Leases

12 Months Ended

Dec. 31, 2024

Leases [Line Items]

Leases

Leases

Lessee

CMS Energy and Consumers lease various assets from third parties, including coal-carrying railcars, real estate, service vehicles, and gas pipeline capacity. In addition, CMS Energy and Consumers account for several of their PPAs as leases.

CMS Energy and Consumers do not record right-of-use assets or lease liabilities on their consolidated balance sheets for rentals with lease terms of 12 months or less, most of which are for the lease of real estate and service vehicles. Lease expense for these rentals is recognized on a straight-line basis over the lease term.

CMS Energy and Consumers include future payments for all renewal options, fair market value extensions, and buyout provisions reasonably certain of exercise in their measurement of lease right-of-use assets and lease liabilities. In addition, certain leases for service vehicles contain end-of-lease adjustment clauses based on proceeds received from the sale or disposition of the vehicles. CMS Energy and Consumers also include executory costs in the measurement of their right-of-use assets and lease liabilities, except for maintenance costs related to their coal-carrying railcar leases.

Most of Consumers’ PPAs contain provisions at the end of the initial contract terms to renew the agreements annually under mutually agreed‑upon terms at the time of renewal. Energy and capacity

payments that vary depending on quantities delivered are recognized as variable lease costs when incurred. Consumers accounts for a PPA with one of CMS Energy’s equity method subsidiaries as a finance lease.

Presented in the following table is information about CMS Energy’s and Consumers’ lease right-of-use assets and lease liabilities:

In Millions, Except as Noted
	CMS Energy, including Consumers								Consumers
December 31	2024				2023				2024				2023
Operating leases
Right-of-use assets1		$	24			$	26			$	20			$	23
Lease liabilities
Current lease liabilities2		3				4				3				4
Non-current lease liabilities3		21				22				17				19
Finance leases
Right-of-use assets		119				71				76				48
Lease liabilities4
Current lease liabilities		4				5				4				5
Non-current lease liabilities		112				62				69				39
Weighted-average remaining lease term (in years)
Operating leases		20				19				19				18
Finance leases		26				19				22				11
Weighted-average discount rate
Operating leases		5.3		%		5.2		%		5.4		%		5.3		%
Finance leases5		5.8				5.3				4.8				1.5

1CMS Energy’s and Consumers’ operating right-of-use lease assets are reported as other non‑current assets on their consolidated balance sheets.

2The current portion of CMS Energy’s and Consumers’ operating lease liabilities are reported as other current liabilities on their consolidated balance sheets.

3The non‑current portion of CMS Energy’s and Consumers’ operating lease liabilities are reported as other non‑current liabilities on their consolidated balance sheets.

4Includes related-party lease liabilities of $23 million, of which less than $1 million was current, at December 31, 2024 and 2023.

5This rate excludes the impact of Consumers’ pipeline agreements and long-term PPAs accounted for as finance leases. The required capacity payments under these agreements, when compared to the underlying fair value of the leased assets, result in effective interest rates that exceed market rates for leases with similar terms.

CMS Energy and Consumers report operating, variable, and short-term lease costs as operating expenses on their consolidated statements of income, except for certain amounts that may be capitalized to other assets. Presented in the following table is a summary of CMS Energy’s and Consumers’ total lease costs:

In Millions
Years Ended December 31	2024			2023
CMS Energy, including Consumers
Operating lease costs		$	6		$	6
Finance lease costs
Amortization of right-of-use assets		6			9
Interest on lease liabilities		16			15
Variable lease costs		107			107
Short-term lease costs		13			14
Total lease costs		$	148		$	151
Consumers
Operating lease costs		$	5		$	5
Finance lease costs
Amortization of right-of-use assets		5			8
Interest on lease liabilities		13			13
Variable lease costs		107			107
Short-term lease costs		12			14
Total lease costs		$	142		$	147

Presented in the following table is supplemental cash flow information related to CMS Energy’s and Consumers’ lease liabilities:

In Millions
Years Ended December 31	2024			2023
CMS Energy, including Consumers
Cash paid for amounts included in the measurement of lease liabilities
Cash used in operating activities for operating leases		$	6		$	6
Cash used in operating activities for finance leases		15			15
Cash used in financing activities for finance leases		6			8
Lease liabilities arising from obtaining right-of-use assets
Operating leases		3			1
Finance leases		55			—
Consumers
Cash paid for amounts included in the measurement of lease liabilities
Cash used in operating activities for operating leases		$	5		$	6
Cash used in operating activities for finance leases		13			13
Cash used in financing activities for finance leases		5			8
Lease liabilities arising from obtaining right-of-use assets
Operating leases		1			1
Finance leases		34			—

Presented in the following table are the minimum rental commitments under CMS Energy’s and Consumers’ non‑cancelable leases:

In Millions
				Finance Leases
December 31, 2024	Operating Leases			Pipelines and PPAs			Land and Other			Total
CMS Energy, including Consumers
2025		$	4		$	13		$	7		$	20
2026		3			13			7			20
2027		2			13			5			18
2028		2			13			5			18
2029		2			13			5			18
2030 and thereafter		29			13			177			190
Total minimum lease payments		$	42		$	78		$	206		$	284
Less discount		18			50			118			168
Present value of minimum lease payments		$	24		$	28		$	88		$	116
Consumers
2025		$	4		$	13		$	4		$	17
2026		3			13			4			17
2027		2			13			3			16
2028		2			13			2			15
2029		1			13			2			15
2030 and thereafter		23			13			71			84
Total minimum lease payments		$	35		$	78		$	86		$	164
Less discount		15			50			41			91
Present value of minimum lease payments		$	20		$	28		$	45		$	73

Lessor

CMS Energy and Consumers are the lessor under power sales and natural gas delivery agreements that are accounted for as leases.

CMS Energy has power sales agreements that are accounted for as operating leases. In addition to fixed payments, these agreements have variable payments based on energy delivered. For the year ended December 31, 2024, lease revenue from these power sales agreements was $105 million, which included variable lease payments of $61 million. For the year ended December 31, 2023, lease revenue from these power sales agreements was $116 million, which included variable lease payments of $74 million.

Presented in the following table are the minimum rental payments to be received under CMS Energy’s non‑cancelable operating leases:

In Millions
December 31, 2024
2025	$	44
2026	18
Total minimum lease payments	$	62

Consumers has a natural gas transportation agreement with a subsidiary of CMS Energy that extends through 2038, related to a pipeline owned by Consumers. This agreement is accounted for as a direct finance lease and will automatically extend annually unless terminated by either party. The effects of the lease are eliminated on CMS Energy’s consolidated financial statements.

Minimum rental payments to be received under Consumers’ direct financing lease are less than $1 million for each of the next five years and $6 million for the years thereafter. The lease receivable was $6 million as of December 31, 2024, which does not include unearned income of $5 million.

Consumers Energy Company

Leases [Line Items]

Leases

Leases

Lessee

CMS Energy and Consumers lease various assets from third parties, including coal-carrying railcars, real estate, service vehicles, and gas pipeline capacity. In addition, CMS Energy and Consumers account for several of their PPAs as leases.

CMS Energy and Consumers do not record right-of-use assets or lease liabilities on their consolidated balance sheets for rentals with lease terms of 12 months or less, most of which are for the lease of real estate and service vehicles. Lease expense for these rentals is recognized on a straight-line basis over the lease term.

CMS Energy and Consumers include future payments for all renewal options, fair market value extensions, and buyout provisions reasonably certain of exercise in their measurement of lease right-of-use assets and lease liabilities. In addition, certain leases for service vehicles contain end-of-lease adjustment clauses based on proceeds received from the sale or disposition of the vehicles. CMS Energy and Consumers also include executory costs in the measurement of their right-of-use assets and lease liabilities, except for maintenance costs related to their coal-carrying railcar leases.

Most of Consumers’ PPAs contain provisions at the end of the initial contract terms to renew the agreements annually under mutually agreed‑upon terms at the time of renewal. Energy and capacity

payments that vary depending on quantities delivered are recognized as variable lease costs when incurred. Consumers accounts for a PPA with one of CMS Energy’s equity method subsidiaries as a finance lease.

Presented in the following table is information about CMS Energy’s and Consumers’ lease right-of-use assets and lease liabilities:

In Millions, Except as Noted
	CMS Energy, including Consumers								Consumers
December 31	2024				2023				2024				2023
Operating leases
Right-of-use assets1		$	24			$	26			$	20			$	23
Lease liabilities
Current lease liabilities2		3				4				3				4
Non-current lease liabilities3		21				22				17				19
Finance leases
Right-of-use assets		119				71				76				48
Lease liabilities4
Current lease liabilities		4				5				4				5
Non-current lease liabilities		112				62				69				39
Weighted-average remaining lease term (in years)
Operating leases		20				19				19				18
Finance leases		26				19				22				11
Weighted-average discount rate
Operating leases		5.3		%		5.2		%		5.4		%		5.3		%
Finance leases5		5.8				5.3				4.8				1.5

1CMS Energy’s and Consumers’ operating right-of-use lease assets are reported as other non‑current assets on their consolidated balance sheets.

2The current portion of CMS Energy’s and Consumers’ operating lease liabilities are reported as other current liabilities on their consolidated balance sheets.

3The non‑current portion of CMS Energy’s and Consumers’ operating lease liabilities are reported as other non‑current liabilities on their consolidated balance sheets.

4Includes related-party lease liabilities of $23 million, of which less than $1 million was current, at December 31, 2024 and 2023.

5This rate excludes the impact of Consumers’ pipeline agreements and long-term PPAs accounted for as finance leases. The required capacity payments under these agreements, when compared to the underlying fair value of the leased assets, result in effective interest rates that exceed market rates for leases with similar terms.

CMS Energy and Consumers report operating, variable, and short-term lease costs as operating expenses on their consolidated statements of income, except for certain amounts that may be capitalized to other assets. Presented in the following table is a summary of CMS Energy’s and Consumers’ total lease costs:

In Millions
Years Ended December 31	2024			2023
CMS Energy, including Consumers
Operating lease costs		$	6		$	6
Finance lease costs
Amortization of right-of-use assets		6			9
Interest on lease liabilities		16			15
Variable lease costs		107			107
Short-term lease costs		13			14
Total lease costs		$	148		$	151
Consumers
Operating lease costs		$	5		$	5
Finance lease costs
Amortization of right-of-use assets		5			8
Interest on lease liabilities		13			13
Variable lease costs		107			107
Short-term lease costs		12			14
Total lease costs		$	142		$	147

Presented in the following table is supplemental cash flow information related to CMS Energy’s and Consumers’ lease liabilities:

In Millions
Years Ended December 31	2024			2023
CMS Energy, including Consumers
Cash paid for amounts included in the measurement of lease liabilities
Cash used in operating activities for operating leases		$	6		$	6
Cash used in operating activities for finance leases		15			15
Cash used in financing activities for finance leases		6			8
Lease liabilities arising from obtaining right-of-use assets
Operating leases		3			1
Finance leases		55			—
Consumers
Cash paid for amounts included in the measurement of lease liabilities
Cash used in operating activities for operating leases		$	5		$	6
Cash used in operating activities for finance leases		13			13
Cash used in financing activities for finance leases		5			8
Lease liabilities arising from obtaining right-of-use assets
Operating leases		1			1
Finance leases		34			—

Presented in the following table are the minimum rental commitments under CMS Energy’s and Consumers’ non‑cancelable leases:

In Millions
				Finance Leases
December 31, 2024	Operating Leases			Pipelines and PPAs			Land and Other			Total
CMS Energy, including Consumers
2025		$	4		$	13		$	7		$	20
2026		3			13			7			20
2027		2			13			5			18
2028		2			13			5			18
2029		2			13			5			18
2030 and thereafter		29			13			177			190
Total minimum lease payments		$	42		$	78		$	206		$	284
Less discount		18			50			118			168
Present value of minimum lease payments		$	24		$	28		$	88		$	116
Consumers
2025		$	4		$	13		$	4		$	17
2026		3			13			4			17
2027		2			13			3			16
2028		2			13			2			15
2029		1			13			2			15
2030 and thereafter		23			13			71			84
Total minimum lease payments		$	35		$	78		$	86		$	164
Less discount		15			50			41			91
Present value of minimum lease payments		$	20		$	28		$	45		$	73

Lessor

CMS Energy and Consumers are the lessor under power sales and natural gas delivery agreements that are accounted for as leases.

CMS Energy has power sales agreements that are accounted for as operating leases. In addition to fixed payments, these agreements have variable payments based on energy delivered. For the year ended December 31, 2024, lease revenue from these power sales agreements was $105 million, which included variable lease payments of $61 million. For the year ended December 31, 2023, lease revenue from these power sales agreements was $116 million, which included variable lease payments of $74 million.

Presented in the following table are the minimum rental payments to be received under CMS Energy’s non‑cancelable operating leases:

In Millions
December 31, 2024
2025	$	44
2026	18
Total minimum lease payments	$	62

Consumers has a natural gas transportation agreement with a subsidiary of CMS Energy that extends through 2038, related to a pipeline owned by Consumers. This agreement is accounted for as a direct finance lease and will automatically extend annually unless terminated by either party. The effects of the lease are eliminated on CMS Energy’s consolidated financial statements.

Minimum rental payments to be received under Consumers’ direct financing lease are less than $1 million for each of the next five years and $6 million for the years thereafter. The lease receivable was $6 million as of December 31, 2024, which does not include unearned income of $5 million.