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Regulatory Matters | 3 Months Ended
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Mar. 31, 2017
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 negatively affect CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. Consumers cannot predict the outcome of these proceedings. There are multiple appeals pending that involve various issues concerning cost recovery from customers, 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. 2016 Electric Rate Case: In March 2016, Consumers filed an application with the MPSC seeking an annual rate increase of $225 million, based on a 10.7 percent authorized return on equity. In September 2016, Consumers self‑implemented an annual rate increase of $170 million, subject to refund with interest. The MPSC issued an order in February 2017, authorizing an annual rate increase of $113 million, based on a 10.1 percent authorized return on equity. Consumers had a recorded liability of $16 million for customer refunds at March 31, 2017. Gas Rate Case: In August 2016, Consumers filed an application with the MPSC seeking an annual rate increase of $90 million, based on a 10.6 percent authorized return on equity. In March 2017, Consumers reduced its requested annual rate increase to $80 million, of which the majority relates to new investments that will allow Consumers to strengthen infrastructure and improve system capacity and deliverability. The filing also seeks approval of two rate adjustment mechanisms: one that would reconcile annually Consumers’ actual nonfuel revenues with the revenues approved by the MPSC, and another that would provide for additional annual rate increases of $35 million beginning in 2018 and another $35 million beginning in 2019 for incremental investments that Consumers plans to make in those years, subject to reconciliation. These future investments are intended to help ensure adequate system capacity and deliverability. The MPSC issued an order in January 2017, limiting Consumers’ self-implementation to an annual rate increase of $20 million. Accordingly, in January 2017, Consumers self-implemented an annual rate increase of $20 million, subject to refund with interest. Energy Optimization Plan Incentive: Consumers will file its 2016 energy optimization reconciliation in May 2017, requesting the MPSC’s approval to collect the maximum performance incentive of $18 million from customers for exceeding its statutory savings targets in 2016. Consumers recognized incentive revenue under this program of $18 million in 2016. Depreciation Rate Case: In August 2016, Consumers filed a depreciation rate case related to its gas utility property, requesting to decrease depreciation expense by $3 million annually. In March 2017, the MPSC approved a settlement agreement authorizing the requested decrease in depreciation expense effective as of January 2017. FERC Transmission Order: In September 2016, FERC issued an order reducing the rate of return on equity earned by transmission owners operating within MISO to a base of 10.32 percent from 12.38 percent. FERC ordered MISO and transmission owners to provide refunds, with interest, to transmission customers such as Consumers for the period from November 2013 through February 2015. In February 2017, as a result of this order, Consumers received from MISO a credit of $28 million, which it will return to its electric customers through the PSCR ratemaking process. The FERC order is subject to further legal proceedings.
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 negatively affect CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. Consumers cannot predict the outcome of these proceedings. There are multiple appeals pending that involve various issues concerning cost recovery from customers, 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. 2016 Electric Rate Case: In March 2016, Consumers filed an application with the MPSC seeking an annual rate increase of $225 million, based on a 10.7 percent authorized return on equity. In September 2016, Consumers self‑implemented an annual rate increase of $170 million, subject to refund with interest. The MPSC issued an order in February 2017, authorizing an annual rate increase of $113 million, based on a 10.1 percent authorized return on equity. Consumers had a recorded liability of $16 million for customer refunds at March 31, 2017. Gas Rate Case: In August 2016, Consumers filed an application with the MPSC seeking an annual rate increase of $90 million, based on a 10.6 percent authorized return on equity. In March 2017, Consumers reduced its requested annual rate increase to $80 million, of which the majority relates to new investments that will allow Consumers to strengthen infrastructure and improve system capacity and deliverability. The filing also seeks approval of two rate adjustment mechanisms: one that would reconcile annually Consumers’ actual nonfuel revenues with the revenues approved by the MPSC, and another that would provide for additional annual rate increases of $35 million beginning in 2018 and another $35 million beginning in 2019 for incremental investments that Consumers plans to make in those years, subject to reconciliation. These future investments are intended to help ensure adequate system capacity and deliverability. The MPSC issued an order in January 2017, limiting Consumers’ self-implementation to an annual rate increase of $20 million. Accordingly, in January 2017, Consumers self-implemented an annual rate increase of $20 million, subject to refund with interest. Energy Optimization Plan Incentive: Consumers will file its 2016 energy optimization reconciliation in May 2017, requesting the MPSC’s approval to collect the maximum performance incentive of $18 million from customers for exceeding its statutory savings targets in 2016. Consumers recognized incentive revenue under this program of $18 million in 2016. Depreciation Rate Case: In August 2016, Consumers filed a depreciation rate case related to its gas utility property, requesting to decrease depreciation expense by $3 million annually. In March 2017, the MPSC approved a settlement agreement authorizing the requested decrease in depreciation expense effective as of January 2017. FERC Transmission Order: In September 2016, FERC issued an order reducing the rate of return on equity earned by transmission owners operating within MISO to a base of 10.32 percent from 12.38 percent. FERC ordered MISO and transmission owners to provide refunds, with interest, to transmission customers such as Consumers for the period from November 2013 through February 2015. In February 2017, as a result of this order, Consumers received from MISO a credit of $28 million, which it will return to its electric customers through the PSCR ratemaking process. The FERC order is subject to further legal proceedings.

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