Plant, Property, and Equipment

12 Months Ended

Dec. 31, 2013

8: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			2013			2012
CMS Energy, including Consumers
Electric
Generation	22	-	125		$	3,992		$	4,254
Distribution	23	-	75			6,140			5,831
Other	5	-	50			770			677
Assets under capital leases and other arrangements						284			279
Gas
Distribution	28	-	80			3,015			2,861
Transmission	17	-	75			821			770
Underground storage facilities1	29	-	65			535			339
Other	5	-	50			465			424
Capital leases						7			6
Enterprises
Independent power production	3	-	30			89			89
Other	3	-	40			26			24
Other	1	-	51			40			38
Construction work in progress						1,149			1,080
Less accumulated depreciation and amortization						(5,087)			(5,121)
Net plant, property, and equipment2					$	12,246		$	11,551
Consumers
Electric
Generation	22	-	125		$	3,992		$	4,254
Distribution	23	-	75			6,140			5,831
Other	5	-	50			770			677
Assets under capital leases and other arrangements						284			279
Gas
Distribution	28	-	80			3,015			2,861
Transmission	17	-	75			821			770
Underground storage facilities1	29	-	65			535			339
Other	5	-	50			465			424
Capital leases						7			6
Other non-utility property	8	-	51			15			15
Construction work in progress						1,147			1,080
Less accumulated depreciation and amortization						(5,022)			(5,061)
Net plant, property, and equipment2					$	12,169		$	11,475

Underground storage includes base natural gas of $26 million at December 31, 2013 and 2012. Base natural gas is not subject to depreciation.

For the year ended December 31, 2013, utility plant additions were $1.3 billion and utility plant retirements were $156 million. Subject to a successful Securitization transaction, Consumers plans to retire seven smaller coal-fueled electric generating units and three smaller gas-fueled electric generating units by April 2016. Accordingly, Consumers removed the net book value of the ten units from plant, property, and equipment and recorded this amount as a regulatory asset at December 31, 2013. As a result, net plant, property, and equipment decreased by $362 million. For additional details, see Note 2, Regulatory Matters.

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

Presented in the following table is further detail on changes in Consumers’ assets under capital leases and other arrangements:



In Millions
Years Ended December 31	2013			2012
Consumers
Balance at beginning of period		$	285		$	280
Additions			12			9
Net retirements and other adjustments			(6)			(4)
Balance at end of period		$	291		$	285

Assets under capital leases and other arrangements are presented as gross amounts. Accumulated amortization of assets under capital leases and other arrangements was $124 million at December 31, 2013 and $108 million at December 31, 2012 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	2013			2012
CMS Energy, including Consumers
Utility plant assets		$	5,021		$	5,060
Non-utility plant assets			66			61
Consumers
Utility plant assets		$	5,021		$	5,060
Non-utility plant assets			1			1

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	2013			2012			2011
Electric utility property		3.5	%		3.2	%		3.0	%
Gas utility property		2.8	%		2.9	%		2.9	%
Other property		7.0	%		7.2	%		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 2, 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-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’ composite AFUDC capitalization rates:



Years Ended December 31	2013			2012			2011
AFUDC capitalization rate		7.3	%		7.3	%		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					2013						2012
Description	Amortization Life in years				Gross Cost1			Accumulated Amortization			Gross Cost1			Accumulated Amortization
CMS Energy, including Consumers
Software development		3	-	15		$	508		$	174		$	466		$	172
Plant acquisition adjustments		40	-	46			216			32			214			27
Rights of way		50	-	75			135			42			130			40
Leasehold improvements		various2					14			11			13			10
Franchises and consents		5	-	30			15			7			14			6
Other intangibles		various					21			14			18			14
Total						$	909		$	280		$	855		$	269
Consumers
Software development		3	-	15		$	506		$	173		$	464		$	172
Plant acquisition adjustments		40	-	46			216			32			214			27
Rights of way		50	-	75			135			42			130			40
Leasehold improvements		various2					14			11			13			10
Franchises and consents		5	-	30			15			7			14			6
Other intangibles		various					20			14			18			14
Total						$	906		$	279		$	853		$	269

Net intangible asset additions for Consumers’ utility plant were $53 million during 2013 and $108 million during 2012 and primarily represented software development costs.

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
2013		$	48		$	39		$	47		$	39
2012			39			31			38			30
2011			32			24			32			24

Amortization of intangible assets is expected to range between $54 million and $73 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, 2013:



In Millions, Except Ownership Share
	J.H. Campbell Unit 3				Ludington				Distribution
Ownership share			93.3	%			51.0	%			various
Utility plant in service		$	1,073			$	193			$	190
Accumulated depreciation			(456)				(152)				(59)
Construction work-in-progress			81				71				2
Net investment		$	698			$	112			$	133

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