Plant, Property, and Equipment

12 Months Ended

Dec. 31, 2017

9:Plant, Property, and Equipment

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			2017			2016
CMS Energy, including Consumers
Plant, property, and equipment, gross
Consumers	3	-	125		$	22,318		$	20,838
Enterprises
Independent power production	3	-	35			163			141
Other	3	-	5			4			16
Other	1	-	7			21			15
Plant, property, and equipment, gross					$	22,506		$	21,010
Construction work in progress						765			761
Accumulated depreciation and amortization						(6,510)			(6,056)
Total plant, property, and equipment1					$	16,761		$	15,715
Consumers
Plant, property, and equipment, gross
Electric
Generation	22	-	125		$	6,025		$	5,900
Distribution	20	-	75			7,603			7,149
Transmission	46	-	75			66			59
Other	5	-	50			1,229			1,137
Assets under capital leases and financing obligation2						298			295
Gas
Distribution	20	-	85			4,182			3,806
Transmission	17	-	75			1,278			1,124
Underground storage facilities3	27	-	75			842			630
Other	5	-	50			764			708
Capital leases2						14			15
Other non-utility property	3	-	51			17			15
Plant, property, and equipment, gross					$	22,318		$	20,838
Construction work in progress						753			759
Accumulated depreciation and amortization						(6,441)			(5,994)
Total plant, property, and equipment1					$	16,630		$	15,603

1For the year ended December 31, 2017, Consumers’ plant additions were $1.7 billion and plant retirements were $214 million. For the year ended December 31, 2016, Consumers’ plant additions were $2.3 billion and plant retirements were $285 million.

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

3Underground storage includes base natural gas of $26 million at December 31, 2017 and 2016. Base natural gas is not subject to depreciation.

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 rate making 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	2017			2016			2015
Electric		6.8	%		7.3	%		7.6	%
Gas		6.0	%		6.2	%		6.2	%

Assets Under Capital Leases and Financing Obligation: Presented in the following table are further details about changes in Consumers’ assets under capital leases and financing obligation:



In Millions
Years Ended December 31	2017			2016
Consumers
Balance at beginning of period		$	310		$	300
Additions			3			13
Net retirements and other adjustments			(1)			(3)
Balance at end of period		$	312		$	310

Assets under capital leases and financing obligation are presented as gross amounts. Accumulated amortization of assets under capital leases and financing obligation was $193 million at December 31, 2017 and $172 million at December 31, 2016 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	2017			2016
CMS Energy, including Consumers
Utility plant assets		$	6,439		$	5,993
Non-utility plant assets			71			63
Consumers
Utility plant assets		$	6,439		$	5,993
Non-utility plant assets			2			1

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	2017			2016			2015
Electric utility property		3.9	%		3.9	%		3.5	%
Gas utility property		2.9			2.9			2.8
Other property		10.0			9.8			8.7

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	2017			2016			2015
CMS Energy, including Consumers
Depreciation expense – plant, property, and equipment		$	739		$	687		$	591
Amortization expense
Software			114			96			70
Other intangible assets			3			3			4
Securitized regulatory assets			25			25			83
Other regulatory assets			-			-			2
Total depreciation and amortization expense		$	881		$	811		$	750
Consumers
Depreciation expense – plant, property, and equipment		$	732		$	680		$	586
Amortization expense
Software			112			95			69
Other intangible assets			3			3			4
Securitized regulatory assets			25			25			83
Other regulatory assets			-			-			2
Total depreciation and amortization expense		$	872		$	803		$	744

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
	2018			2019			2020			2021			2022
CMS Energy, including Consumers
Intangible asset amortization expense		$	131		$	139		$	135		$	124		$	109
Consumers
Intangible assets amortization expense		$	129		$	137		$	133		$	123		$	108

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, 2017						December 31, 2016
Description	Amortization Life in Years				Gross Cost1			Accumulated Amortization			Gross Cost1			Accumulated Amortization
CMS Energy, including Consumers
Software development		1	-	15		$	950		$	481		$	853		$	367
Rights of way		50	-	85			162			50			155			48
Franchises and consents		5	-	30			14			8			15			8
Leasehold improvements		various2					9			7			7			6
Other intangibles		various					23			15			22			15
Total						$	1,158		$	561		$	1,052		$	444
Consumers
Software development		3	-	15		$	937		$	475		$	845		$	363
Rights of way		50	-	85			162			50			155			48
Franchises and consents		5	-	30			14			8			15			8
Leasehold improvements		various2					9			7			7			6
Other intangibles		various					21			15			21			15
Total						$	1,143		$	555		$	1,043		$	440

1For the year ended December 31, 2017, Consumers’ intangible asset additions were $100 million and there were no retirements. For the year ended December 31, 2016, Consumers’ intangible asset additions were $141 million and intangible asset retirements were $23 million.

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

Jointly Owned Regulated Utility Facilities

Presented in the following table are Consumers’ investments in jointly owned regulated utility facilities at December 31, 2017:



In Millions, Except Ownership Share
	J.H. Campbell Unit 3				Ludington				Other
Ownership share			93.3	%			51.0	%			various
Utility plant in service		$	1,655			$	354			$	217
Accumulated depreciation			(592)				(151)				(69)
Construction work in progress			30				142				6
Net investment		$	1,093			$	345			$	154

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 [Member]

Plant, Property, and Equipment