorist attacks and related acts of war, cyber incidents, vandalism, and other catastrophic events.
Natural disasters, severe weather, extreme temperatures, wildfires, fires, smoke, flooding, wars, terrorist acts, civil unrest, vandalism, theft, cyber incidents, government shutdowns, pandemics, and other catastrophic events could result in severe damage to CMS Energy’s and Consumers’ assets beyond what could be recovered through insurance policies (which are subject to deductibles, limitations, and self‑insurance amounts that could be material), could require CMS Energy and Consumers to incur significant upfront costs, and could severely disrupt operations, resulting in loss of service to customers.Natural disasters, severe weather, extreme temperatures, fires, smoke, flooding, wars, terrorist acts, civil unrest, vandalism, theft, cyber incidents, pandemics, and other catastrophic events could result in severe damage to CMS Energy’s and Consumers’ assets beyond what could be recovered through insurance policies (which are subject to deductibles, limitations, and self-insurance amounts that could be material), could require CMS Energy and Consumers to incur significant upfront costs, and could severely disrupt operations, resulting in loss of service to customers. There is also a risk that regulators could, after the fact, conclude that Consumers’ preparedness or response to such an event was inadequate and take adverse actions as a result.
Energy risk management strategies might not be effective in managing fuel and electricity pricing risks, which could result in unanticipated liabilities to CMS Energy and Consumers or increased volatility in their earnings.
CMS Energy and Consumers are exposed to changes in market prices for commodities including, but not limited to, natural gas, coal, electric capacity, electric energy, emission allowances, gasoline, diesel fuel, and RECs. CMS Energy and Consumers manage commodity price risk using established policies and procedures, and they may use various contracts to manage this risk, including swaps, options, futures, and forward contracts. No assurance can be made that these strategies will be successful in managing CMS Energy’s and Consumers’ risk or that they will not result in net liabilities to CMS Energy or Consumers as a result of future volatility. No assurance can be made that these strategies will be successful in managing 47Table of ContentsCMS Energy’s and Consumers’ risk or that they will not result in net liabilities to CMS Energy or Consumers as a result of future volatility.
A substantial portion of Consumers’ operating expenses for its electric generating plants and vehicle fleet consists of the costs of obtaining commodities. The contracts associated with Consumers’ fuel for electric generation and purchased power are executed in conjunction with the PSCR mechanism, which is designed to allow Consumers to recover prudently incurred costs associated with its positions in these commodities. If the MPSC determined that any of these contracts or related contracting policies were imprudent, recovery of these costs could be disallowed.
Natural gas prices in particular have been historically volatile. Consumers routinely enters into contracts for natural gas to mitigate exposure to the risks of demand, market effects of weather, and changes in commodity prices associated with the gas distribution business. These contracts are executed in conjunction with the GCR mechanism, which is designed to allow Consumers to recover prudently incurred costs associated with its natural gas positions. If the MPSC determined that any of these contracts or related contracting policies were imprudent, recovery of these costs could be disallowed.
49
CMS Energy and Consumers do not always hedge any or all of the exposure of their operations from commodity price volatility. Furthermore, the ability to hedge exposure to commodity price volatility depends on liquid commodity markets. As a result, to the extent the commodity markets are illiquid, CMS Energy and Consumers might not be able to execute their risk management strategies, which could result in larger unhedged positions than preferred at a given time. To the extent that unhedged positions exist, fluctuating commodity prices could have a negative effect on CMS Energy and Consumers. Changes in laws that limit CMS Energy’s and Consumers’ ability to hedge could also have a negative effect on CMS Energy and Consumers.
CMS Energy and Consumers might not be able to obtain an adequate supply of natural gas or coal, which could limit their ability to operate electric generation facilities or serve Consumers’ natural gas customers.
CMS Energy and Consumers have contracts in place for the supply and transportation of the natural gas, coal, and other fuel sources they require for their electric generating capacity. Consumers also has interstate transportation and supply agreements in place to facilitate delivery of natural gas to its customers. Apart from the contractual and monetary remedies available to CMS Energy and Consumers in the event of a counterparty’s failure to perform under any of these contracts, there can be no assurances that the counterparties to these contracts will fulfill their obligations to provide natural gas or coal to CMS Energy or Consumers. The counterparties under the agreements could experience financial or operational problems that inhibit their ability to fulfill their obligations to CMS Energy or Consumers. In addition, counterparties under these contracts might not be required to supply natural gas or coal to CMS Energy or Consumers under certain circumstances, such as in the event of a natural disaster or severe weather.
If Consumers were unable to obtain its supply requirements, it could be required to purchase natural gas or coal at higher prices, implement its natural gas curtailment program filed with the MPSC, or purchase replacement power at higher prices.
Unplanned outages or maintenance could be costly for CMS Energy or Consumers.
Unforeseen outages or maintenance of the electric and gas delivery systems, power plants, gas infrastructure including storage facilities and compression stations, wind energy or solar equipment, energy storage assets, and energy products owned in whole or in part by CMS Energy or Consumers may be required for many reasons. When unplanned outages occur, CMS Energy and Consumers will not only incur unexpected maintenance expenses, but may also have to make spot market purchases of electric and gas commodities that may exceed CMS Energy’s or Consumers’ expected cost of generation or gas supply, be forced to curtail services, or retire a given asset if the cost or timing of the maintenance is not reasonable and prudent. When unplanned outages occur, CMS Energy and Consumers will not only 48Table of Contentsincur unexpected maintenance expenses, but may also have to make spot market purchases of electric and gas commodities that may exceed CMS Energy’s or Consumers’ expected cost of generation or gas supply, be forced to curtail services, or retire a given asset if the cost or timing of the maintenance is not reasonable and prudent. Unplanned generator outages could reduce the capacity credit CMS Energy or Consumers receives from MISO and could cause CMS Energy or Consumers to incur additional capacity costs in future years.
General Risk Factors
CMS Energy and Consumers are exposed to counterparty risk.
Adverse economic conditions or financial difficulties experienced by counterparties with whom CMS Energy and Consumers do business could impair the ability of these counterparties to pay for CMS Energy’s and Consumers’ services and/or fulfill their contractual obligations, including performance and payment of damages. CMS Energy and Consumers depend on these counterparties to remit payments and perform contracted services in a timely and adequate fashion. In addition, any delay or default in payment or performance, including inadequate performance, of contractual obligations (such
50
as contractual obligations by third parties to purchase utility services, perform work, supply equipment, provide services, and meet related specifications or requirements), could have a material adverse effect on CMS Energy and Consumers.
Volatility and disruptions in capital and credit markets could have a negative impact on CMS Energy’s and Consumers’ lenders, vendors, contractors, suppliers, customers, and other counterparties, causing them to fail to meet their obligations.
CMS Energy and Consumers are exposed to significant reputational risks.
CMS Energy and Consumers could suffer negative impacts to their reputations as a result of operational incidents, accidents, actual or perceived violations of corporate policies or regulatory violations, inappropriate use of social media, or other events. Reputational damage could have a material adverse effect and could result in negative customer perception and increased regulatory oversight.
A work interruption or other union actions could adversely affect CMS Energy and Consumers.
At December 31, 2025, unions represent 45 percent of Consumers’ employees and 22 percent of NorthStar Clean Energy’s employees.At December 31, 2024, unions represent 46 percent of Consumers’ employees. Consumers’ union agreements expire in 2030 and the majority of NorthStar Clean Energy’s represented employees have an agreement that expires in 2029. If these employees were to engage in a strike, work stoppage, or other slowdown, CMS Energy or Consumers could experience a significant disruption in its operations and higher ongoing labor costs.
Failure to attract and retain an appropriately qualified workforce could adversely impact CMS Energy’s and Consumers’ results of operations.
In some areas, competition for skilled employees is high and if CMS Energy and Consumers were unable to match skill sets to future needs, they could encounter operating challenges and increased costs. These challenges could include a lack of resources, loss of knowledge, and delays in skill development. Additionally, higher costs could result from the use of contractors to replace employees, loss of productivity, and safety incidents. Failing to train replacement employees adequately and to transfer internal knowledge and expertise could adversely affect CMS Energy’s and Consumers’ ability to manage and operate their businesses.
Item 1B.Item 1A. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Enterprise Risk Management: CMS Energy and Consumers manage security risks, including cybersecurity risks, through a robust enterprise risk management program that includes people, processes, technology, and governance structures. The enterprise risk management program identifies risks that may significantly impact the business and informs the companies’ risk-mitigation strategies. The enterprise risk management program is reviewed with the Board at least annually.
Cybersecurity Program: CMS Energy’s and Consumers’ security function, led by the Vice President of IT and Security and CIO , is accountable for cyber and physical security and is subject to various state, federal, and industry cybersecurity, physical security, and privacy regulations. Their cybersecurity program is responsible for assessing, identifying, and managing risks from cybersecurity threats using industry frameworks, as well as best practices developed by government and industry partners.
51
topics. Additionally, the companies continuously upgrade technological investments designed to prevent, detect, and respond to attacks. The companies’ electric, natural gas, and corporate systems each follow standards, controls, and requirements designed to maintain compliance with applicable regulations and standards, such as MPSC, NERC critical infrastructure protection, and payment card industry regulations. Technology projects and third-party service providers are reviewed for adherence to cybersecurity requirements .
CMS Energy’s and Consumers’ cybersecurity program focuses on finding and remediating vulnerabilities in their systems. The companies use third-party firms for penetration testing, audits, and assessments, and conduct technical exercises to practice their response to simulated events as well as tabletop exercises to test that response using their incident command system, including leadership decisions. The companies also have a dedicated, proactive function focused fully on monitoring CMS Energy’s and Consumers’ systems and responding when cybersecurity attacks occur. This includes regular information sharing with industry partners, peer utilities, and state and federal partners. The companies’ incident response plan outlines the individuals responsible, the methods employed, and the timeline for notifying state and federal governmental agencies. The companies retain a third-party cybersecurity firm to assist with potentially significant cybersecurity incidents and have invested in cybersecurity insurance to offset costs incurred from any such cybersecurity incidents. To manage cybersecurity risks associated with the companies’ use of third-party service providers, the companies incorporate security requirements into contracts, when deemed applicable, and pursue third-party security certifications for vendors with a higher risk profile.
Board Oversight: As part of the Board’s risk oversight process, senior management meets with the Board or Audit Committee at least twice annually to provide updates on and discuss cybersecurity. Such updates include a review of the companies’ cybersecurity strategy, a scan of the threat landscape, and recent performance. Additionally, cybersecurity risks are included in the Audit Committee’s risk oversight functions, which focus on operating and financial activities that could impact the companies’ financial and other disclosure reporting. The Audit Committee’s oversight involves reviewing and approving policies on risk assessment, controls, and accounting risk exposure. The Audit Committee also reviews internal audit reports regarding cybersecurity processes, and receives updates that focus on CMS Energy’s and Consumers’ cybersecurity program, mitigation of cybersecurity risks, and assessments by third-party experts. Of note, two members of the Board have extensive industry experience in cybersecurity and are on CMS Energy’s and Consumers’ Audit Committee.
52
Recently Filed
Click on a ticker to see risk factors
| Ticker * | File Date |
|---|---|
| GT | an hour ago |
| CMS | an hour ago |
| L | 4 hours ago |
| CNA | 5 hours ago |
| MAS | 6 hours ago |
| CURB | 6 hours ago |
| CVS | 6 hours ago |
| ACRE | 15 hours ago |
| T | 19 hours ago |
| BE | 20 hours ago |
| SIGI | 20 hours ago |
| UTL | 20 hours ago |
| RXO | 20 hours ago |
| APAD | 20 hours ago |
| ITT | 20 hours ago |
| CLF | 20 hours ago |
| VNO | 20 hours ago |
| ON | 20 hours ago |
| PI | 21 hours ago |
| BSAA | 21 hours ago |
| ZWS | 21 hours ago |
| BRX | 21 hours ago |
| KN | 21 hours ago |
| MRSH | 21 hours ago |
| FCFS | 21 hours ago |
| WM | 21 hours ago |
| NSC | 1 day, 1 hour ago |
| OHI | 1 day, 2 hours ago |
| LADR | 1 day, 4 hours ago |
| ALX | 1 day, 4 hours ago |
| AAT | 3 days, 20 hours ago |
| LVS | 3 days, 20 hours ago |
| RTX | 3 days, 20 hours ago |
| APTV | 3 days, 20 hours ago |
| SYF | 3 days, 21 hours ago |
| POWI | 3 days, 21 hours ago |
| MAA | 3 days, 21 hours ago |
| CHAC | 3 days, 21 hours ago |
| VTR | 3 days, 21 hours ago |
| ELV | 3 days, 22 hours ago |
| MSCI | 3 days, 22 hours ago |
| HNOI | 3 days, 23 hours ago |
| HAL | 3 days, 23 hours ago |
| AXP | 4 days ago |
| RLEA | 4 days, 1 hour ago |
| ATR | 4 days, 1 hour ago |
| MTD | 4 days, 1 hour ago |
| TXN | 4 days, 2 hours ago |
| UNP | 4 days, 3 hours ago |
| OMF | 4 days, 4 hours ago |
