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<SEC-DOCUMENT>0000950124-03-000511.txt : 20030305
<SEC-HEADER>0000950124-03-000511.hdr.sgml : 20030305
<ACCEPTANCE-DATETIME>20030305171113
ACCESSION NUMBER:		0000950124-03-000511
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20030304
ITEM INFORMATION:		Other events
ITEM INFORMATION:		Financial statements and exhibits
FILED AS OF DATE:		20030305

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CONSUMERS ENERGY CO
		CENTRAL INDEX KEY:			0000201533
		STANDARD INDUSTRIAL CLASSIFICATION:	ELECTRIC & OTHER SERVICES COMBINED [4931]
		IRS NUMBER:				380442310
		STATE OF INCORPORATION:			MI
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-05611
		FILM NUMBER:		03593609

	BUSINESS ADDRESS:	
		STREET 1:		212 W MICHIGAN AVE
		CITY:			JACKSON
		STATE:			MI
		ZIP:			49201
		BUSINESS PHONE:		5177881030

	MAIL ADDRESS:	
		STREET 1:		212 W MICHIGAN AVE
		STREET 2:		M 946
		CITY:			JACKSON
		STATE:			MI
		ZIP:			49201

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	CONSUMERS POWER CO
		DATE OF NAME CHANGE:	19920703

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CMS ENERGY CORP
		CENTRAL INDEX KEY:			0000811156
		STANDARD INDUSTRIAL CLASSIFICATION:	ELECTRIC & OTHER SERVICES COMBINED [4931]
		IRS NUMBER:				382726431
		STATE OF INCORPORATION:			MI
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-09513
		FILM NUMBER:		03593610

	BUSINESS ADDRESS:	
		STREET 1:		FAIRLANE PLZ S STE 1100
		STREET 2:		330 TOWN CENTER DR
		CITY:			DEARBORN
		STATE:			MI
		ZIP:			48126
		BUSINESS PHONE:		3134369261

	MAIL ADDRESS:	
		STREET 1:		FAIRLANE PLAZA SOUTH, SUITE 1100
		STREET 2:		330 TOWN CENTER DRIVE
		CITY:			DEARBORN
		STATE:			MI
		ZIP:			48126
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>k75255e8vk.txt
<DESCRIPTION>CURRENT REPORT DATED 03/04/03
<TEXT>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

                                    FORM 8-K

                                 CURRENT REPORT


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


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

         DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) MARCH 4, 2003


COMMISSION         REGISTRANT; STATE OF INCORPORATION;           IRS EMPLOYER
FILE NUMBER           ADDRESS; AND TELEPHONE NUMBER           IDENTIFICATION NO.
- -----------        -----------------------------------        ------------------
   1-9513                CMS ENERGY CORPORATION                  38-2726431
                        (A MICHIGAN CORPORATION)
                    FAIRLANE PLAZA SOUTH, SUITE 1100
                          330 TOWN CENTER DRIVE
                        DEARBORN, MICHIGAN 48126
                             (313) 436-9261


   1-5611               CONSUMERS ENERGY COMPANY                  38-0442310
                        (A MICHIGAN CORPORATION)
                        212 WEST MICHIGAN AVENUE
                            JACKSON, MICHIGAN
                             (517) 788-1030


<PAGE>

ITEM 5. OTHER EVENTS

SECURITIZATION

On March 4, 2003, Consumers Energy Company, the principal subsidiary of CMS
Energy Corporation, filed an application with the Michigan Public Service
Commission (MPSC) to begin the securitization process for approximately $1.084
billion in qualified costs, in compliance with the State of Michigan's electric
restructuring and securitization laws.

The qualified costs Consumers Energy proposes to securitize are:

              -   Expenditures for Clean Air Act compliance totaling $587
                  million;

              -   Required contributions to electric utility pension costs
                  totaling $227 million;

              -   New capital investments in the Palisades Nuclear Plant
                  totaling $113 million;

              -   Costs of implementing Public Act 141, the state's
                  restructuring law, totaling $97 million; and

              -   Costs of preparing and issuing securitization bonds, retiring
                  existing debt, and establishing a cash flow account to make
                  payment on the bonds, totaling $60 million.

Consumers Energy has filed the application at this time since Consumers Energy
plans to refinance $777 million and $780 million of debt in 2003 and 2004,
respectively. In addition, Consumers Energy expects to issue $295 million of new
debt in 2003 and $365 million of new debt in 2004. This additional debt is
required for Consumers Energy's ongoing operations and construction program
including construction expenditures for Clean Air Act compliance. Consumers
Energy also plans to contribute over $150 million in 2003 and over $200 million
in 2004 to its pension funds. Consumers Energy will use proceeds from the sale
of securitization bonds for refinancing or retirement of debt. Approval of the
application will not increase current electric rates for any of Consumers
Energy's customers.

State law requires the MPSC to act on the request within 90 days, meaning that
securitization bonds could be issued as early as August 2003.

STRANDED COSTS

Also on March 4, 2003, Consumers Energy submitted to the MPSC its stranded cost
recovery filing for 2002. Consumers Energy asked to recover $35 million to $103
million in stranded costs or 0.9 cents to 2.6 cents per kilowatt-hour from
customers getting power from alternative suppliers pursuant to Public Act 141,
the State of Michigan's electric restructuring law. The final amount requested
will depend on the MPSC's decision on Consumers Energy's securitization
application. Several of the items that Consumers Energy is requesting to be


<PAGE>

considered stranded costs, it has also requested to be considered as qualified
costs under its securitization application. If Consumers Energy's securitization
application is approved in full, then its stranded cost filing will only request
$35 million of stranded cost recovery.

Copies of the securitization application (exclusive of accompanying testimony
and exhibits) of Consumers Energy to the MPSC (Case No. U-13715) and the
stranded cost application (exclusive of accompanying testimony and exhibits) of
Consumers Energy to the MPSC (Case No. U-13720), are filed as exhibits to this
report and are incorporated by reference. Both applications, with accompanying
testimony and exhibits, can be accessed on the MPSC's website
http://www.michigan.gov/mpsc


ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS

         (c) Exhibits:


                  99(a)  Application for Financing Order, Case No. U-13715,
                         filed March 4, 2003 by Consumers Energy Company with
                         the Michigan Public Service Commission.
                  99(b)  Application of Consumers Energy Company, Case
                         No. U-13720 filed March 4, 2003 by Consumers Energy
                         Company with the Michigan Public Service Commission

This Form 8-K contains "forward-looking statements", within the meaning of the
safe harbor provisions of the federal securities laws. The "forward-looking
statements" are subject to risks and uncertainties. They should be read in
conjunction with the "Forward-Looking Statements and Risk Factors" in CMS
Energy's Form 10-Q for the Quarterly Period Ended September 30, 2002, Management
Discussion and Analysis (incorporated herein by reference) and Consumers
Energy's Form 10-K/A for the Year Ended December 31, 2001, Item I, Consumers
Forward-Looking Statements Cautionary Factors and Uncertainties that discuss
important factors that could cause CMS Energy's and Consumers Energy's results
to differ materially from those anticipated in such statements.


<PAGE>


                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on their behalf by the
undersigned hereunto duly authorized.



                                             CMS ENERGY CORPORATION

Dated:  March 5, 2003

                                             By: /s/ Thomas J. Webb
                                                 -------------------------------
                                                 Thomas J. Webb
                                                 Executive Vice President and
                                                 Chief Financial Officer


                                             CONSUMERS ENERGY COMPANY

Dated:  March 5, 2003

                                             By: /s/ Thomas J. Webb
                                                 -------------------------------
                                                 Thomas J. Webb
                                                 Executive Vice President and
                                                 Chief Financial Officer



<PAGE>
                               10-K EXHIBIT INDEX


<TABLE>
<CAPTION>

EXHIBIT NO.         DESCRIPTION
<S>                 <C>
EX-99(a)            Application for Financing Order, Case No. U-13715, filed
                    March 4, 2003 by Consumers Energy Company with the Michigan
                    Public Service Commission.

EX-99(b)            Application of Consumers Energy Company, Case No. U-13720
                    filed March 4, 2003 by Consumers Energy Company with the
                    Michigan Public Service Commission.
</TABLE>


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(A)
<SEQUENCE>3
<FILENAME>k75255exv99wxay.txt
<DESCRIPTION>APPLICATION FOR FINANCING ORDER
<TEXT>
<PAGE>
                                                                   EXHIBIT 99(a)

                         S T A T E  O F  M I C H I G A N

                  BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter of the Application of                  )
Consumers Energy Company for a                       )
Financing Order Approving the                        )          Case No. U-13715
Securitization of Certain of its                     )
Qualified Costs.                                     )


                         APPLICATION FOR FINANCING ORDER

         NOW COMES Consumers Energy Company ("Consumers Energy") and, pursuant
to the Customer Choice and Electricity Reliability Act, MCL 460.10 et seq.; MSA
Section 22.13(10) et seq. ("CCERA"), the Michigan Administrative Procedures Act,
MCL 24.201 et seq.; MSA 3.560(101) et seq., MCL 460.1 et seq., as amended, and
other applicable law, hereby applies to the Michigan Public Service Commission
(the "Commission") for a financing order approving the issuance of
securitization bonds for the qualified costs set forth in this Application and
the accompanying testimony and exhibits, stating as follows:

                              IDENTITY OF APPLICANT

         1. Consumers Energy is an electric utility company subject to the
regulatory authority of the Commission. Consumers provides electric service in
62 of 68 counties in the Lower Peninsula of Michigan, serving more than 1.6
million customers in 1,109 incorporated cities, townships and villages, as set
forth at Sheet Nos. A-17.00 et seq. of Consumers' Schedule of Rates Governing
the Sale of Electric Service, M.P.S.C. No. 12-Electric, Consumers Energy
Company.


<PAGE>


                        STATEMENT OF STATUTORY AUTHORITY

         2. CCERA was enacted by the Michigan Legislature and signed by the
Governor in June of 2000 with immediate effect. A portion of CCERA (originally
passed as 2000 PA 142 ("Act 142")) sets forth the legislative provisions
governing electric utility securitization. See, MCL 460.10h through MCL 460.10o,
MCL 460.10z; MSA Section 22.13(10h) through MSA Section 22.13(10o), MSA Section
22.13(10z). Act 142 provides that electric utilities may recover "qualified
costs" if the Commission issues a "financing order" approving the issuance of
securitization bonds. See, MCL 460.10i(1). Due to the availability of very
favorable credit ratings from the rating agencies, these securities are designed
to lower the cost of capital of the electric utility, and to otherwise enable
electric rates to be at a lower level than they would be if conventional
financing was employed by the electric utility to finance the costs being
securitized.

         3.   Act 142 defines "qualified costs" as follows:

                           (g) "Qualified costs" means an electric utility's
                  regulatory assets as determined by the commission, adjusted by
                  the applicable portion of related investment tax credits, plus
                  any costs that the commission determines that the electric
                  utility would be unlikely to collect in a competitive market,
                  including but not limited to, retail open access
                  implementation costs and the costs of a commission approved
                  restructuring, buyout or buy-down of a power purchase
                  contract, together with the costs of issuing, supporting, and
                  servicing securitization bonds and any costs of retiring and
                  refunding the electric utility's existing debt and equity
                  securities in connection with the issuance of securitization
                  bonds. Qualified costs include taxes related to the recovery
                  of securitization charges. MCL 460.10h(g).



                                       2

<PAGE>


         4. Section 10i(6) requires that the Commission conduct an "expedited
contested case proceeding" to consider the application of an electric utility
for a financing order, and that a determination be made no later than 90 days
after the filing of the application.

                           REQUEST FOR FINANCING ORDER

Eligibility for Financing Order.


         5. Consumers is an "electric utility" as that term is defined and used
in Act 142.

         6. Consumers has incurred "qualified costs" as that term is defined and
used in Act 142 that are eligible for securitization under that act.

         7.   MCL 460.10i provides in part:

                           (1) Upon the application of an electric utility, if
                  the commission finds that the net present value of the
                  revenues to be collected under the financing order is less
                  than the amount that would be recovered over the remaining
                  life of the qualified costs using conventional financing
                  methods and that the financing order is consistent with the
                  standards in subsection (2), the commission shall issue a
                  financing order to allow the utility to recover qualified
                  costs.

                           (2) In a financing order, the commission shall ensure
                  all of the following:

                           (a) That the proceeds of the securitization bonds are
                  used solely for the purposes of the refinancing or retirement
                  of debt or equity.

                           (b) That securitization provides tangible and
                  quantifiable benefits to customers of the electric utility.

                           (c) That the expected structuring and expected
                  pricing of the securitization bonds will result in the lowest
                  securitization charges consistent with market conditions and
                  the terms of the financing order.

                           (d) That the amount securitized does not exceed the
                  net present value of the revenue requirement over the life of
                  the proposed securitization bonds associated with the
                  qualified costs sought to be securitized. Id.



                                       3

<PAGE>



         8. As more fully explained in the accompanying testimony and exhibits
which are incorporated herein and made a part hereof by reference, the
securitization proposal set forth in this Application meets all of the statutory
requirements set forth in Act 142.

         9. Underlying the Company's decision to file this Application for
securitization at this time is the need to refinance $ 777 million of debt in
2003 and $780 million in 2004. In addition, the Company needs to issue $295
million of new debt in 2003 and $365 million of new debt in 2004. This financing
is required for the Company's operations and construction program and to enable
it to contribute over $150 million in 2003 and over $200 million in 2004 to its
pension fund. Given the Company's current financial condition, which includes
significant cash needs in the years 2003 and 2004, securitization of qualified
costs is the most cost effective way to meet the Company's cash needs.
Securitization thus would provide a means for the Commission to assist the
Company in meeting its 2003 and 2004 cash needs in the lowest cost manner
possible while at the same time effectuating the intention of the Michigan
Legislature in enacting Act 142.

Amount to Be Securitized and Related Transactions.

         10. As more fully explained in the accompanying testimony and exhibits,
Consumers Energy seeks a financing order that will authorize the securitization
of $1,084,087,000 of qualified costs.

         11. As part of its filing, Consumers Energy is seeking securitization
of certain qualified costs related to the Palisades Nuclear Power Plant.
Consumers Energy believes that it would be appropriate for the Commission to
extend to these costs the conditions


                                       4


<PAGE>


relative to a potential sale of the Palisades Nuclear Power Plant imposed in
MPSC Case No. U-12505 at pages 13-14.

         12. As part of its filing in this case, Consumers Energy is seeking
securitization of retail open access implementation costs. The Commission has
previously stated that Consumers Energy should file an application and
supporting documentation that provides the Commission with a factual basis for
reviewing the success of Consumers Energy's electric restructuring
implementation efforts in order to seek a determination that assures recovery of
implementation costs. Consumers Energy is doing so in this case. Further, as
part of this filing, Consumers Energy is making its annual implementation cost
review filing for recovery of implementation costs incurred for the period
ending December 31, 2002, along with carrying costs until such costs are
recovered from customers, and is seeking approval of budgeted implementation
costs for 2003. Consumers Energy is requesting that the Commission, in this
case, approve full, unconditional recovery of implementation costs, including
carrying costs, in the amount of approximately $96.8 million and that the
Commission approve recovery of these costs through securitization.

         13. Act 142 authorizes an electric utility to assign its rights in
securitization property to another entity and provides certain benefits and
protections. See, MCL 460.10h(a), 10j-o. As more fully explained in the
accompanying testimony and exhibits, Consumers Energy will create one or more
special purpose entities and transfer certain securitization property for the
purpose of minimizing bankruptcy risks to potential securitization bondholders
as much as possible and, thus, maximizing the ratings on the securitization
bonds.



                                       5

<PAGE>


         14. Within the context of approving the securitization transaction in
the financing order, Consumers Energy specifically requests the Commission to
approve the transactions involving Consumers Energy and the special purpose
entities, as described in the accompanying testimony and exhibits, and make any
financing order issued in this proceeding applicable to any transferee,
successor or assignee of Consumers Energy in accordance with Act 142.

Initial Implementation and True-up of Securitization and Tax Charges.

         15. Consumers Energy also requests the Commission to approve the terms
and conditions of the initial implementation of the securitization charges and
tax charges to be collected from Consumers Energy's customers as well as a
periodic true-up mechanism, all as described more fully in the accompanying
testimony and exhibits, and all of which are designed to result in the highest
rating (i.e., a "AAA" rating) for any securitization bonds issued as the result
of the financing order requested herein. The mechanisms proposed for initial
implementation and periodic true-up would be approved by the Commission in the
financing order issued in this proceeding for inclusion in Consumers Energy's
electric tariff and would thereafter operate without the need for further
Commission order. These mechanisms are substantially the same as the mechanisms
approved by the Commission in MPSC Case No U-12505 for Consumers Energy's first
issuance of securitization bonds.


                                       6


<PAGE>


Use of Proceeds.

         16. Consumers Energy will use proceeds from securitization for
refinancing or retirement of debt as provided in Section 10i(2)(a).

Securitization Savings.

         17. As proposed by Consumers Energy, the issuance of securitization
bonds described in this Application will not increase electric rates to any
customer until January 1, 2006. That is, from the date of bond issuance to
January 1, 2006, the securitization charges and tax charges shown on customer
bills will be offset by a credit in an equal amount, thus resulting in a zero
net impact on electric customers. Correspondingly, because the costs being
securitized are not presently reflected in electric rates, the current savings
associated with the issuance of securitization bonds will likewise not be
reflected in electric rates until that time. As proposed by Consumers Energy,
the securitization charges and tax charges approved in this filing will be
applied incrementally to customer bills (i.e., without any offsets) commencing
January 1, 2006. At that time, Consumers Energy anticipates that this
incremental application of securitization charges and tax charges will be
coordinated with a redesign of the rates for all jurisdictional electric rate
classes, at which time the future savings associated with the issuance of
securitization bonds will be reflected in rates in a manner determined by the
Commission.

         18. Upon the issuance of a financing order by the Commission, Consumers
Energy will take all other actions necessary to implement the financing order.



                                       7

<PAGE>


                             TESTIMONY AND EXHIBITS

         19. The testimony and exhibits accompanying this Application, which are
incorporated herein and made a part hereof by reference, describe more fully the
qualified costs sought to be securitized and recovered and demonstrate the
eligibility of these costs for securitization pursuant to Act 142.

         WHEREFORE, Consumers Energy respectfully requests this honorable
Commission to take the following actions:

         A. Issue a financing order applicable to Consumers Energy, its
transferees, successors and assignees, pursuant to CCERA and other applicable
law, (a) declaring that the costs described in the testimony and exhibits
submitted by Consumers Energy are qualified costs under CCERA, because the
Commission determines that these costs are regulatory assets, or, in the
alternative with respect to the qualified costs related to the Palisades Nuclear
Power Plant and the qualified costs related to retail open access, that
Consumers Energy would be unlikely to collect in a competitive market and (b)
authorizing issuance of securitization bonds for the qualified costs being
securitized on terms and conditions substantially similar to the terms and
conditions set forth in the testimony and exhibits accompanying this
Application. Such order shall reserve to Consumers Energy the sole discretion as
to whether and when to proceed with a securitization transaction.

         B. Authorize Consumers Energy in the financing order to impose a
nonbypassable securitization charge payable to the bond trustee pursuant to
CCERA as a separate item on customer bills, rendered on and after the issuance
of securitization bonds, sufficient to pay the financing charges, principal and
interest and other costs


                                       8

<PAGE>


associated with the issuance, service and/or support of the securitization bonds
as described in the accompanying testimony and exhibits.

         C. Authorize Consumers Energy to impose at the same time a
nonbypassable tax charge sufficient for Consumers Energy to pay taxes due on
securitization charge revenues, as more fully explained in the accompanying
testimony and exhibits.

         D. Authorize Consumers Energy to include necessary language in its
tariffs to accomplish the imposition of the above-referenced nonbypassable
securitization and tax charges and initially implement and periodically true-up
the charges described above, all as proposed and more fully explained in the
accompanying testimony and exhibits.

         E. Authorize Consumers Energy to employ appropriate methodology to
account for the transactions contemplated by the financing order, including
granting any additional accounting authority, appropriate ratemaking treatment
and regulatory asset treatment, as proposed and more fully explained in the
accompanying testimony and exhibits.

         F. Grant to Consumers Energy, pursuant to MCL 460.l0i(9), the authority
to refund and retire any or all of the securitization bonds that are issued in
this proceeding upon demonstration of an ability to refinance under applicable
bond covenants and that securitization charges to service new securitization
bonds, including transaction costs, would be less than the future securitization
charges required to service the securitization bonds being refunded.

         G. Authorize Consumers Energy to create one or more special purpose
entities to which it could transfer securitized property and approve transfers
of the securitization



                                        9

<PAGE>


property under the financing order issued in this proceeding and rights
thereunder to any transferee, successor or assignee of Consumers Energy in
accordance with CCERA.

         H.  Grant such other and further relief as may be lawful and
appropriate.

                                            Respectfully submitted,

                                            CONSUMERS ENERGY COMPANY

                                 By:        /s/ Glenn P. Barba
                                            ------------------------------------
                                            Glenn P. Barba
                                            Vice President, Controller and
                                            Chief Accounting Officer

Dated:  March 4, 2003


David A. Mikelonis (P-17709)
Jon R. Robinson (P-27953)
John C. Shea (P-36854)
212 West Michigan Avenue
Jackson, Michigan 49201
Attorneys for Consumers Energy Company

Tel: (517) 788-2112

Email to: jcshea@cmsenergy.com



                                       10
<PAGE>


                          S T A T E  O F  M I C H I G A N

                  BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter of the Application of                  )
Consumers Energy Company for a                       )
Financing Order Approving the                        )          Case No. U-13715
Securitization of Certain of its                     )
Qualified Costs.                                     )



                                  VERIFICATION

STATE OF MICHIGAN          )
                           )SS
COUNTY OF JACKSON          )

         GLENN P. BARBA, being first duly sworn, deposes and says that he is the
Vice President, Controller and Chief Accounting Officer for Consumers Energy
Company, that he has executed the foregoing Application for and on behalf of
Consumers Energy Company; that he has read the foregoing Application and is
familiar with the contents thereof; that the facts contained therein are true
and correct to the best of his information knowledge and belief; and that he is
duly authorized to execute and file such Application on behalf of Consumers
Energy Company.

                                         /s/     Glenn P. Barba
                                         -------------------------------------
                                                 Glenn P. Barba

                  Subscribed and sworn to before me this 4th day of March, 2003.


                                         /s/ Sammie B. Dalton
                                         -------------------------------------
                                         Sammie B. Dalton

                                         Notary Public, Jackson County, Michigan
                                         My Commission expires:  01/04/04



                                       11

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(B)
<SEQUENCE>4
<FILENAME>k75255exv99wxby.txt
<DESCRIPTION>APPLICATION OF CONSUMBERS ENERGY COMPANY
<TEXT>
<PAGE>
                                                                   EXHIBIT 99(b)


                               STATE OF MICHIGAN

                  BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter of the application of         )
CONSUMERS ENERGY COMPANY                    )
for determination of net stranded costs for )                 Case No. U-13720
the year 2002 and for approval of net       )
stranded cost recovery charges.             )
- --------------------------------------------)


                     APPLICATION OF CONSUMERS ENERGY COMPANY


                  Consumers Energy Company ("Consumers Energy") applies for
approval of a determination of its net stranded costs for the year 2002, and for
approval of stranded cost recovery charges to recover those costs. In support of
this relief, Consumers Energy says as follows:

                  1. Consumers Energy is a public utility engaged in, among
other things, the generation, purchase, distribution and sale of electric energy
to approximately 1.6 million retail customers in the lower peninsula of the
State of Michigan.

                  2. Consumers Energy's retail electric business is subject to
the jurisdiction of the Michigan Public Service Commission ("Commission")
pursuant to certain provisions of 1939 PA 3, as amended by various acts,
including 2000 PA 141, MCL 460.1 et seq; MSA 22.23(1) et seq; 1909 PA 106, as
amended, MCL 460.551 et seq; MSA 22.151 et seq; and 1909 PA 300, as amended, MCL
462.2 et seq; MSA 22.21 et seq.

                  3. In an order issued December 20, 2001 in Case No. U-12639,
the Commission adopted a methodology for calculating net stranded costs. That
methodology requires an annual calculation of net stranded costs, and the
establishment of a charge to recover such costs. In an order issued December 20,
2002 in Case No. U-13380, the Commission issued a further order



<PAGE>

addressing stranded costs for 2000 and 2001. Rehearing petitions have been filed
in Case No. U-13380, and are pending before the Commission at this time.

                  4. Consumers Energy has applied the stranded cost methodology
utilized by the Commission in Case Nos. U-12639 and U-13380 to actual 2002
results. Because of some uncertainty concerning the proper treatment of certain
issues, Consumers Energy has made several alternative calculations, which are
described as follows:

                  (A) One of the issues raised in the rehearing petitions
concerns the proper treatment of costs associated with Clean Air Act capital
expenditures. For purposes of one of its alternative calculations for 2002,
Consumers Energy has, consistent with a July 10, 2002 Commission order in Case
No. U-13380, removed such costs from the stranded cost calculation. This
approach presumes that the Commission provides an alternative means of
recovering such costs, as was indicated in the July 10, 2002 U-13380 order.
Consumers Energy has filed, in Case No. U-13715, an application seeking
authorization to recover these costs via the securitization procedure outlined
in 2000 PA 141 and 2000 PA 142. MCL 460.10 et seq. Assuming that the Commission
grants the relief sought in Case No. U-13715 with respect to these Clean Air Act
costs, their removal from the stranded cost calculation for 2002 would be
appropriate. If the relief sought in Case No. U-13715 is not granted, these
Clean Air Act costs should be included in the stranded cost calculation made for
2002.

                  (B) In Case No. U-13715, Consumers Energy is also seeking
approval to utilize the securitization procedure to recover post-2000 capital
expenditures made at the Palisades Nuclear Plant. In Case No. U-12505, the
Commission approved the classification of Palisades capital investments made
through December 31, 2000 as regulatory assets, and also approved the recovery
of those capital investments via the securitization procedure. In Case No.
U-13715, Consumers Energy is seeking the same treatment of capital investments
made at


                                       2
<PAGE>

Palisades since 2000. If this relief is granted, such costs should be removed
from the stranded cost calculation for 2002. If the relief sought in Case No.
U-13715 with respect to these Palisades capital investments is not granted, they
should be included in the 2002 stranded cost calculation.

                  5. If both Clean Air Act costs and post-2000 Palisades capital
investments are also removed from the stranded cost calculation because they
will be recovered as proposed in Case No. U-13715, Consumers Energy calculates
that it incurred $30,973,000 in net stranded costs in 2002. Because of the lag
associated with the recovery of this amount (incurred in 2002, but unlikely to
be recovered prior to 2004), it is appropriate to add carrying costs, which
would increase this amount to approximately $35,461,000. The net stranded cost
recovery charge necessary to recover this amount, assuming a recovery period of
January 1, 2004 through December 31, 2004, is $0.008867 per kilowatt-hour.

                  6. Assuming that only the Clean Air Act costs are removed from
the stranded cost calculation, Consumers Energy calculates that it incurred
$43,496,000 of net stranded costs in 2002. Adding carrying costs would increase
this amount to $49,799,000. The net stranded cost recovery charge necessary to
recover this amount, assuming a recovery period of January 1, 2004 through
December 31, 2004, is $0.012452 per kilowatt-hour.

                  7. If the relief sought in Case No. U-13715 is denied with
respect to the Clean Air Act and Palisades capital investments, and these costs
are included in the 2002 stranded cost calculation, Consumers Energy calculates
that it incurred $90,195,973 in net stranded costs in 2002. Adding carrying
costs would increase this amount to $103,265,369. The net stranded cost recovery
charge necessary to recover this amount, assuming a recovery period of January
1, 2004 through December 31, 2004, is $0.025821 per kilowatt-hour.



                                       3
<PAGE>

                  8. An exhibit showing the above calculations in more detail is
attached to this Application as Exhibit 1.

                  9. In the December 20, 2002 order in Case No. U-13380, the
Commission directed Consumers Energy to "file an accounting of the specific
sources and applications of all excess securitization savings it has realized
since the issuance of its securitization bonds" (i.e., those savings in excess
of those used to offset the 5% residential rate reduction imposed by 2000 PA 141
that have resulted from the issuance of securitization bonds approved in Case
No. U-12505). Attached to this Application as Exhibit 2 is an accounting that
summarizes the excess securitization savings realized from the time the bonds
were issued through December 31, 2002. The total excess savings realized during
this period was $4,712,000. In the October 24, 2000 Case No. U-12505 order, the
Commission directed Consumers Energy to apply 50% of the excess savings to
reductions in distribution charges for non-residential customers and 50% to
reduction in the charges developed to recover stranded costs. Exhibit 2 shows
that retail open access ("ROA") customers have, through December 31, 2002, been
provided "offsets" to securitization charges that total $3,160,000. It is
Consumers Energy's position that these offsets are unlawful, and this issue is
on appeal in Court of Appeals No. 241990 (consolidated with No. 241991, an
appeal of The Detroit Edison Company), and has been raised in rehearing
petitions in Case No. U-13380. In any event, even if application of some portion
of the excess securitization savings as an offset to securitization charges for
ROA customers is lawful, Exhibit 2 shows that the amount that was provided to
ROA customers in this manner through December 31, 2002 is $3,160,000, which
exceeds 50% of the total excess savings that were actually available by
$804,000. Thus, any future allocation of excess savings must take this
historical over-allocation to ROA customers into account. In this case,
Consumers Energy proposes to follow the allocation procedure ordered by the
Commission in the irrevocable



                                       4
<PAGE>

financing order issued in Case No. U-12505, and split the excess savings from
the U-12505 securitization bonds 50-50 between distribution rate reductions for
non-residential customers and reductions in the charges developed to recover net
stranded costs. Because 50% of the excess savings from the U-12505
securitization realized from date of bond issuance to December 31, 2002 have
already been utilized in providing securitization charge offsets through
December 31, 2002, and because it is appropriate to align the use of excess
securitization savings realized in 2002 with the stranded costs incurred in
2002, there are no excess securitization savings available to reduce the 2002
stranded cost charge.

                  WHEREFORE, Consumers Energy Company respectfully requests that
the Commission grant the following relief:

                  (A) Determine that the net stranded costs for Consumers Energy
in 2002 were $35,461,000, assuming that the Clean Air Act costs and post-2000
Palisades capital investments are securitized as proposed in Case No. U-13715,
 and approve a corresponding recovery charge of $0.008867;

                  (B) Determine that the net stranded costs for Consumers Energy
in 2002 were $49,799,000, assuming that the Clean Air Act costs are securitized
as proposed in Case No. U-13715, and approve a corresponding recovery charge of
$0.012452;

                  (C) Determine that the net stranded costs for Consumers Energy
in 2002 were $103,265,369, assuming that neither the Clean Air Act costs nor
post-2000 Palisades capital investments are securitized as proposed in Case No.
U-13715, and approve a corresponding recovery charge of $0.025821;



                                       5
<PAGE>

                  (D) Approve the determination of the excess securitization
savings shown on Exhibit 2 to this Application, and approve the use of such
savings in the manner described in this Application.

                  (E) Grant such other and further relief as is appropriate and
lawful.

                                             Respectfully submitted,
                                             CONSUMERS ENERGY COMPANY

Dated:  March 4, 2003                    By: /s/ John G. Russell
                                             -----------------------------------
                                             John G. Russell
                                             President-Electric
                                             Consumers Energy Company

/s/ Jon R. Robinson
- -----------------------------------
Jon R. Robinson
212 West Michigan Avenue
Jackson, Michigan  49201
(517) 788-0698
Attorney for Consumers Energy Company




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