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Regulatory Matters | 6 Months Ended
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Jun. 30, 2014
Regulatory Matters | 2:REGULATORY MATTERS Regulatory matters are critical to Consumers. The Michigan Attorney General, ABATE, the MPSC Staff, and certain other parties typically participate in MPSC proceedings concerning Consumers, such as Consumers’ rate cases and PSCR and GCR processes. These parties often challenge various aspects of those proceedings, including the prudence of Consumers’ policies and practices, and seek cost disallowances and other relief. The parties also have appealed significant MPSC orders. Depending upon the specific issues, the outcomes of rate cases and proceedings, including judicial proceedings challenging MPSC orders or other actions, could have a material adverse effect on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. Consumers cannot predict the outcome of these proceedings. There are multiple appeals pending that involve various issues concerning cost allocation among customers, the allocation of refunds among customer groups, the adequacy of the record evidence supporting the recovery of Smart Energy investments, and other matters. Consumers is unable to predict the outcome of these appeals. Securitization Financing Order: In July 2014, Consumers, through its subsidiary Consumers 2014 Securitization Funding, issued $378 million of Securitization bonds to finance the recovery of the remaining book value of seven smaller coal-fueled electric generating units and three smaller gas-fueled electric generating units that it plans to retire by April 2016. The MPSC approved the issuance of these bonds in its December 2013 Securitization financing order, and authorized Consumers to collect from its retail electric customers, with some exceptions, Securitization charges to cover the principal and interest on the bonds as well as certain other qualified costs. Major Maintenance Reconciliation: In its June 2012 order in Consumers’ electric rate case, the MPSC allowed Consumers to defer major maintenance costs associated with its electric generating units in excess of the costs approved in the rate order and to recover those excess cost s from customers, subject to MPSC approval. In May 2014, Consumers filed an application with the MPSC to recover $11 million of such excess costs over a 12-month period. Income Tax Benefits Accounting Order: In September 2013, the MPSC issued an order authorizing Consumers to accelerate the flow-through to electric and gas customers of certain income tax benefits associated primarily with the cost of removal of plant placed in service before 1993. The order authorized Consumers to implement a regulatory treatment beginning January 2014 that will return $211 million of income tax benefits over five years to electric customers and $264 million of income tax benefits over 12 years to gas customers. For the six months ended June 30, 2014, this new treatment reduced Consumers’ income tax expense by $23 million. The new treatment, along with other cost saving initiatives that Consumers has undertaken, should allow Consumers to avoid increasing electric and gas base rates during 2014. Gas Cost Recovery and Power Supply Cost Recovery: Due to the impact on natural gas prices of extended periods of colder-than-normal winter weather in Michigan and throughout the United States during the three months ended March 31, 2014, Consumers’ natural gas fuel costs for this period were significantly higher than those projected in its 2013-2014 GCR plan. Consumers calculated an $84 million underrecovery for the 2013-20 1 4 GCR plan year and, in the reconciliation it filed in June 2014, requested approval to roll this underrecovery into its 2014-2015 GCR plan. Consumers had also filed an amendment to its 2014-2015 GCR plan in February 2014, requesting approval to increase the 2014-2015 GCR factor to be charged to customers. In May 2014, the MPSC issued an order approving a temporary increase to the GCR factor. Consumers may charge the increased factor to customers until the MPSC issues a final order in Consumers’ 2014-2015 GCR plan. Consumers had a $72 million GCR underrecovery recorded at June 30, 2014. The severe winter weather also affected Consumers’ power supply costs. Extreme cold weather and heavy snowfall inhibited the delivery and use of coal at Consumers’ coal-fueled generating units. Additionally, increases in natural gas prices raised the cost of electricity purchased from the MISO energy market as well as the cost of power generated at Consumers’ gas-fueled generating units. As a result, Consumers’ power supply costs for 2014 are expected to be significantly higher than those projected in the 2014 PSCR plan it submitted to the MPSC in September 2013. Consumers had an $80 million PSCR underrecovery at June 30, 2014. In March 2014, Consumers filed an amendment to its 2014 PSCR plan, requesting approval to increase the 2014 PSCR factor to be charged to customers beginning in July 2014. Consumers self-implemented the revised factor in July 2014. Energy Optimization Plan: In May 2014, Consumers filed its annual report and reconciliation for its energy optimization plan, requesting approval of its energy optimization plan costs for 2013. Consumers also requested approval to collect $18 million from customers as an incentive payment for exceeding statutory targets under both its electric and gas energy optimization plans during 2013.
Consumers Energy Company [Member] |
Regulatory Matters | 2:REGULATORY MATTERS Regulatory matters are critical to Consumers. The Michigan Attorney General, ABATE, the MPSC Staff, and certain other parties typically participate in MPSC proceedings concerning Consumers, such as Consumers’ rate cases and PSCR and GCR processes. These parties often challenge various aspects of those proceedings, including the prudence of Consumers’ policies and practices, and seek cost disallowances and other relief. The parties also have appealed significant MPSC orders. Depending upon the specific issues, the outcomes of rate cases and proceedings, including judicial proceedings challenging MPSC orders or other actions, could have a material adverse effect on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. Consumers cannot predict the outcome of these proceedings. There are multiple appeals pending that involve various issues concerning cost allocation among customers, the allocation of refunds among customer groups, the adequacy of the record evidence supporting the recovery of Smart Energy investments, and other matters. Consumers is unable to predict the outcome of these appeals. Securitization Financing Order: In July 2014, Consumers, through its subsidiary Consumers 2014 Securitization Funding, issued $378 million of Securitization bonds to finance the recovery of the remaining book value of seven smaller coal-fueled electric generating units and three smaller gas-fueled electric generating units that it plans to retire by April 2016. The MPSC approved the issuance of these bonds in its December 2013 Securitization financing order, and authorized Consumers to collect from its retail electric customers, with some exceptions, Securitization charges to cover the principal and interest on the bonds as well as certain other qualified costs. Major Maintenance Reconciliation: In its June 2012 order in Consumers’ electric rate case, the MPSC allowed Consumers to defer major maintenance costs associated with its electric generating units in excess of the costs approved in the rate order and to recover those excess cost s from customers, subject to MPSC approval. In May 2014, Consumers filed an application with the MPSC to recover $11 million of such excess costs over a 12-month period. Income Tax Benefits Accounting Order: In September 2013, the MPSC issued an order authorizing Consumers to accelerate the flow-through to electric and gas customers of certain income tax benefits associated primarily with the cost of removal of plant placed in service before 1993. The order authorized Consumers to implement a regulatory treatment beginning January 2014 that will return $211 million of income tax benefits over five years to electric customers and $264 million of income tax benefits over 12 years to gas customers. For the six months ended June 30, 2014, this new treatment reduced Consumers’ income tax expense by $23 million. The new treatment, along with other cost saving initiatives that Consumers has undertaken, should allow Consumers to avoid increasing electric and gas base rates during 2014. Gas Cost Recovery and Power Supply Cost Recovery: Due to the impact on natural gas prices of extended periods of colder-than-normal winter weather in Michigan and throughout the United States during the three months ended March 31, 2014, Consumers’ natural gas fuel costs for this period were significantly higher than those projected in its 2013-2014 GCR plan. Consumers calculated an $84 million underrecovery for the 2013-20 1 4 GCR plan year and, in the reconciliation it filed in June 2014, requested approval to roll this underrecovery into its 2014-2015 GCR plan. Consumers had also filed an amendment to its 2014-2015 GCR plan in February 2014, requesting approval to increase the 2014-2015 GCR factor to be charged to customers. In May 2014, the MPSC issued an order approving a temporary increase to the GCR factor. Consumers may charge the increased factor to customers until the MPSC issues a final order in Consumers’ 2014-2015 GCR plan. Consumers had a $72 million GCR underrecovery recorded at June 30, 2014. The severe winter weather also affected Consumers’ power supply costs. Extreme cold weather and heavy snowfall inhibited the delivery and use of coal at Consumers’ coal-fueled generating units. Additionally, increases in natural gas prices raised the cost of electricity purchased from the MISO energy market as well as the cost of power generated at Consumers’ gas-fueled generating units. As a result, Consumers’ power supply costs for 2014 are expected to be significantly higher than those projected in the 2014 PSCR plan it submitted to the MPSC in September 2013. Consumers had an $80 million PSCR underrecovery at June 30, 2014. In March 2014, Consumers filed an amendment to its 2014 PSCR plan, requesting approval to increase the 2014 PSCR factor to be charged to customers beginning in July 2014. Consumers self-implemented the revised factor in July 2014. Energy Optimization Plan: In May 2014, Consumers filed its annual report and reconciliation for its energy optimization plan, requesting approval of its energy optimization plan costs for 2013. Consumers also requested approval to collect $18 million from customers as an incentive payment for exceeding statutory targets under both its electric and gas energy optimization plans during 2013.

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