CMS ENERGY CORP

Index to Financial Statements

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations constitutes Part I—Item 2 of this Form 10‑Q and is not part of the financial statements included in Item 1, for both CMS Energy and Consumers.

Executive Overview

CMS Energy is an energy company operating primarily in Michigan. It is the parent holding company of several subsidiaries, including Consumers, an electric and gas utility, and NorthStar Clean Energy, primarily a domestic independent power producer and marketer. Consumers’ electric utility operations include the generation, purchase, distribution, and sale of electricity, and Consumers’ gas utility operations include the purchase, transmission, storage, distribution, and sale of natural gas. Consumers’ customer base consists of a mix of primarily residential, commercial, and diversified industrial customers. NorthStar Clean Energy, through its subsidiaries and equity investments, is engaged in domestic independent power production and the marketing of independent power production.

CMS Energy and Consumers manage their businesses by the nature of services each provides. CMS Energy operates principally in three business segments: electric utility; gas utility; and NorthStar Clean Energy, its non‑utility operations and investments. Consumers operates principally in two business segments: electric utility and gas utility. CMS Energy’s and Consumers’ businesses are affected primarily by:

•regulation and regulatory matters

•state and federal legislation

•economic conditions

•load growth

•weather

•energy commodity prices

•interest rates

•their securities’ credit ratings

The Triple Bottom Line

CMS Energy’s and Consumers’ purpose is to provide safe, reliable, affordable, clean, and equitable energy in service of their customers. In support of this purpose, CMS Energy and Consumers couple digital transformation with the “CE Way,” a lean operating system designed to improve safety, quality, cost, delivery, and employee morale.

CMS Energy and Consumers measure their progress toward the purpose by considering their impact on the “triple bottom line” of people, planet, and prosperity; this consideration takes into account not only the economic value that CMS Energy and Consumers create for customers and investors, but also their responsibility to social and environmental goals. The triple bottom line balances the interests of employees, customers, suppliers, regulators, creditors, Michigan’s residents, the investment community, and other stakeholders, and it reflects the broader societal impacts of CMS Energy’s and Consumers’ activities.

CMS Energy’s Sustainability Report, which is available to the public, describes CMS Energy’s and Consumers’ progress toward world class performance measured in the areas of people, planet, and prosperity.

People: The people element of the triple bottom line represents CMS Energy’s and Consumers’ commitment to their employees, their customers, the residents of local communities in which they do business, and other stakeholders.

The safety of co-workers, customers, and the general public is a priority of CMS Energy and Consumers. Accordingly, CMS Energy and Consumers have worked to integrate a set of safety principles into their business operations and culture. These principles include complying with applicable safety, health, and security regulations and implementing programs and processes aimed at continually improving safety and security conditions.

CMS Energy and Consumers also place a high priority on customer value and on providing reliable, affordable, and equitable energy in service of their customers. Consumers’ customer-driven investment program is aimed at improving safety and increasing electric and gas reliability.

In the electric rate case it filed with the MPSC in June 2025, Consumers updated its Reliability Roadmap, a five‑year strategy to improve Consumers’ electric distribution system and the reliability of the grid. The plan proposes spending through 2029 for projects designed to reduce the number and duration of power outages to customers through investment in infrastructure upgrades, vegetation management, and grid modernization. Consumers has requested rate recovery of the investments needed to achieve the Reliability Roadmap’s key objectives in its electric rate cases.

Central to Consumers’ commitment to its customers are the initiatives it has undertaken to keep electricity and natural gas affordable, including:

•natural gas purchasing strategy

•replacement of coal-fueled generation and PPAs with a cost-efficient and reliable mix of renewable energy, less-costly dispatchable generation sources, and energy waste reduction and demand response programs

•targeted infrastructure investment to reduce maintenance costs and improve reliability and safety

•supply chain optimization

•economic development to increase sales and reduce overall rates

•information and control system efficiencies

•employee and retiree health care cost sharing

•tax planning

•cost-effective financing

•workforce productivity enhancements

While inflationary pressures and tariffs could impact supply chain availability and pricing, CMS Energy and Consumers are taking steps to help mitigate the impact on their ability to provide safe, reliable, affordable, clean, and equitable energy in service of their customers.

Planet: The planet element of the triple bottom line represents CMS Energy’s and Consumers’ commitment to protect the environment. This commitment extends beyond compliance with various state and federal environmental, health, and safety laws and regulations. Management considers extreme weather and other environmental risks in strategy development, business planning, and enterprise risk management processes.

CMS Energy and Consumers continue to focus on opportunities to protect the environment and reduce their carbon footprint from owned generation. CMS Energy, including Consumers, has decreased its combined percentage of electric supply (self-generated and purchased) from coal by 24 percentage points since 2015. Additionally, as a result of actions already taken through 2025, Consumers has:

•reduced carbon dioxide emissions from owned generation by nearly 30 percent since 2005

•reduced methane emissions by nearly 40 percent since 2012

•reduced the volume of water used to generate electricity by nearly 60 percent since 2012

•reduced landfill waste disposal by more than 2 million tons since 1992

•enhanced, restored, or protected more than 13,500 acres of land since 2017

•reduced sulfur dioxide and particulate matter emissions by more than 90 percent since 2005

•reduced NOx emissions by more than 85 percent since 2005

•reduced mercury emissions by more than 90 percent since 2007

In 2023, Michigan enacted the 2023 Energy Law, which among other things:

•increased the renewable energy standard from 15 percent to 50 percent by 2030 and 60 percent by 2035; renewable energy generated anywhere within MISO can be applied to meeting this standard, with certain limitations

•established a clean energy standard of 80 percent by 2035 and 100 percent by 2040; low- or zero‑carbon emitting resources, such as nuclear generation and natural gas generation coupled with carbon capture, qualify as clean energy sources under this standard

•enhanced existing incentives for energy efficiency programs and returns earned on new clean or renewable PPAs

•created a new energy storage standard, requiring electric utilities to file plans by 2029 to help achieve a statewide target of 2,500 MW

•expanded the statutory cap on distributed generation resources to 10 percent of the electric utility’s five‑year average peak load

Consumers’ Electric Supply Plan, its long-term strategy for delivering safe, reliable, affordable, clean, and equitable energy to its customers, is outlined in its IRP and incorporates Consumers’ REP. In September 2026, Consumers updated its Electric Supply Plan by filing an IRP with the MPSC. The IRP presents a 20‑year plan designed to meet Michigan’s growing energy needs through a balanced portfolio of natural gas generation, solar, wind, battery and pumped storage, PPAs, and customer programs. The plan is intended to maintain reliability and affordability while achieving the requirements of Michigan’s 2023 Energy Law. The resources and other components included in the IRP are subject to MPSC approval.

To meet these objectives, Consumers is pursuing a multi-faceted strategy. This strategy involves taking steps to end the use of coal. Consumers obtained MPSC approval to retire J.H. Campbell, totaling 1,407 MW of nameplate capacity. The retirement of J.H. Campbell is subject to temporary extensions under emergency orders issued by the U.S. Secretary of Energy. For a more detailed discussion of the emergency orders, see Consumers Electric Utility Outlook and Uncertainties—J.H. Campbell Emergency Orders and Notes to the Unaudited Consolidated Financial Statements—Note 2, Regulatory Matters.

To maintain reliability during the transition, Consumers purchased the Covert Generating Station, representing 1,200 MW of nameplate capacity, in 2023. Consumers’ updated IRP also includes two proposed natural gas-fueled generating plants totaling approximately 1,375 MW of nameplate capacity. Both facilities are proposed to be placed in service in 2031 and would use existing industrial sites and grid infrastructure, supplemented by necessary natural gas interconnection and related infrastructure improvements.

The updated IRP includes more than 19 GW of additional renewable and clean energy resources through 2040, including solar, wind, energy storage, and a proposed long-term PPA for clean energy. These resources would be added over time to support customer needs and compliance with Michigan’s renewable and clean energy standards. The portfolio also incorporates Consumers’ REP, which was approved by the MPSC in September 2025. These actions support Consumers’ ability to achieve 60‑percent renewable energy by 2035 and 100‑percent clean energy by 2040, and will also contribute to Consumers’ achievement of the emissions-reduction goals discussed below.

Under its Methane Reduction Plan, Consumers has set a goal of net-zero methane emissions from its natural gas delivery system by 2030. Consumers plans to reduce methane emissions from its system by about 80 percent from 2012 baseline levels by accelerating the replacement of aging pipe, rehabilitating or retiring outdated infrastructure, and adopting new technologies and practices. The remaining emissions will likely be offset through clean fuel alternatives or nature-based carbon removal pathways. To date, Consumers has reduced methane emissions by nearly 40 percent.

Additionally, to advance its environmental stewardship in Michigan and to minimize the impact of future regulations, Consumers set the following goals for the five‑year period 2023 through 2027:

•to enhance, restore, or protect 6,500 acres of land through 2027; Consumers surpassed this goal during the three‑year period 2023 through 2025 and enhanced, restored, or protected 6,700 acres of land

•to reduce water usage by 1.7 billion gallons through 2027; Consumers surpassed this goal during the three‑year period 2023 through 2025 by reducing water usage by more than 1.9 billion gallons

•to annually divert a minimum of 90 percent of waste from landfills (through waste reduction, recycling, and reuse); during 2025, Consumers’ rate of waste diverted from landfills was 93 percent

CMS Energy and Consumers are monitoring numerous legislative, policy, executive, and regulatory initiatives, including those related to regulation and reporting of greenhouse gases, and related litigation. While CMS Energy and Consumers cannot predict the outcome of these matters, which could affect them materially, they intend to continue to move forward with a triple-bottom-line approach that focuses on people, planet, and prosperity.

Prosperity: The prosperity element of the triple bottom line represents CMS Energy’s and Consumers’ commitment to meeting their financial objectives and providing economic development opportunities and benefits in the communities in which they do business. CMS Energy’s and Consumers’ financial strength allows them to maintain solid investment-grade credit ratings and thereby reduce funding costs for the benefit of customers and investors, to attract and retain talent, and to reinvest in the communities they serve.

For the nine months ended September 30, 2026, CMS Energy’s net income available to common stockholders was $576 million and diluted EPS were $1.86. This compares with net income available to common stockholders of $775 million and diluted EPS of $2.59 for the nine months ended September 30, 2025. During the nine months ended September 30, 2026, impairment, disposal, and exit costs associated with planned divestments at NorthStar Clean Energy were offset partially by earnings contributions from NorthStar Clean Energy’s ongoing operations and Consumers’ electric and gas rate increases. A more detailed discussion of the factors affecting CMS Energy’s and Consumers’ performance can be found in the Results of Operations section that follows this Executive Overview.

Over the next five years, Consumers expects weather-normalized electric deliveries to increase compared to 2025. This outlook reflects strong growth in electric demand, offset partially by the effects of energy waste reduction programs. Weather-normalized gas deliveries are expected to remain stable relative to 2025, reflecting modest growth in gas demand, offset by the effects of energy waste reduction programs.

Performance: Impacting the Triple Bottom Line

CMS Energy and Consumers remain committed to delivering safe, reliable, affordable, clean, and equitable energy in service of their customers and positively impacting the triple bottom line of people, planet, and prosperity. During the first nine months of 2026, CMS Energy and Consumers:

•filed an updated IRP presenting a 20‑year Electric Supply Plan designed to meet Michigan’s growing energy needs through a balanced portfolio of natural gas generation, solar, wind, battery and pumped storage resources, PPAs, and customer programs while maintaining reliability and affordability

•received recognition for economic development leadership, as Consumers was named a 2026 Top Utility in Economic Development by Site Selection magazine, reflecting efforts from 2025 that contributed to almost $5 billion of corporate facility investment and nearly 5,000 jobs created within its service territory

•invested more than $90 million in electric reliability improvements through 1,001 projects across 55 counties, strengthening electric infrastructure and supporting safe and reliable service for customers

•advanced land stewardship efforts by exceeding a 6,500‑acre restoration goal ahead of schedule, restoring 6,700 acres and expanding public access to more than 100 acres of utility-owned land across more than 80 Michigan communities

CMS Energy and Consumers will continue to utilize the CE Way to enable them to achieve world class performance and positively impact the triple bottom line. Consumers’ investment plan and the regulatory environment in which it operates also drive its ability to impact the triple bottom line.

Investment Plan: Over the next five years, Consumers expects to make significant expenditures on infrastructure upgrades, replacements, and clean generation. While it has a large number of potential investment opportunities that would add customer value, Consumers has prioritized its spending based on the criteria of enhancing public safety, increasing reliability, maintaining affordability for its customers, and advancing its environmental stewardship. Consumers’ investment program, which is subject to approval through general rate case and other MPSC proceedings, is expected to result in annual rate-base growth of more than 10 percent. This rate-base growth, together with cost-control measures, should allow Consumers to maintain affordable customer bills.

Presented in the following illustration are Consumers’ planned capital expenditures through 2030 of $24.1 billion:

Of this amount, Consumers plans to spend $8.8 billion on electric generation, which includes solar, wind, and natural gas-fueled generation, as well as energy storage. Consumers also expects to spend $15.3 billion over the next five years primarily to maintain and upgrade its electric distribution systems and gas infrastructure in order to enhance safety and reliability, improve customer satisfaction, reduce energy waste on those systems, and facilitate its clean energy transformation. Electric distribution and other projects comprise $8.6 billion primarily to strengthen circuits and substations, replace poles, and interconnect clean energy resources. The gas infrastructure projects comprise $6.7 billion to sustain deliverability, enhance pipeline integrity and safety, and reduce methane emissions.

Regulation: Regulatory matters are a key aspect of Consumers’ business, particularly rate cases and regulatory proceedings before the MPSC, which permit recovery of new investments while helping to ensure that customer rates are fair and affordable. Important regulatory events and developments not already discussed are summarized below.

2026 Electric Rate Case: In June 2026, Consumers filed an application with the MPSC seeking a rate increase of $481 million made up of two components. First, Consumers requested a $456 million annual rate increase, based on a 10.25‑percent return on equity for the projected 12‑month period ending April 30, 2028. The filing requested authority to recover costs related to new infrastructure investment primarily in distribution system reliability. Second, Consumers requested approval of a $25 million surcharge for the recovery of distribution investments made during the 12 months ended February 28, 2026 that exceeded the rate amounts authorized in accordance with previous electric rate orders. The MPSC must issue a final order in this case before or in April 2027. In October 2026, Consumers revised its requested position to $468 million.

2025 Electric Rate Case: In March 2026, the MPSC issued an order stating an annual rate increase of $277 million, based on a 9.90‑percent authorized return on equity. The MPSC also approved deferred accounting treatment for $22 million of incremental costs associated with accelerated low-voltage distribution vegetation management and $15 million of ERP implementation costs. Additionally, the MPSC approved a $24 million surcharge for the recovery of distribution investments made during the 12 months ended February 28, 2025 that exceeded the rate amounts authorized in accordance with previous electric rate orders. The new rates became effective in May 2026.

Subsequent to issuance of the final order, Consumers identified an error affecting the calculation of the rate increase requested and reflected in the case. On a corrected basis, Consumers’ rate increase reflected in the MPSC’s order was $217 million, with no change to the total revenue requirement, approved costs, or customer rates. In April 2026, the MPSC issued an errata to its March 2026 order to reflect this correction in the public record.

2025 Gas Rate Case: In December 2025, Consumers filed an application with the MPSC seeking an annual rate increase of $240 million based on a 10.25‑percent authorized return on equity for the projected 12‑month period ending October 31, 2027. In June 2026, Consumers revised its requested increase to $232 million. In October 2026, the MPSC issued an order authorizing an annual rate increase of $139 million, based on a 9.80‑percent authorized return on equity. The new rates become effective in November 2026.

Looking Forward

CMS Energy and Consumers will continue to consider the impact on the triple bottom line of people, planet, and prosperity in their daily operations as well as in their long-term strategic decisions. Consumers will continue to seek fair and timely regulatory treatment that will support its customer-driven investment plan, while pursuing cost-control measures that will allow it to maintain sustainable customer base rates. The CE Way is an important means of realizing CMS Energy’s and Consumers’ purpose of providing safe, reliable, affordable, clean, and equitable energy in service of their customers.