8-KOther EventsExhibits & Filings

CMS ENERGY CORP 8-K Report, Corporate Update (Jan 27, 2005)

Filed January 27, 2005For Securities:CMSCMS-PCCMSACMSCCMSD

Summary

CMS Energy Corporation, through its subsidiary Consumers Energy Company, has received approval from the Michigan Public Service Commission (MPSC) for a Resource Conservation Plan (RCP) related to its investment in the Midland Cogeneration Venture Limited Partnership (MCV Partnership). This plan allows for a modification in the operation of the MCV Facility, a natural gas-fueled cogeneration plant in which Consumers Energy has a significant interest. The primary objective of the RCP is to conserve natural gas and improve Consumers Energy's financial standing with the MCV Partnership without increasing costs for its electric customers. The approved changes will lead to a substantial reduction in the MCV Facility's electricity production and natural gas consumption, with the resulting fuel cost savings being strategically allocated. These savings will first cover the cost of replacement power for Consumers Energy's customers. A portion will fund a renewable energy program, and the remaining savings will be shared between the MCV Partnership and Consumers Energy. Notably, Consumers Energy's direct savings will be shared with its customers, increasing the customer's share over time. The RCP also introduces mark-to-market accounting for a larger portion of the MCV Facility's gas contracts, which is anticipated to result in a gain in Consumers Energy's 2005 earnings.

Key Highlights

  • 1Michigan Public Service Commission (MPSC) approved Consumers Energy's Resource Conservation Plan (RCP) on January 25, 2005.
  • 2The RCP modifies the operation of the Midland Cogeneration Venture (MCV) Facility to dispatch based on natural gas market prices.
  • 3This change is expected to reduce the MCV Facility's annual natural gas consumption by an estimated 30 to 40 billion cubic feet.
  • 4Fuel cost savings will be used to offset replacement power costs for Consumers Energy's electric customers.
  • 5A $5 million annual renewable energy program will be funded by the savings.
  • 6Consumers Energy's direct savings from the plan will be shared with customers: 50% in 2005 and 70% in 2006 and beyond.
  • 7The RCP subjects more of the MCV Facility's gas contracts to mark-to-market accounting, expected to generate a gain in 2005 earnings.

Frequently Asked Questions

The main purpose of the RCP is to conserve natural gas and improve Consumers Energy's investment in the MCV Partnership without increasing costs for its electric customers. It achieves this by changing the operation of the MCV Facility to dispatch based on natural gas market prices, leading to reduced electricity production and gas consumption.

The fuel cost savings will first be used to fully offset the cost of replacement power for Consumers Energy's electric customers. Additionally, $5 million annually will fund a renewable energy program. The remaining savings will be split between the MCV Partnership and Consumers Energy, with Consumers Energy sharing its direct savings with its customers (50% in 2005, 70% in 2006 and beyond).

The RCP is expected to have a positive impact on Consumers Energy's earnings in 2005. This is primarily due to the change in operating the MCV Facility, which will lead to fuel cost savings, and the application of mark-to-market accounting to a larger portion of the MCV Facility's gas contracts, which is anticipated to result in a gain.

The MCV Facility is a natural gas-fueled combined-cycle cogeneration facility. Consumers Energy purchases power under a long-term contract from this facility and holds a 49 percent interest in the MCV Partnership that operates it. The RCP aims to improve the value and performance of this investment.