CMS ENERGY CORP

CMS Energy and Consumers record the fair value of the cost to remove assets at the end of their useful lives, if there is a legal obligation to remove them. If a reasonable estimate of fair value cannot be made in the period in which the ARO is incurred, such as for assets with indeterminate lives, the liability is recognized when a reasonable estimate of fair value can be made. CMS Energy and Consumers have not recorded liabilities associated with the closure of their hydroelectric facilities and certain gas wells that have an indeterminate life or for assets that have immaterial cumulative disposal costs, such as substation batteries.

CMS Energy and Consumers calculate the fair value of ARO liabilities using an expected present-value technique that reflects assumptions about costs and inflation, and uses a credit-adjusted risk-free rate to discount the expected cash flows. CMS Energy’s ARO liabilities are primarily at Consumers.

Presented below are the categories of assets that CMS Energy and Consumers have legal obligations to remove at the end of their useful lives and for which they have an ARO liability recorded:

In May 2024, the EPA finalized a rule regulating CCR impoundments at electric generating facilities that became inactive prior to the effective date of a rule published in 2015 regulating CCRs under RCRA. Additionally, the EPA established groundwater monitoring, corrective action, closure, and post-closure care requirements for CCR surface impoundments and landfills closed prior to the effective date of the 2015 CCR rule, but that do not meet the closure technical and performance standards of the May 2024 rule. These include inactive CCR landfills that were previously exempted from regulation but that are now considered CCR management units.

In response to the new rule, Consumers has been performing its review of legacy impoundments and of other aspects of the 2024 rule in accordance with the timelines prescribed by the rule, including the requirement to determine and report the presence of any CCR management units to the EPA by February 2027. Consumers has been recording incremental AROs for legacy impoundments and CCR management units when a reasonable estimate of the fair value of the associated costs can be made, and the ultimate amount of any resulting ARO could be material. In February 2026, the EPA issued a final rule extending the compliance milestone schedule for CCR management units. This extension does not have a material impact on Consumers’ compliance strategy. Consumers has historically been authorized to recover in electric rates costs related to coal ash disposal sites.

Presented in the following tables are the changes in CMS Energy’s and Consumers’ ARO liabilities:

1 The increase in the AROs associated with coal ash disposal areas was primarily the result of incremental remedies required by EGLE for certain ash disposal ponds and incremental AROs recorded in response to reviews of legacy CCR impoundments.

2 The increase in AROs associated with water intake lines, which were previously immaterial, was primarily the result of changes in the expected scope of required capping following the finalization of decommissioning plans with the local jurisdiction.