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Plant, Property, and Equipment

12 Months Ended

Dec. 31, 2019

Public Utility, Property, Plant and Equipment [Line Items]

Presented in the following table are details of CMS Energy’s and Consumers’ plant, property, and equipment:



In Millions
December 31	Estimated Depreciable Life in Years			2019				2018
CMS Energy, including Consumers
Plant, property, and equipment, gross
Consumers	3	—	125		$	24,963			$	23,963
Enterprises
Independent power production¹	3	—	40		403				410
Other	3	—	5		2				2
EnerBank	1	—	7		22				25
Plant, property, and equipment, gross					$	25,390			$	24,400
Construction work in progress					896				763
Accumulated depreciation and amortization					(7,360		)		(7,037		)
Total plant, property, and equipment					$	18,926			$	18,126
Consumers
Plant, property, and equipment, gross
Electric
Generation	22	—	125		$	5,942			$	6,305
Distribution	20	—	75		8,519				7,957
Transmission	46	—	75		113				154
Other	5	—	50		1,258				1,316
Assets under finance leases and other financing²					326				295
Gas
Distribution	20	—	85		5,235				4,651
Transmission	17	—	75		1,752				1,521
Underground storage facilities³	27	—	75		987				910
Other	5	—	50		797				823
Assets under finance leases²					14				14
Other non‑utility property	3	—	51		20				17
Plant, property, and equipment, gross					$	24,963			$	23,963
Construction work in progress					879				756
Accumulated depreciation and amortization					(7,272		)		(6,958		)
Total plant, property, and equipment⁴					$	18,570			$	17,761


¹	The majority of independent power production assets are leased to others under operating leases. For information regarding CMS Energy’s operating leases of owned assets, see Note 10, Leases and Palisades Financing.


²	For information regarding the amortization terms of Consumers’ assets under finance leases and other financing, see Note 10, Leases and Palisades Financing.


³	Underground storage includes base natural gas of $26 million at December 31, 2019 and 2018. Base natural gas is not subject to depreciation.

⁴

For the year ended December 31, 2019, Consumers’ plant additions were $2.0 billion and plant retirements were $380 million. For the year ended December 31, 2018, Consumers’ plant additions were $1.8 billion and plant retirements were $190 million. Consumers plans to retire the D.E. Karn 1 & 2 coal-fueled electric generating units in 2023. Accordingly, in 2019, Consumers removed from total plant, property, and equipment $667 million, representing the remaining book value of the two units upon their retirement, and recorded it as a regulatory asset. For additional details, see Note 3, Regulatory Matters.

Intangible Assets: Included in net plant, property, and equipment are intangible assets. Presented in the following table are details about CMS Energy’s and Consumers’ intangible assets:



In Millions
				December 31, 2019						December 31, 2018
Description	Amortization Life in Years			Gross Cost¹			Accumulated Amortization			Gross Cost¹			Accumulated Amortization
CMS Energy, including Consumers
Software development	1	—	15		$	882		$	529		$	1,024		$	603
Rights of way	50	—	85		180			55			167			52
Franchises and consents	5	—	50		16			9			15			9
Leasehold improvements	various²				9			7			9			7
Other intangibles	various				27			15			27			15
Total					$	1,114		$	615		$	1,242		$	686
Consumers
Software development	3	—	15		$	869		$	521		$	1,009		$	595
Rights of way	50	—	85		180			55			167			52
Franchises and consents	5	—	50		16			9			15			9
Leasehold improvements	various²				9			7			9			7
Other intangibles	various				26			15			26			15
Total					$	1,100		$	607		$	1,226		$	678


¹	For the year ended December 31, 2019, Consumers’ intangible asset additions were $67 million and intangible asset retirements were $193 million. For the year ended December 31, 2018, Consumers’ intangible asset additions were $90 million and intangible asset retirements were $7 million.


²	Leasehold improvements are amortized over the life of the lease, which may change whenever the lease is renewed or extended.

Capitalization: CMS Energy and Consumers record plant, property, and equipment at original cost when placed into service. The cost includes labor, material, applicable taxes, overhead such as pension and other benefits, and AFUDC, if applicable. Consumers’ plant, property, and equipment is generally recoverable through its general ratemaking process.

With the exception of utility property for which the remaining book value has been securitized, mothballed utility property stays in rate base and continues to be depreciated at the same rate as before the mothball period. When utility property is retired or otherwise disposed of in the ordinary course of business, Consumers records the original cost to accumulated depreciation, along with associated cost of removal, net of salvage. CMS Energy and Consumers recognize gains or losses on the retirement or disposal of non‑regulated assets in income. Consumers records cost of removal collected from customers, but not spent, as a regulatory liability.

Software: CMS Energy and Consumers capitalize the costs to purchase and develop internal-use computer software. These costs are expensed evenly over the estimated useful life of the internal-use computer software. If computer software is integral to computer hardware, then its cost is capitalized and depreciated with the hardware.

AFUDC: Consumers capitalizes AFUDC on regulated major construction projects, except pollution control facilities on its fossil-fuel-fired power plants. AFUDC represents the estimated cost of debt and authorized return-on-equity funds used to finance construction additions. Consumers records the offsetting credit as a reduction of interest for the amount representing the borrowed funds component and as other income for the equity funds component on the consolidated statements of income. When construction is completed and the property is placed in service, Consumers depreciates and recovers the capitalized AFUDC from customers over the life of the related asset. Presented in the following table are Consumers’ average AFUDC capitalization rates:



Years Ended December 31	2019		2018		2017
Electric	6.4	%	6.9	%	6.8	%
Gas	5.8		5.9		6.0

Assets Under Finance Leases and Other Financing: Presented in the following table are further details about changes in Consumers’ assets under finance leases and other financing:



In Millions
Years Ended December 31	2019			2018
Consumers
Balance at beginning of period		$	309		$	312
Additions		26			—
Net retirements and other adjustments		5			(3		)
Balance at end of period		$	340		$	309

Assets under finance leases and other financing are presented as gross amounts. Accumulated amortization of assets under finance leases and other financing was $239 million at December 31, 2019 and $212 million at December 31, 2018 for Consumers.

Depreciation and Amortization: Presented in the following table are further details about CMS Energy’s and Consumers’ accumulated depreciation and amortization:



In Millions
December 31	2019			2018
CMS Energy, including Consumers
Utility plant assets		$	7,269		$	6,956
Non‑utility plant assets		91			81
Consumers
Utility plant assets		$	7,269		$	6,956
Non‑utility plant assets		3			2

Consumers depreciates utility property on an asset-group basis, in which it applies a single MPSC-approved depreciation rate to the gross investment in a particular class of property within the electric and

gas segments. Consumers performs depreciation studies periodically to determine appropriate group lives. Presented in the following table are the composite depreciation rates for Consumers’ segment properties:



Years Ended December 31	2019			2018			2017
Electric utility property		3.9	%		3.9	%		3.9	%
Gas utility property		2.9			2.9			2.9
Other property		10.0			10.1			10.0

CMS Energy and Consumers record property repairs and minor property replacement as maintenance expense. CMS Energy and Consumers record planned major maintenance activities as operating expense unless the cost represents the acquisition of additional long-lived assets or the replacement of an existing long-lived asset.

Presented in the following table are the components of CMS Energy’s and Consumers’ depreciation and amortization expense:



In Millions
Years Ended December 31	2019			2018			2017
CMS Energy, including Consumers
Depreciation expense – plant, property, and equipment		$	842		$	778		$	739
Amortization expense
Software		121			127			114
Other intangible assets		3			3			3
Securitized regulatory assets		26			25			25
Total depreciation and amortization expense		$	992		$	933		$	881
Consumers
Depreciation expense – plant, property, and equipment		$	827		$	768		$	732
Amortization expense
Software		119			125			112
Other intangible assets		3			3			3
Securitized regulatory assets		26			25			25
Total depreciation and amortization expense		$	975		$	921		$	872

Presented in the following table is CMS Energy’s and Consumers’ estimated amortization expense on intangible assets for each of the next five years:



In Millions
	2020			2021			2022			2023			2024
CMS Energy, including Consumers
Intangible asset amortization expense		$	118		$	112		$	107		$	87		$	70
Consumers
Intangible asset amortization expense		$	116		$	110		$	106		$	87		$	70

Jointly Owned Regulated Utility Facilities

Presented in the following table are Consumers’ investments in jointly owned regulated utility facilities at December 31, 2019:



In Millions, Except Ownership Share
J.H. Campbell Unit 3				Ludington				Other
Ownership share	93.3		%		51.0		%	various
Utility plant in service	$	1,731			$	486		$	233
Accumulated depreciation	(753		)		(166		)	(68		)
Construction work in progress	16				64			15
Net investment	$	994			$	384		$	180

Consumers includes its share of the direct expenses of the jointly owned plants in operating expenses. Consumers shares operation, maintenance, and other expenses of these jointly owned utility facilities in proportion to each participant’s undivided ownership interest. Consumers is required to provide only its share of financing for the jointly owned utility facilities.

Consumers Energy Company