Exhibit 99.1

CMS Energy Corporation
Consumers Energy Company
MANAGEMENT’S DISCUSSION AND ANALYSIS

This MD&A is a combined report of CMS Energy and Consumers. It has been prepared in accordance with the instructions to Form 10-Q and Item 303 of Regulation S-K. This MD&A should be read in conjunction with the MD&A contained in CMS Energy’s and Consumers’ 2008 Form 10-K.

CMS and Consumers have revised their interim Consolidated Financial Statements for 2009 to reflect the impacts on prior interim periods of a rate order issued on November 2, 2009 by the MPSC. In accordance with the accounting rules that apply to certain adjustments of utility revenue under ratemaking processes, CMS Energy and Consumers have recorded the impacts of the MSPC rate order that are specifically identifiable with prior interim periods of the current year as adjustments to those periods. Accordingly, the revised interim Consolidated Financial Statements for CMS Energy and Consumers reflect a decrease of $6 million to net income for the three months ended September 30, 2009, an increase of $1 million to net income for the three months ended June 30, 2009, and an increase of $1 million to net income for the three months ended March 31, 2009. CMS Energy and Consumers have also revised this MD&A for the three months and nine months ended September 30, 2009. All other information in this MD&A remains unchanged. For further information about the rate order, see Note 1, Subsequent Event, and Note 6, Utility Rate Matters.

FORWARD-LOOKING STATEMENTS AND INFORMATION

This Form 10-Q and other written and oral statements that CMS Energy and Consumers make contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. The use of “might,” “may,” “could,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” and other similar words is intended to identify forward-looking statements that involve risk and uncertainty. This discussion of potential risks and uncertainties is designed to highlight important factors that may impact CMS Energy’s and Consumers’ business and financial outlook. CMS Energy and Consumers have no obligation to update or revise forward-looking statements regardless of whether new information, future events, or any other factors affect the information contained in the statements. These forward-looking statements are subject to various factors that could cause CMS Energy’s and Consumers’ actual results to differ materially from the results anticipated in these statements. These factors include CMS Energy’s and Consumers’ inability to predict or control:

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the price of CMS Energy Common Stock, capital and financial market conditions, and the effect of these market conditions on CMS Energy’s and Consumers’ postretirement benefit plans, interest costs, and access to the capital markets, including availability of financing (including Consumers’ accounts receivable sales program and CMS Energy’s and Consumers’ revolving credit facilities) to CMS Energy, Consumers, or any of their affiliates, and the energy industry;

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the impact of the continued downturn in the economy and the sharp downturn and extreme volatility in the financial and credit markets on CMS Energy, Consumers, or any of their affiliates, including their:

	•		revenues;
	•		capital expenditure programs and related earnings growth;
	•		ability to collect accounts receivable from customers;
	•		cost of capital and availability of capital; and
	•		Pension Plan and postretirement benefit plans assets and required contributions;

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changes in the economic and financial viability of CMS Energy’s and Consumers’ suppliers, customers, and other counterparties and the continued ability of these third parties, including third parties in bankruptcy, to meet their obligations to CMS Energy and Consumers;

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population growth or decline in the geographic areas where CMS Energy and Consumers conduct business;

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changes in applicable laws, rules, regulations, principles or practices, or in their interpretation, including those related to taxes, the environment, and accounting matters, that could have an impact on CMS Energy’s and Consumers’ businesses, including the impact of any future regulations or laws regarding:

	•		carbon dioxide and other greenhouse gas emissions, including potential future legislation to establish a cap and trade system;
	•		mercury emissions;
	•		coal ash;
	•		limitations on the use or construction of coal-fueled electric power plants; and
	•		renewable portfolio standards and energy efficiency mandates;

•

national, regional, and local economic, competitive, and regulatory policies, conditions, and developments;

•

adverse regulatory or legal interpretations or decisions, including those related to environmental laws and regulations, and potential environmental remediation costs associated with these interpretations or decisions, including but not limited to those that may affect Bay Harbor or Consumers’ RMRR classification under NSR regulations;

•

potentially adverse regulatory treatment or failure to receive timely regulatory orders concerning a number of significant matters affecting Consumers that are presently or potentially before the MPSC, including:

•

sufficient and timely recovery of:

	•		Clean Air Act capital and operating costs and other environmental and safety-related expenditures;
	•		power supply and natural gas supply costs;
	•		operating and maintenance expenses;
	•		additional utility rate-based investments;
	•		increased MISO energy and transmission costs;
	•		costs associated with energy efficiency investments and state or federally mandated renewable resource standards; and
	•		Big Rock decommissioning funding shortfalls;

	•		actions of regulators with respect to expenditures subject to tracking mechanisms;
	•		actions of regulators to prevent or curtail shutoffs for non-paying customers;
	•		regulatory orders preventing or curtailing rights to self-implement rate requests;
	•		regulatory orders potentially requiring a refund of previously self-implemented rates;
	•		authorization of a new coal-fueled plant; and
	•		implementation of new energy legislation;

•

potentially adverse regulatory treatment resulting from pressure on regulators to oppose annual rate increases or to lessen rate impacts upon customers, particularly in difficult economic times;

	•		potentially adverse regulatory treatment concerning a number of significant matters affecting Consumers that are presently before the MDEQ, including the approval of Consumers’ air permit application for its proposed coal-fueled plant;
	•		the ability of Consumers to recover its regulatory assets in full and in a timely manner;
	•		the ability of Consumers to recover nuclear fuel storage costs incurred as a result of the DOE’s failure to accept spent nuclear fuel on schedule, and the outcome of pending litigation with the DOE;
	•		loss of customer load to alternative energy suppliers;
	•		the impact of expanded enforcement powers and investigation activities at the FERC;
	•		federal regulation of electric sales and transmission of electricity, including periodic re-examination by federal regulators of CMS Energy’s and Consumers’ market-based sales authorizations in wholesale power markets without price restrictions;
	•		effects of weather conditions, such as unusually cool weather during the summer or warm weather during the winter, on sales;
	•		the market perception of the energy industry or of CMS Energy, Consumers, or any of their affiliates;
	•		the credit ratings of CMS Energy or Consumers;
	•		the impact of credit markets, economic conditions, and new banking regulations on EnerBank;
	•		disruptions in the normal commercial insurance and surety bond markets that may increase costs or reduce traditional insurance coverage, particularly terrorism and sabotage insurance, performance bonds, and tax-exempt debt insurance, and stability of insurance providers;
	•		energy markets, including availability of capacity and the timing and extent of changes in commodity prices for oil, coal, natural gas, natural gas liquids, electricity, and certain related products due to lower or higher demand, shortages, transportation problems, or other developments, and their impact on CMS Energy’s and Consumers’ cash flows and working capital;
	•		changes in construction material prices and the availability of qualified construction personnel to implement Consumers’ construction program;
	•		factors affecting operations, such as unusual weather conditions, catastrophic weather-related damage, unscheduled generation outages, maintenance or repairs, environmental incidents, or electric transmission or gas pipeline system constraints;
	•		potential disruption or interruption of facilities or operations due to accidents, war, or terrorism, and the ability to obtain or maintain insurance coverage for these events;
	•		technological developments in energy production, delivery, usage, and storage;
	•		achievement of capital expenditure and operating expense goals;

	•		the impact of CMS Energy’s and Consumers’ integrated business software system on their operations, including utility customer billing and collections;
	•		the effectiveness of CMS Energy’s and Consumers’ risk management policies and procedures;
	•		CMS Energy’s and Consumers’ ability to achieve generation planning goals and the occurrence and duration of planned or unplanned generation outages;
	•		adverse outcomes regarding tax positions;
	•		adverse consequences resulting from any past or future assertion of indemnity or warranty claims associated with assets and businesses previously owned by CMS Energy or Consumers, including the F.T. Barr matter and claims resulting from attempts by foreign or domestic governments to assess taxes on past operations or transactions;
	•		the outcome, cost, and other effects of legal or administrative proceedings, settlements, investigations, or claims;
	•		earnings volatility resulting from the application of fair value accounting to certain energy commodity contracts, such as electricity sales agreements and interest rate and foreign currency contracts;
	•		changes in financial or regulatory accounting principles or policies, including possible changes to rules involving fair value accounting;
	•		new or revised interpretations of GAAP by regulators, which could affect how accounting principles are applied, and could impact future periods’ financial statements or previously filed financial statements;
	•		a possible future requirement to comply with International Financial Reporting Standards, which differ from GAAP in various ways, including the present lack of special accounting treatment for regulated activities; and
	•		other business or investment matters that may be disclosed from time to time in CMS Energy’s and Consumers’ SEC filings, or in other publicly issued documents.

For additional details regarding these and other uncertainties, see the “Outlook” section included in this MD&A, Note 5, Contingencies, Note 6, Utility Rate Matters, and Part II, Item 1A. Risk Factors.

EXECUTIVE OVERVIEW

CMS Energy is an energy company operating primarily in Michigan and is the parent holding company of several subsidiaries, including Consumers and Enterprises. Consumers is a combination electric and gas utility company serving Michigan’s Lower Peninsula. Consumers’ electric utility operations include the generation, purchase, distribution, and sale of electricity. Consumers’ gas utility operations include the purchase, transportation, storage, distribution, and sale of natural gas. Consumers’ customer base includes a mix of residential, commercial, and diversified industrial customers. Enterprises, through its equity investments and subsidiaries, is primarily engaged in 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 enterprises, its non-utility investments and operations. Consumers operates principally in two business segments: electric utility and gas utility.

CMS Energy and Consumers earn revenue and generate cash from operations by providing electric and natural gas utility services, electric power generation, gas distribution, transmission and storage, and other energy-related services. Their businesses are affected primarily by:

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weather, especially during the heating and cooling seasons;

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economic conditions;

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regulation and regulatory matters;

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energy commodity prices;

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interest rates; and

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CMS Energy’s and Consumers’ debt credit ratings.

During the past several years, CMS Energy’s business strategy has emphasized improving its consolidated balance sheet and maintaining focus on its core strength, which is Consumers’ utility operations and service.

Consumers’ forecast calls for capital investments in excess of $6 billion from 2009 through 2013, with a key aspect of its strategy being the balanced energy initiative. The balanced energy initiative is a comprehensive energy resource plan to meet Consumers’ projected short-term and long-term electric power requirements with energy efficiency; demand management; expanded use of renewable energy; development of new power plants; pursuit of additional power purchase agreements to complement existing generating sources; and potential retirement of older, less efficient generating units.

Consumers filed an air permit application with the MDEQ in October 2007 for its proposed new 830 MW coal-fueled plant. Consumers expects the MDEQ to act on the application by the end of 2009. Consumers prepared and filed with the MDEQ and the MPSC a needs-and-alternatives analysis that supported Consumers’ current balanced energy initiative and the construction of its proposed power plant. In September 2009, the MPSC staff issued a report to the MDEQ on Consumers’ analysis, concluding that the long-term capacity need was unjustified without the retirement of certain existing coal-fueled power plants from its fleet and that the proposed coal-fueled plant is only one alternative out of a range of alternatives that Consumers may use to fill the projected capacity need.

The 2008 Energy Legislation requires that at least ten percent of Consumers’ electric sales volume come from renewable energy sources by 2015, and includes requirements for specific capacity additions. In compliance with this legislation, Consumers filed a renewable energy plan with the MPSC in February 2009 outlining its plans to build or contract for additional renewable energy capacity of 200 MW by December 31, 2013, and an additional 300 MW of renewable energy capacity by December 31, 2015.

Consumers’ plan proposed that half of the new renewable capacity would be obtained through long-term agreements to purchase power from third parties, with the remaining capacity to be supplied by facilities built and owned by Consumers. At the same time, Consumers filed an energy optimization plan, also called for by the 2008 Energy Legislation, under which Consumers will promote energy efficiency and provide incentives to reduce customer usage. Consumers’ filings include a request for recovery of the cost of the renewable energy and energy optimization measures. In May 2009, the MPSC approved the energy optimization plan and, with minor exceptions, the renewable energy plan.

In April 2009, Consumers filed tariff sheets indicating that it planned to self-implement an electric rate increase in the annual amount of $179 million based on an 11 percent authorized return on equity, beginning in May 2009. The MPSC issued an order in May 2009 requiring that, if Consumers self-implemented the $179 million electric rate increase, it must simultaneously distribute to customers $36 million of proceeds from the April 2007 sale of Palisades. Accordingly, Consumers self-implemented an annual electric rate increase of $179 million, subject to refund with interest, and also implemented a one-time distribution of $36 million. Consumers received a final order in this rate filing in November 2009. For details of the rate order, see Note 1, Subsequent Event, and Note 6, Utility Rate Matters.

Additionally, in May 2009, Consumers filed an application with the MPSC seeking an annual increase in gas revenue of $114 million based on an 11 percent authorized return on equity. In October 2009, Consumers filed tariff sheets indicating it plans to self-implement a gas rate case in the annual amount of $89 million beginning November 19, 2009. These rate filings include requests for increases in rates to cover various costs, including capital additions under the balanced energy initiative.

In October 2009, the MPSC issued a show-cause order that directed Consumers to present details of its forestry and fossil-fueled plant operation and maintenance expenditures for 2006 through 2008, as well as available detail for 2009 expenditures, and also to explain why Consumers should not be found in violation of the MPSC’s December 2005 order, which required certain minimum operation and maintenance expenditures on these activities.

There is uncertainty associated with federal legislative and regulatory proposals related to the regulation of carbon dioxide emissions, particularly associated with coal-fueled generation. Federal legislation is being considered to establish a cap and trade system, or alternatively, to tax carbon dioxide emissions. In addition, in April 2009, the EPA issued a proposed finding that greenhouse gases, including carbon dioxide, contribute to air pollution that may endanger the public health and welfare, thus setting the stage for regulation of carbon dioxide emissions under the Clean Air Act. CMS Energy and Consumers are monitoring these developments for potential effects on their plans and operations.

Consumers is developing an advanced metering infrastructure system that will provide enhanced controls over and information about energy usage, as well as timely notification of service interruptions. Consumers is using a phased implementation approach that will allow it to analyze, test, and pilot the new technology prior to widespread investment and deployment. Consumers will also make certain modifications to its software to enable the new system.

In the future, CMS Energy will focus its strategy on:

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investing in Consumers’ utility system;

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growing earnings and operating cash flow while controlling operating and fuel costs; and

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maintaining principles of safe, efficient operations, customer value, fair and timely regulation, and consistent financial performance.

As CMS Energy and Consumers execute this strategy, they will need to overcome a Michigan economy that has been impacted adversely by the continued downturn and uncertainty in Michigan’s automotive industry marked by the bankruptcies of GM and Chrysler. The financial market crisis, the effects of which became evident in a global economic downturn during the fourth quarter of 2008, continues to result in a negative economic outlook. A range of possible outcomes exists due to the uncertain financial market environment and ongoing government policy responses. Consumers expects its annual 2009 weather-adjusted sales to decline by four percent for the electric utility and five percent for the gas utility and it projects slower growth in the longer term. While CMS Energy and Consumers believe that their sources of liquidity will be sufficient to meet their requirements, they continue to monitor developments in the financial and credit markets and government policy responses to those developments for potential implications for CMS Energy’s and Consumers’ businesses and their future financial needs.

RESULTS OF OPERATIONS

CMS ENERGY’S CONSOLIDATED RESULTS OF OPERATIONS

		In Millions (except for per share amounts)
Three months ended September 30		2009				2008				Change
Net Income Available to Common Stockholders		$	67			$	78			$	(11	)
Basic Earnings Per Share		$	0.29			$	0.35			$	(0.06	)
Diluted Earnings Per Share		$	0.28			$	0.33			$	(0.05	)
Electric Utility		$	111			$	108			$	3
Gas Utility			(12	)			(18	)			6
Enterprises			5				5				—
Corporate Interest and Other			(37	)			(18	)			(19	)
Discontinued Operations			—				1				(1	)
Net Income Available to Common Stockholders		$	67			$	78			$	(11	)

For the three months ended September 30, 2009, net income was $67 million, compared with $78 million for 2008. Combined net income for Consumers’ electric and gas utility segments increased, as the impact of the MPSC’s December 2008 gas rate order, the November 2009 electric rate order that Consumers self-implemented in May 2009, and a favorable sales mix more than offset lower electric deliveries, increased operating expenses, and increased interest expense. The positive impacts from the utility segments on CMS Energy’s consolidated net income offset partially the premiums paid on retirement of debt.

Specific after-tax changes to net income available to common stockholders for the three months ended September 30, 2009 versus 2008 are:

		After Tax, In Millions
•      Increase in electric and gas revenues at Consumers due primarily to MPSC rate orders		$	30
•      Increase in electric and gas revenues at Consumers due to a favorable sales mix			11
•      Decrease in electric and gas revenues at Consumers due to decreased deliveries, primarily reflecting unfavorable economic conditions			(26	)
•      Change in corporate interest and other due primarily to premiums paid on the retirement of debt			(19	)
•      Increase in other net expenses at Consumers, primarily reflecting higher pension and OPEB expenses, higher interest expense, and higher plant maintenance expense, partially offset by the absence of an impairment charge on its SERP investments recorded in 2008			(6	)
•      Absence of a gain from discontinued operations due to a reduction to a legal reserve recorded in 2008, related to previously sold assets			(1	)
Total change		$	(11	)

		In Millions (except for per share amounts)
Nine months ended September 30		2009				2008				Change
Net Income Available to Common Stockholders		$	212			$	224			$	(12	)
Basic Earnings Per Share		$	0.93			$	0.99			$	(0.06	)
Diluted Earnings Per Share		$	0.90			$	0.94			$	(0.04	)
Electric Utility		$	217			$	232			$	(15	)
Gas Utility			52				46				6
Enterprises			(12	)			13				(25	)
Corporate Interest and Other			(74	)			(67	)			(7	)
Discontinued Operations			29				—				29
Net Income Available to Common Stockholders		$	212			$	224			$	(12	)

For the nine months ended September 30, 2009, net income was $212 million, compared with $224 million for 2008. Combined net income from Consumers’ electric utility and gas utility segments decreased, reflecting decreased deliveries, the absence of gains from the sale of sulfur dioxide allowances recognized in 2008, and an increase in operating expenses and interest expense. These decreases were offset partially by increased earnings from a June 2008 electric rate order, a December 2008 gas rate order, a November 2009 electric rate order that Consumers self-implemented in May 2009, and a favorable sales mix. CMS Energy’s consolidated net income was also negatively impacted by an increase in projected Bay Harbor remediation costs and higher corporate expenses, which were offset partially by the expiration of an indemnity obligation related primarily to discontinued operations.

Specific after-tax changes to net income available to common stockholders for the nine months ended September 30, 2009 versus 2008 are:

				After Tax, In Millions
•		Increase in electric and gas revenues at Consumers due primarily to MPSC rate orders		$	94
•		Increase in electric and gas revenues at Consumers due to a favorable sales mix			34
•		Increase from discontinued operations due primarily to a benefit from the expiration of an indemnity obligation			29
•		Decrease in electric and gas revenues at Consumers due to decreased deliveries, primarily reflecting unfavorable economic conditions			(66	)
•		Increase in projected Bay Harbor remediation costs at Enterprises			(22	)
•		Increase in pension and OPEB expenses at Consumers			(18	)
•		Increase in other net expenses at Consumers primarily related to higher interest, uncollectible accounts expense, and property taxes			(16	)
•		Increase in plant maintenance expense at Consumers			(15	)
•		Absence of gains from the sale of sulfur dioxide credits recognized at Consumers in 2008			(12	)
•		Absence of resource conservation savings recorded in 2008 related to Consumers’ power purchase agreement with the MCV Partnership			(10	)
•		Change in corporate interest and other due primarily to premiums paid on the retirement of debt and increased tax-related expenses, offset partially by a gain on the redemption of preferred securities			(7	)
•		Decrease in revenues at Enterprises due primarily to lower power demand and prices			(3	)
Total change				$	(12	)

CONSUMERS’ ELECTRIC UTILITY RESULTS OF OPERATIONS

In Millions
September 30		2009				2008				Change
Net Income:
Three months ended		$	111			$	108			$	3
Nine months ended		$	217			$	232			$	(15	)

		Three Months Ended				Nine Months Ended
		September 30, 2009				September 30, 2009
Reasons for the change:		vs. 2008				vs. 2008
Electric deliveries and rate increase		$	8			$	43
Power supply costs and related revenue			1				3
Other income, net of deductions			8				7
Maintenance and other operating expenses			(3	)			(46	)
Depreciation and amortization			5				2
General taxes			(5	)			(8	)
Interest charges			(5	)			(15	)
Income taxes			(6	)			(1	)
Total change		$	3			$	(15	)

Electric deliveries and rate increase: For the three months ended September 30, 2009, electric delivery revenues increased $8 million compared with 2008. The increase resulted from $40 million of additional revenue from the November 2009 MPSC rate order, which Consumers self-implemented in May 2009, other rate-related items, and a $13 million increase in revenues from a favorable sales mix. These increases were offset partially by $40 million in lower deliveries. Deliveries to end-use customers were 9 billion kWh, a decrease of 0.7 billion kWh or 7.2 percent compared with 2008, primarily reflecting unfavorable economic conditions in Michigan. Additionally, surcharge revenues and related reserves decreased $5 million due to the expiration of the electric restructuring implementation plan surcharge of $5 million and a reduction in PA 141 surcharge revenue of $4 million, offset partially by a $4 million increase resulting from the implementation of an energy optimization program in June 2009.

For the nine months ended September 30, 2009, electric delivery revenues increased $43 million compared with 2008. The increase resulted from a combined $110 million of additional revenue from the June 2008 MPSC rate order, the November 2009 MPSC rate order, which Consumers self-implemented in May 2009, and other rate-related items, net of a $20 million decrease from a new rate design structure that provides lower winter and higher summer rates to encourage conservation. These variances, together with a $44 million increase in revenues from a favorable sales mix, were offset partially by $90 million in lower deliveries. Deliveries to end-use customers were 27 billion kWh, a decrease of 1.8 billion kWh or 6.3 percent compared with 2008, primarily reflecting unfavorable economic conditions in Michigan. Additionally, surcharge revenues and related reserves decreased $21 million, reflecting the absence of $12 million of retirement benefits expense recovered in revenue in 2008. Also contributing to the decrease were the expiration of the electric restructuring implementation plan surcharge of $9 million and a reduction in PA 141 surcharge revenue of $5 million, offset partially by a $5 million increase resulting from the implementation of an energy optimization program in June 2009.

Power supply costs and related revenue: For the three months ended September 30, 2009, PSCR and related revenue increased $1 million compared with 2008, due primarily to an increase in wholesale fuel recovery revenue.

For the nine months ended September 30, 2009, PSCR and related revenue increased $3 million compared with 2008. The increase reflects the absence of a revenue reduction in 2008 related to amounts excluded from recovery in the 2006 PSCR reconciliation case.

Other income, net of deductions: For the three months ended September 30, 2009, other income increased $8 million compared with 2008. The increase was due to the absence in 2009 of a $6 million impairment charge that recognized an other-than-temporary decline in the fair value of Consumers’ SERP investments. Also contributing to the increase was $5 million related to gains from land sales. These increases were offset partially by a decrease in interest income and related items of $3 million, primarily reflecting lower levels of short-term cash investments.

For the nine months ended September 30, 2009, other income increased $7 million compared with 2008. The increase was due to gains from land sales of $9 million and the absence in 2009 of a $6 million impairment charge that recognized an other-than-temporary decline in the fair value of Consumers’ SERP investments. These increases were offset partially by a decrease in interest income and related items of $8 million, primarily reflecting lower levels of short-term cash investments.

Maintenance and other operating expenses: For the three months ended September 30, 2009, maintenance and other operating expenses increased $3 million compared with 2008. The increase was due to cost increases for plant maintenance of $4 million, and a $5 million increase in OPEB expense due to the unfavorable market performance of retirement benefit plan assets. Also contributing to the increase were the absence in 2009 of $4 million of resource conservation savings recorded in 2008 related to Consumers’ power purchase agreement with the MCV Partnership, higher expenses of $5 million related to forestry and tree-trimming services, and additional expenses of $4 million associated with the implementation of an energy optimization program in 2009. These increases were offset largely by a $6 million decrease in uncollectible accounts expense and a $13 million decrease in storm restoration, outside services, and other net expenses.

For the nine months ended September 30, 2009, maintenance and other operating expenses increased $46 million compared with 2008. The increase was due to cost increases for plant maintenance of $18 million, the absence of an $18 million benefit from the sale of sulfur dioxide credits recognized in 2008, higher expenses of $18 million related to forestry and tree-trimming services, and $5 million associated with the implementation of an energy optimization program in 2009. Also contributing to the increase was the absence of $16 million of resource conservation savings recorded in 2008 related to Consumers’ power purchase agreement with the MCV Partnership. Additionally, pension and OPEB expenses increased $5 million, as a $17 million expense increase due to the unfavorable market performance of retirement benefit plan assets more than offset the absence of $12 million of expense associated with retirement benefits recovered in revenue in 2008. These increases were offset partially by a $6 million decrease in uncollectible accounts expense and a $28 million decrease in storm restoration, outside services, and other net expenses.

Depreciation and amortization: For the three months ended September 30, 2009, depreciation and amortization expense decreased $5 million compared with 2008. The decrease was due to a $9 million reduction in amortization expense on certain regulatory assets, offset partially by a $4 million increase in depreciation from higher plant in service.

For the nine months ended September 30, 2009, depreciation and amortization expense decreased $2 million compared with 2008. The decrease was due to a $14 million reduction in amortization expense on certain regulatory assets, offset partially by a $12 million increase in depreciation from higher plant in service.

General taxes: For the three months ended September 30, 2009, general taxes increased $5 million and for the nine months ended September 30, 2009, general taxes increased $8 million, due to increased property taxes, primarily reflecting higher capital spending.

Interest charges: For the three months ended September 30, 2009, interest charges increased $5 million and for the nine months ended September 30, 2009, interest charges increased $15 million due primarily to the issuance of debt in 2009.

Income taxes: For the three months ended September 30, 2009, income taxes increased $6 million compared with 2008, reflecting $3 million associated with higher utility earnings in the third quarter of 2009 and a $3 million increase in the MBT.

For the nine months ended September 30, 2009, income taxes increased $1 million compared with 2008, reflecting a $6 million increase in the MBT, offset partially by $5 million associated with lower earnings in 2009.

CONSUMERS’ GAS UTILITY RESULTS OF OPERATIONS

In Millions
September 30		2009				2008				Change
Net Income:
Three months ended		$	(12	)		$	(18	)		$	6
Nine months ended		$	52			$	46			$	6

		Three Months Ended				Nine Months Ended
		September 30, 2009				September 30, 2009
Reasons for the change:		vs. 2008				vs. 2008
Gas deliveries and rate increase		$	13			$	17
Gas wholesale and retail services, other gas revenues, and other income			—				2
Other income, net of deductions			5				5
Maintenance and other operating expenses			(5	)			(19	)
Depreciation and amortization			1				9
General taxes			(2	)			(3	)
Interest charges			(1	)			(3	)
Income taxes			(5	)			(2	)
Total change		$	6			$	6

Gas deliveries and rate increase: For the three months ended September 30, 2009, gas delivery revenue increased $13 million compared with 2008. The increase was due to additional revenue of $3 million from the MPSC’s December 2008 gas rate order. Also contributing to the increase were higher deliveries of $1 million, and $6 million from a combination of a favorable sales mix and lower system losses incurred in 2009. Gas deliveries, including miscellaneous transportation to end-use customers, were 25 bcf, an increase of 1 bcf or 4.2 percent compared with 2008. Additionally, surcharge revenues increased $3 million due to the implementation of an energy optimization program in June 2009.

For the nine months ended September 30, 2009, gas delivery revenue increased $17 million compared with 2008. The increase was due to additional revenue of $14 million from the MPSC’s December 2008 gas rate order. Also contributing to the increase was $10 million from a favorable sales mix and lower system losses incurred in 2009. These increases were offset partially by lower deliveries of $11 million. Gas deliveries, including miscellaneous transportation to end-use customers, were 196 bcf, a decrease of 8 bcf or 3.9 percent compared with 2008. Additionally, surcharge revenues increased $4 million due to the implementation of an energy optimization program in June 2009.

Gas wholesale and retail services, other gas revenues, and other income: For the nine months ended September 30, 2009, gas delivery revenue increased $2 million compared with 2008. The increase was due to additional revenue from the appliance service plan program and an increase in transmission line revenue.

Other income, net of deductions: For the three months and nine months ended September 30, 2009, other income increased $5 million compared with 2008. The increase was due primarily to the absence in 2009 of an impairment charge that recognized an other-than-temporary decline in the fair value of Consumers’ SERP investments.

Maintenance and other operating expenses: For the three months ended September 30, 2009, maintenance and other operating expenses increased $5 million compared with 2008. The increase was due to higher OPEB expense of $3 million, reflecting unfavorable market performance of Consumers’

retirement benefit plan assets and an expense associated with prior year retirement benefits recovered in revenue in 2009. Also contributing to the increase were additional expenses related to the implementation of an energy optimization program of $3 million, offset partially by a decrease of $1 million in other net expenses.

For the nine months ended September 30, 2009, maintenance and other operating expenses increased $19 million compared with 2008. The increase was due to higher OPEB expense of $10 million, reflecting unfavorable market performance of Consumers’ retirement benefit plan assets. Also contributing to the increase were higher uncollectible account expense of $8 million and additional expenses of $4 million related to the implementation of an energy optimization program. These increases were offset partially by a decrease of $3 million in other net expenses.

Depreciation and amortization: For the three months ended September 30, 2009, depreciation and amortization expense decreased $1 million compared with 2008. The MPSC’s December 2008 gas rate order reduced amortization expense by $2 million, and delayed collection of an equal amount of amortization in rates. This decrease was offset partially by $1 million of higher depreciation expense due to an increase in plant in service.

For the nine months ended September 30, 2009, depreciation and amortization expense decreased $9 million compared with 2008. The MPSC’s December 2008 gas rate order reduced amortization expense by $13 million, and delayed collection of an equal amount of amortization in rates. This decrease was offset partially by $4 million of higher depreciation expense due to an increase in plant in service.

General taxes: For the three months ended September 30, 2009, general taxes increased $2 million and for the nine months ended September 30, 2009, general taxes increased $3 million, due to increased property taxes, primarily reflecting higher capital spending.

Interest charges: For the three months ended September 30, 2009, interest charges increased $1 million and for the nine months ended September 30, 2009, interest charges increased $3 million, due primarily to the issuance of debt in 2009.

Income taxes: For the three months ended September 30, 2009, income taxes increased $5 million and for the nine months ended September 30, 2009, income taxes increased $2 million, due to higher utility earnings in the third quarter of 2009.

ENTERPRISES RESULTS OF OPERATIONS

September 30		2009				2008				Change
Net Income:
Three months ended		$	5			$	5			$	—
Nine months ended		$	(12	)		$	13			$	(25	)

For the three months ended September 30, 2009, Enterprises reported no change in net income, as the impact of depressed power demand and prices was offset by higher fuel reimbursement revenue.

For the nine months ended September 30, 2009, Enterprises recorded a net loss of $12 million compared with net income of $13 million in 2008. The change reflects an after-tax expense of $22 million resulting from an increase in projected future environmental remediation costs associated with Bay Harbor, and $3 million of lower earnings due to depressed power demand and prices.

CORPORATE INTEREST AND OTHER RESULTS OF OPERATIONS

September 30		2009				2008				Change
Net Income:
Three months ended		$	(37	)		$	(18	)		$	(19	)
Nine months ended		$	(74	)		$	(67	)		$	( 7	)

For the three months ended September 30, 2009, corporate interest and other net expenses increased $19 million, due primarily to a premium paid on the early retirement of debt and the absence of benefits recorded in 2008 related to the reduction of certain tax valuation allowances.

For the nine months ended September 30, 2009, corporate interest and other net expenses increased $7 million. The increase was due to premiums paid on the early retirement of CMS Energy senior notes, the absence of benefits recorded in 2008 related to the reduction of certain tax valuation allowances, and an increase in tax expense due to legislation related to the MBT. These increases were offset partially by a gain recognized on the early retirement of CMS Energy’s long-term debt — related parties.

DISCONTINUED OPERATIONS

For the three months ended September 30, 2009, CMS Energy reported no income from discontinued operations. In 2008, income from discontinued operations was $1 million due primarily to a reduction to a legal reserve related to previously sold assets.

For the nine months ended September 30, 2009, income from discontinued operations was $29 million, due primarily to the expiration of an indemnity obligation related to a 2007 asset sale.

CAPITAL RESOURCES AND LIQUIDITY

Components of CMS Energy’s and Consumers’ cash management plan include controlling operating expenses and capital expenditures and evaluating market conditions for financing opportunities, if needed. Recent major financing transactions and commitments are as follows:

	•		In February 2009, Consumers retired $200 million FMB at maturity;
	•		In March 2009, Consumers issued $500 million in FMB;
	•		In June 2009, CMS Energy issued $173 million in convertible senior notes and $300 million in senior notes, and early retired $144 million of its $178 million Long-term debt — related parties;
	•		In July 2009, CMS Energy repurchased and retired $233 million principal amount of the senior notes due 2010 and $87 million principal amount of the senior notes due 2011;
	•		In August 2009, Consumers retired $150 million FMB at maturity; and
	•		In September 2009, CMS Energy’s $243 million preferred stock and $140 million 3.375 percent senior notes became convertible at the holders’ option for the fourth quarter of 2009.

Despite the present market volatility, CMS Energy and Consumers expect to continue to have access to the financial and capital markets. Recent and upcoming credit renewals and maturities are as follows:

	•		Consumers renewed its accounts receivable sales program in April 2009 through February 2010;
	•		Consumers renewed its $150 million 364-day revolving credit facility in September 2009;
	•		Consumers renewed its letter of credit facility in the amount of $30 million in September 2009, effective November 30, 2009;
	•		Consumers’ $500 million revolving credit facility is planned for renewal in 2012;

	•		Consumers’ FMB maturities are $250 million in 2010, and $300 million in 2012;
	•		Consumers’ tax-exempt pollution control revenue bond maturities are $58 million in 2010;
	•		CMS Energy’s senior notes maturities are $67 million in 2010, $213 million in 2011, and $150 million in 2012; and
	•		CMS Energy’s $550 million revolving credit facility is planned for renewal in 2012.

CMS Energy and Consumers believe that their present level of cash and their expected cash flows from operating activities, together with access to sources of liquidity, will be sufficient to meet cash requirements. If access to the capital markets were to become diminished or otherwise restricted, CMS Energy and Consumers would implement contingency plans to address debt maturities, which could include reduced capital spending. For additional details, see Note 7, Financings and Capitalization.

At September 30, 2009, CMS Energy and Consumers were each in compliance with the financial covenants in their respective debt agreements, and no events of default had occurred with respect to any debt covenants.

Cash Position, Investing, and Financing

CMS Energy’s and Consumers’ operating, investing, and financing activities meet their consolidated cash needs. At September 30, 2009, CMS Energy had $213 million of consolidated cash and cash equivalents, which includes $30 million of restricted cash and cash equivalents and $14 million of cash and cash equivalents held by consolidated VIEs. At September 30, 2009, Consumers had $120 million of consolidated cash and cash equivalents, which includes $22 million of restricted cash and cash equivalents.

CMS Energy’s primary ongoing source of cash is dividends and other distributions from its subsidiaries. Consumers paid $233 million in common stock dividends and Enterprises paid $55 million in common stock dividends to CMS Energy for the nine months ended September 30, 2009. For details on dividend restrictions, see Note 7, Financings and Capitalization.

Operating Activities: For the nine months ended September 30, 2009, CMS Energy generated $638 million in cash from operations and Consumers generated $703 million in cash from operations. For the nine months ended September 30, 2008, CMS Energy generated $181 million in cash from operations and Consumers generated $524 million in cash from operations. Specific components of cash provided by (used in) operating activities for the nine months ended September 30, 2009 and 2008 are:

CMS Energy, including Consumers		In Millions
Nine months ended September 30		2009				2008				Change
•      Net income		$	229			$	238			$	(9	)
•      Non-cash transactions (a)			714				695				19
		$	943			$	933			$	10
•      Sale of gas purchased in prior year			577				548				29
•      Purchase of gas in current year			(654	)			(904	)			250
•      Electric sales contract termination payment			—				(275	)			275
•      Accounts receivable sales			(170	)			—				(170	)
•      Pension contribution			(206	)			—				(206	)
•      Change in other core working capital			275				120				155
•      Other changes in assets and liabilities, net			(127	)			(241	)			114
Net cash provided by operating activities		$	638			$	181			$	457

Consumers		In Millions
Nine months ended September 30		2009				2008				Change
•      Net income		$	272			$	281			$	(9	)
•      Non-cash transactions (a)			640				650				(10	)
		$	912			$	931			$	(19	)
•      Sale of gas purchased in prior year			577				548				29
•      Purchase of gas in current year			(654	)			(904	)			250
•      Accounts receivable sales			(170	)			—				(170	)
•      Pension contribution			(199	)			—				(199	)
•      Change in other core working capital			278				109				169
•      Other changes in assets and liabilities, net			(41	)			(160	)			119
Net cash provided by operating activities		$	703			$	524			$	179

For the nine months ended September 30, 2009, net cash provided by operating activities at CMS Energy increased $457 million compared with 2008. This increase was due to the absence in 2009 of a payment made by CMS ERM in 2008 to terminate electricity sales agreements and the changes affecting Consumers’ cash provided by operating activities described in the following paragraph.

For the nine months ended September 30, 2009, net cash provided by operating activities at Consumers increased $179 million compared with 2008. This increase was due primarily to the impact of lower gas prices on inventory purchased in 2009, collection of increased billings due to recent regulatory actions, and other timing differences. These changes were offset partially by the 2009 pension contribution and the absence of 2008 accounts receivable sales.

Investing Activities: For the nine months ended September 30, 2009, net cash used in investing activities was $679 million at CMS Energy and $639 million at Consumers. For the nine months ended September 30, 2008, net cash used in investing activities was $538 million at CMS Energy and $531 million at Consumers. Specific components of cash used in investing activities for the nine months ended September 30, 2009 and 2008 are:

CMS Energy, including Consumers		In Millions
Nine months ended September 30		2009				2008				Change
•      Capital expenditures		$	(621	)		$	(511	)		$	(110	)
•      Increase in non-current notes receivable			(43	)			(11	)			(32	)
•      Costs to retire property and other			(15	)			(16	)			1
Net cash used in investing activities		$	(679	)		$	(538	)		$	(141	)

Consumers		In Millions
Nine months ended September 30		2009				2008				Change
•      Capital expenditures		$	(616	)		$	(510	)		$	(106	)
•      Costs to retire property and other			(23	)			(21	)			(2	)
Net cash used in investing activities		$	(639	)		$	(531	)		$	(108	)

For the nine months ended September 30, 2009, net cash used in investing activities at CMS Energy increased $141 million compared with 2008. For the nine months ended September 30, 2009, net cash used in investing activities at Consumers increased $108 million compared with 2008. These increases were due primarily to an increase in Consumers’ capital expenditures.

Financing Activities: For the nine months ended September 30, 2009, net cash provided by financing activities was $11 million at CMS Energy and net cash used in financing activities was $35 million at Consumers. For the nine months ended September 30, 2008, net cash provided by financing activities was $171 million at CMS Energy and net cash used in financing activities was $99 million at Consumers. Specific components of cash provided by (used in) financing activities for the nine months ended September 30, 2009 and 2008 are:

CMS Energy, including Consumers		In Millions
Nine months ended September 30		2009				2008				Change
•      Issuance of FMB, convertible senior notes, senior notes and other debt		$	1,047			$	685			$	362
•      Borrowings on revolving credit facility			215				245				(30	)
•      Retirement of debt and other debt maturity payments			(905	)			(528	)			(377	)
•      Payments on revolving credit facility			(255	)			(140	)			(115	)
•      Payments of common and preferred stock dividends			(93	)			(69	)			(24	)
•      Other financing activities			2				(22	)			24
Net cash provided by financing activities		$	11			$	171			$	(160	)

Consumers		In Millions
Nine months ended September 30		2009				2008				Change
•      Issuance of FMB		$	500			$	600			$	(100	)
•      Retirement of debt and other debt maturity payments			(377	)			(434	)			57
•      Payments of common stock dividends			(233	)			(238	)			5
•      Stockholder’s contribution from CMS Energy			100				—				100
•      Other financing activities			(25	)			(27	)			2
Net cash used in financing activities		$	(35	)		$	(99	)		$	64

For the nine months ended September 30, 2009, net cash provided by financing activities at CMS Energy decreased $160 million compared with 2008. This decrease was due primarily to a decrease in net proceeds from borrowings.

For the nine months ended September 30, 2009, net cash used in financing activities at Consumers decreased $64 million compared with 2008. This decrease was due primarily to a stockholder’s contribution from CMS Energy offset partially by a decrease in net proceeds from borrowings.

For additional details on long-term debt activity, see Note 7, Financings and Capitalization.

Retirement Benefits

The following table provides the most recent estimates of pension cost and pension cash contributions:

						In Millions
		Pension Cost				Pension Contributions
CMS Energy, including Consumers
2009		$	97			$	206
2010			108				92
2011			106				118
Consumers
2009		$	94			$	199
2010			105				89
2011			103				114

Based on recent guidance from the federal Pension Protection Act of 2006, IRS notices, and the federal Worker, Retiree, and Employer Recovery Act of 2008, CMS Energy reduced its estimated pension contribution for 2009 by $94 million to $206 million. During the first nine months of 2009, CMS Energy contributed $206 million to its pension fund, which includes a contribution of $199 million by Consumers. Actual future pension cost and contributions will depend on future investment performance, changes in discount rates, and various other factors related to the Pension Plan participants.

For additional details on retirement benefits, see Note 11, Retirement Benefits.

Obligations And Commitments

Revolving Credit Facilities: For details on CMS Energy’s and Consumers’ revolving credit facilities, see Note 7, Financings and Capitalization.

Dividend Restrictions: For details on CMS Energy’s and Consumers’ dividend restrictions, see Note 7, Financings and Capitalization.

Off-Balance-Sheet Arrangements

Off-Balance-Sheet Arrangements: CMS Energy, Consumers, and certain of their subsidiaries enter into various arrangements in the normal course of business to facilitate commercial transactions with third parties. These arrangements include indemnities, surety bonds, letters of credit, and financial and performance guarantees. Indemnities are usually agreements to reimburse a counterparty that may incur losses due to outside claims or breach of contract terms. The maximum payment that could be required under a number of these indemnity obligations is not estimable. While CMS Energy and Consumers believe it is unlikely that they will incur any material losses related to indemnities they have not recorded as liabilities, they cannot predict the impact of these contingent obligations on their liquidity and financial condition. For additional details on these and other guarantee arrangements, see Note 5, Contingencies, “Guarantees.”

Sale of Accounts Receivable: Under Consumers’ revolving accounts receivable sales program, Consumers may sell up to $250 million of accounts receivable, subject to certain eligibility requirements. At September 30, 2009, $250 million of accounts receivable were eligible for sale, and no accounts receivable were sold under the program.

OUTLOOK

Several business trends and uncertainties may affect CMS Energy’s and Consumers’ financial condition and future results of operations. These trends and uncertainties could have a material impact on CMS Energy’s and Consumers’ consolidated income, cash flows, or financial position. For additional details regarding these and other uncertainties, see the “Forward-Looking Statements and Information” section included in this MD&A and Part II, Item 1A. Risk Factors.

Consumers’ Electric Utility Business Outlook and Uncertainties

Balanced Energy Initiative: Consumers’ balanced energy initiative is a comprehensive energy resource plan designed to meet its projected short-term and long-term electric power requirements through:

	•		energy efficiency;
	•		demand management;
	•		expanded use of renewable energy;
	•		development of new power plants and pursuit of additional power purchase agreements to complement existing generating sources; and
	•		potential retirement of older, less efficient generating units.

Consumers’ balanced energy initiative includes plans to build an 830 MW coal-fueled plant at its Karn/Weadock generating complex near Bay City, Michigan. Consumers expects the plant to be in operation in 2017 and plans to use five-eighths of the plant’s output to serve its own customers, with the remaining output to be committed to others. The 2008 Energy Legislation provided guidelines with respect to the MPSC’s review and approval of energy resource plans and proposed power plants through the issuance of a certificate of need. Consumers plans to file a new case with the MPSC seeking a certificate of need that conforms to the legislation.

In October 2007, Consumers filed an air permit application with the MDEQ for its proposed coal-fueled plant. The MDEQ published Consumers’ draft air permit for public comment in March 2009 and, in response to public comments, indicated that it would require a needs-and-alternatives analysis. In June 2009, Consumers prepared and filed with the MDEQ and the MPSC a needs-and-alternatives analysis that supported Consumers’ current balanced energy initiative and the construction of its proposed coal-fueled power plant. In September 2009, the MPSC staff issued a report to the MDEQ on Consumers’ analysis, concluding that the long-term capacity need identified by Consumers in its analysis was unjustified without the retirement of certain existing coal-fueled power plants from its fleet. The MPSC staff’s report also stated that the proposed coal-fueled plant is only one alternative out of a range of options that Consumers may use to fill the projected capacity need, and that such options include increased energy efficiency and renewable energy.

Renewable Energy Plan: The 2008 Energy Legislation prescribed renewable energy standards for energy and capacity. The energy standard requires that at least ten percent of Consumers’ electric sales volume come from renewable sources by 2015 with interim target requirements. Using the guidelines of the standard, four percent of Consumers’ electric sales volume now comes from renewable sources. The capacity standard requires Consumers to add new renewable energy capacity of 200 MW by December 31, 2013, and an additional 300 MW by December 31, 2015, from owned renewable energy sources or agreements to purchase power.

In February 2009, Consumers filed its renewable energy plan with the MPSC. The plan detailed how Consumers would meet the renewable energy standards for energy and capacity, with wind generation as Consumers’ primary resource. Consumers’ plan proposed that half of the new renewable capacity would be obtained through long-term agreements to purchase power from third parties, with the remaining capacity to be supplied by facilities built and owned by Consumers. The plan also proposed a schedule of surcharges to be applied over a 20-year period to recover the incremental cost of compliance. Consumers’ plan was approved by the MPSC in May 2009 with minor exceptions. It is subject to biennial review and annual cost and revenue reconciliation proceedings.

Consumers has secured more than 52,000 acres of land easements in Michigan’s Tuscola and Mason Counties for potential wind generation development and is collecting wind speed and other meteorological data at the sites. Consumers will continue to seek opportunities for wind generation development in support of the renewable energy standard. Consumers has also executed agreements with six small-scale renewable energy suppliers for the purchase of 9.4 MW of renewable capacity and an estimated two percent of its long-term renewable energy needs. The MPSC approved these agreements in October, which will enable Consumers to recover the full costs of these contracts from its customers. Additionally, in May 2009, Consumers requested proposals, due in December 2009, for capacity and energy from larger projects to meet its renewable capacity and energy needs through 2015.

Energy Optimization Plan: The 2008 Energy Legislation requires utilities to prepare energy optimization plans and achieve annual sales reduction targets beginning in 2009 through at least 2015. The targets are incremental with the goal of achieving a six percent reduction in customers’ electricity use and a four percent reduction in natural gas use by December 31, 2015. In February 2009, Consumers filed its energy optimization plan with the MPSC. The plan detailed Consumers’ proposals for energy cost savings among all customer classes through incentives to reduce customer usage by offering customer energy audits, rebates and discounts on purchases of highly efficient appliances, and other incentives and programs. The plan also sought recovery of program costs. Consumers’ plan was approved by the MPSC in May 2009. It is subject to biennial review and annual cost and revenue reconciliation proceedings. In July 2009, Consumers launched its energy optimization programs for residential customers.

Electric Customer Revenue: Michigan’s economy has suffered from plant closures, restructurings, and bankruptcies in the automotive sector and from the depressed housing market. The Michigan economy also has been harmed by the present volatility in the financial and credit markets. Although Consumers’ electric utility results are not substantially dependent upon a single customer, or even a few customers, customers in the automotive sector and their direct suppliers represented four percent of Consumers’ total 2008 electric revenue and 2.5 percent of Consumers’ 2008 electric operating income. Consumers cannot predict the financial impact of the Michigan economy on its electric customer revenue.

Electric Deliveries: Consumers expects weather-adjusted electric deliveries to decrease in 2009 by four percent compared with 2008. Consumers’ outlook for 2009 includes continuing growth in deliveries to its largest customer, which produces semiconductor and solar energy components. Excluding this customer’s growth, Consumers expects weather-adjusted electric deliveries in 2009 to decrease six percent compared with 2008. Consumers’ outlook reflects reduced deliveries associated with its investment in energy efficiency programs included in the 2008 Energy Legislation, as well as recent projections of Michigan economic conditions.

Beginning in 2010, Consumers expects economic conditions to stabilize, resulting in modestly growing deliveries of electricity through 2014. This modest growth expectation takes into account the predicted effects of energy efficiency programs. Actual deliveries will depend on:

	•		energy conservation measures and results of energy efficiency programs;
	•		fluctuations in weather; and
	•		changes in economic conditions, including utilization and expansion or contraction of manufacturing facilities, population trends, and housing activity.

Electric Supply Resources: Consumers, through its supply resources, which consist of electric generating plants, long-term power purchase contracts, and short-term purchases of capacity and energy, is planning to meet the resource adequacy requirements established by MISO.

Electric Transmission Expenses: Consumers expects the transmission charges it incurs to increase by $47 million in 2009 compared with 2008, due primarily to a 25 percent increase in METC and Wolverine transmission rates. This increase was included in Consumers’ 2009 PSCR plan filed with the MPSC in September 2008. For details on litigation concerning Consumers’ recovery of its electric transmission expense, see Note 5, Contingencies, “Consumers’ Electric Utility Contingencies — Litigation.”

Electric ROA: The Customer Choice Act allows Consumers’ electric customers to buy electric generation service from Consumers or from an alternative electric supplier. However, the 2008 Energy Legislation generally limits alternative electric supply to ten percent of Consumers’ weather-adjusted retail sales of the preceding calendar year. During the third quarter of 2009, customer enrollment in the ROA program reached the ten percent limit. At September 30, 2009, alternative electric suppliers were providing 586 MW of generation service to ROA customers, a 77 percent increase from December 31, 2008. For the twelve-month period ended September 30, 2009, alternative electric supply represented 4.5 percent of Consumers’ weather-adjusted retail sales of the preceding calendar year.

Electric Environmental Estimates: Consumers’ operations are subject to various state and federal environmental laws and regulations. Generally, Consumers has been able to recover, in customer rates, its costs to operate its facilities in compliance with these laws and regulations.

Clean Air Act: Consumers continues to focus on complying with the federal Clean Air Act and numerous state and federal environmental regulations. Consumers estimates expenditures of $1.32 billion from 2009 through 2017 for equipment installation to comply with a number of environmental regulations, including regulations limiting nitrogen oxides, sulfur dioxide, and mercury emissions. Consumers expects to recover these costs in customer rates.

It is expected that allowances and installation of pollution control equipment will cover the shortfall in nitrogen oxides emission allowances through 2015. Consumers also plans to purchase sulfur dioxide emission allowances between 2012 and 2015 at an average cost of $5 million per year. Consumers expects to recover emission allowance costs from its customers through the PSCR process.

Clean Air Interstate Rule: In 2005, the EPA adopted the CAIR, which required additional coal-fueled electric generating plant emission controls for nitrogen oxides and sulfur dioxide. The CAIR was appealed to the U.S. Court of Appeals for the District of Columbia. The court initially nullified the CAIR and the CAIR federal implementation plan in its entirety, but subsequently changed course and remanded the rule to the EPA, maintaining the rule in effect pending EPA revision. At this time, the CAIR remains in effect, with 2009 as the first nitrogen oxides compliance year. The EPA must now revise the rule to resolve the court’s concerns. The impacts of this revision are unknown, but stricter regulation is envisioned. A draft rule is expected in 2010.

State and Federal Mercury Air Rules: In 2005, the EPA issued the CAMR, which required initial reductions of mercury emissions from coal-fueled electric generating plants by 2010 and further reductions by 2018. A number of states and other entities appealed certain portions of the CAMR to the

U.S. Court of Appeals for the District of Columbia. In 2008, the U.S. Court of Appeals for the District of Columbia determined that the rules developed by the EPA were not consistent with the Clean Air Act. The U.S. Supreme Court denied a request to review this decision. The EPA has initiated the development of a revised rule based on MACT. The rule is expected to be proposed in early 2010, at which time Consumers will have a better understanding of the potential impact.

In 2006, Michigan’s governor proposed a plan that would result in mercury emissions reductions of 90 percent by 2015. In response to the governor’s proposal, the MDEQ promulgated a rule that became effective in October 2009. Consumers has a plan in place to comply with this proposed rule; however, the development of the Federal rule may affect Consumers’ plan. Consumers cannot predict the financial impact or outcome of this matter until this state regulation can be evaluated with respect to a Federal rule that is under development.

Greenhouse Gases: In June 2009, the United States House of Representatives passed the American Clean Energy and Security Act, which requires reductions in emissions of greenhouse gases, including carbon dioxide. The bill proposes to reduce carbon dioxide and other greenhouse gas emissions by 3 percent below 2005 levels by 2012, 17 percent below 2005 levels by 2020, and 42 percent below 2005 levels by 2030. The bill also contains provisions for the direct granting of substantial free greenhouse gas emission allowances to load-serving entities in order to mitigate price impacts to customers. Consumers considers it likely that Congress will pass greenhouse gas legislation, but the form and timing of any final bill is difficult to predict. These laws, or similar state laws or rules, if enacted, could require Consumers to replace equipment, install additional equipment for emission controls, purchase allowances, curtail operations, arrange for alternative sources of supply, or take other steps to manage or lower the emission of greenhouse gases.

In September 2009, the EPA finalized the Mandatory Reporting of Greenhouse Gases Rule. This rule will require facilities producing 25,000 metric tons or more of greenhouse gases to collect emissions data under a new reporting system, beginning January 1, 2010. The first reports will be due to the EPA on March 31, 2011. The rule covers carbon dioxide, methane, nitrous oxide, hydro fluorocarbons, and other fluorinated gases. The purpose of the rule is to collect accurate and timely data on greenhouse gas emissions that can be used to inform future climate change policy decisions. In addition, the EPA, through public statements and actions, has signaled that it intends to initiate regulation of greenhouse gases through the Clean Air Act.

Although associated capital or operating costs relating to greenhouse gas regulation or legislation could be material, and cost recovery cannot be assured, Consumers expects to have an opportunity to recover these costs and capital expenditures in rates consistent with the recovery of other reasonable costs of complying with environmental laws and regulations.

Water: In 2004, the EPA issued rules that govern existing electric generating plant cooling water intake systems. These rules require a significant reduction in the number of fish harmed by intake structures at existing power plants. The EPA compliance options in the rule were challenged before the U.S. Court of Appeals for the Second Circuit, which remanded the bulk of the rule back to the EPA for reconsideration in 2007. In April 2009, the U.S. Supreme Court ruled in favor of the utility industry’s position that the EPA can rely on a cost-benefit analysis in setting the national performance standards for fish protection. The EPA has announced plans to issue a revised draft rule in early 2010. Consumers estimates capital expenditures of $150 million to comply with these regulations.

Other electric environmental matters, including routine maintenance classification, could have a major impact on Consumers’ outlook. For additional details on these and other electric environmental matters, see Note 5, Contingencies, “Consumers’ Electric Utility Contingencies - Electric Environmental Matters.”

Electric Rate Matters: Rate matters are critical to Consumers’ electric utility business. For details on Consumers’ stranded cost recovery, power supply cost recovery, electric rate case and self-implemented rates, Palisades regulatory proceedings, and Big Rock decommissioning proceedings, see Note 6, Utility Rate Matters, “Consumers’ Electric Utility Rate Matters.”

Consumers’ Gas Utility Business Outlook and Uncertainties

Gas Deliveries: Consumers expects weather-adjusted gas deliveries to decline in 2009 by five percent compared with 2008, due to continuing conservation and overall economic conditions in Michigan. In addition, Consumers expects weather-adjusted gas deliveries to decline an average of two percent annually from 2010 through 2014, which reflects expected effects of energy efficiency programs. Actual delivery levels from year to year may vary from this trend due to:

	•		fluctuations in weather;
	•		use by independent power producers;
	•		availability and development of renewable energy sources;
	•		changes in gas prices;
	•		Michigan economic conditions including population trends and housing activity;
	•		the price of competing energy sources or fuels; and
	•		energy efficiency and conservation.

Gas Environmental Estimates: Consumers expects to incur investigation and remedial action costs at a number of sites, including 23 former manufactured gas plant sites. For additional details, see Note 5, Contingencies, “Consumers’ Gas Utility Contingencies — Gas Environmental Matters.”

Gas Rate Matters: Rate matters are critical to Consumers’ gas utility business. For details on Consumers’ gas cost recovery, gas depreciation, gas rate case, and lost and unaccounted for gas, see Note 6, Utility Rate Matters, “Consumers’ Gas Utility Rate Matters.”

Enterprises’ Outlook and Uncertainties

The primary focus with respect to CMS Energy’s remaining non-utility businesses is to optimize cash flow and maximize the value of their assets.

Trends and uncertainties that could have a material impact on CMS Energy’s consolidated income, cash flows, or financial position include:

	•		the impact of indemnity and environmental remediation obligations at Bay Harbor;
	•		the outcome of certain legal proceedings;
	•		the impact of lower electricity prices, caused primarily by lower natural gas prices, unseasonably cool weather, and decreased industrial production, on the profitability of Enterprises’ generating units;
	•		the impact of representations, warranties, and indemnities provided by CMS Energy or its subsidiaries in connection with the sales of assets;
	•		the impact of changes in commodity prices and interest rates on certain derivative contracts that do not qualify for hedge accounting and must be marked to market through earnings; and
	•		the impact of economic conditions in Michigan, including population trends and housing activity.

For additional details regarding Enterprises’ uncertainties, see Note 5, Contingencies and Part II, Item 1. Legal Proceedings.

Other Outlook and Uncertainties

Advanced Metering Infrastructure: Consumers’ development of an advanced metering infrastructure system is proceeding as planned. This system is designed to provide two-way communications between Consumers and its customers and should allow Consumers to read meters, receive outage and restoration notification, and turn service on and off without visiting the meter. It should enable customers to monitor and manage their energy usage and help reduce demand during critical peak times, resulting in higher energy efficiency and environmental benefits. Due to this system’s complexity and relative market immaturity, Consumers is using a phased implementation approach that will allow it to analyze, test, and pilot the new technology prior to widespread investment and deployment. Consumers will also make certain modifications to its software to enable the new system. Consumers intends to begin mass deployment of the system and installation of new meters in 2012.

Litigation: CMS Energy, Consumers, and certain of their subsidiaries are named as a party in various litigation matters, as well as in administrative proceedings before various courts and governmental agencies arising in the ordinary course of business. For additional details regarding these and other legal matters, see Note 5, Contingencies and Part II, Item 1. Legal Proceedings.

EnerBank: EnerBank, a wholly owned subsidiary of CMS Capital that represents one percent of CMS Energy’s net assets, is a state-chartered, FDIC-insured industrial bank providing unsecured home improvement loans. The carrying value of EnerBank’s loan portfolio was $227 million at September 30, 2009. Its loan portfolio was funded primarily by deposit liabilities of $163 million and borrowings from the U.S. Federal Reserve bank of $50 million. Twelve-month rolling average default rates on loans held by EnerBank have risen from 1.4 percent at December 31, 2008 to 2.2 percent at September 30, 2009. Due to the economic downturn, EnerBank expects the level of loan defaults to continue to increase throughout the remainder of 2009 and into 2010, returning to lower levels thereafter.

NEW ACCOUNTING STANDARDS

For details regarding the implementation of new accounting standards and new accounting standards issued that are not yet effective, see Note 3, New Accounting Standards.

CMS Energy Corporation
Consolidated Statements of Income
(Unaudited)
(As Revised, See Note 1)

										In Millions
		Three Months Ended								Nine Months Ended
September 30		2009				2008				2009				2008
Operating Revenue		$	1,265			$	1,428			$	4,597			$	4,977
Income (Loss) from Equity Method Investees			(1	)			5				(2	)			3
Operating Expenses
Fuel for electric generation			140				173				393				470
Purchased and interchange power			318				406				889				1,026
Cost of gas sold			123				191				1,294				1,526
Other operating expenses			229				218				704				615
Maintenance			52				51				163				140
Depreciation and amortization			128				135				422				436
General taxes			51				47				164				155
Gain on asset sales, net			(5	)			—				(13	)			(8	)
			1,036				1,221				4,016				4,360
Operating Income			228				212				579				620
Other Income (Deductions)
Interest and dividends			6				5				17				23
Regulatory return on capital expenditures			7				9				20				25
Other income			4				4				42				10
Other expense			(20	)			(15	)			(25	)			(21	)
			(3	)			3				54				37
Interest Charges
Interest on long-term debt			96				88				280				264
Interest on long-term debt — related parties			1				3				7				10
Other interest			7				8				23				26
Capitalized interest			(1	)			(1	)			(3	)			(4	)
			103				98				307				296
Income Before Income Taxes			122				117				326				361
Income Tax Expense			47				36				126				123
Income from Continuing Operations			75				81				200				238
Income From Discontinued Operations, Net of Tax of $-, $1, $19 and $-			—				1				29				—
Net Income			75				82				229				238
Income Attributable to Noncontrolling Interests			6				2				9				6
Net Income Attributable to CMS Energy			69				80				220				232
Preferred Stock Dividends			2				2				8				8
Net Income Available to Common Stockholders		$	67			$	78			$	212			$	224

The accompanying notes are an integral part of these statements.

						In Millions, Except Per Share Amounts
		Three Months Ended								Nine Months Ended
September 30		2009				2008				2009				2008
Net Income Available to Common Stockholders		$	67			$	78			$	212			$	224
Basic Earnings Per Average Common Share
Income from Continuing Operations		$	0.29			$	0.34			$	0.80			$	0.99
Income from Discontinued Operations			—				0.01				0.13				—
Net Income Attributable to Common Stock		$	0.29			$	0.35			$	0.93			$	0.99
Diluted Earnings Per Average Common Share
Income from Continuing Operations		$	0.28			$	0.32			$	0.77			$	0.94
Income from Discontinued Operations			—				0.01				0.13				—
Net Income Attributable to Common Stock		$	0.28			$	0.33			$	0.90			$	0.94
Dividends Declared Per Common Share		$	0.125			$	0.09			$	0.375			$	0.27

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CMS Energy Corporation
Consolidated Statements of Cash Flows
(Unaudited)
(As Revised, See Note 1)

						In Millions
Nine Months Ended September 30		2009				2008
Cash Flows from Operating Activities
Net income		$	229			$	238
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization			422				436
Deferred income taxes and investment tax credit			131				115
Postretirement benefits expense			136				110
Regulatory return on capital expenditures			(20	)			(25	)
Capital lease and other amortization			31				34
Bad debt expense			46				36
Gain due to expiration of indemnification			(50	)			—
Gain on sale of assets			(8	)			(8	)
Gain on extinguishment of long-term debt — related parties			(28	)			—
Loss on extinguishment of debt			17				—
Increase in environmental remediation accrual			35				—
Loss (income) from equity method investees			2				(3	)
Cash distributions from equity method investees			—				2
Postretirement benefits contributions			(247	)			(38	)
Electric sales contract termination payment			—				(275	)
Changes in other assets and liabilities:
Decrease in accounts receivable and accrued revenues			205				178
Decrease (increase) in accrued power supply and gas revenue			(1	)			39
Increase in inventories			(122	)			(393	)
Decrease in deferred property taxes			122				118
Decrease in accounts payable			(55	)			(21	)
Decrease in accrued taxes			(166	)			(189	)
Decrease in accrued expenses			(15	)			(42	)
Decrease in other current and non-current assets			15				11
Decrease in other current and non-current liabilities			(41	)			(142	)
Net cash provided by operating activities			638				181
Cash Flows from Investing Activities
Capital expenditures (excludes assets placed under capital lease)			(621	)			(511	)
Cost to retire property			(33	)			(22	)
Proceeds from sale of assets			7				1
Decrease in restricted cash and cash equivalents			8				4
Increase in non-current notes receivable			(43	)			(11	)
Other investing activities			3				1
Net cash used in investing activities			(679	)			(538	)
Cash Flows from Financing Activities
Proceeds from issuance of notes, bonds, and other long-term debt			1,188				845
Proceeds from (retirement of) EnerBank notes, net			(12	)			8
Issuance of common stock			7				6
Retirement of bonds and other long-term debt, including related parties			(1,074	)			(591	)
Payment of common stock dividends			(85	)			(61	)
Payment of preferred stock dividends			(8	)			(8	)
Increase in non-current notes payable			50				—
Payment of capital lease and finance lease obligations			(17	)			(18	)
Debt issuance costs, financing fees, and other			(38	)			(10	)
Net cash provided by financing activities			11				171
Net Decrease in Cash and Cash Equivalents			(30	)			(186	)
Cash and Cash Equivalents, Beginning of Period			213				348
Cash and Cash Equivalents, End of Period		$	183			$	162

The accompanying notes are an integral part of these statements.

CMS Energy Corporation
Consolidated Balance Sheets
(Unaudited)
(As Revised, See Note 1)

						In Millions
		September 30				December 31
ASSETS		2009				2008
Plant and Property (at cost)
Electric utility		$	9,374			$	8,965
Gas utility			3,755				3,622
Enterprises			395				390
Other			33				33
			13,557				13,010
Less accumulated depreciation, depletion and amortization			4,515				4,428
			9,042				8,582
Construction work in progress			524				608
			9,566				9,190
Investments
Enterprises			3				5
Other			6				6
			9				11
Current Assets
Cash and cash equivalents			183				213
Restricted cash and cash equivalents			30				35
Accounts receivable and accrued revenue, less allowances of $31 in 2009 and $26 in 2008			665				851
Notes receivable			87				95
Accrued power supply and gas revenue			8				7
Inventories at average cost
Gas in underground storage			1,246				1,168
Materials and supplies			128				110
Generating plant fuel stock			153				127
Deferred property taxes			115				165
Regulatory assets — postretirement benefits			19				19
Prepayments and other			28				37
			2,662				2,827
Non-current Assets
Regulatory assets
Securitized costs			378				416
Postretirement benefits			1,363				1,431
Customer Choice Act			56				90
Other			473				482
Notes receivable, less allowances of $6 in 2009 and $34 in 2008			227				186
Other			154				268
			2,651				2,873
Total Assets		$	14,888			$	14,901

The accompanying notes are an integral part of these statements.

						In Millions
		September 30				December 31
STOCKHOLDERS’ INVESTMENT AND LIABILITIES		2009				2008
Capitalization
Common stockholders’ equity
Common stock, authorized 350.0 shares; outstanding 227.6 shares in 2009 and 226.4 shares in 2008		$	2			$	2
Other paid-in capital			4,555				4,533
Accumulated other comprehensive loss			(23	)			(28	)
Accumulated deficit			(1,904	)			(2,031	)
			2,630				2,476
Noncontrolling interests			53				52
Preferred stock of subsidiary			44				44
Preferred stock			239				243
Total equity			2,966				2,815
Long-term debt			5,889				5,837
Long-term debt — related parties			34				178
Non-current portion of capital and finance lease obligations			193				206
			9,082				9,036
Current Liabilities
Current portion of long-term debt, capital and finance lease obligations			662				514
Notes payable			50				—
Accounts payable			376				466
Accrued rate refunds			21				7
Accrued interest			79				107
Accrued taxes			123				289
Deferred income taxes			185				100
Regulatory liabilities			107				120
Other			236				260
			1,839				1,863
Non-current Liabilities
Regulatory liabilities
Cost of removal			1,246				1,203
Income taxes, net			528				519
Other			158				146
Postretirement benefits			1,336				1,502
Asset retirement obligation			214				206
Deferred investment tax credit			52				54
Deferred income taxes			105				55
Other			328				317
			3,967				4,002
Commitments and Contingencies (Notes 5, 6, 7, 9 and 10)
Total Stockholders’ Investment and Liabilities		$	14,888			$	14,901

CMS Energy Corporation
Consolidated Statements of Changes in Equity
(Unaudited)
(As Revised, See Note 1)

										In Millions
		Three Months Ended								Nine Months Ended
September 30		2009				2008				2009				2008
Common Stock
At beginning and end of period		$	2			$	2			$	2			$	2
Other Paid-in Capital
At beginning of period			4,552				4,525				4,533				4,517
Common stock issued			4				4				12				12
Common stock repurchased			(1	)			(1	)			(1	)			(1	)
Conversion option on convertible debt			—				—				11				—
At end of period			4,555				4,528				4,555				4,528
Accumulated Other Comprehensive Loss
Retirement benefits liability
At beginning of period			(27	)			(16	)			(27	)			(15	)
Retirement benefits liability adjustments (a)			1				—				1				(1	)
At end of period			(26	)			(16	)			(26	)			(16	)
Investments
At beginning of period			1				(5	)			—				—
Unrealized gain (loss) on investments (a)			3				(3	)			4				(8	)
Reclassification adjustments included in net income (a)			—				8				—				8
At end of period			4				—				4				—
Derivative instruments
At beginning and end of period			(1	)			(1	)			(1	)			(1	)
Foreign currency translation
At beginning of period			—				—				—				(128	)
Sale of interests in TGN (a)			—				—				—				128
At end of period			—				—				—				—
Total Accumulated Other Comprehensive Loss			(23	)			(17	)			(23	)			(17	)
Accumulated Deficit
At beginning of period			(1,943	)			(2,128	)			(2,031	)			(2,227	)
Effects of changing the retirement plans measurement date
Service cost, interest cost, and expected return on plan assets for December 1 through December 31, 2007, net of tax			—				—				—				(4	)
Additional loss from December 1 through December 31, 2007, net of tax			—				—				—				(2	)
Net income attributable to CMS Energy (a)			69				80				220				232
Preferred stock dividends declared			(2	)			(2	)			(8	)			(8	)
Common stock dividends declared			(28	)			(20	)			(85	)			(61	)
At end of period			(1,904	)			(2,070	)			(1,904	)			(2,070	)
Noncontrolling Interests
At beginning of period			338				345				339				347
Conversion of preferred stock			(4	)			—				(4	)			(1	)
Other changes in noncontrolling interests			2				1				1				—
At end of period			336				346				336				346
Total Equity		$	2,966			$	2,789			$	2,966			$	2,789

The accompanying notes are an integral part of these statements.

										In Millions
		Three Months Ended								Nine Months Ended
September 30		2009				2008				2009				2008
| | | |
(a) Disclosure of Comprehensive Income:
Net income attributable to CMS Energy		$	69			$	80			$	220			$	232
Retirement benefits liability adjustments, net of tax of $-, $-, $-, and $2, respectively			1				—				1				(1	)
Unrealized gain (loss) on investments, net of tax (tax benefit) of $4, $(3), $4, and $(6), respectively			3				(3	)			4				(8	)
Reclassification adjustments included in net income, net of tax of $-, $5, $-, and $5, respectively			—				8				—				8
Sale of interests in TGN, net of tax of $69			—				—				—				128
Total Comprehensive Income		$	73			$	85			$	225			$	359