Regulatory Matters

12 Months Ended

Dec. 31, 2025

Public Utilities, General Disclosures [Line Items]

Regulatory matters are critical to Consumers. The Michigan Attorney General, ABATE, the MPSC Staff, residential customer advocacy groups, environmental organizations, and certain other parties typically participate in MPSC proceedings concerning Consumers, such as Consumers’ rate cases and PSCR and GCR processes. Intervenors also participate in certain FERC matters, including FERC’s regulation of certain wholesale rates that affect Consumers’ power supply costs. 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 and FERC orders. Depending upon the specific issues, the outcomes of rate cases and proceedings, including judicial proceedings challenging MPSC and FERC 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.

Regulatory Assets and Liabilities

Consumers is subject to the actions of the MPSC and FERC and therefore prepares its consolidated financial statements in accordance with the provisions of regulatory accounting. A utility must apply regulatory accounting when its rates are designed to recover specific costs of providing regulated services. Under regulatory accounting, Consumers records regulatory assets or liabilities for certain transactions that would have been treated as expense or revenue by non‑regulated businesses.

Presented in the following table are the regulatory assets and liabilities on Consumers’ consolidated balance sheets:


In Millions
December 31	2025			2024
Regulatory assets
Current
Energy waste reduction plan incentive1		$	66		$	60
Retention incentive program2		10			18
2022 PSCR underrecovery3		—			126
Other		28			25
Total current regulatory assets		$	104		$	229
Non-current
Costs of coal-fueled electric generating units to be retired3		$	1,179		$	1,266
Postretirement benefits2		589			747
Securitized costs3		549			666
ARO4		379			366
Decommissioning costs2		197			158
Unamortized loss on reacquired debt3		89			92
MGP sites3		82			90
Energy waste reduction plan incentive1		64			64
Ludington overhaul contract dispute2		60			31
Service restoration cost deferral4		52			—
Energy waste reduction plan3		26			31
Postretirement benefits expense deferral mechanism2		22			21
Renewable Energy Plan3		7			—
Retention incentive program2		6			12
Other		54			25
Total non-current regulatory assets		$	3,355		$	3,569
Total regulatory assets		$	3,459		$	3,798
Regulatory liabilities
Current
Income taxes, net		$	47		$	53
ASP gain		28			47
Other		10			11
Total current regulatory liabilities		$	85		$	111
Non-current
Cost of removal		$	2,727		$	2,665
Income taxes, net		1,118			1,163
Energy waste reduction plan		68			41
Green giving program		41			—
Postretirement benefits expense deferral mechanism		40			37
Renewable energy grant		38			40
ASP gain		19			46
Renewable Energy Plan		—			51
Other		40			24
Total non-current regulatory liabilities		$	4,091		$	4,067
Total regulatory liabilities		$	4,176		$	4,178

1These regulatory assets have arisen from an alternative-revenue program and are not associated with incurred costs or capital investments. Therefore, the MPSC has provided for recovery without a return.

2This regulatory asset is included in rate base, thereby providing a return.

3The MPSC has provided a specific return on these regulatory assets.

4These regulatory assets represent incurred costs for which the MPSC has provided recovery without a return on investment.

Regulatory Assets

Energy Waste Reduction Plan Incentive: The energy waste reduction incentive mechanism provides a financial incentive if the energy savings of Consumers’ customers exceed annual targets established by the MPSC. Consumers accounts for this program as an alternative-revenue program that meets the criteria for recognizing revenue related to the incentive as soon as energy savings exceed the annual targets established by the MPSC.

In January 2026, the MPSC approved a settlement agreement authorizing Consumers to collect $64 million during 2026 as an incentive for exceeding its statutory savings targets in 2024. Consumers recognized incentive revenue under this program of $64 million in 2024.

Consumers also exceeded its statutory savings targets in 2025, achieved certain other goals, and will request the MPSC’s approval to collect $64 million in the energy waste reduction reconciliation to be filed in May 2026. Consumers recognized incentive revenue under this program of $64 million in 2025.

Retention Incentive Program: To ensure necessary staffing at the D.E. Karn and J.H. Campbell coal‑fueled generating units through their retirement, Consumers established retention incentive programs. The MPSC has approved deferred accounting treatment for the retention and severance costs incurred under these programs and has allowed for recovery over three years. These MPSC-approved retention plans concluded in November 2025. For additional details regarding retention incentive programs, see Note 20, Exit Activities and Asset Sales.

2022 PSCR Underrecovery: As a result of rising fuel prices during 2022, Consumers’ power supply costs for 2022 were significantly higher than those projected in its 2022 PSCR plan. At the end of 2022, Consumers had recorded $401 million of under-recovered power supply costs. In 2023, the MPSC authorized Consumers to recover the 2022 underrecovery amount over three years, providing immediate relief to electric customers.

Costs of Coal-fueled Electric Generating Units to be Retired: In 2022, the MPSC approved Consumers’ plans to retire the J.H. Campbell coal-fueled generating units in 2025. The MPSC authorized regulatory asset treatment for Consumers to recover the remaining book value of the units upon their retirement, as well as a 9.0‑percent return on equity, through 2040, the units’ original retirement date. Accordingly, in 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.

As discussed further below, the retirement of J.H. Campbell is subject to temporary extensions under emergency orders issued by the U.S. Secretary of Energy. Such orders authorize Consumers to obtain cost recovery at FERC; thus, Consumers has deferred the costs of complying with these orders as a regulatory asset.

Postretirement Benefits: As part of the ratemaking process, the MPSC allows Consumers to recover the costs of postretirement benefits. Accordingly, Consumers defers the net impact of actuarial losses and gains, prior service costs and credits, and settlements associated with postretirement benefits as a regulatory asset or liability. The asset or liability will decrease as the deferred items are amortized and recognized as components of net periodic benefit cost. For details about the amortization periods, see Note 11, Retirement Benefits.

Securitized Costs: The MPSC has issued securitization financing orders authorizing Consumers to issue securitization bonds in order to finance the recovery of the remaining book value of three smaller natural gas-fueled electric generating units that Consumers retired in 2015, seven smaller coal-fueled electric generating units that Consumers retired in 2016, and the D.E. Karn coal-fueled electric generating units that Consumers retired in 2023. Consumers has removed from plant, property, and equipment and recorded as a regulatory asset the book value of these units. Consumers is amortizing the regulatory asset over the life of the related securitization bonds, which it issued through subsidiaries in 2014 and 2023. For additional details regarding the securitization bonds, see Note 5, Financings and Capitalization—Securitization Bonds.

ARO: The recovery of the underlying asset investments and related removal and monitoring costs of recorded AROs is approved by the MPSC in depreciation rate cases. Consumers records a regulatory asset and a regulatory liability for timing differences between the recognition of AROs for financial reporting purposes and the recovery of these costs from customers. The recovery period approximates the useful life of the assets to be removed.

Decommissioning Costs: In Consumers’ electric depreciation and general rate cases, the MPSC has authorized Consumers to remove from depreciation rates the costs of decommissioning the D.E. Karn coal-fueled electric generating units, and instead defer those costs as a regulatory asset to be recovered through 2031. Additionally, ash disposal costs related to Consumers’ retired coal-fueled generating units may be deferred as a regulatory asset and collected over a ten‑year period. In its 2022 order approving Consumers’ integrated resource plan, the MPSC authorized similar treatment for the decommissioning and ash disposal costs associated with the J.H. Campbell coal-fueled generating units that were planned for retirement in 2025.

Unamortized Loss on Reacquired Debt: Under regulatory accounting, any unamortized discount, premium, or expense related to debt redeemed with the proceeds of new debt is deferred and amortized over the life of the new debt.

MGP Sites: Consumers is incurring environmental remediation and other response activity costs at 23 former MGP facilities. The MPSC allows Consumers to recover from its natural gas customers over a ten‑year period the costs incurred to remediate the MGP sites. For additional information, see Note 4, Contingencies and Commitments—Consumers Gas Utility Contingencies.

Ludington Overhaul Contract Dispute: The MPSC has authorized Consumers to defer as a regulatory asset costs associated with correcting incomplete, nonconforming, and defective work performed by TAES during a major overhaul and upgrade of Ludington. Consumers will defer such costs while post‑verdict proceedings and any appeals in the litigation with TAES and Toshiba continue; such costs will be offset, in part or in whole, by future litigation proceeds received from TAES or Toshiba. Consumers has also deferred replacement power costs due to outages resulting from correcting this work. Consumers will have the opportunity to seek appropriate recovery and ratemaking treatment for amounts recorded as a regulatory asset following resolution of the litigation. During 2025, cash expenditures associated with the Ludington overhaul contract dispute were $30 million. For additional details on the contract dispute, see Note 4, Contingencies and Commitments—Consumers Electric Utility Contingencies.

Service Restoration Cost Deferral: As a result of catastrophic storms in Consumers’ electric service territory, Consumers incurred significant service restoration costs during March and April 2025. In April 2025, Consumers filed with the MPSC an ex parte application requesting approval to defer, as a regulatory asset, operating and maintenance expenses associated with the storms. In June 2025, the MPSC approved the application, authorizing the deferral of these expenses for accounting purposes. Recovery of this regulatory asset will be requested in a future case.

Energy Waste Reduction Plan: Michigan law requires electric and gas utilities to implement programs that reduce energy consumption through energy efficiency and demand-side energy conservation. Utilities may recover the cost of achieving specified reductions in customers’ electricity and gas use through surcharges. The amount of spending incurred in excess of surcharges collected is recorded as a regulatory asset and amortized as surcharges are collected from customers over the plan period. The amount of surcharges collected in excess of spending incurred is recorded as a regulatory liability and amortized as costs are incurred.

Postretirement Benefits Expense Deferral Mechanism: In Consumers’ general rate cases, the MPSC approved a mechanism allowing Consumers to defer for future recovery or refund pension and OPEB expenses above or below the amounts used to set existing rates. Amounts deferred will be collected from or refunded to customers over ten years.

Renewable Energy Plan: Under Michigan law, renewable energy standards specify how much electricity must come from renewable sources and which technologies, such as wind, solar, and certain biomass, qualify. Utilities may recover compliance costs, including renewable power purchases (and related financial mechanisms), depreciation, property taxes, interest, and other operating and maintenance expenses for company-owned renewable assets, along with a return on those assets. The MPSC allows Consumers to transfer and collect a portion of these costs through its PSCR process. Incremental costs may be collected through surcharges. If spending exceeds amounts collected, the difference is recorded as a regulatory asset and amortized as recovered from customers; this excludes amounts related to return on equity. If collections exceed spending, the excess is recorded as a regulatory liability and amortized as future costs are incurred for operating renewable facilities and purchasing RECs under renewable energy agreements.

Regulatory Liabilities

Income Taxes, Net: Consumers records regulatory assets and liabilities to reflect the difference between deferred income taxes recognized for financial reporting purposes and amounts previously reflected in Consumers’ rates. This net balance will decrease over the remaining life of the related temporary differences and flow through income tax expense. The majority of the net regulatory liability recorded related to income taxes is associated with plant assets that are subject to normalization, which is governed by the Internal Revenue Code, and will be returned to customers over the remaining book life of the related plant assets. For additional details on deferred income taxes, see Note 13, Income Taxes.

ASP Gain: In April 2024, Consumers sold its unregulated ASP business to a non-affiliated company, resulting in a $110 million gain. In July 2024, the MPSC approved the utilization of $27.5 million, or one‑fourth, of the gain on the sale as an offset to the revenue deficiency in lieu of additional rate relief during the 12‑month period beginning October 1, 2024, with the remaining three-fourths of the gain, or $82.5 million, to be credited to customers as a bill credit over a three-year period beginning October 1, 2024.

Cost of Removal: The MPSC allows Consumers to collect amounts from customers to fund future asset removal activities. This regulatory liability is reduced as costs are incurred to remove the assets at the end of their useful lives.

Green Giving Program: In conjunction with Consumers’ voluntary green pricing program, the MPSC has directed Consumers to use surplus program funds to support renewable-energy participation by low‑income customers.

Renewable Energy Grant: In 2013, Consumers received a $69 million renewable energy grant for Lake Winds® Energy Park, which began operations in 2012. This grant reduces Consumers’ cost of complying with Michigan’s renewable portfolio standard and, accordingly, reduces the overall renewable energy surcharge to be collected from customers. The regulatory liability recorded for the grant will be amortized over the life of Lake Winds® Energy Park. Consumers presents the amortization as a reduction to maintenance and other operating expenses on its consolidated statements of income.

Consumers Electric Utility

2024 Electric Rate Case: In May 2024, Consumers filed an application with the MPSC seeking a rate increase of $325 million, made up of two components. First, Consumers requested a $303 million annual rate increase, based on a 10.25‑percent authorized return on equity for the projected 12‑month period ending February 28, 2026. The filing requested authority to recover costs related to new infrastructure investment primarily in distribution system reliability and cleaner energy resources. Second, Consumers requested approval of a $22 million surcharge for the recovery of distribution investments made in 2023 that exceeded the rates authorized in accordance with previous electric rate orders.

In October 2024, Consumers revised its requested increase to $277 million, primarily to reflect the removal of projected capital investments associated with certain solar facilities that Consumers incorporated into its amended Renewable Energy Plan.

In March 2025, the MPSC issued an order authorizing an annual rate increase of $176 million, which is inclusive of a $22 million surcharge for the recovery of distribution investments made in 2023 that exceeded the rate amounts authorized in accordance with previous electric rate orders. The approved rate increase is based on a 9.90‑percent authorized return on equity. The new rates became effective in April 2025

J.H. Campbell Emergency Order: In May 2025, before the planned closure of J.H. Campbell, the U.S. Secretary of Energy issued an emergency order under section 202(c) of the Federal Power Act requiring J.H. Campbell to continue operating for 90 days, through August 20, 2025. Subsequently, the U.S. Secretary of Energy issued two additional emergency orders for 90 days each, ultimately requiring continued operation of J.H. Campbell through February 17, 2026. These orders stated that continued operation of J.H. Campbell was required to meet an energy emergency across MISO’s North and Central regions. Consistent with the Federal Power Act and DOE regulations, the orders authorize Consumers to obtain cost recovery at FERC.

As directed, Consumers has continued to make J.H. Campbell available in the MISO market and, in June 2025, filed a complaint at FERC seeking a modification of the MISO Tariff that would enable Consumers to recover the costs of complying with the emergency orders. Consumers’ complaint sought a mechanism in the MISO Tariff that would allow allocation of those compliance costs across the MISO North and Central regions, consistent with the nature of the energy emergency declared in the U.S. Secretary of Energy orders. In August 2025, FERC granted Consumers’ complaint and ordered MISO to revise its tariff accordingly. MISO submitted a compliance filing with FERC in September 2025, and FERC approval of the compliance filing remains pending.

In January 2026, Consumers filed a request at FERC seeking recovery of the net financial impact of complying with the May 2025 emergency order, which was $42 million after applying MISO revenues of $78 million. This filing encompasses recovery sought by the joint owners of J.H. Campbell.

For the second emergency order period through December 31, 2025, the net financial impact of compliance was $93 million after applying MISO revenues of $77 million. Consumers will seek recovery of these compliance costs at a later date, consistent with rate recovery sought for the May 2025 emergency order. The ultimate financial impact remains subject to the outcome of the FERC proceeding and any future guidance or interpretation.

Consumers Gas Utility

2024 Gas Rate Case: In December 2024, Consumers filed an application with the MPSC seeking an annual rate increase of $248 million based on a 10.25‑percent authorized return on equity for the projected 12‑month period ending October 31, 2026. In July 2025, Consumers revised its requested increase to $217 million. In September 2025, the MPSC issued an order authorizing an annual rate increase of $157.5 million, based on a 9.80‑percent authorized return on equity. The new rates became effective in November 2025.

PSCR and GCR

The PSCR and GCR ratemaking processes are designed to allow Consumers to recover all of its power supply and purchased natural gas costs if incurred under reasonable and prudent policies and practices. The MPSC reviews these costs, policies, and practices in annual plan and reconciliation proceedings. Consumers adjusts its PSCR and GCR billing charges monthly, subject to ceiling factor limitations, in order to minimize the underrecovery or overrecovery amount in the annual reconciliations. Underrecoveries represent power supply and purchased natural gas costs that will be recovered from customers; overrecoveries represent previously collected revenues that will be refunded to customers.

Presented in the following table are the liabilities for PSCR and GCR underrecoveries and overrecoveries reflected on Consumers’ consolidated balance sheets:


In Millions
December 31	2025			2024
Assets
PSCR underrecoveries		$	38		$	—

Accounts receivable and accrued revenue		$	38		$	—
Liabilities
PSCR overrecoveries		$	—		$	13
GCR overrecoveries		28			25
Accrued rate refunds		$	28		$	38

Consumers Energy Company