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<SEC-DOCUMENT>0000950124-07-005517.txt : 20071101
<SEC-HEADER>0000950124-07-005517.hdr.sgml : 20071101
<ACCEPTANCE-DATETIME>20071101170308
ACCESSION NUMBER:		0000950124-07-005517
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		11
CONFORMED PERIOD OF REPORT:	20070930
FILED AS OF DATE:		20071101
DATE AS OF CHANGE:		20071101

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:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-05611
		FILM NUMBER:		071207615

	BUSINESS ADDRESS:	
		STREET 1:		ONE ENERGY PLAZA
		CITY:			JACKSON
		STATE:			MI
		ZIP:			49201
		BUSINESS PHONE:		5177881031

	MAIL ADDRESS:	
		STREET 1:		ONE ENERGY PLAZA
		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:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-09513
		FILM NUMBER:		071207614

	BUSINESS ADDRESS:	
		STREET 1:		ONE ENERGY PLAZA
		CITY:			JACKSON
		STATE:			MI
		ZIP:			49201
		BUSINESS PHONE:		5177881031

	MAIL ADDRESS:	
		STREET 1:		ONE ENERGY PLAZA
		CITY:			JACKSON
		STATE:			MI
		ZIP:			49201
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>k21037e10vq.htm
<DESCRIPTION>QUARTERLY REPORT FOR PERIOD ENDED SEPTEMBER 30, 2007
<TEXT>
<HTML>
<HEAD>
<TITLE>e10vq</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, DC 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM 10-Q</B>
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B><B>For the quarterly period ended September&nbsp;30, 2007</B>
</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>OR</B></DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B>For the transition period from <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> to <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center">Commission</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Registrant; State of Incorporation;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">IRS Employer</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">File Number</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Address; and Telephone Number</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Identification No.</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">1-9513
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="font-size:24pt"><B>CMS ENERGY CORPORATION</B></FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">38-2726431</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(A Michigan Corporation)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">One Energy Plaza, Jackson, Michigan 49201</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(517) 788-0550</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">1-5611
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="font-size:24pt"><B>CONSUMERS ENERGY COMPANY</B></FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">38-0442310</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(A Michigan Corporation)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">One Energy Plaza, Jackson, Michigan 49201</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(517) 788-0550</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the Registrants (1)&nbsp;have filed all reports required to be filed by
Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12&nbsp;months (or for
such shorter period that the Registrants were required to file such reports), and (2)&nbsp;have been
subject to such filing requirements for the past 90&nbsp;days. Yes&nbsp;<FONT style="font-family: Wingdings">&#254;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;<FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of &#147;accelerated filer and large accelerated filer&#148; in
Rule&nbsp;12b-2 of the Exchange Act.<BR>
<B>CMS Energy Corporation</B>: Large accelerated filer&nbsp;<FONT face="Wingdings">&#254;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accelerated filer&nbsp;<FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-Accelerated filer&nbsp;<FONT face="Wingdings">&#111;</FONT><BR>
<B>Consumers Energy Company</B>: Large accelerated filer&nbsp;<FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accelerated filer&nbsp;<FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-Accelerated filer&nbsp;<FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the Registrant is a shell company (as defined in Rule&nbsp;12b-2 of the
Exchange Act).<BR>
<B>CMS Energy Corporation</B>: Yes&nbsp;<FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;<FONT face="Wingdings">&#254;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Consumers Energy Company</B>: Yes&nbsp;<FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;<FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate the number of shares outstanding of each of the issuer&#146;s classes of common stock at October&nbsp;30, 2007:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>CMS Energy Corporation:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">CMS Energy Common Stock, $.01 par value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">225,091,031</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Consumers Energy Company</B>, $10 par value, privately held by CMS Energy Corporation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,108,789</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CMS Energy Corporation<BR>
and<BR>
Consumers Energy Company</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Quarterly reports on Form 10-Q to the<BR>
United States Securities and Exchange Commission<BR>
for the Quarter Ended September&nbsp;30, 2007</B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This combined Form 10-Q is separately filed by CMS Energy Corporation and Consumers Energy Company.
Information contained herein relating to each individual registrant is filed by such registrant on
its own behalf. Accordingly, except for its subsidiaries, Consumers Energy Company makes no
representation as to information relating to any other companies affiliated with CMS Energy
Corporation.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="85%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Page</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#101">Glossary</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">3</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>PART I  &#150;  FINANCIAL INFORMATION</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Item&nbsp;1. Financial Statements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><I>CMS Energy Corporation</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#104">Consolidated Statements of Income (Loss) </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">CMS  &#150;  33</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#105">Consolidated Statements of Cash Flows </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">CMS  &#150;  35</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#106">Consolidated Balance Sheets </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">CMS  &#150;  36</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#107">Consolidated Statements of Common Stockholders&#146; Equity </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">CMS  &#150;  38</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#108">Notes to Consolidated Financial Statements (Unaudited):</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#109">1. Corporate Structure and Accounting Policies </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">CMS  &#150;  39</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#110">2. Asset Sales, Discontinued Operations and Impairment Charges </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">CMS  &#150;  42</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#111">3. Contingencies </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">CMS  &#150;  58</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#112">4. Financings and Capitalization </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">CMS  &#150;  61</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#113">5. Earnings Per Share </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">CMS  &#150;  64</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#114">6. Financial and Derivative Instruments </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">CMS  &#150;  65</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#115">7. Retirement Benefits </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">CMS  &#150;  69</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#116">8. Income Taxes </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">CMS  &#150;  70</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#117">9. Asset Retirement Obligations </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">CMS  &#150;  72</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#118">10. Equity Method Investments </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">CMS  &#150;  74</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#119">11. Reportable Segments </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">CMS &#150; 75</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><I>Consumers Energy Company</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#120">Consolidated Statements of Income</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">CE &#150; 25</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#121">Consolidated Statements of Cash Flows</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">CE &#150; 26</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#122">Consolidated Balance Sheets</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">CE &#150; 27</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#123">Consolidated Statements of Common Stockholder&#146;s Equity</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">CE &#150; 29</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#124">Notes to Consolidated Financial Statements (Unaudited):</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#125">1. Corporate Structure and Accounting Policies</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">CE &#150; 31</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#126">2. Asset Sales</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">CE &#150; 33</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#127">3. Contingencies</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">CE &#150; 35</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#128">4. Financings and Capitalization</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">CE &#150; 45</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#129">5. Financial and Derivative Instruments</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">CE &#150; 46</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#130">6. Retirement Benefits</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">CE &#150; 47</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#131">7. Asset Retirement Obligations</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">CE &#150; 49</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#132">8. Income Taxes</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">CE &#150; 51</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#133">9. Reportable Segments</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">CE &#150; 53</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->1<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS<BR>
(Continued)</B>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" nowrap align="center" style="border-bottom: 1px solid #000000">Page</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#134">Item&nbsp;2. Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><I>CMS Energy Corporation</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#135">Forward-Looking Statements and Information </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">CMS&nbsp;</TD>
    <TD align="left" valign="bottom"> &#150; 1</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#136">Executive Overview </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">CMS&nbsp;</TD>
    <TD align="left" valign="bottom"> &#150; 4</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#137">Results of Operations </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">CMS&nbsp;</TD>
    <TD align="left" valign="bottom"> &#150; 6</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#138">Critical Accounting Policies </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">CMS&nbsp;</TD>
    <TD align="left" valign="bottom"> &#150; 15</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#139">Capital Resources and Liquidity </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">CMS&nbsp;</TD>
    <TD align="left" valign="bottom"> &#150; 19</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#140">Outlook </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">CMS&nbsp;</TD>
    <TD align="left" valign="bottom"> &#150; 21</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#141">Implementation of New Accounting Standards </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">CMS&nbsp;</TD>
    <TD align="left" valign="bottom"> &#150; 30</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#142">New Accounting Standards Not Yet Effective </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">CMS&nbsp;</TD>
    <TD align="left" valign="bottom"> &#150; 31</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><I>Consumers Energy Company</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#143">Forward-Looking Statements and Information </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">CE&nbsp;</TD>
    <TD align="left" valign="bottom"> &#150; 1</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#144">Executive Overview </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">CE&nbsp;</TD>
    <TD align="left" valign="bottom"> &#150; 4</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#145">Results of Operations </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">CE&nbsp;</TD>
    <TD align="left" valign="bottom"> &#150; 6</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#146">Critical Accounting Policies</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">CE&nbsp;</TD>
    <TD align="left" valign="bottom"> &#150; 11</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#147">Capital Resources and Liquidity</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">CE&nbsp;</TD>
    <TD align="left" valign="bottom"> &#150; 13</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#148">Outlook</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">CE&nbsp;</TD>
    <TD align="left" valign="bottom"> &#150; 15</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#149">Implementation of New Accounting Standards</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">CE&nbsp;</TD>
    <TD align="left" valign="bottom"> &#150; 23</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#150">New Accounting Standards Not Yet Effective</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">CE&nbsp;</TD>
    <TD align="left" valign="bottom"> &#150; 24</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#151">Item&nbsp;3. Quantitative and Qualitative Disclosures about Market Risk</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">CO&nbsp;</TD>
    <TD align="left" valign="bottom"> &#150; 1</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#152">Item&nbsp;4. Controls and Procedures</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">CO&nbsp;</TD>
    <TD align="left" valign="bottom"> &#150; 1</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#153"><B>PART II &#150; OTHER INFORMATION</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#154">Item&nbsp;1. Legal Proceedings</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">CO&nbsp;</TD>
    <TD align="left" valign="bottom"> &#150; 1</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#155">Item&nbsp;1A. Risk Factors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">CO&nbsp;</TD>
    <TD align="left" valign="bottom"> &#150; 6</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#156">Item&nbsp;2. Unregistered Sales of Equity Securities and Use of Proceeds</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">CO&nbsp;</TD>
    <TD align="left" valign="bottom"> &#150; 9</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#157">Item&nbsp;3. Defaults Upon Senior Securities</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">CO&nbsp;</TD>
    <TD align="left" valign="bottom"> &#150; 9</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#158">Item&nbsp;4. Submission of Matters to a Vote of Security Holders</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">CO&nbsp;</TD>
    <TD align="left" valign="bottom"> &#150; 9</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#159">Item&nbsp;5. Other Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">CO&nbsp;</TD>
    <TD align="left" valign="bottom"> &#150; 9</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#160">Item&nbsp;6. Exhibits</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">CO&nbsp;</TD>
    <TD align="left" valign="bottom"> &#150; 10</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#161">Signatures</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">CO&nbsp;</TD>
    <TD align="left" valign="bottom"> &#150; 11</TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="k21037exv3wxby.htm">CMS Energy Corporation Bylaws</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="k21037exv3wxdy.htm">Consumers Energy Company Bylaws</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="k21037exv10wxay.htm">Form of Indemnification Agreement between CMS Energy Corporation & its Directors</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="k21037exv10wxby.htm">Form of Indemnification Agreement between Consumers Energy Company & its Directors</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="k21037exv31wxay.htm">CMS Energy Corporation's Certification of the CEO pursuant to Section 302</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="k21037exv31wxby.htm">CMS Energy Corporation's Certification of the CFO pursuant to Section 302</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="k21037exv31wxcy.htm">Consumers Energy Corporation's Certification of the CEO pursuant to Section 302</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="k21037exv31wxdy.htm">Consumers Energy Corporation's Certification of the CFO pursuant to Section 302</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="k21037exv32wxay.htm">CMS Energy Corporation's Certifications pursuant to Section 906</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="k21037exv32wxby.htm">Consumers Energy Corporation's Certifications pursuant to Section 906</A></FONT></TD></TR>
</TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GLOSSARY</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Certain terms used in the text and financial statements are defined below

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="64%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">AEI </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ashmore Energy International, a non-affiliated company</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">AFUDC </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Allowance for Funds Used During Construction</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ALJ </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Administrative Law Judge</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">AOC </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Administrative Order on Consent</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">AOCI </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Accumulated Other Comprehensive Income</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">AOCL </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Accumulated Other Comprehensive Loss</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARO </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Asset retirement obligation</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bay Harbor </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A residential/commercial real estate area located near Petoskey, Michigan.  In 2002, CMS</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Energy sold its interest in Bay Harbor.</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">bcf </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">One billion cubic feet of gas</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Big Rock </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Big Rock Point nuclear power plant</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Big Rock ISFSI </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Big Rock Independent Spent Fuel Storage Installation</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Broadway Gen Funding LLC </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Broadway Gen Funding LLC, a non-affiliated company</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CEO </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CFO </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CFTC </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Commodity Futures Trading Commission</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CKD </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Cement Kiln Dust</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Clean Air Act </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Federal Clean Air Act, as amended</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CMS Energy </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CMS Energy Corporation, the parent of Consumers and Enterprises</TD>
</TR>



<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CMS Energy Common Stock or common stock </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Common stock of CMS Energy, par value $.01 per share</TD>
</TR>
<TR valign="top">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CMS ERM </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CMS Energy Resource Management Company, formerly CMS MST, a subsidiary of Enterprises</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CMS Field Services </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CMS Field Services, Inc., a former wholly owned subsidiary of CMS Gas Transmission</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CMS Gas Transmission </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CMS Gas Transmission Company, a wholly owned subsidiary of Enterprises</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CMS Generation </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CMS Generation Co., a former wholly owned subsidiary of Enterprises</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CMS International Ventures </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CMS International Ventures LLC, a subsidiary of Enterprises</TD>
</TR>
<TR valign="top">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CMS MST </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CMS Marketing, Services and Trading
Company, a wholly owned subsidiary of Enterprises, whose name was changed to CMS ERM effective January 2004</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consumers </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consumers Energy Company, a subsidiary of CMS Energy</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Customer Choice Act </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Customer Choice and Electricity Reliability Act, a Michigan statute enacted in June 2000</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">DCCP </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Defined Company Contribution Plan</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Detroit Edison </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The Detroit Edison Company, a non-affiliated company</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->3<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="64%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">DIG </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Dearborn Industrial Generation, LLC, a wholly owned subsidiary of CMS Energy</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">DOE </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">U.S. Department of Energy</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">DOJ </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">U.S. Department of Justice</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dow </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The Dow Chemical Company, a non-affiliated company</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">EISP </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Incentive Separation Plan</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">EITF </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Emerging Issues Task Force</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">EITF Issue No.&nbsp;02-03 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Contracts Involved in Energy Trading and Risk Management Activities</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">El Chocon </DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">A 1,200 MW hydro power plant located in Argentina, in which CMS Generation formerly held a</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">17.2 percent ownership interest</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Entergy </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Entergy Corporation, a non-affiliated company</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Enterprises </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CMS Enterprises Company, a subsidiary of CMS Energy</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">EPA </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">U.S. Environmental Protection Agency</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">EPS </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Earnings per share</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exchange Act </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Securities Exchange Act of 1934, as amended</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">FASB </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Financial Accounting Standards Board</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">FERC </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Federal Energy Regulatory Commission</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">FIN 14 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">FASB Interpretation No. 14, Reasonable Estimation of Amount of a Loss</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">FIN 46(R) </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Revised FASB Interpretation No. 46, Consolidation of Variable Interest Entities</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">FIN 47 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">FIN 48 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">FASB Interpretation No. 48, Uncertainty in Income Taxes</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">FMLP </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Midland Limited Partnership, a partnership that holds a lessor interest in the MCV</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Facility</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">FSP FIN 39-1 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">FASB Staff Position on FASB Interpretation No. 39-1, Amendment of FASB Interpretation No. 39</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">GAAP </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Generally Accepted Accounting Principles</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">GasAtacama </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">GasAtacama Holding Limited, a limited liability partnership that manages GasAtacama S.A.,</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">which includes an integrated natural gas pipeline and electric generating plant located in</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Argentina and Chile and Atacama Finance Company</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">GCR </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Gas cost recovery</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ICSID </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">International Centre for the Settlement of Investment Disputes</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">IRS </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Internal Revenue Service</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ISFSI </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Independent Spent Fuel Storage Installation</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jamaica </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Jamaica Private Power Company, Limited, a 63 MW   diesel-fueled power plant located in</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Jamaica, in which CMS Generation
formerly owned a 42 percent interest</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->4<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="64%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jorf Lasfar </DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">A 1,356 MW coal-fueled power plant in Morocco, in which CMS Generation formerly owned a 50 percent interest</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Jubail </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A 240 MW natural gas cogeneration power plant in Saudi Arabia, in which CMS Generation
formerly owned a 25 percent interest</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">kWh </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Kilowatt-hour (a unit of energy equal to one thousand watt hours)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">LS Power Group </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">LS Power Group, a non-affiliated company</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Lucid Energy </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lucid Energy LLC, a non-affiliated company</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ludington </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ludington pumped storage plant, jointly owned by Consumers and Detroit Edison</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">mcf </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">One thousand cubic feet of gas</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MCV Facility </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A natural gas-fueled, combined-cycle cogeneration facility operated by the MCV Partnership</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MCV Partnership </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Midland Cogeneration Venture Limited Partnership</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MCV PPA </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The Power Purchase Agreement between Consumers and the MCV Partnership with a 35-year term</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">commencing in March 1990, as amended, and as interpreted by the Settlement Agreement dated</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">as of January 1, 1999 between the MCV Partnership and Consumers</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MD&#038;A </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Management&#146;s Discussion and Analysis</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MDEQ </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Michigan Department of Environmental Quality</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MDL </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Multidistrict Litigation</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">METC </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Michigan Electric Transmission Company, LLC, a non-affiliated company</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MISO </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Midwest Independent Transmission System Operator, Inc.</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MMBtu </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Million British Thermal Units</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Moody&#146;s </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Moody&#146;s Investors Service, Inc.</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MPSC </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Michigan Public Service Commission</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MSBT </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Michigan Single Business Tax</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MW </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Megawatt (a unit of power equal to one million watts)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MWh </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Megawatt hour (a unit of energy equal to one million watt hours)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Neyveli </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CMS Generation Neyveli Ltd, a 250 MW lignite-fired power station located in India, in which
CMS International Ventures formerly owned a 50 percent interest</td>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">NMC </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Nuclear Management Company LLC, formed in 1999 by Northern States Power Company (now Xcel</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Energy Inc.), Alliant Energy, Wisconsin Electric Power Company, and Wisconsin Public Service</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Company to operate and manage nuclear generating facilities owned by the utilities</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">NRC </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Nuclear Regulatory Commission</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">NYMEX </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">New York Mercantile Exchange</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">OPEB </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Postretirement benefit plans other than pensions for retired employees</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->5<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="64%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Palisades </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Palisades nuclear power plant, formerly owned by Consumers</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Panhandle </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Panhandle Eastern Pipe Line Company, including its subsidiaries Trunkline, Pan Gas Storage,</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Panhandle Storage, and Panhandle Holdings, a former wholly owned subsidiary of CMS Gas</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Transmission</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">PCB </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Polychlorinated biphenyl</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">PDVSA</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Petroleos de Venezuela S.A.</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Peabody Energy </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Peabody Energy Corporation, a non-affiliated company</TD>
</TR>
<TR valign="top">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pension Plan </DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">The trusteed, non-contributory, defined benefit pension plan of Panhandle, Consumers and CMS</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Energy</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">PowerSmith</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A 124 MW natural gas power plant located in Oklahoma, in which CMS Generation formerly held
a 6.25% limited partner ownership interest</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">PSCR </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Power supply cost recovery</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">PURPA </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Public Utility Regulatory Policies Act of 1978</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Quicksilver </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Quicksilver Resources, Inc., a non-affiliated company</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">RCP </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Resource Conservation Plan</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ROA </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Retail Open Access</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">S&#038;P </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Standard &#038; Poor&#146;s Ratings Group, a division of The McGraw-Hill Companies, Inc.</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SEC </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">U.S. Securities and Exchange Commission</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;10d(4) Regulatory Asset </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Regulatory asset as described in Section 10d(4) of the Customer Choice Act, as amended</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Securitization </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A financing method authorized by statute and approved by the MPSC which allows a utility to</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">sell its right to receive a portion of the rate payments received from its customers for the</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">repayment of Securitization bonds issued by a special purpose entity affiliated with such</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">utility</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SENECA </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Sistema Electrico del Estado Nueva Esparta C.A., a former subsidiary of CMS International</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ventures</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SERP </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Supplemental Executive Retirement Plan</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SFAS </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Statement of Financial Accounting Standards</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SFAS No.&nbsp;5 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">SFAS No. 5, &#147;Accounting for Contingencies&#148;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SFAS No.&nbsp;87 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">SFAS No. 87, &#147;Employers&#146; Accounting for Pensions&#148;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SFAS No.&nbsp;88 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">SFAS No. 88, &#147;Employers&#146; Accounting for Settlements and Curtailments of Defined Benefit</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Pension Plans and for Termination Benefits&#148;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SFAS No.&nbsp;98 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">SFAS No. 98, &#147;Accounting for Leases&#148;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SFAS No.&nbsp;106 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">SFAS No. 106, &#147;Employers&#146; Accounting for Postretirement Benefits Other Than Pensions&#148;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SFAS No.&nbsp;109 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">SFAS No. 109, &#147;Accounting for Income Taxes&#148;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SFAS No.&nbsp;115 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">SFAS No. 115, &#147;Accounting for Certain Investments in Debt and Equity Securities&#148;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">SFAS No.&nbsp;132(R) </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">SFAS No. 132 (revised 2003), &#147;Employers&#146; Disclosures about Pensions and Other Postretirement
Benefits&#148;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="64%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="top">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SFAS No.&nbsp;133 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">SFAS No. 133, &#147;Accounting for Derivative Instruments and Hedging Activities, as amended and</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">interpreted&#148;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SFAS No.&nbsp;143 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">SFAS No. 143, &#147;Accounting for Asset Retirement Obligations&#148;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SFAS No.&nbsp;144 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">SFAS No. 144, &#147;Accounting for the Impairment or Disposal of Long-Lived Assets&#148;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SFAS No.&nbsp;157 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">SFAS No. 157, &#147;Fair Value Measurement&#148;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SFAS No.&nbsp;158 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">SFAS No. 158, &#147;Employers&#146; Accounting for Defined Benefit Pension and Other Postretirement</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Plans &#151; an amendment of FASB Statements No. 87, 88, 106, and 132(R)&#148;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SFAS No.&nbsp;159 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">SFAS No. 159, &#147;The Fair Value Option for Financial Assets and Financial Liabilities,</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Including an amendment to FASB Statement No. 115&#148;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shuweihat</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A power and desalination plant located in the United Arab Emirates, in which CMS Generation</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">formerly owned a 20 percent interest</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Stranded Costs </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Costs incurred by utilities in order to serve their customers in a regulated monopoly
environment, which may not be recoverable in a competitive environment because of customers
leaving their systems and ceasing to pay for their costs.  These costs could include owned
and purchased generation and regulatory assets.</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Superfund </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Comprehensive Environmental Response, Compensation and Liability Act</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Takoradi </DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">A 200 MW open-cycle combustion turbine crude oil power plant located in Ghana, in which CMS</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Generation formerly owned a 90 percent interest</TD>
</TR>
<TR valign="top">
    <TD><DIV style="margin-left:15px; text-indent:-15px">TAQA </DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">Abu Dhabi National Energy Company, a subsidiary of Abu Dhabi Water and Electricity Authority</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Taweelah </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Al Taweelah A2, a power and desalination plant of Emirates CMS Power Company located in the</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">United Arab Emirates, in which CMS Generation formerly held a 40 percent interest</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">TGM </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A natural gas transportation and pipeline business located in Argentina, in which CMS</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">International Ventures formerly owned a 20 percent interest</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">TGN </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A natural gas transportation and pipeline business located in Argentina, in which CMS Gas</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Transmission owns a 23.54 percent interest</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Trunkline </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CMS Trunkline Gas Company, LLC, formerly a subsidiary of CMS Panhandle Holdings, LLC</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Zeeland </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A 946 MW gas-fired power plant located in Zeeland, Michigan</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



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</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 14pt; margin-top: 18pt"><FONT style="font-variant: SMALL-CAPS"><B>CMS Energy Corporation</B></FONT>
</DIV>

<DIV align="left">
<A name="134"></A>
</DIV>
<DIV align="center" style="font-size: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Management&#146;s Discussion and Analysis</B></FONT></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This MD&#038;A is a consolidated report of CMS Energy and Consumers. The terms &#147;we&#148; and &#147;our&#148; as used
in this report refer to CMS Energy and its subsidiaries as a consolidated entity, except where it
is clear that such term means only CMS Energy. This MD&#038;A has been prepared in accordance with the
instructions to Form 10-Q and Item&nbsp;303 of Regulation&nbsp;S-K. This MD&#038;A should be read in conjunction
with the MD&#038;A contained in CMS Energy&#146;s Form 10-K for the year ended December&nbsp;31, 2006 and the Form
8-K filed June&nbsp;4, 2007 amending CMS Energy&#146;s 2006 financial statements to reflect certain
discontinued operations resulting from recent asset sales.
</DIV>

<DIV align="left">
<A name="135"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Forward-looking statements and information</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This Form 10-Q and other written and oral statements that we make contain forward-looking
statements as defined in Rule&nbsp;3b-6 under the Securities Exchange Act of 1934, as amended, Rule&nbsp;175
under the Securities Act of 1933, as amended, and relevant legal decisions. Our intention with the
use of such words as &#147;may,&#148; &#147;could,&#148; &#147;anticipates,&#148; &#147;believes,&#148; &#147;estimates,&#148; &#147;expects,&#148; &#147;intends,&#148;
&#147;plans,&#148; and other similar words is to identify forward-looking statements that involve risk and
uncertainty. We designed this discussion of potential risks and uncertainties to highlight
important factors that may impact our business and financial outlook. We have no obligation to
update or revise forward-looking statements regardless of whether new information, future events,
or any other factors affect the information contained in the statements. These forward-looking
statements are subject to various factors that could cause our actual results to differ materially
from the results anticipated in these statements. Such factors include our inability to predict
and (or)&nbsp;control:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the price of CMS Energy Common Stock, capital and financial market conditions, and
the effect of such market conditions on the Pension Plan, interest rates, and access to
the capital markets, including availability of financing to CMS Energy, Consumers, or any
of their affiliates, and the energy industry,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>market perception of the energy industry, CMS Energy, Consumers, or any of their
affiliates,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the ability of CMS Energy affiliates with interests in the DIG power plant to
effectively restructure power supply agreements on a timely basis,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>factors affecting utility and diversified energy operations, such as unusual weather
conditions, catastrophic weather-related damage, unscheduled generation outages,
maintenance or repairs, environmental incidents, or electric transmission or gas pipeline
system constraints,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the impact of possible regulations or laws regarding carbon dioxide and other greenhouse
gas emissions,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>national, regional, and local economic, competitive, and regulatory policies,
conditions and developments,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>adverse regulatory or legal decisions, including those related to environmental laws
and regulations, and potential environmental remediation costs associated with such
decisions, including but not limited to those that may affect Bay Harbor,</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-1<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>potentially adverse regulatory treatment and
(or)&nbsp;regulatory delay or failure to receive timely regulatory orders concerning a
number of significant questions presently or potentially before the
MPSC, including:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>recovery of Clean Air Act capital and operating costs and other environmental
and safety-related expenditures,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>recovery of power supply and natural gas supply costs when fuel prices are
increasing and (or)&nbsp;fluctuating,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>timely recognition in rates of additional equity investments in Consumers,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>adequate and timely recovery of additional electric and gas rate-based
investments,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>adequate and timely recovery of higher MISO energy and transmission costs,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>recovery of Stranded Costs incurred due to customers choosing alternative
energy suppliers,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>recovery of Palisades plant sale-related costs,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>authorization of Zeeland power plant purchase costs, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>authorization of a new clean coal plant,</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the effects on our ability to purchase capacity to serve our customers and fully
recover the cost of these purchases, if the owners of the MCV Facility exercise their
right to terminate the MCV PPA,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the ability of Consumers to utilize its regulatory
out rights as it pertains to the MCV PPA,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the ability of Consumers to recover Big Rock decommissioning funding shortfalls and
nuclear fuel storage costs due to the DOE&#146;s failure to accept spent nuclear fuel on
schedule, including the outcome of pending litigation with the DOE,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>federal regulation of electric sales and transmission of electricity, including
periodic re-examination by federal regulators of market-based sales authorizations in
wholesale power markets without price restrictions,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>energy markets, including availability of capacity and the timing and extent of
changes in commodity prices for oil, coal, natural gas, natural gas liquids, electricity
and certain related products due to lower or higher demand, shortages, transportation
problems, or other developments,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to collect accounts receivable from our customers,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>earnings volatility as a result of the GAAP requirement that we utilize
mark-to-market accounting on certain energy commodity contracts and interest rate swaps,
which may have, in any given period, a significant positive or negative effect on
earnings, which could change dramatically or be eliminated in subsequent periods,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the effect on our utility and utility revenues of the direct and indirect impacts of the continued
economic downturn experienced by the Michigan economy,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>potential disruption or interruption of facilities or operations due to accidents,
war, terrorism, or changing political environment, and the ability to obtain or maintain
insurance coverage for such events,</TD>
</TR>



<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>technological developments in energy production, delivery, and usage,</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-2<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>achievement of capital expenditure and operating expense goals,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in financial or regulatory accounting principles or policies,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in domestic or foreign tax laws, or new IRS or foreign governmental
interpretations of existing or past tax laws,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in federal or state regulations or laws that could have an impact on our business,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>outcome, cost, and other effects of legal or administrative proceedings,
settlements, investigations or claims, including claims, damages, and fines resulting
from round-trip trading and alleged inaccurate commodity price reporting, including the outcome of
investigations by the DOJ regarding round-trip trading and price reporting,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>disruptions in the normal commercial insurance and surety bond markets that may
increase costs or reduce traditional insurance coverage, particularly terrorism and
sabotage insurance and performance bonds,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>potential assertion of indemnity or warranty claims with respect to previously owned assets and businesses,</TD>
</TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>credit ratings of CMS Energy, Consumers, or any of their affiliates,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>other business or investment considerations that may be disclosed from time to time
in CMS Energy&#146;s or Consumers&#146; SEC filings, or in other publicly issued written documents,
and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>other uncertainties that are difficult to predict, many of which are beyond our
control.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For additional information regarding these and other uncertainties, see the &#147;Outlook&#148; section
included in this MD&#038;A, Note 3, Contingencies, and Part&nbsp;II, Item&nbsp;1A. Risk Factors.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-3<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="136"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Executive Overview</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">CMS Energy is an energy company operating primarily in Michigan. We are the parent holding company
of Consumers and Enterprises. Consumers is a combination electric and gas utility company serving
in Michigan&#146;s Lower Peninsula. Enterprises, through various subsidiaries and equity investments,
is engaged primarily in domestic independent power production. We manage our businesses by the
nature of services each provides and operate principally in three business segments: electric
utility, gas utility, and enterprises.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We earn our revenue and generate cash from operations by providing electric and natural gas utility
services, electric power generation, and gas distribution, transmission, and storage. Our
businesses are affected primarily by:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>weather, especially during the normal heating and cooling seasons,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>economic conditions, primarily in Michigan,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>regulation and regulatory issues that affect our electric and gas utility operations,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>energy commodity prices,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>interest rates, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our debt credit rating.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the past several years, our business strategy has involved improving our consolidated
balance sheet and maintaining focus on our core strength: utility operations and service. As an
indication of our commitment to our utility business, we have invested $650&nbsp;million in Consumers
during 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have completed the sale of all of our international Enterprises assets, using the proceeds to retire debt and to invest in our utility business. Asset sales
completed in 2007 include:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a portfolio of our businesses in Argentina and our northern Michigan non-utility natural
gas assets to Lucid Energy for $130&nbsp;million in March&nbsp;2007,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ownership interest in El Chocon, an Argentine hydroelectric generating business, to
Endesa, S.A. for $50&nbsp;million in March&nbsp;2007,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ownership interest in SENECA and certain associated generating equipment to PDVSA
for $106&nbsp;million in April&nbsp;2007,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ownership interest in businesses in the Middle East, Africa, and India to TAQA for
$900&nbsp;million in May&nbsp;2007,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>CMS Energy Brasil S.A. to CPFL Energia S.A., a Brazilian utility, for $211&nbsp;million in
June&nbsp;2007,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our investment in GasAtacama to Endesa S.A. for $80&nbsp;million in August&nbsp;2007, and</TD>
</TR>


<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our investment in Jamaica to AEI for $14&nbsp;million in October 2007.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We also made important progress at Consumers to reduce business risk and to meet the future needs
of our customers. We sold Palisades to Entergy in April&nbsp;2007 for $380&nbsp;million. The final purchase
price, subject to various closing adjustments, resulted in us receiving $363&nbsp;million as of
September&nbsp;30, 2007. The sale also resulted in an immediate improvement in our cash flow, a
reduction in our nuclear operating and decommissioning risk, and an improvement in our financial
flexibility to support other utility investments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In September&nbsp;2007, we claimed relief under the regulatory-out provision in the MCV PPA, thereby
limiting our capacity and fixed energy payments to the MCV Partnership to the amounts that we
collect from our customers. As a result of our exercise of the regulatory-out provision, the MCV
Partnership may,
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-4<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">under certain circumstances, have the right to terminate or reduce the amount of
capacity sold under the MCV PPA, which could affect our need to build or purchase additional
generating capacity. The MCV Partnership has
notified us that it disputes our right to exercise the regulatory-out provision.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We introduced our Balanced Energy Initiative, a comprehensive plan to meet customer energy needs
over the next 20&nbsp;years, in May&nbsp;2007. The plan, as filed with the MPSC, is designed to meet the
growing customer demand for electricity with energy efficiency,
demand management, expansion of the use of renewable energy, and development of new power plants to
complement existing generating sources.
In September&nbsp;2007, we filed the second phase of our Balanced Energy Initiative with the MPSC,
which contains our plan for construction of a new 800 MW clean coal plant at an existing site
located near Bay City, Michigan. Our plan calls for 500 MW of the plant&#146;s output to be used for
our customers in Michigan and to commit the remaining 300 MW to others. We expect the plant
to enter operation
in 2015 with our share of the cost estimated at $1.3&nbsp;billion excluding financing costs and $1.6
billion with financing costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In May&nbsp;2007, we entered an agreement to buy a 946 MW natural gas-fired power plant located in
Zeeland, Michigan from Broadway Gen Funding LLC, an affiliate of LS Power Group, for $517&nbsp;million.
We expect to close by early 2008, subject to approval from the MPSC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We took an important step in our business plan in January&nbsp;2007 by reinstating a quarterly dividend
of $0.05 per share on our common stock, after a four-year suspension. For the nine months ended
September&nbsp;30, 2007, we paid $34&nbsp;million in common stock dividends. We also resolved a
long-outstanding litigation issue. In September&nbsp;2007, we settled two class action lawsuits related
to round-trip trading by CMS MST. We believe that eliminating this business uncertainty was in the
best interests of our shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We also are in the process of restructuring our investment in DIG. This restructuring may involve
renegotiation or possible buyout of the DIG power sales contracts as well as other measures. These
options may require material cash payments. We believe that resolving the issues associated with
the unfavorable supply contracts will allow us to maximize future benefits from our DIG investment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the future, we will focus our strategy on:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reducing parent debt,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>continued investment in our utility business,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>growing earnings while controlling operating costs, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>principles of safe, efficient operations, customer value, fair and timely regulation,
and consistent financial performance.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As we execute our strategy, we will need to overcome a sluggish Michigan economy that has been
hampered by negative developments in Michigan&#146;s automotive industry and limited growth in the
non-automotive sectors of the state&#146;s economy.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-5<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="137"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Results of Operations</B></FONT>
</DIV>


<DIV align="left" style="font-size: 12pt; margin-top: 6pt"><B>CMS Energy Consolidated Results of Operations</B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="12" style="border-bottom: 1px solid #000000">In Millions (except for per share amounts)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Three months ended September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Change</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Income (Loss) Available to Common Stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(103</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">185</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic Earnings (Loss) Per Share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.47</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.84</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted Earnings (Loss) Per Share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.47</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.81</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Electric Utility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(26</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gas Utility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Enterprises (Includes the MCV Partnership and
FMLP interests)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(133</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">191</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate Interest and Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(35</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(54</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Discontinued Operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Income (Loss) Available to Common Stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(103</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">185</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the three months ended September&nbsp;30, 2007, our net income was $82&nbsp;million, a $185&nbsp;million
increase compared to our 2006 third quarter net loss. Compared with the third quarter of 2006, net
loss from our gas utility decreased, reflecting the positive effect of an MPSC gas rate order. At
our Enterprises and Corporate segments, the positive impacts from the recognition of an insurance
award, the recognition of a gain related to our sale of assets to Lucid, and the absence of a 2006
asset impairment charge more than offset the absence of a 2006 property tax refund at the MCV
Partnership. Net income was negatively impacted by decreased Palisades-related earnings at our
electric utility and the absence of earnings from discontinued operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Specific changes to net income available to common stockholders for the three months ended
September&nbsp;30, 2007 versus 2006 are:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="86%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="8">In Millions</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="center">&#149;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">absence of a 2006 asset impairment of our investment in GasAtacama,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">169</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="center">&#149;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">recognition of an insurance reimbursement related to the non-payment by the Argentine
government of our ICSID award,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="center">&#149;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">increase in earnings from our gas utility primarily due to the positive effect of an
MPSC gas rate order,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="center">&#149;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">recognition of a gain associated with the sale of our Argentine and Michigan assets
to Lucid Energy,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="center">&#149;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">increase in earnings from Enterprises primarily due to decreased operating and
maintenance expenses, and mark-to-market gains at CMS ERM compared to losses in 2006,
partially offset by the absence of earnings from equity method investments that were
sold in
2007,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="center">&#149;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">absence of a 2006 property tax refund at the MCV Partnership,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(26</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="center">&#149;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">decreased Palisades-related earnings at our electric utility partially offset by
lower operating and maintenance expenses, and</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(26</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="center">&#149;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">reduction in earnings from discontinued operations.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD colspan="5" nowrap align="left">Total Change</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">185</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-6<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="12" style="border-bottom: 1px solid #000000">In Millions (except for per share amounts)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Nine months ended September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Change</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Loss Available to Common Stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(100</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(58</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(42</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic Loss Per Share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.45</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.26</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.19</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted Loss Per Share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.45</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.26</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.19</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Electric Utility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gas Utility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Enterprises (Includes the MCV
Partnership and FMLP interests)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(173</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(215</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate Interest and Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(51</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(48</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Discontinued Operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(87</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(119</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Loss Available to Common Stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(100</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(58</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(42</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the nine months ended September&nbsp;30, 2007, our net loss was $100&nbsp;million, a $42&nbsp;million increase
in net loss compared to  2006. Compared with the nine months ended September
30, 2006, net income from our gas and electric utilities increased, reflecting the positive effect
of an MPSC gas rate order, an increase in gas deliveries due to weather, and lower operating and
maintenance expenses. These impacts were partially offset by decreased Palisades-related earnings
at our electric utility. At our Enterprises and Corporate segments, the positive impacts from a
reduction in net asset impairment charges, and gains from mark-to-market activity compared to
losses in 2006, more than offset the net negative impact of taxes and the absence of earnings from
equity investments sold in 2007. Net income was negatively impacted by activities associated with
discontinued operations as the net loss on the disposal of international businesses in 2007
replaced earnings recorded for these businesses in 2006.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-7<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Specific changes to net loss available to common stockholders for the nine months ended September
30, 2007 versus 2006 are:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="86%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="8">In Millions</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="center">&#149;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">impairments of our investments in TGN, GasAtacama, Jamaica, and PowerSmith,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(181</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="center">&#149;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">impact of activities associated with discontinued operations as the net loss on the
disposal of international businesses in 2007 replaced earnings recorded for
these businesses in 2006,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(119</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="center">&#149;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">absence of tax benefits recorded at Corporate and Enterprises in 2006 from
the resolution of an IRS income tax audit,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(54</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="center">&#149;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">the establishment of a tax provision on the cumulative undistributed earnings of foreign
subsidiaries sold in 2007, compared to tax benefits recorded in 2006,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(67</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="center">&#149;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">absence of earnings from our equity method investments that were sold in 2007,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="center">&#149;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">absence of an insurance reimbursement received for previously incurred legal expenses,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="center">&#149;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">premiums paid on the early retirement of corporate debt,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="center">&#149;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">absence of a 2006 GasAtacma impairment,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">169</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="center">&#149;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">reduction to our corporate deferred tax valuation allowances associated with capital loss
carryforwards and foreign basis differences primarily due to the sale of international
businesses in 2007 compared to an increase in the valuation allowance in 2006,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="center">&#149;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">recognition of an insurance reimbursement related to the non-payment by the Argentine
government of our ICSID award,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="center">&#149;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">increase in earnings at our gas and electric utility segments,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="center">&#149;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">absence of mark-to-market losses net of operating earnings from our investment in
the MCV Partnership, and</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="center">&#149;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">additional increase in earnings at Enterprises primarily due to mark-to-market gains
at CMS ERM compared to losses in 2006 and gains associated with asset sales.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="5" align="left">Total Change</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(42</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-8<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>ELECTRIC UTILITY RESULTS OF OPERATIONS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="12" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Change</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Three months ended</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(26</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nine months ended</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>

</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Three Months Ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Nine Months Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">September 30, 2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">September 30, 2007</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Reasons for the change:</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">vs. 2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">vs. 2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Electric deliveries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Surcharge revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Palisades revenue to PSCR</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(50</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(91</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Power supply costs and related revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other operating expenses, other income, and
non-commodity revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">General taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest charges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total change</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(26</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Electric deliveries: </B>For the three months ended September&nbsp;30, 2007, electric delivery revenues
decreased $6&nbsp;million versus  2006, as deliveries to end-use customers were 10.5&nbsp;billion kWh, a
decrease of less than 0.1&nbsp;billion kWh or less than 1&nbsp;percent versus 2006. The decrease in electric
deliveries for the three months ended September&nbsp;30, 2007 is primarily due to unfavorable weather.
For the nine months ended September&nbsp;30, 2007, electric delivery revenues increased $26&nbsp;million
versus 2006, as deliveries to end-use customers were 29.5&nbsp;billion kWh, an increase of 0.5&nbsp;billion
kWh or 2&nbsp;percent versus 2006. The increase in electric deliveries for the nine months ended
September&nbsp;30, 2007 is primarily due to favorable weather.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Surcharge revenue</B>: In the first quarter of 2006,
we started collecting a surcharge that the MPSC
authorized under Section&nbsp;10d(4) of the Customer Choice Act. The surcharge factors increased in January 2007
pursuant to a MPSC order. The increase in the surcharge factors increased electric
delivery revenue by $3&nbsp;million for the three months ended September&nbsp;30, 2007 and $11&nbsp;million for
the nine months ended September&nbsp;30, 2007 versus 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Palisades revenue to PSCR: </B>As
a result of the sale of Palisades, electric revenue of $50&nbsp;million
for the three months ended September&nbsp;30, 2007 and $91&nbsp;million for the nine months ended September
30, 2007, related to Palisades rate base is now designated toward recovery of PSCR costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Power supply costs and related revenue: </B>PSCR revenue decreased by $6&nbsp;million for the three months
ended September&nbsp;30, 2007 and $18&nbsp;million for the nine months ended September&nbsp;30, 2007 versus 2006.
These decreases primarily reflect amounts excluded from recovery in the 2006 PSCR Reconciliation
case. A portion of these excluded costs are instead being recovered through Electric Delivery
Revenue. The decrease also reflects the absence, in 2007, of an increase in Power Supply Revenue
associated with the 2005 PSCR Reconciliation case.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-9<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Other operating expenses, other income and non-commodity revenue: </B>For the three months ended
September&nbsp;30, 2007, other operating expenses decreased $30&nbsp;million, other income increased $10
million, and non-commodity revenue decreased $7&nbsp;million versus 2006. For the nine months ended
September&nbsp;30, 2007, other operating expenses decreased $79&nbsp;million, other income increased $26
million, and non-commodity revenue decreased $8&nbsp;million versus 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The decrease in other operating expenses was primarily due to lower operating and maintenance
expense, including reductions to certain workers&#146; compensation and injuries and damages expense.
These decreases were offset partially by higher depreciation and amortization expense. Operating
and maintenance expense decreased primarily due to the absence, in 2007, of costs incurred in 2006
related to a planned refueling outage at Palisades, and lower overhead line maintenance, and storm
restoration costs. Also contributing to the decrease was the sale of Palisades in April&nbsp;2007.
Depreciation and amortization expense increased due to higher non-nuclear plant in service and
greater amortization of certain regulatory assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the three months ended September&nbsp;30, 2007, the increase in other income was primarily due to
higher interest income mainly due to the proceeds from the sale of Palisades and equity infusions
from the parent. For the nine months ended September&nbsp;30, 2007, the increase in other income was
primarily due to higher interest income and higher income associated with our Section&nbsp;10d(4)
Regulatory Asset. The increase on our Section&nbsp;10d(4) Regulatory Asset reflects the absence, in
2007, of the impact of the MPSC&#146;s final order in this case.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>General taxes: </B>For the three months ended September&nbsp;30, 2007, general tax expense increased
primarily due to higher property tax and MSBT tax expense. For the nine months ended September&nbsp;30,
2007, general tax expense increased primarily due to higher property tax, sales and use tax
expense, and MSBT tax expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Interest charges: </B>For the three months ended September&nbsp;30, 2007, interest charges increased $7
million versus 2006. For the nine months ended September&nbsp;30, 2007, interest charges increased $13
million versus 2006. The increase was primarily due to interest associated with amounts to be
refunded to customers as a result of the sale of Palisades. The MPSC order approving the Palisades
power purchase agreement with Entergy directed us to record interest on the unrefunded balance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Income taxes: </B>For the three months and nine months ended September&nbsp;30, 2007, income taxes
decreased versus 2006 primarily due to lower earnings.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-10<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>GAS UTILITY RESULTS OF OPERATIONS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="12" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Change</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Three months ended</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(20</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nine months ended</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Three Months Ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Nine Months Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">September 30,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">September 30,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Reasons for the change:</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007 vs. 2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007 vs. 2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gas deliveries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gas rate increase</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gas wholesale and retail
services, other gas
revenues and other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operation and maintenance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">General taxes and depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest charges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total change</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Gas deliveries: </B>For the three months ended September&nbsp;30, 2007, gas deliveries decreased less than
1 bcf or 1&nbsp;percent versus 2006. Despite lower gas deliveries, gas delivery revenue increased by $5
million due to higher estimated system efficiency.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the
nine months ended September&nbsp;30, 2007, gas delivery revenues
increased by $22&nbsp;million versus 2006 as gas deliveries, including miscellaneous transportation to end-use customers, were 207 bcf,
an increase of 18 bcf or 9&nbsp;percent. The increase in gas deliveries was primarily due to favorable
weather.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Gas rate increases: </B>In November&nbsp;2006, the MPSC issued an order authorizing an annual rate increase
of $81&nbsp;million. In August&nbsp;2007, the MPSC issued an order authorizing an annual rate increase of
$50&nbsp;million. As a result of these orders, gas revenues increased $11&nbsp;million for the three months
ended September&nbsp;30, 2007 and $56&nbsp;million for the nine months ended September&nbsp;30, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Gas wholesale and retail services, other gas revenues and other income: </B>For the three and nine
months ended September&nbsp;30, 2007, the increase was primarily due to higher pipeline capacity
optimization revenue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Operation and maintenance: </B>For the three months and nine months ended September&nbsp;30, 2007,
operation and maintenance expenses increased versus 2006 primarily due to higher uncollectible
accounts expense and contributions, beginning in November&nbsp;2006 pursuant to a November&nbsp;2006 MPSC
order, to a fund that provides energy assistance to low-income customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>General taxes and depreciation: </B>For the three months ended September&nbsp;30, 2007, depreciation
expense increased versus 2006 primarily due to higher plant in service. The increase in general
taxes primarily reflects higher property tax expense and MSBT tax expense. For the nine months
ended September&nbsp;30, 2007, depreciation expense increased versus 2006 primarily due to higher plant
in service. The increase in general taxes primarily reflects higher property tax expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Interest charges: </B>For the three months and nine months ended September&nbsp;30, 2007, interest charges
reflect lower average debt levels versus 2006.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-11<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Income taxes: </B>For the three and nine months ended September&nbsp;30, 2007, income taxes increased
versus 2006 primarily due to higher earnings by the gas utility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ENTERPRISES RESULTS OF OPERATIONS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="12" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Change</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Three months ended</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(133</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">191</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nine months ended</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(173</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(215</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Three Months Ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Nine Months Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">September 30, 2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">September 30, 2007</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Reasons for the change:</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">vs. 2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">vs. 2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of gas and purchased power</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Earnings from equity method investees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(26</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on sale of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operation and maintenance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">General taxes, depreciation, and
other income, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Asset impairment, net of insurance
reimbursement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">288</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fixed charges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(103</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(68</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">The MCV Partnership</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(28</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total change</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Operating revenues: </B>For the three months ended September&nbsp;30, 2007, operating revenues increased
$17&nbsp;million versus 2006 primarily due to $22&nbsp;million of mark-to-market gain in power and gas
contracts compared to losses on such items in 2006 at CMS ERM. Partially offsetting these increases
were decreases of $5&nbsp;million in third party power and gas sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the nine months ended September&nbsp;30, 2007, operating revenues increased $24&nbsp;million versus 2006
primarily due to higher revenues at CMS ERM resulting from
mark-to-market gains of $89&nbsp;million on power and gas contracts compared to losses on such items in 2006 and increased power sales of $25
million. These were offset partially by the write off of $40&nbsp;million derivative assets associated
with the Quicksilver contract that was voided by the trial judge in May&nbsp;2007, absence of 2006 third
party financial settlements of $22&nbsp;million, and decreased third party gas sales of $28&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Cost of gas and purchased power: </B>For the nine months ended September&nbsp;30, 2007, cost of gas and
purchased power decreased $20&nbsp;million versus 2006. The decrease was primarily due to a decrease of
$32&nbsp;million in power purchases from the MISO market, offset partially by higher cost of gas of $12
million resulting from increased usage and higher prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Earnings from equity method investees: </B>For the three months ended September&nbsp;30, 2007, earnings
from equity method investees decreased by $19&nbsp;million versus 2006. The decrease was due to the
absence of
$17&nbsp;million of earnings associated with our investments in Africa, the Middle East and India that
were sold in May&nbsp;2007 and a $2&nbsp;million reduction in earnings associated with our investment in
GasAtacama.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-12<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the nine months ended September&nbsp;30, 2007 earnings from equity method investees decreased by $26
million versus 2006. The decrease was due to the absence of $41&nbsp;million of earnings associated
with sale of our investments in Africa, the Middle East and India in
May&nbsp;2007, and a $5&nbsp;million
reduction in earnings associated with our investment in GasAtacama due to the shortage of gas from
Argentina, offset by the absence in 2007 of a $20&nbsp;million provision for higher foreign taxes in
Argentina recorded in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Gain on sale of assets: </B>For the three months ended September&nbsp;30, 2007, the net gain on asset sales
was $18&nbsp;million. $17&nbsp;million of the net gain resulted from the settlement of certain legal
proceedings associated with the sale of our Argentine and Michigan assets to Lucid Energy. We also
recorded $1&nbsp;million in gains from the sale of various assets at CMS ERM. There were no gains or
losses on asset sales for the three months ended September&nbsp;30, 2006. For additional details, see
Note 2, Asset Sales, Discontinued Operations and Impairment Charges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the nine months ended September&nbsp;30, 2007, the net gain on asset sales was $16&nbsp;million. The net
gain consisted of $34&nbsp;million from the sale of our equity investment in El Chocon to Endesa S.A.
and $1&nbsp;million in gains from the sale of various assets at CMS Energy. These gains were partially
offset by a $14&nbsp;million net loss on the sale of our equity investments in Africa, the Middle East
and India to TAQA and a $5&nbsp;million net loss on the sale of our Argentine and Michigan assets to
Lucid Energy. There were no gains or losses on asset sales for the nine months ended September&nbsp;30,
2006. For additional details, see Note 2, Asset Sales, Discontinued Operations and Impairment
Charges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Operation and maintenance: </B>For the three months ended September&nbsp;30, 2007, operation and
maintenance expenses decreased $13&nbsp;million versus 2006 due to the absence, in 2007, of a $6&nbsp;million
loss recorded on the termination of the remaining prepaid gas contracts at CMS ERM, reimbursement
of $3&nbsp;million in arbitration costs at CMS Gas Transmission, and a $4&nbsp;million net reduction in other
expenses primarily due to the absence of expenses associated with
assets sold during the first six months of 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the nine months ended September&nbsp;30, 2007, operation and maintenance expenses decreased $7
million versus 2006 due to the absence, in 2007, of a $6&nbsp;million loss recorded on the termination
of the remaining prepaid gas contracts at CMS ERM, reimbursement of $3&nbsp;million in arbitration costs
at CMS Gas Transmission, partially offset by a $2&nbsp;million net increase in other expenses primarily
due to expenses associated with assets sold during the first six months of 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>General taxes, depreciation, and other income, net: </B>For the three months ended September&nbsp;30, 2007,
the net of general taxes, depreciation, and other income increased
operating income by $6&nbsp;million versus 2006 due to lower accretion expense related to the termination of the prepaid gas contracts
at CMS ERM.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the nine months ended September&nbsp;30, 2007, the net of general taxes, depreciation, and other
income increased operating income by $6&nbsp;million versus 2006 due to lower accretion expense of $4
million related to the termination of the prepaid gas contracts at CMS ERM, and lower expense due
to asset sales of $2&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Asset impairment charges, net of insurance reimbursement: </B>For the three months ended September&nbsp;30,
2007, asset impairment charges, net of insurance reimbursement, decreased $288&nbsp;million versus 2006.
The decrease in impairment charges relates to a $75&nbsp;million credit recorded in September&nbsp;2007 to
recognize a prior insurance award associated with our ownership interest in TGN, and the absence,
in 2007, of a $213&nbsp;million impairment of our equity investment in GasAtacama and related notes
receivable recorded in 2006. For additional details, see Note 2, Asset Sales, Discontinued
Operations and Impairment Charges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the nine months ended September&nbsp;30, 2007, asset impairment charges, net of insurance
reimbursement, decreased $25&nbsp;million versus 2006. For the nine months ended September&nbsp;30, 2007, we
recorded net impairment charges of $204&nbsp;million that included $277&nbsp;million of charges for the
reduction in fair value of our investments in TGN, Jamaica, GasAtacama and PowerSmith, and a $75
million credit to recognize a
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-13<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">prior insurance award associated with our ownership interest in TGN.
For the nine months ended September&nbsp;30,
2006, we recorded a $212&nbsp;million charge for the reduction in the fair value of our equity
investment in GasAtacama and related notes receivable. For additional details, see Note 2, Asset
Sales, Discontinued Operations and Impairment Charges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Fixed charges: </B>For the three and nine months ended September&nbsp;30, 2007, fixed charges decreased due
to lower interest expenses from subsidiary debt due to asset sales in 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Minority Interest: </B>The allocation of profits to minority owners decreases our net income, and the
allocation of losses to minority owners increases our net income. For the three months ended
September&nbsp;30, 2007, minority owners shared in a portion of the profits at our subsidiaries. For the
three months ended September&nbsp;30, 2006, minority owners shared in a portion of losses at our
subsidiaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the nine months ended September&nbsp;30, 2007, minority owners shared in a portion of greater
profits at our subsidiaries versus profits shared in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Income taxes: </B>For the three months ended September&nbsp;30, 2007, income tax expense increased $103
million versus 2006. The increase reflects $113&nbsp;million of tax expense on higher earnings and the
absence of $4&nbsp;million in tax benefits recorded in 2006 related to foreign subsidiaries subsequently
sold in 2007, offset by $14&nbsp;million of tax benefit primarily related to lower tax reserves in 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the nine months ended September&nbsp;30, 2007, income tax expense increased $68&nbsp;million versus 2006.
The increase reflects the $68&nbsp;million net increase in tax expense on earnings associated with the
recognition of previously unremitted foreign earnings of subsidiaries sold in 2007. Also
increasing tax expense was $26&nbsp;million of tax expense on higher earnings. These expenses were
offset by $26&nbsp;million of tax benefits primarily related to lower tax reserves in 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The MCV Partnership: </B>Due to the November&nbsp;2006 sale of our ownership interests in the MCV
Partnership, we have condensed their consolidated results of operations for the three and nine
months ended September&nbsp;30, 2007 for discussion purposes. The decrease in losses from our ownership
interest in the MCV Partnership is primarily due to the absence, in 2007, of mark-to-market losses
on certain long-term contracts and financial hedges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>CORPORATE INTEREST AND OTHER RESULTS OF OPERATIONS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="12" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Change</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Three months ended</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(35</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(54</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nine months ended</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(51</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(48</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the three months ended September&nbsp;30, 2007, corporate interest and other net expenses were $35
million, a decrease of $19&nbsp;million versus 2006. The $19&nbsp;million decrease
primarily reflects the absence, in 2007, of a portion of the reduction in fair value of our
investment in GasAtacama recognized in 2006 and reduced interest expense due to lower debt levels
in 2007. Partially offsetting the decrease were premiums on the early retirement of CMS Energy debt
paid in 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the nine months ended September&nbsp;30, 2007, corporate interest and other net expense were $51
million, an increase of $3&nbsp;million versus 2006. The $3&nbsp;million increase
primarily reflects the absence, in 2007, of a tax benefit due to the resolution of an IRS income
tax audit, higher income tax expense in 2007, and the absence of an insurance reimbursement
received in June&nbsp;2006 for previously incurred legal expenses. Also contributing to the increase
was the recognition of a portion of the reduction in fair value of our investment in GasAtacama and
premiums paid on the early retirement of CMS Energy
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-14<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">debt in June&nbsp;2007.
Partially offsetting the increase was the reduction of certain deferred tax valuation allowances in
March&nbsp;2007 that were no longer required due to the sale of our international operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Discontinued Operations: </B>For the three months ended September&nbsp;30, 2007, there was no net income
from discontinued operations compared to net income of $11&nbsp;million in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the nine months ended September&nbsp;30, 2007, the net loss from discontinued operations was $87
million compared to $32&nbsp;million in net income in 2006. The $119&nbsp;million change is primarily due to
the net loss on the disposal of international businesses in 2007, which replaced earnings recorded
for these businesses in 2006.
</DIV>
<DIV align="left">
<A name="138"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Critical Accounting Policies</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following accounting policies are important to an understanding of our results of operations
and financial condition and should be considered an integral part of our MD&#038;A. For additional
accounting policies, see Note 1, Corporate Structure and Accounting Policies.
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Use of Estimates and Assumptions</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We use estimates and assumptions in preparing our consolidated financial statements that may affect
reported amounts and disclosures. We use accounting estimates for asset valuations, depreciation,
amortization, financial and derivative instruments, employee benefits, and contingencies. For
example, we estimate the rate of return on plan assets and the cost of future health-care benefits
to determine our annual pension and other postretirement benefit costs. Actual results may differ
from estimated results due to factors such as changes in the regulatory environment, competition,
foreign exchange, regulatory decisions, and lawsuits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Contingencies: </B>We are involved in various regulatory and legal proceedings that arise in the
ordinary course of our business. We record a liability for contingencies based upon our assessment
that a loss is probable and the amount of loss can be reasonably estimated. We use the principles
in SFAS No.&nbsp;5 when recording estimated liabilities for contingencies. We consider many factors in
making these assessments, including the history and specifics of each matter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The amount of income taxes we pay is subject to ongoing audits by federal, state, and foreign tax
authorities, which can result in proposed assessments. Our estimate for the potential outcome for
any uncertain tax issue is highly judgmental. We believe we have provided adequately for any
likely outcome related to these matters. However, our future results may include favorable or
unfavorable adjustments to our estimated tax liabilities in the period the assessments are made or
resolved or when statutes of limitation on potential assessments expire. As a result, our
effective tax rate may fluctuate significantly on a quarterly basis. The FASB issued a new
interpretation on the recognition and measurement of uncertain tax positions that we adopted on
January&nbsp;1, 2007. For additional details, see the &#147;Implementation of New Accounting Standards&#148;
section included in this MD&#038;A.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Discontinued Operations: </B>We have determined that certain consolidated subsidiaries meet the
criteria of assets held for sale under SFAS No.&nbsp;144. At December&nbsp;31, 2006, these subsidiaries
included our Argentine businesses sold in March&nbsp;2007, a majority of our Michigan non-utility
businesses sold in March&nbsp;2007, CMS Energy Brasil S.A., Takoradi, SENECA, and certain associated
holding companies. There were no assets classified as held for sale at September&nbsp;30, 2007. For
additional details, see Note 2, Asset Sales, Discontinued Operations and Impairment Charges.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-15<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 12pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Accounting for Financial and Derivative Instruments, Trading Activities, and Market Risk
Information</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Financial Instruments: </B>Debt and equity securities classified as available-for-sale are reported at
fair value determined from quoted market prices. Unrealized gains or losses resulting from changes
in fair value of certain available-for-sale debt and equity securities are reported, net of tax, in
equity as part of AOCL. Unrealized gains or losses are excluded from earnings unless the related
changes in fair value are determined to be other than temporary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Derivative Instruments: </B>We account for derivative instruments in accordance with SFAS No.&nbsp;133.
Except as noted within this section, since the year ended December&nbsp;31, 2006, there have been no
significant changes in the amount or types of derivatives that we hold or to how we account for
derivatives. For additional details on our derivatives, see Note 6, Financial and Derivative
Instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To determine the fair value of our derivatives, we use information from external sources (i.e.,
quoted market prices and third party valuations), if available. For certain contracts, this
information is not available and we use mathematical valuation models to value our derivatives.
These models require various inputs and assumptions, including commodity market prices and
volatilities, as well as interest rates and contract maturity dates. The following table
summarizes the interest rate and volatility rate assumptions we used to value these contracts at
September&nbsp;30, 2007:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Interest Rates (%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Volatility Rates (%)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Electricity-related option contracts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">68 &#151; 113</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Changes in forward prices or volatilities could significantly change the calculated fair value of
our derivative contracts. The cash returns we actually realize on these contracts may vary, either
positively or negatively, from the results that we estimate using these models. As part of valuing
our derivatives at market, we maintain reserves, if necessary, for credit risks arising from the
financial condition of our counterparties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Derivative Contracts Associated with Equity Investments</I>: In May&nbsp;2007, we sold our ownership
interest in businesses in the Middle East, Africa, and India. Certain of these businesses held
interest rate contracts and foreign exchange contracts that were derivatives. Before the sale, we
recorded our proportionate share of the change in fair value of these contracts in AOCL if the
contracts qualified for cash flow hedge accounting; otherwise, we recorded our share in Earnings
from Equity Method Investees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At the date of the sale, we had accumulated a net loss of $13&nbsp;million, net of tax, in AOCL
representing our proportionate share of mark-to-market gains and losses from cash flow hedges held
by the equity method investees. After the sale, we reclassified this amount and recognized it in
earnings as a reduction of the gain on the sale. For additional details on the sale of our
interest in these equity method investees, see Note 2, Asset Sales, Discontinued Operations and
Impairment Charges.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-16<!-- /Folio -->
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>CMS ERM Contracts: </B>CMS ERM enters into and owns energy contracts that support CMS Energy&#146;s ongoing
operations. We include the fair value of the derivative contracts held by CMS ERM in either Price
risk management assets or Price risk management liabilities on our Consolidated Balance Sheets.
The following tables provide a summary of these contracts at September&nbsp;30, 2007:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="5" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="3" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="3" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Non-Trading</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Trading</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Fair value of contracts outstanding at December&nbsp;31, 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">31</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">(68</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">(37</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Fair value of new contracts when entered into during the
period (a)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(1</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(1</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Contracts realized or otherwise settled during the period (b)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(6</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">67</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">61</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Other changes in fair value (c)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(26</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(12</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(38</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Fair value of contracts outstanding at September&nbsp;30, 2007
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">(1</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">(14</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">(15</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" valign="top" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(a)&nbsp;Reflects only the initial premium payments (receipts)&nbsp;for new contracts. No unrealized gains
or losses were recognized at the inception of any new contracts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(b)&nbsp;The fair value of CMS ERM&#146;s trading contracts has increased significantly from December&nbsp;31,
2006 due to the termination of certain gas contracts. CMS ERM had recorded derivative liabilities,
representing cumulative unrealized mark-to-market losses, associated with these contracts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(c)&nbsp;Reflects changes in the fair value of contracts over the period, as well as increases or
decreases to credit reserves. For CMS ERM&#146;s non-trading contracts, this amount also reflects the
rescission of a natural gas contract with Quicksilver. CMS ERM had recorded a derivative asset,
representing cumulative unrealized mark-to-market gains, associated with this contract. See Note
3, Contingencies, &#147;Other Contingencies &#151; Quicksilver Resources, Inc.&#148; for additional details.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="8" style="border-bottom: 1px solid #000000">Fair Value of Non-Trading Contracts at September 30, 2007</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 0px solid #000000">Maturity (in years)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Source of Fair Value</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Fair Value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Less than 1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">1 to 3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">4 to 5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Greater than 5</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prices actively quoted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prices obtained from external
sources or based on
models and
other valuation methods</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="4" style="border-bottom: 1px solid #000000">Fair Value of Trading Contracts at September 30, 2007</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 0px solid #000000">Maturity (in years)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Source of Fair Value</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Fair Value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Less than 1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">1 to 3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">4 to 5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Greater than 5</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prices actively quoted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prices obtained from external
sources or based on models and
other valuation methods</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(14</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(12</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Market Risk Information: </B>The following is an update of our risk sensitivities since December&nbsp;31,
2006. These sensitivities indicate the potential loss in fair value, cash flows, or future
earnings from our financial instruments, including our derivative contracts, assuming a
hypothetical adverse change in market rates or prices of 10&nbsp;percent. Changes in excess of the
amounts shown in the sensitivity analyses could occur if changes in market rates or prices exceed
the 10&nbsp;percent shift used for the analyses.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-17<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Interest Rate Risk Sensitivity Analysis </I>(assuming an increase in market interest rates of 10
percent):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">September 30, 2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">December 31, 2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Variable-rate financing &#151; before-tax annual earnings
exposure</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fixed-rate financing &#151; potential <B>reduction </B>in fair value (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">181</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">193</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fair value reduction could only be realized if we repurchased all of our fixed-rate financing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Commodity Price Risk Sensitivity Analysis </I>(assuming an adverse change in market prices of 10
percent):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">September 30, 2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">December 31, 2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Potential <B>reduction </B>in fair value:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-trading contracts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">CMS ERM gas forward contracts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Trading contracts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Electricity-related option contracts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Electricity-related swaps</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gas-related option contracts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gas-related swaps and futures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Investment Securities Price Risk Sensitivity Analysis </I>(assuming an adverse change in market prices
of 10&nbsp;percent):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">September 30, 2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">December 31, 2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Potential <B>reduction </B>in fair value of
available-for-sale equity
securities (primarily SERP investments):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For additional details on market risk and derivative activities, see Note 6, Financial and
Derivative Instruments.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Other</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other accounting policies important to an understanding of our results of operations and financial
condition include:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>accounting for long-lived assets and equity method investments,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>accounting for the effects of industry regulation,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>accounting for pension and OPEB,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>accounting for asset retirement obligations, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>accounting for nuclear decommissioning costs.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">These accounting policies were disclosed in our 2006 Form 10-K and there have been no subsequent
material changes.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-18<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="139"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Capital Resources And Liquidity</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Factors affecting our liquidity and capital requirements are:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>results of operations,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>capital expenditures,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>energy commodity and transportation costs,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>contractual obligations,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>regulatory decisions,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>debt maturities,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>credit ratings,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>working capital needs, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>collateral requirements.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the summer months, we purchase natural gas and store it for resale primarily during the
winter heating season. Although our prudent natural gas costs are recoverable from our customers,
the amount paid for natural gas stored as inventory requires additional liquidity due to the lag in
cost recovery.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our current financial plan includes controlling operating expenses and capital expenditures and
evaluating market conditions for financing opportunities, if needed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We believe the following items will be sufficient to meet our liquidity needs:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our current level of cash and revolving credit facilities,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our anticipated cash flows from operating and investing activities, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to access secured and unsecured borrowing capacity in the capital markets,
if necessary.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the second quarter of 2007, Moody&#146;s and S&#038;P upgraded long-term credit ratings of CMS Energy and
Consumers and revised the rating outlook to stable from positive.
</DIV>


<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Cash Position, Investing, and Financing</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our operating, investing, and financing activities meet consolidated cash needs. At September&nbsp;30,
2007, we had $1.293&nbsp;billion consolidated cash, which includes $48&nbsp;million of restricted cash and $4
million from entities consolidated pursuant to FIN 46(R).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our primary ongoing source of cash is dividends and other distributions from our subsidiaries. For
the nine months ended September&nbsp;30, 2007, Consumers paid $176&nbsp;million in common stock dividends to
CMS Energy.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Summary of Consolidated Statements of Cash Flows:</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Nine months ended September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by (used in):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(116</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">447</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,394</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(436</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by operating and investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,278</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(386</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(400</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of exchange rates on cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Increase (Decrease) in Cash and Cash Equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(388</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Operating Activities: </B>For the nine months ended September&nbsp;30, 2007, net cash used in operating
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-19<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">activities was $116&nbsp;million, an increase of $563&nbsp;million versus 2006. The increase in cash used in
operations was a result of the absence, in 2007, of the sale of accounts receivable combined with
payments made to fund our pension plan and to settle a shareholder class action lawsuit. The
absence of the return of funds formerly held as collateral under certain gas hedging arrangements
and other timing differences also contributed to the increased use of cash from operations. These
increases were offset partially by the absence of the MCV Partnership gas supplier funds on deposit
and a decrease in expenditures for gas inventory, as the milder winter in 2006 allowed us to
accumulate more gas in our storage facilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Investing Activities: </B>For the nine months ended September&nbsp;30, 2007, net cash provided by investing
activities was $1.394&nbsp;billion, an increase of $1.83&nbsp;billion versus 2006. This increase was
primarily due to proceeds from asset sales and proceeds from nuclear decommissioning trust funds.
For additional details on asset sales, see Note 2, Asset Sales, Discontinued Operations and
Impairment Charges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Financing Activities: </B>For the nine months ended September&nbsp;30, 2007, cash used in financing
activities was $386&nbsp;million, a decrease of $14&nbsp;million versus 2006. This was primarily due to a
decrease in debt payments offset by the payment of common stock dividends. For additional details
on long-term debt activity, see Note 4, Financings and Capitalization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our cash flow statements include amounts related to discontinued operations through the date of
disposal. For additional details on discontinued operations, see Note 2, Asset Sales, Discontinued
Operations and Impairment Charges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Obligations and Commitments</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Revolving Credit Facilities: </B>For details on our revolving credit facilities, see Note 4,
Financings and Capitalization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Dividend Restrictions: </B>For details on dividend restrictions, see Note 4, Financings and
Capitalization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Off-Balance Sheet Arrangements: </B>CMS Energy and certain of its subsidiaries enter into various
arrangements in the normal course of business to facilitate commercial transactions with third
parties. These arrangements include indemnifications, letters of credit, surety bonds, and
financial and performance guarantees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We enter into agreements containing indemnifications standard in the industry and indemnifications
specific to a transaction, such as the sale of a subsidiary. Indemnifications are usually
agreements to reimburse other companies if those companies incur losses due to third party claims
or breach of contract terms. Banks, on our behalf, issue letters of credit guaranteeing payment to
a third party. Letters of credit substitute the bank&#146;s credit for ours and reduce credit risk for
the third party beneficiary. We monitor these obligations and believe it is unlikely that we would
be required to perform or otherwise incur any material losses associated with these guarantees.
For additional details on these and other guarantee arrangements, see Note 3, Contingencies, &#147;Other
Contingencies &#151; FASB Interpretation No.&nbsp;45, <I>Guarantor&#146;s Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others.&#148;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In May&nbsp;2007, we sold our ownership interests in businesses in the Middle East, Africa, and India to
TAQA. TAQA has assumed all contingent obligations related to our project-financing security
agreements. For more details on the sale of our ownership interests to TAQA, see Note 2, Asset
Sales, Discontinued Operations and Impairment Charges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Sale of Accounts Receivable: </B>Under a revolving accounts receivable sales program, Consumers may
sell up to $325&nbsp;million of certain accounts receivable. The highly liquid and efficient market for
securitized
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-20<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">financial assets provides a lower cost source of funding compared to unsecured debt. For additional details,
see Note 4, Financings and Capitalization.
</DIV>

<DIV align="left">
<A name="140"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Outlook</B></FONT>
</DIV>


<DIV align="left" style="font-size: 12pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>CORPORATE OUTLOOK</B></FONT>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our business strategy will focus on continued investment in our utility business, reducing parent
debt, and growing earnings while controlling operating costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our primary focus with respect to our non-utility businesses is to optimize cash flow and maximize
the value of our remaining assets. Our primary focus with respect to our utility business is to continue to invest in our utility
system to enable us to meet our customer commitments, comply with increasing environmental
performance standards, and maintain adequate supply and capacity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In January&nbsp;2007, we reinstated a quarterly dividend on our common stock after a four-year
suspension at $0.05 per share. For the nine months ended September&nbsp;30, 2007, we paid $34&nbsp;million
in common stock dividends. On October&nbsp;26, 2007, we declared a dividend of $0.05 per share on our
common stock payable November&nbsp;30, 2007 to shareholders of record on November&nbsp;9, 2007.
</DIV>


<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>ELECTRIC UTILITY BUSINESS OUTLOOK</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Growth: </B>In 2007, we expect electric deliveries to grow about one percent compared to 2006 levels.
The outlook for 2007 assumes a small decline in industrial economic activity and normal weather
conditions throughout the remainder of the year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Over the next five years, we expect electric deliveries to grow less than 1.5&nbsp;percent per year.
This outlook assumes a modestly growing customer base and a stabilizing Michigan economy after
2007. This growth rate includes both full-service sales and delivery service to customers who
choose to buy generation service from an alternative electric supplier, but excludes transactions
with other wholesale market participants and other electric utilities. This growth rate reflects a
long-range expected trend of growth. Growth from year to year may vary from this trend due to
customer response to the following:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>energy conservation measures,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>fluctuations in weather conditions, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in economic conditions, including utilization and expansion or contraction of
manufacturing facilities.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Electric Customer Revenue Outlook: </B>Michigan&#146;s economy has been hampered by automotive
manufacturing facility and related supplier closures and restructurings. The Michigan economy has
also had limited growth in the non-automotive sector. Although our electric utility results are
not dependent upon a single customer, or even a few customers, customers in the automotive sector
represented five percent of our total 2006 electric revenue. We cannot predict the impact of the
Michigan economy on our electric utility customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Electric Reserve Margin: </B>We have purchased capacity and energy contracts covering partially the
estimated reserve margin requirements for 2008 through 2010. As of September&nbsp;30, 2007, we expect
total 2007 capacity costs for these primarily seasonal electric capacity and energy contracts to be
$17&nbsp;million.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are
currently planning for a reserve margin of approximately 11 percent
for summer 2008, or supply resources equal to 111 percent of
projected firm summer peak load. Of the 2008 supply resources target,
we expect 85 percent to come from our electric generating plants and
long-term power purchase contracts with other contractual
arrangements making up the remainder of our supply resource needs for
2008. If the MPSC approves the Zeeland power plant purchase, we
expect 95 percent of our 2008 supply resource target will be satisfied
with our electric generating plants and long-term power purchase
contracts, with other contractual arrangements making up the
remainder of our supply resource needs for 2008. Our 15-year power
purchase agreement with Entergy for 100 percent of the Palisades
facility&#146;s current electric output will offset the reduction in
the owned capacity represented by the sale of Palisades in April 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In September&nbsp;2007, we exercised the regulatory-out provision in the MCV PPA, resulting in a
reduction in the amount we pay to the MCV Partnership to equal the amount we are allowed to recover
in the rates charged to customers. The MCV Partnership may, under certain circumstances, have the
right to terminate the MCV PPA, which could affect our reserve margin status. The MCV PPA
represents 13&nbsp;percent of our 2008 expected supply resources.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Electric Transmission Expenses: </B>METC, which provides electric transmission service to us,
increased substantially the transmission rates it charged us in 2006. The revenue collected by
METC under those rates in 2006 was subject to refund. The parties filed a settlement agreement
with the FERC, which was approved in August&nbsp;2007. This settlement resulted in a refund of 2006
transmission charges of $18&nbsp;million and a corresponding reduction of our power supply costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Electric transmission expenses are anticipated to increase in 2008 by $42&nbsp;million due primarily to
a 33&nbsp;percent increase in rates charged to us by our major
transmission provider. This increase is
included in our 2008 PSCR Plan filed with the MPSC in September&nbsp;2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In September&nbsp;2007, the FERC approved a proposal from transmission owners and operators to include
100&nbsp;percent of generator interconnection costs in our transmission rates. Previously, generator
interconnection costs were split 50-50 between transmission owners and operators and generators.
Consumers, Detroit Edison, the MPSC, and other parties filed a request for rehearing regarding the
FERC&#146;s order.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For additional details on power supply costs, see Note 3, Contingencies, &#147;Consumers&#146; Electric
Utility Rate Matters &#151; Power Supply Costs.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>21st Century Electric Energy Plan: </B>In January&nbsp;2007, the then chairman of the MPSC proposed three
major policy initiatives to the governor of Michigan. The initiatives involve the use of more
renewable energy resources by all load-serving entities such as Consumers, the creation of an
energy efficiency program, and a procedure for reviewing proposals to construct new generation
facilities. The January proposal indicated that Michigan needs new base-load capacity by 2015 and
recommended measures to make it easier to predict customer demand and revenues. The proposed
initiatives will require changes to current legislation. We will continue to participate as the
MPSC, legislature, and other stakeholders address future electric resource needs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Balanced Energy Initiative: </B>In May&nbsp;2007, we filed a &#147;Balanced Energy Initiative&#148; with the MPSC
providing a comprehensive energy resource plan to meet our projected short-term and long-term
electric power requirements. The plan is responsive to the 21st Century Electric Energy Plan and
assumes that Michigan will implement a state-wide energy efficiency program and a renewable energy
portfolio standard. The filing requests the MPSC to rule that the Balanced Energy Initiative
represents a reasonable and prudent plan for the acquisition of necessary electric utility
resources. As acknowledged in the 21st Century Electric Energy Plan, implementation of the
Balanced Energy Initiative will require legislative repeal or significant reform of the Customer
Choice Act. In addition, we endorse the 21st Century Electric
</DIV>



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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Energy Plan recommendation to adopt
a new, up-front certification policy for major power plant investments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In September&nbsp;2007, as part of our Balanced Energy Initiative, we announced plans to build an 800 MW
advanced clean coal plant at our Karn/Weadock Generating complex near Bay City, Michigan. We
expect to use 500 MW of the plant&#146;s output to serve
Consumers&#146; customers and to commit the remaining 300 MW to others. We expect the plant to enter operation in 2015 with our share of the cost estimated at
$1.3&nbsp;billion excluding financing costs and $1.6&nbsp;billion with financing costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">There are
several obstacles that must be cleared before construction of the
proposed new clean coal plant, including:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>repeal or significant reform of the Customer Choice Act,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>obtaining environmental permits,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>successful MPSC regulatory review and approval, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>obtaining property tax abatements.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In
September&nbsp;2007, we filed with the MPSC an updated Balanced Energy Initiative including our plan for
construction of the new clean coal plant in order to start the regulatory review
process for the new plant. In October&nbsp;2007, we filed an application with the MDEQ for the
environmental air quality permits required for the new plant. The
Michigan Attorney General has filed a motion with the MPSC to dismiss the Balanced Energy Initiative case claiming that the MPSC lacks
jurisdiction over the matter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Proposed Power Plant Purchase: </B>In May&nbsp;2007, we reached an agreement with Broadway Gen Funding LLC,
an affiliate of LS Power Group, to buy a 946 MW gas-fired power plant located in Zeeland, Michigan
for $517&nbsp;million. The power plant will help meet the growing energy needs of our customers. We
expect to close on the purchase by early 2008, subject to the MPSC&#146;s approval.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Proposed Renewable Energy Legislation: </B>There are various bills introduced into the U.S. Congress
and the Michigan legislature relating to mandatory renewable energy standards. If enacted, these
bills generally would require electric utilities to acquire a certain percentage of their power
from renewable sources or otherwise pay fees or purchase allowances in lieu of having the
resources. We cannot predict whether any such bill will be enacted or in what form.
</DIV>


<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>ELECTRIC UTILITY BUSINESS UNCERTAINTIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Several electric business trends or uncertainties may affect our financial condition and future
results of operations. These trends or uncertainties have, or had, or are reasonably expected to have, a
material impact on revenues or income from continuing electric operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Electric Environmental Estimates: </B>Our operations are subject to various state and federal
environmental laws and regulations. Costs to operate our facilities in compliance with these laws
and regulations generally have been recovered in customer rates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Clean Air Act: </I>Compliance with the federal Clean Air Act and resulting regulations continues to be
a significant focus for us. The Nitrogen Oxide State Implementation Plan requires significant
reductions in nitrogen oxide emissions. To comply with the regulations, we expect to incur capital
expenditures totaling $880&nbsp;million. From 1998 to present, we have incurred $784&nbsp;million in capital
expenditures to comply with the federal Clean Air Act and resulting regulations and anticipate that
the remaining $96&nbsp;million of capital expenditures will be made through 2011. These expenditures
include installing selective catalytic reduction
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">control technology on four of our coal-fired electric generating units. The key assumptions in the
capital expenditure estimate include:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>construction commodity prices, especially construction material and labor,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>project completion schedules,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>cost escalation factor used to estimate future years&#146; costs of 2.6&nbsp;percent, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an AFUDC capitalization rate of 7.8&nbsp;percent.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition to modifying coal-fired electric generating plants, our compliance plan includes the
use of nitrogen oxide emission allowances until all of the control equipment is operational in
2011. The nitrogen oxide emission allowance annual expense is projected to be $2&nbsp;million per year
through 2011, which we expect to recover from our customers through the PSCR process. The
projected annual expense is based on market price forecasts and forecasts of regulatory provisions,
known as progressive flow control, that restrict the usage in any given year of allowances banked
from previous years. The allowances and their cost are accounted for as inventory. The allowance
inventory is expensed at the rolling average cost as the electric generating plants emit nitrogen
oxide.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Clean Air Interstate Rule: </I>In March&nbsp;2005, the EPA adopted the Clean Air Interstate Rule that
requires additional coal-fired electric generating plant emission controls for nitrogen oxides and
sulfur dioxide. We plan to meet the nitrogen oxide requirements of this rule by year-round
operation of our selective catalytic reduction control technology units, installation of low
nitrogen oxide burners, and purchasing emission allowances. We plan to meet the sulfur dioxide
requirements of this rule using sorbent injection, installation of flue gas desulfurization
scrubbers and purchasing emission allowances. Our total cost for equipment installation is
expected to reach approximately $740&nbsp;million by 2015. Additional purchases of sulfur dioxide
emission allowances in 2012 and 2013 will be needed at an estimated cost of $10&nbsp;million per year,
which we expect to recover from our customers through the PSCR process.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Clean Air Interstate Rule was appealed to the U.S. Court of Appeals for the District of
Columbia by a number of utilities and other companies. Final briefs were submitted by September&nbsp;5,
2007, with a decision expected in 2008. We cannot predict the outcome of these appeals.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Clean Air Mercury Rule: </I>Also in March&nbsp;2005, the EPA issued the Clean Air Mercury Rule, which
requires initial reductions of mercury emissions from coal-fired electric generating plants by 2010
and further reductions by 2018. The Clean Air Mercury Rule was appealed to the U.S. Court of
Appeals by a number of states and other entities. Final briefs were submitted by July&nbsp;13, 2007,
with a decision expected in 2008. We cannot predict the outcome of these appeals.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In April&nbsp;2006, Michigan&#146;s governor announced a plan that would result in mercury emissions
reductions of 90&nbsp;percent by 2015. We are working with the MDEQ on the details of this rule;
however, we have developed preliminary cost estimates and a mercury emissions reduction scenario
based on our best knowledge of control technology options and initially proposed requirements. We
estimate costs associated with Phase I of the state&#146;s mercury rule will be approximately $190
million by 2010 and an additional $320&nbsp;million by 2015.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table compares the federal Clean Air Mercury Rule to the proposed state mercury rule:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="3" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">State and Federal</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">State and Federal</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Phase I</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Phase II</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="5" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Federal Clean Air <BR>
Mercury Rule
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">30% reduction by 2010
with interstate
trading of allowances
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">70% reduction by 2018
with interstate
trading of allowances</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Proposed State <BR>
Mercury Rule
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">30% reduction by 2010
without interstate
trading of allowances
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">90% reduction by 2015
without interstate
trading of allowances</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" valign="top" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Routine Maintenance Classification: </I>The EPA has alleged that some utilities have incorrectly
classified plant modifications as &#147;routine maintenance&#148; rather than seeking permits from the EPA to
modify the plant. We have received and responded to information requests from the EPA on this
subject in 2000, 2002, and 2006. We believe that we have properly interpreted the requirements of
&#147;routine maintenance.&#148; If our interpretation is found to be incorrect, we may be required to
install additional pollution controls at some or all of our coal-fired electric generating plants
and potentially pay fines. Additionally, the viability of certain plants remaining in operation
would be re-examined. We cannot predict the financial impact or outcome of this issue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Greenhouse Gases</I>: Several legislative proposals have been introduced in the United States Congress
that would require reductions in emissions of greenhouse gases, including carbon dioxide.
These laws, if enacted, could require us to replace equipment, install additional equipment for pollution controls,
purchase allowances, curtail operations, or take other steps. Although associated
capital or operating costs relating to greenhouse gas regulation or legislation
could be material, and cost recovery cannot be assured, we expect to have an opportunity
to recover these costs and capital expenditures in rates consistent with the recovery of other reasonable costs of complying with environmental laws and regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On April
2, 2007, the U.S. Supreme Court ruled that the Clean Air Act gives the EPA the authority to
regulate emissions of carbon dioxide and other greenhouse gases from automobiles. In its decision,
the court ordered the EPA to revisit its finding that it has the discretion not to regulate
greenhouse gas emissions from automobiles.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To the extent that greenhouse gas emission reduction rules come into effect, the mandatory
emissions reduction requirements could have far-reaching and significant implications for the
energy sector. We cannot estimate the effect of federal or state greenhouse gas policy on our
future consolidated results of operations, cash flows, or financial position due to the uncertain
nature of the policies at this time. However, we will continue to monitor greenhouse gas policy
developments and assess and respond to their potential implications on our business operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Water: </I>In March&nbsp;2004, the
EPA issued rules that govern electric generating plant cooling water
intake systems. The rules require significant reduction in fish harmed by
operating equipment. EPA compliance options in the rule were challenged in court. In January
2007, the court rejected many of the compliance options favored by industry and remanded the bulk
of the rule back to the EPA for reconsideration. The court&#146;s ruling is expected to increase
significantly the cost of complying with this rule. However, the cost to comply will not be known
until the EPA&#146;s reconsideration is complete. At this time, the EPA has not established a schedule
to address the court decision.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For additional details on electric environmental matters, see Note 3, Contingencies, &#147;Consumers&#146;
Electric Utility Contingencies &#151; Electric Environmental Matters.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Competition and Regulatory Restructuring: </B>The Customer Choice Act allows all of our electric
customers to buy electric generation service from us or from an alternative electric supplier. At
September&nbsp;30, 2007, alternative electric suppliers were providing 311 MW of generation service to
ROA customers.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This is 4&nbsp;percent of our total distribution load and represents an increase of 1
percent of ROA load compared to September&nbsp;30, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In November&nbsp;2004, the MPSC issued an order allowing us to recover Stranded Costs incurred from 2002
through 2003 through a surcharge applied to ROA customers. Since the MPSC order, we have
experienced a downward trend in ROA customers. If this trend continues, it will extend the time it
takes to recover fully our Stranded Costs. It is difficult to predict future ROA customer trends,
which affect our ability to recover timely these Stranded Costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Electric Rate Case: </B>In March&nbsp;2007, we filed an application with the MPSC seeking an 11.25&nbsp;percent
authorized return on equity and an annual increase in revenues of $157&nbsp;million. The increase seeks
recovery of the costs associated with increased plant investment, increased equity investment, and
greater operation and maintenance expenses. In May&nbsp;2007, we filed supplemental testimony with the
MPSC to include transaction costs from the sale of Palisades. In July&nbsp;2007, we filed an amended
application with the MPSC to include the proposed purchase of the Zeeland power plant, the approval
of an energy efficiency program, and to make other revisions. The revised application seeks an
annual increase in revenues of $282&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In July&nbsp;2007, we also filed an amended application for rate relief that seeks the removal of costs
associated with Palisades, the approval of partial and immediate rate relief for certain items,
including the proposed purchase of the Zeeland power plant, and the approval of a plan to
distribute excess proceeds from the sale of Palisades to customers. The case schedule will allow
for an MPSC order on our Zeeland request and on our request for partial and immediate rate relief
by the end of 2007 and a final rate order in mid-2008. We cannot predict the amount or timing of
any MPSC decision on our requests.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For additional details and material changes relating to the restructuring of the electric utility
industry and electric rate matters, see Note 3, Contingencies, &#147;Consumers&#146; Electric Utility Rate
Matters.&#148;
</DIV>


<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>OTHER ELECTRIC UTILITY BUSINESS UNCERTAINTIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The MCV PPA: </B>The MCV Partnership, which leases and operates the MCV Facility, contracted to sell
electricity to Consumers for a 35-year period beginning in 1990. The cost that we incur under the
MCV PPA exceeded the recovery amount allowed by the MPSC until we exercised the regulatory-out
provision in the MCV PPA in September&nbsp;2007. This action limited our capacity and fixed energy
payments to the MCV Partnership to the amounts that we collect from our customers. We incurred $39
million in underrecoveries in 2007. The MCV Partnership has notified us that it disputes our right to
exercise the regulatory-out provision. We believe that the provision is valid and fully
effective, but cannot assure that we will prevail in the event of a proceeding on this issue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a result of our exercise of the regulatory-out provision, the MCV Partnership may, under certain
circumstances, have the right to terminate or reduce the amount of capacity sold under the MCV PPA.
If the MCV Partnership terminates the MCV PPA or reduces the amount of capacity sold under the MCV
PPA, we would seek to replace the lost capacity to maintain an adequate electric reserve margin.
This could involve entering into a new PPA and (or)&nbsp;entering into electric capacity contracts on
the open market. We cannot predict our ability to enter into such contracts at a reasonable price.
We are also unable to predict regulatory approval of the terms and conditions of such contracts,
or that the MPSC would allow full recovery of our incurred costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To comply with a prior MPSC order, we made a filing in May&nbsp;2007 with the MPSC requesting a
determination regarding whether it wished to reconsider the amount of the MCV PPA payments that we
recover from customers. Also, in May&nbsp;2007, the MCV Partnership filed an application with the MPSC
seeking approval to increase our recovery of costs incurred under the MCV PPA. We are unable to
predict
</DIV>




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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the outcome of these requests. For additional details on the MCV PPA, see Note 3,
Contingencies, &#147;Other Consumers&#146; Electric Utility Contingencies &#151; The MCV PPA.&#148;
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Sale of Nuclear Assets: </B>In April&nbsp;2007, we sold Palisades to Entergy for $380&nbsp;million. The final
purchase price, subject to various closing adjustments, resulted in us receiving $363&nbsp;million as of
September&nbsp;30, 2007. We also paid Entergy $30&nbsp;million to assume ownership and responsibility for
the Big Rock ISFSI. Because of the sale of Palisades, we also paid the NMC, the former operator of
Palisades, $7&nbsp;million in exit fees and forfeited our $5&nbsp;million investment in the NMC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The MPSC order approving the Palisades transaction allowed us to recover the book value of
Palisades. This results in us crediting estimated proceeds in excess of book value of $66&nbsp;million
to our customers from June&nbsp;2007 through December&nbsp;2008. After closing adjustments, which are
subject to MPSC review, proceeds in excess of the book value were
$77&nbsp;million as of September&nbsp;30,
2007. The MPSC order deferred ruling on the recovery of transaction costs, including the NMC exit
fees, and the $30&nbsp;million payment to Entergy related to the Big Rock ISFSI until the next general
rate case.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Entergy assumed responsibility for the future decommissioning of Palisades and for storage and
disposal of spent nuclear fuel located at Palisades and the Big Rock ISFSI sites. We transferred
$252&nbsp;million in trust fund assets to Entergy. We are crediting estimated excess decommissioning
funds of $189&nbsp;million to our retail customers from June&nbsp;2007 through December&nbsp;2008. Access to
additional decommissioning fund balances above the estimates in the MPSC order resulted in excess
decommissioning funds of $123&nbsp;million as of September&nbsp;30,
2007. We have proposed a plan to credit these balances to our retail customers and this plan is under review by the MPSC in our current
electric rate case filing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As part of the transaction, Entergy will sell us 100&nbsp;percent of the plant&#146;s output up to its
current annual average capacity of 798 MW under a 15-year power purchase agreement. Because of the
Palisades power purchase agreement and our continuing involvement with the Palisades assets, we
account for the disposal of Palisades as a financing for accounting purposes and not a sale. This
resulted in the recognition of a finance obligation of $197&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For additional details on the sale of Palisades and the Big Rock ISFSI, see Note 2, Asset Sales,
Discontinued Operations and Impairment Charges.
</DIV>


<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>GAS UTILITY BUSINESS OUTLOOK</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Growth: </B>In 2007, we project gas deliveries will decline slightly, on a weather-adjusted basis,
from 2006 levels due to continuing conservation and overall economic conditions in the state of
Michigan. Over the next five years, we expect gas deliveries to decline by less than one-half of
one percent annually. Actual gas deliveries in future periods may be affected by:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>fluctuations in weather conditions,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>use by independent power producers,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in gas commodity prices,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Michigan economic conditions,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the price of competing energy sources or fuels,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>gas consumption per customer, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>improvements in gas appliance efficiency.</TD>
</TR>

</TABLE>
</DIV>
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<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>GAS UTILITY BUSINESS UNCERTAINTIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Several gas business trends or uncertainties may affect our future financial results and financial
condition. These trends or uncertainties could have a material impact on future revenues or income
from gas operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Gas Environmental Estimates: </B>We expect to incur investigation and remedial action costs at a
number of sites, including 23 former manufactured gas plant sites. For additional details, see
Note 3, Contingencies, &#147;Consumers&#146; Gas Utility Contingencies &#151; Gas Environmental Matters.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Gas Cost Recovery: </B>The GCR process is designed to allow us to recover all of our purchased natural
gas costs if incurred under reasonable and prudent policies and practices. The MPSC reviews these
costs, policies, and practices for prudency in annual plan and reconciliation proceedings. For
additional details on gas cost recovery, see Note 3, Contingencies, &#147;Consumers&#146; Gas Utility Rate
Matters &#151; Gas Cost Recovery.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Gas Depreciation: </B>In June&nbsp;2007, the MPSC issued its final order in the generic ARO accounting case
and modified the filing requirement for our next gas depreciation case. The original filing
requirement date was changed from 90&nbsp;days after the issuance of this order to no later than August
1, 2008. Additionally, we have been ordered to use 2007 data and prepare a cost of removal
depreciation study with five alternatives using the MPSC&#146;s prescribed methods.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If a final order in our next gas depreciation case is not issued concurrently with a final order in
a general gas rate case, the MPSC may incorporate the results of the depreciation case into general
gas rates through use of a surcharge mechanism (which may be either positive or negative).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>2007 Gas Rate Case: </B>In February&nbsp;2007, we filed an application with the MPSC seeking an 11.25
percent authorized return on equity along with an $88&nbsp;million annual increase in our gas delivery
and transportation rates. We proposed the use of a Revenue Decoupling and Conservation Incentive
Mechanism for residential and general service rate classes, which would partially separate the
collection of fixed costs from gas sales and enhance the utility&#146;s ability to recover its fixed
costs<B>.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In August&nbsp;2007, the MPSC approved a partial settlement agreement authorizing an annual rate
increase of $50&nbsp;million, including an authorized return on equity of 10.75&nbsp;percent. The proposed
Revenue Decoupling and Conservation Incentive Mechanism was not approved. On September&nbsp;25, 2007,
the MPSC reopened the record in the case to allow all interested parties to be heard concerning the
approval of an energy efficiency program, which we included in our original filing. If approved in
total, this would result in an additional rate increase of $9&nbsp;million to be used to implement the
energy efficiency program.
</DIV>


<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>ENTERPRISES OUTLOOK</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2007, we completed the sale of our international assets. Our primary focus with respect to our non-utility businesses is to optimize cash flow and maximize
the value of our remaining assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We completed the sale of a portfolio of our businesses in Argentina and our northern Michigan
non-utility natural gas assets to Lucid Energy for $130&nbsp;million in March&nbsp;2007.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In connection with the sale of our Argentine and Michigan assets, we entered into agreements that
grant Lucid Energy:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an option to buy CMS Gas Transmission&#146;s ownership interest in TGN, subject to the rights
of other third parties,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the right to certain proceeds that may be awarded and received by CMS Gas
Transmission in connection with certain legal proceedings, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the right to proceeds that Enterprises will receive if it sells its stock
interest in CMS Generation San Nicolas Company.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under these agreements, we have essentially sold our rights to certain awards or proceeds that we
may receive in the future. Of the total consideration received in the sale, we allocated $32
million to these agreements and recorded this amount as a deferred credit on our Consolidated
Balance Sheets. Due to the settlement of certain legal proceedings in September&nbsp;2007, a portion of
CMS Gas Transmission&#146;s obligations under these agreements has been satisfied. As such, we
recognized $17&nbsp;million of the deferred credit as a gain in September&nbsp;2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We entered into an agreement to sell our investment in Jamaica to AEI for gross cash proceeds of
$14&nbsp;million in June&nbsp;2007. We closed on the sale in October 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Uncertainties: </B>Trends or uncertainties that could have a material impact on our consolidated
income, cash flows, or balance sheet and credit improvement include:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the outcome of ongoing negotiations to restructure the power supply agreements
associated with our DIG power plant,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the impact of indemnity and environmental remediation obligations at Bay Harbor,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the outcome of certain legal proceedings,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the impact of representations, warranties, and related indemnities in connection with
the sales of our international assets,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the outcome of the planned sale of other assets, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in commodity prices and interest rates on certain derivative contracts that do
not qualify for hedge accounting and must be marked to market through earnings.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Prairie State: </B>In October&nbsp;2006, we signed agreements with Peabody Energy to co-develop the Prairie
State Energy Campus (Prairie State), a 1,600 MW power plant and coal mine in southern Illinois. In
April&nbsp;2007, we withdrew from Prairie State because it did not meet our investment criteria,
including the level of power purchase agreements for our share of output from Prairie State.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>DIG Supply Contracts: </B>DIG and CMS ERM are parties to long-term requirements contracts to provide
steam and (or)&nbsp;electricity based on a fixed price schedule. The price of natural gas, the primary
fuel used by DIG, is volatile and has increased substantially in recent years. Because the prices
charged under DIG&#146;s contracts do not reflect current natural gas prices, DIG&#146;s and CMS ERM&#146;s
financial performance has been impacted negatively. However, since not all of its capacity is
committed under these contracts, DIG has been able to sell a portion of its electric capacity and
(or)&nbsp;energy into the market at a profit, or, through CMS ERM, engage in a hedging strategy to
minimize its losses. DIG and CMS ERM may take various actions such as seeking restructuring or
buyout of the contracts, which may require material cash payments. If a restructuring or buyout is
not possible, then continuing losses under the contracts could have a material adverse impact on
our financial position and results of operations. CMS Energy may also take other measures to
address the unfavorable returns, including the sale of DIG.
</DIV>


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<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Other Outlook</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Software Implementation: </B>We are in the process of implementing new business software to replace
existing business processes and information technology. The core business processes include
finance, purchasing/supply chain, customer billing, human resources and payroll, and utility asset
construction and maintenance work management. We intend the new business software, scheduled to be
in production in the first half of 2008, to improve customer service, reduce risk,
and increase flexibility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Michigan Public Service Commission: </B>During the third quarter of 2007, the Michigan governor
appointed a new MPSC chairperson and a new MPSC Commissioner. We are unable to predict the impact
of these appointments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Litigation and Regulatory Investigation: </B>We are the subject of an investigation by the DOJ
regarding round-trip trading transactions by CMS MST. Also, we are named as a party in various
litigation matters including, but not limited to, securities class
action lawsuits and several lawsuits regarding alleged false natural
gas price reporting and price manipulation. Additionally, the SEC is investigating the actions of
former CMS Energy subsidiaries in relation to Equatorial Guinea. For additional details regarding
these and other matters, see Note 3, Contingencies and Part&nbsp;II, Item&nbsp;1. Legal Proceedings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Michigan Tax Legislation: </B>In July&nbsp;2007, the Michigan governor signed Senate Bill 94, the Michigan
Business Tax Act, which imposes a business income tax of 4.95&nbsp;percent and a modified gross receipts
tax of 0.8&nbsp;percent. The bill provides for a number of tax credits and incentives geared toward
those companies investing and employing in Michigan. The Michigan Business Tax, which is effective
January&nbsp;1, 2008, replaces the state&#146;s current Single Business Tax that expires on December&nbsp;31,
2007. In September&nbsp;2007, the Michigan governor signed House Bill 5104, allowing additional
deductions in future years against the business income portion of the tax. These future deductions
are phased in over a 15-year period, beginning in 2015. As a result of the enactment of this tax,
we recorded, on a consolidated basis, a net deferred tax liability of
$113 million and a corresponding net
deferred tax asset of $113&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In September&nbsp;2007, Michigan&#146;s governor also signed legislation expanding the state&#146;s sales tax to
certain services. The list of covered services includes certain services that we purchase from
outside vendors and potentially services that we sell. This list includes, but is not limited to,
certain consulting services, landscaping (which encompasses tree trimming), janitorial services,
security guards and security systems.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Michigan Business Tax and the expanded sales tax were enacted to replace the expiring Michigan
Single Business Tax. We are currently evaluating the impact of the replacement of the Michigan
Single Business Tax with these new taxes. We expect to recover the taxes that we pay from our
customers, but we cannot predict the timeliness of such recovery.
</DIV>

<DIV align="left">
<A name="141"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Implementation of New Accounting Standards </B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>SFAS No.&nbsp;158, Employers&#146; Accounting for Defined Benefit Pension and Other Postretirement Plans &#151; an
amendment of FASB Statements No.&nbsp;87, 88, 106, and 132(R): </I></B>In September&nbsp;2006, the FASB issued SFAS
No.&nbsp;158. Phase one of this standard required us to recognize the funded status of our defined
benefit postretirement plans on our Consolidated Balance Sheets at December&nbsp;31, 2006. Phase one
was implemented in December&nbsp;2006. Phase two of this standard requires that we change our plan
measurement date from November&nbsp;30 to December&nbsp;31, effective December&nbsp;31, 2008. We do not believe
that implementation of phase two of this standard will have a material effect on our consolidated
financial statements. We expect to adopt the measurement date provisions of SFAS No.&nbsp;158 in 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>FIN 48, Accounting for Uncertainty in Income Taxes</I></B><I>: </I>We adopted the provisions of FIN 48 on January
1, 2007. This interpretation provides a two-step approach for the recognition and measurement of
</DIV>




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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">uncertain tax positions taken, or expected to be taken, by a company on its income tax returns.
The first step is to evaluate the tax position to determine if, based on management&#146;s best
judgment, it is greater than 50&nbsp;percent likely that we will sustain the tax position. The second
step is to measure the appropriate amount of the benefit to recognize. This is done by estimating
the potential outcomes and recognizing the greatest amount that has a cumulative probability of at
least 50&nbsp;percent. FIN 48 requires interest and penalties, if applicable, to be accrued on
differences between tax positions recognized in our consolidated financial statements and the
amount claimed, or expected to be claimed, on the tax return.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a result of the implementation of FIN 48, we have identified additional uncertain tax benefits
of $11&nbsp;million as of January&nbsp;1, 2007. Included in this amount is an increase in our valuation
allowance of $100&nbsp;million, decreases to tax reserves of $61&nbsp;million and a decrease to deferred tax
liabilities of $28&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">CMS Energy and its subsidiaries file a consolidated U.S. federal income tax return as well as
unitary and combined income tax returns in several states. CMS Energy and its subsidiaries also
file separate company income tax returns in several states. The only significant state tax paid by
CMS Energy is in Michigan. However, since the Michigan Single Business Tax is not an income tax,
it is not part of the FIN 48 analysis. For the U.S. federal income tax return, CMS Energy
completed examinations by federal taxing authorities for its taxable years prior to 2002. The
federal income tax returns for the years 2002 through 2005 are open under the statute of
limitations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have reflected a net interest liability of $3&nbsp;million related to our uncertain income tax
positions on our Consolidated Balance Sheets as of January&nbsp;1, 2007. We have not accrued any
penalties with respect to uncertain tax benefits. We recognize accrued interest and penalties,
where applicable, related to uncertain tax benefits as part of income tax expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of the date of adoption of FIN 48, we had valuation allowances against certain U.S. and foreign
deferred tax assets totaling $216&nbsp;million and other uncertain tax positions of $31&nbsp;million,
resulting in total unrecognized benefits of $247&nbsp;million. Of this amount, $217&nbsp;million would
result in a decrease in our effective tax rate, if recognized. We released $81&nbsp;million of our
valuation allowance in the first quarter of 2007, reducing our effective tax rate, due to the
anticipated sales of our foreign investments. During the second quarter of 2007, we eliminated $63
million of valuation allowance attributable to additional foreign asset sales. This had no income
impact, as an identical amount of deferred tax asset also expired. As we continue to market our
foreign investments, it is reasonably possible that additional valuation allowance adjustments
could be made.
</DIV>

<DIV align="left">
<A name="142"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>New Accounting Standards Not Yet Effective</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>SFAS No.&nbsp;157, Fair Value Measurements: </I></B>In September&nbsp;2006, the FASB issued SFAS No.&nbsp;157, effective
for us January&nbsp;1, 2008. The standard provides a revised definition of &#147;fair value&#148; and gives
guidance on how to measure the fair value of assets and liabilities. Under the standard, fair
value is defined as the price that would be received to sell an asset or paid to transfer a
liability in an orderly exchange between market participants. The standard does not expand the use
of fair value in any new circumstances. However, additional disclosures will be required on the
impact and reliability of fair value measurements reflected in our consolidated financial
statements. The standard will also eliminate the existing prohibition of recognizing &#147;day one&#148;
gains or losses on derivative instruments, and will generally require such gains and losses to be
recognized through earnings. We are presently evaluating the impacts, if any, of implementing SFAS
No.&nbsp;157. We currently do not hold any derivatives that would involve day one gains or losses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>SFAS No.&nbsp;159, The Fair Value Option for Financial Assets and Financial Liabilities, Including an
amendment to FASB Statement No.&nbsp;115: </I></B>In February&nbsp;2007, the FASB issued SFAS No.&nbsp;159, effective for
us January&nbsp;1, 2008. This standard will give us the option to select certain financial instruments
and other items, which otherwise are not required to be measured at fair value, and measure those
items at fair value. If we choose to elect the fair value option for an item, we would recognize
unrealized gains and
</DIV>




<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-31<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">losses associated with changes in the fair value of the item over time. The
statement will also require disclosures for items for which the fair value option has been elected.
We are presently evaluating whether we will choose to elect the fair value option for any
financial instruments or other items.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>FSP FIN 39-1, </B><B><I>Amendment of FASB Interpretation No.&nbsp;39</I></B><B>: </B>In April&nbsp;2007, the FASB issued FSP FIN
39-1, effective for us January&nbsp;1, 2008. This standard will permit us to offset the fair value of
derivative instruments with cash collateral received or paid for those derivative instruments
executed with the same counterparty under a master netting arrangement. As a result, we will be
permitted to record one net asset or liability that represents the total net exposure of all
derivative positions under a master netting arrangement. The decision to offset derivative
positions under master netting arrangements remains an accounting policy choice. We presently
record the net fair value of derivative assets and liabilities for those contracts held by CMS ERM
that are subject to master netting arrangements, and separately record amounts for cash collateral
received or paid for these instruments. Under this standard, as a result of offsetting the
collateral amounts against the fair value of derivative assets and liabilities, both our total
assets and total liabilities could be reduced. The standard is to be applied retrospectively by
adjusting the financial statements for all periods presented. There will be no impact to earnings
from adopting this standard.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>EITF Issue 06-11, Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards:</I></B>
In June&nbsp;2007, the FASB ratified EITF Issue 06-11, effective for us on a prospective basis beginning
January&nbsp;1, 2008. EITF 06-11 requires companies to recognize the income tax benefit realized from
dividends or dividend equivalents that are charged to retained earnings and paid to employees for
non-vested equity-classified employee share-based payment awards as an increase to additional
paid-in capital. We do not believe that implementation of this standard will have a material
effect on our financial statements.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-32<!-- /Folio -->
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="104"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><FONT style="font-size:14pt"><B>CMS Energy Corporation</B></FONT><BR>
<FONT style="font-size:12pt"><B>Consolidated Statements of Income (Loss)</B></FONT><BR>
<FONT style="font-size:12pt"><B>(Unaudited)</B></FONT>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><I>In Millions</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 0px solid #000000"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 0px solid #000000"><B>Nine Months Ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>September 30</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Operating Revenue</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,288</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,404</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Earnings from Equity Method Investees</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Operating Expenses</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fuel for electric generation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">224</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">587</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fuel costs mark-to-market at the MCV Partnership</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchased and interchange power</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,079</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">476</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cost of gas sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,591</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,439</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">273</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">714</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">754</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Maintenance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">220</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">402</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">General taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Asset impairment charges, net of insurance recoveries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(76</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">239</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">239</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,088</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,334</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,446</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Operating Income (Loss)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Other Income (Deductions)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gain on asset sales, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest and dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Regulatory return on capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign currency gain (loss), net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(29</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Fixed Charges</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest on long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">295</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">342</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest on long-term debt &#151; related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capitalized interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Preferred dividends of subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">338</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">369</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Income (Loss) Before Minority Interests (Obligations), Net</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(115</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(54</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(263</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Minority Interests (Obligations), Net</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(33</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Income (Loss) Before Income Taxes</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(153</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(62</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(230</TD>
    <TD nowrap>)</TD>
</TR>
<TR>
<TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Income Tax Expense (Benefit)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(41</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(58</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(148</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Income (Loss) From Continuing Operations</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(112</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(82</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Income (Loss) From Discontinued Operations, Net of Tax
(Tax Benefit) of $-, $11, $(1), and $24</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(87</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net Income (Loss)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(101</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(91</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(50</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Preferred Dividends</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Redemption Premium on Preferred Stock</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net Income (Loss) Available to Common Stockholders</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(103</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(100</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(58</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>The accompanying notes are an integral part of these statements.</B>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-33<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="14" style="border-bottom: 0px solid #000000"><I>In Millions, Except Per Share Amounts</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 0px solid #000000"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 0px solid #000000"><B>Nine Months Ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>September 30</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>CMS Energy</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Net Income (Loss)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net Income (Loss) Available to Common
Stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(103</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(100</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(58</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Basic Earnings (Loss) Per Average Common Share</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Income (Loss) from Continuing Operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.52</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.06</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.41</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gain (Loss) from Discontinued Operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.39</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net Income (Loss) Attributable to Common Stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.47</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.45</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.26</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Diluted Earnings (Loss) Per Average Common Share</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Income (Loss) from Continuing Operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.52</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.06</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.41</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gain (Loss) from Discontinued Operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.39</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net Income (Loss) Attributable to Common Stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.47</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.45</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.26</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Dividends Declared Per Common Share</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>The accompanying notes are an integral part of these statements.</B>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-34<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><FONT style="font-size:14pt"><B>CMS Energy Corporation</B></FONT><BR>
<FONT style="font-size:12pt"><B>Consolidated Statements of Cash Flows</B></FONT><BR>
<FONT style="font-size:12pt"><B>(Unaudited)</B></FONT>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 0px solid #000000"><B>Nine Months Ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>September 30</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><I>In Millions</I></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash Flows from Operating Activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(91</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(50</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Adjustments to reconcile net loss to net cash
provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Depreciation and amortization, net of nuclear
decommissioning of $4 and $3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">407</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">418</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Deferred income taxes and investment tax credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(79</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(223</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Minority interests (obligations), net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Asset impairment charges, net of insurance recoveries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">239</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Fuel costs mark-to-market at the MCV Partnership</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Regulatory return on capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Capital lease and other amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Loss on the sale of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Earnings from equity method investees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(36</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(63</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Cash distributions from equity method investees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Pension contribution</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(109</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(13</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Shareholder class action settlement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(125</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Changes in other assets and liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Decrease (increase)&nbsp;in accounts receivable and accrued revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(148</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">340</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Decrease (increase)&nbsp;in accrued power supply and gas revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(90</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Increase in inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(186</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(246</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Decrease in deferred property taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Decrease in accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(91</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(116</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Decrease in accrued taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(144</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(152</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Increase (decrease)&nbsp;in accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(37</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Decrease in the MCV Partnership gas supplier funds on deposit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(159</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Decrease in other current and non-current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">106</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Increase (decrease)&nbsp;in other current and non-current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(67</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41</TD>
    <TD nowrap>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Net cash provided by (used in) operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(116</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">447</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash Flows from Investing Activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capital expenditures (excludes assets placed under capital lease)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(523</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(477</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cost to retire property</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(41</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Restricted cash and restricted short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investments in nuclear decommissioning trust funds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from nuclear decommissioning trust funds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Maturity of the MCV Partnership restricted investment securities held-to-maturity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchase of the MCV Partnership restricted investment securities held-to-maturity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(118</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from sale of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash relinquished from sale of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(113</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other investing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(44</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR>
<TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Net cash provided by (used in) investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,394</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(436</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash Flows from Financing Activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from notes, bonds, and other long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">476</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Retirement of bonds and other long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(769</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(433</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Redemption of preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(32</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payment of common stock dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(34</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payment of preferred stock dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payment of capital lease and financial lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(23</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Debt issuance costs, financing fees, and other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR>
<TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Net cash used in financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(386</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(400</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Effect of Exchange Rates on Cash</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net Increase (Decrease) in Cash and Cash Equivalents</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(388</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash and Cash Equivalents, Beginning of Period</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">847</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR>
<TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash and Cash Equivalents, End of Period</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">459</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>The accompanying notes are an integral part of these statements.</B>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-35<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="106"></A>
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 18pt"><B>CMS Energy Corporation </b></div>
<DIV align="center" style="font-size: 14pt; margin-top: 6pt"><b>Consolidated Balance Sheets</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><I>In Millions</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>September 30</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>December 31</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>ASSETS</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>(Unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Plant and Property (At cost)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Electric utility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,504</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gas utility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,327</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,273</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Enterprises</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">453</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,697</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,263</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less accumulated depreciation, depletion and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,194</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,580</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,069</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Construction work-in-progress</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">381</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">639</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,961</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,708</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Investments</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Enterprises</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">556</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">566</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current Assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents at cost, which approximates market</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">249</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Restricted cash at cost, which approximates market</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts receivable and accrued revenue, less
allowances of $20 in 2007 and $25 in 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">531</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">502</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Notes receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued power supply and gas revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">156</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts receivable and notes receivable &#151; related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventories at average cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gas in underground storage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,129</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Materials and supplies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Generating plant fuel stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Regulatory assets &#151; postretirement benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">155</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred property taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Assets held for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">239</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Price risk management assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepayments and other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">105</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,143</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Non-current Assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Regulatory Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Securitized costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">514</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Postretirement benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,032</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,131</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Customer Choice Act</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">190</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">508</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">497</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Nuclear decommissioning trust funds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">602</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Notes receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">137</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Notes receivable &#151; related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Assets held for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">412</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Price risk management assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">327</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,622</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,954</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total Assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,304</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,371</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-36<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><I>In Millions</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>September 30</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>December 31</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>STOCKHOLDERS&#146; INVESTMENT AND LIABILITIES</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>(Unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Capitalization</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Common stock, authorized 350.0 shares; outstanding 225.1 shares and
222.8 shares, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,476</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,468</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accumulated other comprehensive loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(136</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(318</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Retained deficit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,070</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,918</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,234</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Preferred stock of subsidiary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">261</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,200</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term debt &#151; related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">178</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Non-current portion of capital and finance lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,959</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Minority Interests</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current Liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current portion of long-term debt, capital and finance leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">997</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">563</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Notes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">481</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued rate refunds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable &#151; related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">301</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Regulatory liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Argentine currency impairment reserve</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Legal settlement liability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">200</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Liabilities held for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">144</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Price risk management liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">230</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,449</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,156</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Non-current Liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Regulatory Liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Regulatory liabilities for cost of removal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,166</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Income taxes, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">539</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other regulatory liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">249</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Postretirement benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">947</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,066</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred investment tax credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Asset retirement obligation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">498</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Liabilities held for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Price risk management liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">411</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,445</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,204</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Commitments and Contingencies </B>(Notes 3, 4 and 6)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total Stockholders&#146; Investment and Liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,304</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,371</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>The accompanying notes are an integral part of these statements.</B>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-37<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CMS Energy Corporation<BR>
Consolidated Statements of Common Stockholders&#146; Equity<BR>
(Unaudited)</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000"><I>In Millions</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6"><B>Nine Months Ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>September 30</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Common Stock</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">At beginning and end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Other Paid-in Capital</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">At beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,477</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,436</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock issued</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock repurchased</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock reissued</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Redemption of preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">At end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,476</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,476</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,461</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Accumulated Other Comprehensive Loss</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Retirement Benefits Liability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">At beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(23</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(23</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Unrealized gain on retirement benefits (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">At end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">At beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Unrealized gain on investments (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">At end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Derivative Instruments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">At beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Unrealized loss on derivative instruments (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Reclassification adjustments included in net income (loss) (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">At end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign Currency Translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">At beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(129</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(308</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(297</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(313</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Sale of Argentine assets (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Sale of Brazilian assets (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other foreign currency translations (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">At end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(129</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(306</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(129</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(306</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total Accumulated Other Comprehensive Loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(136</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(301</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(136</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(301</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Retained Deficit</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">At beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,140</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,783</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,918</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,828</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Adjustment to initially apply FIN 48</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income (loss) (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(101</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(91</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(50</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Preferred stock dividends declared</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock dividends declared</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(34</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Redemption of preferred stock (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">At end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,070</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,886</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,070</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,886</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total Common Stockholders&#146; Equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,276</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,276</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>(a)&nbsp;Disclosure of Comprehensive Income (Loss):</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized gain on retirement benefits, net of tax
of $&#151;, $&#151;, $1, and <BR>$&#151;, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized gain on investments, net of tax
of $1, $1, $2, and $1, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">
Unrealized loss on derivative instruments, net of tax (tax
benefit)
of $&#151;, $(7), $2, and $(14), respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Reclassification adjustments included in net income (loss),
net of tax
(tax benefit) of $&#151;, $&#151;, $7, and $(2), respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Sale of Argentine assets, net of tax of $68</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Sale of Brazilian assets, net of tax of $20</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other foreign currency translations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Redemption of preferred stock, net of tax benefit of $1 in 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(101</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(91</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(50</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total Comprehensive Income (Loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(120</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(63</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>The accompanying notes are an integral part of these statements.</B>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-38<!-- /Folio -->
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 14pt; margin-top: 18pt"><FONT style="font-variant: SMALL-CAPS"><B>CMS Energy Corporation</B></FONT>
</DIV>

<DIV align="left">
<A name="108"></A>
</DIV>
<DIV align="center" style="font-size: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to Consolidated Financial Statements</B></FONT></DIV>


<DIV align="center" style="font-size: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>(Unaudited)</B></FONT></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">These interim Consolidated Financial Statements have been prepared by CMS Energy in accordance with
accounting principles generally accepted in the United States for interim financial information and
with the instructions to Form 10-Q and Article&nbsp;10 of Regulation&nbsp;S-X. As such, certain information
and footnote disclosures normally included in consolidated financial statements prepared in
accordance with accounting principles generally accepted in the United States have been condensed
or omitted. Certain prior year amounts have been reclassified to conform to the presentation in
the current year, including certain reclassifications to our Consolidated Financial Statements for
discontinued operations. Therefore, the consolidated financial statements for the year ended
December&nbsp;31, 2006 and for the three and nine months ended September&nbsp;30, 2006 have been updated for
amounts previously reported. In management&#146;s opinion, the unaudited information contained in this
report reflects all adjustments of a normal recurring nature necessary to assure the fair
presentation of financial position, results of operations and cash flows for the periods presented.
The Notes to Consolidated Financial Statements and the related Consolidated Financial Statements
should be read in conjunction with the Consolidated Financial Statements and related Notes
contained in CMS Energy&#146;s Form 10-K for the year ended December&nbsp;31, 2006 and the Form 8-K filed
June&nbsp;4, 2007 amending CMS Energy&#146;s 2006 financial statements to reflect certain discontinued
operations resulting from certain asset sales. Due to the seasonal nature of CMS Energy&#146;s
operations, the results as presented for this interim period are not necessarily indicative of
results to be achieved for the fiscal year.
</DIV>

<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>1: Corporate Structure and Accounting Policies </B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Corporate Structure: </B>CMS Energy is an energy company operating primarily in Michigan. We are the
parent holding company of Consumers and Enterprises. Consumers is a combination electric and gas
utility company serving in Michigan&#146;s Lower Peninsula. Enterprises, through various subsidiaries and
equity investments, is engaged in primarily domestic independent power production. We manage our
businesses by the nature of services each provides and operate principally in three business
segments: electric utility, gas utility, and enterprises.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Principles of Consolidation: </B>The consolidated financial statements include CMS Energy, Consumers,
Enterprises, and all other entities in which we have a controlling financial interest or are the
primary beneficiary, in accordance with FIN 46(R). We use the equity method of accounting for
investments in companies and partnerships that are not consolidated, where we have significant
influence over operations and financial policies, but are not the primary beneficiary. We
eliminate intercompany transactions and balances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Use of Estimates: </B>We prepare our consolidated financial statements in conformity with U.S. GAAP.
We are required to make estimates using assumptions that may affect the reported amounts and
disclosures. Actual results could differ from those estimates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We record estimated liabilities for contingencies in our consolidated financial statements when it
is probable that a loss will be incurred in the future as a result of a current event, and when an
amount can be reasonably estimated. For additional details, see Note 3, Contingencies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Revenue Recognition Policy: </B>We recognize revenues from deliveries of electricity and natural gas,
and the transportation, processing, and storage of natural gas when services are provided. We
record sales tax on a net basis and exclude it from revenues. We recognize revenues on sales of
marketed electricity, natural gas, and other energy products at delivery. We recognize
mark-to-market changes in
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-39<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the fair values of energy trading contracts that qualify as derivatives as revenues in the periods
in which the changes occur.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Accounting for Legal Fees: </B>We expense legal fees as incurred; fees incurred but not yet billed are
accrued based on estimates of work performed. This policy also applies to fees incurred on behalf
of employees and officers related to indemnification agreements; such fees are billed directly to
us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Accounting for MISO Transactions: </B>MISO requires that we submit hourly day-ahead and real-time bids
and offers for energy at locations across the MISO region. Consumers and CMS ERM account for MISO
transactions on a net hourly basis in each of the real-time and day-ahead markets, and net
transactions across all MISO energy market nodes at which they enter into transactions. To the
degree we have made net purchases in a single hour, we report the net amount in the &#147;Purchased and
interchange power&#148; line item of the Consolidated Statements of Income (Loss). To the degree we
have made net sales in a single hour, we report the net amount in the &#147;Operating Revenue&#148; line item
of the Consolidated Statements of Income (Loss). CMS ERM records billing adjustments when it
receives invoices. Consumers records expense accruals for future adjustments based on historical
experience, and reconciles accruals to actual expenses when invoices are received.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>International Operations and Foreign Currency: </B>Our previously owned subsidiaries and affiliates
whose functional currency is not the U.S. dollar translate their assets and liabilities into U.S.
dollars at the exchange rates in effect at the end of the fiscal period. We translate revenue and
expense accounts of such subsidiaries and affiliates into U.S. dollars at the average exchange
rates that prevailed during the period. We show these foreign currency translation adjustments in
the stockholders&#146; equity section on our Consolidated Balance Sheets. We include exchange rate
fluctuations on transactions denominated in a currency other than the functional currency, except
those that are hedged, in determining net income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At September&nbsp;30, 2007, the cumulative Foreign Currency Translation component of stockholders&#146;
equity was $129&nbsp;million, net of tax, which primarily represents currency losses in Argentina. The
cumulative foreign currency loss due to the unfavorable exchange rate of the Argentine peso using
an exchange rate of 3.149 pesos per U.S. dollar was $129&nbsp;million, net of tax.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Impairment of Long-Lived Assets and Equity Method Investments: </B>We evaluate potential impairments
of our long-lived assets, other than goodwill, based on various analyses, including the projection
of undiscounted cash flows, whenever events or changes in circumstances indicate that the carrying
amount of the assets may not be recoverable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">An asset held-in-use is evaluated for impairment by calculating the undiscounted future cash flows
expected to result from the use of the asset and its eventual disposition. If the undiscounted
future cash flows are less than the carrying amount, we recognize an impairment loss. The
impairment loss recognized is the amount by which the carrying amount exceeds the fair value. We
estimate the fair market value of the asset utilizing the best information available. This
information includes quoted market prices, market prices of similar assets, and discounted future
cash flow analyses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We also assess our ability to recover the carrying amounts of our equity method investments
whenever events or changes in circumstances indicate that the carrying amount of the investments
may not be recoverable. This assessment requires us to determine the fair values of our equity
method investments. We determine fair value using valuation methodologies, including discounted
cash flows and the ability of the investee to sustain an earnings capacity that justifies the
carrying amount of the investment. We record a write down if the fair value is less than the
carrying value and the decline in value is considered to be other than temporary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For additional details, see Note 2, Asset Sales, Discontinued Operations and Impairment Charges.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-40<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Other Income and Other Expense: </B>The following tables show the components of Other income and Other
expense:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="16" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #000000">Three Months Ended</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #000000">Nine Months Ended</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest and dividends &#151; related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Electric restructuring return</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Return on stranded and security costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Nitrogen oxide allowance sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Refund of surety bond premium</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gain on investment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">All other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="16" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #000000">Three Months Ended</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #000000">Nine Months Ended</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accretion expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Derivative loss on debt tender offer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss on reacquired and extinguished debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Civic and political expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Donations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">All other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total other expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(12</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(29</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(15</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Reclassifications:
</B>We have reclassified certain prior period amounts on our Consolidated Financial
Statements to conform to the presentation for the current period. These reclassifications did not
affect consolidated net income (loss)&nbsp;or cash flow for the periods presented. The most significant
of these reclassifications is related to certain subsidiaries reclassified as &#147;held for sale&#148; on
our Consolidated Balance Sheets and activities of those subsidiaries as Income (Loss) From
Discontinued Operations in our Consolidated Statements of Income (Loss). For additional details,
see Note 2, Asset Sales, Discontinued Operations and Impairment Charges, &#147;Discontinued Operations.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>New Accounting Standards Not Yet Effective: </B><I>SFAS No.&nbsp;157, Fair Value Measurements</I><B><I>: </I></B>In September
2006, the FASB issued SFAS No.&nbsp;157, effective for us January&nbsp;1, 2008. The standard provides a
revised definition of &#147;fair value&#148; and gives guidance on how to measure the fair value of assets
and liabilities. Under the standard, fair value is defined as the price that would be received to
sell an asset or paid to transfer a liability in an orderly exchange between market participants.
The standard does not expand the use of fair value in any new circumstances. However, additional
disclosures will be required on the impact and reliability of fair value measurements reflected in
our consolidated financial statements. The standard will also eliminate the existing prohibition
of recognizing &#147;day one&#148; gains or losses on derivative instruments, and will generally require such
gains and losses to be recognized through earnings. We are presently evaluating the impacts, if
any, of implementing SFAS No.&nbsp;157. We currently do not hold any derivatives that would involve day
one gains or losses.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-41<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>SFAS No.&nbsp;159, The Fair Value Option for Financial Assets and Financial Liabilities, Including an
amendment to FASB Statement No.&nbsp;115</I><B><I>: </I></B>In February&nbsp;2007, the FASB issued SFAS No.&nbsp;159, effective for
us January&nbsp;1, 2008. This standard will give us the option to select certain financial instruments
and other items, which otherwise are not required to be measured at fair value, and measure those
items at fair value. If we choose to elect the fair value option for an item, we would recognize
unrealized gains and losses associated with changes in the fair value of the item over time. The
statement will also require disclosures for items for which the fair value option has been elected.
We are presently evaluating whether we will choose to elect the fair value option for any
financial instruments or other items.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">FSP FIN 39-1, <I>Amendment of FASB Interpretation No.&nbsp;39</I>: In April&nbsp;2007, the FASB issued FSP FIN
39-1, effective for us January&nbsp;1, 2008. This standard will permit us to offset the fair value of
derivative instruments with cash collateral received or paid for those derivative instruments
executed with the same counterparty under a master netting arrangement. As a result, we will be
permitted to record one net asset or liability that represents the total net exposure of all
derivative positions under a master netting arrangement. The decision to offset derivative
positions under master netting arrangements remains an accounting policy choice. We presently
record the net fair value of derivative assets and liabilities for those contracts held by CMS ERM
that are subject to master netting arrangements, and separately record amounts for cash collateral
received or paid for these instruments. Under this standard, as a result of offsetting the
collateral amounts against the fair value of derivative assets and liabilities, both our total
assets and total liabilities could be reduced. The standard is to be applied retrospectively by
adjusting the financial statements for all periods presented. There will be no impact to earnings
from adopting this standard.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>EITF Issue 06-11, Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards:</I>
In June&nbsp;2007, the FASB ratified EITF Issue 06-11, effective for us on a prospective basis beginning
January&nbsp;1, 2008. EITF 06-11 requires companies to recognize the income tax benefit realized from
dividends or dividend equivalents that are charged to retained earnings and paid to employees for
non-vested equity-classified employee share-based payment awards as an increase to additional
paid-in capital. We do not believe that implementation of this standard will have a material
effect on our financial statements.
</DIV>

<DIV align="left">
<A name="110"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>2: </B><FONT style="font-variant: SMALL-CAPS"><B>Asset Sales, Discontinued Operations and Impairment Charges</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Asset Sales</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The impacts of our asset sales are included in Gain on asset sales, net and Income (Loss) from
Discontinued Operations in our Consolidated Statements of Income (Loss). There were no asset sales
for the nine months ended September&nbsp;30, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We completed the sale of a portfolio of our businesses in Argentina and our northern Michigan
non-utility natural gas assets to Lucid Energy for gross cash proceeds of $130&nbsp;million in March
2007. The $301&nbsp;million pretax loss on sale includes a $279&nbsp;million loss in discontinued operations
and a $22&nbsp;million loss in continuing operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In connection with the sale of our Argentine and Michigan assets, we entered into agreements that
grant Lucid Energy:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an option to buy CMS Gas Transmission&#146;s ownership interest in TGN, subject to the rights
of other third parties,</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-42<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the right to certain proceeds that may be awarded and received by CMS Gas
Transmission in connection with certain legal proceedings, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the right to proceeds that Enterprises will receive if it sells its stock
interest in CMS Generation San Nicolas Company.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under these agreements, we have essentially sold our rights to certain awards or proceeds that we
may receive in the future. Of the total consideration received in the sale, we allocated $32
million to these agreements and recorded this amount as a deferred credit on our Consolidated
Balance Sheets. Due to the settlement of certain legal proceedings in September&nbsp;2007, a portion of
CMS Gas Transmission&#146;s obligations under these agreements has been satisfied. As such, we
recognized $17&nbsp;million of the deferred credit as a gain in September&nbsp;2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We also sold our interest in El Chocon, an Argentine hydroelectric generating business, to Endesa,
S.A. for gross cash proceeds of $50&nbsp;million in March&nbsp;2007. We recorded a $34&nbsp;million pretax gain
in continuing operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We sold our ownership interest in SENECA and certain associated generating equipment to PDVSA,
which is owned by the Bolivarian Republic of Venezuela, for gross cash proceeds of $106&nbsp;million in
April&nbsp;2007. We recorded a $46&nbsp;million pretax gain in discontinued operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We sold our ownership interest in businesses in the Middle East, Africa, and India to TAQA for $900
million in May&nbsp;2007. Gross proceeds from the sale included $792&nbsp;million in cash proceeds and
TAQA&#146;s assumption of $108&nbsp;million in debt. Businesses included in the sale were Takoradi,
Taweelah, Shuweihat, Jorf Lasfar, Jubail, and Neyveli. The $80&nbsp;million pretax gain on sale
includes a $96&nbsp;million gain recorded in discontinued operations and a $16&nbsp;million loss recorded in
continuing operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In June&nbsp;2007, we sold CMS Energy Brasil S.A. to CPFL Energia S.A., a Brazilian utility, for $211
million, which included $201&nbsp;million in cash proceeds and CPFL Energia S.A.&#146;s assumption of a $10
million tax liability. We recorded a $3&nbsp;million pretax gain in discontinued operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We sold our investment in GasAtacama to Endesa S.A. for gross cash proceeds of $80&nbsp;million in
August&nbsp;2007. There was no gain or loss on the sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the nine months ended September&nbsp;30, 2007, the following table summarizes asset sales that did
not meet the definition of, and therefore were not reported as, discontinued operations:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="69%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="10" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Pretax</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">After-tax</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Date sold</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Business/Project</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Gain (Loss)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Gain (Loss)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">March</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">El Chocon</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">March</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">TGM and Bay Area Pipeline (a)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">May</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Middle East, Africa and India businesses (b)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(16</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">August</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">GasAtacama</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">September</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Sale of award rights (a)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Various</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"  style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Total gain on asset sales</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<DIV style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>Included in the $130&nbsp;million sale to Lucid Energy.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(b)</TD>
    <TD>&nbsp;</TD>
    <TD>Included in the $900&nbsp;million sale to TAQA.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-43<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Sale of Nuclear Assets: </I>In April&nbsp;2007, we sold Palisades to Entergy for $380&nbsp;million. Due to
various closing adjustments such as working capital and capital expenditure adjustments and nuclear
fuel usage and inventory adjustments, we have received $363&nbsp;million in proceeds as of September&nbsp;30,
2007. We also paid Entergy $30&nbsp;million to assume ownership and responsibility for the Big Rock
ISFSI. Because of the sale of Palisades, we paid the NMC, the former operator of Palisades, $7
million in exit fees and forfeited our $5&nbsp;million investment in the NMC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Entergy assumed responsibility for the future decommissioning of Palisades and for storage and
disposal of spent nuclear fuel located at Palisades and the Big Rock ISFSI sites. At closing, we
transferred $252&nbsp;million in decommissioning trust fund balances
to Entergy. We are crediting excess decommissioning funds of $189&nbsp;million to our retail customers from June&nbsp;2007 through
December&nbsp;2008 and have recorded this obligation, plus interest, as a regulatory liability on our
Consolidated Balance Sheets. Modification to the terms of the transaction allowed us immediate
access to additional excess decommissioning trust funds of $123&nbsp;million as of September&nbsp;30, 2007.
We have proposed a plan to credit these excess decommissioning fund balances to our retail
customers. This plan is under review by the MPSC in our current electric rate case filing. We
recorded this balance, plus interest, as a regulatory liability on our Consolidated Balance Sheets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The MPSC order approving the Palisades transaction allows us to recover the book value of
Palisades, which we estimated at $314&nbsp;million. As a result, we
are crediting proceeds in excess of
book value of $66&nbsp;million to our retail customers from June&nbsp;2007 through December&nbsp;2008. After
closing adjustments, which are subject to MPSC review, proceeds in excess of the book value were
$77&nbsp;million as of September&nbsp;30, 2007. We deferred the gain as a regulatory liability. The MPSC
order put off ruling on the recovery of transaction costs, including the NMC exit fees, and the $30
million payment to Entergy related to the Big Rock ISFSI until our next general rate case. We
deferred these costs as a regulatory asset on our Consolidated Balance Sheets as recovery is
probable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In April&nbsp;2007, the NRC issued an order approving the transfer of the Palisades operating license.
Intervenors have filed petitions for reconsideration of the NRC orders approving the transfer of
the Palisades and Big Rock licenses. The NRC did not alter or stay the prior order approving the
license transfer. We believe that it is unlikely that the NRC will conduct further proceedings or
alter its prior orders, but we cannot predict the outcome of the matter.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-44<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes the impacts of the Palisades and the Big Rock ISFSI transaction:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="12" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="12" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">MPSC Order</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Estimated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Customer</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Closing</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Customer Benefits</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Benefits Estimate</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Adjustments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Benefits</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">380</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">373</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less: Book value of Palisades</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">314</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">296</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Excess proceeds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Excess decommissioning trust funds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">312</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total customer benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">389</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<Div align="center" style="margin-top: 3pt">&nbsp;</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Deferred Costs</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Costs</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">NMC exit fee</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeiture of the NMC investment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total transaction costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Big Rock ISFSI operation and
maintenance fee to Entergy</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Regulatory asset, as of
September&nbsp;30, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">56</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Palisades Power Purchase Agreement: </I>Entergy contracted to sell us 100&nbsp;percent of the plant&#146;s
output up to its current annual average capacity of 798 MW under a 15-year power purchase agreement
beginning in April&nbsp;2007. We provided $30&nbsp;million in security to Entergy for our power purchase
agreement obligation in the form of a letter of credit. We estimate that capacity and energy
payments under the Palisades power purchase agreement will be $180&nbsp;million in 2007 and average $300
million per year thereafter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Due to the Palisades power purchase agreement, the transaction is a sale and leaseback for
accounting purposes. SFAS No.&nbsp;98 specifies the accounting required for a seller&#146;s sale and
simultaneous leaseback involving real estate. We have continuing involvement with Palisades
through security provided to Entergy for our power purchase agreement obligation and our DOE
liability and other forms of involvement. As a result, we accounted for the Palisades plant, which
is the real estate asset subject to the leaseback, as a financing for accounting purposes and not a
sale. As a financing, no gain on the sale of Palisades was recognized on the Consolidated
Statements of Income (Loss). We accounted for the remaining non-real estate assets and liabilities
associated with the transaction as a sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a financing, the Palisades plant remains on our Consolidated Balance Sheets and we continue to
depreciate it. We recorded the related proceeds as a finance obligation with payments recorded to
interest expense and the finance obligation based on the amortization of the obligation over the
life of the Palisades power purchase agreement. The value of the finance obligation was based on
an allocation of the transaction proceeds to the fair values of the net assets sold and fair value
of the Palisades plant asset under the financing. As of September&nbsp;30, 2007, the financing
obligation was $190&nbsp;million. We estimate future payments of $13&nbsp;million per year over the next
five years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Subsequent Asset Sale</B>: We entered into an agreement to sell our investment in Jamaica to AEI for
gross cash proceeds of $14&nbsp;million in June&nbsp;2007. We closed on the sale in October
2007.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-45<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Discontinued Operations</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In accordance with SFAS No.&nbsp;144, our consolidated financial statements have been reclassified for
all periods presented to reflect the operations, assets and liabilities of our consolidated
subsidiaries that meet the criteria of discontinued operations. The assets and liabilities of
these subsidiaries have been classified as &#147;Assets held for sale&#148; and &#147;Liabilities held for sale&#148;
on our December&nbsp;31, 2006 consolidated balance sheets. Subsidiaries classified as &#147;held for sale&#148;
at December&nbsp;31, 2006 include our Argentine businesses, a majority of our Michigan non-utility gas
businesses, CMS Energy Brasil S.A., SENECA, Takoradi, and certain associated holding companies. At
September&nbsp;30, 2007, there were no subsidiaries classified as &#147;held for sale&#148; due to the completion
of these sales in the first and second quarters of 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The major classes of assets and liabilities &#147;held for sale&#148; on our December&nbsp;31, 2006 Consolidated
Balance Sheet are as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">In Millions</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">102</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts receivable, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">105</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Notes receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Property, plant and equipment, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">233</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">651</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Liabilities
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">203</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-46<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our discontinued operations contain the activities of the subsidiaries classified as &#147;held for
sale&#148; as well as those disposed of for the nine months ended September&nbsp;30, 2007 and are a component
of our Enterprises business segment. We reflect the following amounts in the Income (Loss) From
Discontinued Operations line in our Consolidated Statements of Income (Loss):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="8" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Three months ended September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">174</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Pretax income from discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income From Discontinued Operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="8" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Nine months ended September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">235</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">486</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Pretax income (loss)&nbsp;from discontinued
operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(88</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">56</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income tax expense (benefit)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)(a)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income (Loss) From Discontinued Operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(87</TD>
    <TD nowrap>)(b)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<DIV style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes a $5&nbsp;million additional charge related to foreign earnings repatriated in March&nbsp;2007.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(b)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes a loss on disposal of our Argentine and northern Michigan non-utility assets of $279
million ($171&nbsp;million after-tax and after minority interest), a gain on disposal of SENECA of $46
million ($33&nbsp;million after-tax and after minority interest), a gain on disposal of our ownership
interest in businesses in the Middle East, Africa, and India of $96&nbsp;million ($62&nbsp;million
after-tax), and a gain on disposal of CMS Energy Brasil S.A. of $3&nbsp;million ($2&nbsp;million after-tax).</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Income (Loss) From Discontinued Operations includes a provision for anticipated closing costs and a
portion of CMS Energy&#146;s parent company interest expense. Interest expense of $7&nbsp;million for the
nine months ended September&nbsp;30, 2007 and $12&nbsp;million for the nine months ended September&nbsp;30, 2006
has been allocated based on the net book value of the asset to be sold divided by CMS Energy&#146;s
total capitalization of each discontinued operation multiplied by CMS Energy&#146;s interest expense.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Impairment Charges</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The table below summarizes our asset impairments:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="16" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Pretax</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">After-tax</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Pretax</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">After-tax</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Nine months ended September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Asset impairments:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Enterprises:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">TGN (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">91</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">GasAtacama (b)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">239</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">169</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Jamaica (c)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">PowerSmith (d)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Prairie State (e)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total asset impairments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">239</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">169</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<DIV style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>In the first quarter of 2007, we recorded a $215&nbsp;million impairment charge to recognize the
reduction in fair value of our investment in TGN, a natural gas business in Argentina. The</TD>
</TR>

</TABLE>
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>impairment included a cumulative net foreign currency translation loss of approximately $197
million.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>In December&nbsp;2005, certain insurance underwriters paid $75&nbsp;million to CMS Gas
Transmission in respect of their insurance obligations resulting from the non-payment of the
ICSID arbitration award. We recorded this payment as a deferred credit on our Consolidated Balance
Sheets because of a contingent obligation to refund the proceeds if the arbitration decision was
annulled. In September 2007, the contingent repayment obligation was eliminated by agreement. Later that month,
a separate arbitration panel ruling on the annulment issue upheld the
prior ICSID award. As a result, we recognized the $75&nbsp;million deferred credit in
Asset impairment charges, net of insurance recoveries on our Consolidated Statements of Income
(Loss). For additional details on this settlement, see Note 3, Contingencies, &#147;Other
Contingencies &#151; Argentina.&#148;</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>We will maintain our interest in TGN, which remains subject to a potential sale to the
government of Argentina or some other disposition.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(b)</TD>
    <TD>&nbsp;</TD>
    <TD>In August&nbsp;2006, a major gas supplier notified GasAtacama that it would no longer deliver gas
to GasAtacma due to the Argentine government&#146;s decision to increase the cost of its gas exports
using a special tax. We performed an impairment analysis to determine the fair value of our
investment in GasAtacama and concluded that the fair value was lower than the carrying amount
and that this decline was other than temporary. We recorded an impairment charge in the third
quarter of 2006. As a result, our consolidated net income was reduced by $169&nbsp;million after
considering tax effects and minority interest.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>In the second quarter of 2007, we recorded an impairment charge to reflect the fair value of our
investment in GasAtacama as determined in sale negotiations.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(c)</TD>
    <TD>&nbsp;</TD>
    <TD>In the first quarter of 2007, we recorded an impairment charge to reflect the fair value of
our investment in an electric generating plant in Jamaica.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(d)</TD>
    <TD>&nbsp;</TD>
    <TD>In the first quarter of 2007, we recorded an impairment charge to reflect the fair value of
our investment in PowerSmith.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(e)</TD>
    <TD>&nbsp;</TD>
    <TD>In the second quarter of 2007, we recorded an impairment charge to reflect our withdrawal
from the co-development of Prairie State with Peabody Energy because it did not meet our
investment criteria.</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>3: CONTINGENCIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SEC and DOJ Investigations: </B>During the period of May&nbsp;2000 through January&nbsp;2002, CMS MST engaged in
simultaneous, prearranged commodity trading transactions in which energy commodities were sold and
repurchased at the same price. These so-called round-trip trades had no impact on previously
reported consolidated net income, earnings per share or cash flows, but had the effect of
increasing operating revenues and operating expenses by equal amounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">CMS Energy is cooperating with an investigation by the DOJ concerning round-trip trading, which the
DOJ commenced in May&nbsp;2002. CMS Energy is unable to predict the outcome of this matter and what
effect, if any, this investigation will have on its business. In March&nbsp;2004, the SEC approved a
cease-and-desist order settling an administrative action against CMS Energy related to round-trip
trading. The order did not assess a fine and CMS Energy neither admitted to nor denied the order&#146;s
findings. The settlement resolved the SEC investigation involving CMS Energy and CMS MST. Also in
March&nbsp;2004, the SEC filed an action against three former employees related to round-trip trading at
CMS MST. One of the individuals has settled with the SEC. CMS Energy is currently advancing legal
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">defense costs for the remaining two individuals in accordance with existing indemnification
policies. Those two individuals filed a motion to dismiss the SEC action, which was denied.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Securities Class&nbsp;Action Lawsuits</B>: Beginning in May&nbsp;2002, a number of complaints were filed against
CMS Energy, Consumers and certain officers and directors of CMS Energy and its affiliates in the
United States District Court for the Eastern District of Michigan. The cases were consolidated
into a single lawsuit (the &#147;Shareholder Action&#148;), which generally seeks unspecified damages based
on allegations that the defendants violated United States securities laws and regulations by making
allegedly false and misleading statements about CMS Energy&#146;s business and financial condition,
particularly with respect to revenues and expenses recorded in connection with round-trip trading
by CMS MST. In January&nbsp;2005, the court granted a motion to dismiss Consumers and three of the
individual defendants, but denied the motions to dismiss CMS Energy and the 13 remaining individual
defendants. In March&nbsp;2006, the court conditionally certified a class consisting of &#147;all persons
who purchased CMS Common Stock during the period of October&nbsp;25, 2000 through and including May&nbsp;17,
2002 and who were damaged thereby.&#148; The court excluded purchasers of CMS Energy&#146;s 8.75&nbsp;percent
Adjustable Convertible Trust Securities (&#147;ACTS&#148;) from the class and, in response, a new class
action lawsuit was filed on behalf of ACTS purchasers (the &#147;ACTS Action&#148;) against the same
defendants named in the Shareholder Action. The settlement described in the following paragraph
has resolved both the Shareholder and ACTS Actions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;3, 2007, CMS Energy and other parties entered into a Memorandum of Understanding (the
&#147;MOU&#148;), subject to court approval, regarding settlement of the two class action lawsuits. The
settlement was approved by a special committee of independent directors and by the full board of
directors of CMS Energy. Both judged that it was in the best interests of shareholders to
eliminate this business uncertainty. Under the terms of the MOU, the litigation was settled for a
total of $200&nbsp;million, including the cost of administering the settlement and any attorney fees the
court awards. CMS Energy made a payment of approximately $123&nbsp;million plus interest on the
settlement amount on September&nbsp;20, 2007. CMS Energy&#146;s insurers paid $77&nbsp;million, the balance of
the settlement amount. In entering into the MOU, CMS Energy made no admission of liability under
the Shareholder Action and the ACTS Action. The parties executed a Stipulation and Agreement of
Settlement dated May&nbsp;22, 2007 (&#147;Stipulation&#148;) incorporating the terms of the MOU. In accordance
with the Stipulation, CMS Energy paid approximately $1&nbsp;million of the settlement amount to fund
administrative expenses. On September&nbsp;6, 2007, the court issued a final order approving the
settlement. The remaining settlement amount was paid following the September&nbsp;6, 2007 hearing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On October 5, 2007, two
former officers of Consumers filed an appeal of the order approving
the settlement of the shareholder litigation. Based on the objections
they filed in the District Court and comments made on the record at
the fairness hearing on September 6, 2007, they are not challenging
the amount of the settlement. Their principal complaint was with the
exclusion of all present and former officers and their immediate
families from participation in the settlement. It is not anticipated
that the appeal will result in changes to any material terms of the
settlement approved by the District Court.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Gas Index Price Reporting Investigation: </B>CMS Energy notified appropriate regulatory and
governmental agencies that some employees at CMS MST and CMS Field Services appeared to have
provided inaccurate information regarding natural gas trades to various energy industry
publications, which compile and report index prices. CMS Energy cooperated with an investigation
by the DOJ regarding this matter. Although CMS Energy has not received any formal notification
that the DOJ has completed its investigation, the DOJ&#146;s last request for information occurred in
November&nbsp;2003, and CMS Energy completed its response to this request in May&nbsp;2004. CMS Energy is
unable to predict the outcome of the DOJ investigation and what effect, if any, the investigation
will have on its business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The CFTC filed a civil injunctive action against two former CMS Field Services employees in
Oklahoma federal district court on February&nbsp;1, 2005. The action alleges the two engaged in
reporting false natural gas trade information, and seeks to prohibit these acts, compel compliance
with the Commodities Exchange Act, and impose monetary penalties. The court entered separate
consent orders with respect to each of the two individuals, one dated April&nbsp;18, 2007 and one dated
June&nbsp;25, 2007, resolving this litigation. The consent orders prohibit each of the individuals from
engaging in certain activities and further provide civil monetary penalties in the amount of
$100,000 for one individual and $25,000 for the other individual. Pursuant to agreements with each
of the individuals, CMS has paid $95,000 of the $100,000 amount and $22,000 of the $25,000 amount,
with the remaining amounts paid
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">by the individuals themselves. These settlements put an end to CFTC enforcement actions relating
to gas price reporting by individuals once employed at present or former CMS subsidiaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Gas Index Price Reporting Litigation: </B>CMS Energy, CMS MST, CMS Field Services, Cantera Natural Gas,
Inc. (the company that purchased CMS Field Services) and Cantera Gas Company are named as
defendants in various lawsuits arising as a result of claimed inaccurate natural gas price
reporting. Allegations include manipulation of NYMEX natural gas futures and options prices,
price-fixing conspiracies, and artificial inflation of natural gas retail prices in California,
Colorado, Kansas, Missouri, Tennessee, and Wisconsin. CMS MST has settled a master class action
suit in California state court for $7&nbsp;million. The CMS Energy defendants
have also settled four class action suits originally filed in California federal
court. The other cases in several federal and state jurisdictions remain pending.
We cannot predict the outcome of these matters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Katz Technology Litigation: </B>In June&nbsp;2007, Ronald A. Katz Technology Licensing, L.P. (&#147;RAKTL&#148;),
filed a lawsuit in the United States District Court for the Eastern District of Michigan against
CMS Energy and Consumers alleging patent infringement. RAKTL is claiming that automated customer
service, bill payment services and gas leak reporting offered to our customers and accessed through
toll free numbers infringe on patents held by RAKTL. This case has been transferred to the U.S.
District Court for the Central District of California where other similar cases against public
utilities, banks and other entities involving these patents are pending. We obtained an opinion
from patent counsel that our automated telephone systems do not infringe on RAKTL patents and that
those patents may be invalid. We will defend ourselves vigorously against these claims but cannot
predict their outcome.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Bay Harbor: </B>As part of the development of Bay Harbor by certain subsidiaries of CMS Energy, which
went forward under an agreement with the MDEQ, third parties constructed a golf course and a park
over several abandoned CKD piles, left over from the former cement plant operation on the Bay
Harbor site. Pursuant to the agreement with the MDEQ, a water collection system was constructed to
recover seep water from one of the CKD piles and CMS Energy built a treatment plant to treat the
seep water. In 2002, CMS Energy sold its interest in Bay Harbor, but retained its obligations
under previous environmental indemnifications entered into at the inception of the project.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In September&nbsp;2004, the MDEQ issued a notice of noncompliance after finding high-pH seep water in
Lake Michigan adjacent to the property. The MDEQ also found higher than acceptable levels of heavy
metals, including mercury, in the seep water.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In February&nbsp;2005, the EPA executed an AOC to address problems at Bay Harbor, upon the consent of
CMS Land Company (CMS Land) and CMS Capital, LLC, both subsidiaries of CMS Energy. Pursuant to the
AOC, the EPA approved a Removal Action Work Plan in July&nbsp;2005. Among other things, this plan calls
for the installation of collection trenches to intercept high-pH CKD leachate flow to the lake.
All collection systems contemplated in this work plan have been installed. Shoreline effectiveness
monitoring is ongoing, and CMS Land is obligated to address any observed exceedances in pH. This
may potentially include the augmentation of the collection system. In May&nbsp;2006, the EPA approved a
pilot carbon dioxide augmentation plan to augment the leachate recovery system by improving pH
results in the Pine Court area of the collection system. The augmentation system was installed in
June&nbsp;2006. Depending upon measurement results, further augmentation may be necessary.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In February&nbsp;2006, CMS Land submitted to the EPA a proposed Remedial Investigation and Feasibility
Study for the East Park CKD pile. The EPA approved a schedule for near-term activities, which
includes consolidating certain CKD materials and installing collection trenches in the East Park
leachate release area. In June&nbsp;2006, the EPA approved an East Park CKD Removal Action Work Plan
and Final Engineering Design for Consolidation. CMS Energy and the MDEQ have initiated
negotiations of an AOC and to define a long-term remedy at East Park. These negotiations
have included, among other things, issues relating to the disposal of leachate, the
location and design of collection lines and upstream diversion of water, potential
flow of leachate below the collection system, and other issues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a result of the installation of collection systems at the East Park and Bay Harbor sites, CMS
Land is collecting and treating approximately 135,000 gallons of leachate per day and shipping it
by truck for disposal at a Class&nbsp;1 well located in Johannesburg, Michigan, and at a Municipal
Wastewater Treatment Plant located in Traverse City, Michigan. To address the longer term disposal
of leachate, CMS Land has filed two permit applications with the MDEQ and the EPA, the first to
treat the collected leachate at the East Park and Bay Harbor sites before releasing the water to
Lake Michigan and a second to dispose of leachate in a deep injection well in Alba, Michigan, that
we would own and operate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">CMS Land has entered into various access, purchase and settlement agreements with several of the
affected landowners at Bay Harbor, and entered into a confidential settlement with one landowner to
resolve a lawsuit filed by that landowner. We have received demands for indemnification relating
to claims and (or)&nbsp;lawsuits filed by a property owner and a former business owner at Bay Harbor.
CMS Land has purchased five unimproved lots and two lots with houses. At this time, CMS Land
believes it has all necessary access arrangements to complete the remediation work required under
the AOC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">CMS Energy recorded charges related to this matter in 2004, 2005, and 2006 totaling $93&nbsp;million.
At September&nbsp;30, 2007, CMS Energy has a liability of $40&nbsp;million for its remaining obligations. We
based the liability on 2006 discounted costs, using a discount rate of 4.7&nbsp;percent and an inflation
rate of 1&nbsp;percent on annual operating and maintenance costs. We used the interest rate for 30-year
U.S. Treasury securities for the discount rate. The undiscounted amount of the remaining
obligation is $53&nbsp;million. We expect to pay $18&nbsp;million in 2007, $17&nbsp;million in 2008, $3&nbsp;million
in 2009, and the remaining expenditures as part of long-term operating and maintenance costs. Any
significant change in assumptions, such as an increase in the number of sites, different
remediation techniques, nature and extent of contamination, inability to reach agreement with the
MDEQ or EPA over remedial actions, failure to obtain requested permits from the EPA and the DEQ
related to the Alba injection well or the release of treated leachate to Lake Michigan, and legal
and regulatory requirements, could impact our estimate of remedial action costs and the timing of
the expenditures. An adverse outcome of this matter could, depending on the size of any
indemnification obligation or liability under environmental laws, have a potentially significant
adverse effect on CMS Energy&#146;s financial condition and liquidity and could negatively impact CMS
Energy&#146;s financial results. CMS Energy cannot predict the ultimate cost or outcome of this matter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Consumers&#146; Electric Utility Contingencies</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Electric Environmental Matters: </B>Our operations are subject to environmental laws and regulations.
Costs to operate our facilities in compliance with these laws and regulations generally have been
recovered in customer rates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Routine Maintenance Classification: </I>The EPA has alleged that some utilities have incorrectly
classified plant modifications as &#147;routine maintenance&#148; rather than seeking permits from the EPA to
modify the plant. We have received and responded to information requests from the EPA on this
subject. We believe that we have properly interpreted the requirements of &#147;routine maintenance.&#148;
If our interpretation is found to be incorrect, we may be required to install additional pollution
controls at some or all of our coal-fired electric generating plants and potentially pay fines.
Additionally, the viability of certain plants remaining in operation could be called into question.
We cannot predict the financial impact or outcome of this issue.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Cleanup and Solid Waste: </I>Under the Michigan Natural Resources and Environmental Protection Act, we
expect that we will ultimately incur investigation and remedial action costs at a number of sites.
We believe that these costs will be recoverable in rates under current ratemaking policies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are a potentially responsible party at several contaminated sites administered under the
Superfund. Superfund liability is joint and several, meaning that many other creditworthy parties
with substantial assets are potentially responsible with respect to the individual sites. Based on
our experience, we estimate that our share of the total liability for the known Superfund sites
will be between $1&nbsp;million and $10&nbsp;million. At September&nbsp;30, 2007, we have recorded a liability
for the minimum amount of our estimated probable Superfund liability in accordance with FIN 14.
The timing of payments related to the remediation of our Superfund sites is uncertain. Any
significant change in assumptions, such as different remediation techniques, nature and extent of
contamination, and legal and regulatory requirements, could affect our estimate of remedial action
costs and the timing of our remediation payments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Ludington PCB: </I>In October&nbsp;1998, during routine maintenance activities, we identified PCB as a
component in certain paint, grout, and sealant materials at Ludington. We removed and replaced
part of the PCB material. Since proposing a plan to deal with the remaining materials, we have had
several conversations with the EPA. The EPA has proposed a rule that would authorize continued use
of such material in place, subject to certain restrictions. We are not able to predict when a
final rule will be issued.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Electric Utility Plant Air Permit Issues: </I>In April&nbsp;2007, we received a Notice of
Violation(NOV)/Finding of Violation (FOV)&nbsp;from the EPA alleging that fourteen of our utility
boilers exceeded visible emission limits in their associated air permits. The utility boilers are
located at the D.E. Karn/J.C. Weadock Generating Complex, the J.H. Campbell Plant, the BC Cobb
Electric Generating Station and the JR Whiting Plant, which are all located in Michigan. We have
formally responded to the NOV/FOV denying the allegations and are awaiting the EPA&#146;s response to
our submission. We cannot predict the financial impact or outcome of this issue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Litigation: </B>In 2003, a group of eight PURPA qualifying facilities (the plaintiffs), which sell
power to us, filed a lawsuit in Ingham County Circuit Court. The lawsuit alleged that we
incorrectly calculated the energy charge payments made pursuant to power purchase agreements with
qualifying facilities. The judge deferred to the primary jurisdiction of the MPSC, dismissing the
circuit court case without prejudice. In February&nbsp;2005, the MPSC issued an order in the 2004 PSCR
plan case concluding that we have been correctly administering the energy charge calculation
methodology. The plaintiffs have appealed the MPSC order to the Michigan Court of Appeals. The
plaintiffs also filed suit in the United States Court for the Western District of Michigan, which
the judge subsequently dismissed on the basis that the pending state court litigation would fully
resolve any federal issue before the courts. The plaintiffs then appealed the dismissal to the
United States Court of Appeals, which held that the district court matter should be stayed rather
than dismissed, pending the outcome of the state appeal. We cannot predict the outcome of these
appeals.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Consumers&#146; Electric Utility Rate Matters</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Electric ROA: </B>The Customer Choice Act allows electric utilities to recover their net Stranded
Costs. In November&nbsp;2004, the MPSC approved recovery of Stranded Costs incurred from 2002 through
2003 plus the cost of money through the period of collection. At September&nbsp;30, 2007, we had a
regulatory asset for Stranded Costs of $67&nbsp;million on our Consolidated Balance Sheets. We collect
these Stranded Costs through a surcharge on ROA customers. At September&nbsp;30, 2007, alternative
electric suppliers were providing 311 MW of generation service to ROA customers, which represents
an increase of 1&nbsp;percent of ROA load compared to September&nbsp;30, 2006. Since the MPSC order, we have
experienced downward trends in ROA customers. This trend has affected negatively our ability to
recover these
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Stranded Costs in a timely manner. If this trend continues, it may require legislative or
regulatory assistance to recover fully our Stranded Costs. It is difficult to predict future ROA
customer trends and their effect on the timely recovery of Stranded Costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Power Supply Costs: </B>To reduce the risk of high power supply costs during peak demand periods and
to achieve our reserve margin target, we purchase electric capacity and energy contracts for the
physical delivery of electricity primarily in the summer months and to a lesser degree in the
winter months. We have purchased capacity and energy contracts covering partially the estimated
reserve margin requirements for 2008 through 2010.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>PSCR: </I>The PSCR process allows recovery of reasonable and prudent power supply costs. The MPSC
reviews these costs for reasonableness and prudency in annual plan proceedings and in plan
reconciliation proceedings. The following table summarizes our PSCR reconciliation filings with
the MPSC:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="11" style="border-bottom: 1px solid #000000"><FONT style="font-size:10pt">Power Supply Cost Recovery Reconciliation</FONT></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Net Under-</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">PSCR Cost of Power</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Description of Net</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">PSCR Year</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Date Filed</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Order Date</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">recovery</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Sold</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Underrecovery</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="11" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2005 Reconciliation
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">March&nbsp;2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">July&nbsp;2007
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$36&nbsp;million
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$1.081&nbsp;billion
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">MPSC approved the
recovery of our $36
million
underrecovery,
including the cost
of money, related
to our commercial
and industrial
customers.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2006 Reconciliation
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">March&nbsp;2007
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Pending
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$105&nbsp;million
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$1.490&nbsp;billion
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Underrecovery
relates to our
increased METC
costs and coal
supply costs,
increased bundled
sales, and other
cost increases
beyond those
included in the
2006 PSCR plan
filings.</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="11" valign="top" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>2007 PSCR Plan: </I>In September&nbsp;2006, we filed our 2007 PSCR plan with the MPSC. The plan sought
authorization to incorporate our 2005 and 2006 PSCR underrecoveries into our 2007 PSCR monthly
factor. In December&nbsp;2006, the MPSC issued a temporary order allowing us to implement our 2007 PSCR
monthly factor on January&nbsp;1, 2007, as filed. The order also allowed us to continue to roll in
prior year underrecoveries and overrecoveries in future PSCR plans. In September&nbsp;2007, the ALJ
recommended in his Proposal for Decision that we reduce our 2006 underrecovery rolled into 2007 by
$62&nbsp;million to reflect the refund of 100&nbsp;percent of the proceeds from the sale of sulfur dioxide
allowances. Our PSCR plan proposed to refund 50&nbsp;percent of the proceeds to customers. In
accordance with FERC regulations, we reserved this amount, excluding interest, as a regulatory
liability on our Consolidated Balance Sheets until a final order is received from the MPSC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Underrecoveries in power supply costs are included in Accrued power supply and gas revenue on our
Consolidated Balance Sheets. We expect to recover fully all of our PSCR costs. When we are unable
to collect these costs as they are incurred, there is a negative impact on our cash flows from
electric utility operations. We cannot predict the outcome of these proceedings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>2008 PSCR Plan</I>: In September&nbsp;2007, we submitted our 2008 PSCR plan filing to the MPSC. Included
in our request is proposed recovery of estimated 2007 PSCR underrecoveries of $84&nbsp;million. We
expect to self-implement the proposed 2008 PSCR charge in January&nbsp;2008, absent action by the MPSC
by the end of 2007. We cannot predict the outcome of this proceeding.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Electric Rate Case: </B>In March&nbsp;2007, we filed an application with the MPSC seeking an 11.25&nbsp;percent
authorized return on equity and an annual increase in revenues of $157&nbsp;million. In May&nbsp;2007, we
filed supplemental testimony with the MPSC to include transaction costs from the sale of Palisades.
In July&nbsp;2007, we filed an amended application with the MPSC to include the proposed purchase of
the Zeeland power plant, the approval of an energy efficiency program, and to make other revisions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In July&nbsp;2007, we also filed an amended application for rate relief, which seeks the following:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>approval to remove the costs associated with Palisades,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>recovery of the proposed purchase of the Zeeland power plant,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>partial and immediate rate relief associated with 2007 capital investments, a $400
million equity infusion into Consumers, and general inflation on operation and maintenance
expenses to 2007 levels, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>approval of a plan for the distribution of additional excess proceeds from the sale of
Palisades to customers, effectively offsetting the partial and immediate relief for up to
nine months.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes the components of the final and interim requested increase in
revenue:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="8" style="border-bottom: 1px solid #000000"><FONT style="font-size:10pt">In Millions</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Zeeland</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">and</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Partial</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">and</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Components of the increase in revenue</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Immediate</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Final</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase in base rates (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">146</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Removal of Palisades from base rates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(169</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(169</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Elimination of Palisades base rate recovery credit from the
PSCR (b)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">167</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Surcharge for return on nuclear investments (c)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total requested increase in revenues at March&nbsp;2007 filing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">157</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Palisades transaction costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Zeeland power plant non-fuel revenue requirements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Energy Efficiency Program surcharge</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Palisades excess proceeds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(127</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total requested increase in revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">282</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<DIV style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>The increase in base rates relates to Clean Air Act-related and other utility expenditures,
changes in the capital structure, and increased distribution system operation and maintenance costs
including employee pension and health care costs.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(b)</TD>
    <TD>&nbsp;</TD>
    <TD>Palisades power purchase agreement costs in the PSCR are presently offset through a base rate
recovery credit. The Palisades base rate recovery credit will be discontinued once Palisades&#146;
costs are removed from base rates.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(c)</TD>
    <TD>&nbsp;</TD>
    <TD>The nuclear surcharge is a proposal to earn a return on funds spent on Big Rock spent nuclear
fuel storage, decommissioning, and site restoration expenditures until pending DOE litigation and
future MPSC proceedings regarding this issue are concluded.</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">When we are unable to include increased costs and investments in rates in a timely manner, there is
a negative impact on our cash flows from electric utility operations. We cannot predict the amount
or timing of any MPSC decision on the requests.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Other Consumers&#146; Electric Utility Contingencies</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The MCV PPA: </B>The MCV Partnership, which leases and operates the MCV Facility, contracted to sell
1,240 MW of electricity to Consumers under a 35-year power purchase agreement beginning in 1990.
We estimate that capacity and energy payments under the MCV PPA, excluding RCP savings, will range
from $650&nbsp;million to $750&nbsp;million per year, which assumes successful exercise of the regulatory-out
provision in the MCV PPA.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Regulatory-out Provision in the MCV PPA: </I>The cost that we incur under the MCV PPA exceeded the
recovery amount allowed by the MPSC until we exercised the regulatory-out provision in the MCV PPA
in September&nbsp;2007. This action limited our capacity and fixed energy payments to the MCV
Partnership to the amounts that we collect from our customers. Cash underrecoveries of our
capacity and fixed energy payments were $39&nbsp;million in 2007. However, we used savings from the
RCP, after allocating a portion to customers, to offset a portion of our capacity and fixed energy
underrecoveries expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a result of our exercise of the regulatory-out provision, the MCV Partnership may, under certain
circumstances, have the right to terminate or reduce the amount of capacity sold under the MCV PPA
from 1,240 MW to 806 MW, which could affect our electric reserve margin. The MCV Partnership has
until January&nbsp;26, 2008 to notify us of their intention to terminate the MCV PPA at which time the
MCV Partnership must specify the termination date. We have not yet received any notification of
termination. However, the MCV Partnership has notified us that it
disputes our right to exercise the
regulatory-out provision. We believe that the provision is valid and fully effective, but cannot
assure that we will prevail in the event of a proceeding on this issue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We anticipate that the MPSC will review our exercise of the regulatory-out provision and the likely
consequences of such action in 2007. It is possible that in the event that the MCV Partnership
terminates performance under the MCV PPA, prior orders could limit recovery of replacement power
costs to the amounts that the MPSC authorized for recovery under the MCV PPA. Depending on the
cost of replacement power, this could result in our costs exceeding the recovery amount allowed by
the MPSC. We cannot predict the outcome of these matters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To comply with a prior MPSC order, we made a filing in May&nbsp;2007 with the MPSC requesting a
determination regarding whether it wished to reconsider the amount of the MCV PPA payments that we
recover from customers. Furthermore, the MCV Partnership filed an application with the MPSC
requesting the elimination of the 88.7&nbsp;percent availability cap on the amount of capacity and fixed
energy charges that we are allowed to recover from our customers. We cannot predict the outcome of
these matters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>RCP: </I>In January&nbsp;2005, we implemented the MPSC-approved RCP with modifications. The RCP allows us
to recover the same amount of capacity and fixed energy charges from customers as approved in prior
MPSC orders. However, we are able to dispatch the MCV Facility based on natural gas market prices.
This results in fuel cost savings for the MCV Facility, which the MCV Partnership shares with us.
The RCP also requires contributions of $5&nbsp;million annually to a renewable resources program. As of
September&nbsp;30, 2007, contributions of $13&nbsp;million were made to the renewable resources program. The
underlying RCP agreement between Consumers and the MCV Partnership extends through the term of the
MCV PPA. However, either party may terminate that agreement under certain conditions. In January
2007, the Michigan Attorney General filed an appeal with the Michigan Supreme Court regarding the
MPSC&#146;s order approving the RCP. The Supreme Court denied the Attorney General&#146;s request to further
consider the matter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Nuclear Matters: </B><I>Big Rock Decommissioning: </I>The MPSC and the FERC regulate the recovery of costs
to decommission Big Rock. In December&nbsp;2000, funding of the Big Rock trust fund stopped because the
MPSC-
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">authorized decommissioning surcharge collection period expired. The level of funds provided by the
trust fell short of the amount needed to complete decommissioning. As a result, we provided $45
million of corporate contributions for costs associated with NRC radiological and non-NRC
greenfield decommissioning work as of September&nbsp;30, 2007. This amount excludes the $30&nbsp;million
payment to Entergy to assume ownership and responsibility for the Big Rock ISFSI and additional
corporate contributions for nuclear fuel storage costs of $54&nbsp;million as of September&nbsp;30, 2007, due
to the DOE&#146;s failure to accept spent nuclear fuel on schedule. We plan to seek recovery  from the MPSC of
expenditures that we have funded and have a $129&nbsp;million regulatory asset recorded on
our Consolidated Balance Sheets as of September&nbsp;30, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Actual expenditures for Big Rock decommissioning totaled $388&nbsp;million as of September&nbsp;30, 2007.
This total excludes the additional costs for spent nuclear fuel storage due to the DOE&#146;s failure to
accept this spent nuclear fuel on schedule as well as certain increased security costs that we are
recovering through the security cost provisions of Public Act 609 of 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Nuclear Fuel Cost: </I>We deferred payment for disposal of spent nuclear fuel burned before April&nbsp;7,
1983. Our DOE liability is $158&nbsp;million at September&nbsp;30, 2007. This amount includes interest,
which is payable upon the first delivery of spent nuclear fuel to the DOE. We recovered, through
electric rates, the amount of this liability, excluding a portion of interest. In conjunction with
the sale of Palisades and the Big Rock ISFSI, we retained this obligation and provided a $155
million letter of credit to Entergy as security for this obligation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>DOE Litigation: </I>In 1997, a U.S. Court of Appeals decision confirmed that the DOE was to begin
accepting deliveries of spent nuclear fuel for disposal by January&nbsp;1998. Subsequent U.S. Court of
Appeals litigation, in which we and other utilities participated, has not been successful in
producing more specific relief for the DOE&#146;s failure to accept the spent nuclear fuel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">There are a number of court decisions that support the right of utilities to pursue damage claims
in the United States Court of Claims against the DOE for failure to take delivery of spent nuclear
fuel. If our litigation against the DOE is successful, we plan to use any recoveries as
reimbursement for the incurred costs of spent nuclear fuel storage during our ownership of
Palisades and Big Rock. We can make no assurance that the litigation against the DOE will be
successful. The sale of Palisades and the Big Rock ISFSI did not transfer the right to any
recoveries from the DOE related to costs of spent nuclear fuel storage incurred during our
ownership of Palisades and Big Rock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2002, the site at Yucca Mountain, Nevada was designated for the development of a repository for
the disposal of high-level radioactive waste and spent nuclear fuel. We expect that the DOE,
ultimately, will submit a final license application to the NRC for the repository. The application
and review process is estimated to take several years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Consumers&#146; Gas Utility Contingencies</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Gas Environmental Matters: </B>We expect to incur investigation and remediation costs at a number of
sites under the Michigan Natural Resources and Environmental Protection Act, a Michigan statute
that covers environmental activities including remediation. These sites include 23 former
manufactured gas plant facilities. We operated the facilities on these sites for some part of
their operating lives. For some of these sites, we have no current ownership or may own only a
portion of the original site. In 2005, we estimated our remaining costs to be between $29&nbsp;million
and $71&nbsp;million, based on 2005 discounted costs, using a discount rate of three percent. The
discount rate represents a 10-year average of U.S. Treasury bond rates reduced for increases in
the consumer price index. We expect to fund most of
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">these costs through proceeds derived from a settlement with insurers and MPSC-approved rates. At
September&nbsp;30, 2007, we have a liability of $19&nbsp;million, net of $63&nbsp;million of expenditures incurred
to date, and a regulatory asset of $52&nbsp;million. The timing of payments related to the remediation
of our manufactured gas plant sites is uncertain. Any significant change in assumptions, such as
an increase in the number of sites, different remediation techniques, nature and extent of
contamination, and legal and regulatory requirements, could affect our estimate of remedial action
costs and the timing of our remediation payments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Gas Title Transfer Tracking Fees and Services (TTT): </B>On September&nbsp;19, 2007, the FERC issued an
order denying Consumers&#146; request for Summary Disposition and established hearing procedures in this
proceeding. In addition to issues related to the appropriate level of the TTT fee and refunds
related to TTT transactions, this order sets for hearing the issue of whether Consumers has
violated annual reporting requirements of the FERC&#146;s regulations. A prehearing conference was held
on October&nbsp;4, 2007. Testimony is due November&nbsp;9, 2007, with hearings to begin February&nbsp;5, 2008.
We cannot predict the outcome of this proceeding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Consumers&#146; Gas Utility Rate Matters</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Gas Cost Recovery: </B>The GCR process is designed to allow us to recover all of our purchased natural
gas costs if incurred under reasonable and prudent policies and practices. The MPSC reviews these
costs, policies, and practices for prudency in annual plan and reconciliation proceedings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes our GCR reconciliation filings with the MPSC:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="11" style="border-bottom: 1px solid #000000"><FONT style="font-size:10pt">Gas Cost Recovery Reconciliation</FONT></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Net Over-</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">GCR Cost</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center">GCR Year</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Date Filed</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Order Date</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">recovery</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">of Gas Sold</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Description of Net Overrecovery</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="11" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2005-2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June&nbsp;2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">April&nbsp;2007
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$3&nbsp;million
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$1.8&nbsp;billion
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The net overrecovery includes
$1&nbsp;million interest income
through March&nbsp;2006, which
resulted from a net
underrecovery position during
the majority of the GCR
period.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2006-2007
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June&nbsp;2007
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Pending
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$5 million
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$1.7&nbsp;billion
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The total overrecovery amount
reflects an overrecovery of $1
million plus $4&nbsp;million in
accrued interest owed to
customers.</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="11" valign="top" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Overrecoveries in cost of gas sold are included in Accrued rate refunds on our Consolidated Balance
Sheets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>GCR plan for year 2005-2006: </I>In November&nbsp;2005, the MPSC issued an order for our 2005-2006 GCR Plan
year, which resulted in approval of a settlement agreement and established a fixed price cap of
$10.10 per mcf for the December&nbsp;2005 through March&nbsp;2006 billing period. We were able to maintain
our GCR billing factor below the authorized level for that period. The order was appealed to the
Michigan Court of Appeals by one intervenor. We are unable to predict the outcome of this
proceeding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>GCR plan for year 2006-2007: </I>In August&nbsp;2006, the MPSC issued an order for our 2006-2007 GCR Plan
year, which resulted in approval of a settlement agreement that allowed a base GCR ceiling factor
of $9.48 per mcf for the 12-month period of April&nbsp;2006 through March&nbsp;2007. We were able to
maintain our GCR billing factor below the authorized level for that period.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>GCR plan for year 2007-2008: </I>In July&nbsp;2007, the MPSC issued an order for our 2007-2008 GCR plan
year, which resulted in approval of a settlement agreement that allowed a base GCR ceiling factor
of $8.47 per mcf for the 12-month period of April&nbsp;2007 through March&nbsp;2008, subject to a quarterly
ceiling price adjustment mechanism.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Due to an increase in NYMEX gas prices compared to the plan, the base GCR ceiling factor increased
to $8.67 per mcf pursuant to the quarterly ceiling price adjustment mechanism for the 3-month
period of July&nbsp;2007 through September&nbsp;2007. Beginning October&nbsp;2007, the base GCR ceiling factor
was adjusted to $8.47 due to a decrease in NYMEX gas prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The GCR billing factor is adjusted monthly in order to minimize the over or underrecovery amounts
in our annual GCR reconciliation. Our GCR billing factor for the month of November&nbsp;2007 is $7.78
per mcf.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>2007 Gas Rate Case: </B>In February&nbsp;2007, we filed an application with the MPSC seeking an 11.25
percent authorized return on equity along with an $88&nbsp;million annual increase in our gas delivery
and transportation rates. We proposed the use of a Revenue Decoupling and Conservation Incentive
Mechanism for residential and general service rate classes, which would partially separate the
collection of fixed costs from gas sales and enhance the utility&#146;s ability to recover its fixed
costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In August&nbsp;2007, the MPSC approved a partial settlement agreement authorizing an annual rate
increase of $50&nbsp;million, including an authorized return on equity of 10.75&nbsp;percent. The proposed
Revenue Decoupling and Conservation Incentive Mechanism was not approved. On September&nbsp;25, 2007,
the MPSC reopened the record in the case to allow all interested parties to be heard concerning the
approval of an energy efficiency program, which we included in our original filing. If approved in
total, this would result in an additional rate increase of $9&nbsp;million to be used to implement the
energy efficiency program.
</DIV>
<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Other Contingencies</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Argentina: </B>As part of its energy privatization incentives, Argentina directed CMS Gas Transmission
to calculate tariffs in U.S. dollars, then convert them to pesos at the prevailing exchange rate,
and to adjust tariffs every six months to reflect changes in inflation. Starting in early 2000,
Argentina suspended the inflation adjustments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In January&nbsp;2002, the Republic of Argentina enacted the Public Emergency and Foreign Exchange System
Reform Act. This law repealed the fixed exchange rate of one U.S. dollar to one Argentine peso,
converted all dollar-denominated utility tariffs and energy contract obligations into pesos at the
same one-to-one exchange rate, and directed the Government of Argentina to renegotiate such
tariffs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">CMS Gas Transmission began arbitration proceedings against the Republic of Argentina (Argentina)
under the auspices of the International Centre for the Settlement of Investment Disputes (ICSID)&nbsp;in
mid-2001, citing breaches by Argentina of the Argentine-U.S. Bilateral Investment Treaty (BIT). In
May&nbsp;2005, an ICSID tribunal concluded, among other things, that Argentina&#146;s economic emergency did
not excuse Argentina from liability for violations of the BIT. The ICSID tribunal found in favor
of CMS Gas Transmission, and awarded damages of U.S. $133&nbsp;million, plus interest.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The ICSID Convention provides that either party may seek annulment of the award based upon five
possible grounds specified in the ICSID Convention. ICSID formally registered Argentina&#146;s
Application for Annulment in September&nbsp;2005. In December&nbsp;2005, certain insurance underwriters paid
 $75&nbsp;million to CMS Gas Transmission in respect of their insurance obligations resulting
from non-payment of the ICSID arbitration award. We recorded this payment as a deferred credit on our Consolidated Balance
Sheets because of a contingent obligation to refund the proceeds
 if the arbitration decision was annulled. In September 2007, the contingent repayment obligation was eliminated by agreement.
Later that month, a separate arbitration panel ruling on the
annulment issue upheld the prior ICSID award. As a result, we
recognized the $75&nbsp;million deferred credit in Asset impairment
charges, net of insurance recoveries on our Consolidated Statements
of Income (Loss).</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For
more details on the sale of our Argentine and Michigan assets to Lucid Energy, see Note 2, Asset
Sales, Discontinued Operations and Impairment Charges, &#147;Asset Sales.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Quicksilver Resources, Inc.: </B>Quicksilver sued CMS MST for breach of contract in connection with a
Contract for Sale and Purchase of natural gas, pursuant to which Quicksilver agreed to sell, and
CMS MST agreed to buy, natural gas. Quicksilver believes that it is entitled to more payments for
natural gas than it has received. CMS MST disagrees with Quicksilver&#146;s analysis and believes that
it has paid all amounts owed for delivery of gas pursuant to the contract. Quicksilver is seeking
damages of up to approximately $126&nbsp;million, plus prejudgment interest and attorney fees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The trial commenced on March&nbsp;19, 2007. The jury verdict awarded Quicksilver zero compensatory
damages but $10&nbsp;million in punitive damages. The jury found that CMS MST breached the contract and
committed fraud but found no actual damage on account of either such claim.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On May&nbsp;15, 2007, the trial court, ruling on motions to counter the entry of the judgment, vacated
the jury award of punitive damages but held that the contract should be rescinded prospectively.
The judicial rescission of the contract caused CMS Energy to record a charge in the second quarter
of 2007 of approximately $24&nbsp;million, net of tax. To preserve its appellate rights, CMS MST filed
a motion to modify, correct or reform the judgment and a motion for a judgment contrary to the jury
verdict with the trial court. The trial court dismissed these motions. CMS MST has filed a notice
of appeal with the Texas Court of Appeals.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Star Energy</B>: In 2000, a Michigan trial judge granted Star Energy, Inc. and White Pine Enterprises,
LLC a judgment in an action filed in 1999 that claimed Terra Energy Ltd., a former CMS Oil and Gas
subsidiary, violated an oil and gas lease and other arrangements by failing to drill wells it had
committed to drill. A jury then awarded the plaintiffs an $8&nbsp;million award. The Michigan Court of
Appeals reversed the damages award and granted Terra Energy Ltd. a new trial on damages only. The
trial was set for August&nbsp;2007, but the parties reached a settlement before trial. As a result, CMS
Energy recorded a charge in the second quarter of 2007 of approximately $3&nbsp;million, net of tax.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>T.E.S. Filer City Air Permit Issue</B>: In January&nbsp;2007, we received a Notice of Violation from the
EPA alleging that T.E.S. Filer City, a generating facility in which we have a 50&nbsp;percent
partnership interest, exceeded certain air permit limits. We are in discussions with the EPA with
regard to these allegations, but cannot predict the financial impact or outcome of this issue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Equatorial
Guinea Tax Claim:</B> In 2004, CMS Energy received a request for indemnification from the purchaser of
CMS Oil and Gas. The indemnification claim relates to the sale by CMS Energy of its oil, gas and
methanol projects in Equatorial Guinea and the claim of the government of Equatorial Guinea that we
owe it $142&nbsp;million in taxes in connection with that sale. CMS Energy and its tax advisors concluded that
the government&#146;s tax claim is without merit and the purchaser of CMS Oil and Gas submitted a response to the government rejecting the claim.
CMS Energy was informed recently that the Equatorial Guinea
government still intends to pursue its claim. An adverse outcome of this claim could
have a material adverse effect on CMS Energy&#146;s financial condition, liquidity and results of
operations. We cannot predict the ultimate cost or outcome of this matter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Other: </B>In addition to the matters disclosed within this Note, Consumers and certain other
subsidiaries of CMS Energy are parties to certain lawsuits and administrative proceedings before
various courts and governmental agencies arising from the ordinary course of business. These
lawsuits and proceedings may involve personal injury, property damage, contractual matters,
environmental issues, federal and state taxes, rates, licensing, and other matters.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have accrued estimated losses for certain contingencies discussed within this Note. Resolution
of these contingencies is not expected to have a material adverse impact on our financial position,
liquidity, or future results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>FASB Interpretation No.&nbsp;45, </B><B><I>Guarantor&#146;s Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others: </I></B>The Interpretation requires the
guarantor, upon issuance of a guarantee, to recognize a liability for the fair value of the
obligation it undertakes in issuing the guarantee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table describes our guarantees at September&nbsp;30, 2007:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="13" style="border-bottom: 1px solid #000000"><FONT style="font-size:10pt">In Millions</FONT></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">FIN 45</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Issue</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Expiration</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Maximum</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Carrying</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Guarantee Description</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Date</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Date</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Obligation</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Amount</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Indemnifications from asset sales and
other agreements (a)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Various
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Indefinite
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom">1,327</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom">88</TD>
    <TD nowrap valign="bottom">(b)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Surety bonds and other indemnifications
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Various
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Indefinite
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">24</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">&#151;
</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Guarantees and put options (c)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Various
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Various through
September&nbsp;2027
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">99</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">1</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" valign="top" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<DIV style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>The majority of this amount arises from routine provisions in stock and asset sales agreements
under which we indemnify the purchaser for losses resulting from claims related to tax disputes,
claims related to power purchase agreements and the failure of title to the assets or stock sold by
us to the purchaser.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(b)</TD>
    <TD>&nbsp;</TD>
    <TD>In the second quarter of 2007, we recorded $87&nbsp;million of liabilities related to tax and other
indemnifications for completed asset sales.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(c)</TD>
    <TD>&nbsp;</TD>
    <TD>Maximum obligation includes $85&nbsp;million related to the MCV Partnership&#146;s non-performance under
a steam and electric power agreement with Dow. We sold our interests in the MCV Partnership and
the FMLP. The sales agreement calls for the purchaser, an affiliate of GSO Capital Partners and
Rockland Capital Energy Investments, to pay $85&nbsp;million, subject to certain reimbursement rights,
if Dow terminates an agreement under which the MCV Partnership provides it steam and electric
power. This agreement expires in March&nbsp;2016, subject to certain terms and conditions. The
purchaser secured its reimbursement obligation with an irrevocable letter of credit of up to $85
million.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-60<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table provides additional information regarding our guarantees:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Events That Would Require</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #ffffff">Guarantee Description</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #ffffff">How Guarantee Arose</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #ffffff"> Performance</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="5" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Indemnifications from
asset sales
and other agreements
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Stock and asset sales agreements
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Findings of
misrepresentation,
breach of
warranties, tax
claims and other
specific events or
circumstances</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Surety bonds and other
indemnifications
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Normal operating activity,
permits and licenses
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Nonperformance</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Guarantees and put options
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Normal operating activity
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Nonperformance or
non-payment by a
subsidiary under a
related contract</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement to provide power and
steam to Dow
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">MCV Partnership&#146;s
nonperformance or
non-payment under a
related contract</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bay Harbor remediation efforts
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Owners exercising
put options
requiring us to
purchase property</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" valign="top" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At September&nbsp;30, 2007, certain contracts contained provisions allowing us to recover, from third
parties, amounts paid under the guarantees. For example, if we are required to purchase a property
under a put option agreement, we may sell the property to recover the amount paid under the option.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We enter into various agreements containing tax and other indemnification provisions in connection
with a variety of transactions, including the sale of our interests in the MCV Partnership and the
FMLP and the sale of our interest in Palisades and the Big Rock ISFSI. While we are unable to
estimate the maximum potential obligation related to these indemnities, we consider the likelihood
that we would be required to perform or incur significant losses related to these indemnities and
the guarantees listed in the preceding tables to be remote.
</DIV>
<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>4: </B><FONT style="font-variant: SMALL-CAPS"><B>Financings and Capitalization</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Long-term debt is summarized as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">In Millions</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">September 30, 2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">December 31, 2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS"><B>CMS Energy Corporation</B></FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Senior notes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,271</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total &#151; CMS Energy Corporation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,272</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS"><B>Consumers Energy Company</B></FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">First mortgage bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,172</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Senior notes and other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">657</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">652</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Securitization bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">318</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">340</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total &#151; Consumers Energy Company</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,164</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS"><B>Other Subsidiaries</B></FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">224</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">328</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS"><B>Total principal amounts outstanding</B></FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,764</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current amounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(971</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(550</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net unamortized discount</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,200</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-61<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Financings: </B>The following is a summary of significant long-term debt transactions during the nine
months ended September&nbsp;30, 2007:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Principal</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Issue/Retirement</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(in millions)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Interest Rate (%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Date</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Maturity Date</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS"><B>Debt Issuances</B></FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS"><B>CMS Energy</B></FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Senior notes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.55</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center">July 2007</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center">July 2017</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Senior notes (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Variable</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">July 2007</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">January 2013</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS"><B>Total</B></FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS"><B>Debt Retirements:</B></FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS"><B>CMS Energy</B></FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Senior notes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">260</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8.90</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center">June 2007</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center">July 2008</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Senior notes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.50</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center">July and August 2007</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center">January 2009</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS"><B>Enterprises</B></FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">CMS Generation
Investment Co.
IV Bank
Loan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Variable</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">May 2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center">December 2008</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px"><FONT style="font-variant: SMALL-CAPS"><B>Total</B></FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">777</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<DIV style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>The variable rate senior notes bear interest at three-month LIBOR plus 95 basis points (6.31
percent at September&nbsp;30, 2007).</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Costs and discounts associated with CMS Energy&#146;s senior notes issuances totaled $7&nbsp;million and are
being amortized over the lives of the related debt. Premiums associated with CMS Energy&#146;s debt
retirements totaled $21&nbsp;million and were charged to other expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In October&nbsp;2007, $289&nbsp;million of CMS Energy&#146;s 9.875&nbsp;percent senior notes matured and were redeemed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Revolving Credit Facilities: </B>The following secured revolving credit facilities with banks are
available at September&nbsp;30, 2007:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="19" style="border-bottom: 1px solid #000000"><FONT style="font-size:10pt">In Millions</FONT></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Outstanding</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Company</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Expiration Date</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Amount of Facility</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Amount Borrowed</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Letters-of-Credit</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Amount Available</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="19" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">CMS Energy
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">April&nbsp;2, 2012
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">300</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="left" valign="top">&#151;
</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">297</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Consumers
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" valign="top">March&nbsp;30, 2012
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">500</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">&#151;
</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">218</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">282</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="19" valign="top" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We replaced our $300&nbsp;million facility with a new $300&nbsp;million credit facility in April&nbsp;2007.
Consumers replaced its $500&nbsp;million facility with a new $500&nbsp;million credit facility in March&nbsp;2007.
The new facilities contain less restrictive covenants, and provide for lower fees and lower
interest margins than the previous credit facilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Dividend Restrictions: </B>Under provisions of our senior notes indenture, at September&nbsp;30, 2007,
payment of common stock dividends was limited to $499&nbsp;million. The dividend restrictions in our
secured revolving credit facility were removed in April&nbsp;2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under the provisions of its articles of incorporation, at September&nbsp;30, 2007, Consumers had $250
million of unrestricted retained earnings available to pay common stock dividends. The dividend
restrictions in its secured revolving credit facility were removed in March&nbsp;2007. Provisions of
the Federal Power Act and the Natural Gas Act effectively restrict dividends to the amount of
Consumers&#146; retained earnings. For the nine months ended September&nbsp;30, 2007, we received $176
million of common stock dividends from Consumers.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-62<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Preferred Stock: </B>In February&nbsp;2007, our non-voting preferred subsidiary interest of $11&nbsp;million was
repurchased and redeemed for a cash payment of $32&nbsp;million. The original $19&nbsp;million addition to
paid-in-capital was reversed and a $1&nbsp;million redemption premium was charged to retained deficit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Contingently Convertible Securities: </B>In September&nbsp;2007, the $11.87 per share conversion trigger
price contingency was met for our $250&nbsp;million 4.50&nbsp;percent contingently convertible preferred
stock and the $12.81 per share conversion trigger price contingency was met for our $150&nbsp;million
3.375&nbsp;percent contingently convertible senior notes. As a result, these securities are convertible
at the option of the security holders for the three months ending December&nbsp;31, 2007, with the par
value or principal payable in cash. As of October&nbsp;2007, none of the security holders have notified
us of their intention to convert these securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Because the 3.375&nbsp;percent senior notes are convertible on demand, they are classified as current
liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Capital Lease Obligations: </B>Our capital leases are comprised mainly of leased service vehicles,
office furniture, and gas pipeline capacity. At September&nbsp;30, 2007, capital lease obligations
totaled $62&nbsp;million. We estimate future minimum lease payments to range between $10&nbsp;million and
$19&nbsp;million per year over the next five years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Sale of Accounts Receivable: </B>Under a revolving accounts receivable sales program, Consumers sells
certain accounts receivable to a wholly owned, consolidated, bankruptcy remote special purpose
entity. In turn, the special purpose entity may sell an undivided interest in up to $325&nbsp;million
of the receivables. The special purpose entity sold no receivables at September&nbsp;30, 2007 and $325
million of receivables at December&nbsp;31, 2006. Consumers continues to service the receivables sold
to the special purpose entity. The purchaser of the receivables has no recourse against Consumers&#146;
other assets for failure of a debtor to pay when due and no right to any receivables not sold.
Consumers has neither recorded a gain or loss on the receivables sold nor retained an interest in
the receivables sold.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Certain cash flows under Consumers&#146; accounts receivable sales program are shown in the following
table:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="8" style="border-bottom: 1px solid #000000"><FONT style="font-size:10pt">In Millions</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Nine months ended September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash flow as a result of accounts receivable financing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(325</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(9</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Collections from customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,631</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,402</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-63<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="113"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>5: </B><FONT style="font-variant: SMALL-CAPS"><B>Earnings Per Share </B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table presents the basic and diluted earnings per share computations based on
Income (Loss) from Continuing Operations:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000">In Millions, Except Per Share Amounts</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Three Months Ended September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2006</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Income (Loss) Available to Common Stockholders</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income (Loss) from Continuing Operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(112</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less Preferred Dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income (Loss) from Continuing Operations
Available to
Common Stockholders &#151; Basic and Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(114</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Average Common Shares Outstanding</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Weighted Average Shares &#151; Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">223.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">220.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Add dilutive impact of Contingently
Convertible Securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Add dilutive Stock Options and Warrants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Weighted Average Shares &#151; Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">241.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">220.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Income (Loss) Per Average Common Share
Available to Common Stockholders</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.52</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.52</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000">In Millions, Except Per Share Amounts</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Nine Months Ended September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2006</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Loss Available to Common Stockholders</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss from Continuing Operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(82</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less Preferred Dividends and Redemption Premium</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss from Continuing Operations Available to
Common Stockholders &#151; Basic and Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(13</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(90</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Average Common Shares Outstanding</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Weighted Average Shares &#151; Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">222.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">219.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Add dilutive impact of Contingently
Convertible Securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Add dilutive Stock Options and Warrants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Weighted Average Shares &#151; Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">222.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">219.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Loss Per Average Common Share
Available to Common Stockholders</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.06</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.41</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.06</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.41</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Contingently Convertible Securities: </I>Our contingently convertible securities dilute EPS to the
extent that the conversion value, which is based on the average market price of our common stock,
exceeds the principal or par value. For the nine months ended September&nbsp;30, 2007, we recorded a
loss from continuing operations. Due to antidilution, there was no impact to diluted EPS from our
contingently convertible securities. Had there been positive income from continuing operations,
our contingently convertible securities would have contributed an additional 19.0&nbsp;million shares
for the nine months ended September&nbsp;30, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Stock Options, Warrants and Restricted Stock: </I>For the nine months ended September&nbsp;30,
2007, due to
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-64<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">antidilution, there was no impact to diluted EPS for 1.1&nbsp;million shares of unvested restricted
stock awards or for options and warrants to purchase 0.3&nbsp;million shares of common stock. Since the
exercise price was greater than the average market price of our common stock, there was no impact
to diluted EPS for additional options and warrants to purchase 0.7&nbsp;million shares of common stock
for the three and nine months ended September&nbsp;30, 2007. These stock options have the potential to
dilute EPS in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Convertible Debentures: </I>For the three months and nine months ended September&nbsp;30, 2007, due to
antidilution, there was no impact to diluted EPS from our 7.75&nbsp;percent convertible subordinated
debentures. Using the if-converted method, the debentures would have:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>increased the numerator of diluted EPS by $2&nbsp;million for the three months ended
September&nbsp;30, 2007, and $7&nbsp;million for the nine months ended September&nbsp;30, 2007, from an
assumed reduction of interest expense, net of tax, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>increased the denominator of diluted EPS by 4.2&nbsp;million shares.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We can revoke the conversion rights if certain conditions are met.
</DIV>
<DIV align="left">
<A name="114"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>6: F</B><FONT style="font-variant: SMALL-CAPS"><B>inancial and derivative instruments</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Financial Instruments: </B>The carrying amounts of cash, short-term investments, and current
liabilities approximate their fair values because of their short-term nature. We estimate the fair
values of long-term financial instruments based on quoted market prices or, in the absence of
specific market prices, on quoted market prices of similar instruments or other valuation
techniques.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The cost and fair value of our long-term debt instruments including current maturities are as
follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3" style="border-bottom: 1px solid #ffffff">In Millions</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #ffffff">September 30, 2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #ffffff">December 31, 2006</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unrealized Gain</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unrealized Gain</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Cost</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Fair Value</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Loss)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Cost</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Fair Value</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Loss)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,361</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,494</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(133</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(196</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt &#151; related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">162</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The summary of our available-for-sale investment securities is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3" style="border-bottom: 1px solid #ffffff">In Millions</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="33" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #ffffff">September 30, 2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #ffffff">December 31, 2006</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="33" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Cost</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unrealized Gains</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unrealized Losses</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Fair Value</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Cost</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unrealized Gains</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unrealized Losses</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Fair Value</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="33" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nuclear decommissioning
investments:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">286</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">309</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">SERP:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="33" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-65<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Derivative Instruments: </B>In order to limit our exposure to certain market risks, we may enter into
various risk management contracts, such as swaps, options, futures, and forward contracts. These
contracts, used primarily to manage our exposure to changes in interest rates, commodity prices,
and currency exchange rates, are classified as either non-trading or trading. We enter into these
contracts using established policies and procedures, under the direction of both:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an executive oversight committee consisting of senior management representatives, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a risk committee consisting of business unit managers.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The contracts we use to manage market risks may qualify as derivative instruments that are subject
to derivative and hedge accounting under SFAS No.&nbsp;133. If a contract is a derivative and does not
qualify for the normal purchases and sales exception under SFAS No.&nbsp;133, it is recorded on our
consolidated balance sheet at its fair value. We then adjust the resulting asset or liability each
quarter to reflect any change in the market value of the contract, a practice known as marking the
contract to market. From time to time, we enter into cash flow hedges. If a derivative qualifies
for cash flow hedge accounting treatment, the changes in fair value (gains or losses) are reported
in AOCL; otherwise, the changes are reported in earnings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For a derivative instrument to qualify for cash flow hedge accounting:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the relationship between the derivative instrument and the forecasted transaction being
hedged must be formally documented at inception,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the derivative instrument must be highly effective in offsetting the hedged
transaction&#146;s cash flows, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the forecasted transaction being hedged must be probable.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If a derivative qualifies for cash flow hedge accounting treatment and gains or losses are recorded
in AOCL, those gains or losses will be reclassified into earnings in the same period or periods the
hedged forecasted transaction affects earnings. If a cash flow hedge is terminated early because
it is determined that the forecasted transaction will not occur, any gain or loss recorded in AOCL
at that date is recognized immediately in earnings. If a cash flow hedge is terminated early for
other economic reasons, any gain or loss as of the termination date is deferred and then
reclassified to earnings when the forecasted transaction affects earnings. The ineffective
portion, if any, of all hedges is recognized in earnings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To determine the fair value of our derivatives, we use information from external sources (i.e.,
quoted market prices and third party valuations), if available. For certain contracts, this
information is not available and we use mathematical valuation models to value our derivatives.
These models require various inputs and assumptions, including commodity market prices and
volatilities, as well as interest rates and contract maturity dates. The cash returns we actually
realize on these contracts may vary, either positively or negatively, from the results that we
estimate using these models. As part of valuing our derivatives at market, we maintain reserves,
if necessary, for credit risks arising from the financial condition of our counterparties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The majority of our commodity purchase and sale contracts are not subject to derivative accounting
under SFAS No.&nbsp;133 because:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>they do not have a notional amount (that is, a number of units specified in a derivative
instrument, such as MWh of electricity or bcf of natural gas),</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>they qualify for the normal purchases and sales exception, or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>there is not an active market for the commodity.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-66<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our coal purchase contracts are not derivatives because there is not an active market for the coal
we purchase. If an active market for coal develops in the future, some of these contracts may
qualify as derivatives and the resulting mark-to-market impact on earnings could be material.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Derivative accounting is required for certain contracts used to limit our exposure to interest rate
risk, commodity price risk, and foreign exchange risk. The following table summarizes our
derivative instruments:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3" style="border-bottom: 1px solid #ffffff">In Millions</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #ffffff">September 30, 2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid ffffff">December 31, 2006</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unrealized Gain</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Derivative Instruments</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Cost</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Fair Value</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unrealized Loss</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Cost</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Fair Value</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Loss)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>CMS ERM derivative contracts:</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-trading electric / gas contracts (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Trading electric / gas contracts (b)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(14</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(68</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(57</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>Derivative contracts associated with
equity investments in:</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Shuweihat (c)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(14</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(14</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Taweelah (c)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(35</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Jorf Lasfar (c)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>The fair value of CMS ERM&#146;s non-trading electric and gas contracts has decreased significantly
from December&nbsp;31, 2006 due to the termination of certain gas contracts. CMS ERM had recorded
derivative assets, representing cumulative unrealized mark-to-market gains, associated with these
contracts.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(b)</TD>
    <TD>&nbsp;</TD>
<TD>The fair value of CMS ERM&#146;s trading electric and gas contracts has increased significantly from
December&nbsp;31, 2006 due to the termination of certain gas contracts. CMS ERM had recorded derivative
liabilities, representing cumulative unrealized mark-to-market losses, associated with these
contracts.</td>
</tr>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(c)</TD>
    <TD>&nbsp;</TD>
 <TD>We sold our equity investments in Shuweihat, Taweelah, and Jorf Lasfar in May&nbsp;2007. As such,
we no longer reflect our proportionate share of the fair value of the derivatives contracts held by
these investments in our consolidated financial statements.
</td>
</tr>
</table>
</div>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We record the fair value of the derivative contracts held by CMS ERM in either Price risk
management assets or Price risk management liabilities on our Consolidated Balance Sheets. At
December&nbsp;31, 2006, the fair value of derivative contracts associated with our equity investments
was included in Investments &#151; Enterprises on our Consolidated Balance Sheets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>CMS ERM Contracts: </B>CMS ERM enters into and owns energy contracts that support CMS Energy&#146;s ongoing
operations. CMS ERM holds certain contracts for the future purchase and sale of natural gas and
electricity that will result in physical delivery of the commodity at contractual prices. These
forward contracts are generally long-term in nature and are classified as non-trading. CMS ERM
also uses various financial instruments, including swaps, options, and futures, to manage commodity
price risks associated with its forward purchase and sale contracts and with generation assets
owned by CMS Energy or its subsidiaries. These financial contracts are classified as trading
activities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In accordance with SFAS No.&nbsp;133, non-trading and trading contracts that qualify as derivatives are
recorded at fair value on our Consolidated Balance Sheets. The resulting assets and liabilities
are marked to market each quarter, and changes in fair value are recorded in earnings as a
component of Operating Revenue. For trading contracts, these gains and losses are recorded net in
accordance with
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-67<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">EITF Issue No.&nbsp;02-03. Contracts that do not meet the definition of a derivative are accounted for
as executory contracts (that is, on an accrual basis).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Derivative Contracts Associated with Equity Investments: </B>In May&nbsp;2007, we sold our ownership
interest in businesses in the Middle East, Africa, and India. Certain of these businesses held:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>interest rate contracts that hedged the risk associated with variable-rate debt, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>foreign exchange contracts that hedged the foreign currency risk associated with
payments to be made under operating and maintenance service agreements.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Before the sale, we recorded our proportionate share of the change in fair value of these contracts
in AOCL if the contracts qualified for cash flow hedge accounting; otherwise, we recorded our share
in Earnings from Equity Method Investees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At the date of the sale, we had accumulated a net loss of $13&nbsp;million, net of tax, in AOCL
representing our proportionate share of mark-to-market gains and losses from cash flow hedges held
by the equity method investees. After the sale, we reclassified this amount and recognized it in
earnings as a reduction of the gain on the sale. For additional details on the sale of our
interest in these equity method investees, see Note 2, Asset Sales, Discontinued Operations and
Impairment Charges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Credit Risk</B>: Our swaps, options, and forward contracts contain credit risk, which is the risk that
counterparties will fail to perform their contractual obligations. We reduce this risk through
established credit policies. For each counterparty, we assess credit quality by using credit
ratings, financial condition, and other available information. We then establish a credit limit
for each counterparty based upon our evaluation of credit quality. We monitor the degree to which
we are exposed to potential loss under each contract and take remedial action, if necessary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">CMS ERM enters into contracts primarily with companies in the electric and gas industry. This
industry concentration may have an impact on our exposure to credit risk, either positively or
negatively, based on how these counterparties are affected by similar changes in economic
conditions, the weather, or other conditions. CMS ERM typically uses industry-standard agreements
that allow for netting positive and negative exposures associated with the same counterparty,
thereby reducing exposure. These contracts also typically provide for the parties to demand
adequate assurance of future performance when there are reasonable grounds for doing so.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table illustrates our exposure to potential losses at September&nbsp;30, 2007, if each
counterparty within this industry concentration failed to perform its contractual obligations.
This table includes contracts accounted for as financial instruments. It does not include trade
accounts receivable, derivative contracts that qualify for the normal purchases and sales exception
under SFAS No.&nbsp;133, or other contracts that are not accounted for as derivatives.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3" style="border-bottom: 1px solid #ffffff">In Millions</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Net Exposure from</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Net Exposure from</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Exposure Before</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Collateral</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Investment Grade</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Investment Grade</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Collateral (a)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Held</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Net Exposure</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Companies</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Companies (%)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CMS ERM</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">80</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(a)</TD>
    <TD>&nbsp;</TD>
<TD>Exposure is reflected net of payables or derivative liabilities if netting arrangements exist.</td>
</tr>
</table>
</div>
<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-68<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Based on our credit policies, our current exposures, and our credit reserves, we do not expect a
material adverse effect on our financial position or future earnings as a result of counterparty
nonperformance.
</DIV>
<DIV align="left">
<A name="115"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>7: </B><FONT style="font-variant: SMALL-CAPS"><B>Retirement Benefits</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We provide retirement benefits to our employees under a number of different plans, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a non-contributory, defined benefit Pension Plan,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a cash balance Pension Plan for certain employees hired between July&nbsp;1, 2003 and August
31, 2005,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a DCCP for employees hired on or after September&nbsp;1, 2005,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>benefits to certain management employees under SERP,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a defined contribution 401(k) Savings Plan,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>benefits to a select group of management under the EISP, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>health care and life insurance benefits under OPEB.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Pension Plan: </I>The Pension Plan includes funds for most of our current employees, the employees of
our subsidiaries, and Panhandle, a former subsidiary. The Pension Plan&#146;s assets are not
distinguishable by company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In April&nbsp;2007, we sold Palisades to Entergy. Employees transferred to Entergy as a result of the
sale no longer participate in our retirement benefit plans. We recorded a net reduction of $22
million in pension SFAS No.&nbsp;158 regulatory assets with a corresponding decrease of $22&nbsp;million in
pension liabilities on our Consolidated Balance Sheets. We also recorded a net reduction of $15
million in OPEB regulatory SFAS No.&nbsp;158 assets with a corresponding decrease of $15&nbsp;million in OPEB
liabilities. The following table shows the net adjustment:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Pension</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">OPEB</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Plan liability transferred to Entergy</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Trust assets transferred to Entergy</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Beginning May&nbsp;1, 2007, the CMS Energy Common Stock Fund is no longer an investment option available
for new investments in the 401(k) Savings Plan and the employer&#146;s match is no longer in CMS Energy
Stock. Participants have an opportunity to reallocate investments in the CMS Energy Stock Fund to
other plan investment alternatives. Beginning November&nbsp;1, 2007, any remaining shares in the CMS
Energy Stock Fund will be sold and the sale proceeds will be reallocated to other plan investment
options. At September&nbsp;30, 2007, there were 7&nbsp;million shares of CMS Energy Common Stock in the CMS
Energy Stock Fund.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>SFAS No.&nbsp;158, Employers&#146; Accounting for Defined Benefit Pension and Other Postretirement Plans &#151; an
amendment of FASB Statements No.&nbsp;87, 88, 106, and 132(R): </I>In September&nbsp;2006, the FASB issued SFAS
No.&nbsp;158. Phase one of this standard required us to recognize the funded status of our defined
benefit postretirement plans on our Consolidated Balance Sheets at December&nbsp;31, 2006. Phase one
was implemented in December&nbsp;2006. Phase two of this standard requires that we change our plan
measurement date from November&nbsp;30 to December&nbsp;31, effective December&nbsp;31, 2008. We do not believe
that implementation of phase two of this standard will have a material effect on our consolidated
financial statements. We expect to adopt the measurement date provisions of SFAS No.&nbsp;158 in 2008.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-69<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Costs: </I>The following table recaps the costs, other changes in plan assets, and benefit obligations
incurred in our retirement benefits plans:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="16" style="border-bottom: 1px solid #ffffff">In Millions</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #ffffff">Pension</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="RIGHT" colspan="6" style="border-bottom: 1px solid #ffffff">Three Months Ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="RIGHT" colspan="6" style="border-bottom: 1px solid #ffffff">Nine Months Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected return on plan assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(19</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(20</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(59</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(63</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prior service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net periodic cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Regulatory adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(14</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net periodic cost after regulatory adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">65</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="16" style="border-bottom: 1px solid #ffffff">In Millions</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #ffffff">OPEB</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #ffffff">Three Months Ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #ffffff">Nine Months Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected return on plan assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(14</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(47</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(43</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prior service credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net periodic cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Regulatory adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net periodic cost after regulatory adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD style="border-top: 3px double #000000">&nbsp;</TD>
    <TD style="border-top: 3px double #000000">&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<A name="116"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>8: </B><FONT style="font-variant: SMALL-CAPS"><B>Income taxes</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The principal components of deferred tax assets (liabilities)&nbsp;recognized on our Consolidated
Balance Sheets both before and after the adoption of FIN 48 are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="8">In Millions</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">January 1, 2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">December 31, 2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(592</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(790</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Securitized costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(177</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(177</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Employee benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gas inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(168</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(168</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax loss and credit carryforwards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">867</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SFAS No.&nbsp;109 regulatory liabilities, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">189</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign investments inflation indexing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Valuation allowances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(216</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(116</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">106</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred tax assets (liabilities)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(37</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD style="border-top: 3px double #000000">&nbsp;</TD>
    <TD style="border-top: 3px double #000000">&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a result of the implementation of FIN 48, we have identified additional uncertain tax benefits
of $11&nbsp;million as of January&nbsp;1, 2007. Included in this amount is an increase in our valuation
allowance of
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-70<!-- /Folio -->
</DIV>



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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">$100&nbsp;million, decreases to tax reserves of $61&nbsp;million and a decrease to deferred tax liabilities
of $28&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">CMS Energy and its subsidiaries file a consolidated U.S. federal income tax return as well as
unitary and combined income tax returns in several states. CMS Energy and its subsidiaries also
file separate company income tax returns in several states. The only significant state tax paid by
CMS Energy is in Michigan. However, since the Michigan Single Business Tax is not an income tax,
it is not part of the FIN 48 analysis. For the U.S. federal income tax return, CMS Energy
completed examinations by federal taxing authorities for its taxable years prior to 2002. The
federal income tax returns for the years 2002 through 2005 are open under the statute of
limitations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We reflected a net interest liability of $3&nbsp;million related to our uncertain income tax positions
on our Consolidated Balance Sheets as of January&nbsp;1, 2007. We have not accrued any penalties with
respect to uncertain tax benefits. We recognize accrued interest and penalties, where applicable,
related to uncertain tax benefits as part of income tax expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of the date of adoption of FIN 48, we had valuation allowances against certain U.S. and foreign
deferred tax assets totaling $216&nbsp;million and other uncertain tax positions of $31&nbsp;million,
resulting in total unrecognized benefits of $247&nbsp;million. Of this amount, $217&nbsp;million would
result in a decrease in our effective tax rate, if recognized. We released $81&nbsp;million of our
valuation allowance in the first quarter of 2007, reducing our effective tax rate, due to the
anticipated sales of our foreign investments. During the second quarter we reduced deferred tax
assets and related valuation allowances attributable to sold foreign assets by $63&nbsp;million each.
This reduction had no income impact. As we continue to market our foreign investments, it is
reasonably possible that additional valuation allowance adjustments could be made over the next 12
months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The actual income tax benefit on continuing operations differs from the amount computed by applying
the statutory federal tax rate of 35&nbsp;percent to loss before income taxes as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="8">In Millions</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Nine Months Ended September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(62</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(230</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Statutory federal income tax rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="right">x 35</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="right">x 35</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected income tax benefit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(22</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(81</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase (decrease)&nbsp;in taxes from:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Property differences</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income tax effect of foreign investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(20</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income tax credit amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Medicare Part D exempt income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tax exempt income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(82</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tax contingency reserves</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(15</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">IRS settlement/credit restoration</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(49</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Recorded income benefit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(58</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(148</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effective tax rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">94</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">64</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">U.S. income taxes were not recorded on the undistributed earnings of foreign subsidiaries that had
been or were intended to be reinvested indefinitely. Upon distribution, those earnings would
likely be subject to both U.S. income taxes (adjusted for foreign tax credits or deductions) and
withholding taxes payable to various foreign countries. During the first quarter of 2007, we
announced we had signed
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-71<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">agreements or plans to sell substantially all of our foreign assets or subsidiaries. These
anticipated sales resulted in the recognition in 2007 of $71&nbsp;million of U.S. income tax expense
associated with the change in our determination of our permanent reinvestment of these
undistributed earnings, with $46&nbsp;million of this amount reflected in income from continuing
operations and $25&nbsp;million in discontinued operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Michigan Business Tax Act: </I>In July&nbsp;2007, the Michigan governor signed Senate Bill 94, the Michigan
Business Tax Act, which imposes a business income tax of 4.95&nbsp;percent and a modified gross receipts
tax of 0.8&nbsp;percent. The bill provides for a number of tax credits and incentives geared toward
those companies investing and employing in Michigan. The Michigan Business Tax, which is effective
January&nbsp;1, 2008, replaces the state&#146;s current Single Business Tax that expires on December&nbsp;31,
2007. In September&nbsp;2007, the Michigan governor signed House Bill 5104, allowing additional
deductions in future years against the business income portion of the tax. These future deductions
are phased in over a 15-year period, beginning in 2015. As a result of the enactment of this tax,
we recorded, on a consolidated basis, a net deferred tax liability of $113&nbsp;million completely
offset by a net deferred tax asset of $113&nbsp;million.
</DIV>
<DIV align="left">
<A name="117"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>9: </B><FONT style="font-variant: SMALL-CAPS"><B>Asset Retirement Obligations</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>SFAS No.&nbsp;143, Accounting for Asset Retirement Obligations</I></B><B>: </B>This standard requires companies to
record the fair value of the cost to remove assets at the end of their useful life, if there is a
legal obligation to remove them. Fair value, to the extent possible, should include a market risk
premium for unforeseeable circumstances. No market risk premium was included in our ARO fair value
estimate since a reasonable estimate could not be made. If a five percent market risk premium were
assumed, our ARO liability would increase by $5&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If a reasonable estimate of fair value cannot be made in the period in which the ARO is incurred,
such as for assets with indeterminate lives, the liability is to be recognized when a reasonable
estimate of fair value can be made. Generally, electric and gas transmission and distribution
assets have indeterminate lives. Retirement cash flows cannot be determined and there is a low
probability of a retirement date. Therefore, no liability has been recorded for these assets or
associated obligations related to potential future abandonment. Also, no liability has been
recorded for assets that have insignificant cumulative disposal costs, such as substation
batteries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>FASB Interpretation No.&nbsp;47, </B><B><I>Accounting for Conditional Asset Retirement Obligations: </I></B>This
Interpretation clarified the term &#147;conditional asset retirement obligation&#148; as used in SFAS No.
143. The term refers to a legal obligation to perform an asset retirement activity in which the
timing and (or)&nbsp;method of settlement are conditional on a future event. We determined that
abatement of asbestos included in our plant investments qualifies as a conditional ARO, as defined
by FIN 47.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-72<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following tables describe our assets that have legal obligations to be removed at the end of
their useful life:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #ffffff">September 30, 2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">In Millions</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3">In Service</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">Trust</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">ARO Description</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3">Date</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Long-Lived Assets</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">Fund</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Palisades-decommission plant site
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">1972</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD align="left" valign="top">Palisades nuclear plant
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$&nbsp;&#151;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Big Rock-decommission plant site
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">1962</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD align="left" valign="top">Big Rock nuclear plant
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">JHCampbell intake/discharge water line
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">1980</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD align="left" valign="top">Plant intake/discharge water line
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Closure of coal ash disposal areas
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="right" valign="top">Various
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Generating plants coal ash areas
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Closure of wells at gas storage fields
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="right" valign="top">Various
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Gas storage fields
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Indoor gas services equipment <BR>
relocations
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="right" valign="top">Various
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Gas meters located inside structures
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Asbestos abatement
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">1973</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD align="left" valign="top">Electric and gas utility plant
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Natural gas-fired power plant
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">1997</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD align="left" valign="top">Gas fueled power plant
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Close gas treating plant and gas wells
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="right" valign="top">Various
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Gas transmission and storage
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" valign="top" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="24">In Millions</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">ARO</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">ARO</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Liability</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Cash flow</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Liability</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">ARO Description</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">12/31/06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Incurred</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Settled (a)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Accretion</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Revisions</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">9/30/07</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Palisades &#151; decommission</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(410</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Big Rock &#151; decommission</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">JHCampbell intake line</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Coal ash disposal areas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Wells at gas storage fields</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Indoor gas services relocations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Asbestos abatement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natural gas-fired power plant</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Close gas treating plant and gas wells</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">         2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="23" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">500</TD>
    <TD nowrap>(a)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(419</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">97</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(a)&nbsp;$2&nbsp;million in ARO liabilities moved to Noncurrent liabilities held for sale on our Consolidated
Balance Sheets at December&nbsp;31, 2006. These AROs were subsequently settled as a result of the sale
of our businesses in Argentina and our northern Michigan non-utility natural gas assets to Lucid
Energy. Cash payments of $4&nbsp;million are included in the Other current and non-current liabilities
line in Net cash provided by operating activities in our Consolidated Statements of Cash Flows. In
April&nbsp;2007, we sold Palisades to Entergy and paid Entergy to assume ownership and responsibility
for the Big Rock ISFSI. Our AROs related to Palisades and the Big Rock ISFSI ended with the sale
and the related ARO liabilities were removed from our Consolidated Balance Sheets. We also removed
the Big Rock ARO related to the plant in the second quarter of 2007 due to the completion of
decommissioning.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In October&nbsp;2004, the MPSC initiated a generic proceeding to review SFAS No.&nbsp;143, FERC Order No.
631, Accounting, Financial Reporting, and Rate Filing Requirements for Asset Retirement
Obligations, and related accounting and ratemaking issues for MPSC-jurisdictional electric and gas
utilities. In June&nbsp;2007, the MPSC issued an order that requires:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the MPSC Staff to advise the MPSC whether there are any FERC accounts, rules or
procedures that should be adopted by reference or changed, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the use of a revised calculation for cost of removal estimates derived from applying
SFAS No.&nbsp;143, which includes the use of standard retirement units.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-73<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We will also be required to file a new gas depreciation study by August&nbsp;1, 2008, using 2007 removal
costs as the basis for the calculation, and a new electric depreciation study by August&nbsp;3, 2009,
using 2008 removal costs as the basis for the calculation.
</DIV>
<DIV align="left">
<A name="118"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>10: </B><FONT style="font-variant: SMALL-CAPS"><B>Equity Method Investments</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Where ownership is more than 20&nbsp;percent but less than a majority, we account for certain
investments in other companies, partnerships, and joint ventures by the equity method of
accounting. Earnings from equity method investments were less than $1&nbsp;million for the three months
ended September&nbsp;30, 2007 and $19&nbsp;million for the three months ended September&nbsp;30, 2006. Earnings
from equity method investments were $36&nbsp;million for the nine months ended September&nbsp;30, 2007 and
$63&nbsp;million for the nine months ended September&nbsp;30, 2006. The amount of consolidated retained
earnings that represent undistributed earnings from these equity method investments were $21
million as of September&nbsp;30, 2007. As of September&nbsp;30, 2006, there were no undistributed earnings
from our equity method investments. The most significant of these investments was our 50&nbsp;percent
interest in Jorf Lasfar, which was sold in May&nbsp;2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Summarized Income Statement Data for Jorf Lasfar is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="16" style="border-bottom: 1px solid #ffffff">In Millions</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #ffffff">Three Months Ended</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #ffffff">Nine Months Ended</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007 (a)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007 (a)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">164</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">355</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">235</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other expense, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">78</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 3pt">
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR>    <TD>&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>Jorf Lasfar was sold May&nbsp;2, 2007. The summarized income statement data in the table is
comprised of Jorf Lasfar&#146;s financial information through April&nbsp;30, 2007.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-74<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="left">
<A name="119"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>11: </B><FONT style="font-variant: SMALL-CAPS"><B>Reportable Segments</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our reportable segments consist of business units organized and managed by the nature of products
and services each provides. We evaluate performance based upon the net income of each segment. We
operate principally in three reportable segments: electric utility, gas utility, and enterprises.
&#147;Other&#148; includes corporate interest and other expenses and benefits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following tables show our financial information by reportable segment:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="16" style="border-bottom: 1px solid #ffffff">In Millions</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #ffffff">Three Months Ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #ffffff">Nine Months Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Electric utility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">976</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,663</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,496</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gas utility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">201</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,576</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Enterprises</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">303</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">323</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Operating Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,288</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,404</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Income (Loss) Available
to Common Stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Electric utility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">159</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gas utility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(20</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Enterprises</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(133</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(173</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(215</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(87</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(35</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(54</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(51</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(48</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Net Income (Loss)
Available to Common
Stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(103</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(100</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(58</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="9">In Millions</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">September 30, 2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">December 31, 2006</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Electric utility (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,516</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gas utility (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,950</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Enterprises (b)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">925</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,947</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">958</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">14,304</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">15,371</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 3pt">
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR>    <TD>&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>Amounts include a portion of Consumers&#146; other common assets attributable to both the
electric and gas utility businesses.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(b)</TD>
    <TD>&nbsp;</TD>
    <TD>There were no assets classified as held for sale at September&nbsp;30, 2007 and $651&nbsp;million
at December&nbsp;31, 2006.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2006 amounts have been reclassified to reflect CMS Capital, LLC results in the Corporate
Interest and Other segment.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CMS-75<!-- /Folio -->
</DIV>



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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><I>Consumers
Energy Company</I>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><FONT style="font-size:14pt"><FONT style="font-variant: SMALL-CAPS"><B>Consumers Energy Company</B></FONT></FONT><BR>
<FONT style="font-size:12pt"><FONT style="font-variant: SMALL-CAPS"><B>Management&#146;s Discussion and Analysis</B></FONT></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In this MD&#038;A, Consumers Energy, which includes Consumers Energy Company and all of its
subsidiaries, is at times referred to in the first person as &#147;we,&#148; &#147;our&#148; or &#147;us.&#148; This MD&#038;A has
been prepared in accordance with the instructions to Form 10-Q and Item&nbsp;303 of Regulation&nbsp;S-K.
This MD&#038;A should be read in conjunction with the MD&#038;A contained in Consumers Energy&#146;s Form 10-K for
the year ended December&nbsp;31, 2006.
</DIV>
<DIV align="left">
<A name="143"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Forward-looking statements and information</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This Form 10-Q and other written and oral statements that we make contain forward-looking
statements as defined by the Private Securities Litigation Reform Act of 1995. Our intention with
the use of words such as &#147;may,&#148; &#147;could,&#148; &#147;anticipates,&#148; &#147;believes,&#148; &#147;estimates,&#148; &#147;expects,&#148;
&#147;intends,&#148; &#147;plans,&#148; and other similar words is to identify forward-looking statements that involve
risk and uncertainty. We designed this discussion of potential risks and uncertainties to
highlight important factors that may impact our business and financial outlook. We have no
obligation to update or revise forward-looking statements regardless of whether new information,
future events, or any other factors affect the information contained in the statements. These
forward-looking statements are subject to various factors that could cause our actual results to
differ materially from the results anticipated in these statements. Such factors include our
inability to predict and (or)&nbsp;control:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the price of CMS Energy Common Stock, capital and financial market conditions, and the
effect of such market conditions on the Pension Plan, interest rates, and access to the
capital markets, including availability of financing to Consumers, CMS Energy, or any of
their affiliates, and the energy industry,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>market perception of the energy industry, Consumers, CMS Energy, or any of their
affiliates,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>factors affecting utility and diversified energy operations, such as unusual weather
conditions, catastrophic weather-related damage, unscheduled generation outages,
maintenance or repairs, environmental incidents, or electric transmission or gas pipeline
system constraints,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the impact of possible regulations or laws regarding carbon dioxide and other greenhouse
gas emissions,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>national, regional, and local economic, competitive, and regulatory policies,
conditions and developments,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>adverse regulatory or legal decisions, including those related to environmental laws
and regulations, and potential environmental remediation costs associated with such
decisions,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>potentially adverse regulatory treatment and
(or)&nbsp;regulatory delay or failure to receive timely
regulatory orders concerning a number of significant questions presently or potentially
before the MPSC, including:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>recovery of Clean Air Act capital and operating costs and other environmental
and safety-related expenditures,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>recovery of power supply and natural gas supply costs,</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->CE-1<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><I>Consumers
Energy Company</I>
</DIV>


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>timely recognition in rates of additional equity investments in Consumers,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>adequate and timely recovery of additional electric and gas rate-based
investments,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>adequate and timely recovery of higher MISO energy and transmission costs,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>recovery of Stranded Costs incurred due to customers choosing alternative
energy suppliers,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>recovery of Palisades sale-related costs,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>approval of Zeeland power plant purchase costs, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>approval of a new clean coal plant,</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the effects on our ability to purchase capacity to serve our customers and fully
recover the cost of these purchases, if the owners of the MCV Facility exercise their right
to terminate the MCV PPA,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to utilize our regulatory out rights as it
pertains to the MCV PPA,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to recover Big Rock decommissioning funding shortfalls and nuclear fuel
storage costs due to the DOE&#146;s failure to accept spent nuclear fuel on schedule, including the outcome of pending litigation with the DOE,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>federal regulation of electric sales and transmission of electricity, including
periodic re-examination by federal regulators of our market-based sales authorizations in
wholesale power markets without price restrictions,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>energy markets, including availability of capacity and the timing and extent of changes
in commodity prices for oil, coal, natural gas, natural gas liquids, electricity and
certain related products due to lower or higher demand, shortages, transportation problems,
or other developments,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to collect accounts receivable from our customers,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>earnings volatility as a result of the GAAP requirement that we utilize mark-to-market
accounting on certain energy commodity contracts and interest rate swaps, which may have,
in any given period, a significant positive or negative effect on earnings, which could
change dramatically or be eliminated in subsequent periods,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the effect on our utility and utility revenues of the direct and indirect impacts of the continued economic
downturn experienced by the Michigan economy,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>potential disruption or interruption of facilities or operations due to accidents, war,
terrorism, or changing political environment, and the ability to obtain or maintain
insurance coverage for such events,</TD>
</TR>


<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>technological developments in energy production, delivery, and usage,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>achievement of capital expenditure and operating expense goals,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in financial or regulatory accounting principles or policies,
</TD>
</TR>
</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->CE-2<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><I>Consumers
Energy Company</I>
</DIV>

<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in domestic or foreign tax laws or new IRS or foreign governmental
interpretations of
existing or past tax laws,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in federal or state regulations or laws that could have an impact on our business,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>outcome, cost, and other effects of legal or administrative proceedings, settlements,
investigations or claims,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>disruptions in the normal commercial insurance and surety bond markets that may
increase costs or reduce traditional insurance coverage, particularly terrorism and
sabotage insurance and performance bonds,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>credit ratings of Consumers, CMS Energy, or any of their affiliates,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>other business or investment considerations that may be disclosed from time to time in
Consumers&#146; or CMS Energy&#146;s SEC filings, or in other publicly issued written documents, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>other uncertainties that are difficult to predict, many of which are beyond our
control.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For additional information regarding these and other uncertainties, see the &#147;Outlook&#148; section
included in this MD&#038;A, Note 3, Contingencies, and Part&nbsp;II, Item&nbsp;1A. Risk Factors.<BR>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->CE-3<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="144"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Executive Overview</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Consumers, a subsidiary of CMS Energy, a holding company, is a combination electric and gas utility
company serving in Michigan&#146;s Lower Peninsula. Our customer base includes a mix of residential,
commercial, and diversified industrial customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We manage our business by the nature of services each provides and operate principally in two
business segments: electric utility and gas utility. Our electric utility operations include the
generation, purchase, distribution, and sale of electricity. Our gas utility operations include
the purchase, transportation, storage, distribution, and sale of natural gas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We earn our revenue and generate cash from operations by providing electric and natural gas utility
services, electric power generation, gas distribution, transmission, and storage, and other energy
related services. Our businesses are affected primarily by:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>weather, especially during the normal heating and cooling seasons,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>economic conditions,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>regulation and regulatory issues,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>energy commodity prices,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>interest rates, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our debt credit rating.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the past several years, our business strategy has involved improving our consolidated
balance sheet and maintaining focus on our core strength: utility operations and service.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In April&nbsp;2007, we sold Palisades to Entergy for $380&nbsp;million. The final purchase price, subject to
various closing adjustments, resulted in us receiving $363&nbsp;million as of September&nbsp;30, 2007. We
also paid Entergy $30&nbsp;million to assume ownership and responsibility for the Big Rock ISFSI. We
entered into a 15-year power purchase agreement with Entergy for 100&nbsp;percent of the plant&#146;s current
electric output. The sale resulted in an immediate improvement in our cash flow, a reduction in
our nuclear operating and decommissioning risk, and an improvement in our financial flexibility to
support other utility investments. The MPSC order approving the
transaction requires that we credit $255&nbsp;million to our retail customers from June&nbsp;2007 through December&nbsp;2008. As of September&nbsp;30,
2007, there are additional excess sales proceeds and decommissioning fund balances of $134&nbsp;million
above the amount in the MPSC order. The distribution of these additional amounts has not yet been
addressed by the MPSC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In September&nbsp;2007, we claimed relief under the regulatory-out provision in the MCV PPA, thereby
limiting our capacity and fixed energy payments to the MCV Partnership to the amounts that we
collect from our customers. As a result of our exercise of the regulatory-out provision, the MCV
Partnership may, under certain circumstances, have the right to terminate or reduce the amount of
capacity sold under the MCV PPA, which could affect our need to build or purchase additional
generating capacity. The MCV Partnership has notified us that it
disputes our right to exercise the regulatory-out provision.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We introduced our Balanced Energy Initiative, a comprehensive plan to meet customer energy needs
over the next 20&nbsp;years, in May&nbsp;2007. The plan, as filed with the MPSC, is designed to meet the
growing customer demand for electricity with energy efficiency,
demand management, expansion of the use of renewable energy, and development of new power plants to complement existing generating sources.
In September&nbsp;2007, we filed the second phase of our Balanced Energy Initiative with the MPSC,
which contains our plan for construction of a new 800 MW clean coal plant at an existing site
located near Bay
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->CE-4<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">City, Michigan. Our plan calls for 500 MW of the plant&#146;s output to be used for our customers in
Michigan and to commit the remaining 300 MW to others. We expect the plant to enter operation in 2015 with our
share of the cost estimated at $1.3&nbsp;billion excluding financing costs and $1.6&nbsp;billion with
financing costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In May&nbsp;2007, we entered an agreement to buy a 946 MW natural gas-fired power plant located in
Zeeland, Michigan from Broadway Gen Funding LLC, an affiliate of LS Power Group, for $517&nbsp;million.
We expect to close by early 2008, subject to approval from the MPSC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the future, we will continue to focus on:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>investing in our utility system to enable us to meet our customer commitments, comply
with increasing environmental performance standards, improve system performance, and
maintain adequate supply and capacity,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>growing earnings while controlling operating and fuel costs,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>managing cash flow issues, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>principles of safe, efficient operations, customer value, fair and timely regulation,
and consistent financial performance.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As we execute our strategy, we will need to overcome a sluggish Michigan economy that has been
hampered by negative developments in Michigan&#146;s automotive industry and limited growth in the
non-automotive sectors of the state&#146;s economy.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CE-5<!-- /Folio -->
</DIV>




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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="145"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Results of Operations</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NET INCOME AVAILABLE TO COMMON STOCKHOLDER</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Three months ended September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Change</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Electric</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(26</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other (Includes the MCV Partnership and FMLP interests)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(25</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income available to common stockholder</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(39</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the three months ended September&nbsp;30, 2007, net income available to our common stockholder was
$60&nbsp;million, compared to $99&nbsp;million for the three months ended September&nbsp;30, 2006. The decrease
primarily reflects a decrease in electric net income due to the sale of Palisades in April&nbsp;2007.
As a result of the sale of Palisades, electric revenue related to the recovery of Palisades and Big
Rock costs has been used to offset costs incurred under our power purchase agreement with Entergy.
Also contributing to the decrease was the absence, in 2007, of the recognition of a property tax
refund. Partially offsetting these decreases was lower nuclear operating and maintenance costs due
to the sale of Palisades.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Specific changes to net income available to our common stockholder for 2007 versus 2006 are:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="87%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3">In Millions</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="7" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">decrease in general taxes primarily due to absence, in 2007, of a property tax
refund at the MCV Partnership,
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom">(32</TD>
    <TD nowrap valign="bottom">)</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">decrease due to electric revenue being used to offset costs incurred under our power
purchase agreement with Entergy,
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">(32</TD>
    <TD nowrap valign="bottom">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">other net decreases,
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">(7</TD>
    <TD nowrap valign="bottom">)</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">lower nuclear operating and maintenance costs,
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">21</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">increase in gas delivery revenue primarily due to the MPSC&#146;s November&nbsp;2006 and August
2007 gas rate orders, and
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">8</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">increase in gas delivery revenue primarily due to higher estimated system efficiency.
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">3</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="7" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Total Change
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom">(39</TD>
    <TD nowrap valign="bottom">)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="7" valign="top" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CE-6<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Nine months ended September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Change</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Electric</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other (Includes the MCV Partnership and FMLP interests)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(29</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income available to common stockholder</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">72</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the nine months ended September&nbsp;30, 2007, net income available to our common stockholder was
$216&nbsp;million, compared to $144&nbsp;million for the nine months ended September&nbsp;30, 2006. The increase
primarily reflects the sale of our ownership interest in the MCV Partnership in late 2006.
Accordingly, in 2007, we are no longer experiencing mark-to-market losses on certain long-term gas
contracts and associated financial hedges at the MCV Partnership. The increase also reflects
higher net income from our electric and gas utilities due to higher, weather-driven sales caused by
favorable weather compared to 2006, and gas rate increases authorized in November&nbsp;2006 and August
2007. Partially offsetting these gains was a decrease in electric net income due to the sale of
Palisades in April&nbsp;2007. As a result of the sale of Palisades, electric revenue related to the
recovery of Palisades and Big Rock costs has been used to offset costs incurred under our power
purchase agreement with Entergy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Specific changes to net income available to our common stockholder for 2007 versus 2006 are:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="87%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3">In Millions</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="7" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">lower nuclear operating and maintenance costs,
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom">46</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">increase in gas delivery revenue primarily due to the MPSC&#146;s November&nbsp;2006 and August
2007 gas rate orders,
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">37</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">decrease in losses from our ownership interest in the MCV Partnership primarily due to
the absence, in 2007, of mark-to-market losses on certain long-term gas contracts and
financial hedges, and a property tax refund,
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">34</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">increase in electric revenue primarily due to favorable weather and higher surcharge
revenue,
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">24</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">increase in gas delivery revenue primarily due to favorable
weather,

</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">14</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">decrease due to electric revenue
being used to offset costs incurred under our power purchase agreement with Entergy,
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">(59</TD>
    <TD nowrap valign="bottom">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">increase in general taxes,
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">(13</TD>
    <TD nowrap valign="bottom">)</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">increase in income taxes, primarily due to the absence of IRS income tax benefits, and
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">(7</TD>
    <TD nowrap valign="bottom">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><B>&#149;</B></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">other net decreases.
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">(4</TD>
    <TD nowrap valign="bottom">)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="7" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Total Change
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom">72</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="7" valign="top" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CE-7<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ELECTRIC UTILITY RESULTS OF OPERATIONS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Change</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Three months ended</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(26</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nine months ended</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Three Months Ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Nine Months Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">September 30, 2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">September 30, 2007</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Reasons for the change:</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">vs. 2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">vs. 2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Electric deliveries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Surcharge revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Palisades revenue to PSCR</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(50</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(91</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Power supply costs and related revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other operating expenses, other income, and
non-commodity revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">General taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest charges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total change</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(26</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">
<B>Electric deliveries: </B>For the three months ended September&nbsp;30, 2007, electric delivery revenues
decreased $6&nbsp;million versus 2006, as deliveries to end-use customers were 10.5&nbsp;billion kWh, a
decrease of less than 0.1&nbsp;billion kWh or less than
1&nbsp;percent versus 2006. The decrease in electric
deliveries for the three months ended September&nbsp;30, 2007 is primarily due to unfavorable weather.
For the nine months ended September&nbsp;30, 2007, electric delivery revenues increased $26&nbsp;million
versus 2006, as deliveries to end-use customers were 29.5&nbsp;billion kWh, an increase of 0.5&nbsp;billion
kWh or 2&nbsp;percent versus 2006. The increase in electric deliveries for the nine months ended
September&nbsp;30, 2007 is primarily due to favorable weather.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">
<B>Surcharge revenue</B>: In the first quarter of 2006, we started collecting a surcharge that the MPSC
authorized under Section&nbsp;10d(4) of the Customer Choice Act. The
surcharge factors increased in January 2007 pursuant to a MPSC order.
 The increase in the surcharge factors increased electric
delivery revenue by $3&nbsp;million for the three months ended September&nbsp;30, 2007 and $11&nbsp;million for
the nine months ended September&nbsp;30, 2007 versus 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">
<B>Palisades revenue to PSCR: </B>As a result of the sale of Palisades, electric revenue of $50&nbsp;million
for the three months ended September&nbsp;30, 2007 and $91&nbsp;million for the nine months ended September
30, 2007, related to Palisades rate base is now designated toward recovery of PSCR costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Power supply costs and related revenue: </B>PSCR revenue decreased by $6&nbsp;million for the three months
ended September&nbsp;30, 2007 and $18&nbsp;million for the nine months ended September&nbsp;30, 2007 versus 2006.
These decreases primarily reflect amounts excluded from recovery in the 2006 PSCR Reconciliation
case. A portion of these excluded costs are instead being recovered through Electric Delivery
Revenue. The decrease also reflects the absence, in 2007, of an increase in Power Supply Revenue
associated with the 2005 PSCR Reconciliation case.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Other operating expenses, other income and non-commodity revenue: </B>For the three months ended
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CE-8<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">September&nbsp;30, 2007, other operating expenses decreased $30&nbsp;million, other income increased $10
million,
and non-commodity revenue decreased $7&nbsp;million versus 2006. For the nine months ended September
30, 2007, other operating expenses decreased $79&nbsp;million, other income increased $26&nbsp;million, and
non-commodity revenue decreased $8&nbsp;million versus 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The decrease in other operating expenses was primarily due to lower operating and maintenance
expense, including reductions to certain workers&#146; compensation and injuries and damages expense.
These decreases were offset partially by higher depreciation and amortization expense. Operating
and maintenance expense decreased primarily due to the absence, in 2007, of costs incurred in 2006
related to a planned refueling outage at Palisades, and lower overhead line maintenance, and storm
restoration costs. Also contributing to the decrease was the sale of Palisades in April&nbsp;2007.
Depreciation and amortization expense increased due to higher non-nuclear plant in service and
greater amortization of certain regulatory assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the three months ended September&nbsp;30, 2007, the increase in other income was primarily due to
higher interest income mainly due to the proceeds from the sale of Palisades and equity infusions
from the parent. For the nine months ended September&nbsp;30, 2007, the increase in other income was
primarily due to higher interest income and higher income associated with our Section&nbsp;10d(4)
Regulatory Asset. The increase on our Section&nbsp;10d(4) Regulatory Asset reflects the absence, in
2007, of the impact of the MPSC&#146;s final order in this case.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>General taxes: </B>For the three months ended September&nbsp;30, 2007, general tax expense increased
primarily due to higher property tax and MSBT tax expense. For the nine months ended September&nbsp;30,
2007, general tax expense increased primarily due to higher property tax, sales and use tax
expense, and MSBT tax expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Interest charges: </B>For the three months ended September&nbsp;30, 2007, interest charges increased $7
million versus 2006. For the nine months ended September&nbsp;30, 2007, interest charges increased $13
million versus 2006. The increase was primarily due to interest associated with amounts to be
refunded to customers as a result of the sale of Palisades. The MPSC order approving the Palisades
power purchase agreement with Entergy directed us to record interest on the unrefunded balance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Income taxes: </B>For the three months and nine months ended September&nbsp;30, 2007, income taxes decreased
versus 2006 primarily due to lower earnings.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CE-9<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>GAS UTILITY RESULTS OF OPERATIONS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">

    <TD nowrap align="right" colspan="13" style="border-bottom: 1px solid #000000">In Millions</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Change</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Three months ended</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(20</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nine months ended</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Three Months Ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Nine Months Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">September 30,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">September 30,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Reasons for the change:</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007 vs. 2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007 vs. 2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gas deliveries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gas rate increase</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gas wholesale and retail
services, other gas
revenues and other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operation and maintenance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">General taxes and depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest charges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total change</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Gas deliveries: </B>For the three months ended September&nbsp;30, 2007, gas deliveries decreased less than
1 bcf or 1&nbsp;percent versus 2006. Despite lower gas deliveries, gas delivery revenue increased by $5
million due to higher estimated system efficiency.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the nine months ended September&nbsp;30, 2007, gas delivery revenues increased by $22&nbsp;million
 versus 2006 as gas deliveries, including miscellaneous transportation to end-use customers, were 207 bcf,
an increase of 18 bcf or 9&nbsp;percent. The increase in gas deliveries was primarily due to favorable
weather.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Gas rate increases: </B>In November&nbsp;2006, the MPSC issued an order authorizing an annual rate increase
of $81&nbsp;million. In August&nbsp;2007, the MPSC issued an order authorizing an annual rate increase of
$50&nbsp;million. As a result of these orders, gas revenues increased $11&nbsp;million for the three months
ended September&nbsp;30, 2007 and $56&nbsp;million for the nine months ended September&nbsp;30, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Gas wholesale and retail services, other gas revenues and other income: </B>For the three and nine
months ended September&nbsp;30, 2007, the increase was primarily due to higher pipeline capacity
optimization revenue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Operation and maintenance: </B>For the three months and nine months ended September&nbsp;30, 2007,
operation and maintenance expenses increased versus 2006 primarily due to higher uncollectible
accounts expense and contributions, beginning in November&nbsp;2006 pursuant to a November&nbsp;2006 MPSC
order, to a fund that provides energy assistance to low-income customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>General taxes and depreciation: </B>For the three months ended September&nbsp;30, 2007, depreciation
expense increased versus 2006 primarily due to higher plant in service. The increase in general
taxes primarily reflects higher property tax expense and MSBT tax expense. For the nine months
ended September&nbsp;30, 2007, depreciation expense increased versus 2006 primarily due to higher plant
in service. The increase in general taxes primarily reflects higher property tax expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Interest charges: </B>For the three months and nine months ended September&nbsp;30, 2007, interest charges
reflect lower average debt levels versus 2006.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CE-10<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Income taxes: </B>For the three and nine months ended September&nbsp;30, 2007, income taxes increased
versus 2006 primarily due to higher earnings by the gas utility.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>OTHER RESULTS OF OPERATIONS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">

    <TD nowrap align="right" colspan="13" style="border-bottom: 1px solid #000000">In Millions</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Change</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Three months ended</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(25</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nine months ended</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(29</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the three months ended September&nbsp;30, 2007, net income from other nonutility operations
decreased $25&nbsp;million versus 2006. In late 2006, we sold our ownership interest in the MCV
Partnership. The change in earnings reflects the absence, in 2007, of the recognition of a property
tax refund received in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the nine months ended September&nbsp;30, 2007, net income from other nonutility operations was $5
million, an increase of $34&nbsp;million versus 2006. In late 2006, we sold our ownership interest in
the MCV Partnership. The change in earnings reflects the absence, in 2007, of a $35&nbsp;million loss
related to our ownership interest in the MCV Partnership. The loss in 2006 primarily reflects
mark-to-market losses on certain long-term gas contracts and associated financial hedges.
Partially offsetting this increase is the absence, in 2007, of the recognition of a property tax
refund and the absence, in 2007, of tax benefits associated with the resolution of an IRS income
tax audit.
</DIV>

<DIV align="left">
<A name="146"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Critical Accounting Policies</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following accounting policies are important to an understanding of our results of operations
and financial condition and should be considered an integral part of our MD&#038;A. For additional
accounting policies, see Note 1, Corporate Structure and Accounting Policies.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Use of Estimates and Assumptions</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We use estimates and assumptions in preparing our consolidated financial statements that may affect
reported amounts and disclosures. We use accounting estimates for asset valuations, depreciation,
amortization, financial and derivative instruments, employee benefits, and contingencies. For
example, we estimate the rate of return on plan assets and the cost of future health-care benefits
to determine our annual pension and other postretirement benefit costs. Actual results may differ
from estimated results due to factors such as changes in the regulatory environment, competition,
regulatory decisions, and lawsuits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Contingencies: </B>We are involved in various regulatory and legal proceedings that arise in the
ordinary course of our business. We record a liability for contingencies based upon our assessment
that a loss is probable and the amount of loss can be reasonably estimated. We use the principles
in SFAS No.&nbsp;5 when recording estimated liabilities for contingencies. We consider many factors in
making these assessments, including the history and specifics of each matter. We discuss
significant contingencies in the &#147;Outlook&#148; section included in this MD&#038;A.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->CE-11<!-- /Folio -->
</DIV>



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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Accounting for Financial and Derivative Instruments and Market Risk Information</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Financial Instruments: </B>Debt and equity securities classified as available-for-sale are reported at
fair value determined from quoted market prices. Unrealized gains or losses resulting from changes
in fair value of certain available-for-sale debt and equity securities are reported, net of tax, in
equity as part of AOCI. Unrealized gains or losses are excluded from earnings unless the related
changes in fair value are determined to be other than temporary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Derivative Instruments: </B>We account for derivative instruments in accordance with SFAS No.&nbsp;133.
Since the year ended December&nbsp;31, 2006, there have been no significant changes in the amount or
types of derivatives that we hold or to how we account for derivatives. For additional details on
our derivatives, see Note 5, Financial and Derivative Instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To determine the fair value of our derivatives, we use information from external sources (i.e.,
quoted market prices and third party valuations), if available. For certain contracts, this
information is not available and we use mathematical valuation models to value our derivatives.
These models require various inputs and assumptions, including commodity market prices and
volatilities, as well as interest rates and contract maturity dates. Changes in forward prices or
volatilities could significantly change the calculated fair value of our derivative contracts. The
cash returns we actually realize on these contracts may vary, either positively or negatively, from
the results that we estimate using these models. As part of valuing our derivatives at market, we
maintain reserves, if necessary, for credit risks arising from the financial condition of our
counterparties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Market Risk Information: </B>The following is an update of our risk sensitivities since December&nbsp;31,
2006. These sensitivities indicate the potential loss in fair value, cash flows, or future earnings
from our financial instruments, including our derivative contracts, assuming a hypothetical adverse
change in market rates or prices of 10&nbsp;percent. Changes in excess of the amounts shown in the
sensitivity analyses could occur if changes in market rates or prices exceed the 10&nbsp;percent shift
used for the analyses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Interest Rate Risk Sensitivity Analysis </I>(assuming an increase in market interest rates of 10
percent):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="8" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">September 30, 2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">December 31, 2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Variable-rate financing &#151; before tax annual earnings
exposure</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fixed-rate financing &#151; potential <B>reduction </B>in fair value (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">134</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR>    <TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>Fair value reduction could only be realized if we repurchased all of our fixed-rate
financing.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Investment Securities Price Risk Sensitivity Analysis </I>(assuming an adverse change in market prices
of 10&nbsp;percent):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="8" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">September 30, 2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">December 31, 2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Potential <B>reduction </B>in fair
value of available-for-sale
equity securities (SERP
investments and investment in
CMS Energy common stock)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For additional details on market risk and derivative activities, see Note 5, Financial and
Derivative Instruments.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->CE-12<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Other</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other accounting policies important to an understanding of our results of operations and financial
condition include:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>accounting for long-lived assets,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>accounting for the effects of industry regulation,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>accounting for pension and OPEB,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>accounting for asset retirement obligations,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>accounting for nuclear decommissioning costs, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>accounting for related party transactions.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">These accounting policies were disclosed in our 2006 Form 10-K and there have been no subsequent
material changes.
</DIV>
<DIV align="left">
<A name="147"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Capital Resources and Liquidity</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Factors affecting our liquidity and capital requirements are:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>results of operations,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>capital expenditures,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>energy commodity and transportation costs,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>contractual obligations,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>regulatory decisions,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>debt maturities,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>credit ratings,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>working capital needs, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>collateral requirements.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the summer months, we purchase natural gas and store it for resale primarily during the
winter heating season. Although our prudent natural gas costs are recoverable from our customers,
the amount paid for natural gas stored as inventory requires additional liquidity due to the lag in
cost recovery.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our current financial plan includes controlling operating expenses and capital expenditures and
evaluating market conditions for financing opportunities, if needed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We believe the following items will be sufficient to meet our liquidity needs:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our current level of cash and revolving credit facilities,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our anticipated cash flows from operating and investing activities, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to access secured and unsecured borrowing capacity in the capital markets,
if necessary.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the second quarter of 2007, Moody&#146;s and S&#038;P upgraded our long-term credit ratings and revised
our rating outlook to stable from positive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Cash Position, Investing, and Financing</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our operating, investing, and financing activities meet consolidated cash needs. At September&nbsp;30,
2007, we had $810&nbsp;million of consolidated cash, which includes $41&nbsp;million of restricted cash.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Summary of Cash Flows:</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="8" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Nine Months Ended September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by (used in):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">89</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(371</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by (used in) operating and investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(282</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Increase (Decrease) in Cash and Cash Equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(</B>288</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Operating Activities: </B>For the nine months ended September&nbsp;30, 2007, net cash provided by operating
activities was $189&nbsp;million, an increase of $100&nbsp;million versus 2006. In addition to increased
earnings, operating cash flow increased due to the absence, in 2007, of tax payments made to the
parent related to the 2006 IRS income tax audit, and the absence of the MCV Partnership gas
supplier funds on deposit. Also increasing our operating cash flow was our decrease in
expenditures for gas inventory as the milder winter in 2006 allowed us to accumulate more gas in
our storage facilities. These increases were reduced partially by our payment to fund our pension
plan and the absence, in 2007, of the sale of accounts receivable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Investing Activities: </B>For the nine months ended September&nbsp;30, 2007, net cash provided by investing
activities was $151&nbsp;million, an increase of $522&nbsp;million versus 2006. This increase was due to
proceeds from the sale of Palisades and proceeds from our nuclear decommissioning trust funds.
This increase was partially offset by the absence, in 2007, of $128&nbsp;million of restricted cash
released in February&nbsp;2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Financing Activities: </B>For the nine months ended September&nbsp;30, 2007, net cash provided by financing
activities was $392&nbsp;million, an increase of $398&nbsp;million versus 2006. This increase was primarily
due to an increase in cash infusions from the parent and a reduction in debt retirements. These
changes were partially offset by an increase in dividends paid to the parent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Obligations and Commitments</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Revolving Credit Facility: </B>For details on our revolving credit facility, see Note 4, Financings
and Capitalization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Dividend Restrictions: </B>For details on dividend restrictions, see Note 4, Financings and
Capitalization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Off-Balance Sheet Arrangements</B>: We enter into various arrangements in the normal course of
business to facilitate commercial transactions with third parties. These arrangements include
indemnifications, letters of credit and surety bonds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We enter into agreements containing indemnifications standard in the industry and indemnifications
specific to a transaction, such as the sale of a subsidiary. Indemnifications are usually
agreements to reimburse other companies if those companies incur losses due to third party claims
or breach of contract terms. Banks, on our behalf, issue letters of credit guaranteeing payment to
a third party. Letters of credit substitute the bank&#146;s credit for ours and reduce credit risk for
the third party beneficiary. We monitor these obligations and believe it is unlikely that we would
be required to perform or otherwise incur any material losses associated with these guarantees.
For additional details on these arrangements, see Note 3, Contingencies, &#147;Other Contingencies -
FASB Interpretation No.&nbsp;45, <I>Guarantor&#146;s Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others.&#148;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Sale of Accounts Receivable</B><I>: </I>Under a revolving accounts receivable sales program, we may sell up
to $325&nbsp;million of certain accounts receivable. The highly liquid and efficient market for
securitized
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">financial assets provides a lower cost source of funding compared to unsecured debt. For additional details, see
Note 4, Financings and Capitalization.
</DIV>
<DIV align="left">
<A name="148"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Outlook</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>CORPORATE OUTLOOK</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our business strategy will focus on investing in our utility system to enable us to meet our
customer commitments, comply with increasing environmental performance standards, and maintain
adequate supply and capacity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ELECTRIC BUSINESS OUTLOOK</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Growth: </B>In 2007, we expect electric deliveries to grow about one percent compared to 2006 levels.
The outlook for 2007 assumes a small decline in industrial economic activity and normal weather
conditions throughout the remainder of the year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Over the next five years, we expect electric deliveries to grow less than 1.5&nbsp;percent per year.
This outlook assumes a modestly growing customer base and a stabilizing Michigan economy after
2007. This growth rate includes both full-service sales and delivery service to customers who
choose to buy generation service from an alternative electric supplier, but excludes transactions
with other wholesale market participants and other electric utilities. This growth rate reflects a
long-range expected trend of growth. Growth from year to year may vary from this trend due to
customer response to the following:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>energy conservation measures,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>fluctuations in weather conditions, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in economic conditions, including utilization and expansion or contraction of
manufacturing facilities.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Electric Customer Revenue Outlook: </B>Michigan&#146;s economy has been hampered by automotive
manufacturing facility and related supplier closures and restructurings. The Michigan economy has
also had limited growth in the non-automotive sector. Although our electric utility results are
not dependent upon a single customer, or even a few customers, customers in the automotive sector
represented five percent of our total 2006 electric revenue. We cannot predict the impact of the
Michigan economy on our electric utility customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Electric Reserve Margin: </B>We have purchased capacity and energy contracts covering partially the
estimated reserve margin requirements for 2008 through 2010. As of September&nbsp;30, 2007, we expect
total 2007 capacity costs for these primarily seasonal electric capacity and energy contracts to be
$17&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are
currently planning for a reserve margin of approximately 11 percent
for summer 2008, or supply resources equal to 111 percent of
projected firm summer peak load. Of the 2008 supply resources target,
we expect 85 percent to come from our electric generating plants and
long-term power purchase contracts with other contractual
arrangements making up the remainder of our supply resource needs for
2008. If the MPSC approves the Zeeland power plant purchase, we
expect 95 percent of our 2008 supply resource target will be
satisfied with our electric generating plants and long-term power
purchase contracts, with other contractual arrangements making up the
remainder of our supply resource needs for 2008. Our 15-year power
purchase agreement with Entergy for 100 percent of the Palisades
facility&#146;s current electric output will offset the reduction in
the owned capacity represented by the sale of Palisades in April 2007.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In September&nbsp;2007, we exercised the regulatory-out provision in the MCV PPA, resulting in a
reduction in the amount we pay to the MCV Partnership to equal the amount we are allowed to recover
in the rates charged to customers. The MCV Partnership may, under certain circumstances, have the
right to terminate the MCV PPA, which could affect our reserve margin status. The MCV PPA
represents 13&nbsp;percent of our 2008 expected supply resources.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Electric Transmission Expenses: </B>METC, which provides electric transmission service to us,
increased substantially the transmission rates it charged us in 2006. The revenue collected by
METC under those rates in 2006 was subject to refund. The parties filed a settlement agreement
with the FERC, which was approved in August&nbsp;2007. This settlement resulted in a refund of 2006
transmission charges of $18&nbsp;million and a corresponding reduction of our power supply costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Electric transmission expenses are anticipated to increase in 2008 by $42&nbsp;million due primarily to
a 33&nbsp;percent increase in rates charged to us by our major
transmission provider. This increase is
included in our 2008 PSCR Plan filed with the MPSC in September&nbsp;2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In September&nbsp;2007, the FERC approved a proposal from transmission owners and operators to include
100&nbsp;percent of generator interconnection costs in our transmission rates. Previously, generator
interconnection costs were split 50-50 between transmission owners and operators and generators.
Consumers, Detroit Edison, the MPSC, and other parties filed a request for rehearing regarding the
FERC&#146;s order.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For additional details on power supply costs, see Note 3, Contingencies, &#147;Electric Rate Matters &#151;
Power Supply Costs.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>21st Century Electric Energy Plan: </B>In January&nbsp;2007, the then chairman of the MPSC proposed three
major policy initiatives to the governor of Michigan. The initiatives involve the use of more
renewable energy resources by all load-serving entities such as Consumers, the creation of an
energy efficiency program, and a procedure for reviewing proposals to construct new generation
facilities. The January proposal indicated that Michigan needs new base-load capacity by 2015 and
recommended measures to make it easier to predict customer demand and revenues. The proposed
initiatives will require changes to current legislation. We will continue to participate as the
MPSC, legislature, and other stakeholders address future electric resource needs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Balanced Energy Initiative: </B>In May&nbsp;2007, we filed a &#147;Balanced Energy Initiative&#148; with the MPSC
providing a comprehensive energy resource plan to meet our projected short-term and long-term
electric power requirements. The plan is responsive to the 21st Century Electric Energy Plan and
assumes that Michigan will implement a state-wide energy efficiency program and a renewable energy
portfolio standard. The filing requests the MPSC to rule that the Balanced Energy Initiative
represents a reasonable and prudent plan for the acquisition of necessary electric utility
resources. As acknowledged in the 21st Century Electric Energy Plan, implementation of the
Balanced Energy Initiative will require legislative repeal or significant reform of the Customer
Choice Act. In addition, we endorse the 21st Century Electric Energy Plan recommendation to adopt
a new, up-front certification policy for major power plant investments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In September&nbsp;2007, as part of our Balanced Energy Initiative, we announced plans to build an 800 MW
advanced clean coal plant at our Karn/Weadock Generating complex near Bay City, Michigan. We
expect to use 500 MW of the plant&#146;s output to serve
Consumers&#146; customers and to commit the remaining 300 MW to others. We expect the plant to enter operation in 2015 with our share of the cost estimated at
$1.3&nbsp;billion excluding financing costs and $1.6&nbsp;billion with financing costs.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">There are
several obstacles that must be cleared before construction of the
proposed new clean coal plant, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>repeal or significant reform of the Customer Choice Act,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>obtaining environmental permits,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>successful MPSC regulatory review and approval, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>obtaining property tax abatements.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In
September&nbsp;2007, we filed with the  MPSC an updated Balanced Energy Initiative including our plan for
construction of the new clean coal plant in order to start the regulatory review
process for the new plant. In October&nbsp;2007, we filed an application with the MDEQ for the
environmental air quality permits required for the new plant. The
Michigan Attorney General has filed a motion with the MPSC to dismiss the Balanced Energy Initiative case claiming that the MPSC lacks
jurisdiction over the matter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Proposed Power Plant Purchase: </B>In May&nbsp;2007, we reached an agreement with Broadway Gen Funding LLC,
an affiliate of LS Power Group, to buy a 946 MW gas-fired power plant located in Zeeland, Michigan
for $517&nbsp;million. The power plant will help meet the growing energy needs of our customers. We
expect to close on the purchase by early 2008, subject to the MPSC&#146;s approval.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Proposed Renewable Energy Legislation: </B>There are various bills introduced into the U.S. Congress
and the Michigan legislature relating to mandatory renewable energy standards. If enacted, these
bills generally would require electric utilities to acquire a certain percentage of their power
from renewable sources or otherwise pay fees or purchase allowances in lieu of having the
resources. We cannot predict whether any such bill will be enacted or in what form.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ELECTRIC BUSINESS UNCERTAINTIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Several electric business trends or uncertainties may affect our financial condition and future
results of operations. These trends or uncertainties have, or had, or are reasonably expected to have, a
material impact on revenues or income from continuing electric operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Electric Environmental Estimates: </B>Our operations are subject to various state and federal
environmental laws and regulations. Costs to operate our facilities in compliance with these laws
and regulations generally have been recovered in customer rates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Clean Air Act: </I>Compliance with the federal Clean Air Act and resulting regulations continues to be
a significant focus for us. The Nitrogen Oxide State Implementation Plan requires significant
reductions in nitrogen oxide emissions. To comply with the regulations, we expect to incur capital
expenditures totaling $880&nbsp;million. From 1998 to present, we have incurred $784&nbsp;million in capital
expenditures to comply with the federal Clean Air Act and resulting regulations and anticipate that
the remaining $96&nbsp;million of capital expenditures will be made through 2011. These expenditures
include installing selective catalytic reduction control technology on four of our coal-fired
electric generating units. The key assumptions in the capital expenditure estimate include:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>construction commodity prices, especially construction material and labor,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>project completion schedules,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>cost escalation factor used to estimate future years&#146; costs of 2.6&nbsp;percent, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an AFUDC capitalization rate of 7.8&nbsp;percent.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition to modifying coal-fired electric generating plants, our compliance plan includes the
use of nitrogen oxide emission allowances until all of the control equipment is operational in
2011. The nitrogen oxide emission allowance annual expense is projected to be $2&nbsp;million per year
through 2011, which we expect to recover from our customers through the PSCR process. The
projected annual expense
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">is based on market price forecasts and forecasts of regulatory provisions, known as progressive flow control, that
restrict the usage in any given year of allowances banked from previous years. The allowances and
their cost are accounted for as inventory. The allowance inventory is expensed at the rolling
average cost as the electric generating plants emit nitrogen oxide.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Clean Air Interstate Rule: </I>In March&nbsp;2005, the EPA adopted the Clean Air Interstate Rule that
requires additional coal-fired electric generating plant emission controls for nitrogen oxides and
sulfur dioxide. We plan to meet the nitrogen oxide requirements of this rule by year-round
operation of our selective catalytic reduction control technology units, installation of low
nitrogen oxide burners, and purchasing emission allowances. We plan to meet the sulfur dioxide
requirements of this rule using sorbent injection, installation of flue gas desulfurization
scrubbers and purchasing emission allowances. Our total cost for equipment installation is
expected to reach approximately $740&nbsp;million by 2015. Additional purchases of sulfur dioxide
emission allowances in 2012 and 2013 will be needed at an estimated cost of $10&nbsp;million per year,
which we expect to recover from our customers through the PSCR process.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Clean Air Interstate Rule was appealed to the U.S. Court of Appeals for the District of
Columbia by a number of utilities and other companies. Final briefs were submitted by September&nbsp;5,
2007, with a decision expected in 2008. We cannot predict the outcome of these appeals.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Clean Air Mercury Rule: </I>Also in March&nbsp;2005, the EPA issued the Clean Air Mercury Rule, which
requires initial reductions of mercury emissions from coal-fired electric generating plants by 2010
and further reductions by 2018. The Clean Air Mercury Rule was appealed to the U.S. Court of
Appeals by a number of states and other entities. Final briefs were submitted by July&nbsp;13, 2007,
with a decision expected in 2008. We cannot predict the outcome of these appeals.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In April&nbsp;2006, Michigan&#146;s governor announced a plan that would result in mercury emissions
reductions of 90&nbsp;percent by 2015. We are working with the MDEQ on the details of this rule;
however, we have developed preliminary cost estimates and a mercury emissions reduction scenario
based on our best knowledge of control technology options and initially proposed requirements. We
estimate costs associated with Phase I of the state&#146;s mercury rule will be approximately $190
million by 2010 and an additional $320&nbsp;million by 2015.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table compares the federal Clean Air Mercury Rule to the proposed state mercury rule:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="46%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">State and Federal</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">State and Federal</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Phase I</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Phase II</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="5" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Federal Clean Air<BR>
Mercury Rule
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">30% reduction by 2010<BR>
with interstate<BR>
trading of allowances
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">70% reduction by 2018<BR>
with interstate<BR>
trading of allowances</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Proposed State<BR>
Mercury Rule
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">30% reduction by 2010<BR>
without interstate<BR>
trading of allowances
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">90% reduction by 2015<BR>
without interstate<BR>
trading of allowances</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" valign="top" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Routine Maintenance Classification: </I>The EPA has alleged that some utilities have incorrectly
classified plant modifications as &#147;routine maintenance&#148; rather than seeking permits from the EPA to
modify the plant. We have received and responded to information requests from the EPA on this
subject in 2000, 2002, and 2006. We believe that we have properly interpreted the requirements of
&#147;routine maintenance.&#148;
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If our interpretation is found to be incorrect, we may be required to install additional pollution
controls at some or all of our coal-fired electric generating plants and potentially pay fines.
Additionally, the viability of certain plants remaining in operation would be re-examined. We
cannot predict the financial impact or outcome of this issue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Greenhouse Gases</I>: Several legislative proposals have been introduced in the United States Congress
that would require reductions in emissions of greenhouse gases, including carbon dioxide. These laws, if enacted, could
require us to replace equipment, install additional equipment for pollution controls,
purchase allowances, curtail operations, or take other steps. Although associated
capital or operating costs relating to greenhouse gas regulation or legislation
could be material, and cost recovery cannot be assured, we expect to have an opportunity
to recover these costs and capital expenditures in rates consistent with the recovery of other reasonable costs of complying with environmental laws and regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On April 2, 2007, the U.S. Supreme Court ruled that the Clean Air Act gives the EPA the authority to
regulate emissions of carbon dioxide and other greenhouse gases from automobiles. In its decision,
the court ordered the EPA to revisit its finding that it has the discretion not to regulate
greenhouse gas emissions from automobiles.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To the extent that greenhouse gas emission reduction rules come into effect, the mandatory
emissions reduction requirements could have far-reaching and significant implications for the
energy sector. We cannot estimate the effect of federal or state greenhouse gas policy on our
future consolidated results of operations, cash flows, or financial position due to the uncertain
nature of the policies at this time. However, we will continue to monitor greenhouse gas policy
developments and assess and respond to their potential implications on our business operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">
<I>Water: </I>In March&nbsp;2004, the EPA issued rules that govern electric generating plant cooling water
intake systems. The rules require significant reduction in fish harmed by
operating equipment. EPA compliance options in the rule were challenged in court. In January
2007, the court rejected many of the compliance options favored by industry and remanded the bulk
of the rule back to the EPA for reconsideration. The court&#146;s ruling is expected to increase
significantly the cost of complying with this rule. However, the cost to comply will not be known
until the EPA&#146;s reconsideration is complete. At this time, the EPA has not established a schedule
to address the court decision.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For additional details on electric environmental matters, see Note 3, Contingencies, &#147;Electric
Contingencies &#151; Electric Environmental Matters.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Competition and Regulatory Restructuring: </B>The Customer Choice Act allows all of our electric
customers to buy electric generation service from us or from an alternative electric supplier. At
September&nbsp;30, 2007, alternative electric suppliers were providing 311 MW of generation service to
ROA customers. This is 4&nbsp;percent of our total distribution load and represents an increase of 1
percent of ROA load compared to September&nbsp;30, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In November&nbsp;2004, the MPSC issued an order allowing us to recover Stranded Costs incurred from 2002
through 2003 through a surcharge applied to ROA customers. Since the MPSC order, we have
experienced a downward trend in ROA customers. If this trend continues, it will extend the time it
takes to recover fully our Stranded Costs. It is difficult to predict future ROA customer trends,
which affect our ability to recover timely these Stranded Costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Electric Rate Case: </B>In March&nbsp;2007, we filed an application with the MPSC seeking an 11.25&nbsp;percent
authorized return on equity and an annual increase in revenues of $157&nbsp;million. The increase seeks
recovery of the costs associated with increased plant investment, increased equity investment, and
greater operation and maintenance expenses. In May&nbsp;2007, we filed supplemental testimony with the
MPSC to include transaction costs from the sale of Palisades. In July&nbsp;2007, we filed an amended
application with the MPSC to include the proposed purchase of the Zeeland power plant, the approval
of an energy efficiency program, and to make other revisions. The revised application seeks an
annual increase in revenues of $282&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In July&nbsp;2007, we also filed an amended application for rate relief that seeks the removal of costs
associated with Palisades, the approval of partial and immediate rate relief for certain items,
including the
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">proposed purchase of the Zeeland power plant, and the approval of a plan to
distribute excess proceeds from the sale of
Palisades to customers. The case schedule will allow for an MPSC order on our Zeeland request and
on our request for partial and immediate rate relief by the end of 2007 and a final rate order in
mid-2008. We cannot predict the amount or timing of any MPSC decision on our requests.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For additional details and material changes relating to the restructuring of the electric utility
industry and electric rate matters, see Note 3, Contingencies, &#147;Electric Rate Matters.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>OTHER ELECTRIC BUSINESS UNCERTAINTIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The MCV PPA: </B>The MCV Partnership, which leases and operates the MCV Facility, contracted to sell
electricity to Consumers for a 35-year period beginning in 1990. The cost that we incur under the
MCV PPA exceeded the recovery amount allowed by the MPSC until we exercised the regulatory-out
provision in the MCV PPA in September&nbsp;2007. This action limited our capacity and fixed energy
payments to the MCV Partnership to the amounts that we collect from our customers. We incurred $39
million in underrecoveries in 2007. The MCV Partnership has notified us that it disputes our right to
exercise  the regulatory-out provision. We believe that the provision is valid and fully
effective, but cannot assure that we will prevail in the event of a proceeding on this issue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a result of our exercise of the regulatory-out provision, the MCV Partnership may, under certain
circumstances, have the right to terminate or reduce the amount of capacity sold under the MCV PPA.
If the MCV Partnership terminates the MCV PPA or reduces the amount of capacity sold under the MCV
PPA, we would seek to replace the lost capacity to maintain an adequate electric reserve margin.
This could involve entering into a new PPA and (or)&nbsp;entering into electric capacity contracts on
the open market. We cannot predict our ability to enter into such contracts at a reasonable price.
We are also unable to predict regulatory approval of the terms and conditions of such contracts,
or that the MPSC would allow full recovery of our incurred costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To comply with a prior MPSC order, we made a filing in May&nbsp;2007 with the MPSC requesting a
determination regarding whether it wished to reconsider the amount of the MCV PPA payments that we
recover from customers. Also, in May&nbsp;2007, the MCV Partnership filed an application with the MPSC
seeking approval to increase our recovery of costs incurred under the MCV PPA. We are unable to
predict the outcome of these requests. For additional details on the MCV PPA, see Note 3,
Contingencies, &#147;Other Electric Contingencies &#151; The MCV PPA.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Sale of Nuclear Assets: </B>In April&nbsp;2007, we sold Palisades to Entergy for $380&nbsp;million. The final
purchase price, subject to various closing adjustments, resulted in us receiving $363&nbsp;million as of
September&nbsp;30, 2007. We also paid Entergy $30&nbsp;million to assume ownership and responsibility for
the Big Rock ISFSI. Because of the sale of Palisades, we also paid the NMC, the former operator of
Palisades, $7&nbsp;million in exit fees and forfeited our $5&nbsp;million investment in the NMC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">
The MPSC order approving the Palisades transaction allowed us to recover the book value of
Palisades. This results in us crediting estimated proceeds in excess of book value of $66&nbsp;million
to our customers from June&nbsp;2007 through December&nbsp;2008. After closing adjustments, which are
subject to MPSC review, proceeds in excess of the book value were
$77&nbsp;million as of September&nbsp;30,
2007. The MPSC order deferred ruling on the recovery of transaction costs, including the NMC exit
fees, and the $30&nbsp;million payment to Entergy related to the Big Rock ISFSI until the next general
rate case.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Entergy assumed responsibility for the future decommissioning of Palisades and for storage and
disposal of spent nuclear fuel located at Palisades and the Big Rock ISFSI sites. We transferred
$252&nbsp;million in trust fund assets to Entergy. We are crediting estimated excess decommissioning
funds of $189&nbsp;million to our retail customers from June&nbsp;2007 through December&nbsp;2008. Access to
additional decommissioning fund balances above the estimates in the MPSC order resulted in excess
decommissioning funds of $123
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">million as
of September&nbsp;30, 2007. We have proposed a plan to credit these balances to our retail customers
and this plan is under review by the MPSC in our current electric rate case filing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As part of the transaction, Entergy will sell us 100&nbsp;percent of the plant&#146;s output up to its
current annual average capacity of 798 MW under a 15-year power purchase agreement. Because of the
Palisades power purchase agreement and our continuing involvement with the Palisades assets, we
account for the disposal of Palisades as a financing for accounting purposes and not a sale. This
resulted in the recognition of a finance obligation of $197&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For additional details on the sale of Palisades and the Big Rock ISFSI, see Note 2, Asset Sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>GAS BUSINESS OUTLOOK</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Growth: </B>In 2007, we project gas deliveries will decline slightly, on a weather-adjusted basis,
from 2006 levels due to continuing conservation and overall economic conditions in the state of
Michigan. Over the next five years, we expect gas deliveries to decline by less than one-half of
one percent annually. Actual gas deliveries in future periods may be affected by:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>fluctuations in weather conditions,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>use by independent power producers,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in gas commodity prices,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Michigan economic conditions,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the price of competing energy sources or fuels,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>gas consumption per customer, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>improvements in gas appliance efficiency.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>GAS BUSINESS UNCERTAINTIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Several gas business trends or uncertainties may affect our future financial results and financial
condition. These trends or uncertainties could have a material impact on future revenues or income
from gas operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Gas Environmental Estimates: </B>We expect to incur investigation and remedial action costs at a
number of sites, including 23 former manufactured gas plant sites. For additional details, see
Note 3, Contingencies, &#147;Gas Contingencies &#151; Gas Environmental Matters.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Gas Cost Recovery: </B>The GCR process is designed to allow us to recover all of our purchased natural
gas costs if incurred under reasonable and prudent policies and practices. The MPSC reviews these
costs, policies, and practices for prudency in annual plan and reconciliation proceedings. For
additional details on gas cost recovery, see Note 3, Contingencies, &#147;Gas Rate Matters &#151; Gas Cost
Recovery.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Gas Depreciation: </B>In June&nbsp;2007, the MPSC issued its final order in the generic ARO accounting case
and modified the filing requirement for our next gas depreciation case. The original filing
requirement date was changed from 90&nbsp;days after the issuance of this order to no later than August
1, 2008. Additionally, we have been ordered to use 2007 data and prepare a cost of removal
depreciation study with five alternatives using the MPSC&#146;s prescribed methods.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If a final order in our next gas depreciation case is not issued concurrently with a final order in
a general gas rate case, the MPSC may incorporate the results of the depreciation case into general
gas rates through use of a surcharge mechanism (which may be either positive or negative).
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>2007 Gas Rate Case: </B>In February&nbsp;2007, we filed an application with the MPSC seeking an 11.25
percent authorized return on equity along with an $88&nbsp;million annual increase in our gas delivery
and transportation rates. We proposed the use of a Revenue Decoupling and Conservation Incentive
Mechanism for residential and general service rate classes, which would partially separate the
collection of fixed costs from gas sales and enhance the utility&#146;s ability to recover its fixed
costs<B>.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In August&nbsp;2007, the MPSC approved a partial settlement agreement authorizing an annual rate
increase of $50&nbsp;million, including an authorized return on equity of 10.75&nbsp;percent. The proposed
Revenue Decoupling and Conservation Incentive Mechanism was not approved. On September&nbsp;25, 2007,
the MPSC reopened the record in the case to allow all interested parties to be heard concerning the
approval of an energy efficiency program, which we included in our original filing. If approved in
total, this would result in an additional rate increase of $9&nbsp;million to be used to implement the
energy efficiency program.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>OTHER OUTLOOK</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Software Implementation: </B>We are in the process of implementing new business software to replace
existing business processes and information technology. The core business processes include
finance, purchasing/supply chain, customer billing, human resources and payroll, and utility asset
construction and maintenance work management. We intend the new business software, scheduled to be
in production in the first half of 2008, to improve customer service, reduce risk,
and increase flexibility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Michigan Public Service Commission: </B>During the third quarter of 2007, the Michigan governor
appointed a new MPSC chairperson and a new MPSC Commissioner. We are unable to predict the impact
of these appointments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Litigation and Regulatory Investigation: </B>CMS Energy is the subject of various investigations as a
result of round-trip trading transactions by CMS MST, including an investigation by the DOJ. For
additional details regarding this investigation and litigation, see Note 3, Contingencies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Michigan Tax Legislation: </B>In July&nbsp;2007, the Michigan governor signed Senate Bill 94, the Michigan
Business Tax Act, which imposes a business income tax of 4.95&nbsp;percent and a modified gross receipts
tax of 0.8&nbsp;percent. The bill provides for a number of tax credits and incentives geared toward
those companies investing and employing in Michigan. The Michigan Business Tax, which is effective
January&nbsp;1, 2008, replaces the state&#146;s current Single Business Tax that expires on December&nbsp;31,
2007. In September&nbsp;2007, the Michigan governor signed House Bill 5104, allowing additional
deductions in future years against the business income portion of the tax. These future deductions
are phased in over a 15-year period, beginning in 2015. As a result of the enactment of this tax,
we recorded, on a consolidated basis, a net deferred tax liability of $125&nbsp;million completely
offset by a net deferred tax asset of $125&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In September&nbsp;2007, Michigan&#146;s governor also signed legislation expanding the state&#146;s sales tax to
certain services. The list of covered services includes certain services that we purchase from
outside vendors and potentially services that we sell. This list includes, but is not limited to,
certain consulting services, landscaping (which encompasses tree trimming), janitorial services,
security guards and security systems.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Michigan Business Tax and the expanded sales tax were enacted to replace the expiring Michigan
Single Business Tax. We are currently evaluating the impact of the replacement of the Michigan
Single Business Tax with these new taxes. We expect Consumers to recover the taxes paid from
customers, but we cannot predict the timeliness of such recovery.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->CE-22<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="149"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Implementation of New Accounting Standards </B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>SFAS No.&nbsp;158, Employers&#146; Accounting for Defined Benefit Pension and Other Postretirement Plans &#151; an
amendment of FASB Statements No.&nbsp;87, 88, 106, and 132(R): </I></B>In September&nbsp;2006, the FASB issued SFAS
No.&nbsp;158. Phase one of this standard required us to recognize the funded status of our defined
benefit postretirement plans on our Consolidated Balance Sheets at December&nbsp;31, 2006. Phase one
was implemented in December&nbsp;2006. Phase two of this standard requires that we change our plan
measurement date from November&nbsp;30 to December&nbsp;31, effective December&nbsp;31, 2008. We do not believe
that implementation of phase two of this standard will have a material effect on our consolidated
financial statements. We expect to adopt the measurement date provisions of SFAS No.&nbsp;158 in 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>FIN 48, Accounting for Uncertainty in Income Taxes: </I></B>We adopted the provisions of FIN 48 on January
1, 2007. This interpretation provides a two-step approach for the recognition and measurement of
uncertain tax positions taken, or expected to be taken, by a company on its income tax returns.
The first step is to evaluate the tax position to determine if, based on management&#146;s best
judgment, it is greater than 50&nbsp;percent likely that we will sustain the tax position. The second
step is to measure the appropriate amount of the benefit to recognize. This is done by estimating
the potential outcomes and recognizing the greatest amount that has a cumulative probability of at
least 50&nbsp;percent. FIN 48 requires interest and penalties, if applicable, to be accrued on
differences between tax positions recognized in our consolidated financial statements and the
amount claimed, or expected to be claimed, on the tax return.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a result of the implementation of FIN 48, we have identified additional uncertain tax benefits
of $5&nbsp;million as of January&nbsp;1, 2007. Included in this amount is an increase in our valuation
allowance of $7&nbsp;million, increases to tax reserves of $55&nbsp;million and a decrease to deferred tax
liabilities of $57&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Consumers joins in the filing of a consolidated U.S. federal income tax return as well as unitary
and combined income tax returns in several states. Consumers and its subsidiaries also file
separate company income tax returns in several states. The only significant state tax paid by
Consumers or any of its subsidiaries is in Michigan. However, since the Michigan Single Business
Tax is not an income tax, it is not part of the FIN 48 analysis. The IRS has completed its audits
for all the consolidated federal returns, of which Consumers is a member, for years through 2001.
The federal income tax returns for the years 2002 through 2005 are open under the statute of
limitations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have reflected a net interest liability of $1&nbsp;million related to our uncertain income tax
positions on our Consolidated Balance Sheets as of January&nbsp;1, 2007. We have not accrued any
penalties with respect to uncertain tax benefits. We recognize accrued interest and penalties,
where applicable, related to uncertain tax benefits as part of income tax expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of the date of adoption of FIN 48, we had valuation allowances against certain deferred tax
assets totaling $22&nbsp;million and other net uncertain tax positions of $55&nbsp;million, resulting in
total uncertain benefits of $77&nbsp;million. Of this amount, $24&nbsp;million would result in a decrease in
our effective tax rate, if recognized. We are not expecting any material changes to our uncertain
tax positions over the next 12&nbsp;months.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->CE-23<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="150"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>New Accounting Standards Not Yet Effective</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>SFAS No.&nbsp;157, Fair Value Measurements: </I></B>In September&nbsp;2006, the FASB issued SFAS No.&nbsp;157, effective
for us January&nbsp;1, 2008. The standard provides a revised definition of &#147;fair value&#148; and gives
guidance on how to measure the fair value of assets and liabilities. Under the standard, fair
value is defined as the price that would be received to sell an asset or paid to transfer a
liability in an orderly exchange between market participants. The standard does not expand the use
of fair value in any new circumstances. However, additional disclosures will be required on the
impact and reliability of fair value measurements reflected in our consolidated financial
statements. The standard will also eliminate the existing prohibition of recognizing &#147;day one&#148;
gains or losses on derivative instruments, and will generally require such gains and losses to be
recognized through earnings. We are presently evaluating the impacts, if any, of implementing SFAS
No.&nbsp;157. We currently do not hold any derivatives that would involve day one gains or losses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>SFAS No.&nbsp;159, The Fair Value Option for Financial Assets and Financial Liabilities, Including an
amendment to FASB Statement No.&nbsp;115: </I></B>In February&nbsp;2007, the FASB issued SFAS No.&nbsp;159, effective for
us January&nbsp;1, 2008. This standard will give us the option to select certain financial instruments
and other items, which otherwise are not required to be measured at fair value, and measure those
items at fair value. If we choose to elect the fair value option for an item, we would recognize
unrealized gains and losses associated with changes in the fair value of the item over time. The
statement will also require disclosures for items for which the fair value option has been elected.
We are presently evaluating whether we will choose to elect the fair value option for any
financial instruments or other items.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>EITF Issue 06-11, Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards:</I></B>
In June&nbsp;2007, the FASB ratified EITF Issue 06-11, effective for us on a prospective basis beginning
January&nbsp;1, 2008. EITF 06-11 requires companies to recognize the income tax benefit realized from
dividends or dividend equivalents that are charged to retained earnings and paid to employees<BR>
for non-vested equity-classified employee share-based payment awards as an increase to additional
paid-in capital. We do not believe that implementation of this standard will have a material
effect on our financial statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CE-24<!-- /Folio -->
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="120"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><FONT style="font-size:14pt"><B>Consumers Energy Company</B></FONT><BR>
<FONT style="font-size:12pt"><B>Consolidated Statements of Income</B></FONT><BR>
<B>(Unaudited)</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6"><I>In Millions</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #ffffff">Three Months Ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #ffffff">Nine Months Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Operating Revenue</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,111</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Earnings from Equity Method Investees</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Operating Expenses</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fuel for electric generation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">557</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fuel costs mark-to-market at the MCV Partnership</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchased and interchange power</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,055</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">427</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchased power &#151; related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cost of gas sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,309</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,164</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">201</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">661</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Maintenance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">214</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">387</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">General taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,048</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">952</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,039</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,788</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Operating Income</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">239</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">324</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Other Income (Deductions)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest and dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Regulatory return on capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Interest Charges</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest on long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">216</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest on long-term debt &#151; related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capitalized interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">222</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Income Before Income Taxes and Minority Interests (Obligations), Net</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">176</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Minority Interests (Obligations), Net</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(35</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Income Before Income Taxes</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">211</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Income Tax Expense</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net Income</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Preferred Stock Dividends</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net Income Available to Common Stockholder</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">144</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The accompanying notes are an integral part of these statements.</B>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CE-25<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="121"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><FONT style="font-size:14pt"><B>Consumers Energy Company</B></FONT><BR>
<FONT style="font-size:12pt"><B>Consolidated Statements of Cash Flows</B></FONT><BR>
<B>(Unaudited)</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #ffffff"><I>In Millions</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #ffffff">Nine Months Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash Flows from Operating Activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">217</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">145</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Adjustments to reconcile net income to net cash
provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Depreciation and amortization (includes nuclear
decommissioning of $4 and $3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">387</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Deferred income taxes and investment tax credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(267</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Fuel costs mark-to-market at the MCV Partnership</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Minority obligations, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(35</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Regulatory return on capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Gain on sale of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Capital lease and other amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Earnings from equity method investees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Pension contribution</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(103</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(13</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Changes in assets and liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Decrease (increase)&nbsp;in accounts receivable, notes receivable and
accrued revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(142</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">302</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Decrease (increase)&nbsp;in accrued power supply and gas revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(90</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Increase in inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(184</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(256</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Decrease in deferred property taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Decrease in accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(67</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(93</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Decrease in accrued taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(75</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(248</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Increase (decrease)&nbsp;in accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Decrease in the MCV Partnership gas supplier funds on deposit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(159</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Decrease (increase)&nbsp;in other current and non-current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Increase (decrease)&nbsp;in other current and non-current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(48</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net cash provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash Flows from Investing Activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capital expenditures (excludes assets placed under capital lease)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(518</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(461</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cost to retire property</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(41</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Restricted cash and restricted short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investments in nuclear decommissioning trust funds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from nuclear decommissioning trust funds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from sale of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">337</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Maturity of the MCV Partnership restricted investment securities held-to-maturity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchase of the MCV Partnership restricted investment securities held-to-maturity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(118</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other investing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net cash provided by (used in) investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(371</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash Flows from Financing Activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Retirement of long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(208</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payment of common stock dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(176</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(71</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payment of capital and finance lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(23</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stockholder&#146;s contribution, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">200</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payment of preferred stock dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Increase (decrease)&nbsp;in notes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(42</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Debt issuance and financing costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net cash provided by (used in) financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Increase (Decrease) in Cash and Cash Equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(288</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and Cash Equivalents, Beginning of Period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">416</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and Cash Equivalents, End of Period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">128</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The accompanying notes are an integral part of these statements.</B>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->CE-26<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="122"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><FONT style="font-size:14pt"><B>Consumers Energy Company</B></FONT><BR>
<FONT style="font-size:12pt"><B>Consolidated Balance Sheets</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ASSETS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><I>In Millions</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">September 30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">December 31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">(Unaudited)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Plant and Property (at cost)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Electric</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,504</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,327</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,273</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,792</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less accumulated depreciation, depletion, and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,948</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,018</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,339</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,774</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Construction work-in-progress</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">381</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">639</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,720</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,413</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Investments</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock of affiliates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current Assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents at cost, which approximates market</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Restricted cash at cost, which approximates market</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts receivable, and accrued revenue, less
allowances of $15 in 2007 and $14 in 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">389</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Notes receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued power supply and gas revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">156</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts receivable &#151; related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventories at average cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gas in underground storage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,129</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Materials and supplies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Generating plant fuel stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">105</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred property taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Regulatory assets &#151; postretirement benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepayments and other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,224</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Non-current Assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Regulatory assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Securitized costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">514</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Postretirement benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,032</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,131</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Customer Choice Act</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">190</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">508</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">497</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Nuclear decommissioning trust funds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">602</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">233</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,268</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,167</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total Assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,845</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The accompanying notes are an integral part of these statements.</B>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CE-27<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>STOCKHOLDER&#146;S INVESTMENT AND LIABILITIES</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #ffffff"><I>In Millions</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">September 30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">December 31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">(Unaudited)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Capitalization</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stockholder&#146;s equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Common stock, authorized 125.0 shares; outstanding
84.1 shares for all periods</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">841</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">841</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,832</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated other comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,642</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,958</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,127</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Non-current portion of capital leases and finance lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,611</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,171</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current Liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current portion of long-term debt, capital leases, and finance leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Notes payable &#151; related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">421</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued rate refunds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable &#151; related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">295</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Regulatory liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">184</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,644</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,114</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Non-current Liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">606</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">847</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Regulatory liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Regulatory liabilities for cost of removal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,166</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Income taxes, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">539</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other regulatory liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">249</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Postretirement benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">993</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Asset retirement obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">497</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred investment tax credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">207</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,560</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commitments and Contingencies (Notes 3, 4, and 5)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total Stockholder&#146;s Investment and Liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,845</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CE-28<!-- /Folio -->
</DIV>




<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="123"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><FONT style="font-size:14pt"><B>Consumers Energy Company</B></FONT><BR>
<FONT style="font-size:12pt"><B>Consolidated Statements of Common Stockholder&#146;s Equity</B></FONT><BR>
<FONT style="font-size:12pt"><B>(Unaudited)</B></FONT>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000"><I>In Millions</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 0px solid #000000">Three Months Ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 0px solid #000000">Nine Months Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Common Stock</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">At beginning and end of period (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">841</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">841</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">841</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">841</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Other Paid-in Capital</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">At beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,832</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,832</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,632</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stockholder&#146;s contribution</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">200</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">At end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,832</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,832</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Accumulated Other Comprehensive Income</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Retirement benefits liability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">At beginning and end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">At beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Unrealized gain (loss)&nbsp;on investments (b)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">At end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Derivative instruments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">At beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Unrealized loss on derivative instruments (b)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Reclassification adjustments included in net income (b)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">At end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total Accumulated Other Comprehensive Income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Retained Earnings</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">At beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">238</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">233</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Adjustment to initially apply FIN 48</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash dividends declared &#151; Common Stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(41</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(31</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(176</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(71</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash dividends declared &#151; Preferred Stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">At end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total Common Stockholder&#146;s Equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,642</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,021</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,642</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,021</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>The accompanying notes are an integral part of these statements.</B>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->CE-29<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000"><I>In Millions</I></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 0px solid #000000">Three Months Ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 0px solid #000000">Nine Months Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:25px; text-indent:-25px">(a)&nbsp;&nbsp;&nbsp;Number of shares of common stock outstanding was 84,108,789 for all periods presented.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(b)&nbsp;&nbsp;&nbsp;Disclosure of Comprehensive Income:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Unrealized gain (loss)&nbsp;on investments, net of tax (tax benefit) of
$-, $2, $(1), $-, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Derivative instruments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Unrealized loss on derivative instruments, net of tax benefit of
$-, $(7), $-, $(14), respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Reclassification adjustments included in net income, net of tax
benefit of $-, $(1), $-, $(2), respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="14" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total Comprehensive Income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">115</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="14" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->CE-30<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><I>Consumers Energy Company</I>
</DIV>


<DIV align="center" style="font-size: 14pt; margin-top: 18pt"><FONT style="font-variant: SMALL-CAPS"><B>Consumers Energy Company</B></FONT>
</DIV>

<DIV align="left">
<A name="124"></A>
</DIV>
<DIV align="center" style="font-size: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to Consolidated Financial Statements</B></FONT></DIV>


<DIV align="center" style="font-size: 10pt"><FONT style="font-variant: SMALL-CAPS"><B>(Unaudited)</B></FONT></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">These interim Consolidated Financial Statements have been prepared by Consumers in accordance with
accounting principles generally accepted in the United States for interim financial information and
with the instructions to Form 10-Q and Article&nbsp;10 of Regulation&nbsp;S-X. As such, certain information
and footnote disclosures normally included in consolidated financial statements prepared in
accordance with accounting principles generally accepted in the United States have been condensed
or omitted. Certain prior year amounts have been reclassified to conform to the presentation in
the current year. In management&#146;s opinion, the unaudited information contained in this report
reflects all adjustments of a normal recurring nature necessary to assure the fair presentation of
financial position, results of operations and cash flows for the periods presented. The Notes to
Consolidated Financial Statements and the related Consolidated Financial Statements should be read
in conjunction with the Consolidated Financial Statements and related Notes contained in the
Consumers&#146; Form 10-K for the year ended December&nbsp;31, 2006. Due to the seasonal nature of
Consumers&#146; operations, the results as presented for this interim period are not necessarily
indicative of results to be achieved for the fiscal year.
</DIV>

<DIV align="left">
<A name="125"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>1: </B><FONT style="font-variant: SMALL-CAPS"><B>Corporate Structure and Accounting Policies</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Corporate Structure: </B>Consumers, a subsidiary of CMS Energy, a holding company, is a combination
electric and gas utility company serving Michigan&#146;s Lower Peninsula. Our customer base includes a
mix of residential, commercial, and diversified industrial customers. We manage our business by
the nature of services each provides and operate principally in two business segments: electric
utility and gas utility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Principles of Consolidation: </B>The consolidated financial statements include Consumers, and all
other entities in which we have a controlling financial interest or are the primary beneficiary, in
accordance with FIN 46(R). We use the equity method of accounting for investments in companies and
partnerships that are not consolidated, where we have significant influence over operations and
financial policies, but are not the primary beneficiary. We eliminate intercompany transactions
and balances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Use of Estimates: </B>We prepare our consolidated financial statements in conformity with U.S. GAAP.
We are required to make estimates using assumptions that may affect the reported amounts and
disclosures. Actual results could differ from those estimates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We record estimated liabilities for contingencies in our consolidated financial statements when it
is probable that a loss will be incurred in the future as a result of a current event, and when the
amount can be reasonably estimated. For additional details, see Note 3, Contingencies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Revenue Recognition Policy: </B>We recognize revenues from deliveries of electricity and natural gas,
and the storage of natural gas when services are provided. We record sales tax on a net basis and
exclude it from revenues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Accounting for Legal Fees: </B>We expense legal fees as incurred; fees incurred but not yet billed are
accrued based on estimates of work performed. This policy also applies to fees incurred on behalf
of
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CE-31<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><I>Consumers Energy Company</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">employees and officers related to indemnification agreements; such fees are billed directly to
us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">
<B>Accounting for MISO Transactions: </B>MISO requires that we submit hourly day-ahead and real-time bids
and offers for energy at locations across the MISO region. We account for MISO transactions on a
net hourly basis in each of the real-time and day-ahead markets, and net transactions across all
MISO energy market nodes at which we enter into transactions. To the degree we have made net
purchases in a single hour, we report the net amount in the
&#147;Purchased and interchange power&#148; line
item of the Consolidated Statements of Income. To the degree we have made net sales in a single
hour, we report the net amount in the &#147;Operating Revenue&#148; line item of the Consolidated Statements
of Income. We record expense accruals for future adjustments based on historical experience, and
reconcile accruals to actual expenses when invoices are received.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Reclassifications:
</B>We have reclassified certain prior period amounts on our Consolidated Financial
Statements to conform to the presentation for the current period. These reclassifications did not
affect consolidated net income or cash flow for the periods presented.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Other Income and Other Expense: </B>The following tables show the components of Other income and Other
expense:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="16" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #ffffff">Three Months Ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #ffffff">Nine Months Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Electric restructuring return</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Return on stranded and security costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Nitrogen oxide allowance sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gain on stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gain on investment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gain on asset sales, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">All other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="16" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #ffffff">Three Months Ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #ffffff">Nine Months Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Civic and political expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Donations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">All other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total other expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>New Accounting Standards Not Yet Effective: </B><I>SFAS No.&nbsp;157, Fair Value Measurements: </I>In September
2006, the FASB issued SFAS No.&nbsp;157, effective for us January&nbsp;1, 2008. The standard provides a
revised definition of &#147;fair value&#148; and gives guidance on how to measure the fair value of assets
and liabilities. Under the standard, fair value is defined as the price that would be received to
sell an asset or paid to transfer a liability in an orderly exchange between market participants. The standard does not
expand the use of fair value in any new circumstances. However, additional disclosures will be
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CE-32<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><I>Consumers Energy Company</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">required on the impact and reliability of fair value measurements reflected in our consolidated
financial statements. The standard will also eliminate the existing prohibition of recognizing
&#147;day one&#148; gains or losses on derivative instruments, and will generally require such gains and
losses to be recognized through earnings. We are presently evaluating the impacts, if any, of
implementing SFAS No.&nbsp;157. We currently do not hold any derivatives that would involve day one
gains or losses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>SFAS No.&nbsp;159, The Fair Value Option for Financial Assets and Financial Liabilities, Including an
amendment to FASB Statement No.&nbsp;115: </I>In February&nbsp;2007, the FASB issued SFAS No.&nbsp;159, effective for
us January&nbsp;1, 2008. This standard will give us the option to select certain financial instruments
and other items, which otherwise are not required to be measured at fair value, and measure those
items at fair value. If we choose to elect the fair value option for an item, we would recognize
unrealized gains and losses associated with changes in the fair value of the item over time. The
statement will also require disclosures for items for which the fair value option has been elected.
We are presently evaluating whether we will choose to elect the fair value option for any
financial instruments or other items.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>EITF Issue 06-11, Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards:</I>
In June&nbsp;2007, the FASB ratified EITF Issue 06-11, effective for us on a prospective basis beginning
January&nbsp;1, 2008. EITF 06-11 requires companies to recognize the income tax benefit realized from
dividends or dividend equivalents that are charged to retained earnings and paid to employees for
non-vested equity-classified employee share-based payment awards as an increase to additional
paid-in capital. We do not believe that implementation of this standard will have a material
effect on our financial statements.
</DIV>

<DIV align="left">
<A name="126"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>2: Asset Sales</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Gross cash proceeds from the sale of assets totaled $337&nbsp;million through September&nbsp;30, 2007. The
sale of assets resulted in a $2&nbsp;million gain on our Consolidated Statements of Income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Sale of Nuclear Assets: </I>In April&nbsp;2007, we sold Palisades to Entergy for $380&nbsp;million. Due to
various closing adjustments such as working capital and capital expenditure adjustments and nuclear
fuel usage and inventory adjustments, we have received $363&nbsp;million in proceeds as of September&nbsp;30,
2007. We also paid Entergy $30&nbsp;million to assume ownership and responsibility for the Big Rock
ISFSI. Because of the sale of Palisades, we paid the NMC, the former operator of Palisades, $7
million in exit fees and forfeited our $5&nbsp;million investment in the NMC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Entergy assumed responsibility for the future decommissioning of Palisades and for storage and
disposal of spent nuclear fuel located at Palisades and the Big Rock ISFSI sites. At closing, we
transferred $252&nbsp;million in decommissioning trust fund balances
to Entergy. We are crediting excess decommissioning funds of $189&nbsp;million to our retail customers from June&nbsp;2007 through
December&nbsp;2008 and have recorded this obligation, plus interest, as a regulatory liability on our
Consolidated Balance Sheets. Modification to the terms of the transaction allowed us immediate
access to additional excess decommissioning trust funds of $123&nbsp;million as of September&nbsp;30, 2007.
We have proposed a plan to credit these excess decommissioning fund balances to our retail
customers. This plan is under review by the MPSC in our current electric rate case filing. We
recorded this balance, plus interest, as a regulatory liability on our Consolidated Balance Sheets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The MPSC order approving the Palisades transaction allows us to recover the book value of
Palisades, which we estimated at $314&nbsp;million. As a result, we
are crediting proceeds in excess of book value of
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CE-33<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><I>Consumers Energy Company</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">$66&nbsp;million to our retail customers from June&nbsp;2007 through December&nbsp;2008. After
closing adjustments, which are subject to MPSC review, proceeds in excess of the book value were
$77&nbsp;million as of September&nbsp;30, 2007. We deferred the gain as a regulatory liability. The MPSC
order put off ruling on the recovery of transaction costs, including the NMC exit fees, and the $30
million payment to Entergy related to the Big Rock ISFSI until our next general rate case. We
deferred these costs as a regulatory asset on our Consolidated Balance Sheets as recovery is
probable.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In April&nbsp;2007, the NRC issued an order approving the transfer of the Palisades operating license.
Intervenors have filed petitions for reconsideration of the NRC orders approving the transfer of
the Palisades and Big Rock licenses. The NRC did not alter or stay the prior order approving the
license transfer. We believe that it is unlikely that the NRC will conduct further proceedings or
alter its prior orders, but we cannot predict the outcome of the matter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes the impacts of the Palisades and the Big Rock ISFSI transaction:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="12" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 1px">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="12" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">MPSC Order</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Estimated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Customer</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Closing</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Customer Benefits</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Benefits Estimate</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Adjustments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Benefits</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">380</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">373</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less: Book value of Palisades</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">314</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">296</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Excess proceeds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Excess decommissioning trust funds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">312</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total customer benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">389</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="center" style="margin-top: 3pt">&nbsp;</div>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 1px">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Deferred Costs</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Costs</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">NMC exit fee</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeiture of the NMC investment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total transaction costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Big Rock ISFSI operation and
maintenance fee to Entergy</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Regulatory asset, as of
September&nbsp;30, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">56</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Palisades Power Purchase Agreement: </I>Entergy contracted to sell us 100&nbsp;percent of the plant&#146;s
output up to its current annual average capacity of 798 MW under a 15-year power purchase agreement
beginning in April&nbsp;2007. We provided $30&nbsp;million in security to Entergy for our power purchase
agreement obligation in the form of a letter of credit. We estimate that capacity and energy
payments under the Palisades power purchase agreement will be $180&nbsp;million in 2007 and average $300
million per year thereafter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Due to the Palisades power purchase agreement, the transaction is a sale and leaseback for
accounting purposes. SFAS No.&nbsp;98 specifies the accounting required for a seller&#146;s sale and
simultaneous leaseback involving real estate. We have continuing involvement with Palisades
through security provided to Entergy for our power purchase agreement obligation and our DOE
liability and other forms of involvement. As a
result, we accounted for the Palisades plant, which is the real estate asset subject to the
leaseback, as a financing for accounting purposes and not a sale. As a financing, no gain on the
sale
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><I>Consumers Energy Company</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">of Palisades was recognized on the Consolidated Statements of Income. We accounted for the
remaining non-real estate assets and liabilities associated with the transaction as a sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a financing, the Palisades plant remains on our Consolidated Balance Sheets and we continue to
depreciate it. We recorded the related proceeds as a finance obligation with payments recorded to
interest expense and the finance obligation based on the amortization of the obligation over the
life of the Palisades power purchase agreement. The value of the finance obligation was based on
an allocation of the transaction proceeds to the fair values of the net assets sold and fair value
of the Palisades plant asset under the financing. As of September&nbsp;30, 2007, the financing
obligation was $190&nbsp;million. We estimate future payments of $13&nbsp;million per year over the next
five years.
</DIV>

<DIV align="left">
<A name="127"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>3: </B><FONT style="font-variant: SMALL-CAPS"><B>Contingencies</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SEC and DOJ Investigations: </B>During the period of May&nbsp;2000 through January&nbsp;2002, CMS MST engaged in
simultaneous, prearranged commodity trading transactions in which energy commodities were sold and
repurchased at the same price. These so called round-trip trades had no impact on previously
reported consolidated net income, earnings per share or cash flows, but had the effect of
increasing operating revenues and operating expenses by equal amounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">CMS Energy is cooperating with an investigation by the DOJ concerning round-trip trading, which the
DOJ commenced in May&nbsp;2002. CMS Energy is unable to predict the outcome of this matter and what
effect, if any, this investigation will have on its business. In March&nbsp;2004, the SEC approved a
cease-and-desist order settling an administrative action against CMS Energy related to round-trip
trading. The order did not assess a fine and CMS Energy neither admitted to nor denied the order&#146;s
findings. The settlement resolved the SEC investigation involving CMS Energy and CMS MST. Also in
March&nbsp;2004, the SEC filed an action against three former employees related to round-trip trading at
CMS MST. One of the individuals has settled with the SEC. CMS Energy is currently advancing legal
defense costs for the remaining two individuals in accordance with existing indemnification
policies. Those two individuals filed a motion to dismiss the SEC action, which was denied.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Securities Class&nbsp;Action Lawsuits</B>: Beginning in May&nbsp;2002, a number of complaints were filed against
CMS Energy, Consumers and certain officers and directors of CMS Energy and its affiliates in the
United States District Court for the Eastern District of Michigan. The cases were consolidated
into a single lawsuit (the &#147;Shareholder Action&#148;), which generally seeks unspecified damages based
on allegations that the defendants violated United States securities laws and regulations by making
allegedly false and misleading statements about CMS Energy&#146;s business and financial condition,
particularly with respect to revenues and expenses recorded in connection with round-trip trading
by CMS MST. In January&nbsp;2005, the court granted a motion to dismiss Consumers and three of the
individual defendants, but denied the motions to dismiss CMS Energy and the 13 remaining individual
defendants. In March&nbsp;2006, the court conditionally certified a class consisting of &#147;all persons
who purchased CMS Common Stock during the period of October&nbsp;25, 2000 through and including May&nbsp;17,
2002 and who were damaged thereby.&#148; The court excluded purchasers of CMS Energy&#146;s 8.75&nbsp;percent
Adjustable Convertible Trust Securities (&#147;ACTS&#148;) from the class and, in response, a new class
action lawsuit was filed on behalf of ACTS purchasers (the &#147;ACTS Action&#148;) against the same
defendants named in the Shareholder Action. The settlement described in the following paragraph
has resolved both the Shareholder and ACTS actions.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><I>Consumers Energy Company</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;3, 2007, CMS Energy and other parties entered into a Memorandum of Understanding (the
&#147;MOU&#148;), subject to court approval, regarding settlement of the two class action lawsuits. The
settlement was approved by a special committee of independent directors and by the full board of
directors of CMS Energy. Both judged that it was in the best interests of shareholders to
eliminate this business uncertainty. Under the terms of the MOU, the litigation was settled for a
total of $200&nbsp;million, including the cost of administering the settlement and any attorney fees the
court awards. CMS Energy made a payment of approximately $123&nbsp;million plus interest on the
settlement amount on September&nbsp;20, 2007. CMS Energy&#146;s insurers paid $77&nbsp;million, the balance of
the settlement amount. In entering into the MOU, CMS Energy made no admission of liability under
the Shareholder Action and the ACTS Action. The parties executed a Stipulation and Agreement of
Settlement dated May&nbsp;22, 2007 (&#147;Stipulation&#148;) incorporating the terms of the MOU. In accordance
with the Stipulation, CMS has paid approximately $1&nbsp;million of the settlement amount to fund
administrative expenses. On September&nbsp;6, 2007, the court issued a final order approving the
settlement. The remaining settlement amount was paid following the September&nbsp;6, 2007 hearing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On
October&nbsp;5, 2007, two former officers of Consumers filed an
appeal of the order approving the settlement of the shareholder
litigation. Based on the objections they filed in the District Court
and comments made on the record at the fairness hearing on
September&nbsp;6, 2007, they are not challenging the amount of the
settlement. Their principal complaint was with the exclusion of all
present and former officers and their immediate families from
participation in the settlement. It is not anticipated that the
appeal will result in changes to any material terms of the settlement
approved by the District Court.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Katz Technology Litigation: </B>In June&nbsp;2007, Ronald A. Katz Technology Licensing, L.P. (&#147;RAKTL&#148;),
filed a lawsuit in the United States District Court for the Eastern District of Michigan against
CMS Energy and Consumers alleging patent infringement. RAKTL is claiming that automated customer
service, bill payment services and gas leak reporting offered to our customers and accessed through
toll free numbers infringe on patents held by RAKTL. This case has been transferred to the U.S.
District Court for the Central District of California where other similar cases against public
utilities, banks and other entities involving these patents are pending. We obtained an opinion
from patent counsel that our automated telephone systems do not infringe on RAKTL patents and that
those patents may be invalid. We will defend ourselves vigorously against these claims but cannot
predict their outcome.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>ELECTRIC CONTINGENCIES</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Electric Environmental Matters: </B>Our operations are subject to environmental laws and regulations.
Costs to operate our facilities in compliance with these laws and regulations generally have been
recovered in customer rates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Routine Maintenance Classification: </I>The EPA has alleged that some utilities have incorrectly
classified plant modifications as &#147;routine maintenance&#148; rather than seeking permits from the EPA to
modify the plant. We have received and responded to information requests from the EPA on this
subject. We believe that we have properly interpreted the requirements of &#147;routine maintenance.&#148;
If our interpretation is found to be incorrect, we may be required to install additional pollution
controls at some or all of our coal-fired electric generating plants and potentially pay fines.
Additionally, the viability of certain plants remaining in operation could be called into question.
We cannot predict the financial impact or outcome of this issue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Cleanup and Solid Waste: </I>Under the Michigan Natural Resources and Environmental Protection Act, we
expect that we will ultimately incur investigation and remedial action costs at a number of sites.
We believe that these costs will be recoverable in rates under current ratemaking policies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are a potentially responsible party at several contaminated sites administered under the
Superfund. Superfund liability is joint and several, meaning that many other creditworthy parties
with substantial assets are potentially responsible with respect to the individual sites. Based on
our experience, we estimate that our share of the total liability for the known Superfund sites
will be between $1&nbsp;million and $10&nbsp;million. At September&nbsp;30, 2007, we have recorded a liability
for the minimum amount of our estimated probable Superfund liability in accordance with FIN 14.
The timing of payments related to
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><I>Consumers Energy Company</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the remediation of our Superfund sites is uncertain. Any significant change in assumptions, such as different
remediation techniques, nature and extent of contamination, and legal and regulatory requirements,
could affect our estimate of remedial action costs and the timing of our remediation payments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Ludington PCB: </I>In October&nbsp;1998, during routine maintenance activities, we identified PCB as a
component in certain paint, grout, and sealant materials at Ludington. We removed and replaced
part of the PCB material. Since proposing a plan to deal with the remaining materials, we have had
several conversations with the EPA. The EPA has proposed a rule that would authorize continued use
of such material in place, subject to certain restrictions. We are not able to predict when a
final rule will be issued.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Electric Utility Plant Air Permit Issues: </I>In April&nbsp;2007, we received a Notice of
Violation(NOV)/Finding of Violation (FOV)&nbsp;from the EPA alleging that fourteen of our utility
boilers exceeded visible emission limits in their associated air permits. The utility boilers are
located at the D.E. Karn/J.C. Weadock Generating Complex, the J.H. Campbell Plant, the BC Cobb
Electric Generating Station and the JR Whiting Plant, which are all located in Michigan. We have
formally responded to the NOV/FOV denying the allegations and are awaiting the EPA&#146;s response to
our submission. We cannot predict the financial impact or outcome of this issue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Litigation: </B>In 2003, a group of eight PURPA qualifying facilities (the plaintiffs), which sell
power to us, filed a lawsuit in Ingham County Circuit Court. The lawsuit alleged that we
incorrectly calculated the energy charge payments made pursuant to power purchase agreements with
qualifying facilities. The judge deferred to the primary jurisdiction of the MPSC, dismissing the
circuit court case without prejudice. In February&nbsp;2005, the MPSC issued an order in the 2004 PSCR
plan case concluding that we have been correctly administering the energy charge calculation
methodology. The plaintiffs have appealed the MPSC order to the Michigan Court of Appeals. The
plaintiffs also filed suit in the United States Court for the Western District of Michigan, which
the judge subsequently dismissed on the basis that the pending state court litigation would fully
resolve any federal issue before the courts. The plaintiffs then appealed the dismissal to the
United States Court of Appeals, which held that the district court matter should be stayed rather
than dismissed, pending the outcome of the state appeal. We cannot predict the outcome of these
appeals.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>ELECTRIC RATE MATTERS</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Electric ROA: </B>The Customer Choice Act allows electric utilities to recover their net Stranded
Costs. In November&nbsp;2004, the MPSC approved recovery of Stranded Costs incurred from 2002 through
2003 plus the cost of money through the period of collection. At September&nbsp;30, 2007, we had a
regulatory asset for Stranded Costs of $67&nbsp;million on our Consolidated Balance Sheets. We collect
these Stranded Costs through a surcharge on ROA customers. At September&nbsp;30, 2007, alternative
electric suppliers were providing 311 MW of generation service to ROA customers, which represents
an increase of 1&nbsp;percent of ROA load compared to September&nbsp;30, 2006. Since the MPSC order, we have
experienced downward trends in ROA customers. This trend has affected negatively our ability to
recover these Stranded Costs in a timely manner. If this trend continues, it may require
legislative or regulatory assistance to recover fully our Stranded Costs. It is difficult to
predict future ROA customer trends and their effect on the timely recovery of Stranded Costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Power Supply Costs: </B>To reduce the risk of high power supply costs during peak demand periods and
to achieve our reserve margin target, we purchase electric capacity and energy contracts for the
physical delivery of electricity primarily in the summer months and to a lesser degree in the
winter months. We
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><I>Consumers Energy Company</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">have purchased capacity and energy contracts covering partially the estimated reserve margin
requirements for 2008 through 2010.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>PSCR: </I>The PSCR process allows recovery of reasonable and prudent power supply costs. The MPSC
reviews these costs for reasonableness and prudency in annual plan proceedings and in plan
reconciliation proceedings. The following table summarizes our PSCR reconciliation filings with
the MPSC:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="11" style="border-bottom: 1px solid #000000">Power Supply Cost Recovery Reconciliation</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Net Under-</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">PSCR Cost<BR>of Power</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Description of Net</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">PSCR Year</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Date Filed</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Order Date</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">recovery</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Sold</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Underrecovery</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="11" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2005 Reconciliation
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">March&nbsp;2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">July&nbsp;2007
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$36&nbsp;million
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$1.081&nbsp;billion
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">MPSC approved the
recovery of our $36
million
underrecovery,
including the cost
of money, related
to our commercial
and industrial
customers.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2006 Reconciliation
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">March&nbsp;2007
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Pending
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$105&nbsp;million
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$1.490&nbsp;billion
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Underrecovery
relates to our
increased METC
costs and coal
supply costs,
increased bundled
sales, and other
cost increases
beyond those
included in the
2006 PSCR plan
filings.</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="11" valign="top" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>2007 PSCR Plan: </I>In September&nbsp;2006, we filed our 2007 PSCR plan with the MPSC. The plan sought
authorization to incorporate our 2005 and 2006 PSCR underrecoveries into our 2007 PSCR monthly
factor. In December&nbsp;2006, the MPSC issued a temporary order allowing us to implement our 2007 PSCR
monthly factor on January&nbsp;1, 2007, as filed. The order also allowed us to continue to roll in
prior year underrecoveries and overrecoveries in future PSCR plans. In September&nbsp;2007, the ALJ
recommended in his Proposal for Decision that we reduce our 2006 underrecovery rolled into 2007 by
$62&nbsp;million to reflect the refund of 100&nbsp;percent of the proceeds from the sale of sulfur dioxide
allowances. Our PSCR plan proposed to refund 50&nbsp;percent of the proceeds to customers. In
accordance with FERC regulations, we reserved this amount, excluding interest, as a regulatory
liability on our Consolidated Balance Sheets until a final order is received from the MPSC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Underrecoveries in power supply costs are included in Accrued power supply and gas revenue on our
Consolidated Balance Sheets. We expect to recover fully all of our PSCR costs. When we are unable
to collect these costs as they are incurred, there is a negative impact on our cash flows from
electric utility operations. We cannot predict the outcome of these proceedings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>2008 PSCR Plan</I>: In September&nbsp;2007, we submitted our 2008 PSCR plan filing to the MPSC. Included
in our request is proposed recovery of estimated 2007 PSCR underrecoveries of $84&nbsp;million. We
expect to self-implement the proposed 2008 PSCR charge in January&nbsp;2008, absent action by the MPSC
by the end of 2007. We cannot predict the outcome of this proceeding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Electric Rate Case: </B>In March&nbsp;2007, we filed an application with the MPSC seeking an 11.25&nbsp;percent
authorized return on equity and an annual increase in revenues of $157&nbsp;million. In May
2007, we filed
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><I>Consumers Energy Company</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">supplemental testimony with the MPSC to include transaction costs from the sale of Palisades. In
July&nbsp;2007, we filed an amended application with the MPSC to include the proposed purchase of the
Zeeland power plant, the approval of an energy efficiency program, and to make other revisions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In July&nbsp;2007, we also filed an amended application for rate relief, which seeks the following:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>approval to remove the costs associated with Palisades,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>recovery of the proposed purchase of the Zeeland power plant,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>partial and immediate rate relief associated with 2007 capital investments, a $400
million equity infusion into Consumers, and general inflation on operation and maintenance
expenses to 2007 levels, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>approval of a plan for the distribution of additional excess proceeds from the sale of
Palisades to customers, effectively offsetting the partial and immediate relief for up to
nine months.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes the components of the final and interim requested increase in
revenue:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="8" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Zeeland</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">and Partial</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">and</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Components of the increase in revenue</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Immediate</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Final</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase in base rates (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">146</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Removal of Palisades from base rates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(169</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(169</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Elimination of Palisades base rate recovery credit from the
PSCR (b)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">167</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Surcharge for return on nuclear investments (c)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total requested increase in revenues at March&nbsp;2007 filing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">157</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Palisades transaction costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Zeeland power plant non-fuel revenue requirements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Energy Efficiency Program surcharge</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Palisades excess proceeds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(127</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total requested increase in revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">282</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<DIV style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>The increase in base rates relates to Clean Air Act-related and other utility expenditures,
changes in the capital structure, and increased distribution system operation and maintenance costs
including employee pension and health care costs.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(b)</TD>
    <TD>&nbsp;</TD>
    <TD>Palisades power purchase agreement costs in the PSCR are presently offset through a base rate
recovery credit. The Palisades base rate recovery credit will be discontinued once Palisades&#146;
costs are removed from base rates.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(c)</TD>
    <TD>&nbsp;</TD>
    <TD>The nuclear surcharge is a proposal to earn a return on funds spent on Big Rock spent nuclear
fuel storage, decommissioning, and site restoration expenditures until pending DOE litigation and
future MPSC proceedings regarding this issue are concluded.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">When we are unable to include increased costs and investments in rates in a timely manner, there is
a negative impact on our cash flows from electric utility operations. We cannot predict the amount
or timing of any MPSC decision on the requests.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CE-39<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><I>Consumers Energy Company</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>OTHER ELECTRIC CONTINGENCIES</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The MCV PPA: </B>The MCV Partnership, which leases and operates the MCV Facility, contracted to sell
1,240 MW of electricity to Consumers under a 35-year power purchase agreement beginning in 1990.
We estimate that capacity and energy payments under the MCV PPA, excluding RCP savings, will range
from $650&nbsp;million to $750&nbsp;million per year, which assumes successful exercise of the regulatory-out
provision in the MCV PPA.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Regulatory-out Provision in the MCV PPA: </I>The cost that we incur under the MCV PPA exceeded the
recovery amount allowed by the MPSC until we exercised the regulatory-out provision in the MCV PPA
in September&nbsp;2007. This action limited our capacity and fixed energy payments to the MCV
Partnership to the amounts that we collect from our customers. Cash underrecoveries of our
capacity and fixed energy payments were $39&nbsp;million in 2007. However, we used savings from the
RCP, after allocating a portion to customers, to offset a portion of our capacity and fixed energy
underrecoveries expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a result of our exercise of the regulatory-out provision, the MCV Partnership may, under certain
circumstances, have the right to terminate or reduce the amount of capacity sold under the MCV PPA
from 1,240 MW to 806 MW, which could affect our electric reserve margin. The MCV Partnership has
until January&nbsp;26, 2008 to notify us of their intention to terminate the MCV PPA at which time the
MCV Partnership must specify the termination date. We have not yet received any notification of
termination. However, the MCV Partnership has notified us that it
disputes our right to exercise the regulatory-out provision. We believe that the provision is valid and fully effective, but cannot
assure that we will prevail in the event of a proceeding on this issue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We anticipate that the MPSC will review our exercise of the regulatory-out provision and the likely
consequences of such action in 2007. It is possible that in the event that the MCV Partnership
terminates performance under the MCV PPA, prior orders could limit recovery of replacement power
costs to the amounts that the MPSC authorized for recovery under the MCV PPA. Depending on the
cost of replacement power, this could result in our costs exceeding the recovery amount allowed by
the MPSC. We cannot predict the outcome of these matters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To comply with a prior MPSC order, we made a filing in May&nbsp;2007 with the MPSC requesting a
determination regarding whether it wished to reconsider the amount of the MCV PPA payments that we
recover from customers. Furthermore, the MCV Partnership filed an application with the MPSC
requesting the elimination of the 88.7&nbsp;percent availability cap on the amount of capacity and fixed
energy charges that we are allowed to recover from our customers. We cannot predict the outcome of
these matters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>RCP: </I>In January&nbsp;2005, we implemented the MPSC-approved RCP with modifications. The RCP allows us
to recover the same amount of capacity and fixed energy charges from customers as approved in prior
MPSC orders. However, we are able to dispatch the MCV Facility based on natural gas market prices.
This results in fuel cost savings for the MCV Facility, which the MCV Partnership shares with us.
The RCP also requires contributions of $5&nbsp;million annually to a renewable resources program. As of
September&nbsp;30, 2007, contributions of $13&nbsp;million were made to the renewable resources program. The
underlying RCP agreement between Consumers and the MCV Partnership extends through the term of the
MCV PPA. However, either party may terminate that agreement under certain conditions. In
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><I>Consumers Energy Company</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">January&nbsp;2007, the Michigan Attorney General filed an appeal with the Michigan Supreme Court
regarding the MPSC&#146;s order approving the RCP. The Supreme Court denied the Attorney General&#146;s
request to further consider the matter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Nuclear Matters: </B><I>Big Rock Decommissioning: </I>The MPSC and the FERC regulate the recovery of costs
to decommission Big Rock. In December&nbsp;2000, funding of the Big Rock trust fund stopped because the
MPSC-authorized decommissioning surcharge collection period expired. The level of funds provided
by the trust fell short of the amount needed to complete decommissioning. As a result, we provided
$45&nbsp;million of corporate contributions for costs associated with NRC radiological and non-NRC
greenfield decommissioning work as of September&nbsp;30, 2007. This amount excludes the $30&nbsp;million
payment to Entergy to assume ownership and responsibility for the Big Rock ISFSI and additional
corporate contributions for nuclear fuel storage costs of $54&nbsp;million as of September&nbsp;30, 2007, due
to the DOE&#146;s failure to accept spent nuclear fuel on schedule. We plan to seek recovery from
the MPSC of expenditures that we have funded and have a $129&nbsp;million regulatory asset recorded on
our Consolidated Balance Sheets as of September&nbsp;30, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Actual expenditures for Big Rock decommissioning totaled $388&nbsp;million as of September&nbsp;30, 2007.
This total excludes the additional costs for spent nuclear fuel storage due to the DOE&#146;s failure to
accept this spent nuclear fuel on schedule as well as certain increased security costs that we are
recovering through the security cost provisions of Public Act 609 of 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Nuclear Fuel Cost: </I>We deferred payment for disposal of spent nuclear fuel burned before April&nbsp;7,
1983. Our DOE liability is $158&nbsp;million at September&nbsp;30, 2007. This amount includes interest,
which is payable upon the first delivery of spent nuclear fuel to the DOE. We recovered, through
electric rates, the amount of this liability, excluding a portion of interest. In conjunction with
the sale of Palisades and the Big Rock ISFSI, we retained this obligation and provided a $155
million letter of credit to Entergy as security for this obligation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>DOE Litigation: </I>In 1997, a U.S. Court of Appeals decision confirmed that the DOE was to begin
accepting deliveries of spent nuclear fuel for disposal by January&nbsp;1998. Subsequent U.S. Court of
Appeals litigation, in which we and other utilities participated, has not been successful in
producing more specific relief for the DOE&#146;s failure to accept the spent nuclear fuel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">There are a number of court decisions that support the right of utilities to pursue damage claims
in the United States Court of Claims against the DOE for failure to take delivery of spent nuclear
fuel. If our litigation against the DOE is successful, we plan to use any recoveries as
reimbursement for the incurred costs of spent nuclear fuel storage during our ownership of
Palisades and Big Rock. We can make no assurance that the litigation against the DOE will be
successful. The sale of Palisades and the Big Rock ISFSI did not transfer the right to any
recoveries from the DOE related to costs of spent nuclear fuel storage incurred during our
ownership of Palisades and Big Rock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2002, the site at Yucca Mountain, Nevada was designated for the development of a repository for
the disposal of high-level radioactive waste and spent nuclear fuel. We expect that the DOE,
ultimately, will submit a final license application to the NRC for the repository. The application
and review process is estimated to take several years.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><I>Consumers Energy Company</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>GAS CONTINGENCIES</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Gas Environmental Matters: </B>We expect to incur investigation and remediation costs at a number of
sites under the Michigan Natural Resources and Environmental Protection Act, a Michigan statute
that covers environmental activities including remediation. These sites include 23 former
manufactured gas plant facilities. We operated the facilities on these sites for some part of
their operating lives. For some of these sites, we have no current ownership or may own only a
portion of the original site. In 2005, we estimated our remaining costs to be between $29&nbsp;million
and $71&nbsp;million, based on 2005 discounted costs, using a discount rate of three percent. The
discount rate represents a 10-year average of U.S. Treasury bond rates reduced for increases in
the consumer price index. We expect to fund most of these costs through proceeds derived from a
settlement with insurers and MPSC-approved rates. At September&nbsp;30, 2007, we have a liability of
$19&nbsp;million, net of $63&nbsp;million of expenditures incurred to date, and a regulatory asset of $52
million. The timing of payments related to the remediation of our manufactured gas plant sites is
uncertain. Any significant change in assumptions, such as an increase in the number of sites,
different remediation techniques, nature and extent of contamination, and legal and regulatory
requirements, could affect our estimate of remedial action costs and the timing of our remediation
payments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Gas Title Transfer Tracking Fees and Services (TTT): </B>On September&nbsp;19, 2007, the FERC issued an
order denying Consumers&#146; request for Summary Disposition and established hearing procedures in this
proceeding. In addition to issues related to the appropriate level of the TTT fee and refunds
related to TTT transactions, this order sets for hearing the issue of whether Consumers has
violated annual reporting requirements of the FERC&#146;s regulations. A prehearing conference was held
on October&nbsp;4, 2007. Testimony is due November&nbsp;9, 2007, with hearings to begin February&nbsp;5, 2008.
We cannot predict the outcome of this proceeding.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>GAS RATE MATTERS</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Gas Cost Recovery: </B>The GCR process is designed to allow us to recover all of our purchased natural
gas costs if incurred under reasonable and prudent policies and practices. The MPSC reviews these
costs, policies, and practices for prudency in annual plan and reconciliation proceedings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes our GCR reconciliation filings with the MPSC:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="11" style="border-bottom: 1px solid #000000">Gas Cost Recovery Reconciliation</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Net Over-</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">GCR Cost</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">GCR Year</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Date Filed</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Order Date</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">recovery</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">of Gas Sold</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Description of Net Overrecovery</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="11" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2005-2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">June&nbsp;2006
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April&nbsp;2007
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$3&nbsp;million
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$1.8&nbsp;billion
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The net overrecovery includes
$1&nbsp;million interest income
through March&nbsp;2006, which
resulted from a net
underrecovery position during
the majority of the GCR
period.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2006-2007
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">June&nbsp;2007
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Pending
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$5 million
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$1.7&nbsp;billion
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The total overrecovery amount
reflects an overrecovery of $1
million plus $4&nbsp;million in
accrued interest owed to
customers.</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="11" valign="top" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Overrecoveries in cost of gas sold are included in Accrued rate refunds on our Consolidated Balance
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->CE-42<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><I>Consumers Energy Company</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Sheets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>GCR plan for year 2005-2006: </I>In November&nbsp;2005, the MPSC issued an order for our 2005-2006 GCR Plan
year, which resulted in approval of a settlement agreement and established a fixed price cap of
$10.10 per mcf for the December&nbsp;2005 through March&nbsp;2006 billing period. We were able to maintain
our GCR billing factor below the authorized level for that period. The order was appealed to the
Michigan Court of Appeals by one intervenor. We are unable to predict the outcome of this
proceeding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>GCR plan for year 2006-2007: </I>In August&nbsp;2006, the MPSC issued an order for our 2006-2007 GCR Plan
year, which resulted in approval of a settlement agreement that allowed a base GCR ceiling factor
of $9.48 per mcf for the 12-month period of April&nbsp;2006 through March&nbsp;2007. We were able to
maintain our GCR billing factor below the authorized level for that period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>GCR plan for year 2007-2008: </I>In July&nbsp;2007, the MPSC issued an order for our 2007-2008 GCR plan
year, which resulted in approval of a settlement agreement that allowed a base GCR ceiling factor
of $8.47 per mcf for the 12-month period of April&nbsp;2007 through March&nbsp;2008, subject to a quarterly
ceiling price adjustment mechanism.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Due to an increase in NYMEX gas prices compared to the plan, the base GCR ceiling factor increased
to $8.67 per mcf pursuant to the quarterly ceiling price adjustment mechanism for the 3-month
period of July&nbsp;2007 through September&nbsp;2007. Beginning October&nbsp;2007, the base GCR ceiling factor
was adjusted to $8.47 due to a decrease in NYMEX gas prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The GCR billing factor is adjusted monthly in order to minimize the over or underrecovery amounts
in our annual GCR reconciliation. Our GCR billing factor for the month of November&nbsp;2007 is $7.78
per mcf.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>2007 Gas Rate Case: </B>In February&nbsp;2007, we filed an application with the MPSC seeking an 11.25
percent authorized return on equity along with an $88&nbsp;million annual increase in our gas delivery
and transportation rates. We proposed the use of a Revenue Decoupling and Conservation Incentive
Mechanism for residential and general service rate classes, which would partially separate the
collection of fixed costs from gas sales and enhance the utility&#146;s ability to recover its fixed
costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In August&nbsp;2007, the MPSC approved a partial settlement agreement authorizing an annual rate
increase of $50&nbsp;million, including an authorized return on equity of 10.75&nbsp;percent. The proposed
Revenue Decoupling and Conservation Incentive Mechanism was not approved. On September&nbsp;25, 2007,
the MPSC reopened the record in the case to allow all interested parties to be heard concerning the
approval of an energy efficiency program, which we included in our original filing. If approved in
total, this would result in an additional rate increase of $9&nbsp;million to be used to implement the
energy efficiency program.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>OTHER CONTINGENCIES</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Other: </B>In addition to the matters disclosed within this Note, we are party to certain lawsuits and
administrative proceedings before various courts and governmental agencies arising from the
ordinary course of business. These lawsuits and proceedings may involve personal injury, property
damage, contractual matters, environmental issues, federal and state taxes, rates, licensing, and
other matters.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CE-43<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><I>Consumers Energy Company</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have accrued estimated losses for certain contingencies discussed within this Note. Resolution
of these contingencies is not expected to have a material adverse impact on our financial position,
liquidity, or future results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>FASB Interpretation No.&nbsp;45, </B><B><I>Guarantor&#146;s Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others: </I></B>The Interpretation requires the
guarantor, upon issuance of a guarantee, to recognize a liability for the fair value of the
obligation it undertakes in issuing the guarantee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table describes our guarantees at September&nbsp;30, 2007:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="9" style="border-bottom: 1px solid #000000">In Millions</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">FIN 45</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Expiration</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Maximum</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">Carrying</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Guarantee Description</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Issue Date</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Date</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Obligation</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">Amount</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Surety bonds and other indemnifications

</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">Various

</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">Various

</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">$&nbsp;1

</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
&#151;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Guarantee
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
January&nbsp;1987
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
March&nbsp;2016
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
85
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&#151;</TD>
</TR>
<TR style="font-size: 1px">
<TD nowrap align="right" colspan="9" style="border-bottom: 3px double #000000">&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table provides additional information regarding our guarantees:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Events That Would Require</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Guarantee Description</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">How Guarantee Arose</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Performance</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="5" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Surety bonds and other
indemnifications
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Normal operating
activity, permits and
licenses
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Nonperformance</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Guarantee
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement to provide
power and steam to
Dow
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">MCV Partnership&#146;s
nonperformance or
non-payment under a
related contract</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" valign="top" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At September&nbsp;30, 2007, only our guarantee to provide power and steam to Dow contained provisions
allowing us to recover, from third parties, amounts paid under the guarantees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We sold our interests in the MCV Partnership and the FMLP. The sales agreement calls for the
purchaser, an affiliate of GSO Capital Partners and Rockland Capital Energy Investments, to pay
Consumers $85&nbsp;million, subject to certain reimbursement rights, if Dow terminates an agreement
under which the MCV Partnership provides it steam and electric power. This agreement expires in
March&nbsp;2016 and is subject to certain terms and conditions. The purchaser secured their
reimbursement obligation with an irrevocable letter of credit of up to $85&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We enter into various agreements containing tax and other indemnification provisions in connection
with a variety of transactions, including the sale of our interests in the MCV Partnership and the
FMLP and the sale of our interest in Palisades and the Big Rock ISFSI. While we are unable to
estimate the maximum potential obligation related to these indemnities, we consider the likelihood
that we would be required to perform or incur significant losses related to these indemnities and
the guarantees listed in the preceding tables to be remote.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CE-44<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="128"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>4: </B><FONT style="font-variant: SMALL-CAPS"><B>Financings and Capitalization</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Long-term debt is summarized as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="8" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">September 30, 2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">December 31, 2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">First mortgage bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,172</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Senior notes and other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">657</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">652</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Securitization bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">318</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">340</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Principal amounts outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,164</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Current amounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(440</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(31</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net unamortized discount</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,127</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Revolving Credit Facility: </B>The following secured revolving credit facility with banks is available
at September&nbsp;30, 2007:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="32%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="17" style="border-bottom: 1px solid #000000">In Millions</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Outstanding</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Amount of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Amount</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Letters-of-</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Amount</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Company</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Expiration Date</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Facility</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Borrowed</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Credit</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Available</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Consumers
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">March&nbsp;30, 2012
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">500</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$&nbsp;&#151;
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">218</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">282</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" valign="top" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We replaced our $500&nbsp;million facility with a new $500&nbsp;million credit facility in March&nbsp;2007. The
new facility contains less restrictive covenants, and provides for lower fees and lower interest
margins than the previous credit facilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Dividend Restrictions: </B>Under the provisions of our articles of incorporation, at September&nbsp;30,
2007, we had $250&nbsp;million of unrestricted retained earnings available to pay common stock
dividends. The dividend restrictions in our secured revolving credit facility were removed in
March&nbsp;2007. Provisions of the Federal Power Act and the Natural Gas Act effectively restrict
dividends to the amount of our retained earnings. For the nine months ended September&nbsp;30, 2007, we
paid $176&nbsp;million in common stock dividends to CMS Energy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Capital Lease Obligations: </B>Our capital leases are comprised mainly of leased service vehicles,
office furniture, and gas pipeline capacity. At September&nbsp;30, 2007, capital lease obligations
totaled $62&nbsp;million. We estimate future minimum lease payments to range between $10&nbsp;million and
$19&nbsp;million per year over the next five years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Sale of Accounts Receivable: </B>Under a revolving accounts receivable sales program, we sell certain
accounts receivable to a wholly owned, consolidated, bankruptcy remote special purpose entity. In
turn, the special purpose entity may sell an undivided interest in up to $325&nbsp;million of the
receivables. The special purpose entity sold no receivables at September&nbsp;30, 2007 and $325&nbsp;million
of receivables at December&nbsp;31, 2006. We continue to service the receivables sold to the special
purpose entity. The purchaser of the receivables has no recourse against our other assets for
failure of a debtor to pay when due and no right to any receivables not sold. We have neither
recorded a gain or loss on the receivables sold nor retained an interest in the receivables sold.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->CE-45<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><I>Consumers Energy Company</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Certain cash flows under our accounts receivable sales program are shown in the following table:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="9" style="border-bottom: 1px solid #000000">In Millions</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Nine months ended September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash flow as a result of accounts receivable financing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(325</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(9</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Collections from customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,631</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,402</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<A name="129"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>5: </B><FONT style="font-variant: SMALL-CAPS"><B>Financial and Derivative Instruments</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Financial Instruments: </B>The carrying amounts of cash, short-term investments, and current
liabilities approximate their fair values because of their short-term nature. We estimate the fair
values of long-term financial instruments based on quoted market prices or, in the absence of
specific market prices, on quoted market prices of similar instruments or other valuation
techniques.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The cost and fair value of our long-term debt instruments including current maturities are as
follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="25" style="border-bottom: 1px solid #000000">In Millions</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">September 30, 2007</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">December 31, 2006</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Fair</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Fair</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unrealized</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Cost</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Value</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Gain</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Cost</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Value</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Gain</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,073</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The summary of our available-for-sale investment securities is as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="33" style="border-bottom: 1px solid #000000">In Millions</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">September 30, 2007</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">December 31, 2006</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Fair</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Fair</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Cost</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Gains</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Losses</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Value</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Cost</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Gains</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Losses</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Value</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="33" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Common stock of CMS Energy (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$&nbsp;&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$&nbsp;&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nuclear decommissioning investments:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">286</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">309</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SERP:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="33" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<DIV style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>At September&nbsp;30, 2007, we held 1.8&nbsp;million shares and at December&nbsp;31, 2006, we held 2.2&nbsp;million
shares of CMS Energy Common Stock.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Derivative Instruments</B>: In order to limit our exposure to certain market risks, we may enter into
various risk management contracts, such as swaps, options, futures, and forward contracts. These
contracts, used primarily to manage our exposure to changes in interest rates and commodity prices,
are entered into for purposes other than trading. We enter into these contracts using established
policies and procedures, under the direction of both:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an executive oversight committee consisting of senior management representatives, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a risk committee consisting of business unit managers.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->CE-46<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><I>Consumers Energy Company</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The contracts we use to manage market risks may qualify as derivative instruments that are subject
to derivative and hedge accounting under SFAS No.&nbsp;133. If a contract is a derivative and does not
qualify for the normal purchases and sales exception under SFAS No.&nbsp;133, it is recorded on our
consolidated balance sheet at its fair value. We then adjust the resulting asset or liability each
quarter to reflect any change in the market value of the contract, a practice known as marking the
contract to market. From time to time, we enter into cash flow hedges. If a derivative qualifies
for cash flow hedge accounting treatment, the changes in fair value (gains or losses) are reported
in AOCI; otherwise, the changes are reported in earnings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The majority of our commodity purchase and sale contracts are not subject to derivative accounting
under SFAS No.&nbsp;133 because:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>they do not have a notional amount (that is, a number of units specified in a
derivative instrument, such as MWh of electricity or bcf of natural gas),</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>they qualify for the normal purchases and sales exception, or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>there is not an active market for the commodity.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our coal purchase contracts are not derivatives because there is not an active market for the coal
we purchase. If an active market for coal develops in the future, some of these contracts may
qualify as derivatives and the resulting mark-to-market impact on earnings could be material.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Derivative accounting is required for certain contracts used to limit our exposure to commodity
price risk. At September&nbsp;30, 2007, the fair value of these derivative contracts was immaterial.
</DIV>

<DIV align="left">
<A name="130"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>6: </B><FONT style="font-variant: SMALL-CAPS"><B>Retirement Benefits</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We provide retirement benefits to our employees under a number of different plans, including:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a non-contributory, defined benefit Pension Plan,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a cash balance Pension Plan for certain employees hired between July&nbsp;1, 2003 and August
31, 2005,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a DCCP for employees hired on or after September&nbsp;1, 2005,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>benefits to certain management employees under SERP,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a defined contribution 401(k) Savings Plan,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>benefits to a select group of management under the EISP, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>health care and life insurance benefits under OPEB.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Pension Plan: </I>The Pension Plan includes funds for most of our current employees, the employees of
our subsidiaries, and Panhandle, a former subsidiary. The Pension Plan&#146;s assets are not
distinguishable by company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In April&nbsp;2007, we sold Palisades to Entergy. Employees transferred to Entergy as a result of the
sale no longer participate in our retirement benefit plans. We recorded a net reduction of $22
million in pension SFAS No.&nbsp;158 regulatory assets with a corresponding decrease of $22&nbsp;million in
pension liabilities on our Consolidated Balance Sheets. We also recorded a net reduction of $15
million in OPEB regulatory SFAS No.&nbsp;158 assets with a corresponding decrease of $15&nbsp;million in OPEB
liabilities. The following table shows the net adjustment:
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CE-47<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><I>Consumers Energy Company</I>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Pension</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">OPEB</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Plan liability transferred to Entergy</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Trust assets transferred to Entergy</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Beginning May&nbsp;1, 2007, the CMS Energy Common Stock Fund is no longer an investment option available
for new investments in the 401(k) Savings Plan and the employer&#146;s match is no longer in CMS Energy
Stock. Participants have an opportunity to reallocate investments in the CMS Energy Stock Fund to
other plan investment alternatives. Beginning November&nbsp;1, 2007, any remaining shares in the CMS
Energy Stock Fund will be sold and the sale proceeds will be reallocated to other plan investment
options. At September&nbsp;30, 2007, there were 7&nbsp;million shares of CMS Energy Common Stock in the CMS
Energy Stock Fund.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>SFAS No.&nbsp;158, Employers&#146; Accounting for Defined Benefit Pension and Other Postretirement Plans &#151; an
amendment of FASB Statements No.&nbsp;87, 88, 106, and 132(R): </I>In September&nbsp;2006, the FASB issued SFAS
No.&nbsp;158. Phase one of this standard required us to recognize the funded status of our defined
benefit postretirement plans on our Consolidated Balance Sheets at December&nbsp;31, 2006. Phase one
was implemented in December&nbsp;2006. Phase two of this standard requires that we change our plan
measurement date from November&nbsp;30 to December&nbsp;31, effective December&nbsp;31, 2008. We do not believe
that implementation of phase two of this standard will have a material effect on our consolidated
financial statements. We expect to adopt the measurement date provisions of SFAS No.&nbsp;158 in 2008.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CE-48<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><I>Consumers Energy Company</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Costs: </I>The following table recaps the costs, other changes in plan assets, and benefit obligations
incurred in our retirement benefits plans:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="17" style="border-bottom: 1px solid #000000">In Millions</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14">Pension</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #000000">Three Months Ended</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #000000">Nine Months Ended</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected return on plan assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(56</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(60</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prior service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net periodic cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Regulatory adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net periodic cost after regulatory adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">61</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="17" style="border-bottom: 1px solid #000000">In Millions</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14">OPEB</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #000000">Three Months Ended</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #000000">Nine Months Ended</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected return on plan assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(16</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(47</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(43</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prior service credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net periodic cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Regulatory adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net periodic cost after regulatory adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<A name="131"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>7: </B><FONT style="font-variant: SMALL-CAPS"><B>Asset Retirement Obligations</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>SFAS No.&nbsp;143, Accounting for Asset Retirement Obligations</I></B><B>: </B>This standard requires companies to
record the fair value of the cost to remove assets at the end of their useful life, if there is a
legal obligation to remove them. Fair value, to the extent possible, should include a market risk
premium for unforeseeable circumstances. No market risk premium was included in our ARO fair value
estimate since a reasonable estimate could not be made. If a five percent market risk premium were
assumed, our ARO liability would increase by $5&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If a reasonable estimate of fair value cannot be made in the period in which the ARO is incurred,
such as for assets with indeterminate lives, the liability is to be recognized when a reasonable
estimate of fair value can be made. Generally, gas transmission and electric and gas distribution
assets have indeterminate lives. Retirement cash flows cannot be determined and there is a low
probability of a retirement date. Therefore, no liability has been recorded for these assets or
associated obligations related to potential future abandonment. Also, no liability has been
recorded for assets that have insignificant cumulative disposal costs, such as substation batteries.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CE-49<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><I>Consumers Energy Company</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>FASB Interpretation No.&nbsp;47, </B><B><I>Accounting for Conditional Asset Retirement Obligations: </I></B>This
Interpretation clarified the term &#147;conditional asset retirement obligation&#148; as used in SFAS No.
143. The term refers to a legal obligation to perform an asset retirement activity in which the
timing and (or)&nbsp;method of settlement are conditional on a future event. We determined that
abatement of asbestos included in our plant investments qualifies as a conditional ARO, as defined
by FIN 47.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following tables describe our assets that have legal obligations to be removed at the end of
their useful life:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">September 30, 2007</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">In Service</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Trust</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">ARO Description</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">Date</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Long-Lived Assets</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">Fund</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Palisades &#151; decommission plant site</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1972</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Palisades nuclear plant</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Big Rock &#151; decommission plant site</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1962</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Big Rock nuclear plant</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">JHCampbell intake/discharge water line</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1980</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Plant intake/discharge water line</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Closure of coal ash disposal areas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">Various</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Generating plants coal ash areas</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Closure of wells at gas storage fields</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">Various</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Gas storage fields</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Indoor gas services equipment relocations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">Various</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Gas meters located inside structures</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Asbestos abatement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1973</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Electric and gas utility plant</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="24" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">ARO</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">ARO</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Liability</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Cash flow</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Liability</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">ARO Description</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">12/31/06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Incurred</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Settled (a)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Accretion</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Revisions</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">9/30/07</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Palisades &#151; decommission</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(410</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Big Rock &#151; decommission</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">JHCampbell intake line</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Coal ash disposal areas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Wells at gas storage fields</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Indoor gas services relocations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Asbestos abatement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="23" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 10px">
    <TD colspan="25" align="left">&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(417</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">96</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<DIV style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>Cash payments of $4&nbsp;million are included in the Other current and non-current liabilities line
in Net cash provided by operating activities in our Consolidated Statements of Cash Flows. In
April&nbsp;2007, we sold Palisades to Entergy and paid Entergy to assume ownership and responsibility
for the Big Rock ISFSI. Our AROs related to Palisades and the Big Rock ISFSI ended with the sale
and the related ARO liabilities were removed from our Consolidated Balance Sheets. We also removed
the Big Rock ARO related to the plant in the second quarter of 2007 due to the completion of
decommissioning.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->CE-50<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><I>Consumers Energy Company</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In October&nbsp;2004, the MPSC initiated a generic proceeding to review SFAS No.&nbsp;143, FERC Order No.
631, Accounting, Financial Reporting, and Rate Filing Requirements for Asset Retirement
Obligations, and related accounting and ratemaking issues for MPSC-jurisdictional electric and gas
utilities. In June&nbsp;2007, the MPSC issued an order that requires:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the MPSC Staff to advise the MPSC whether there are any FERC accounts, rules or
procedures that should be adopted by reference or changed, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the use of a revised calculation for cost of removal estimates derived from applying
SFAS No.&nbsp;143, which includes the use of standard retirement units.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We will also be required to file a new gas depreciation study by August&nbsp;1, 2008, using 2007 removal
costs as the basis for the calculation, and a new electric depreciation study by August&nbsp;3, 2009,
using 2008 removal costs as the basis for the calculation.
</DIV>

<DIV align="left">
<A name="132"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>8: </B><FONT style="font-variant: SMALL-CAPS"><B>income taxes</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The principal components of deferred tax assets (liabilities)&nbsp;recognized on our Consolidated
Balance Sheets both before and after the adoption of FIN 48 are as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="8" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">January 1,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(725</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(814</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Securitized costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(177</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(177</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gas inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(168</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(168</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Employee benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SFAS No.&nbsp;109 regulatory liability, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">189</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nuclear decommissioning</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax loss and credit carryforwards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">209</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Valuation allowances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(176</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(175</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(808</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(858</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a result of the implementation of FIN 48, we identified additional uncertain tax benefits of $5
million as of January&nbsp;1, 2007. Included in this amount is an increase in our valuation allowance
of $7&nbsp;million, increases to tax reserves of $55&nbsp;million and a decrease to deferred tax liabilities
of $57&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Consumers joins in the filing of a consolidated U.S. federal income tax return as well as unitary
and combined income tax returns in several states. Consumers and its subsidiaries also file
separate company income tax returns in several states. The only significant state tax paid by
Consumers or any of its subsidiaries is in Michigan. However, since the Michigan Single Business
Tax is not an income tax, it is not part of the FIN 48 analysis. The IRS has completed its audits
for all the consolidated federal returns, of which Consumers is a member, for years through 2001.
The federal income tax returns for the years 2002
through 2005 are open under the statute of limitations.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CE-51<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><I>Consumers Energy Company</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We reflected a net interest liability of $1&nbsp;million related to our uncertain income tax positions
on our Consolidated Balance Sheets as of January&nbsp;1, 2007. We have not accrued any penalties with
respect to uncertain tax benefits. We recognize accrued interest and penalties, where applicable,
related to uncertain tax benefits as part of income tax expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of the date of adoption of FIN 48, we had valuation allowances against certain deferred tax
assets totaling $22&nbsp;million and other net uncertain tax positions of $55&nbsp;million, resulting in
total uncertain benefits of $77&nbsp;million. Of this amount, $24&nbsp;million would result in a decrease in
our effective tax rate, if recognized. We are not expecting any material changes to our uncertain
tax positions over the next 12&nbsp;months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The actual income tax expense differs from the amount computed by applying the statutory federal
tax rate of 35&nbsp;percent to income before income taxes as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="9" style="border-bottom: 1px solid #000000">In Millions</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Nine Months Ended September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">211</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Statutory federal income tax rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">x 35</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">x 35</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase (decrease)&nbsp;in taxes from:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Property differences</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">IRS Settlement/Credit Restoration</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fair market value charitable donation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tax exempt income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Medicare Part D exempt income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income tax credit amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Valuation Allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Recorded income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">66</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effective tax rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">35</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">31</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Michigan Business Tax Act: </I>In July&nbsp;2007, the Michigan governor signed Senate Bill 94, the Michigan
Business Tax Act, which imposes a business income tax of 4.95&nbsp;percent and a modified gross receipts
tax of 0.8&nbsp;percent. The bill provides for a number of tax credits and incentives geared toward
those companies investing and employing in Michigan. The Michigan Business Tax, which is effective
January&nbsp;1, 2008, replaces the state&#146;s current Single Business Tax that expires on December&nbsp;31,
2007. In September&nbsp;2007, the Michigan governor signed House Bill 5104, allowing additional
deductions in future years against the business income portion of the tax. These future deductions
are phased in over a 15-year period, beginning in 2015. As a result of the enactment of this tax,
we recorded, on a consolidated basis, a net deferred tax liability of $125&nbsp;million completely
offset by a net deferred tax asset of $125&nbsp;million.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CE-52<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><I>Consumers Energy Company</I>
</DIV>

<DIV align="left">
<A name="133"></A>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>9: </B><FONT style="font-variant: SMALL-CAPS"><B>Reportable Segments</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our reportable segments consists of business units organized and managed by the nature of the
products and services each provides. We evaluate performance based upon the net income of each
segment. We operate principally in two segments: electric utility and gas utility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following tables show our financial information by reportable segment:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" colspan="5" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="14" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6">Three Months Ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6">Nine Months Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">September 30</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Electric</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">976</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,663</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,496</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">201</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,576</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Operating Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,111</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income available to common stockholder</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Electric</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">159</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(29</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Net Income Available to Common
Stockholder</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">144</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" colspan="8" style="border-bottom: 1px solid #000000">In Millions</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">September 30, 2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">December 31, 2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Electric (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,516</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gas (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,950</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">379</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,845</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<DIV style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>Amounts include a portion of our other common assets attributable to both the electric and gas utility businesses.</TD>
</TR>

</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->CE-53<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="151"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;3. Quantitative and Qualitative Disclosures About Market Risk</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>CMS ENERGY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Quantitative and Qualitative Disclosures about Market Risk is contained in PART I: CMS Energy
Corporation&#146;s Management&#146;s Discussion and Analysis, which is incorporated by reference herein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>CONSUMERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Quantitative and Qualitative Disclosures about Market Risk is contained in PART I: Consumers Energy
Company&#146;s Management&#146;s Discussion and Analysis, which is incorporated by reference herein.
</DIV>
<DIV align="left">
<A name="152"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;4. Controls and Procedures</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>CMS ENERGY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Disclosure Controls and Procedures: CMS Energy&#146;s management, with the participation of its CEO and
CFO, has evaluated the effectiveness of its disclosure controls and procedures (as such term is
defined in Rules&nbsp;13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period
covered by this report. Based on such evaluation, CMS Energy&#146;s CEO and CFO have concluded that, as
of the end of such period, its disclosure controls and procedures are effective.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Internal Control Over Financial Reporting: There have not been any changes in CMS Energy&#146;s
internal control over financial reporting (as such term is defined in Rules&nbsp;13a-15(f) and 15d-15(f)
under the Exchange Act) during the last fiscal quarter that have materially affected, or are
reasonably likely to materially affect, its internal control over financial reporting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>CONSUMERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Disclosure Controls and Procedures: Consumers&#146; management, with the participation of its CEO and
CFO, has evaluated the effectiveness of its disclosure controls and procedures (as such term is
defined in Rules&nbsp;13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period
covered by this report. Based on such evaluation, Consumers&#146; CEO and CFO have concluded that, as
of the end of such period, its disclosure controls and procedures are effective.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Internal Control Over Financial Reporting: There have not been any changes in Consumers&#146; internal
control over financial reporting (as such term is defined in Rules&nbsp;13a-15(f) and 15d-15(f) under
the Exchange Act) during the last fiscal quarter that have materially affected, or are reasonably
likely to materially affect, its internal control over financial reporting.
</DIV>
<DIV align="left">
<A name="153"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>PART II. OTHER INFORMATION</B>
</DIV>

<DIV align="left">
<A name="154"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Item&nbsp;1. Legal Proceedings</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The discussion below is limited to an update of developments that have occurred in various judicial
and administrative proceedings, many of which are more fully described in CMS Energy&#146;s and
Consumers&#146; Forms 10-K for the year ended December&nbsp;31, 2006 and Forms 10-Q for the quarters ended
March&nbsp;31, 2007 and June&nbsp;30, 2007. Reference is also made to the NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS, in particular, Note 3, Contingencies, for CMS Energy and Note 3, Contingencies, for
Consumers, included herein for additional information regarding various pending administrative and
judicial proceedings involving rate, operating, regulatory and environmental matters.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->CO-1<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>CMS ENERGY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>GAS INDEX PRICE REPORTING LITIGATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Texas-Ohio Energy, Inc. filed a putative class action lawsuit in the United States District Court
for the Eastern District of California in November&nbsp;2003 against a number of energy companies
engaged in the sale of natural gas in the United States (including CMS Energy). The complaint
alleged defendants entered into a price-fixing scheme by engaging in activities to manipulate the
price of natural gas in California. The complaint alleged violations of the federal Sherman Act,
the California Cartwright Act, and the California Business and Professions Code relating to
unlawful, unfair and deceptive business practices. In April&nbsp;2004, a Nevada Multidistrict
Litigation (MDL)&nbsp;Panel ordered the transfer of the Texas-Ohio case to a pending MDL matter in the
Nevada federal district court that at the time involved seven complaints originally filed in
various state courts in California. These complaints make allegations similar to those in the
Texas-Ohio case regarding price reporting, although none contain a federal Sherman Act claim. In
November&nbsp;2004, those seven complaints, as well as a number of others that were originally filed in
various state courts in California and subsequently transferred to the MDL proceeding, were
remanded back to California state court. The Texas-Ohio case remained in Nevada federal district
court, and defendants, with CMS Energy joining, filed a motion to dismiss. The court issued an
order granting the motion to dismiss on April&nbsp;8, 2005 and entered a judgment in favor of the
defendants on April&nbsp;11, 2005. Texas-Ohio has appealed the dismissal to the Ninth Circuit Court of
Appeals.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">While that
appeal was pending, CMS Energy agreed to settle the Texas-Ohio case
and four other cases originally filed in California federal courts
for a total payment of $700,000. That settlement money was paid and
on September 10, 2007, the court entered an order granting final
approval of the settlement and dismissing the CMS Energy defendants
from these cases. On September 26, 2007, the Ninth Circuit Court of
Appeals reversed the ruling of the trial judge in the Texas-Ohio case
and held that the &#147;filed rate doctrine&#148; is not applicable
to the claims. The Ninth Circuit then remanded the case to the
federal district court. While CMS Energy is no longer a party to the
Texas-Ohio case, the ninth circuit ruling may affect the position of
CMS entities in other pending cases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Three federal putative class actions, Fairhaven Power Company v. Encana Corp. et al., Utility
Savings &#038; Refund Services LLP v. Reliant Energy Resources Inc. et al., and Abelman Art Glass v.
Encana Corp. et al., all of which make allegations similar to those in the Texas-Ohio case
regarding price manipulation and seek similar relief, were originally filed in the United States
District Court for the Eastern District of California in September&nbsp;2004, November&nbsp;2004 and December
2004, respectively. The Fairhaven and Abelman Art Glass cases also include claims for unjust
enrichment and a constructive trust. The three complaints were filed against CMS Energy and many
of the other defendants named in the Texas-Ohio case. In addition, the Utility Savings case names
CMS MST and Cantera Resources Inc. (Cantera Resources Inc. is the parent of Cantera Natural Gas,
LLC and CMS Energy is required to indemnify Cantera Natural Gas, LLC and Cantera Resources Inc.
with respect to these actions.)
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Fairhaven, Utility Savings and Abelman Art Glass cases have been transferred to the MDL
proceeding, where the Texas-Ohio case was pending. Pursuant to stipulation by the parties and
court order, defendants were not required to respond to the Fairhaven, Utility Savings and Abelman
Art Glass complaints until the court ruled on defendants&#146; motion to dismiss in the Texas-Ohio case.
Plaintiffs subsequently filed a consolidated class action complaint alleging violations of federal
and California antitrust laws. Defendants filed a motion to dismiss, arguing that the consolidated
complaint should be dismissed for the same reasons as the Texas-Ohio case. The court issued an
order granting the motion to dismiss on December&nbsp;19, 2005 and entered judgment in favor of
defendants on December&nbsp;23, 2005. Plaintiffs have appealed the dismissal to the Ninth Circuit Court
of Appeals. California-based plaintiffs in the pending Ninth Circuit Court of Appeals cases
(Texas-Ohio, Fairhaven, Abelman Art Glass and Utility Savings) have entered into a settlement
agreement dated January&nbsp;10, 2007 to collectively settle their claims against all CMS Energy
defendants for the payment of $700,000. Plaintiffs filed a motion for preliminary approval of this
and other settlements with various defendants on April&nbsp;3, 2007. An order was entered on May&nbsp;3,
2007 granting preliminary approval of the settlement, and CMS has wire transferred its $700,000
settlement payment. On September 10, 2007, the court entered an
order granting final approval of the settlement and dismissing the
CMS Energy defendants and other settling defendants from these cases.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Commencing in or about February&nbsp;2004, 15 state law complaints containing allegations similar to
those made in the Texas-Ohio case, but generally limited to the California Cartwright Act and
unjust enrichment, were filed in various California state courts against many of the same
defendants named in the federal price manipulation cases discussed above. In addition to CMS
Energy, CMS MST is named in all of the 15 state law complaints. Cantera Gas Company and Cantera
Natural Gas, LLC (erroneously sued as Cantera Natural Gas, Inc.) are named in all but one
complaint.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In February&nbsp;2005, these 15 separate actions, as well as nine other similar actions that were filed
in California state court but do not name CMS Energy or any of its former or current subsidiaries,
were ordered coordinated with pending coordinated proceedings in the San Diego Superior Court. The
24 state court complaints involving price reporting were coordinated as Natural Gas Antitrust Cases
V. Plaintiffs in Natural Gas Antitrust Cases V were ordered to file a consolidated complaint, but
a consolidated complaint was filed only for the two putative class action lawsuits. Pursuant to a
ruling dated August&nbsp;23, 2006, CMS Energy, Cantera Gas Company and Cantera Natural Gas, LLC were
dismissed as defendants in the master class action and the thirteen non-class actions, due to lack
of personal jurisdiction. CMS MST remains a defendant in all of these actions. CMS MST has
settled a master class action suit in California state court for $7&nbsp;million. In March&nbsp;2007, CMS
Energy paid $7&nbsp;million into a trust fund account following preliminary approval of the settlement
by the judge. The court entered a judgment, final order and decree dated June&nbsp;12, 2007 granting
final approval to the class action settlement with CMS MST. Certain of the individual cases filed
in the California State Court remain pending.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Samuel D. Leggett, et al v. Duke Energy Corporation, et al, a class action complaint brought on
behalf of retail and business purchasers of natural gas in Tennessee, was filed in the Chancery
Court of Fayette County, Tennessee in January&nbsp;2005. The complaint contains claims for violations
of the Tennessee Trade Practices Act based upon allegations of false reporting of price information
by defendants to publications that compile and publish indices of natural gas prices for various
natural gas hubs. The complaint seeks statutory full consideration damages and attorneys fees and
injunctive relief regulating defendants&#146; future conduct. The defendants include CMS Energy, CMS
MST and CMS Field Services. On August&nbsp;10, 2005, certain defendants, including CMS MST, filed a
motion to dismiss and CMS Energy and CMS Field Services filed a motion to dismiss for lack of
personal jurisdiction. Defendants attempted to remove the case to federal court, but it was
remanded to state court by a federal judge. On February&nbsp;2, 2007, the state court granted
defendants&#146; motion to dismiss the complaint. Plaintiffs filed a notice of appeal on April&nbsp;4, 2007.
Oral arguments on the appeal is set for November 8, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">J.P. Morgan Trust Company, in its capacity as Trustee of the FLI Liquidating Trust, filed an action
in Kansas state court in August&nbsp;2005 against a number of energy companies, including CMS Energy,
CMS MST and CMS Field Services. The complaint alleges various claims under the Kansas Restraint of
Trade Act relating to reporting false natural gas trade information to publications that report
trade information. Plaintiff is seeking statutory full consideration damages for its purchases of
natural gas between January&nbsp;1, 2000 and December&nbsp;31, 2001. The case was removed to the United
States District Court for the District of Kansas on September&nbsp;8, 2005 and transferred to the MDL
proceeding on October&nbsp;13, 2005. A motion to remand the case back to Kansas state court was denied
on April&nbsp;21, 2006. The court initially issued an order granting the motion to dismiss on December
18, 2006, but later reversed the ruling on reconsideration and has now denied the defendants&#146;
motion to dismiss. On September 7, 2007, the CMS Energy defendants
filed an answer to the complaint.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On November&nbsp;20, 2005, CMS MST was served with a summons and complaint which named CMS Energy, CMS
MST and CMS Field Services as defendants in a putative class action filed in Kansas state court,
Learjet, Inc., et al. v. Oneok, Inc., et al. Similar to the other actions that have been filed,
the complaint alleges that during the putative class period, January&nbsp;1, 2000 through October&nbsp;31,
2002, defendants engaged in a scheme to violate the Kansas Restraint of Trade Act by knowingly
reporting false or inaccurate information to the publications, thereby affecting the market price
of natural gas. Plaintiffs,
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">who allege they purchased natural gas from defendants and others for their facilities, are seeking
statutory full consideration damages consisting of the full consideration paid by plaintiffs for
natural gas. On December&nbsp;7, 2005, the case was removed to the United States District Court for the
District of Kansas and later that month a motion was filed to transfer the case to the MDL
proceeding. On January&nbsp;6, 2006, plaintiffs filed a motion to remand the case to Kansas state
court. On January&nbsp;23, 2006, a conditional transfer order transferring the case to the MDL
proceeding was issued. On February&nbsp;7, 2006, plaintiffs filed an opposition to the conditional
transfer order and on June&nbsp;20, 2006 the MDL Panel issued an order transferring the case to the MDL
proceeding. The court issued an order dated August&nbsp;3, 2006 denying the motion to remand the case
to Kansas state court. Defendants have filed a motion to dismiss,
which was denied on July 27, 2007. On September 7, 2007, the CMS
Energy defendants filed an answer to the complaint.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Breckenridge Brewery of Colorado, LLC and BBD Acquisition Co. v. Oneok, Inc., et al., a class
action complaint brought on behalf of retail direct purchasers of natural gas in Colorado, was
filed in Colorado state court in May&nbsp;2006. Defendants, including CMS Energy, CMS Field Services,
and CMS MST, are alleged to have violated the Colorado Antitrust Act of 1992 in connection with
their natural gas price reporting activities. Plaintiffs are seeking full refund damages. The
case was removed to the United States District Court for the District of Colorado on June&nbsp;12, 2006,
a conditional transfer order transferring the case to the MDL proceeding was entered on June&nbsp;27,
2006, and an order transferring the case to the MDL proceeding was entered on October&nbsp;17, 2006.
The court issued an order dated December&nbsp;4, 2006 denying the motion to remand the case back to
Colorado state court. Defendants have filed a motion to dismiss. On August&nbsp;21, 2007, the court
granted the motion to dismiss by CMS Energy on the basis of a lack of jurisdiction. The other
defendants remain in the case, and they filed an answer to the
complaint on September 7, 2007. The remaining CMS Energy defendants
also filed a summary judgment motion which remains pending.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On October&nbsp;30, 2006, CMS Energy and CMS MST were each served with a summons and complaint which
named CMS Energy, CMS MST and CMS Field Services as defendants in an action filed in Missouri state
court, titled Missouri Public Service Commission v. Oneok, Inc. The Missouri Public Service
Commission purportedly is acting as an assignee of six local distribution companies, and it alleges
that from at least January&nbsp;2000 through at least October&nbsp;2002, defendants knowingly reported false
natural gas prices to publications that compile and publish indices of natural gas prices, and
engaged in wash sales. The complaint contains claims for violation of the Missouri Anti-Trust Law,
fraud and unjust enrichment. Defendants removed the case to Missouri federal court and then
transferred it to the Nevada MDL proceeding. A second action, Heartland Regional Medical Center,
et al. v. Oneok, Inc., et al., was filed in Missouri state court in March&nbsp;2007 alleging violations
of Missouri anti-trust laws. The second action is denoted as a class action. Defendants also
removed this case to Missouri federal court, and it has been conditionally transferred to the
Nevada MDL proceeding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A class action complaint, Arandell Corp., et al v. XCEL Energy Inc., et al, was filed on or about
December&nbsp;15, 2006 in Wisconsin state court on behalf of Wisconsin commercial entities that
purchased natural gas between January&nbsp;1, 2000 and October&nbsp;31, 2002. Defendants, including CMS
Energy, CMS ERM and Cantera Gas Company, LLC, are alleged to have violated Wisconsin&#146;s Anti-Trust
statute by conspiring to manipulate natural gas prices. Plaintiffs are seeking full consideration
damages, plus exemplary damages in an amount equal to three times the actual damages, and
attorneys&#146; fees. The action was removed to Wisconsin federal district court and CMS entered a
special appearance for purpose of filing a motion to dismiss all the CMS defendants on the ground
of lack of personal jurisdiction and that motion was filed on
September 10, 2007. The court has not yet ruled on the motion. The court denied plaintiffs&#146; motion to remand the case back to
Wisconsin state court, and the case has been transferred to the Nevada MDL proceeding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">CMS Energy and the other CMS defendants will defend themselves vigorously against these matters but
cannot predict their outcome.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>QUICKSILVER RESOURCES, INC.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On November&nbsp;1, 2001, Quicksilver sued CMS MST in the Texas State Court in Fort Worth, Texas for
breach of contract in connection with a Base Contract for Sale and Purchase of natural gas,
pursuant to which Quicksilver agreed to sell, and CMS MST agreed to buy, natural gas. Quicksilver
contended that a special provision in the contract requires CMS MST to pay Quicksilver 50&nbsp;percent
of the difference between $2.47/MMBtu and the index price each month. CMS MST disagrees with
Quicksilver&#146;s interpretation of the special provision and contends that it has paid all monies owed
for delivery of gas pursuant to the contract. Quicksilver is seeking damages of approximately $126
million, plus prejudgment interest and attorneys&#146; fees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Trial commenced on March&nbsp;19, 2007. The jury verdict awarded Quicksilver zero compensatory damages
but $10&nbsp;million in punitive damages. The jury found that CMS MST breached the contract and
committed fraud but found no actual damage on account of either such claim.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On May&nbsp;15, 2007, the trial court, ruling on motions to counter the entry of the judgment, vacated
the jury award of punitive damages but held that the contract should be rescinded prospectively.
The judicial rescission of the contract caused CMS Energy to record a charge in the second quarter
of 2007 of approximately $24&nbsp;million, net of tax. To preserve its appellate rights, CMS MST filed
a motion to modify, correct or reform the judgment and a motion for a judgment contrary to the jury
verdict with the trial court. The trial court dismissed these motions. CMS MST has filed a notice
of appeal with the Texas Court of Appeals.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>CMS ENERGY AND CONSUMERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SECURITIES CLASS ACTION LAWSUITS</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Beginning in May&nbsp;2002, a number of complaints were filed against CMS Energy, Consumers and certain
officers and directors of CMS Energy and its affiliates in the United States District Court for the
Eastern District of Michigan. The cases were consolidated into a single lawsuit (the &#147;Shareholder
Action&#148;), which generally seeks unspecified damages based on allegations that the defendants
violated United States securities laws and regulations by making allegedly false and misleading
statements about CMS Energy&#146;s business and financial condition, particularly with respect to
revenues and expenses recorded in connection with round-trip trading by CMS MST. In January&nbsp;2005,
the court granted a motion to dismiss Consumers and three of the individual defendants, but denied
the motions to dismiss CMS Energy and the 13 remaining individual defendants. In March&nbsp;2006, the
court conditionally certified a class consisting of &#147;all persons who purchased CMS Common Stock
during the period of October&nbsp;25, 2000 through and including May&nbsp;17, 2002 and who were damaged
thereby.&#148; The court excluded purchasers of CMS Energy&#146;s 8.75&nbsp;percent Adjustable Convertible Trust
Securities (&#147;ACTS&#148;) from the class and, in response, a new class action lawsuit was filed on behalf
of ACTS purchasers (the &#147;ACTS Action&#148;) against the same defendants named in the Shareholder Action.
The settlement described in the following paragraph has resolved both the Shareholder and ACTS
actions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;3, 2007, CMS Energy and other parties entered into a Memorandum of Understanding (the
&#147;MOU&#148;), subject to court approval, regarding settlement of the two class action lawsuits. The
settlement was approved by a special committee of independent directors and by the full board of
directors of CMS Energy. Both judged that it was in the best interests of shareholders to
eliminate this business uncertainty. Under the terms of the MOU, the litigation was settled for a
total of $200&nbsp;million, including the cost of administering the settlement and any attorney fees the
court awards. CMS Energy made a payment of approximately $123&nbsp;million plus interest on the
settlement amount on September&nbsp;20, 2007. CMS Energy&#146;s insurers paid $77&nbsp;million, the balance of
the settlement amount. In entering into the
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">MOU, CMS Energy made no admission of liability under the Shareholder Action and the ACTS Action.
The parties executed a Stipulation and Agreement of Settlement dated May&nbsp;22, 2007 (&#147;Stipulation&#148;)
incorporating the terms of the MOU. In accordance with the Stipulation, CMS has paid approximately
$1&nbsp;million of the settlement amount to fund administrative expenses. On September&nbsp;6, 2007, the
court issued a final order approving the settlement. The remaining settlement amount was paid
following the September&nbsp;6, 2007 hearing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On October 5, 2007, two
former officers of Consumers filed an appeal of the order approving
the settlement of the shareholder litigation. Based on the objections
they filed in the District Court and comments made on the record at
the fairness hearing on September 6, 2007, they are not challenging
the amount of the settlement. Their principal complaint was with the
exclusion of all present and former officers and their immediate
families from participation in the settlement. It is not anticipated
that the appeal will result in changes to any material terms of the
settlement approved by the District Court.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ENVIRONMENTAL MATTERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">CMS Energy and Consumers, as well as their subsidiaries and affiliates are subject to various
federal, state and local laws and regulations relating to the environment. Several of these
companies have been named parties to various actions involving environmental issues. Based on
their present knowledge and subject to future legal and factual developments, they believe it is
unlikely that these actions, individually or in total, will have a material adverse effect on their
financial condition or future results of operations. For additional information, see both CMS
Energy&#146;s and Consumers&#146; Forms 10-K for the year ended December&nbsp;31, 2006 &#151; ITEM 7. MANAGEMENT&#146;S
DISCUSSION AND ANALYSIS and ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA &#151; NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
</DIV>
<DIV align="left">
<A name="155"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1A. Risk Factors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other than discussed below, there have been no material changes to the Risk Factors as previously
disclosed in CMS Energy&#146;s Form 10-K and Consumers&#146; Form 10-K for the year ended December&nbsp;31, 2006
and Forms 10-Q for the quarters ended March&nbsp;31, 2007 and June&nbsp;30, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risks Related to CMS Energy and Consumers</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>CMS Energy and Consumers may be adversely affected by regulatory investigations regarding
&#147;round-trip&#148; trading by CMS MST as well as civil lawsuits regarding pricing information that CMS
MST and CMS Field Services provided to market publications.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a result of round-trip trading transactions (simultaneous, prearranged commodity trading
transactions in which energy commodities were sold and repurchased at the same price) at CMS MST,
CMS Energy is under investigation by the DOJ. CMS Energy received subpoenas in 2002 and 2003 from
U.S. Attorneys&#146; Offices regarding investigations of those trades. CMS Energy responded to those
subpoenas in 2003 and 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In March&nbsp;2004, the SEC approved a cease-and-desist order settling an administrative action against
CMS Energy relating to round-trip trading. The order did not assess a fine and CMS Energy neither
admitted nor denied the order&#146;s findings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">CMS Energy has notified appropriate regulatory and governmental agencies that some employees at CMS
MST and CMS Field Services appeared to have provided inaccurate information regarding natural gas
trades to various energy industry publications which compile and report index prices. CMS Energy
has cooperated with an investigation by the DOJ regarding this matter. Although CMS Energy has not
received any formal notification that the DOJ has completed its investigation, the DOJ&#146;s last
request for information occurred in November&nbsp;2003, and CMS Energy completed its response to this
request in May&nbsp;2004. CMS Energy is unable to predict the outcome of the DOJ investigation and what
effect, if any, the investigation will have on CMS Energy. The CFTC filed a civil injunctive
action against two former CMS Field Services employees in Oklahoma federal district court on
February&nbsp;1, 2005. The action alleges the two engaged in reporting false natural gas trade
information, and seeks to enjoin these acts,
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">compel compliance with the Commodities Exchange Act, and impose monetary penalties. Trial dates
have been held in abeyance pending settlement discussions. CMS Energy is currently advancing legal
defense costs to the two individuals in accordance with existing indemnification policies. The
court entered separate consent orders with respect to each of the two individuals, one dated April
18, 2007 and one dated June&nbsp;25, 2007, resolving this litigation. The consent orders enjoin each of
the individuals from engaging in certain activities and further provide civil monetary penalties in
the amount of $100,000 for one individual and $25,000 for the other individual. Pursuant to
agreements with each of the individuals, CMS has paid $95,000 of the $100,000 amount and $22,000 of
the $25,000 amount, with the remaining amounts paid by the individuals themselves. These
settlements put an end to CFTC enforcement actions relating to gas price reporting by individuals
once employed at present or former CMS subsidiaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">CMS Energy, CMS MST, CMS Field Services, Cantera Natural Gas, Inc. (the company that purchased CMS
Field Services) and Cantera Gas Company are named as defendants in various lawsuits arising as a
result of false natural gas price reporting. Allegations include manipulation of NYMEX natural gas
futures and options prices, price-fixing conspiracies, and artificial inflation of natural gas
retail prices in California, Colorado, Kansas, Missouri, Tennessee, and Wisconsin. In September
2006, CMS MST reached an agreement in principle to settle a master class action suit in California
for $7&nbsp;million, pending approval by the trial Court. The court entered an order granting
preliminary approval of the settlement, and CMS MST has paid the $7&nbsp;million settlement amount. The
court entered a judgment, final order and decree dated June&nbsp;12, 2007 granting final approval to the
class action settlement with CMS MST.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">CMS Energy and the other CMS Energy defendants will defend themselves vigorously against all of
these matters, but cannot predict the outcome of the DOJ investigations and the lawsuits. It is
possible that the outcome in one or more of the investigations or the lawsuits could adversely
affect CMS Energy&#146;s and Consumers&#146; financial condition, liquidity or results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>CMS Energy and Consumers could incur significant capital expenditures to comply with environmental
standards and face difficulty in recovering these costs on a current basis.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">CMS Energy, Consumers, and their subsidiaries are subject to costly and increasingly stringent
environmental regulations. They expect that the cost of future environmental compliance,
especially compliance with clean air and water laws, will be significant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 1998, the EPA issued regulations requiring the State of Michigan to further limit nitrogen oxide
emissions at coal-fired electric generating plants. The EPA and State of Michigan regulations
require Consumers to make significant capital expenditures estimated to be $880&nbsp;million. From 1998
to present, Consumers has incurred $784&nbsp;million in capital expenditures to comply with these
regulations and anticipates that the remaining $96&nbsp;million of capital expenditures will be made in
2007 through 2011. In addition to modifying coal-fired electric plants, Consumers&#146; compliance plan
includes the use of nitrogen oxide emission allowances until all of the control equipment is
operational in 2011. The nitrogen oxide emission allowance annual expense is projected to be $2
million per year through 2011, which Consumers expects to recover from customers through the PSCR
process.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In March&nbsp;2005, the EPA adopted the Clean Air Interstate Rule that requires additional coal-fired
electric plant emission controls for nitrogen oxides and sulfur dioxide. Consumers plans to meet
the nitrogen oxide requirements of this rule by year-round operation of its selective catalytic
reduction control technology units, installation of low nitrogen oxide burners, and purchasing
emission allowances. Consumers plans to meet the sulfur dioxide requirements of this rule using
sorbent injection, installation of flue gas desulfurization scrubbers and purchasing emission
allowances. Consumers&#146; total cost for equipment installation is expected to reach approximately
$740&nbsp;million by 2015. Additional purchases of
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">sulfur dioxide emission allowances in 2012 and 2013 will be needed for an estimated cost of $10
million per year, which Consumers expects to recover from customers through the PSCR process.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Clean Air Interstate Rule was appealed to the U.S. Court of Appeals for the District of
Columbia by a number of utilities and other companies. Final briefs were due September&nbsp;5, 2007
with a decision expected in 2008. We cannot predict the outcome of these appeals.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Also in March&nbsp;2005, the EPA issued the Clean Air Mercury Rule, which requires initial reductions of
mercury emissions from coal-fired electric generating plants by 2010 and further reductions by
2018. The Clean Air Mercury Rule was appealed to the U.S. Court of Appeals by a number of states
and other entities. Final briefs were due July&nbsp;13, 2007, with a decision expected in 2008. We
cannot predict the outcome of these appeals.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In April&nbsp;2006, Michigan&#146;s governor announced a plan that would result in mercury emissions
reductions of 90&nbsp;percent by 2015. Consumers is currently working with the MDEQ on the details of
these rules; however, Consumers has developed preliminary cost estimates and a mercury emissions
reduction scenario based on its best knowledge of control technology options and initially proposed
requirements. The scenario includes expenditures of approximately $510&nbsp;million for mercury control
equipment and continuous emissions monitoring systems through 2015.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The EPA has alleged that some utilities have incorrectly classified plant modifications as &#147;routine
maintenance&#148; rather than seeking permits from the EPA to modify the plant. We have received and
responded to information requests from the EPA on this subject. We believe that we have properly
interpreted the requirements of &#147;routine maintenance.&#148; If our interpretation is found to be
incorrect, we may be required to install additional pollution controls at some or all of our
coal-fired electric generating plants and potentially pay fines. Additionally, the viability of
certain plants remaining in operation could be called into question.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Several legislative proposals have been introduced in the United States Congress that would require
reductions in emissions of greenhouse gases, including carbon dioxide. On April&nbsp;2, 2007, the U.S.
Supreme Court ruled that the Clean Air Act gives the EPA the authority to regulate emissions of
carbon dioxide and other greenhouse gases from automobiles. In its decision, the court ordered the
EPA to revisit its finding that it has the discretion not to regulate greenhouse gas emissions
from automobiles.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To the extent that greenhouse gas emission reduction rules come into effect, the mandatory
emissions reduction requirements could have far-reaching and significant implications for the
energy sector. We cannot estimate the effect of federal or state greenhouse gas policy on our
future consolidated results of operations, cash flows, or financial position due to the uncertain
nature of the policies at this time. However, we will continue to monitor greenhouse gas policy
developments and assess and respond to their potential implications on our business operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In March&nbsp;2004, the EPA issued rules that govern electric generating plant cooling water intake
systems. The rules require significant reduction in fish killed by operating equipment. EPA
compliance options in the rule were challenged in court. In January&nbsp;2007, the court rejected many
of the compliance options favored by industry and remanded the bulk of the rule back to the EPA for
reconsideration. The court&#146;s ruling is expected to increase significantly the cost of complying
with this rule. However, the cost to comply will not be known until the EPA&#146;s reconsideration is
complete. At this time, the EPA has not established a schedule to address the court decision.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->CO-8<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">CMS Energy expects to collect fully from its customers, through the ratemaking process, these and
other required environmental expenditures. However, if these expenditures are not recovered from
customers in Consumers&#146; rates, CMS Energy and/or Consumers may be required to seek significant
additional financing to fund these expenditures, which could strain their cash resources.
</DIV>
<DIV align="left">
<A name="156"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;2. Unregistered Sales of Equity Securities and Use of Proceeds</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">None.
</DIV>
<DIV align="left">
<A name="157"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;3. Defaults Upon Senior Securities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">None.
</DIV>
<DIV align="left">
<A name="158"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;4. Submission of Matters to a Vote of Security Holders</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">None.
</DIV>
<DIV align="left">
<A name="159"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;5. Other Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A Shareholder who wishes to submit a proposal for consideration at the CMS Energy 2008 Annual
Meeting pursuant to the applicable rules of the SEC must send the proposal to reach CMS Energy&#146;s
Corporate Secretary on or before December&nbsp;13, 2007. In any event, if CMS Energy has not received
written notice of any matter to be proposed at that meeting by February&nbsp;26, 2008, the holders of
proxies may use their discretionary voting authority on such matter. The proposals should be
addressed to: Corporate Secretary, CMS Energy Corporation, One Energy Plaza, Jackson, MI 49201.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Effective November&nbsp;1, 2007, CMS Energy and Consumers entered into Indemnification Agreements with
each of their respective Directors. These Agreements have an indefinite term and provide for
advancement of costs and expenses incurred to defend certain legal actions relating to their
services as a Director. These Indemnification Agreements provide consistent indemnification
provisions for all Directors and replace Indemnification Agreements that were in place for certain
Directors.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->CO-9<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="160"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;6. Exhibits</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="93%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">(3)(b)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CMS Energy Corporation Bylaws, amended and restated as of August&nbsp;10, 2007</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">(3)(d)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consumers Energy Company Bylaws, amended and restated as of August&nbsp;10, 2007</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">(10)(a)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Indemnification Agreement between CMS Energy Corporation and its Directors,
effective as of November&nbsp;1, 2007</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">(10)(b)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Indemnification Agreement between Consumers Energy Company and its Directors,
effective as of November&nbsp;1, 2007</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">(31)(a)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CMS Energy Corporation&#146;s certification of the CEO pursuant to Section&nbsp;302 of the
Sarbanes-Oxley Act of 2002</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">(31)(b)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CMS Energy Corporation&#146;s certification of the CFO pursuant to Section&nbsp;302 of the
Sarbanes-Oxley Act of 2002</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">(31)(c)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consumers Energy Company&#146;s certification of the CEO pursuant to Section&nbsp;302 of the
Sarbanes-Oxley Act of 2002</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">(31)(d)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consumers Energy Company&#146;s certification of the CFO pursuant to Section&nbsp;302 of the
Sarbanes-Oxley Act of 2002</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">(32)(a)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CMS Energy Corporation&#146;s certifications pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act
of 2002</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">(32)(b)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consumers Energy Company&#146;s certifications pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act
of 2002</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->CO-10<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="161"></A>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The
signature for each undersigned company shall be deemed to relate only to matters having reference
to such company or its subsidiary.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">CMS ENERGY CORPORATION<BR>
(Registrant)<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Dated:  November 1, 2007&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Thomas J. Webb
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Thomas J. Webb&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Executive Vice President and
Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">CONSUMERS ENERGY COMPANY<BR>
(Registrant)<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Dated:  November 1, 2007&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Thomas J. Webb
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Thomas J. Webb&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Executive Vice President and
Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->CO-11<!-- /Folio -->
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.(B)
<SEQUENCE>2
<FILENAME>k21037exv3wxby.htm
<DESCRIPTION>CMS ENERGY CORPORATION BYLAWS
<TEXT>
<HTML>
<HEAD>
<TITLE>exv3wxby</TITLE>
</HEAD>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit (3)(b)
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">CMS ENERGY CORPORATION
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">BYLAWS

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ARTICLE I: LOCATION OF OFFICES</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;1 &#151; <U>Registered Office</U>: The registered office of CMS Energy Corporation, (the
&#147;Corporation&#148;) shall be at such place in the City of Jackson, County of Jackson, Michigan, or
elsewhere in the State of Michigan, as the Board of Directors may from time to time
designate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;2 &#151; <U>Other Offices</U>: The Corporation may have and maintain other offices
within or without the State of Michigan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ARTICLE II: CORPORATE SEAL</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;1 &#151; <U>Corporate Seal</U>: The Corporation shall have a corporate seal bearing the
name of the Corporation. The form of the corporate seal may be altered by the Board of
Directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ARTICLE III: FISCAL YEAR</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;1 &#151; <U>Fiscal Year</U>: The fiscal year of the Corporation shall begin with the
first day of January and end with the thirty-first day of December of each year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ARTICLE IV: SHAREHOLDERS&#146; MEETINGS</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;1 &#151; <U>Annual Meetings</U>: An annual meeting of the shareholders for election of
Directors and for such other business as may come before the meeting shall be held at the
registered office of the Corporation or at such other place within or without the State of
Michigan, at 10:00 AM, Eastern Daylight Saving Time, or at such other time on the fourth
Friday in May of each year or upon such other day as the Board of Directors may designate,
but in no event shall such date be more than ninety (90)&nbsp;days after the fourth Friday in May.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;2 &#151; <U>Special Meetings</U>: Special meetings of the shareholders may be called by
the Board of Directors or by the Chairman of the Board. Such meetings shall be held at the
registered office of the Corporation or at such other place within or without the State of
Michigan as the Board of Directors may designate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;3 &#151; <U>Notices</U>: Except as otherwise provided by law, written notice of any
meeting of the shareholders shall be given, either personally or by mail to each shareholder
of record entitled to vote at such meeting, not less than ten (10)&nbsp;days nor more than sixty
(60)&nbsp;days prior to the date of the meeting, at their last known address as the same appears
on the stock records of the Corporation. Written notice shall be considered given when
deposited, with postage thereon prepaid, in a post office or official depository under the
control of the United States postal service. Such notice shall specify the time and place of
</DIV>
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">holding the meeting, the purpose or purposes for which such meeting is called, and the record
date fixed for the determination of shareholders entitled to notice of and to vote at such
meeting. The Board of Directors shall fix a record date for determining shareholders
entitled to notice of and to vote at such meeting. The Board of Directors shall fix a record
date for determining shareholders entitled to notice of and to vote at a meeting of
shareholders, which record date shall not be more than sixty (60)&nbsp;days nor less than ten (10)
days before the date of the meeting. Such record date shall apply to any adjournment of the
meeting unless the Board of Directors shall fix a new record date for purposes of the
adjourned meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">No notice of an adjourned meeting shall be necessary if the time and place to which the
meeting is adjourned are announced at the meeting at which the adjournment is taken. At the
adjourned meeting only such business may be transacted as might have been transacted at the
original meeting. If, after an adjournment, the Board of Directors shall fix a new record
date for the adjourned meeting, a notice of the adjourned meeting shall be mailed, in
conformity with the provisions of the first paragraph of this Section&nbsp;3, to each shareholder
of record on the new record date entitled to vote at the adjourned meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;4 &#151; <U>Quorum</U>: Except as otherwise provided by law or by the Articles of
Incorporation of the Corporation, the holders of the shares of stock of the Corporation
entitled to cast a majority of the votes at a meeting shall constitute a quorum for the
transaction of business at the meeting, but a lesser number may convene any meeting and, by a
majority vote of the shares present at the meeting, may adjourn the same from time to time
until a quorum shall be present.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;5 &#151; <U>Voting</U>: Shareholders may vote at all meetings in person or by proxy, but
all proxies shall be filed with the Secretary of the meeting before being voted upon.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Subject to the provisions of the Articles of Incorporation of the Corporation at all
meetings of the shareholders of the Corporation each holder of Common Stock shall be entitled
on all questions to one vote for each share of stock held by such holder, and a majority of
the votes cast by the holders of shares entitled to vote thereon shall be sufficient for the
adoption of any question presented, unless otherwise provided by law or by the Articles of
Incorporation of the Corporation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;6 &#151; <U>Inspectors</U>: In advance of any meeting of shareholders the Board of
Directors shall appoint one or more inspectors to act at such meeting or any adjournment
thereof. The inspectors shall have such powers and duties as are provided by law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ARTICLE V: DIRECTORS</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;1 &#151; <U>Number</U>: The Board of Directors of the Corporation shall consist of not
less than seven (7)&nbsp;nor more than seventeen (17)&nbsp;members, as fixed from time to time by
resolution of the Board of Directors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;2 &#151; <U>Election</U>: The Directors shall be elected annually at the annual meeting
of the shareholders or at any adjournment thereof.
</DIV>
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;3 &#151; <U>Term of Office</U>: Subject to the provisions of the Articles of
Incorporation of the Corporation and unless otherwise provided by law, the Directors shall
hold office from the date of their election until the next succeeding annual meeting and
until their successors are elected and shall qualify.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;4 &#151; <U>Vacancies</U>: Any vacancy or vacancies in the Board of Directors arising
from any cause may be filled by the affirmative vote of a majority of the Directors then in
office although less than a quorum. An increase in the number of members shall be construed
as creating a vacancy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ARTICLE VI: DIRECTORS&#146; MEETINGS</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;1 &#151; <U>Organization Meeting</U>: As soon as possible after their election, the
Board of Directors shall meet and organize and may also transact other business.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;2 &#151; <U>Other Meetings</U>: Meetings of the Board of Directors may be held at any
time upon call of the Secretary or an Assistant Secretary made at the direction of the
Chairman of the Board, the President, a Vice Chairman, if any, or a Vice President.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;3 &#151; <U>Place of Meeting</U>: All meetings of Directors shall be held at such place
within or without the State of Michigan as may be designated in the call therefore.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;4 &#151; <U>Notice</U>: A reasonable notice of all meetings, in writing or otherwise,
shall be given to each Director or sent to the Director&#146;s residence or place of business;
provided, however, that no notice shall be required for an organization meeting if held on
the same day as the shareholders&#146; meeting at which Directors were elected.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">No notice of the holding of an adjourned meeting shall be necessary.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Notice of all meetings shall specify the time and place of holding the meeting and
unless otherwise stated any and all business may be transacted at any such meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Notice of the time, place and purpose of any meeting may be waived in writing either
before or after the holding thereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;5 &#151; <U>Quorum</U>: At all meetings of the Board of Directors a majority of the
Board then in office shall constitute a quorum but a majority of the Directors present may
convene and adjourn any such meeting from time to time until a quorum shall be present;
provided, that if the Board shall consist of ten (10)&nbsp;and not more than fifteen (15), then
five (5)&nbsp;members shall constitute a quorum; and if the Board shall consist of more than
fifteen (15), then seven (7)&nbsp;members shall constitute a quorum.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;6 &#151; <U>Voting</U>: All questions coming before any meeting of the Board of
Directors for action shall be decided by a majority vote of the Directors present at such
meeting, unless otherwise provided by law, the Articles of Incorporation of the Corporation
or by these Bylaws.
</DIV>
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="right" style="font-size: 10pt"><!-- Folio -->4<!-- /Folio -->


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;7 &#151; <U>Participation by Communications Equipment</U>: A Director or a member of a
Committee designated by the Board of Directors may participate in a meeting by means of
conference telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation in a meeting by such means
shall constitute presence in person at the meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;8 &#151; <U>Action Without Meeting</U>: Any action required or permitted to be taken
pursuant to authorization voted at a meeting of the Board of Directors or a Committee
thereof, may be taken without a meeting if, before or after the action, all members of the
Board or of the Committee consent thereto in writing. The written consents shall be filed
with the minutes of the proceedings of the Board or Committee, and the consents shall have
the same effect as a vote of the Board or Committee for all purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ARTICLE VII: EXECUTIVE AND OTHER COMMITTEES</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;1 &#151; <U>Number and Qualifications</U>: By resolution passed by a majority of the
whole Board, the Board of Directors may from time to time designate one or more of their
number to constitute an Executive or any other Committee of the Board, as the Board of
Directors may from time to time determine to be desirable, and may fix the number of members
and designate the Chairperson of each such Committee, except that the Audit Committee shall
consist of not less than three outside members of the Board of Directors. Except as provided
by law, the powers of each such Committee shall be as defined in the resolution or
resolutions of the Board of Directors relating to the authorization of such Committee, and
may include, if such resolution or resolutions so provide, the power and authority to declare
a dividend or to authorize the issuance of shares of stock of the Corporation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;2 &#151; <U>Appointment</U>: The appointment of members of each such Committee, or other
action respecting any Committee, may take place at any meeting of the Directors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;3 &#151; <U>Term of Office</U>: The members of each Committee shall hold office at the
pleasure of the Board of Directors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;4 &#151; <U>Vacancies</U>: Any vacancy or vacancies in any such Committee arising from
any cause shall be filled by resolution passed by a majority of the whole Board of Directors.
By like vote the Board may designate one or more Directors to serve as alternate members of
a Committee, who may replace an absent or disqualified member at a meeting of a Committee;
provided, however, in the absence or disqualification of a member of a Committee, the members
of the Committee present at a meeting and not disqualified from voting, whether or not
constituting a quorum, may unanimously appoint another member of the Board of Directors to
act in the place of the absent or disqualified member.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;5 &#151; <U>Minutes</U>: Except as provided in Section&nbsp;2 of Article&nbsp;X hereof or as
otherwise determined by the Board of Directors, each such Committee shall make a written
report or recommendation following its meetings or keep minutes of all its meetings.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;6 &#151; <U>Quorum</U>: At all meetings of any duly authorized Committee of the Board of
Directors, a majority of the members of such Committee shall constitute a quorum but a
</DIV>
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">majority of the members present may convene and adjourn any such meeting from time to time
until a quorum shall be present; provided, that with respect to any Committee of the Board
other than the Executive Committee, if the membership of such Committee is four (4)&nbsp;or less,
then two (2)&nbsp;members of such Committee shall constitute a quorum and one member may convene
and adjourn any such meeting from time to time until a quorum shall be present.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ARTICLE VIII: OFFICERS</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;1 &#151; <U>Election</U>: The officers shall be chosen by the Board of Directors. The
Corporation shall have a Chairman of the Board, a President, a Secretary and a Treasurer, and
such other officers as the Board of Directors may from time to time determine, who shall have
respectively such duties and authority as may be provided by these Bylaws or as may be
provided by resolution of the Board of Directors not inconsistent herewith. Any two (2)&nbsp;or
more of such offices may be held by the same persons but no officer shall execute,
acknowledge or verify any instrument in more than one capacity if such instrument is required
by law, by the Articles of Incorporation of the Corporation or by these Bylaws to be
executed, acknowledged or verified by two (2)&nbsp;or more officers.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;2 &#151; <U>Qualifications</U>: The Chairman of the Board and Vice Chairman, if any,
shall be chosen from among the Board of Directors, but the other officers need not be members
of the Board.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;3 &#151; <U>Vacancies</U>: Any vacancy or vacancies among the officers arising from any
cause shall be filled by the Board of Directors. In case of the absence of any officer of
the Corporation or for any other reason that the Board of Directors may deem sufficient, the
Board of Directors may delegate, for the time being, the powers or duties, or any of them, of
any officer to any other officer or to any Director.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;4 &#151; <U>Term of Office</U>: Each officer of the Corporation shall hold office until
a successor is chosen and qualified, or until the officer&#146;s resignation or removal. Any
officer appointed by the Board of Directors may be removed at any time by the Board of
Directors with or without cause.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;5 &#151; <U>Compensation</U>: The compensation of the officers shall be fixed by a
committee of the Board of Directors composed of independent directors as defined by
applicable law and regulation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ARTICLE IX: AGENTS</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;1 &#151; <U>Resident Agent</U>: The Corporation shall have and continuously maintain a
resident agent, which may be either an individual resident in the State of Michigan whose
business office is identical with the Corporation&#146;s registered office or a Michigan
corporation or a foreign corporation authorized to transact business in Michigan and having a
business office identical with the Corporation&#146;s registered office. The Board of Directors
shall appoint the resident agent.
</DIV>
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;2 &#151; <U>Other Agents</U>: The Board of Directors may appoint such other agents as
may in their judgment be necessary for the proper conduct of the business of the Corporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ARTICLE X: POWERS AND DUTIES</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;1 &#151; <U>Directors</U>: The business and affairs of the Corporation shall be managed
by the Board of Directors which shall have and exercise all of the powers and authority of
the Corporation except as otherwise provided by law, by the Articles of Incorporation of the
Corporation or by these Bylaws.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;2 &#151; <U>Executive Committee</U>: In the interim between meetings of the Board of
Directors the Executive Committee shall have and exercise all the powers and authority of the
Board of Directors except as otherwise provided by law. The Executive Committee shall meet
from time to time on the call of the Chairman of the Board or the Chairman of the Committee.
The Secretary shall keep minutes in sufficient detail to advise fully the Board of Directors
of the actions taken by the Committee and shall submit copies of such minutes to the Board of
Directors for its approval or other action at its next meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;3 &#151; <U>Chairman of the Board</U>: The Chairman of the Board shall preside at all
meetings of Directors and shareholders; and shall perform and do all acts and things incident
to the position of Chairman of the Board, and such other duties as may be assigned from time
to time by the Board of Directors or the Executive Committee.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;4 &#151; <U>President</U>: The President shall be the chief executive officer of the
Corporation and, subject to the supervision of the Board of Directors and of the Executive
Committee, shall have general charge of the business and affairs of the Corporation; shall
perform and do all acts and things incident to such position and such other duties as may be
assigned from time to time by the Board of Directors, the Executive Committee or the Chairman
of the Board; in the absence of the Chairman of the Board and a Vice Chairman, shall preside
at meetings of Directors; and in the absence of the Chairman of the Board shall preside at
meetings of shareholders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;5 &#151; <U>Vice Chairman</U>: A Vice Chairman, if any, shall perform such of the duties
of the Chairman of the Board or the President on behalf of the Corporation as may be
respectively assigned from time to time by the Board of Directors, the Executive Committee,
the Chairman of the Board or the President; in the absence of the Chairman of the Board shall
preside at meetings of Directors; and in the absence of the Chairman of the Board and the
President shall preside at meetings of shareholders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;6 &#151; <U>Vice Presidents</U>: Vice Presidents, if any, shall perform such of the
duties of the Chairman of the Board or the President or the Vice Chairman, if any, on behalf
of the Corporation as may be respectively assigned to them from time to time by the Board of
Directors, the Executive Committee, the Chairman of the Board or the President or a Vice
Chairman. The Board of Directors or Executive Committee may designate one or more of the
Vice Presidents as Executive Vice President or Senior Vice President.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;7 &#151; <U>Controller</U>: Subject to the control of the Board of Directors, the
Executive Committee, the Chairman of the Board, the President and the Vice President having
</DIV>
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">general charge of accounting, the Controller, if any, shall have charge of the supervision of
the accounting system of the Corporation, including the preparation and filing of all tax
returns and financial reports required by law to be made to any and all public authorities
and officials; and shall perform such other duties as may be assigned, from time to time, by
the Board of Directors, the Executive Committee, the Chairman of the Board, the President, a
Vice Chairman, if any, or Vice President having general charge of accounting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;8 &#151; <U>Treasurer</U>: It shall be the duty of the Treasurer to have the care and
custody of all the funds and securities, including the investment thereof, of the Corporation
which may come into Treasurer&#146;s hands, and to endorse checks, drafts and other instruments
for the payment of money for deposit or collection when necessary or proper and to deposit
the same to the credit of the Corporation in such bank or banks or depository as may be
designated, may endorse all commercial documents requiring endorsements for or on behalf of
the Corporation, may sign all receipts and vouchers for the payments made to the Corporation,
shall render an account of transactions to the Board of Directors or the Executive Committee
as often as the Board or the Committee shall require, and shall perform all acts incident to
the position of Treasurer, subject to the control of the Board of Directors, the Executive
Committee, the Chairman of the Board, the President and a Vice Chairman, if any.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;9 &#151; <U>Secretary</U>: The Secretary shall act as custodian of and record the
minutes of all meetings of the Board of Directors, of the Executive Committee, of the
shareholders and of any Committees of the Board of Directors which keep formal minutes; shall
attend to the giving and serving of all notices of the Corporation; shall prepare or cause to
be prepared the list of shareholders required to be produced at any meeting; shall attest the
seal of the Corporation upon all contracts and instruments executed under such seal, shall
affix or cause to be affixed the seal of the Corporation thereto and to all certificates of
shares of the capital stock, shall have charge of the stock records of the Corporation, and
shall, in general, perform all the duties of Secretary, subject to the control of the Board
of Directors, the Executive Committee, the Chairman of the Board, the President and a Vice
Chairman, if any.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;10 &#151; <U>General Counsel</U>: The General Counsel, if any, shall have charge of all
matters of a legal nature involving the Corporation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;11
&#151;  <U>Assistant Controllers, Assistant Secretaries and Assistant
Treasurers</U>: An Assistant Controller, an Assistant Secretary or an
Assistant Treasurer, if any, shall, in the absence or inability to act or at the request of
the Controller, Secretary or Treasurer, respectively, perform the duties of the Controller or
Secretary or Treasurer, respectively, and shall perform such other duties as may from time to
time be assigned by the Board of Directors, the Executive Committee, the Chairman of the
Board, the President or a Vice Chairman, if any. The performance of any such duty shall be
conclusive evidence of right to act.
</DIV>
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;12 &#151; <U>Principal Financial Officer and</U>
<U>Principal Accounting Officer</U>: The Board of Directors or the Executive Committee
may from time to time designate officers of the Corporation to be the Principal Financial
Officer and the Principal Accounting Officer of the Corporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ARTICLE XI: STOCK</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;1 &#151; <U>Certificated and Uncertificated Shares</U>: The shares of stock of the
Corporation may be either certificated shares or uncertificated shares or a combination
thereof. A resolution approved by a majority of the directors may provide that some or all
of any or all classes and series of the shares of the Corporation will be uncertificated
shares. Every owner of certificated shares of the Corporation shall be entitled to a
certificate, to be in such form as shall be prescribed by law, the Articles of Incorporation
of the Corporation or by these Bylaws. Each certificate shall be numbered and shall be
entered on the stock records of the Corporation and registered as they are issued, and shall
be signed, in the name of the Corporation, by the Chairman of the Board, Vice Chairman, if
any, President or one of the Vice Presidents and by the Treasurer or an Assistant Treasurer
or the Secretary or an Assistant Secretary; and shall be sealed with the seal of the
Corporation or a facsimile thereof, or by such officers as the Board of Directors may
designate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;2 &#151; <U>Facsimile Signatures</U>: When a certificate is countersigned (1)&nbsp;by a
transfer agent, or (2)&nbsp;by a transfer clerk acting on behalf of the Corporation and a
registrar, the signatures of any such Chairman of the Board, Vice Chairman, if any,
President, Vice President, Treasurer, Assistant Treasurer, Secretary or Assistant Secretary
may be facsimile. In case any officer or officers who have signed, or whose facsimile
signature or signatures have been used on any such certificate or certificates shall cease to
be such officer or officers of the Corporation before such certificate or certificates have
been delivered by the Corporation, such certificate or certificates may nevertheless be
adopted by the Corporation and be issued and delivered as though the person or persons who
signed such certificate or certificates or whose facsimile signature or signatures have been
used thereon had not ceased to be such officer or officers of the Corporation..
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;3 &#151; <U>Stock &#151; Preferred and Common</U>: The designations, relative rights,
preferences, limitations and voting powers, or restrictions, or qualifications of the shares
of Preferred Stock and Common Stock shall be as set forth in the Articles of Incorporation of
the Corporation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;4 &#151; <U>Replacing Certificates</U>: In case of the alleged loss, theft or
destruction of any certificate of shares of stock and the submission of proper proof thereof,
a new certificate may be issued in lieu thereof upon delivery to the Corporation by the owner
or legal representative of a bond of indemnity against any claim that may be made against the
Corporation on account of such alleged lost, stolen or destroyed certificate or such issuance
of a new certificate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;5 &#151; <U>Stock Records and Transfers of Stock</U>: Transfers of shares of stock of
the Corporation shall be made by the transfer agent and registrar on the Books of the
Corporation after receipt of a request with proper evidence of succession, assignment, or
authority to transfer by the record holder of such stock, or by an attorney lawfully
</DIV>
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">constituted in writing, and, in the case of stock represented by a certificate, upon
surrender of the certificate duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer. Subject to the foregoing, the Board of Directors shall
have power and authority to adopt resolutions as it shall deem necessary or appropriate
concerning the issue, transfer, and registration of shares of stock of the Corporation, and
to appoint and remove transfer agents and registrars of transfers.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Board of Directors may fix a date preceding the date fixed for any meeting of the
shareholders or any dividend payment date or the date for the allotment of rights or the date
when any change, conversion or exchange of stock shall go into effect or the date for any
other action, as the record date for the determination of the shareholders entitled to notice
of and to vote at such meeting or to receive payment of such dividend or to receive such
allotment of rights or to exercise such rights in respect of any such change, conversion or
exchange of stock or to take such other action, as the case may be, notwithstanding any
transfer of shares on the records of the Corporation or otherwise after any such record date
fixed as aforesaid. The record date so fixed by the Board shall not be more than sixty (60)
nor less than ten (10)&nbsp;days before the date of the meeting of the shareholders, nor more than
sixty (60)&nbsp;days before any other action. If the Board of Directors does not fix a date of
record, as aforesaid, the record date shall be as provided by law.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;6 &#151; <U>Registered Shareholders</U>: The Corporation shall be entitled to recognize
the exclusive right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and shall be entitled to hold liable for calls and
assessments a person so registered on its books as the owner of shares, and shall not be
bound to recognize any equitable or other claim to or interest in such share or shares on the
part of any other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by applicable statute.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ARTICLE XII: AUTHORIZED SIGNATURES</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;1 &#151; <U>Authorized Signatures</U>: All checks, drafts and other negotiable
instruments issued by the Corporation shall be made in the name of the Corporation and shall
be signed manually or signed by facsimile signature by such one of the officers of the
Corporation or such other person as the Chairman of the Board, the Vice Chairman of the
Board, the President or the Treasurer may from time to time designate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ARTICLE XIII: INSURANCE</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;1 &#151; <U>Insurance</U>: The Corporation may purchase and maintain liability
insurance, to the full extent permitted by law, on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at the request
of the Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability asserted against
such person and incurred by such person in any such capacity.
</DIV>
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ARTICLE XIV: AMENDMENTS OF BYLAWS</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;1 &#151; <U>Amendments, How Effected</U>: These Bylaws may be amended or repealed, or
new Bylaws may be adopted, either by the majority vote of the votes cast by the shareholders
entitled to vote thereon or by the majority vote of the Directors then in office at any
meeting of the Directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Amended and Restated<br>
August&nbsp;10, 2007

</DIV>


<P align="right" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>



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<TYPE>EX-3.(D)
<SEQUENCE>3
<FILENAME>k21037exv3wxdy.htm
<DESCRIPTION>CONSUMERS ENERGY COMPANY BYLAWS
<TEXT>
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<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit (3)(d)
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">CONSUMERS ENERGY COMPANY
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">BYLAWS

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ARTICLE I: LOCATION OF OFFICES</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;1 &#151; <U>Registered Office</U>: The registered office of Consumers Energy Company,
(the &#147;Company&#148;) shall be at such place in the City of Jackson, County of Jackson, Michigan, or
elsewhere in the State of Michigan, as the Board of Directors may from time to time designate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;2 &#151; <U>Other Offices</U>: The Company may have and maintain other offices within
or without the State of Michigan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ARTICLE II: CORPORATE SEAL</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;1 &#151; <U>Corporate Seal</U>: The Company shall have a corporate seal bearing the
name of the Company. The form of the corporate seal may be altered by the Board of
Directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ARTICLE III: FISCAL YEAR</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;1 &#151; <U>Fiscal Year</U>: The fiscal year of the Company shall begin with the first
day of January and end with the thirty-first day of December of each year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ARTICLE IV: SHAREHOLDERS&#146; MEETINGS</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;1 &#151; <U>Annual Meetings</U>: An annual meeting of the shareholders for election of
Directors and for such other business as may come before the meeting shall be held at the
registered office of the Company or at such other place within or without the State of
Michigan, at 10:00 AM, Eastern Daylight Saving Time, or at such other time on the fourth
Friday in May of each year or upon such other date as the Board of Directors may designate,
but in no event shall such date be more than ninety (90)&nbsp;days after the fourth Friday in
May.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;2 &#151; <U>Special Meetings</U>: Special meetings of the shareholders may be called
by the Board of Directors or by the Chairman of the Board. Such meetings shall be held at
the registered office of the Company or at such other place within or without the State of
Michigan as the Board of Directors may designate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;3 &#151; <U>Notices</U>: Except as otherwise provided by law, written notice of any
meeting of the shareholders shall be given, either personally or by mail to each
shareholder of record entitled to vote at such meeting, not less than ten (10)&nbsp;days nor
more than sixty (60)&nbsp;days prior to the date of the meeting, at their last known address as
the same appears on the stock records of the Company. Written notice shall be considered
given when deposited, with postage thereon prepaid, in a post office or official depository
</DIV>
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="right" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">under the control of the United States postal service. Such notice shall specify the time
and place of holding the meeting, the purpose or purposes for which such meeting is called,
and the record date fixed for the determination of shareholders entitled to notice of and
to vote at such meeting. The Board of Directors shall fix a record date for determining
shareholders entitled to notice of and to vote at a meeting of shareholders, which record
date shall not be more than sixty (60)&nbsp;days nor less than ten (10)&nbsp;days before the date of
the meeting. Such record date shall apply to any adjournment of the meeting unless the
Board of Directors shall fix a new record date for purposes of the adjourned meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No notice of an adjourned meeting shall be necessary if the time and place to which
the meeting is adjourned are announced at the meeting at which the adjournment is taken.
At the adjourned meeting only such business may be transacted as might have been transacted
at the original meeting. If, after an adjournment, the Board of Directors shall fix a new
record date for the adjourned meeting, a notice of the adjourned meeting shall be mailed,
in conformity with the provisions of the first paragraph of this Section&nbsp;3, to each
shareholder of record on the new record date entitled to vote at the adjourned meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;4 &#151; <U>Quorum</U>: Except as otherwise provided by law or by the Articles of
Incorporation of the Company, the holders of the shares of stock of the Company entitled to
cast a majority of the votes at a meeting shall constitute a quorum for the transaction of
business at the meeting, but a lesser number may convene any meeting and, by a majority
vote of the shares present at the meeting, may adjourn the same from time to time until a
quorum shall be present.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;5 &#151; <U>Voting</U>: Shareholders may vote at all meetings in person or by proxy,
but all proxies shall be filed with the Secretary of the meeting before being voted upon.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The voting powers of the shares of Preferred Stock, Class&nbsp;A Preferred Stock,
Preference Stock and Common Stock shall be as provided by law or set forth in the Articles
of Incorporation of the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;6 &#151; <U>Inspectors</U>: In advance of any meeting of shareholders the Board of
Directors shall appoint one or more inspectors to act at such meeting or any adjournment
thereof. The inspectors shall have such powers and duties as are provided by law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ARTICLE V: DIRECTORS</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;1 &#151; <U>Number</U>: The Board of Directors of the Company shall consist of not
less than seven (7)&nbsp;nor more than seventeen (17)&nbsp;members, as fixed from time to time by
resolution of the Board of Directors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;2 &#151; <U>Election</U>: The Directors shall be elected annually at the annual
meeting of the shareholders or at any adjournment thereof.
</DIV>
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="right" style="font-size: 10pt"><!-- Folio -->3<!-- /Folio -->


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;3 &#151; <U>Term of Office</U>: Subject to the provisions of the Articles of
Incorporation of the Company and unless otherwise provided by law, the Directors shall hold
office from the date of their election until the next succeeding annual meeting and until
their successors are elected and shall qualify.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;4 &#151; <U>Vacancies</U>: Any vacancy or vacancies in the Board of Directors arising
from any cause may be filled by the affirmative vote of a majority of the Directors then in
office although less than a quorum. An increase in the number of members shall be
construed as creating a vacancy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ARTICLE VI: DIRECTORS&#146; MEETINGS</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;1 &#151; <U>Organization Meeting</U>: As soon as possible after their
election, the Board of Directors shall meet and organize and may also transact other
business.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;2 &#151; <U>Other Meetings</U>: Meetings of the Board of Directors may be held at any
time upon call of the Secretary or an Assistant Secretary made at the direction of the
Chairman of the Board, the President, a Vice Chairman, if any, or a Vice President.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;3 &#151; <U>Place of Meeting</U>: All meetings of Directors shall be held at such
place within or without the State of Michigan as may be designated in the call therefor.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;4 &#151; <U>Notice</U>: A reasonable notice of all meetings, in writing or otherwise,
shall be given to each Director or sent to the Director&#146;s residence or place of business;
provided, however, that no notice shall be required for an organization meeting if held on
the same day as the shareholders&#146; meeting at which the Directors were elected.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">No notice of the holding of an adjourned meeting shall be necessary.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Notice of all meetings shall specify the time and place of holding the meeting and
unless otherwise stated any and all business may be transacted at any such meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Notice of the time, place and purpose of any meeting may be waived in writing either
before or after the holding thereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;5 &#151; <U>Quorum</U>: At all meetings of the Board of Directors a majority of the
Board then in office shall constitute a quorum but a majority of the Directors present may
convene and adjourn any such meeting from time to time until a quorum shall be present;
provided, that if the Board shall consist of ten (10)&nbsp;and not more than fifteen (15), then
five (5)&nbsp;members shall constitute a quorum; and if the Board shall consist of more than
fifteen (15), then seven (7)&nbsp;members shall constitute a quorum.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;6 &#151; <U>Voting</U>: All questions coming before any meeting of the Board of
Directors for action shall be decided by a majority vote of the Directors present at such
meeting, unless otherwise provided by law, the Articles of Incorporation of the Company or
by these Bylaws.
</DIV>
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="right" style="font-size: 10pt"><!-- Folio -->4<!-- /Folio -->


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;7 &#151; <U>Participation by Communications Equipment</U>: A Director or a member of a
Committee designated by the Board of Directors may participate in a meeting by means of
conference telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation in a meeting by such means
shall constitute presence in person at the meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;8 &#151; <U>Action Without Meeting</U>: Any action required or permitted to be taken
pursuant to authorization voted at a meeting of the Board of Directors or a Committee
thereof, may be taken without a meeting if, before or after the action, all members of the
Board or of the Committee consent thereto in writing. The written consents shall be filed
with the minutes of the proceedings of the Board or Committee, and the consents shall have
the same effect as a vote of the Board or Committee for all purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ARTICLE VII: EXECUTIVE AND OTHER COMMITTEES</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;1 &#151; <U>Number and Qualifications</U>: By resolution passed by a majority of the
whole Board, the Board of Directors may from time to time designate one or more of their
number to constitute an Executive or any other Committee of the Board, as the Board of
Directors may from time to time determine to be desirable, and may fix the number of
members and designate the Chairperson of each such Committee, except that the Audit
Committee shall consist of not less than three outside members of the Board of Directors.
Except as provided by law, the powers of each such Committee shall be as defined in the
resolution or resolutions of the Board of Directors relating to the authorizations of such
Committee, and may include, if such resolution or resolutions so provide, the power and
authority to declare a dividend or to authorize the issuance of shares of stock of the
Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;2 &#151; <U>Appointment</U>: The appointment of members of each such Committee, or
other action respecting any Committee, may take place at any meeting of the Directors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;3 &#151; <U>Term of Office</U>: The members of each Committee shall hold office at the
pleasure of the Board of Directors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;4 &#151; <U>Vacancies</U>: Any vacancy or vacancies in any such Committee arising from
any cause shall be filled by resolution passed by a majority of the whole Board of
Directors. By like vote the Board may designate one or more Directors to serve as
alternate members of a Committee, who may replace an absent or disqualified member at a
meeting of a Committee; provided, however, in the absence or disqualification of a member
of a Committee, the members of the Committee present at a meeting and not disqualified from
voting, whether or not constituting a quorum, may unanimously appoint another member of the
Board of Directors to act in the place of the absent or disqualified member.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;5 &#151; <U>Minutes</U>: Except as provided in Section&nbsp;2 of Article&nbsp;X hereof or as
otherwise determined by the Board of Directors, each such Committee shall make a written
report or recommendation following its meetings or keep minutes of all its meetings.
</DIV>
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="right" style="font-size: 10pt"><!-- Folio -->5<!-- /Folio -->


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;6 &#151; <U>Quorum</U>: At all meetings of any duly authorized Committee of the Board
of Directors, a majority of the members of such Committee shall constitute a quorum but a
majority of the members present may convene and adjourn any such meeting from time to time
until a quorum shall be present; provided, that with respect to any Committee of the Board
other than the Executive Committee, if the membership of such Committee is four (4)&nbsp;or
less, then two (2)&nbsp;members of such Committee shall constitute a quorum and one member may
convene and adjourn any such meeting from time to time until a quorum shall be present.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ARTICLE VIII: OFFICERS</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;1 &#151; <U>Election</U>: The officers shall be chosen by the Board of Directors. The
Company shall have a Chairman of the Board, a President, a Secretary and a Treasurer, and
such other officers as the Board of Directors may from time to time determine, who shall
have respectively such duties and authority as may be provided by these Bylaws or as may be
provided by resolution of the Board of Directors not inconsistent herewith. Any two (2)&nbsp;or
more of such offices may be held by the same person but no officer shall execute,
acknowledge or verify any instrument in more than one capacity if such instrument is
required by law, by the Articles of Incorporation of the Company or by these Bylaws to be
executed, acknowledged or verified by two (2)&nbsp;or more officers.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;2 &#151; <U>Qualifications</U>: The Chairman of the Board and Vice Chairman, if any,
shall be chosen from among the Board of Directors, but the other officers need not be
members of the Board.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;3 &#151; <U>Vacancies</U>: Any vacancy or vacancies among the officers arising from
any cause shall be filled by the Board of Directors. In case of the absence of any officer
of the Company or for any other reason that the Board of Directors may deem sufficient, the
Board of Directors may delegate, for the time being, the powers or duties, or any of them,
of any officer to any other officer or to any Director.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;4 &#151; <U>Term of Office</U>: Each officer of the Company shall hold office until
the officer&#146;s successor is chosen and qualified, or until the officer&#146;s resignation or
removal. Any officer appointed by the Board of Directors may be removed at any time by the
Board of Directors with or without cause.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;5 &#151; <U>Compensation</U>: The compensation of the officers shall be fixed by a
committee of the Board of Directors composed of independent directors as defined by
applicable law and regulation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ARTICLE IX: AGENTS</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;1 &#151; <U>Resident Agent</U>: The Company shall have and continuously maintain a
resident agent, which may be either an individual resident in the State of Michigan whose
business office is identical with the Company&#146;s registered office or a Michigan corporation
or a foreign corporation authorized to transact business in Michigan and having a business
office identical with the Company&#146;s registered office. The Board of Directors shall
appoint the resident agent.
</DIV>
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="right" style="font-size: 10pt"><!-- Folio -->6<!-- /Folio -->


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;2 &#151; <U>Other Agents</U>: The Board of Directors may appoint such other agents as
may in their judgment be necessary for the proper conduct of the business of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ARTICLE X: POWERS AND DUTIES</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;1 &#151; <U>Directors</U>: The business and affairs of the Company shall be managed by
the Board of Directors which shall have and exercise all of the powers and authority of the
Company except as otherwise provided by law, by the Articles of Incorporation of the
Company or by these Bylaws.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;2 &#151; <U>Executive Committee</U>: In the interim between meetings of the Board of
Directors the Executive Committee shall have and exercise all the powers and authority of
the Board of Directors except as otherwise provided by law. The Executive Committee shall
meet from time to time on the call of the Chairman of the Board or the Chairman of the
Committee. The Secretary shall keep minutes in sufficient detail to advise fully the Board
of Directors of the actions taken by the Committee and shall submit copies of such minutes
to the Board of Directors for its approval or other action at its next meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;3 &#151; <U>Chairman of the Board</U>: The Chairman of the Board shall preside at all
meetings of Directors and shareholders; shall perform and do all acts and things incident
to the position of Chairman of the Board; and shall perform such other duties as may be
assigned from time to time by the Board of Directors or the Executive Committee.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;4 &#151; <U>Chief Executive Officer</U>: The Chief Executive Officer, subject to the
supervision of the Board of Directors and of the Executive Committee, shall have general
charge of the business and affairs of the Company. Unless otherwise provided by the Board
or the Executive Committee, the Chief Executive Officer shall have full power and authority
on behalf of the Company to execute any shareholder, member or partnership consents and to
attend and act and to vote in person or by proxy at any meetings of shareholders, members
or partners of any entity in which the Company may own stock or an interest and at any such
meeting shall possess and may exercise any and all the rights and powers incident to the
ownership of such stock or interest and which, as the owner thereof, the Company might have
possessed and exercised if present. If the Chief Executive Officer shall not exercise such
powers, or in the absence or inability to act of the Chief Executive Officer, the President
may exercise such powers. In the absence or inability to act of the President, a Vice
Chairman, if any, may exercise such powers. In the absence or inability to act of a Vice
Chairman, any Vice President may exercise such powers. The Board of Directors or Executive
Committee by resolution from time to time may confer like powers upon any other person or
persons. In the absence of the Chairman of the Board and a Vice Chairman, the Chief
Executive Officer shall preside at meetings of Directors. In the absence of the Chairman
of the Board, the Chief Executive Officer shall preside at meetings of shareholders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;5 &#151; <U>President</U>: The President shall be the chief operating officer of the
Company and shall perform and do all acts and things incident to such position; and shall
perform
</DIV>
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="right" style="font-size: 10pt"><!-- Folio -->7<!-- /Folio -->


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">such other duties as may be assigned from time to time by the Board of Directors, the
Executive Committee, the Chairman of the Board or the Chief Executive Officer.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;6 &#151; <U>Vice Chairman</U>: The Vice Chairman, if any, shall perform such of the
duties of the Chairman of the Board or the President on behalf of the Company as may be
respectively assigned from time to time by the Board of Directors, the Executive Committee,
the Chairman of the Board or the President. In the absence of the Chairman of the Board,
the Vice Chairman shall preside at meetings of Directors. In the absence of the Chairman
of the Board and the President, the Vice Chairman shall preside at meetings of
shareholders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;7 &#151; <U>Vice Presidents</U>: Vice Presidents, if any, shall perform such of the
duties of the Chairman of the Board or the President or the Vice Chairman, if any, on
behalf of the Company as may be respectively assigned from time to time by the Board of
Directors, the Executive Committee, the Chairman of the Board or the President or a Vice
Chairman. The Board of Directors or Executive Committee may designate one or more of the
Vice Presidents as Executive Vice President or Senior Vice President.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;8 &#151; <U>Controller</U>: Subject to the Board of Directors, the Executive
Committee, the Chairman of the Board, the President and the Vice President having general
charge of accounting, the Controller, if any, shall have charge of the supervision of the
accounting system of the Company, including the preparation and filing of all tax returns
and financial reports required by law to be made to any and all public authorities and
officials; and shall perform such other duties as may be assigned, from time to time, by
the Board of Directors, the Executive Committee, the Chairman of the Board, the President,
a Vice Chairman, if any, or Vice President having general charge of accounting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;9 &#151; <U>Treasurer</U>: It shall be the duty of the Treasurer to have the care and
custody of all the funds and securities, including the investment thereof, of the Company
which may come into the Treasurer&#146;s hands, and to endorse checks, drafts and other
instruments for the payment of money for deposit or collection when necessary or proper and
to deposit the same to the credit of the Company in such bank or banks or depository as the
Treasurer may designate, and the Treasurer may endorse all commercial documents requiring
endorsements for or on behalf of the Company. The Treasurer may sign all receipts and
vouchers for the payments made to the Company; shall render an account of transactions to
the Board of Directors or the Executive Committee as often as the Board or the Committee
shall require; and shall perform all acts incident to the position of Treasurer, subject to
the control of the Board of Directors, the Executive Committee, the Chairman of the Board,
the President and a Vice Chairman, if any.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;10 &#151; <U>Secretary</U>: The Secretary shall act as custodian of and record the
minutes of all meetings of the Board of Directors, of the Executive Committee, of the
shareholders and of any Committees of the Board of Directors which keep formal minutes;
shall attend to the giving and serving of all notices of the Company; shall prepare or
cause to be prepared the list of shareholders required to be produced at any meeting; shall
attest the seal of the Company upon all contracts and instruments executed under such seal
</DIV>
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="right" style="font-size: 10pt"><!-- Folio -->8<!-- /Folio -->


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">and shall affix or cause to be affixed the seal of the Company thereto and to all
certificates of shares of the capital stock; shall have charge of the stock records of the
Company and such other books and papers as the Board of Directors, the Executive Committee,
the Chairman of the Board, the President or a Vice Chairman, if any, may direct; and shall,
in general, perform all the duties of Secretary, subject to the control of the Board of
Directors, the Executive Committee, the Chairman of the Board, the President and a Vice
Chairman, if any.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;11 &#151; <U>General Counsel</U>: The General Counsel, if any, shall have charge of
all matters of a legal nature involving the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;12 &#151;
<U>Assistant Controllers, Assistant Secretaries and Assistant Treasurers</U>: An Assistant Controller, an Assistant Secretary or an
Assistant Treasurer, if any, shall, in the absence or inability to act or at the request of
the Controller, Secretary or Treasurer, respectively, perform the duties of the Controller
or Secretary or Treasurer, respectively, and shall perform such other duties as may from
time to time be assigned by the Board of Directors, the Executive Committee, the Chairman
of the Board, the President or a Vice Chairman, if any. The performance of any such duty
shall be conclusive evidence of their right to act.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;13 &#151;
<U>Principal Financial Officer and Principal Accounting Officer</U>: The Board of Directors or the Executive
Committee may from time to time designate officers of the Company to be the Principal
Financial Officer and the Principal Accounting Officer of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ARTICLE XI: STOCK</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;1 &#151; <U>Certificated and Uncertificated Shares</U>: The shares of stock of the
Corporation may be either certificated shares or uncertificated shares or a combination
thereof. A resolution approved by a majority of the directors may provide that some or
all of any or all classes and series of the shares of the Company will be uncertificated shares. Every owner of certificated shares of the Company shall be entitled to a
certificate, to be in such form as shall be prescribed by law, the Articles of
Incorporation of the Company or by these Bylaws. Each certificate shall be numbered and
shall be entered on the stock records of the Company and registered as they are issued,
and shall be signed, in the name of the Company, by the Chairman of the Board, Vice
Chairman, if any, President or one of the Vice Presidents and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary; and shall be sealed with
the seal of the Company or a facsimile thereof, or by such officers as the Board of
Directors may designate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;2 &#151; <U>Facsimile Signatures</U>: When a certificate is countersigned (1)&nbsp;by a
transfer agent, or (2)&nbsp;by a transfer clerk acting on behalf of the Company and a
registrar, the signatures of any such Chairman of the Board, Vice Chairman, if any,
President, Vice President, Treasurer, Assistant Treasurer, Secretary or Assistant
Secretary may be facsimile. In case any officer or officers who have signed, or whose
facsimile signature or signatures have been used on any such certificate or certificates
shall cease to be
</DIV>
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">such officer or officers of the Company before such certificate or certificates have been
delivered by the Company, such certificate or certificates may nevertheless be adopted by
the Company and be issued and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or signatures have been used
thereon had not ceased to be such officer or officers of the Company..
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;3 &#151; <U>Stock &#151; Preferred, Class&nbsp;A Preferred, Preference and Common</U>: The
designations, relative rights, preferences, limitations and voting powers, or
restrictions, or qualifications of the shares of Preferred Stock, Class&nbsp;A Preferred Stock,
Preference Stock and Common Stock shall be as set forth in the Articles of Incorporation
of the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;4 &#151; <U>Replacing Certificates</U>: In case of the alleged loss, theft or
destruction of any certificate of shares of stock and the submission of proper proof
thereof, a new certificate may be issued in lieu thereof upon delivery to the Company by
the owner or legal representative of a bond of indemnity against any claim that may be
made against the Company on account of such alleged lost, stolen or destroyed certificate
or such issuance of a new certificate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;5 &#151; <U>Stock Records and Transfers of Stock</U>: Transfers of shares of stock
of the Company shall be made by the transfer agent and registrar on the Books of the
Company after receipt of a request with proper evidence of succession, assignment, or
authority to transfer by the record holder of such stock, or by an attorney lawfully
constituted in writing, and, in the case of stock represented by a certificate, upon
surrender of the certificate duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer. Subject to the foregoing, the Board of
Directors shall have power and authority to adopt resolutions as it shall deem necessary
or appropriate concerning the issue, transfer, and registration of shares of stock of the
Corporation, and to appoint and remove transfer agents and registrars of transfers.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Board of Directors may fix a date preceding the date fixed for any meeting of the
shareholders or any dividend payment date or the date for the allotment of rights or the
date when any change, conversion or exchange of stock shall go into effect or the date for
any other action, as the record date for the determination of the shareholders entitled to
notice of and to vote at such meeting or to receive payment of such dividend or to receive
such allotment of rights or to exercise such rights in respect of any such change,
conversion or exchange of stock or to take such other action, as the case may be,
notwithstanding any transfer of shares on the records of the Company or otherwise after
any such record date fixed as aforesaid. The record date so fixed by the Board shall not
be more than sixty (60)&nbsp;nor less than ten (10)&nbsp;days before the date of the meeting of the
shareholders, nor more than sixty (60)&nbsp;days before any other action. If the Board of
Directors does not fix a date of record, as aforesaid, the record date shall be as
provided by law.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;6 &#151; <U>Registered Shareholders</U>: The Company shall be entitled to recognize
the exclusive right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and shall be entitled to hold liable for calls and
assessments a person so registered on its books as the owner of shares, and shall not be
</DIV>
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">bound to recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by applicable statute.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ARTICLE XII: AUTHORIZED SIGNATURES</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;1 &#151; <U>Authorized Signatures</U>: All checks, drafts and other negotiable
instruments issued by the Company shall be made in the name of the Company and shall be
signed manually or signed by facsimile signature by such one of the officers of the Company
or such other person as the Chairman of the Board, the Vice Chairman of the Board,
President or the Treasurer may from time to time designate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ARTICLE XIII: INSURANCE</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;1 &#151; <U>Insurance</U>: The Company may purchase and maintain liability insurance,
to the full extent permitted by law, on behalf of any person who is or was a director,
officer, employee or agent of the Company, or is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against such person
and incurred by such person in any such capacity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>ARTICLE XIV: AMENDMENTS OF BYLAWS</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Section&nbsp;1 &#151; <U>Amendments, How Effected</U>: These Bylaws may be amended or repealed, or
new Bylaws may be adopted, either by the majority vote of the votes cast by the
shareholders entitled to vote thereon or by the majority vote of the Directors then in
office at any meeting of the Directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Amended and Restated<BR>
August&nbsp;10, 2007
</DIV>



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<DOCUMENT>
<TYPE>EX-10.(A)
<SEQUENCE>4
<FILENAME>k21037exv10wxay.htm
<DESCRIPTION>FORM OF INDEMNIFICATION AGREEMENT BETWEEN CMS ENERGY CORPORATION & ITS DIRECTORS
<TEXT>
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<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit (10)(a)
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>INDEMNIFICATION AGREEMENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Indemnification Agreement (&#147;<U>Agreement</U>&#148;) is made and entered into as of
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>, by and between <B>CMS ENERGY CORPORATION</B>, a Michigan corporation (the
&#147;<U>Corporation</U>&#148;), and <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>, a director of the Corporation (the
&#147;<U>Indemnitee</U>&#148;). The Corporation and the Indemnitee are sometimes individually referred to
herein as a &#147;<U>Party</U>&#148; and collectively as the &#147;<U>Parties</U>.&#148;
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>RECITALS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;The Michigan Business Corporation Act, 284 PA 1972, MCL 450.1101- 450.2099 (the
&#147;<U>MBCA</U>&#148;), provides that directors may be entitled to indemnification and advancement of
expenses rights pursuant to contractual agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;In addition to the indemnification to which the Indemnitee is entitled under the Articles
of Incorporation of the Corporation (the &#147;<U>Articles</U>&#148;) or Bylaws of the Corporation (the
&#147;<U>Bylaws</U>&#148;), or granted pursuant to various Board resolutions, in effect from time to time,
the Corporation has obtained at its sole expense liability insurance protecting its directors,
including the Indemnitee, against certain losses arising out of actual or threatened actions, suits
or proceedings to which such persons may be made or threatened to be made parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;Because of the increasing exposure to the risks of litigation and the need to attract, and
the difficulty of attracting, qualified candidates to serve as directors, the Corporation has
deemed it appropriate to enter into this Agreement with the Indemnitee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D.&nbsp;The Indemnitee is presently serving as a director of the Corporation, and the Corporation
desires the Indemnitee to continue in such capacity. The Indemnitee is willing, subject to certain
conditions, including, without limitation, the execution and performance of this Agreement by the
Corporation, to continue in that capacity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E.&nbsp;The Parties agree that this Agreement will apply prospectively to Proceedings (as defined
herein) arising after the date of this Agreement, and that it is the intent of the Parties to
provide the Indemnitee with the broadest possible indemnification.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accordingly, in consideration of the mutual covenants and agreements set forth in this
Agreement, the sufficiency of which is hereby acknowledged, the Corporation and Indemnitee agree as
follows:
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1.&nbsp;</B><U><B>Definitions</B></U><B>. </B>For purposes of this Agreement, the following terms shall have the
meanings set forth below:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) &#147;Advancement of Expenses&#148; or to &#147;Advance Expenses&#148; shall refer to the payment of
Expenses in connection with a Proceeding prior to an ultimate determination whether the
Indemnitee has met any applicable standard of conduct.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) &#147;<U>Agreement</U>&#148; shall mean this Indemnification Agreement, including the
Preamble, Recitals, and Exhibit.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) &#147;<U>Articles</U>&#148; shall have the meaning set forth in Recital B.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) &#147;<U>Board</U>&#148; shall have the meaning set forth in Section&nbsp;3(b)(i).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) &#147;<U>Bylaws</U>&#148; shall have the meaning set forth in Recital B.
(f) &#147;Corporation&#148; shall have the meaning set forth in the Preamble.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) &#147;<U>Expenses</U>&#148; shall mean any costs or expenses actually and reasonably
incurred by the Indemnitee in connection with a Proceeding, including but not limited to,
judgments, amounts paid in settlement, fines, penalties, attorney fees, expert and witness
fees, expenses of investigations, expenses of appeals, expenses of bonds, court costs,
expenses of arbitration and mediation, and any other cost or expense reasonably related to a
Proceeding.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) References to &#147;<U>fines</U>&#148; shall include any excise or other taxes assessed on
Indemnitee with respect to any employee benefit plan or otherwise.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) &#147;<U>Indemnification</U>&#148; (and correspondingly &#147;indemnity&#148; and &#147;indemnify&#148;) shall
refer to the payment of Expenses in connection with a Proceeding as set forth in this
Agreement following an ultimate determination that any applicable standard of conduct has
been met.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) &#147;<U>Indemnitee</U>&#148; shall have the meaning set forth in the Preamble.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) &#147;<U>MBCA</U>&#148; shall have the meaning set forth in Recital A.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) &#147;<U>Party</U>&#148; or &#147;<U>Parties</U>&#148; shall have the meaning set forth in the Preamble.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) &#147;<U>Payment Request</U>&#148; shall have the meaning set forth in Section&nbsp;4(a).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n) &#147;Payment Time Limit&#148; shall mean 65&nbsp;days after a Payment Request, except if a
regularly scheduled Board of Directors&#146; meeting is not scheduled to occur within 60&nbsp;days
after a payment request, then the Payment Time Limit shall be within 5&nbsp;days after the date
of the next meeting of the Board of Directors after the Payment Request not to exceed 100
days after the Payment Request.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o) &#147;<U>Proceeding</U>&#148; shall mean any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative; whether formal or
informal; and whether or not by or in the right of the Corporation, as to which Indemnitee
is or may become a party or witness, by reason of the fact that the Indemnitee is or was a
director of the Corporation or which relates to the Indemnitee&#146;s service as a director of
the Corporation, including but not limited to, court proceedings, arbitrations, alternative
dispute resolution proceedings, administrative proceedings, any other type of judicial or
quasi-judicial proceeding, or any such proceeding to enforce Indemnitee&#146;s rights hereunder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p) &#147;<U>Shareholders</U>&#148; shall have the meaning set forth in Section&nbsp;3(b)(v).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.&nbsp;</B><U><B>Continued Service</B></U><B>. </B>The Indemnitee agrees to continue to serve the Corporation as a
director in consideration of the personal liability protections granted by the Corporation to the
Indemnitee herein; <U>provided</U>, however, that nothing contained in this Agreement shall
constitute a contract of employment or designation of directorship between the Corporation and the
Indemnitee; and <U>provided</U> <U>further</U>, that the Indemnitee shall serve as a director so
long as the Indemnitee is duly nominated, elected and qualified in accordance with applicable
requirements or until the Indemnitee resigns. The Corporation is under no obligation to renominate
an Indemnitee entering into this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.&nbsp;</B><U><B>Indemnity</B></U><B>.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <U>Indemnification and Advancement of Expenses</U>. Unless prohibited by law, the
Corporation shall indemnify the Indemnitee against Expenses and shall Advance Expenses to
the maximum extent when the Indemnitee was or is a party or is threatened to be made a party
or a witness in a Proceeding. The termination of any Proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent shall not create
a presumption that the Indemnitee failed to satisfy the applicable standard of conduct
required by law for indemnification or Advancement of Expenses.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <U>Determination and Evaluation</U>. Any indemnification or Advancement of
Expenses under Section 3(a) (unless ordered by a court) shall be made by the Corporation
within the time specified in Section&nbsp;4(a), upon a determination that the Indemnitee
satisfies the applicable standard of conduct, if any, and upon an evaluation of the
reasonableness of Expenses. Such determination and evaluation shall be made:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) by a majority vote of a quorum of the Board of Directors of the Corporation
(the &#147;<U>Board</U>&#148;) consisting of directors who are not parties or threatened to
be made parties to such Proceeding;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) if such a quorum is not obtainable, by a majority vote of a committee duly
designated by the Board consisting solely of two or more directors not at the time
parties or threatened to be made parties to such Proceeding;
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) by independent legal counsel (designated in the manner provided below in
this subsection (b)) in a written opinion;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) by all independent directors (as defined in Section&nbsp;107(3) of the MBCA)
who are not parties to such Proceeding; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) by the shareholders of the Corporation (the &#147;<U>Shareholders</U>&#148;), but
shares held by directors, officers, employees or agents who are parties or
threatened to be made parties to such Proceeding may not be voted.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Independent legal counsel shall be designated by the Board or its committee in the manner
prescribed in Section&nbsp;3(b)(i) or 3(b)(ii); <U>provided</U>, <U>however</U>, that if a
quorum of the Board cannot be obtained under Section&nbsp;3(b)(i) and a committee cannot be
designated under Section&nbsp;3(b)(ii), designation of independent legal counsel shall be made by
the Board. In the designation of a committee under Section&nbsp;3(b)(ii) or the selection of
independent legal counsel by the Board, all directors may participate. The time limits set
forth in Section 4(a) shall govern the process of the determination and evaluation set forth
in this Section.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;<U>Presumption of Reasonableness</U>. For purposes of this Agreement, legal fees
and expenses which are incurred upon the advice of legal counsel shall be presumed
reasonable. Under the terms of this Agreement, Indemnitee shall have the right to legal
counsel of his or her choosing. The hourly rate of counsel chosen by Indemnitee shall be
presumed reasonable so long as the hourly rate of such counsel is customary for such
counsel, notwithstanding that the rate may be higher than the rate of other attorneys with
comparable skills.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;<U>Partial Indemnification</U>. If the Indemnitee is entitled to indemnification
or Advancement of Expenses under Section 3(a) for a portion of Expenses, but not for the
total amount, the Corporation shall indemnify and Advance Expenses to the Indemnitee for the
portion of the Expenses to which the Indemnitee is entitled.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;<U>Modification of Indemnitee&#146;s Rights</U>. The Indemnitee&#146;s rights to
indemnification and Advancement of Expenses pursuant to the Articles, Bylaws or resolutions
of the Board in effect as of the date of this Agreement, or any future modification of such
Articles, Bylaws or resolutions which expands the rights of Indemnitee, are incorporated in
this Agreement. In the event that the Corporation adopts any amendment to the Articles,
Bylaws or resolutions, or adopts a new resolution, which effect is to deny, diminish or
encumber the Indemnitee&#146;s rights to indemnification or Advancement of Expenses, such
amendment or new resolution shall not diminish the rights of Indemnitee pursuant to this
Agreement and shall be deemed to be invalid and of no force and effect to reduce
Indemnitee&#146;s rights hereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;To the extent any action or inaction of Indemnitee is based upon the books and
records of the Corporation, including financial statements, or upon information supplied to
Indemnitee by officers of the Corporation or its counsel, auditors, or experts, then such
action or inaction shall be conclusively deemed to be in good faith for purposes
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">of this Agreement, provided that the foregoing shall not be deemed to be exclusive
tests of good faith.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.&nbsp;</B><U><B>Procedures Relating to Indemnification and Advancement of Expenses</B></U><B>.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;<U>Indemnification and Advancement of Expenses</U>. For purposes of pursuing the
Indemnitee&#146;s rights to indemnification and Advancement of Expenses under Section 3(a)
hereof, the Indemnitee shall submit a request (&#147;<U>Payment Request</U>&#148;) by means of the
following: (i)&nbsp;a signed request, substantially in the form of <U>Exhibit&nbsp;A</U> attached
hereto and made a part hereof, averring that the Indemnitee is entitled to indemnification
and/or Advancement of Expenses hereunder; and (ii)&nbsp;evidence in customary or reasonable form
of all Expenses for which payment is requested. In the event Indemnitee is submitting a
Payment Request after having previously submitted such a request concerning the same
Proceeding, Indemnitee may refer to and rely upon the previously submitted Payment Request,
and merely supplement evidence of Expenses for which payment is sought. Any such supplement
of Expenses shall be treated as a new Payment Request for purposes of the time limits set
forth in this Section. Within the Payment Time Limit, the Corporation shall decide the
extent to which Indemnitee is entitled to payment of Expenses and submit payment
accordingly; <U>provided</U>, <U>however</U>, that if the Corporation should fail to
decide within the Payment Time Limit it shall submit payment in accordance with the Payment
Request. In making its decision hereunder, the Corporation shall use the procedures set
forth in Section 3(b) hereof. In the event the Indemnitee disagrees with the Corporation&#146;s
decision made within such Payment Time Limit, he/she may seek judicial relief pursuant to
Section&nbsp;9 of this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;At the conclusion of the Proceeding, if it is ultimately determined that Indemnitee
was not legally entitled to receive all or a portion of Expenses previously paid by the
Corporation, then, subject to Indemnitee&#146;s rights to dispute the Corporation&#146;s findings
pursuant to Section&nbsp;9, Indemnitee shall promptly repay to the Corporation any amounts to
which Indemnitee was not legally entitled.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;The provisions of this Section are procedural only and are in addition to any other
procedures that may be available by law to Indemnitee to recover indemnification or
Advancement of Expenses to which Indemnitee may be entitled pursuant to Section 3(a) hereof
or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Notwithstanding any other provision herein, upon application to a court by the
Indemnitee and a determination of such court that the Indemnitee is fairly and reasonably
entitled to indemnification or Advancement of Expenses, the Corporation shall pay to the
Indemnitee the amount so ordered by the court.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;No security shall be required of any Indemnitee in connection with any
Indemnification and/or Advancement of Expenses hereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;The Corporation may, but shall not be required to, create a trust fund, grant a
security interest or use other means, including a letter of credit, to ensure the
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;payment of such amounts as may be necessary to satisfy its obligations to indemnify and
Advance Expenses pursuant to this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.&nbsp;</B><U><B>Liability Insurance and Funding</B></U><B>.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Unless otherwise agreed by Indemnitee, for the duration of Indemnitee&#146;s service as
a director of the Corporation, and thereafter for so long as Indemnitee shall be subject to
any pending or possible Proceeding for which indemnification may be provided hereunder, the
Corporation shall use commercially reasonable efforts (taking into account the scope and
amount of coverage available relative to the cost thereof) to cause to be maintained in
effect policies of directors&#146; liability insurance providing coverage for directors of the
Corporation that is at least substantially comparable in scope and amount to that provided
by the Corporation&#146;s current policies of directors&#146; liability insurance; <U>provided</U>,
if a lesser amount of insurance coverage would provide Indemnitee adequate protection for
any actual or potential Proceeding (without regard to any contribution that the Corporation
might be able to provide from its own funds in the absence of insurance coverage), the
Corporation may arrange for such adequate insurance coverage, with the consent of
Indemnitee, which consent shall not be unreasonably withheld.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) In all policies of directors&#146; liability insurance obtained by the Corporation,
Indemnitee shall be named as an insured in such a manner as to provide Indemnitee the same
rights and benefits, subject to the same limitations, as are accorded to the Corporation&#146;s
directors most favorably insured by such policy.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) If, at the time of receipt of any notice of a Proceeding, the Corporation has
directors&#146; liability insurance in effect, the Corporation shall give prompt notice of the
commencement of such proceeding to the liability insurers in accordance with the procedures
set forth in the respective policies. A copy of such notice shall be provided to
Indemnitee. The Corporation shall take all necessary or appropriate action to cause such
insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such proceeding
in accordance with the terms of such policies. Upon the request of the Indemnitee, the
Corporation shall provide to Indemnitee a copy of all insurance policies which provide
coverage or potential coverage to Indemnitee relating to a Proceeding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.&nbsp;</B><U><B>Notification of Action</B></U><B>. </B>Promptly after receipt by Indemnitee of notice of any
Proceeding, Indemnitee will, if a claim in respect thereof is to be made against the Corporation
under this Agreement, notify the Corporation of the commencement thereof; but the failure to so
notify the Corporation will not relieve it from any liability that it may have to Indemnitee
unless, and to the extent that, the Corporation is actually prejudiced thereby.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.&nbsp;</B><U><B>Defense and Settlement of Claims</B></U><B>. </B>The Corporation shall be entitled to participate
in the defense of any Proceeding for which indemnification is provided hereunder or to assume the
defense thereof, with counsel reasonably satisfactory to the Indemnitee; <U>provided</U> that if
Indemnitee believes, after consultation with counsel selected by Indemnitee, that (a)&nbsp;in the event
the Corporation assumes the defense of a Proceeding, the use of counsel chosen by the Corporation
to represent Indemnitee would or does present such counsel with an actual or
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">potential conflict, (b)&nbsp;the named parties in any such proceeding (including any impleaded
parties) include both the Corporation and Indemnitee and Indemnitee concludes that there may be one
or more legal defenses available to him or her that are different from or in addition to those
available to the Corporation or such other parties, (c)&nbsp;any such representation by such counsel
would be precluded under the applicable standards of professional conduct then prevailing, or (d)
the Corporation has not actively defended the Indemnitee after assuming the defense in a
Proceeding, then Indemnitee shall be entitled to retain separate counsel (but not more than one law
firm plus, if applicable, local counsel in respect of any particular Proceeding) at the
Corporation&#146;s expense. The Corporation shall not be liable to Indemnitee under this Agreement for
any amounts paid by Indemnitee in settlement of any Proceeding effected without the Corporation&#146;s
prior consent. The Corporation shall not, without the prior consent of the Indemnitee, effect any
settlement of any Proceeding to which the Indemnitee is, or could have been, a party unless such
settlement (i)&nbsp;solely involves the payment of money by the Corporation, (ii)&nbsp;includes a complete
and unconditional release of the Indemnitee from all liability on any claims that are the subject
matter of such Proceeding and (iii)&nbsp;imposes no obligation on the Indemnitee, including without
limitation, by way of an order or injunction. Neither the Corporation nor Indemnitee shall
unreasonably withhold its consent to any proposed settlement; <U>provided</U> that Indemnitee may
withhold consent to any settlement that does not provide a complete and unconditional release of
Indemnitee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.&nbsp;</B><U><B>Subrogation, Duplication and Set Off of Payments</B></U><B>.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <U>Subrogation</U>. In the event of payment by the Corporation to the Indemnitee
under this Agreement, the Corporation shall be subrogated to the extent of such payment to
all of the rights of recovery of the Indemnitee, who shall, at the Corporation&#146;s expense,
execute all papers required and shall do everything that may be reasonably necessary to
secure such rights, including the execution of such documents necessary to enable the
Corporation effectively to bring suit to enforce such rights.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <U>Duplication</U>. The Corporation shall not be liable under this Agreement to
make any payment in connection with any claim made against the Indemnitee to the extent the
Indemnitee has actually received payment (under any insurance policy, the Articles, the
Bylaws or otherwise) of the amounts otherwise payable hereunder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <U>Set Off</U>. Any payments due to the Indemnitee under this Agreement shall not
be subject to set off by the Corporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>9.&nbsp;</B><U><B>Enforcement and Interpretation</B></U><B>.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) If a Payment Request pursuant to Section 4(a) hereof is not paid in full by the
Corporation within the Payment Time Limit, the Indemnitee may at any time thereafter bring
suit against the Corporation to recover the unpaid amount of the claim.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) In any action under this Agreement, it shall be a defense to a claim for
indemnification or Advancement of Expenses pursuant to Section 3(a) hereof that the
Indemnitee has not met the standards of conduct, as applicable, which make it permissible
for the Corporation to indemnify or Advance Expenses to the Indemnitee for
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">the amount claimed, but the burden of proving such defense and going forward with
evidence shall be on the Corporation. Neither the failure of the Corporation (including the
Board, independent legal counsel or the Shareholders) to have made a determination prior to
commencement of such action that indemnification of, or Advancement of Expenses to, the
Indemnitee is proper in the circumstances because the Indemnitee has met the applicable
standard of conduct, nor an actual determination by the Corporation (including the Board,
independent legal counsel or the Shareholders) that the Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a presumption
that the Indemnitee has not met the applicable standard of conduct, nor shall such
determination or the failure to make it be admitted into evidence by the Corporation in such
action except to rebut an assertion by Indemnitee that the Corporation failed to make a
determination required by this Agreement. It is the intent of the Parties to this Agreement
to provide the broadest possible indemnification (not prohibited by law) to the Indemnitee
and the Agreement shall be interpreted in accordance with that intent. Any ambiguities in
this Agreement are intended by the Parties to be interpreted in favor of Indemnitee. For
purposes of determining Indemnitee&#146;s rights hereunder, Indemnitee shall be presumed to have
met any applicable standard of conduct required for Indemnification and/or advancement and
such presumption may overcome only by clear and convincing evidence to the contrary.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) It is the intent of the Corporation that the Indemnitee not be required to incur
Expenses associated with the enforcement of the Indemnitee&#146;s rights under this Agreement by
litigation or other legal action because the cost and expense thereof would substantially
detract from the benefits intended to be extended to the Indemnitee hereunder. Accordingly,
if it should appear to the Indemnitee that the Corporation has failed to comply with any of
its obligations under the Agreement or in the event that the Corporation or any other person
takes any action to declare this Agreement void or unenforceable, or institutes any action,
suit or proceeding designed to deny, or to recover from, the Indemnitee the benefits
intended to be provided to the Indemnitee hereunder, or having the effect thereof, the
Corporation irrevocably authorizes the Indemnitee from time to time to retain counsel of the
Indemnitee&#146;s choice, at the expense of the Corporation, to represent the Indemnitee in
connection with the initiation or defense of any litigation or other legal action, whether
by or against the Corporation or any director, officer, shareholder or other person
affiliated with the Corporation to enforce the Indemnitee&#146;s rights hereunder. Regardless of
the outcome thereof, the Corporation shall pay and be solely responsible for any and all
Expenses, reasonably incurred by the Indemnitee (i)&nbsp;as a result of the Corporation&#146;s failure
to perform its obligations pursuant to this Agreement, (ii)&nbsp;as a result of the Corporation
or any person contesting the validity or enforceability of this Agreement or any provision
thereof as aforesaid, or (iii)&nbsp;as otherwise contemplated in this subsection.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.&nbsp;</B><U><B>Merger or Consolidation</B></U><B>. </B>In the event that the Corporation shall be a constituent
corporation in a consolidation, merger or other reorganization, the Corporation, if it shall not be
the surviving, resulting or acquiring corporation therein, shall require as a condition thereto the
surviving, resulting or acquiring corporation to agree to indemnify the Indemnitee to the full
extent provided in this Agreement. Whether or not the Corporation is the resulting,
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">surviving or acquiring corporation in any such transaction, the Indemnitee shall also stand in
the same position under this Agreement with respect to the resulting, surviving or acquiring
corporation as the Indemnitee would have with respect to the Corporation if its separate existence
had continued.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.&nbsp;</B><U><B>Nonexclusivity and Severability</B></U><B>.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <U>Nonexclusivity</U>. The right to indemnification provided by this Agreement
shall not be exclusive of any other rights to which the Indemnitee may be entitled under the
Articles, Bylaws, the MBCA, resolutions, any other statute, insurance policy, agreement,
vote of Shareholders or of directors or otherwise, both as to actions in the Indemnitee&#146;s
official capacity and as to actions in another capacity while holding such office.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <U>Severability</U>. If any provision of this Agreement or the application of any
provision hereof to any person or circumstances is held invalid, unenforceable or otherwise
illegal, the remainder of this Agreement and the application of such provision to other
persons or circumstances shall not be affected, and shall be enforced to the fullest extent
permissible, and the provision so held to be invalid, unenforceable or otherwise illegal
shall be reformed to the extent (and only to the extent) necessary to make it enforceable,
valid and legal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.&nbsp;</B><U><B>Governing Law</B></U><B>. </B>This Agreement shall be governed by and construed in accordance
with the laws of the State of Michigan, without giving effect to the principles of conflict of laws
thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>13.&nbsp;</B><U><B>Counterparts</B></U><B>. </B>This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>14.&nbsp;</B><U><B>Notices</B></U><B>. </B>All notices, demands, requests and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly given when delivered
by hand or when mailed by United States certified or registered mail with postage prepaid addressed
as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;<U>Indemnitee</U>. If to the Indemnitee, to the address set forth by the
Indemnitee on the signature page of this Agreement or to such other person or address as the
Indemnitee shall furnish to the Corporation pursuant to this Section.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;<U>Corporation</U>. If to the Corporation, to the attention of the officer
signing this Agreement on behalf of the Corporation at the address set forth on the
signature page of this Agreement (with a copy to the Corporation&#146;s Corporate Secretary, One
Energy Plaza, Jackson, Michigan 49201) or to such other person or address as the
Corporation shall furnish to the Indemnitee pursuant to this Section.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>15.&nbsp;</B><U><B>Modification and Survival</B></U><B>. </B>Subject to Section 11(a) hereof, this Agreement
contains the entire agreement of the Parties relating to the subject matter hereof and supersedes
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">any and all previous agreements and understandings, oral or written with respect to any
Proceeding that has not been formally initiated through the filing of a Complaint or similar action
prior to the date hereof. This Agreement may be modified only by an instrument signed by both
Parties hereto. The provisions of this Agreement shall survive the death, disability, or incapacity
of the Indemnitee or the termination of the Indemnitee&#146;s service as a director of the Corporation
and shall inure to the benefit of the Indemnitee&#146;s heirs, executors and administrators.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>16.&nbsp;</B><U><B>Assignment</B></U><B>. </B>This Agreement is personal in nature and neither Party shall, without
the consent of the other Party, assign or delegate this Agreement or any rights or obligations
hereunder, except as expressly provided in this Agreement. Without limiting the generality or
effect of the foregoing, Indemnitee&#146;s right to receive payments hereunder shall not be assignable,
whether by pledge, creation of a security interest or otherwise, other than by a transfer by the
Indemnitee&#146;s will or by the laws of descent and distribution, and, in the event of any attempted
assignment or transfer contrary to this Section, the Corporation shall have no liability to pay any
amount so attempted to be assigned or transferred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>17.&nbsp;</B><U><B>Claims Initiated by Indemnitee</B></U><B>. </B>No indemnification or Advancement of Expenses to
Indemnitee shall be made with respect to any legal action or proceeding initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to such proceeding
brought to establish or enforce a right to indemnification or Advancement of Expenses under this
Agreement, unless (i)&nbsp;the Board has approved the initiation or bringing of such proceeding (or any
part of any such proceeding) or (ii)&nbsp;the Corporation provides the indemnification, in its sole
discretion, pursuant to the powers vested in the Corporation under applicable law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>18.&nbsp;</B><U><B>Representations</B></U><B>.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Corporation represents to Indemnitee that this Agreement constitutes a valid
and binding obligation of the Corporation, enforceable against the Corporation in accordance
with its terms (subject in each case to the effect of any applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors&#146; rights
generally, to general principles of equity and to public policy).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Indemnitee represents to the Corporation that this Agreement constitutes a valid
and binding obligation of Indemnitee, enforceable against Indemnitee in accordance with its
terms (subject in each case to the effect of any applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors&#146; rights generally, to general
principles of equity and to public policy).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>19.&nbsp;Headings. </B>The headings of the various sections and subsections of this Agreement shall not
limit or affect the terms and provisions of this Agreement.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><I>&#091;Signatures appear on the following page.&#093;</I>
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement as of the date first
above written.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>CMS ENERGY CORPORATION</B><BR>
<BR>
<BR>
One Energy Plaza<BR>
Jackson, MI 49201<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">&nbsp;</td>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">&nbsp;</td>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>INDEMNITEE</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">&nbsp;</td>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">&nbsp;</td>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Address&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">City, State, Zip Code&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT A</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>PAYMENT REQUEST</B>

</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;This Payment Request is submitted pursuant to the Indemnification Agreement (the
&#147;<U>Agreement</U>&#148;), dated as of &#95;&#95;&#95;, &#95;&#95;&#95;, between <B>CMS Energy Corporation</B>, a Michigan
corporation (the &#147;<U>Corporation</U>&#148;), and the undersigned (&#147;<U>Indemnitee</U>&#148;). Capitalized
terms in this Payment Request shall have the same meaning ascribed to them in the Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;I am requesting indemnification and/or Advancement of Expenses, all of which have been or
will be incurred by me in connection with the following actual or threatened Proceeding:
</DIV>

<div align="right">
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<td>&nbsp;&nbsp;</td>
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<TR>
<td style="border-bottom: 1px solid #000000">&nbsp;</td>
<td>&nbsp;<BR>&nbsp;</td>
</tr>
<TR>
<td style="border-bottom: 1px solid #000000">&nbsp;<BR>&nbsp;</td>
<td valign="bottom">&nbsp;<BR>.&nbsp;</td>
</tr>
</table>
</div>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;I affirm my good faith belief that I have met the applicable standard of conduct as
required by applicable law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;I hereby undertake to repay on demand any Advancement of Expenses under the Agreement, if
and to the extent I am obligated to repay Expenses pursuant to the terms of the Agreement and
applicable law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;I acknowledge this undertaking is my unlimited general obligation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;I have attached evidence of Expenses, which may be supplemented without re-submitting this
Payment Request, except for providing evidence of further Expenses for which I seek reimbursement,
and so long as the Expenses relate only to the Proceeding described in #2 above.
</DIV>

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<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">INDEMNITEE<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">&nbsp;
</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">&nbsp;
</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
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<DOCUMENT>
<TYPE>EX-10.(B)
<SEQUENCE>5
<FILENAME>k21037exv10wxby.htm
<DESCRIPTION>FORM OF INDEMNIFICATION AGREEMENT BETWEEN CONSUMERS ENERGY COMPANY & ITS DIRECTORS
<TEXT>
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<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit (10)(b)
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>INDEMNIFICATION AGREEMENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Indemnification Agreement (&#147;<U>Agreement</U>&#148;) is made and entered into as of
&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;
&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;, by and between <B>CONSUMERS ENERGY COMPANY</B>, a Michigan corporation (the
&#147;<U>Corporation</U>&#148;), and &#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;, a director of the Corporation (the
&#147;<U>Indemnitee</U>&#148;). The Corporation and the Indemnitee are sometimes individually referred to
herein as a &#147;<U>Party</U>&#148; and collectively as the &#147;<U>Parties</U>.&#148;
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>RECITALS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;The Michigan Business Corporation Act, 284 PA 1972, MCL 450.1101- 450.2099 (the
&#147;<U>MBCA</U>&#148;), provides that directors may be entitled to indemnification and advancement of
expenses rights pursuant to contractual agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;In addition to the indemnification to which the Indemnitee is entitled under the Articles
of Incorporation of the Corporation (the &#147;<U>Articles</U>&#148;) or Bylaws of the Corporation (the
&#147;<U>Bylaws</U>&#148;), or granted pursuant to various Board resolutions, in effect from time to time,
the Corporation has obtained at its sole expense liability insurance protecting its directors,
including the Indemnitee, against certain losses arising out of actual or threatened actions, suits
or proceedings to which such persons may be made or threatened to be made parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;Because of the increasing exposure to the risks of litigation and the need to attract, and
the difficulty of attracting, qualified candidates to serve as directors, the Corporation has
deemed it appropriate to enter into this Agreement with the Indemnitee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D.&nbsp;The Indemnitee is presently serving as a director of the Corporation, and the Corporation
desires the Indemnitee to continue in such capacity. The Indemnitee is willing, subject to certain
conditions, including, without limitation, the execution and performance of this Agreement by the
Corporation, to continue in that capacity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E.&nbsp;The Parties agree that this Agreement will apply prospectively to Proceedings (as defined
herein) arising after the date of this Agreement, and that it is the intent of the Parties to
provide the Indemnitee with the broadest possible indemnification.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accordingly, in consideration of the mutual covenants and agreements set forth in this
Agreement, the sufficiency of which is hereby acknowledged, the Corporation and Indemnitee agree as
follows:
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1.&nbsp;</B><U><B>Definitions</B></U><B>. </B>For purposes of this Agreement, the following terms shall have the
meanings set forth below:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) &#147;Advancement of Expenses&#148; or to &#147;Advance Expenses&#148; shall refer to the payment of
Expenses in connection with a Proceeding prior to an ultimate determination whether the
Indemnitee has met any applicable standard of conduct.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) &#147;<U>Agreement</U>&#148; shall mean this Indemnification Agreement, including the
Preamble, Recitals, and Exhibit.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) &#147;Articles&#148; shall have the meaning set forth in Recital B.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) &#147;Board&#148; shall have the meaning set forth in Section&nbsp;3(b)(i).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) &#147;Bylaws&#148; shall have the meaning set forth in Recital B.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) &#147;Corporation&#148; shall have the meaning set forth in the Preamble.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) &#147;<U>Expenses</U>&#148; shall mean any costs or expenses actually and reasonably
incurred by the Indemnitee in connection with a Proceeding, including but not limited to,
judgments, amounts paid in settlement, fines, penalties, attorney fees, expert and witness
fees, expenses of investigations, expenses of appeals, expenses of bonds, court costs,
expenses of arbitration and mediation, and any other cost or expense reasonably related to a
Proceeding.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) References to &#147;<U>fines</U>&#148; shall include any excise or other taxes assessed on
Indemnitee with respect to any employee benefit plan or otherwise.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) &#147;<U>Indemnification</U>&#148; (and correspondingly &#147;indemnity&#148; and &#147;indemnify&#148;) shall
refer to the payment of Expenses in connection with a Proceeding as set forth in this
Agreement following an ultimate determination that any applicable standard of conduct has
been met.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) &#147;<U>Indemnitee</U>&#148; shall have the meaning set forth in the Preamble.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) &#147;<U>MBCA</U>&#148; shall have the meaning set forth in Recital A.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) &#147;<U>Party</U>&#148; or &#147;<U>Parties</U>&#148; shall have the meaning set forth in the Preamble.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) &#147;<U>Payment Request</U>&#148; shall have the meaning set forth in Section&nbsp;4(a).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n) &#147;Payment Time Limit&#148; shall mean 65&nbsp;days after a Payment Request, except if a
regularly scheduled Board of Directors&#146; meeting is not scheduled to occur within 60&nbsp;days
after a payment request, then the Payment Time Limit shall be within 5&nbsp;days after the date
of the next meeting of the Board of Directors after the Payment Request not to exceed 100
days after the Payment Request.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o) &#147;<U>Proceeding</U>&#148; shall mean any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative; whether formal or
informal; and whether or not by or in the right of the Corporation, as to which Indemnitee
is or may become a party or witness, by reason of the fact that the Indemnitee is or was a
director of the Corporation or which relates to the Indemnitee&#146;s service as a director of
the Corporation, including but not limited to, court proceedings, arbitrations, alternative
dispute resolution proceedings, administrative proceedings, any other type of judicial or
quasi-judicial proceeding, or any such proceeding to enforce Indemnitee&#146;s rights hereunder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p) &#147;<U>Shareholders</U>&#148; shall have the meaning set forth in Section&nbsp;3(b)(v).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.&nbsp;</B><U><B>Continued Service</B></U><B>. </B>The Indemnitee agrees to continue to serve the Corporation as a
director in consideration of the personal liability protections granted by the Corporation to the
Indemnitee herein; <U>provided</U>, however, that nothing contained in this Agreement shall
constitute a contract of employment or designation of directorship between the Corporation and the
Indemnitee; and <U>provided</U> <U>further</U>, that the Indemnitee shall serve as a director so
long as the Indemnitee is duly nominated, elected and qualified in accordance with applicable
requirements or until the Indemnitee resigns. The Corporation is under no obligation to renominate
an Indemnitee entering into this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.&nbsp;</B><U><B>Indemnity</B></U><B>.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <U>Indemnification and Advancement of Expenses</U>. Unless prohibited by law, the
Corporation shall indemnify the Indemnitee against Expenses and shall Advance Expenses to
the maximum extent when the Indemnitee was or is a party or is threatened to be made a party
or a witness in a Proceeding. The termination of any Proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent shall not create
a presumption that the Indemnitee failed to satisfy the applicable standard of conduct
required by law for indemnification or Advancement of Expenses.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <U>Determination and Evaluation</U>. Any indemnification or Advancement of
Expenses under Section 3(a) (unless ordered by a court) shall be made by the Corporation
within the time specified in Section&nbsp;4(a), upon a determination that the Indemnitee
satisfies the applicable standard of conduct, if any, and upon an evaluation of the
reasonableness of Expenses. Such determination and evaluation shall be made:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) by a majority vote of a quorum of the Board of Directors of the Corporation
(the &#147;<U>Board</U>&#148;) consisting of directors who are not parties or threatened to
be made parties to such Proceeding;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) if such a quorum is not obtainable, by a majority vote of a committee duly
designated by the Board consisting solely of two or more directors not at the time
parties or threatened to be made parties to such Proceeding;
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) by independent legal counsel (designated in the manner provided below in
this subsection (b)) in a written opinion;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) by all independent directors (as defined in Section&nbsp;107(3) of the MBCA)
who are not parties to such Proceeding; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) by the shareholders of the Corporation (the &#147;<U>Shareholders</U>&#148;), but
shares held by directors, officers, employees or agents who are parties or
threatened to be made parties to such Proceeding may not be voted.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Independent legal counsel shall be designated by the Board or its committee in the manner
prescribed in Section&nbsp;3(b)(i) or 3(b)(ii); <U>provided</U>, <U>however</U>, that if a
quorum of the Board cannot be obtained under Section&nbsp;3(b)(i) and a committee cannot be
designated under Section&nbsp;3(b)(ii), designation of independent legal counsel shall be made by
the Board. In the designation of a committee under Section&nbsp;3(b)(ii) or the selection of
independent legal counsel by the Board, all directors may participate. The time limits set
forth in Section 4(a) shall govern the process of the determination and evaluation set forth
in this Section.
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <U>Presumption of Reasonableness</U>. For purposes of this Agreement, legal fees
and expenses which are incurred upon the advice of legal counsel shall be presumed
reasonable. Under the terms of this Agreement, Indemnitee shall have the right to legal
counsel of his or her choosing. The hourly rate of counsel chosen by Indemnitee shall be
presumed reasonable so long as the hourly rate of such counsel is customary for such
counsel, notwithstanding that the rate may be higher than the rate of other attorneys with
comparable skills.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <U>Partial Indemnification</U>. If the Indemnitee is entitled to indemnification
or Advancement of Expenses under Section 3(a) for a portion of Expenses, but not for the
total amount, the Corporation shall indemnify and Advance Expenses to the Indemnitee for the
portion of the Expenses to which the Indemnitee is entitled.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <U>Modification of Indemnitee&#146;s Rights</U>. The Indemnitee&#146;s rights to
indemnification and Advancement of Expenses pursuant to the Articles, Bylaws or resolutions
of the Board in effect as of the date of this Agreement, or any future modification of such
Articles, Bylaws or resolutions which expands the rights of Indemnitee, are incorporated in
this Agreement. In the event that the Corporation adopts any amendment to the Articles,
Bylaws or resolutions, or adopts a new resolution, which effect is to deny, diminish or
encumber the Indemnitee&#146;s rights to indemnification or Advancement of Expenses, such
amendment or new resolution shall not diminish the rights of Indemnitee pursuant to this
Agreement and shall be deemed to be invalid and of no force and effect to reduce
Indemnitee&#146;s rights hereunder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) To the extent any action or inaction of Indemnitee is based upon the books and
records of the Corporation, including financial statements, or upon information supplied to
Indemnitee by officers of the Corporation or its counsel, auditors, or experts, then such
action or inaction shall be conclusively deemed to be in good faith for purposes
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">of this Agreement, provided that the foregoing shall not be deemed to be exclusive
tests of good faith.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.&nbsp;</B><U><B>Procedures Relating to Indemnification and Advancement of Expenses</B></U><B>.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <U>Indemnification and Advancement of Expenses</U>. For purposes of pursuing the
Indemnitee&#146;s rights to indemnification and Advancement of Expenses under Section 3(a)
hereof, the Indemnitee shall submit a request (&#147;<U>Payment Request</U>&#148;) by means of the
following: (i)&nbsp;a signed request, substantially in the form of <U>Exhibit&nbsp;A</U> attached
hereto and made a part hereof, averring that the Indemnitee is entitled to indemnification
and/or Advancement of Expenses hereunder; and (ii)&nbsp;evidence in customary or reasonable form
of all Expenses for which payment is requested. In the event Indemnitee is submitting a
Payment Request after having previously submitted such a request concerning the same
Proceeding, Indemnitee may refer to and rely upon the previously submitted Payment Request,
and merely supplement evidence of Expenses for which payment is sought. Any such supplement
of Expenses shall be treated as a new Payment Request for purposes of the time limits set
forth in this Section. Within the Payment Time Limit, the Corporation shall decide the
extent to which Indemnitee is entitled to payment of Expenses and submit payment
accordingly; <U>provided</U>, <U>however</U>, that if the Corporation should fail to
decide within the Payment Time Limit it shall submit payment in accordance with the Payment
Request. In making its decision hereunder, the Corporation shall use the procedures set
forth in Section 3(b) hereof. In the event the Indemnitee disagrees with the Corporation&#146;s
decision made within such Payment Time Limit, he/she may seek judicial relief pursuant to
Section&nbsp;9 of this Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) At the conclusion of the Proceeding, if it is ultimately determined that Indemnitee
was not legally entitled to receive all or a portion of Expenses previously paid by the
Corporation, then, subject to Indemnitee&#146;s rights to dispute the Corporation&#146;s findings
pursuant to Section&nbsp;9, Indemnitee shall promptly repay to the Corporation any amounts to
which Indemnitee was not legally entitled.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The provisions of this Section are procedural only and are in addition to any other
procedures that may be available by law to Indemnitee to recover indemnification or
Advancement of Expenses to which Indemnitee may be entitled pursuant to Section 3(a) hereof
or otherwise.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Notwithstanding any other provision herein, upon application to a court by the
Indemnitee and a determination of such court that the Indemnitee is fairly and reasonably
entitled to indemnification or Advancement of Expenses, the Corporation shall pay to the
Indemnitee the amount so ordered by the court.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) No security shall be required of any Indemnitee in connection with any
Indemnification and/or Advancement of Expenses hereunder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) The Corporation may, but shall not be required to, create a trust fund, grant a
security interest or use other means, including a letter of credit, to ensure the
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">payment of such amounts as may be necessary to satisfy its obligations to indemnify and
Advance Expenses pursuant to this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.&nbsp;</B><U><B>Liability Insurance and Funding</B></U><B>.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Unless otherwise agreed by Indemnitee, for the duration of Indemnitee&#146;s service as
a director of the Corporation, and thereafter for so long as Indemnitee shall be subject to
any pending or possible Proceeding for which indemnification may be provided hereunder, the
Corporation shall use commercially reasonable efforts (taking into account the scope and
amount of coverage available relative to the cost thereof) to cause to be maintained in
effect policies of directors&#146; liability insurance providing coverage for directors of the
Corporation that is at least substantially comparable in scope and amount to that provided
by the Corporation&#146;s current policies of directors&#146; liability insurance; <U>provided</U>,
if a lesser amount of insurance coverage would provide Indemnitee adequate protection for
any actual or potential Proceeding (without regard to any contribution that the Corporation
might be able to provide from its own funds in the absence of insurance coverage), the
Corporation may arrange for such adequate insurance coverage, with the consent of
Indemnitee, which consent shall not be unreasonably withheld.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) In all policies of directors&#146; liability insurance obtained by the Corporation,
Indemnitee shall be named as an insured in such a manner as to provide Indemnitee the same
rights and benefits, subject to the same limitations, as are accorded to the Corporation&#146;s
directors most favorably insured by such policy.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) If, at the time of receipt of any notice of a Proceeding, the Corporation has
directors&#146; liability insurance in effect, the Corporation shall give prompt notice of the
commencement of such proceeding to the liability insurers in accordance with the procedures
set forth in the respective policies. A copy of such notice shall be provided to
Indemnitee. The Corporation shall take all necessary or appropriate action to cause such
insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such proceeding
in accordance with the terms of such policies. Upon the request of the Indemnitee, the
Corporation shall provide to Indemnitee a copy of all insurance policies which provide
coverage or potential coverage to Indemnitee relating to a Proceeding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.&nbsp;</B><U><B>Notification of Action</B></U><B>. </B>Promptly after receipt by Indemnitee of notice of any
Proceeding, Indemnitee will, if a claim in respect thereof is to be made against the Corporation
under this Agreement, notify the Corporation of the commencement thereof; but the failure to so
notify the Corporation will not relieve it from any liability that it may have to Indemnitee
unless, and to the extent that, the Corporation is actually prejudiced thereby.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7. </B><U><B>Defense and Settlement of Claims</B></U><B>. </B>The Corporation shall be entitled to participate
in the defense of any Proceeding for which indemnification is provided hereunder or to assume the
defense thereof, with counsel reasonably satisfactory to the Indemnitee; <U>provided</U> that if
Indemnitee believes, after consultation with counsel selected by Indemnitee, that (a)&nbsp;in the event
the Corporation assumes the defense of a Proceeding, the use of counsel chosen by the Corporation
to represent Indemnitee would or does present such counsel with an actual or
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->6<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">potential conflict, (b)&nbsp;the named parties in any such proceeding (including any impleaded
parties) include both the Corporation and Indemnitee and Indemnitee concludes that there may be one
or more legal defenses available to him or her that are different from or in addition to those
available to the Corporation or such other parties, (c)&nbsp;any such representation by such counsel
would be precluded under the applicable standards of professional conduct then prevailing, or (d)
the Corporation has not actively defended the Indemnitee after assuming the defense in a
Proceeding, then Indemnitee shall be entitled to retain separate counsel (but not more than one law
firm plus, if applicable, local counsel in respect of any particular Proceeding) at the
Corporation&#146;s expense. The Corporation shall not be liable to Indemnitee under this Agreement for
any amounts paid by Indemnitee in settlement of any Proceeding effected without the Corporation&#146;s
prior consent. The Corporation shall not, without the prior consent of the Indemnitee, effect any
settlement of any Proceeding to which the Indemnitee is, or could have been, a party unless such
settlement (i)&nbsp;solely involves the payment of money by the Corporation, (ii)&nbsp;includes a complete
and unconditional release of the Indemnitee from all liability on any claims that are the subject
matter of such Proceeding and (iii)&nbsp;imposes no obligation on the Indemnitee, including without
limitation, by way of an order or injunction. Neither the Corporation nor Indemnitee shall
unreasonably withhold its consent to any proposed settlement; <U>provided</U> that Indemnitee may
withhold consent to any settlement that does not provide a complete and unconditional release of
Indemnitee.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.&nbsp;</B><U><B>Subrogation, Duplication and Set Off of Payments</B></U><B>.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <U>Subrogation</U>. In the event of payment by the Corporation to the Indemnitee
under this Agreement, the Corporation shall be subrogated to the extent of such payment to
all of the rights of recovery of the Indemnitee, who shall, at the Corporation&#146;s expense,
execute all papers required and shall do everything that may be reasonably necessary to
secure such rights, including the execution of such documents necessary to enable the
Corporation effectively to bring suit to enforce such rights.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <U>Duplication</U>. The Corporation shall not be liable under this Agreement to
make any payment in connection with any claim made against the Indemnitee to the extent the
Indemnitee has actually received payment (under any insurance policy, the Articles, the
Bylaws or otherwise) of the amounts otherwise payable hereunder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <U>Set Off</U>. Any payments due to the Indemnitee under this Agreement shall not
be subject to set off by the Corporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>9.&nbsp;</B><U><B>Enforcement and Interpretation</B></U><B>.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) If a Payment Request pursuant to Section 4(a) hereof is not paid in full by the
Corporation within the Payment Time Limit, the Indemnitee may at any time thereafter bring
suit against the Corporation to recover the unpaid amount of the claim.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) In any action under this Agreement, it shall be a defense to a claim for
indemnification or Advancement of Expenses pursuant to Section 3(a) hereof that the
Indemnitee has not met the standards of conduct, as applicable, which make it permissible
for the Corporation to indemnify or Advance Expenses to the Indemnitee for
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">the amount claimed, but the burden of proving such defense and going forward with
evidence shall be on the Corporation. Neither the failure of the Corporation (including the
Board, independent legal counsel or the Shareholders) to have made a determination prior to
commencement of such action that indemnification of, or Advancement of Expenses to, the
Indemnitee is proper in the circumstances because the Indemnitee has met the applicable
standard of conduct, nor an actual determination by the Corporation (including the Board,
independent legal counsel or the Shareholders) that the Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a presumption
that the Indemnitee has not met the applicable standard of conduct, nor shall such
determination or the failure to make it be admitted into evidence by the Corporation in such
action except to rebut an assertion by Indemnitee that the Corporation failed to make a
determination required by this Agreement. It is the intent of the Parties to this Agreement
to provide the broadest possible indemnification (not prohibited by law) to the Indemnitee
and the Agreement shall be interpreted in accordance with that intent. Any ambiguities in
this Agreement are intended by the Parties to be interpreted in favor of Indemnitee. For
purposes of determining Indemnitee&#146;s rights hereunder, Indemnitee shall be presumed to have
met any applicable standard of conduct required for Indemnification and/or advancement and
such presumption may overcome only by clear and convincing evidence to the contrary.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) It is the intent of the Corporation that the Indemnitee not be required to incur
Expenses associated with the enforcement of the Indemnitee&#146;s rights under this Agreement by
litigation or other legal action because the cost and expense thereof would substantially
detract from the benefits intended to be extended to the Indemnitee hereunder. Accordingly,
if it should appear to the Indemnitee that the Corporation has failed to comply with any of
its obligations under the Agreement or in the event that the Corporation or any other person
takes any action to declare this Agreement void or unenforceable, or institutes any action,
suit or proceeding designed to deny, or to recover from, the Indemnitee the benefits
intended to be provided to the Indemnitee hereunder, or having the effect thereof, the
Corporation irrevocably authorizes the Indemnitee from time to time to retain counsel of the
Indemnitee&#146;s choice, at the expense of the Corporation, to represent the Indemnitee in
connection with the initiation or defense of any litigation or other legal action, whether
by or against the Corporation or any director, officer, shareholder or other person
affiliated with the Corporation to enforce the Indemnitee&#146;s rights hereunder. Regardless of
the outcome thereof, the Corporation shall pay and be solely responsible for any and all
Expenses, reasonably incurred by the Indemnitee (i)&nbsp;as a result of the Corporation&#146;s failure
to perform its obligations pursuant to this Agreement, (ii)&nbsp;as a result of the Corporation
or any person contesting the validity or enforceability of this Agreement or any provision
thereof as aforesaid, or (iii)&nbsp;as otherwise contemplated in this subsection.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10. </B><U><B>Merger or Consolidation</B></U><B>. </B>In the event that the Corporation shall be a constituent
corporation in a consolidation, merger or other reorganization, the Corporation, if it shall not be
the surviving, resulting or acquiring corporation therein, shall require as a condition thereto the
surviving, resulting or acquiring corporation to agree to indemnify the Indemnitee to the full
extent provided in this Agreement. Whether or not the Corporation is the resulting,
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">surviving or acquiring corporation in any such transaction, the Indemnitee shall also stand in
the same position under this Agreement with respect to the resulting, surviving or acquiring
corporation as the Indemnitee would have with respect to the Corporation if its separate existence
had continued.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.&nbsp;</B><U><B>Nonexclusivity and Severability</B></U><B>.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <U>Nonexclusivity</U>. The right to indemnification provided by this Agreement
shall not be exclusive of any other rights to which the Indemnitee may be entitled under the
Articles, Bylaws, the MBCA, resolutions, any other statute, insurance policy, agreement,
vote of Shareholders or of directors or otherwise, both as to actions in the Indemnitee&#146;s
official capacity and as to actions in another capacity while holding such office.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <U>Severability</U>. If any provision of this Agreement or the application of any
provision hereof to any person or circumstances is held invalid, unenforceable or otherwise
illegal, the remainder of this Agreement and the application of such provision to other
persons or circumstances shall not be affected, and shall be enforced to the fullest extent
permissible, and the provision so held to be invalid, unenforceable or otherwise illegal
shall be reformed to the extent (and only to the extent) necessary to make it enforceable,
valid and legal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.&nbsp;</B><U><B>Governing Law</B></U><B>. </B>This Agreement shall be governed by and construed in accordance
with the laws of the State of Michigan, without giving effect to the principles of conflict of laws
thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>13.&nbsp;</B><U><B>Counterparts</B></U><B>. </B>This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>14.&nbsp;</B><U><B>Notices</B></U><B>. </B>All notices, demands, requests and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly given when delivered
by hand or when mailed by United States certified or registered mail with postage prepaid addressed
as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <U>Indemnitee</U>. If to the Indemnitee, to the address set forth by the
Indemnitee on the signature page of this Agreement or to such other person or address as the
Indemnitee shall furnish to the Corporation pursuant to this Section.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <U>Corporation</U>. If to the Corporation, to the attention of the officer
signing this Agreement on behalf of the Corporation at the address set forth on the
signature page of this Agreement (with a copy to the Corporation&#146;s Corporate Secretary, One
Energy Plaza, Jackson, Michigan 49201) or to such other person or address as the
Corporation shall furnish to the Indemnitee pursuant to this Section.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>15. </B><U><B>Modification and Survival</B></U><B>. </B>Subject to Section 11(a) hereof, this Agreement
contains the entire agreement of the Parties relating to the subject matter hereof and supersedes
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->9<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">any and all previous agreements and understandings, oral or written with respect to any
Proceeding that has not been formally initiated through the filing of a Complaint or similar action
prior to the date hereof. This Agreement may be modified only by an instrument signed by both
Parties hereto. The provisions of this Agreement shall survive the death, disability, or incapacity
of the Indemnitee or the termination of the Indemnitee&#146;s service as a director of the Corporation
and shall inure to the benefit of the Indemnitee&#146;s heirs, executors and administrators.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>16.&nbsp;</B><U><B>Assignment</B></U><B>. </B>This Agreement is personal in nature and neither Party shall, without
the consent of the other Party, assign or delegate this Agreement or any rights or obligations
hereunder, except as expressly provided in this Agreement. Without limiting the generality or
effect of the foregoing, Indemnitee&#146;s right to receive payments hereunder shall not be assignable,
whether by pledge, creation of a security interest or otherwise, other than by a transfer by the
Indemnitee&#146;s will or by the laws of descent and distribution, and, in the event of any attempted
assignment or transfer contrary to this Section, the Corporation shall have no liability to pay any
amount so attempted to be assigned or transferred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>17.&nbsp;</B><U><B>Claims Initiated by Indemnitee</B></U><B>. </B>No indemnification or Advancement of Expenses to
Indemnitee shall be made with respect to any legal action or proceeding initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to such proceeding
brought to establish or enforce a right to indemnification or Advancement of Expenses under this
Agreement, unless (i)&nbsp;the Board has approved the initiation or bringing of such proceeding (or any
part of any such proceeding) or (ii)&nbsp;the Corporation provides the indemnification, in its sole
discretion, pursuant to the powers vested in the Corporation under applicable law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>18.&nbsp;</B><U><B>Representations</B></U><B>.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Corporation represents to Indemnitee that this Agreement constitutes a valid
and binding obligation of the Corporation, enforceable against the Corporation in accordance
with its terms (subject in each case to the effect of any applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors&#146; rights
generally, to general principles of equity and to public policy).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Indemnitee represents to the Corporation that this Agreement constitutes a valid
and binding obligation of Indemnitee, enforceable against Indemnitee in accordance with its
terms (subject in each case to the effect of any applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors&#146; rights generally, to general
principles of equity and to public policy).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>19.&nbsp;Headings. </B>The headings of the various sections and subsections of this Agreement shall not
limit or affect the terms and provisions of this Agreement.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><I>&#091;Signatures appear on the following page.&#093;</I>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->10<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement as of the date first
above written.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>CMS ENERGY CORPORATION</B><BR>
<BR>
One Energy Plaza<BR>
Jackson, MI 49201<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">&nbsp;</td>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">&nbsp;</td>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>INDEMNITEE</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">&nbsp;</td>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">&nbsp;</td>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Address&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">City, State, Zip Code&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt"><!-- Folio -->11<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT A</b></div>
<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>PAYMENT REQUEST</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;This Payment Request is submitted pursuant to the Indemnification Agreement (the
&#147;<U>Agreement</U>&#148;), dated as of &#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95; &#95;&#95;&#95;, &#95;&#95;&#95;, between <B>Consumers Energy Company</B>, a Michigan
corporation (the &#147;<U>Corporation</U>&#148;), and the undersigned (&#147;<U>Indemnitee</U>&#148;). Capitalized
terms in this Payment Request shall have the same meaning ascribed to them in the Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;I am requesting indemnification and/or Advancement of Expenses, all of which have been or
will be incurred by me in connection with the following actual or threatened Proceeding:
</DIV>


<div align="right">
<TABLE width="98%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="99%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</tr>
<TR>
<td style="border-bottom: 1px solid #000000">&nbsp;</td>
<td>&nbsp;&nbsp;</td>
</tr>
<TR>
<td style="border-bottom: 1px solid #000000">&nbsp;</td>
<td>&nbsp;<BR>&nbsp;</td>
</tr>
<TR>
<td style="border-bottom: 1px solid #000000">&nbsp;<BR>&nbsp;</td>
<td valign="bottom">&nbsp;<BR>.&nbsp;</td>
</tr>
</table>
</div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;I affirm my good faith belief that I have met the applicable standard of conduct as
required by applicable law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;I hereby undertake to repay on demand any Advancement of Expenses under the Agreement, if
and to the extent I am obligated to repay Expenses pursuant to the terms of the Agreement and
applicable law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;I acknowledge this undertaking is my unlimited general obligation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;I have attached evidence of Expenses, which may be supplemented without re-submitting this
Payment Request, except for providing evidence of further Expenses for which I seek reimbursement,
and so long as the Expenses relate only to the Proceeding described in #2 above.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">INDEMNITEE<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">&nbsp;
</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">&nbsp;
</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->A-1<!-- /Folio -->
</DIV>



</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.(A)
<SEQUENCE>6
<FILENAME>k21037exv31wxay.htm
<DESCRIPTION>CMS ENERGY CORPORATION'S CERTIFICATION OF THE CEO PURSUANT TO SECTION 302
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31wxay</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit (31)(a)
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATION OF DAVID W. JOOS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, David W. Joos, certify that:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I have reviewed this quarterly report on Form 10-Q of CMS Energy Corporation;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in
Exchange Act Rules&nbsp;13a-15(f) and 15d-15(f)) for the registrant and have:</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this
report is being prepared;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted
accounting principles;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) Evaluated the effectiveness of the registrant&#146;s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) Disclosed in this report any change in the registrant&#146;s internal control over
financial reporting that occurred during the registrant&#146;s most recent fiscal quarter (the
registrant&#146;s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant&#146;s internal control
over financial reporting; and
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrant&#146;s
auditors and the audit committee of registrant&#146;s board of directors (or persons
performing the equivalent functions):</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to adversely
affect the registrant&#146;s ability to record, process, summarize and report financial
information; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant&#146;s internal control over financial
reporting.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Dated:  November 1, 2007&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ David W. Joos
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">David W. Joos&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">President and<br>
Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.(B)
<SEQUENCE>7
<FILENAME>k21037exv31wxby.htm
<DESCRIPTION>CMS ENERGY CORPORATION'S CERTIFICATION OF THE CFO PURSUANT TO SECTION 302
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31wxby</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit (31)(b)
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATION OF THOMAS J. WEBB</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Thomas J. Webb, certify that:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I have reviewed this quarterly report on Form 10-Q of CMS Energy Corporation;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in
Exchange Act Rules&nbsp;13a-15(f) and 15d-15(f)) for the registrant and have:</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this
report is being prepared;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted
accounting principles;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) Evaluated the effectiveness of the registrant&#146;s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) Disclosed in this report any change in the registrant&#146;s internal control over
financial reporting that occurred during the registrant&#146;s most recent fiscal quarter (the
registrant&#146;s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant&#146;s internal control
over financial reporting; and
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrant&#146;s
auditors and the audit committee of registrant&#146;s board of directors (or persons
performing the equivalent functions):</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to adversely
affect the registrant&#146;s ability to record, process, summarize and report financial
information; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant&#146;s internal control over financial
reporting.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Dated:  November 1, 2007&nbsp;</TD>
    <TD valign="top">By&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Thomas J. Webb
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Thomas J. Webb&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Executive Vice President and<BR>
Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.(C)
<SEQUENCE>8
<FILENAME>k21037exv31wxcy.htm
<DESCRIPTION>CONSUMERS ENERGY CORPORATION'S CERTIFICATION OF THE CEO PURSUANT TO SECTION 302
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31wxcy</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit (31)(c)
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATION OF DAVID W. JOOS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, David W. Joos, certify that:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I have reviewed this quarterly report on Form 10-Q of Consumers Energy Company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in
Exchange Act Rules&nbsp;13a-15(f) and 15d-15(f)) for the registrant and have:</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this
report is being prepared;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted
accounting principles;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) Evaluated the effectiveness of the registrant&#146;s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) Disclosed in this report any change in the registrant&#146;s internal control over
financial reporting that occurred during the registrant&#146;s most recent fiscal quarter (the
registrant&#146;s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant&#146;s internal control
over financial reporting; and
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrant&#146;s
auditors and the audit committee of registrant&#146;s board of directors (or persons
performing the equivalent functions):</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to adversely
affect the registrant&#146;s ability to record, process, summarize and report financial
information; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant&#146;s internal control over financial
reporting.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Dated:  November 1, 2007&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ David W. Joos
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">David W. Joos&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.(D)
<SEQUENCE>9
<FILENAME>k21037exv31wxdy.htm
<DESCRIPTION>CONSUMERS ENERGY CORPORATION'S CERTIFICATION OF THE CFO PURSUANT TO SECTION 302
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31wxdy</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit (31)(d)
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATION OF THOMAS J. WEBB</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Thomas J. Webb, certify that:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I have reviewed this quarterly report on Form 10-Q of Consumers Energy Company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in
Exchange Act Rules&nbsp;13a-15(f) and 15d-15(f)) for the registrant and have:</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this
report is being prepared;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted
accounting principles;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) Evaluated the effectiveness of the registrant&#146;s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) Disclosed in this report any change in the registrant&#146;s internal control over
financial reporting that occurred during the registrant&#146;s most recent fiscal quarter (the
registrant&#146;s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant&#146;s internal control
over financial reporting; and
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrant&#146;s
auditors and the audit committee of registrant&#146;s board of directors (or persons
performing the equivalent functions):</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to adversely
affect the registrant&#146;s ability to record, process, summarize and report financial
information; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant&#146;s internal control over financial
reporting.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Dated:  November 1, 2007&nbsp;</TD>
    <TD valign="top">By&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Thomas J. Webb
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Thomas J. Webb&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Executive Vice President and
Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>



</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.(A)
<SEQUENCE>10
<FILENAME>k21037exv32wxay.htm
<DESCRIPTION>CMS ENERGY CORPORATION'S CERTIFICATIONS PURSUANT TO SECTION 906
<TEXT>
<HTML>
<HEAD>
<TITLE>exv32wxay</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit (32)(a)
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Certification of CEO and CFO Pursuant to</B>
</DIV>

<DIV align="center" style="font-size: 10pt"><B>18 U.S.C. Section&nbsp;1350,<BR>
as Adopted Pursuant to<BR>
Section&nbsp;906 of the Sarbanes-Oxley Act of 2002</B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In connection with the Quarterly Report on Form 10-Q of CMS Energy Corporation (the &#147;Company&#148;) for
the quarterly period ended September&nbsp;30, 2007 as filed with the Securities and Exchange Commission
on the date hereof (the &#147;Report&#148;), David W. Joos, as President and Chief Executive Officer of the
Company, and Thomas J. Webb, as Executive Vice President and Chief Financial Officer of the
Company, each hereby certifies, pursuant to 18 U.S.C. Section&nbsp;1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;The Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ David W. Joos
&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD colspan="2" align="left">David W. Joos&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD colspan="2" align="left">President and<BR>
Chief Executive Officer&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: pt">Date: November&nbsp;1, 2007

</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR><TR>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Thomas J. Webb
&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD colspan="2" align="left">Thomas J. Webb&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD colspan="2" align="left">Executive Vice President and<BR>
Chief Financial Officer&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 0pt">Date: November&nbsp;1, 2007

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.(B)
<SEQUENCE>11
<FILENAME>k21037exv32wxby.htm
<DESCRIPTION>CONSUMERS ENERGY CORPORATION'S CERTIFICATIONS PURSUANT TO SECTION 906
<TEXT>
<HTML>
<HEAD>
<TITLE>exv32wxby</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit (32)(b)
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Certification of CEO and CFO Pursuant to<BR>
18 U.S.C. Section&nbsp;1350,<BR>
as Adopted Pursuant to<BR>
Section&nbsp;906 of the Sarbanes-Oxley Act of 2002</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In connection with the Quarterly Report on Form 10-Q of Consumers Energy Company (the &#147;Company&#148;)
for the quarterly period ended September&nbsp;30, 2007 as filed with the Securities and Exchange
Commission on the date hereof (the &#147;Report&#148;), David W. Joos, as Chief Executive Officer of the
Company, and Thomas J. Webb, as Executive Vice President and Chief Financial Officer of the
Company, each hereby certifies, pursuant to 18 U.S.C. Section&nbsp;1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;The Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>

    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
 <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ David W. Joos
&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD colspan="2" align="left">David W. Joos&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD colspan="2" align="left">Chief Executive Officer&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 0pt">Date: November&nbsp;1, 2007

</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Thomas J. Webb
&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD colspan="2" align="left">Thomas J. Webb&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD colspan="2" align="left">Executive Vice President and
Chief Financial Officer&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 0pt">Date: November&nbsp;1, 2007

</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>



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</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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