CONSUMERS ENERGY CO

Retention Incentive Program: In accordance with its Clean Energy Plan, Consumers plans to retire the J.H. Campbell coal-fueled generating units in 2025. In order to ensure necessary staffing at J.H. Campbell through retirement, Consumers has implemented a retention incentive program. 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 June 30, 2024, the cumulative cost incurred and deferred as a regulatory asset related to the J.H. Campbell retention incentive program was $38 million. The regulatory asset 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:

1 Includes amounts associated with a retention incentive program at the D.E. Karn coal-fueled generating units; this program concluded following the units’ retirement in June 2023.

2 Includes less than $1 million for the three months ended June 30, 2024 and $5 million for the three months ended June 30, 2023.

3 Includes current portion of other liabilities of $8 million at June 30, 2024 and $18 million at June 30, 2023.

Sale of ASP Business: In April 2024, Consumers sold its unregulated ASP business to a non-affiliated company. Consumers received proceeds of $124 million from the transaction, which resulted in a $110 million gain on the transaction; both of these amounts may be impacted by customary post-closing adjustments.

Prior to the sale closing, Consumers filed an application requesting the MPSC’s approval to share voluntarily with customers half of the gain, net of transaction costs, to be recognized on this sale. In Consumers’ 2023 gas rate case, it had proposed sharing the gain with customers over five years in the form of a surcharge credit. In July 2024, the MPSC approved a settlement in the gas rate case, under which Consumers agreed to utilize $27.5 million, or one-fourth, of the gain on the sale as an offset to the revenue deficiency in lieu of additional rate relief, with the remaining three-fourths of the gain, or $82.5 million, to be credited to customers as a bill credit over athree-year period. Accordingly, at June 30, 2024, Consumers recorded a regulatory liability of $110 million on its consolidated balance sheets.

In conjunction with the sale, Consumers executed a long-term services agreement, under which it will continue to provide certain services associated with the ASP business for a fee, including billing, collection, and call center services.