Asset Retirement Obligations

12 Months Ended

Dec. 31, 2016

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. 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.

CMS Energy and Consumers calculate the fair value of ARO liabilities using an expected present-value technique that reflects assumptions about costs and inflation, and uses a credit-adjusted risk-free rate to discount the expected cash flows. CMS Energy’s ARO liabilities are primarily at Consumers. As a regulated entity, Consumers defers the effects of any changes in assumptions on the fair values of its ARO liabilities, adjusting the associated regulatory assets or liabilities rather than recognizing such effects in earnings.

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:

Company and ARO Description	In-Service 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
Gas distribution cut, purge, and cap	Various	Gas distribution mains and services
Asbestos abatement	1973	Electric and gas utility plant
Closure of renewable generation assets	2012,2014,2016	Wind and solar generation facilities
Consumers
Closure of coal ash disposal areas	Various	Generating plants coal ash areas
Gas distribution cut, purge, and cap	Various	Gas distribution mains and services
Asbestos abatement	1973	Electric and gas utility plant
Closure of renewable generation assets	2012,2014,2016	Wind and solar 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	12/31/2015			Incurred			Settled			Accretion			Revisions			12/31/2016
CMS Energy, including Consumers
Consumers		$	438		$	3		$	(18)		$	23		$	-		$	446
Gas treating plant and gas wells			1			-			-			-			-			1
Total CMS Energy		$	439		$	3		$	(18)		$	23		$	-		$	447
Consumers
Coal ash disposal areas		$	200		$	-		$	(8)		$	9		$	-		$	201
Gas distribution cut, purge, and cap			178			2			(9)			11			-			182
Asbestos abatement			54			-			(1)			3			-			56
Renewable generation assets			6			1			-			-			-			7
Total Consumers		$	438		$	3		$	(18)		$	23		$	-		$	446

In Millions
	ARO															ARO
	Liability												Cash flow			Liability
Company and ARO Description	12/31/2014			Incurred			Settled			Accretion			Revisions			12/31/2015
CMS Energy, including Consumers
Consumers		$	339		$	11		$	(6)		$	20		$	74		$	438
Gas treating plant and gas wells			1			-			-			-			-			1
Total CMS Energy		$	340		$	11		$	(6)		$	20		$	74		$	439
Consumers
Coal ash disposal areas		$	120		$	-		$	-		$	6		$	74		$	200
Gas distribution cut, purge, and cap			162			11			(6)			11			-			178
Asbestos abatement			51			-			-			3			-			54
Renewable generation assets			6			-			-			-			-			6
Total Consumers		$	339		$	11		$	(6)		$	20		$	74		$	438

In 2015, Consumers increased its ARO liability for coal ash disposal areas. The increase was attributable to proposed changes in state regulations based on the EPA’s final rule regarding CCRs, which provided Consumers with sufficient information to reasonably estimate an additional ARO liability associated with closure work at certain waste management facilities.

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. 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.

CMS Energy and Consumers calculate the fair value of ARO liabilities using an expected present-value technique that reflects assumptions about costs and inflation, and uses a credit-adjusted risk-free rate to discount the expected cash flows. CMS Energy’s ARO liabilities are primarily at Consumers. As a regulated entity, Consumers defers the effects of any changes in assumptions on the fair values of its ARO liabilities, adjusting the associated regulatory assets or liabilities rather than recognizing such effects in earnings.

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:

Company and ARO Description	In-Service 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
Gas distribution cut, purge, and cap	Various	Gas distribution mains and services
Asbestos abatement	1973	Electric and gas utility plant
Closure of renewable generation assets	2012,2014,2016	Wind and solar generation facilities
Consumers
Closure of coal ash disposal areas	Various	Generating plants coal ash areas
Gas distribution cut, purge, and cap	Various	Gas distribution mains and services
Asbestos abatement	1973	Electric and gas utility plant
Closure of renewable generation assets	2012,2014,2016	Wind and solar 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	12/31/2015			Incurred			Settled			Accretion			Revisions			12/31/2016
CMS Energy, including Consumers
Consumers		$	438		$	3		$	(18)		$	23		$	-		$	446
Gas treating plant and gas wells			1			-			-			-			-			1
Total CMS Energy		$	439		$	3		$	(18)		$	23		$	-		$	447
Consumers
Coal ash disposal areas		$	200		$	-		$	(8)		$	9		$	-		$	201
Gas distribution cut, purge, and cap			178			2			(9)			11			-			182
Asbestos abatement			54			-			(1)			3			-			56
Renewable generation assets			6			1			-			-			-			7
Total Consumers		$	438		$	3		$	(18)		$	23		$	-		$	446

In Millions
	ARO															ARO
	Liability												Cash flow			Liability
Company and ARO Description	12/31/2014			Incurred			Settled			Accretion			Revisions			12/31/2015
CMS Energy, including Consumers
Consumers		$	339		$	11		$	(6)		$	20		$	74		$	438
Gas treating plant and gas wells			1			-			-			-			-			1
Total CMS Energy		$	340		$	11		$	(6)		$	20		$	74		$	439
Consumers
Coal ash disposal areas		$	120		$	-		$	-		$	6		$	74		$	200
Gas distribution cut, purge, and cap			162			11			(6)			11			-			178
Asbestos abatement			51			-			-			3			-			54
Renewable generation assets			6			-			-			-			-			6
Total Consumers		$	339		$	11		$	(6)		$	20		$	74		$	438

In 2015, Consumers increased its ARO liability for coal ash disposal areas. The increase was attributable to proposed changes in state regulations based on the EPA’s final rule regarding CCRs, which provided Consumers with sufficient information to reasonably estimate an additional ARO liability associated with closure work at certain waste management facilities.