Transition Activities

9 Months Ended

Sep. 30, 2023

Restructuring Cost and Reserve [Line Items]

Transition Activities

Transition Activities

Asset Acquisition: In May 2023, Consumers purchased the Covert Generating Facility, a natural gas-fueled generation facility with 1,200 MW of nameplate capacity in Van Buren County, Michigan for $810 million. In August 2023, Consumers paid an additional $2 million as a result of a post-closing adjustment required under the purchase agreement.

Consumers accounted for the purchase as an asset acquisition, allocating the purchase price to the assets acquired and liabilities assumed based on their relative fair value. The original cost of the plant was $665 million and the seller had recognized $225 million of accumulated depreciation. Upon acquisition, Consumers recorded the net book value of $440 million and a plant acquisition adjustment of $370 million, resulting in an increase to plant, property, and equipment of $810 million. The remainder of the purchase price was allocated among various working capital accounts.

Exit Activities: In accordance with its Clean Energy Plan, Consumers retired the D.E. Karn coal-fueled electric generating units in June 2023. In 2019, when the MPSC approved the retirement of these units, Consumers removed from total plant, property, and equipment an amount representing the projected remaining book value of the two coal-fueled electric generating units upon their retirement, and recorded it as a regulatory asset. As of September 30, 2023, Consumers has recorded a regulatory asset of $655 million representing the remaining book value of these units.

Through a 2020 securitization financing order, the MPSC authorized Consumers to issue securitization bonds in order to finance the recovery of the remaining book value of the two coal-fueled electric generating units upon their retirement. Until securitization, which is expected in the fourth quarter of 2023, the book value of the generating units will remain in rate base and receive full regulatory returns in general rate cases.

Under its Clean Energy Plan, Consumers also plans to retire the J.H. Campbell coal-fueled generating units in 2025. In order to ensure necessary staffing at both D.E. Karn and J.H. Campbell through retirement, Consumers has implemented retention incentive programs. The aggregate cost of the D.E. Karn program, which is now complete, was $32 million. The aggregate cost of the J.H. Campbell program through 2025 is estimated to be $50 million. The MPSC has approved deferred accounting treatment for these costs; these expenses are deferred as a regulatory asset.

As of September 30, 2023, the cumulative cost incurred and charged to expense related to the D.E. Karn retention incentive program was $16 million. Additionally, an amount of $4 million was capitalized as a cost of plant, property, and equipment and an amount of $12 million was deferred as a regulatory asset. The cumulative cost incurred and deferred as a regulatory asset related to the J.H. Campbell retention incentive program was $32 million. The regulatory assets for both programs will be collected from customers over three years.

Presented in the following table is a reconciliation of the retention benefit liability recorded in other liabilities on Consumers’ consolidated balance sheets:

In Millions
	Nine Months Ended
September 30	2023			2022
Retention benefit liability at beginning of period		$	21		$	14
Costs deferred as a regulatory asset1		14			14
Costs paid or settled		(13)			—
Retention benefit liability at the end of the period2		$	22		$	28

1Includes $4 million for the three months ended September 30, 2023 and $11 million for the three months ended September 30, 2022.

2Includes current portion of other liabilities of $11 million at September 30, 2023 and $25 million at September 30, 2022.

Consumers Energy Company

Restructuring Cost and Reserve [Line Items]

Transition Activities

Transition Activities

Asset Acquisition: In May 2023, Consumers purchased the Covert Generating Facility, a natural gas-fueled generation facility with 1,200 MW of nameplate capacity in Van Buren County, Michigan for $810 million. In August 2023, Consumers paid an additional $2 million as a result of a post-closing adjustment required under the purchase agreement.

Consumers accounted for the purchase as an asset acquisition, allocating the purchase price to the assets acquired and liabilities assumed based on their relative fair value. The original cost of the plant was $665 million and the seller had recognized $225 million of accumulated depreciation. Upon acquisition, Consumers recorded the net book value of $440 million and a plant acquisition adjustment of $370 million, resulting in an increase to plant, property, and equipment of $810 million. The remainder of the purchase price was allocated among various working capital accounts.

Exit Activities: In accordance with its Clean Energy Plan, Consumers retired the D.E. Karn coal-fueled electric generating units in June 2023. In 2019, when the MPSC approved the retirement of these units, Consumers removed from total plant, property, and equipment an amount representing the projected remaining book value of the two coal-fueled electric generating units upon their retirement, and recorded it as a regulatory asset. As of September 30, 2023, Consumers has recorded a regulatory asset of $655 million representing the remaining book value of these units.

Through a 2020 securitization financing order, the MPSC authorized Consumers to issue securitization bonds in order to finance the recovery of the remaining book value of the two coal-fueled electric generating units upon their retirement. Until securitization, which is expected in the fourth quarter of 2023, the book value of the generating units will remain in rate base and receive full regulatory returns in general rate cases.

Under its Clean Energy Plan, Consumers also plans to retire the J.H. Campbell coal-fueled generating units in 2025. In order to ensure necessary staffing at both D.E. Karn and J.H. Campbell through retirement, Consumers has implemented retention incentive programs. The aggregate cost of the D.E. Karn program, which is now complete, was $32 million. The aggregate cost of the J.H. Campbell program through 2025 is estimated to be $50 million. The MPSC has approved deferred accounting treatment for these costs; these expenses are deferred as a regulatory asset.

As of September 30, 2023, the cumulative cost incurred and charged to expense related to the D.E. Karn retention incentive program was $16 million. Additionally, an amount of $4 million was capitalized as a cost of plant, property, and equipment and an amount of $12 million was deferred as a regulatory asset. The cumulative cost incurred and deferred as a regulatory asset related to the J.H. Campbell retention incentive program was $32 million. The regulatory assets for both programs will be collected from customers over three years.

Presented in the following table is a reconciliation of the retention benefit liability recorded in other liabilities on Consumers’ consolidated balance sheets:

In Millions
	Nine Months Ended
September 30	2023			2022
Retention benefit liability at beginning of period		$	21		$	14
Costs deferred as a regulatory asset1		14			14
Costs paid or settled		(13)			—
Retention benefit liability at the end of the period2		$	22		$	28

1Includes $4 million for the three months ended September 30, 2023 and $11 million for the three months ended September 30, 2022.

2Includes current portion of other liabilities of $11 million at September 30, 2023 and $25 million at September 30, 2022.