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Regulatory Matters | 9 Months Ended
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Sep. 30, 2022
Public Utilities, General Disclosures [Line Items] |
Regulatory Matters | Regulatory Matters Regulatory matters are critical to Consumers. The Michigan Attorney General, ABATE, the MPSC Staff, the Residential Customer Group, 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 MPSC’s authority to approve voluntary revenue refunds, and other matters. Consumers is unable to predict the outcome of these appeals. Electric Rate Case Proceedings: In Consumers’ recent electric rate proceedings, the MPSC and the MPSC Staff have recommended that Consumers be disallowed recovery of certain categories of capital expenditures. In December 2021, the MPSC issued a final order in Consumers’ 2021 general electric rate case, disallowing cost recovery for fleet assets and certain other categories of recently completed capital expenditures incurred by Consumers. As a result, Consumers impaired a portion of these capital expenditures in 2021. For other categories of capital expenditures, the MPSC ordered Consumers to provide additional cost/benefit analysis and other information to support cost recovery. Consumers believes it has provided such analysis and information in its 2022 electric rate case. In August 2022, the MPSC Staff recommended disallowance of additional categories of capital expenditures incurred by Consumers during 2022. Further, some of these are joint (or common) projects undertaken by both the electric and gas business units. Consumers has incurred $19 million related to these programs as of September 30, 2022 and, for certain ongoing projects, expects to incur additional capital expenditures during the remainder of 2022 and beyond. While Consumers has provided the additional analysis and information requested by the MPSC as supporting evidence of the prudency of such capital expenditures in its pending electric rate case proceeding, it is reasonably possible that the MPSC will disallow some or all of these capital expenditures. Any material disallowance of incurred capital costs could negatively affect CMS Energy’s and Consumers’ future results of operations. Consumers expects the MPSC to issue a final order in its pending electric rate case by March 2023. Consumers cannot predict the outcome of this proceeding. In January 2022, Consumers filed a petition for rehearing that, among other things, requested that the MPSC reconsider its disallowance in the 2021 electric rate case of $11 million in capital expenditures for which the MPSC had already approved recovery in a previous rate order. In March 2022, the MPSC approved Consumers’ rehearing petition in full and authorized that the $11 million of capital expenditures be included in rate base, which resulted an additional annual rate increase of $5 million prospectively. Energy Waste Reduction Plan Incentive: Consumers filed its 2021 energy waste reduction reconciliation in May 2022, requesting the MPSC’s approval to collect from customers the maximum performance incentive of $46 million for exceeding statutory savings targets in 2021. Consumers recognized incentive revenue under this program of $46 million in 2021. Costs of Coal-fueled Electric Generating Units to be Retired: In June 2022, the MPSC approved the settlement agreement reached in Consumers’ 2021 IRP, under which Consumers plans to retire the J.H. Campbell coal-fueled generating units in 2025. Under the 2021 IRP, upon the units’ retirement, Consumers will receive regulatory asset treatment to recover their remaining book value, as well as a 9.0‑percent return on equity, over their original design lives. Until retirement, the book value of the generating units will remain in rate base and receive full regulatory returns in general rate cases. In June 2022, Consumers removed from total plant, property, and equipment an amount of $1.3 billion, representing the projected remaining book value of the electric generating units upon their retirement, and recorded it as a non-current regulatory asset on its consolidated balance sheets. Voluntary Radio Tower Asset Sale Gain Share: In May 2022, Consumers completed a sale of various radio tower assets. In June 2022, Consumers filed an application with the MPSC requesting approval to share voluntarily half of the gain from the sale with its electric and gas utility customers. Of the amount to be shared with customers, Consumers proposes to share two-thirds with electric customers through additional spending for tree trimming in 2022 and one-third with gas customers through a donation to nonprofit agencies that provide customer energy bill assistance. As a result, Consumers deferred $7 million of the gain in June 2022, and recorded it as a non-current regulatory liability on its consolidated balance sheets. GCR and PSCR: Due to rising natural gas prices, Consumers’ gas fuel costs for the nine months ended September 30, 2022 were higher than those projected in its 2022-2023 GCR plan. As a result, Consumers had recorded a $45 million underrecovery in accounts receivable and accrued revenue on its consolidated balance sheets at September 30, 2022. Consumers expects that higher gas fuel costs will continue into the 2022-2023 GCR plan year. Consequently, in June 2022, Consumers filed with the MPSC a revised GCR plan requesting an increase to the GCR factor and self-implemented that increased factor in October 2022. The recent spikes in fuel prices also increased the cost of electric generation and resulted in higher market prices for electricity. As a result, Consumers’ power supply costs for the nine months ended September 30, 2022 were significantly higher than those projected in the 2022 PSCR plan it submitted to the MPSC in September 2021. Consequently, Consumers had recorded a $375 million underrecovery in accounts receivable and accrued revenue on its consolidated balance sheets at September 30, 2022. Consumers included a projection of its full-year 2022 underrecovery in its 2023 PSCR plan filed with the MPSC in September 2022.
Consumers Energy Company |
Public Utilities, General Disclosures [Line Items] |
Regulatory Matters | Regulatory Matters Regulatory matters are critical to Consumers. The Michigan Attorney General, ABATE, the MPSC Staff, the Residential Customer Group, 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 MPSC’s authority to approve voluntary revenue refunds, and other matters. Consumers is unable to predict the outcome of these appeals. Electric Rate Case Proceedings: In Consumers’ recent electric rate proceedings, the MPSC and the MPSC Staff have recommended that Consumers be disallowed recovery of certain categories of capital expenditures. In December 2021, the MPSC issued a final order in Consumers’ 2021 general electric rate case, disallowing cost recovery for fleet assets and certain other categories of recently completed capital expenditures incurred by Consumers. As a result, Consumers impaired a portion of these capital expenditures in 2021. For other categories of capital expenditures, the MPSC ordered Consumers to provide additional cost/benefit analysis and other information to support cost recovery. Consumers believes it has provided such analysis and information in its 2022 electric rate case. In August 2022, the MPSC Staff recommended disallowance of additional categories of capital expenditures incurred by Consumers during 2022. Further, some of these are joint (or common) projects undertaken by both the electric and gas business units. Consumers has incurred $19 million related to these programs as of September 30, 2022 and, for certain ongoing projects, expects to incur additional capital expenditures during the remainder of 2022 and beyond. While Consumers has provided the additional analysis and information requested by the MPSC as supporting evidence of the prudency of such capital expenditures in its pending electric rate case proceeding, it is reasonably possible that the MPSC will disallow some or all of these capital expenditures. Any material disallowance of incurred capital costs could negatively affect CMS Energy’s and Consumers’ future results of operations. Consumers expects the MPSC to issue a final order in its pending electric rate case by March 2023. Consumers cannot predict the outcome of this proceeding. In January 2022, Consumers filed a petition for rehearing that, among other things, requested that the MPSC reconsider its disallowance in the 2021 electric rate case of $11 million in capital expenditures for which the MPSC had already approved recovery in a previous rate order. In March 2022, the MPSC approved Consumers’ rehearing petition in full and authorized that the $11 million of capital expenditures be included in rate base, which resulted an additional annual rate increase of $5 million prospectively. Energy Waste Reduction Plan Incentive: Consumers filed its 2021 energy waste reduction reconciliation in May 2022, requesting the MPSC’s approval to collect from customers the maximum performance incentive of $46 million for exceeding statutory savings targets in 2021. Consumers recognized incentive revenue under this program of $46 million in 2021. Costs of Coal-fueled Electric Generating Units to be Retired: In June 2022, the MPSC approved the settlement agreement reached in Consumers’ 2021 IRP, under which Consumers plans to retire the J.H. Campbell coal-fueled generating units in 2025. Under the 2021 IRP, upon the units’ retirement, Consumers will receive regulatory asset treatment to recover their remaining book value, as well as a 9.0‑percent return on equity, over their original design lives. Until retirement, the book value of the generating units will remain in rate base and receive full regulatory returns in general rate cases. In June 2022, Consumers removed from total plant, property, and equipment an amount of $1.3 billion, representing the projected remaining book value of the electric generating units upon their retirement, and recorded it as a non-current regulatory asset on its consolidated balance sheets. Voluntary Radio Tower Asset Sale Gain Share: In May 2022, Consumers completed a sale of various radio tower assets. In June 2022, Consumers filed an application with the MPSC requesting approval to share voluntarily half of the gain from the sale with its electric and gas utility customers. Of the amount to be shared with customers, Consumers proposes to share two-thirds with electric customers through additional spending for tree trimming in 2022 and one-third with gas customers through a donation to nonprofit agencies that provide customer energy bill assistance. As a result, Consumers deferred $7 million of the gain in June 2022, and recorded it as a non-current regulatory liability on its consolidated balance sheets. GCR and PSCR: Due to rising natural gas prices, Consumers’ gas fuel costs for the nine months ended September 30, 2022 were higher than those projected in its 2022-2023 GCR plan. As a result, Consumers had recorded a $45 million underrecovery in accounts receivable and accrued revenue on its consolidated balance sheets at September 30, 2022. Consumers expects that higher gas fuel costs will continue into the 2022-2023 GCR plan year. Consequently, in June 2022, Consumers filed with the MPSC a revised GCR plan requesting an increase to the GCR factor and self-implemented that increased factor in October 2022. The recent spikes in fuel prices also increased the cost of electric generation and resulted in higher market prices for electricity. As a result, Consumers’ power supply costs for the nine months ended September 30, 2022 were significantly higher than those projected in the 2022 PSCR plan it submitted to the MPSC in September 2021. Consequently, Consumers had recorded a $375 million underrecovery in accounts receivable and accrued revenue on its consolidated balance sheets at September 30, 2022. Consumers included a projection of its full-year 2022 underrecovery in its 2023 PSCR plan filed with the MPSC in September 2022.

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