Plant, Property, and Equipment

12 Months Ended

Dec. 31, 2012

9:PLANT, PROPERTY, AND EQUIPMENT

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



In Millions
Years Ended December 31	Estimated Depreciable Life in Years			2012			2011
CMS Energy, including Consumers
Electric
Generation	22	-	125		$	4,254		$	3,936
Distribution	23	-	75			5,831			5,538
Other	5	-	50			677			651
Capital and finance leases						279			275
Gas
Distribution	30	-	80			2,861			2,754
Transmission	13	-	75			770			722
Underground storage facilities¹	30	-	65			339			322
Other	5	-	50			424			403
Capital leases						6			5
Enterprises
Independent power production	3	-	30			89			89
Other	3	-	40			24			20
Other	1	-	51			38			36
Construction work in progress						1,080			783
Less accumulated depreciation and amortization						(5,121)			(4,901)
Net plant, property, and equipment²					$	11,551		$	10,633
Consumers
Electric
Generation	22	-	125		$	4,254		$	3,936
Distribution	23	-	75			5,831			5,538
Other	5	-	50			677			651
Capital and finance leases						279			275
Gas
Distribution	30	-	80			2,861			2,754
Transmission	13	-	75			770			722
Underground storage facilities¹	30	-	65			339			322
Other	5	-	50			424			403
Capital leases						6			5
Other non-utility property	8	-	51			15			15
Construction work in progress						1,080			782
Less accumulated depreciation and amortization						(5,061)			(4,846)
Net plant, property, and equipment²					$	11,475		$	10,557

¹	Underground storage includes base natural gas of $26 million at December 31, 2012 and 2011. Base natural gas is not subject to depreciation.

²	For the year ended December 31, 2012, utility plant additions were $999 million and utility plant retirements were $168 million. For the year ended December 31, 2011, utility plant additions were $700 million and utility plant retirements were $104 million.

Presented in the following table is further detail on changes in Consumers’ capital and finance leases:



In Millions
Years Ended December 31	2012			2011
Consumers
Balance at beginning of period		$	280		$	278
Additions			9			4
Net retirements and other adjustments			(4)			(2)
Balance at end of period		$	285		$	280

Capital and finance leases presented are gross amounts. Accumulated amortization of capital and finance leases was $108 million at December 31, 2012 and $87 million at December 31, 2011 for Consumers.

Presented in the following table is further detail on CMS Energy’s and Consumers’ accumulated depreciation and amortization:



In Millions
Years Ended December 31	2012			2011
CMS Energy, including Consumers
Utility plant assets		$	5,060		$	4,844
Non-utility plant assets			61			57
Consumers
Utility plant assets		$	5,060		$	4,844
Non-utility plant assets			1			2

Maintenance and Depreciation: 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.

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	2012			2011			2010
Electric utility property		3.2	%		3.0	%		3.0	%
Gas utility property		2.9	%		2.9	%		2.9	%
Other property		7.2	%		7.4	%		7.4	%

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. For additional details, see Note 3, Regulatory Matters.

When utility property is mothballed, the 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.

Consumers capitalizes AFUDC on regulated major construction projects, except pollution control facilities on its fossil-fueled 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’ composite AFUDC capitalization rates:



Years Ended December 31	2012			2011			2010
AFUDC capitalization rate		7.3	%		7.6	%		7.6	%

CMS Energy and Consumers capitalize the purchase and development of 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. The types of costs capitalized are consistent for all periods presented by the financial statements.

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



In Millions
Years Ended December 31					2012						2011
Description	Amortization Life in years				Gross Cost¹			Accumulated Amortization			Gross Cost¹			Accumulated Amortization
CMS Energy, including Consumers
Software development		3	-	15		$	466		$	172		$	361		$	142
Plant acquisition adjustments		40	-	46			214			27			214			22
Rights of way		50	-	75			130			40			128			38
Leasehold improvements		various²					13			10			11			9
Franchises and consents		5	-	30			14			6			15			7
Other intangibles		various					18			14			19			14
Total						$	855		$	269		$	748		$	232
Consumers
Software development		3	-	15		$	464		$	172		$	360		$	141
Plant acquisition adjustments		40	-	46			214			27			214			22
Rights of way		50	-	75			130			40			128			38
Leasehold improvements		various²					13			10			11			9
Franchises and consents		5	-	30			14			6			15			7
Other intangibles		various					18			14			18			14
Total						$	853		$	269		$	746		$	231

¹	Net intangible asset additions for Consumers’ utility plant were $108 million during 2012 and $23 million during 2011 and primarily represented software development costs.

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

Presented in the following table is CMS Energy’s and Consumers’ amortization expense related to intangible assets:



In Millions
	CMS Energy, including Consumers						Consumers
Years Ended December 31	Total Amortization Expense			Software Amortization Expense			Total Amortization Expense			Software Amortization Expense
2012		$	39		$	31		$	38		$	30
2011			32			24			32			24
2010			28			19			27			19

Amortization of intangible assets is expected to range between $46 million and $56 million per year over the next five years.

Jointly Owned Regulated Utility Facilities

Presented in the following table are Consumers’ investments in jointly owned regulated utility facilities at December 31, 2012:



In Millions, Except Ownership Share
	Campbell Unit 3				Ludington				Distribution
Ownership share			93.3	%			51.0	%			various
Utility plant in service		$	1,080			$	175			$	182
Accumulated depreciation			(431)				(147)				(56)
Construction work-in-progress			84				87				5
Net investment		$	733			$	115			$	131

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

9:PLANT, PROPERTY, AND EQUIPMENT

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



In Millions
Years Ended December 31	Estimated Depreciable Life in Years			2012			2011
CMS Energy, including Consumers
Electric
Generation	22	-	125		$	4,254		$	3,936
Distribution	23	-	75			5,831			5,538
Other	5	-	50			677			651
Capital and finance leases						279			275
Gas
Distribution	30	-	80			2,861			2,754
Transmission	13	-	75			770			722
Underground storage facilities¹	30	-	65			339			322
Other	5	-	50			424			403
Capital leases						6			5
Enterprises
Independent power production	3	-	30			89			89
Other	3	-	40			24			20
Other	1	-	51			38			36
Construction work in progress						1,080			783
Less accumulated depreciation and amortization						(5,121)			(4,901)
Net plant, property, and equipment²					$	11,551		$	10,633
Consumers
Electric
Generation	22	-	125		$	4,254		$	3,936
Distribution	23	-	75			5,831			5,538
Other	5	-	50			677			651
Capital and finance leases						279			275
Gas
Distribution	30	-	80			2,861			2,754
Transmission	13	-	75			770			722
Underground storage facilities¹	30	-	65			339			322
Other	5	-	50			424			403
Capital leases						6			5
Other non-utility property	8	-	51			15			15
Construction work in progress						1,080			782
Less accumulated depreciation and amortization						(5,061)			(4,846)
Net plant, property, and equipment²					$	11,475		$	10,557

¹	Underground storage includes base natural gas of $26 million at December 31, 2012 and 2011. Base natural gas is not subject to depreciation.

²	For the year ended December 31, 2012, utility plant additions were $999 million and utility plant retirements were $168 million. For the year ended December 31, 2011, utility plant additions were $700 million and utility plant retirements were $104 million.

Presented in the following table is further detail on changes in Consumers’ capital and finance leases:



In Millions
Years Ended December 31	2012			2011
Consumers
Balance at beginning of period		$	280		$	278
Additions			9			4
Net retirements and other adjustments			(4)			(2)
Balance at end of period		$	285		$	280

Presented in the following table is further detail on CMS Energy’s and Consumers’ accumulated depreciation and amortization:



In Millions
Years Ended December 31	2012			2011
CMS Energy, including Consumers
Utility plant assets		$	5,060		$	4,844
Non-utility plant assets			61			57
Consumers
Utility plant assets		$	5,060		$	4,844
Non-utility plant assets			1			2




Years Ended December 31	2012			2011			2010
Electric utility property		3.2	%		3.0	%		3.0	%
Gas utility property		2.9	%		2.9	%		2.9	%
Other property		7.2	%		7.4	%		7.4	%



Years Ended December 31	2012			2011			2010
AFUDC capitalization rate		7.3	%		7.6	%		7.6	%

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



In Millions
Years Ended December 31					2012						2011
Description	Amortization Life in years				Gross Cost¹			Accumulated Amortization			Gross Cost¹			Accumulated Amortization
CMS Energy, including Consumers
Software development		3	-	15		$	466		$	172		$	361		$	142
Plant acquisition adjustments		40	-	46			214			27			214			22
Rights of way		50	-	75			130			40			128			38
Leasehold improvements		various²					13			10			11			9
Franchises and consents		5	-	30			14			6			15			7
Other intangibles		various					18			14			19			14
Total						$	855		$	269		$	748		$	232
Consumers
Software development		3	-	15		$	464		$	172		$	360		$	141
Plant acquisition adjustments		40	-	46			214			27			214			22
Rights of way		50	-	75			130			40			128			38
Leasehold improvements		various²					13			10			11			9
Franchises and consents		5	-	30			14			6			15			7
Other intangibles		various					18			14			18			14
Total						$	853		$	269		$	746		$	231

¹	Net intangible asset additions for Consumers’ utility plant were $108 million during 2012 and $23 million during 2011 and primarily represented software development costs.

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

Presented in the following table is CMS Energy’s and Consumers’ amortization expense related to intangible assets:



In Millions
	CMS Energy, including Consumers						Consumers
Years Ended December 31	Total Amortization Expense			Software Amortization Expense			Total Amortization Expense			Software Amortization Expense
2012		$	39		$	31		$	38		$	30
2011			32			24			32			24
2010			28			19			27			19

Amortization of intangible assets is expected to range between $46 million and $56 million per year over the next five years.

Jointly Owned Regulated Utility Facilities

Presented in the following table are Consumers’ investments in jointly owned regulated utility facilities at December 31, 2012:



In Millions, Except Ownership Share
	Campbell Unit 3				Ludington				Distribution
Ownership share			93.3	%			51.0	%			various
Utility plant in service		$	1,080			$	175			$	182
Accumulated depreciation			(431)				(147)				(56)
Construction work-in-progress			84				87				5
Net investment		$	733			$	115			$	131

- Definition

The entire disclosure for long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale. Examples include land, buildings, machinery and equipment, and other types of furniture and equipment including, but not limited to, office equipment, furniture and fixtures, and computer equipment and software. This disclosure may include property plant and equipment accounting policies and methodology, a schedule of property, plant and equipment gross, additions, deletions, transfers and other changes, depreciation, depletion and amortization expense, net, accumulated depreciation, depletion and amortization expense and useful lives, income statement disclosures, assets held for sale and public utility disclosures.

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