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Asset Retirement Obligations
 12 Months Ended
Dec. 31, 2012
Asset Retirement Obligations

11:ASSET RETIREMENT OBLIGATIONS

CMS Energy and Consumers record the fair value of the cost to remove assets at the end of their useful lives, if there is a legal obligation to remove them.  No market risk premiums were included in CMS Energy’s and Consumers’ ARO fair value estimates since reasonable estimates could not be made.  If a five percent market risk premium were assumed, CMS Energy’s and Consumers’ ARO liabilities at December 31, 2012 would increase by $16 million and at December 31, 2011 would increase by $13 million.  In 2012, Consumers updated the ARO for coal ash disposal areas to reflect a revised estimate of future obligations, and recorded the initial estimate for the Lake Winds® Energy Park ARO.

If a reasonable estimate of fair value cannot be made in the period in which the ARO is incurred, such as for assets with indeterminate lives, the liability is recognized when a reasonable estimate of fair value can be made.  CMS Energy and Consumers have not recorded liabilities for assets that have insignificant cumulative disposal costs, such as substation batteries.

Presented below are the categories of assets that CMS Energy and Consumers have legal obligations to remove at the end of their useful lives and for which they have an ARO liability recorded:

 

 

 

 

 

 

 

 

 

In-Service

 

 

Company and ARO Description

Date

Long-Lived Assets

 

CMS Energy, including Consumers

 

 

 

Closure of gas treating plant and gas wells

Various

Gas transmission and storage

 

Closure of coal ash disposal areas

Various

Generating plants coal ash areas

 

Closure of wells at gas storage fields

Various

Gas storage fields

 

Indoor gas services equipment relocations

Various

Gas meters located inside structures

 

Asbestos abatement
1973 

Electric and gas utility plant

 

Gas distribution cut, purge, and cap

Various

Gas distribution mains and services

 

Closure of wind farm
2012 

Wind generation facilities

 

Consumers

 

 

 

Closure of coal ash disposal areas

Various

Generating plants coal ash areas

 

Closure of wells at gas storage fields

Various

Gas storage fields

 

Indoor gas services equipment relocations

Various

Gas meters located inside structures

 

Asbestos abatement
1973 

Electric and gas utility plant

 

Gas distribution cut, purge, and cap

Various

Gas distribution mains and services

 

Closure of wind farm
2012 

Wind generation facilities

 

No assets have been restricted for purposes of settling AROs.

Presented in the following tables are the changes in CMS Energy’s and Consumers’ ARO liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Millions  

 

ARO 

 

 

 

 

 

 

 

 

 

 

 

 

ARO 

 

 

Liability 

 

 

 

 

 

 

 

 

 

Cash flow 

Liability 

 

Company and ARO Description

12/31/2011 

Incurred 

Settled1 

Accretion 

Revisions 

12/31/2012 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gas treating plant and gas wells

 

$
1 

 

$

 -

 

$

 -

 

$

 -

 

$

 -

 

$
1 

 

Consumers

 

 
253 

 

 
7 

 

 
(8)

 

 
19 

 

 
40 

 

 
311 

 

Total CMS Energy

 

$
254 

 

$
7 

 

$
(8)

 

$
19 

 

$
40 

 

$
312 

 

Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal ash disposal areas

 

$
70 

 

$

 -

 

$
(3)

 

$
7 

 

$
40 

 

$
114 

 

Wells at gas storage fields

 

 
1 

 

 

 -

 

 
(1)

 

 

 -

 

 

 -

 

 

 -

 

Asbestos abatement

 

 
42 

 

 

 -

 

 
(1)

 

 
2 

 

 

 -

 

 
43 

 

Gas distribution cut, purge,
   and cap

 

 
140 

 

 
4 

 

 
(3)

 

 
10 

 

 

 -

 

 
151 

 

Wind farm

 

 

 -

 

 
3 

 

 

 -

 

 

 -

 

 

 -

 

 
3 

 

Total Consumers

 

$
253 

 

$
7 

 

$
(8)

 

$
19 

 

$
40 

 

$
311 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Millions  

 

ARO 

 

 

 

 

 

 

 

 

 

 

 

 

ARO 

 

 

Liability 

 

 

 

 

 

 

 

 

 

Cash flow 

Liability 

 

Company and ARO Description

12/31/2010 

Incurred 

Settled1 

Accretion 

Revisions 

12/31/2011 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gas treating plant and gas wells

 

$
1 

 

$

 -

 

$

 -

 

$

 -

 

$

 -

 

$
1 

 

Consumers 

 

 
244 

 

 
(2)

 

 
(7)

 

 
18 

 

 

 -

 

 
253 

 

Total CMS Energy

 

$
245 

 

$
(2)

 

$
(7)

 

$
18 

 

$

 -

 

$
254 

 

Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal ash disposal areas

 

$
66 

 

$

 -

 

$
(2)

 

$
6 

 

$

 -

 

$
70 

 

Wells at gas storage fields

 

 
1 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
1 

 

Indoor gas services relocations

 

 
1 

 

 

 -

 

 
(1)

 

 

 -

 

 

 -

 

 

 -

 

Asbestos abatement

 

 
40 

 

 

 -

 

 
(1)

 

 
3 

 

 

 -

 

 
42 

 

Gas distribution cut, purge,
   and cap

 

 
136 

 

 
(2)

 

 
(3)

 

 
9 

 

 

 -

 

 
140 

 

Total Consumers

 

$
244 

 

$
(2)

 

$
(7)

 

$
18 

 

$

 -

 

$
253 

 

 

1            Cash payments of $8 million in 2012 and $7 million in 2011 were included in other current and non-current assets and liabilities as a component of net cash provided by operating activities in CMS Energy’s and Consumers’ consolidated statements of cash flow.

Consumers Energy Company [Member]
  
Asset Retirement Obligations

11:ASSET RETIREMENT OBLIGATIONS

CMS Energy and Consumers record the fair value of the cost to remove assets at the end of their useful lives, if there is a legal obligation to remove them.  No market risk premiums were included in CMS Energy’s and Consumers’ ARO fair value estimates since reasonable estimates could not be made.  If a five percent market risk premium were assumed, CMS Energy’s and Consumers’ ARO liabilities at December 31, 2012 would increase by $16 million and at December 31, 2011 would increase by $13 million.  In 2012, Consumers updated the ARO for coal ash disposal areas to reflect a revised estimate of future obligations, and recorded the initial estimate for the Lake Winds® Energy Park ARO.

If a reasonable estimate of fair value cannot be made in the period in which the ARO is incurred, such as for assets with indeterminate lives, the liability is recognized when a reasonable estimate of fair value can be made.  CMS Energy and Consumers have not recorded liabilities for assets that have insignificant cumulative disposal costs, such as substation batteries.

Presented below are the categories of assets that CMS Energy and Consumers have legal obligations to remove at the end of their useful lives and for which they have an ARO liability recorded:

 

 

 

 

 

 

 

 

 

In-Service

 

 

Company and ARO Description

Date

Long-Lived Assets

 

CMS Energy, including Consumers

 

 

 

Closure of gas treating plant and gas wells

Various

Gas transmission and storage

 

Closure of coal ash disposal areas

Various

Generating plants coal ash areas

 

Closure of wells at gas storage fields

Various

Gas storage fields

 

Indoor gas services equipment relocations

Various

Gas meters located inside structures

 

Asbestos abatement
1973 

Electric and gas utility plant

 

Gas distribution cut, purge, and cap

Various

Gas distribution mains and services

 

Closure of wind farm
2012 

Wind generation facilities

 

Consumers

 

 

 

Closure of coal ash disposal areas

Various

Generating plants coal ash areas

 

Closure of wells at gas storage fields

Various

Gas storage fields

 

Indoor gas services equipment relocations

Various

Gas meters located inside structures

 

Asbestos abatement
1973 

Electric and gas utility plant

 

Gas distribution cut, purge, and cap

Various

Gas distribution mains and services

 

Closure of wind farm
2012 

Wind generation facilities

 

No assets have been restricted for purposes of settling AROs.

Presented in the following tables are the changes in CMS Energy’s and Consumers’ ARO liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Millions  

 

ARO 

 

 

 

 

 

 

 

 

 

 

 

 

ARO 

 

 

Liability 

 

 

 

 

 

 

 

 

 

Cash flow 

Liability 

 

Company and ARO Description

12/31/2011 

Incurred 

Settled1 

Accretion 

Revisions 

12/31/2012 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gas treating plant and gas wells

 

$
1 

 

$

 -

 

$

 -

 

$

 -

 

$

 -

 

$
1 

 

Consumers

 

 
253 

 

 
7 

 

 
(8)

 

 
19 

 

 
40 

 

 
311 

 

Total CMS Energy

 

$
254 

 

$
7 

 

$
(8)

 

$
19 

 

$
40 

 

$
312 

 

Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal ash disposal areas

 

$
70 

 

$

 -

 

$
(3)

 

$
7 

 

$
40 

 

$
114 

 

Wells at gas storage fields

 

 
1 

 

 

 -

 

 
(1)

 

 

 -

 

 

 -

 

 

 -

 

Asbestos abatement

 

 
42 

 

 

 -

 

 
(1)

 

 
2 

 

 

 -

 

 
43 

 

Gas distribution cut, purge,
   and cap

 

 
140 

 

 
4 

 

 
(3)

 

 
10 

 

 

 -

 

 
151 

 

Wind farm

 

 

 -

 

 
3 

 

 

 -

 

 

 -

 

 

 -

 

 
3 

 

Total Consumers

 

$
253 

 

$
7 

 

$
(8)

 

$
19 

 

$
40 

 

$
311 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Millions  

 

ARO 

 

 

 

 

 

 

 

 

 

 

 

 

ARO 

 

 

Liability 

 

 

 

 

 

 

 

 

 

Cash flow 

Liability 

 

Company and ARO Description

12/31/2010 

Incurred 

Settled1 

Accretion 

Revisions 

12/31/2011 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gas treating plant and gas wells

 

$
1 

 

$

 -

 

$

 -

 

$

 -

 

$

 -

 

$
1 

 

Consumers 

 

 
244 

 

 
(2)

 

 
(7)

 

 
18 

 

 

 -

 

 
253 

 

Total CMS Energy

 

$
245 

 

$
(2)

 

$
(7)

 

$
18 

 

$

 -

 

$
254 

 

Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal ash disposal areas

 

$
66 

 

$

 -

 

$
(2)

 

$
6 

 

$

 -

 

$
70 

 

Wells at gas storage fields

 

 
1 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
1 

 

Indoor gas services relocations

 

 
1 

 

 

 -

 

 
(1)

 

 

 -

 

 

 -

 

 

 -

 

Asbestos abatement

 

 
40 

 

 

 -

 

 
(1)

 

 
3 

 

 

 -

 

 
42 

 

Gas distribution cut, purge,
   and cap

 

 
136 

 

 
(2)

 

 
(3)

 

 
9 

 

 

 -

 

 
140 

 

Total Consumers

 

$
244 

 

$
(2)

 

$
(7)

 

$
18 

 

$

 -

 

$
253 

 

 

1            Cash payments of $8 million in 2012 and $7 million in 2011 were included in other current and non-current assets and liabilities as a component of net cash provided by operating activities in CMS Energy’s and Consumers’ consolidated statements of cash flow.