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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION REGISTRANT; STATE OF INCORPORATION; IRS EMPLOYER
FILE NUMBER ADDRESS; AND TELEPHONE NUMBER IDENTIFICATION NO.
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1-9513 CMS Energy Corporation 38-2726431
(A Michigan Corporation)
Fairlane Plaza South, Suite 1100
330 Town Center Drive,
Dearborn, Michigan 48126
(313)436-9200
1-5611 Consumers Energy Company 38-0442310
(A Michigan Corporation)
212 West Michigan Avenue,
Jackson, Michigan 49201
(517)788-0550
1-2921 Panhandle Eastern Pipe Line Company 44-0382470
(A Delaware Corporation)
5444 Westheimer Road,
P.O. Box 4967,
Houston, Texas 77210-4967
(713)989-7000
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
REGISTRANT TITLE OF CLASS ON WHICH REGISTERED
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CMS ENERGY CORPORATION Common Stock, $.01 par value New York Stock Exchange
CMS ENERGY TRUST II 8.75% Adjustable Convertible Trust Securities New York Stock Exchange
CMS ENERGY TRUST III 7.25% Premium Equity Participating Security Units New York Stock Exchange
CONSUMERS ENERGY
COMPANY Preferred Stocks, $100 par value: $4.16 Series, $4.50 Series New York Stock Exchange
CONSUMERS POWER
COMPANY FINANCING I 8.36% Trust Originated Preferred Securities New York Stock Exchange
CONSUMERS ENERGY
COMPANY FINANCING II 8.20% Trust Originated Preferred Securities New York Stock Exchange
CONSUMERS ENERGY
COMPANY FINANCING
III 9.25% Trust Originated Preferred Securities New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
Indicate by check mark whether the Registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrants' knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Panhandle Eastern Pipe Line Company meets the conditions set forth in General
Instructions I(1)(a) and (b) of Form 10-K and is therefore filing this Form 10-K
with the reduced disclosure format. Items 4, 6, 10, 11, 12 and 13 have been
omitted and Items 1, 2 and 7 have been reduced in accordance with Instruction I.
The aggregate market value of CMS Energy voting and non-voting common equity
held by non-affiliates was $3,883,404,796 for the 131,418,098 CMS Energy Common
Stock shares outstanding on February 28, 2001.
On February 28, 2001 CMS Energy held all voting and non-voting common equity of
Consumers and Panhandle.
Documents incorporated by reference: CMS Energy's proxy statement and Consumers'
information statement relating to the 2001 annual meeting of shareholders to be
held May 25, 2001, are incorporated by reference in Part III, except for the
organization and compensation committee report and the performance graph
contained therein.
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CMS Energy Corporation
and
Consumers Energy Company
and
Panhandle Eastern Pipe Line Company
Annual Reports on Form 10-K to the Securities and Exchange Commission for the
Year Ended December 31, 2000
This combined Form 10-K is separately filed by CMS Energy Corporation,
Consumers Energy Company and Panhandle Eastern Pipe Line Company. Information
contained herein relating to each individual registrant is filed by such
registrant on its own behalf. Accordingly, except for its subsidiaries,
Consumers Energy Company and Panhandle Eastern Pipe Line Company make no
representation as to information relating to any other companies affiliated with
CMS Energy Corporation.
TABLE OF CONTENTS
PAGE
----
Glossary ............................................................ 3
PART I:
Item 1. Business.................................................... 7
Item 2. Properties.................................................. 30
Item 3. Legal Proceedings........................................... 30
Item 4. Submission of Matters to a Vote of Security Holders......... 31
PART II
Market for CMS Energy's, Consumers' and Panhandle's Common
Item 5. Equity and Related
Stockholder Matters......................................... 32
Item 6. Selected Financial Data..................................... 32
Management's Discussion and Analysis of Financial Condition
Item 7. and Results of Operations................................... 33
Quantitative and Qualitative Disclosures About Market
Item 7A Risk........................................................ 33
Item 8. Financial Statements and Supplementary Data................. 34
Changes in and Disagreements With Accountants on Accounting
Item 9. and
Financial Disclosure........................................ CO-1
PART III
Directors and Executive Officers of CMS Energy and
Item 10. Consumers................................................... CO-2
Item 11. Executive Compensation...................................... CO-2
Security Ownership of Certain Beneficial Owners and
Item 12. Management.................................................. CO-2
Item 13. Certain Relationships and Related Transactions.............. CO-2
PART IV
Exhibits, Financial Statement Schedules and Reports on Form
Item 14. 8-K......................................................... CO-3
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GLOSSARY
Certain terms used in the text and financial statements are defined below.
ABATE..................................... Association of Businesses Advocating Tariff Equity
APB....................................... Accounting Principles Board
ALJ....................................... Administrative Law Judge
AMT....................................... Alternative minimum tax
Alliance.................................. Alliance Regional Transmission Organization
Anadarko.................................. Anadarko Petroleum Corporation, a non-affiliated company
Articles.................................. Articles of Incorporation
Attorney General.......................... Michigan Attorney General
bcf....................................... Billion cubic feet
Big Rock.................................. Big Rock Point nuclear power plant, owned by Consumers
Board of Directors........................ Board of Directors of CMS Energy
Btu....................................... British thermal unit
Class G Common Stock...................... One of two classes of common stock of CMS Energy, no par
value, which reflects the separate performance of the
Consumers Gas Group, redeemed in October 1999
Clean Air Act............................. Federal Clean Air Act, as amended
CMS Capital............................... CMS Capital Corp., a subsidiary of Enterprises
CMS Electric and Gas...................... CMS Electric and Gas Company, a subsidiary of
Enterprises
CMS Energy................................ CMS Energy Corporation, the parent of Consumers and
Enterprises
CMS Energy Common Stock................... One of two classes of common stock of CMS Energy, par
value $.01 per share
CMS Gas Transmission...................... CMS Gas Transmission Company, a subsidiary of
Enterprises
CMS Generation............................ CMS Generation Co., a subsidiary of Enterprises
CMS Holdings.............................. CMS Midland Holdings Company, a subsidiary of Consumers
CMS Midland............................... CMS Midland Inc., a subsidiary of Consumers
CMS MST................................... CMS Marketing, Services and Trading Company, a
subsidiary of Enterprises
CMS Oil and Gas........................... CMS Oil and Gas Company, a subsidiary of Enterprises
CMS Panhandle Holding..................... CMS Panhandle Holding Company, a subsidiary of CMS Gas
Transmission
Common Stock.............................. All classes of Common Stock of CMS Energy and each of
its subsidiaries, or any of them individually, at the
time of an award or grant under the Performance
Incentive Stock Plan
Consumers................................. Consumers Energy Company, a subsidiary of CMS Energy
Consumers Gas Group....................... The gas distribution, storage and transportation
businesses currently conducted by Consumers and Michigan
Gas Storage
Court of Appeals.......................... Michigan Court of Appeals
Customer Choice Act....................... Customer Choice and Electricity Reliability Act, a
Michigan statute enacted in June 2000 that allows all
retail customers choice of alternative electric
suppliers no later than January 1, 2002, provides for
full recovery of net stranded costs and implementation
costs, establishes a five percent reduction in
residential rates, establishes rate freeze and rate cap,
and allows for Securitization
Detroit Edison............................ The Detroit Edison Company, a non-affiliated company
DOE....................................... U.S. Department of Energy
Dow....................................... The Dow Chemical Company, a non-affiliated company
DSM....................................... Demand-side management
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Duke Energy............................... Duke Energy Corporation, a non-affiliated company
EITF...................................... Emerging Issues Task Force
El Chocon................................. Hidroelectrica El Chocon S.A., an indirect subsidiary of CMS
Generation
Enterprises............................... CMS Enterprises Company, a subsidiary of CMS Energy
EPA....................................... U.S. Environmental Protection Agency
EPS....................................... Earnings per share
FASB...................................... Financial Accounting Standards Board
FERC...................................... Federal Energy Regulatory Commission
FMLP...................................... First Midland Limited Partnership, a partnership which holds a lessor
interest in the MCV Facility
FTC....................................... Federal Trade Commission
GCR....................................... Gas cost recovery
GTNs...................................... CMS Energy General Term Notes(R), $250 million Series A, $125 million
Series B, $150 million Series C, $200 million Series D, $400 million
Series E and $18 million Series F
GWh....................................... Gigawatt-hour
Huron..................................... Huron Hydrocarbons, Inc., a subsidiary of Consumers
INGAA..................................... Interstate Natural Gas Association of America
ITC....................................... Investment tax credit
Jorf Lasfar............................... The 1,356 MW coal-fueled power plant in Morocco, jointly owned by CMS
Generation and ABB Energy Venture, Inc.
kWh....................................... Kilowatt-hour
Loy Yang.................................. The 2,000 MW brown coal fueled Loy Yang A power plant and an
associated coal mine in Victoria, Australia, in which CMS Generation
holds a 50 percent ownership interest
LNG....................................... Liquefied natural gas
Ludington................................. Ludington pumped storage plant, jointly owned by Consumers and
Detroit Edison
mcf....................................... Thousand cubic feet
MCV Facility.............................. A natural gas-fueled, combined-cycle cogeneration facility operated
by the MCV Partnership
MCV Partnership........................... Midland Cogeneration Venture Limited Partnership in which Consumers
has a 49 percent interest through CMS Midland
MD&A...................................... Management's Discussion and Analysis
MEPCC..................................... Michigan Electric Power Coordination Center
Michigan Gas Storage...................... Michigan Gas Storage Company, a subsidiary of Consumers
Michigan State Utility Workers Council.... The executive board and negotiating body for local chapters of the
Union
Michigan Transco.......................... Michigan Electric Transmission Company, a subsidiary of Consumers
Energy
Mbbls..................................... Thousand barrels
MMbbls.................................... Million barrels
MMBtu..................................... Million British thermal unit
MMcf...................................... Million cubic feet
MPSC...................................... Michigan Public Service Commission
MW........................................ Megawatts
MWh....................................... Megawatt-hours
Natural Gas Act........................... Federal Natural Gas Act
NEIL...................................... Nuclear Electric Insurance Limited, an industry mutual insurance
company owned by member utility companies
Nitrotec.................................. Nitrotec Corporation, a propriety gas technology company in which CMS
Gas Transmission owns an equity interest
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5
NMC....................................... Nuclear Management Company, a Wisconsin company, formed in 1999 by
Northern States Power Company (now Xcel Energy Inc.), Alliant Energy,
Wisconsin Electric Power Company, and Wisconsin Public Service
Company to operate and manage nuclear capacity owned by the four
utilities
NOx....................................... Nitrogen Oxide
NRC....................................... Nuclear Regulatory Commission
NYMEX..................................... New York Mercantile Exchange
OPEB...................................... Postretirement benefit plans other than pensions for retired
employees
Outstanding Shares........................ Outstanding shares of Class G Common Stock
Palisades................................. Palisades nuclear power plant, owned by Consumers
Pan Gas Storage........................... Pan Gas Storage Company, a subsidiary of Panhandle Eastern Pipe Line
Company
Panhandle................................. Panhandle Eastern Pipe Line Company, including its subsidiaries
Trunkline, Pan Gas Storage, Panhandle Storage, and Trunkline LNG.
Panhandle is a wholly owned subsidiary of CMS Gas Transmission
Panhandle Eastern Pipe Line............... Panhandle Eastern Pipe Line Company, a wholly owned subsidiary of CMS
Gas Transmission
Panhandle Storage......................... CMS Panhandle Storage Company, a subsidiary of Panhandle Eastern Pipe
Line Company
PCBs...................................... Poly chlorinated biphenyls
Pension Plan.............................. The trusteed, non-contributory, defined benefit pension plan of
Panhandle, Consumers and CMS Energy
PPA....................................... The Power Purchase Agreement between Consumers and the MCV
Partnership with a 35-year term commencing in March 1990
ppm....................................... Parts per million
PSCR...................................... Power supply cost recovery
PUHCA..................................... Public Utility Holding Company Act of 1935
RTO....................................... Regional Transmission Organization
SAB....................................... Staff Accounting Bulletin
Sea Robin................................. Sea Robin Pipeline Company
SEC....................................... U.S. Securities and Exchange Commission
Securitization............................ A financing authorized by statute in which a MPSC approved flow of
revenues from a portion of the rates charged by a utility to its
customers is set aside and pledged as security for the repayment of
Securitization bonds issued by a special purpose entity affiliated
with such utility
Senior Credit Facility.................... $1 billion one-year revolving credit facility maturing in June 2001
SERP...................................... Supplemental Executive Retirement Plan
SFAS...................................... Statement of Financial Accounting Standards
SIPS...................................... State Implementation Plans
SOP....................................... Statement of Position
Stranded Costs............................ Costs incurred by utilities in order to serve their customers in a
regulated monopoly environment, but which may not be recoverable in a
competitive environment because of customers leaving their systems
and ceasing to pay for their costs. These costs could include owned
and purchased generation and regulatory assets
Superfund................................. Comprehensive Environmental Response, Compensation and Liability Act
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6
TBtu...................................... Trillion british thermal unit
TGN....................................... Transportadora de Gas del Norte S.A., a natural gas pipeline located
in Argentina
Transition Costs.......................... Stranded Costs, as defined, plus the costs incurred in the transition
to competition
Trunkline................................. Trunkline Gas Company, a subsidiary of Panhandle Eastern Pipe Line
Company
Trunkline LNG............................. Trunkline LNG Company, a subsidiary of Panhandle Eastern Pipe Line
Company
Trust Preferred Securities................ Securities representing an undivided beneficial interest in the
assets of statutory business trusts, which interests have a
preference with respect to certain trust distributions over the
interests of either CMS Energy or Consumers, as applicable, as owner
of the common beneficial interests of the trusts
Union..................................... Utility Workers of America, AFL-CIO
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PART I
ITEM 1. BUSINESS
GENERAL
CMS ENERGY
CMS Energy, formed in Michigan in 1987, is a leading diversified energy
company operating in the United States and in selected growth markets around the
world. Its two principal subsidiaries are Consumers and Enterprises. Consumers
is a public utility that provides natural gas and/or electricity to almost six
million of the 9.9 million residents in Michigan's lower peninsula. Enterprises,
through subsidiaries, is engaged in several energy businesses in the United
States and in approximately 20 countries on five continents.
In 2000, CMS Energy's consolidated operating revenue was $9.0 billion. See
BUSINESS SEGMENTS later in this Item 1 for further discussion of each segment.
CONSUMERS
Consumers, formed in Michigan in 1968, is the successor to a corporation
organized in Maine in 1910 that conducted business in Michigan from 1915 to
1968. In 1997, Consumers, originally named Consumers Power Company, changed its
name to Consumers Energy Company to reflect its increasing focus on providing
customers with total energy solutions.
Consumers' service areas include automotive, metal, chemical, food and wood
products and a diversified group of other industries. Consumers' consolidated
operations account for a majority of CMS Energy's total assets and income, as
well as a substantial portion of its operating revenue. At year-end 2000,
Consumers' customer base and operating revenues were as follows:
CUSTOMERS OPERATING 2000 VS. 1999
SERVED REVENUE OPERATING REVENUE
(MILLIONS) (MILLIONS) % INCREASE
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Electric Utility Business................................ 1.69 2,676 0.3
Gas Utility Business..................................... 1.61 1,196 3.5
Non-Utility.............................................. -- 63(a) 23.5
Total.................................................. 3.18 3,935 1.6
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(a) Primarily represents earnings attributable to Consumers' interest in the
MCV Partnership and MCV Facility, the earnings of which are reported within
CMS Energy's independent power production business segment.
Consumers' rates and certain other aspects of its business are subject to
the jurisdiction of the MPSC and FERC, as described in CMS ENERGY, CONSUMERS AND
PANHANDLE REGULATION later in this Item 1.
CONSUMERS PROPERTIES -- GENERAL: The principal properties of Consumers and
its subsidiaries are owned in fee, except that most electric lines and gas mains
are located, pursuant to easements and other rights, in public roads or on land
owned by others. Substantially all of Consumers' properties are subject to the
lien of its First Mortgage Bond Indenture. For additional information on
Consumers' properties see BUSINESS SEGMENTS -- Consumers Electric
Utility -- Electric Utility Properties, and -- Consumers Gas Utility-Gas Utility
Properties, below.
For information on capital expenditures, see ITEM 7. CONSUMERS MANAGEMENT'S
DISCUSSION AND ANALYSIS -- OUTLOOK and ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA -- NOTE 10 OF CONSUMERS' NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS.
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BUSINESS SEGMENTS
CMS ENERGY, CONSUMERS AND PANHANDLE FINANCIAL INFORMATION
For information with respect to operating revenue, net operating income,
identifiable assets and liabilities attributable to all of CMS Energy's business
segments and international and domestic operations, see ITEM 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA -- SELECTED FINANCIAL INFORMATION AND CMS
ENERGY'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS.
For information with respect to the operating revenue, net operating
income, identifiable assets and liabilities attributable only to Consumers'
business segments, see ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA -- SELECTED FINANCIAL INFORMATION AND CONSUMERS' CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
For information with respect to the operating revenue, net operating
income, identifiable assets and liabilities attributable only to Panhandle's
business segments, see ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA -- PANHANDLE'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS.
CONSUMERS ELECTRIC UTILITY
Based on the number of customers, Consumers' electric utility operations,
if independent, would be the twelfth largest electric utility company in the
United States. The electric operations of Consumers include the generation,
purchase, transmission, distribution and sale of electricity. At year-end 2000,
it served customers in 61 of the 68 counties of Michigan's lower peninsula.
Principal cities served include Battle Creek, Flint, Grand Rapids, Jackson,
Kalamazoo, Midland, Muskegon and Saginaw. Consumers' electric utility customer
base includes a mix of residential, commercial and diversified industrial
customers, the largest segment of which is the automotive industry. Consumers'
electric operations are not dependent upon a single customer, or even a few
customers, and the loss of any one or even a few of such customers is not
reasonably likely to have a material adverse effect on its financial condition.
Consumers' electric operations are seasonal. The summer months usually
increase demand for electric energy, principally due to the use of air
conditioners and other cooling equipment, thereby affecting revenues. In 2000,
total electric sales were 41 billion kWh, similar to 1999 levels.
Consumers experienced a 2000 winter peak demand of 6,159 MW and a summer
peak demand of 7,325 MW. In 2000, based on the summer peak, Consumers' power
reserve, also called a reserve margin, was 21 percent compared to 14.7 percent
in 1999. Consumers estimates that during the summer of 2001, it will be able to
satisfy its peak demand with a reserve margin of approximately 15 percent from a
combination of its owned electric generating plants and electricity purchase
contracts or options, as well as other arrangements. Consumers bases this
estimate on other energy suppliers providing 64 MW of power to retail open
access customers at the time of Consumers' peak customer demand. Consumers has
offered other energy suppliers the opportunity to serve up to 750 MW of nominal
retail open access load prior to summer 2001.
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ELECTRIC UTILITY PROPERTIES: At December 31, 2000, Consumers' electric
generating system consists of the following:
2000 SUMMER NET 2000 NET
DEMONSTRATED GENERATION
SIZE AND YEAR CAPABILITY (THOUSANDS
NAME AND LOCATION (MICHIGAN) ENTERING SERVICE (KWHS) OF KWHS)
---------------------------- ---------------- --------------- ----------
COAL GENERATION
J H Campbell 1&2 -- West Olive............ 2 Units, 1962-1967 609,000 3,639,548
J H Campbell 3 -- West Olive.............. 1 Unit, 1980 765,100(a) 4,322,824
D E Karn -- Essexville.................... 2 Units, 1959-1961 515,000 3,580,567
B C Cobb -- Muskegon...................... 2 Units, 1956-1957 320,000 2,182,702
J R Whiting -- Erie....................... 3 Units, 1952-1953 324,000 2,004,412
J C Weadock -- Essexville................. 2 Units, 1955-1958 310,000 2,196,344
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Total coal generation....................... 2,843,100 17,926,397
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OIL/GAS GENERATION
B C Cobb -- Muskegon...................... 3 Units, 1999-2000 183,000 52,900
D E Karn -- Essexville.................... 2 Units, 1975-1977 1,276,000 939,212
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Total oil/gas generation.................... 1,459,000 992,112
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HYDROELECTRIC
Conventional Hydro Generation............. 13 Plants, 1907-1949 73,500 351,263
Ludington Pumped Storage.................. 6 Units, 1973 954,700(b) (540,446)(c)
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Total Hydroelectric......................... 1,028,200 (189,183)
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NUCLEAR GENERATION
Palisades -- South Haven.................. 1 Unit, 1971 760,000 5,723,784
--------- ----------
GAS/OIL COMBUSTION TURBINE GENERATION....... 8 Plants, 1966-1999 346,800(d) 52,295
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Total owned generation...................... 6,437,100 24,505,405
========= ==========
PURCHASED AND INTERCHANGE POWER CAPACITY.... 1,644,200(e)
---------
Total....................................... 8,081,300
=========
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(a) Represents Consumers' share of the capacity of the J H Campbell 3, net of
6.69 percent (ownership interests of the Michigan Public Power Agency and
Wolverine Power Supply Cooperative, Inc.).
(b) Represents Consumers' share of the capacity of Ludington. Consumers and
Detroit Edison have 51 percent and 49 percent undivided ownership,
respectively, in the plant, and the capacity of the plant is shared
accordingly.
(c) Represents Consumers' share of net pumped storage generation. This facility
electrically pumps water during off-peak hours for storage to later
generate electricity during peak-demand hours.
(d) Includes 1.8 MW of distributed generation.
(e) Includes capacity from long-term power purchase contracts, including 1,240
MW of purchased contract capacity from the MCV Facility.
In 2000, Consumers purchased, through long-term purchase contracts,
options, spot market and other seasonal purchases, 2,552 MW of net capacity from
other power producers, which amounted to 34.8 percent of Consumers' total system
requirements, the largest of which was the MCV Partnership.
A high voltage transmission system interconnects Consumers' electric
generating plants at many locations with transmission facilities of unaffiliated
systems, including those of other utilities in Michigan and Indiana. The
interconnections permit a sharing of the reserve capacity of the connected
systems. This allows mutual assistance during emergencies and substantially
reduces investment in utility plant facilities. Consumers owns: a) 4,467 miles
of overhead transmission lines operating at 120 kilovolts and above; b) owns
4,176 miles of subtransmission overhead lines operating at 23 kilovolts and 46
kilovolts; c) owns 16 subsurface miles of
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subtransmission underground lines operating at 23 kilovolts and 46 kilovolts; d)
owns 61,298 miles of electric distribution overhead lines; e) owns 7,386
subsurface mile of underground distribution lines and f) owns substations having
an aggregate transformer capacity of 40,254,830 kilovoltamperes.
FUEL SUPPLY: Consumers has four generating plant sites that use coal as a
fuel source and that constitute 73.2 percent of its baseload capacity, the
capacity used to serve a constant level of customer demand. In 2000, these
plants produced a combined total of 17,926 million kWhs of electricity and
required 8.5 million tons of coal. On December 31, 2000, Consumers' coal
inventory amounted to approximately 50 days' supply. For additional information
on future sources of coal, see ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA -- NOTE 2 OF CONSUMERS' NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS -- UNCERTAINTIES -- OTHER ELECTRIC UNCERTAINTIES.
Consumers owns two nuclear power plants, Big Rock, located near Charlevoix,
Michigan and Palisades, located near South Haven, Michigan. In 1997, Consumers
ceased operating Big Rock, and therefore in 2000 it only operated Palisades.
During 2000, Palisades' net generation was 5,724 million kWhs, constituting 23.4
percent of Consumers' baseload supply. Consumers currently has two contracts for
uranium concentrates sufficient to provide up to 43 percent of its fuel supply
requirements for the 2001 period. Consumers also has contracts for conversion
services and enrichment services with quantity flexibility ranging from 40
percent to 100 percent and 50 percent and 100 percent of its nuclear fuel
requirements, respectively. If spot market prices are below the contract price,
Consumers will purchase only the minimum amount of nuclear fuel required by the
contracts. Conversely, if spot market prices are above the contracts prices,
Consumers will purchase the maximum amount of nuclear fuel allowed by the
contracts to meet its requirements.
For the spring 2001 refueling outage, Consumers has purchased all of its
fuel supply requirements. Consumers also has contracts for nuclear fuel services
and for fabrication of nuclear fuel assemblies. The fabrication contract for
Palisades remains in effect for the next three reloads with options to extend
the contract for an additional two reloads. The fuel contracts are with major
private industrial suppliers of nuclear fuel and related services and with
uranium producers, converters and enrichers who participate in the world nuclear
fuel marketplace.
As shown below, Consumers generates electricity principally from coal and
nuclear fuel.
MILLIONS OF KWHS
----------------------------------------------
POWER GENERATED 2000 1999 1998 1997 1996
--------------- ---- ---- ---- ---- ----
Coal................................................ 17,926 19,085 17,959 16,427 16,928
Nuclear............................................. 5,724 5,105 5,364 5,970 5,653
Oil................................................. 645 809 520 258 364
Gas................................................. 400 441 302 80 74
Hydro............................................... 351 365 395 467 473
Net pumped storage(a)............................... (541) (476) (480) (477) (419)
------ ------ ------ ------ ------
Total net generation................................ 24,505 25,329 24,060 22,725 23,073
====== ====== ====== ====== ======
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(a) Represents Consumers' 51 percent share of net generation from Ludington.
This facility pumps water into a storage pond using electricity generated
during off-peak hours to generate electricity later during peak demand
hours.
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The cost of all fuels consumed, shown below, fluctuates with the mix of
fuel burned.
COST PER MILLION BTU
-----------------------------------------
FUEL CONSUMED 2000 1999 1998 1997 1996
------------- ---- ---- ---- ---- ----
Coal..................................................... $1.34 $1.38 $1.45 $1.53 $1.50
Oil...................................................... 3.30 2.69 2.73 2.97 2.67
Gas...................................................... 4.80 2.74 2.66 3.36 3.60
Nuclear (a).............................................. 0.45 0.52 0.50 0.57 0.50
All Fuels(b)............................................. 1.27 1.29 1.28 1.29 1.27
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(a) Includes amounts charged, and included in fuel expense, to Palisades and Big
Rock for decontamination and decommission of uranium enrichment facility.
(b) Weighted average fuel costs.
Pursuant to the Nuclear Waste Policy Act of 1982, the federal government
became responsible for the permanent disposal of spent nuclear fuel and
high-level radioactive waste by 1998. To date, the DOE has been unable to
arrange for storage facilities to meet this obligation and it does not expect
that in 2001 it will be able to receive spent nuclear fuel for storage. For
additional information on disposal of nuclear fuel see ITEM 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA -- NOTE 2 OF CMS ENERGY'S NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS and ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA -- NOTE 1 OF CONSUMERS' NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS. The amount of spent nuclear fuel discharged from the reactor to date
exceeds Palisades' temporary on-site storage pool capacity, and Consumers is
currently storing spent nuclear fuel in NRC-approved steel and concrete vaults,
known as "dry casks". Currently, three storage casks are available for future
storage. For a discussion relating to the NRC approval of dry casks and
Consumers' use of the casks, see ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA -- NOTE 5 OF CMS ENERGY'S NOTES TO CONSOLIDATED FINANCIAL STATEMENTS and
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA -- NOTE 2 OF CONSUMERS'
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
INSURANCE: Consumers maintains primary and excess nuclear property
insurance from NEIL totaling $2.4 billion in recoverable limits for Palisades.
The insurance covers risks of direct property loss, decontamination, and debris
removal subject to standard policy terms and conditions. Also covered by
insurance are a portion of the costs arising from accidental premature
decommissioning not funded by the decommissioning trust funds, and part of the
remaining book value of the plant. For any loss more than $100 million, the
ongoing nuclear contamination must be stabilized and decontaminated prior to
NEIL remitting proceeds to Consumers for its coverage.
Consumers also procured coverage from NEIL that would partially cover the
cost of replacement power during certain prolonged accidental outages at
Palisades. Insurance would not cover such costs during the first 12 weeks of any
outage, but insurance would cover most of such costs during the next 52 weeks of
the outage, followed by a reduced level of coverage for a period up to 110
additional weeks.
The permanently closed Big Rock remains insured by NEIL for up to $500
million for decontamination, debris removal, and covered direct property loss,
subject to standard policy terms and conditions.
Consumers retains the risk of loss to the extent of the insurance
deductibles and to the extent that its loss exceeds its policy limits. Because
NEIL is a mutual insurance company, Consumers could be subject to assessments
from NEIL up to $12.8 million in any policy year if insured losses in excess of
NEIL's maximum policyholders surplus occur at its, or any other member's,
nuclear facility.
Consumers maintains nuclear liability insurance for injuries and off-site
property damage insurance for the nuclear hazard at Palisades for up to
approximately $9.5 billion, the maximum insurance liability limits established
by the Price-Anderson Act. Congress enacted the Price-Anderson Act to provide
financial protection for persons who may be liable for a nuclear accident or
incident and persons who may be injured by a nuclear
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incident. Part of this financial protection consists of a mandatory
industry-wide program under which owners of nuclear generating facilities could
be assessed if a nuclear incident occurs at any of such facilities. The maximum
assessment against Consumers could be $88 million per occurrence, limited to
maximum annual installment payments of $10 million. Consumers also maintains
insurance under a master worker program that covers tort claims for bodily
injury to workers caused by nuclear hazards. The policy contains a $200 million
nuclear industry aggregate limit. Under a previous insurance program providing
coverage for claims brought by nuclear workers, Consumers remains responsible
for a maximum assessment of up to $6.3 million. The Big Rock plant remains
insured for nuclear liability by a combination of insurance and United States
government indemnity totaling $544 million.
Consumers has not obtained insurance for property damage at its nuclear
plants caused by floods and earthquakes because it believes that the protective
systems built into these plants and the low probability of an event of this type
at the locations of these plants makes such insurance unnecessary.
Insurance policy terms, limits and conditions are subject to change during
the year as Consumers renews its policies.
CONSUMERS GAS UTILITY
Based on the number of customers, Consumers' gas utility operations, if
independent, would be the fifth largest gas utility company in the United
States. Consumers' gas utility operations purchase, transport, store, distribute
and sell natural gas. As of December 31, 2000, it was authorized to provide
service in 54 of the 68 counties in Michigan's lower peninsula. Principal cities
served include Bay City, Flint, Jackson, Kalamazoo, Lansing, Pontiac and
Saginaw, as well as the suburban Detroit area, where nearly 900,000 of the gas
customers are located. Consumers' gas operations are not dependent upon a single
customer, or even a few customers, and the loss of any one or even a few of such
customers is not reasonably likely to have a material adverse effect on its
financial condition.
Consumers' gas operations are seasonal. Consumers and its wholly owned
subsidiary, Michigan Gas Storage, inject natural gas into storage during the
summer months of the year for use during the winter months when demand is
higher. Peak demand usually occurs in the winter due to colder temperatures and
the resulting increased demand for heating fuels. In 2000, total deliveries of
natural gas sold by Consumers and by other sellers over Consumers' pipeline and
distribution network to ultimate customers, including the MCV Partnership,
totaled 410 bcf.
GAS UTILITY PROPERTIES: Consumers' gas distribution and transmission system
consists of 24,383 miles of distribution mains and 1,108 miles of transmission
lines throughout Michigan's lower peninsula. It owns and operates six compressor
stations with a total of 115,400 installed horsepower. Consumers has 11 gas
storage fields located across Michigan with an aggregate storage capacity of
221.3 bcf.
Michigan Gas Storage's transmission system consists of 521 miles of
pipelines within Michigan's lower peninsula. It owns and operates two compressor
stations with a total of 46,600 installed horsepower. Michigan Gas Storage has
three gas storage fields located in Osceola, Clare and Missaukee counties of
Michigan with an aggregate storage capacity of 109.5 bcf.
GAS SUPPLY: In 2000, Consumers purchased 37.2 percent of its required gas
supply under contracts with a duration of longer than one year. Total 2000
purchases included 15.3 percent from United States producers outside Michigan,
18.6 percent from Canadian producers, 3.3 percent from Michigan producers and
42.7 percent from the spot market. Authorized suppliers in the experimental gas
customer choice pilot program, which started in April 1998, supplied the
remaining 20.1 percent of gas delivered by Consumers.
Consumers' firm transportation agreements, excluding agreements with
Michigan Gas Storage, are with Trunkline, Panhandle, ANR Pipeline Company and
Great Lakes Gas Transmission, L.P. Consumers uses these agreements to deliver
gas to Michigan for ultimate deliveries to market. In total, Consumers' firm
transportation
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arrangements are capable of carrying over 80 percent of Consumers' total gas
supply requirements. As of December 31, 2000, Consumers' portfolio of firm
transportation from pipelines to Michigan is as follows:
VOLUME
(DEKATHERMS/DAY) EXPIRATION
---------------- ----------
Trunkline................................................ 336,375 October 2002
Panhandle................................................ 60,000 October 2002
ANR Pipeline Company..................................... 10,000 December 2002
6,000 January 2002
83,790 October 2003
Great Lakes Gas Transmission, L.P........................ 85,092 April 2004
Consumers transports the balance of its required gas supply under
interruptible contracts. The amount of interruptible transportation service and
the use of it varies primarily with the price for such service and the
availability and price of the spot supplies being purchased and transported.
Consumers' use of interruptible transportation is generally in off-peak summer
months and after Consumers has fully utilized the services under the firm
transportation agreements.
NATURAL GAS TRANSMISSION
CMS Gas Transmission, formed in 1988, owns, develops and manages domestic
and international natural gas facilities. In 2000, CMS Gas Transmission's
operating revenue was $906 million. CMS Energy expanded the importance of this
business segment with the acquisition of Panhandle in 1999. For additional
information on the acquisition of Panhandle, see ITEM 7. PANHANDLE'S
MANAGEMENT'S DISCUSSION AND ANALYSIS.
PANHANDLE: Panhandle Eastern Pipe Line, formed in Delaware in 1929, is a
wholly owned subsidiary of CMS Gas Transmission. In March 1999, CMS Energy
acquired Panhandle Eastern Pipe Line and its principal subsidiaries, Trunkline
and Pan Gas Storage, as well as Panhandle Eastern Pipe Line affiliates,
Trunkline LNG and Panhandle Storage, from subsidiaries of Duke Energy.
Immediately following the acquisition, Trunkline LNG and Panhandle Storage
became wholly owned subsidiaries of Panhandle Eastern Pipe Line.
Panhandle is primarily engaged in the interstate transmission and storage
of natural gas. Panhandle operates a large natural gas pipeline network,
providing customers in the Midwest and Southwest with a comprehensive array of
transportation services. Panhandle's major customers include 25 utilities
located primarily in the United States Midwest market area, which encompasses
large portions of Michigan, Ohio, Indiana, Illinois, Missouri and Tennessee.
In 2000, Panhandle's consolidated operating revenue was $483 million. Of
Panhandle's operating revenue, 79 percent was generated from transportation
services, 9 percent from storage services, 8 percent from LNG terminalling
services and 4 percent from other services. During 2000, 1999 and 1998, sales to
ProLiance Energy, L.L.C., a nonaffiliated gas marketer, accounted for at least
10 percent of consolidated revenues of Panhandle. During 2000 and 1999, sales to
subsidiaries of CMS Energy, primarily Consumers, accounted for at least 10
percent of consolidated revenues of Panhandle. No other customer accounted for
10 percent or more of Panhandle's revenues during 2000, 1999 or 1998. For
additional information, see ITEM 7. PANHANDLE'S MANAGEMENT'S DISCUSSION AND
ANALYSIS -- RESULTS OF OPERATIONS.
For the years 1996 to 2000, Panhandle's combined throughput was 1,319 TBtu,
1,279 TBtu, 1,141 TBtu, 1,139 TBtu and 1,374 TBtu, respectively. Beginning in
March 2000, the amount includes Sea Robin's throughput. A majority of
Panhandle's revenue comes from long-term service agreements with local
distribution company customers. Panhandle also provides firm transportation
services under contract to gas marketers, producers, other pipelines, electric
power generators and a variety of end-users. In addition, the pipelines offer
both firm and interruptible transportation to customers on a short-term or
seasonal basis. Demand for gas transmission on Panhandle's pipeline systems is
seasonal, with the highest throughput and a higher portion of revenues occurring
during the colder period in the first and fourth quarters.
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NATURAL GAS TRANSMISSION PROPERTIES: Domestic -- CMS Gas Transmission has a
total of 15,734 miles of pipeline in the United States, including 154 miles of
projects under construction, with a daily capacity of approximately 8.5 bcf.
Panhandle Eastern Pipe Line's portion of CMS Gas Transmission's natural gas
transmission system consists of four large diameter pipelines extending
approximately 1,300 miles from producing areas in the Anadarko Basin of Texas,
Oklahoma and Kansas through the states of Missouri, Illinois, Indiana, Ohio and
into Michigan. Trunkline's transmission system extends approximately 1,400 miles
from the Gulf Coast areas of Texas and Louisiana through the states of Arkansas,
Mississippi, Tennessee, Kentucky, Illinois and Indiana to a point on the
Indiana-Michigan border.
At December 31, 2000, CMS Gas Transmission had processing capabilities of
approximately 1.0 bcf per day of natural gas at nine plants in Michigan,
Oklahoma and Texas including a hydrocarbon fractionation plant in Michigan with
a capacity of 30,000 barrels per day. Through Panhandle, CMS Gas Transmission
owns and operates 51 compressor stations. It also has six gas storage fields
located in Illinois, Kansas, Louisiana, Michigan and Oklahoma with an aggregate
storage capacity of 70 bcf. One underground storage field in which CMS Gas
Transmission has a 51 percent ownership is used for natural gas liquids. CMS Gas
Transmission currently has two gas storage field under development.
Through subsidiaries, CMS Gas Transmission operates 4,569 miles of gas
gathering systems with total capacity of 1.5 bcf per day in Michigan, Oklahoma,
Texas and Wyoming.
CMS Gas Transmission, through Panhandle, owns and operates an LNG receiving
terminal in Louisiana. Panhandle also owns a one-third interest in a company
that plans to extend and to convert an existing 26-inch pipeline, currently
owned by Trunkline, from natural gas transmission service to liquid products
service by the beginning of 2002.
International -- At December 31, 2000, CMS Gas Transmission has ownership
interests in the following pipelines:
LOCATION OWNERSHIP INTEREST (%) MILES OF PIPELINES
-------- ---------------------- ------------------
Argentina................................................. 29.4 3,331
Argentina to Brazil....................................... 20.0 258
Argentina to Chile........................................ 50.0 707
Australia (Western Australia)............................. 40.0(a) 927
Australia (Western Australia)............................. 100.0 259
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(a) CMS Gas Transmission has a 45 percent interest in a consortium that
acquired an 88 percent interest in the pipeline.
CMS Gas Transmission has an ownership interest in a methanol plant under
construction in Equatorial Guinea, Africa. The plant is scheduled to go into
service in mid-2001 and will have a capacity of 2,500 metric tonnes per day.
Properties of certain CMS Gas Transmission subsidiaries are subject to
liens of creditors of the respective subsidiaries.
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INDEPENDENT POWER PRODUCTION
CMS Generation, formed in 1986, invests in, acquires, develops, constructs
and operates non-utility power generation plants in the United States and
abroad. The rapid growth in CMS Generation's generating capacity has been
matched by growth in this business segment's operating revenue. In 2000, the
independent power production business segment's operating revenue, which
includes revenues from CMS Generation, CMS Operating, S.A., the MCV Facility and
the MCV Partnership, was $500 million. For additional information, see ITEM 7.
CMS ENERGY'S MANAGEMENT'S DISCUSSION AND ANALYSIS -- INDEPENDENT POWER
PRODUCTION RESULTS OF OPERATIONS.
INDEPENDENT POWER PRODUCTION PROPERTIES: As of December 31, 2000, CMS
Generation had ownership interests in operating power plants totaling 8,365
gross MW (3,533 net MW) throughout the United States and abroad. At December 31,
2000, additional plants totaling approximately 3,553 gross MW are under
construction or advanced development.
The following table details CMS Generation's interest in independent power
plants in the United States as well as abroad as of year end 2000 (excluding the
MCV facility and plants owned by CMS Operating, S.A. discussed further below):
OWNERSHIP INTEREST GROSS CAPACITY
LOCATION FUEL TYPE (%) (MW)
-------- --------- ------------------ --------------
DOMESTIC
California.................................... Wind 8.5 72
California.................................... Wind 22.7 30
California.................................... Wood 37.8 36
Connecticut................................... Scrap tire 50.0 31
Maine......................................... Hydro 50.0 4
Michigan...................................... Wood 50.0 35
Michigan...................................... Wood 50.0 39
Michigan...................................... Natural gas 100.0 160
Michigan...................................... Coal 50.0 62
Michigan...................................... Natural gas 100.0 68
Michigan...................................... Natural gas 100.0 156
New York...................................... Hydro 1.0 14
New York...................................... Hydro 50.0 3
North Carolina................................ Wood 50.0 45
Oklahoma...................................... Natural gas 8.8 124
Virginia...................................... Hydro 55.0 3
INTERNATIONAL
Argentina..................................... Hydro 17.2 1,320
Australia..................................... Coal 49.6 2,000
Chile......................................... Natural gas 50.0 555
Ghana......................................... Light fuel oil 90.0 224
India......................................... Diesel 49.0 200
India......................................... Natural gas 33.2 235
Jamaica....................................... Diesel 41.2 63
Latin America................................. Various Various 912
Morocco....................................... Coal 50.0 1,008
Philippines................................... Coal 47.5 96
Philippines................................... Diesel 47.5 50
Thailand...................................... Coal 66.0 300
United Arab Emirates.......................... Natural gas 40.0 370
Venezuela..................................... Diesel 70.0 150
In 2000, CMS Generation sold its ownership interest in a 58 MW
hydroelectric generating project located in New York and its ownership interest
in a 239 MW natural gas-fueled generating plant in New Jersey.
CMS Enterprises, through CMS Operating, S.A., owns a 128 MW natural gas
power plant, and has a 92.6 percent ownership interest in a 540 MW natural gas
power plant, each in Argentina.
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CMS Midland owns 49 percent interest in the MCV Partnership, which was
formed to construct and operate the MCV Facility. The MCV Facility was sold to
five owner trusts and leased back to the MCV Partnership. CMS Holdings is a
limited partner in the FMLP, which is a beneficiary of one of these trusts. CMS
Holdings' indirect beneficial interest in the MCV Facility is 35 percent. The
MCV Facility has gross capacity of approximately 1,370 MW (671 net MW).
CMS Generation has ownership interests in certain facilities such as Loy
Yang, Jorf Lasfar and El Chocon. The Loy Yang assets are owned in fee, but are
subject to the security interests of its lenders. The Jorf Lasfar facility is
held pursuant to a right of possession agreement with the Moroccan state-owned
Office National de l'Electricite. The El Chocon facility is held pursuant to a
30-year possession agreement.
For information on capital expenditures, see ITEM 7. CMS ENERGY
MANAGEMENT'S DISCUSSION AND ANALYSIS -- CAPITAL RESOURCES AND LIQUIDITY AND ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA -- NOTE 5 OF CMS ENERGY'S NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS.
OIL AND GAS EXPLORATION AND PRODUCTION
CMS Oil and Gas formed in 1967, conducts oil and gas exploration and
development operations in the United States, primarily the Permian Basin in
Texas and the Power River Basin in Wyoming and in the countries of Cameroon,
Congo, Colombia, Equatorial Guinea, Tunisia and Venezuela. In 2000, CMS Oil and
Gas achieved production levels of 7.27 million barrels of oil, condensate and
plant products and 17.56 bcf of gas. At January 1, 2001, CMS Oil and Gas's
proven oil and gas reserves total 234.6 million net equivalent barrels
reflecting a balanced portfolio of reserves, consisting of 45.5 percent oil and
condensate and 54.5 percent natural gas.
During 2000, CMS Oil and Gas participated with a working interest in
drilling wells as follows:
NUMBER OF
NUMBER OF WELLS SUCCESSFUL WELLS SUCCESS RATIO
--------------- ----------------- ---------------
TYPE OF WELL GROSS NET GROSS NET GROSS NET
------------ ----- --- ----- --- ----- ---
Exploratory...................................... -- -- -- -- -- --
Development...................................... 466 245 466 245 100% 100%
--- --- --- --- --- ---
Total..................................... 466 245 466 245 100% 100%
=== === === === === ===
The preceding table includes CMS Oil and Gas' participation in coal bed
methane gas wells in Wyoming and Montana, where CMS Oil and Gas participated in
409 wells (198 net) during 2000. In 2000, CMS Oil and Gas' operating revenue was
$131 million.
OIL AND GAS EXPLORATION AND PRODUCTION PROPERTIES: The following table
shows net oil and gas production by CMS Oil and Gas for the years 1998 through
2000:
2000 1999 1998
---- ---- ----
Oil and condensate (Mbbls)(a)............................... 6,980 7,288 7,307
Natural gas (MMcf)(a)....................................... 17,564 26,412 26,495
Plant products (Mbbls)(a)................................... 287 396 413
Reserves to annual production ratio
Oil (MMbbls).............................................. 14.7 15.2 11.5
Gas (bcf)................................................. 43.7 29.9 21.3
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(a) Revenue interest to CMS Oil and Gas.
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The following table shows CMS Oil and Gas' undeveloped net acres of oil and
gas leasehold interests.
DECEMBER 31 2000 1999
----------- ---- ----
DOMESTIC
Wyoming..................................................... 177,408 177,691
Montana..................................................... 95,852 96,994
Michigan.................................................... -- 71,718
Texas (including offshore acreage)(a)....................... 44,372 50,735
Indiana..................................................... -- 12,212
Ohio........................................................ -- 6,887
Louisiana................................................... 2,232 3,480
--------- ---------
Total domestic....................................... 319,864 419,717
--------- ---------
INTERNATIONAL
Venezuela................................................... 339,521 339,521
Colombia.................................................... 331,378 251,680
Cameroon.................................................... 183,636 187,636
Equatorial Guinea........................................... 209,806 148,977
Ecuador..................................................... -- 66,430
Tunisia..................................................... 64,761 64,761
Congo....................................................... 17,364 17,364
--------- ---------
Total international.................................. 1,146,466 1,076,369
--------- ---------
Total net acres...................................... 1,466,330 1,496,086
========= =========
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(a) Does not include net undeveloped acreage of 40,845 in Texas in which CMS
Oil and Gas holds a contractual right to earn an interest by drilling as of
December 31, 2000.
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The following table shows CMS Oil and Gas' estimated proved reserves of oil
and gas for the years 1998 through 2000.
INTERNATIONAL DOMESTIC
------------------------------ --------------
SOUTH
TOTAL AFRICA AMERICA U.S.
--------------- ------------- ------------- --------------
OIL GAS OIL GAS OIL GAS OIL GAS
--- --- --- --- --- --- --- ---
(OIL IN MMBBLS AND NATURAL GAS IN BCF)
Estimated Proved Developed and
Undeveloped Reserves:
December 31, 1997.................... 98.3 322.2 43.0 74.1 53.7 -- 1.6 248.1
Revisions and other changes....... (8.2) (27.4) 2.0 1.4 (10.7) -- 0.5 (28.8)
Extensions and discoveries........ 3.3 278.3 3.2 270.9 0.1 -- -- 7.4
Acquisitions of reserves.......... 2.9 17.4 2.9 17.4 -- -- -- --
Sales of reserves................. -- -- -- -- -- -- -- --
Production........................ (7.7) (26.5) (2.8) (1.9) (4.2) -- (0.7) (24.6)
----- ------ ---- ----- ----- ---- ---- ------
December 31, 1998.................... 88.6 564.0 48.3 361.9 38.9 -- 1.4 202.1
Revisions and other changes....... 15.2 135.2 15.3 131.1 (0.6) -- 0.5 4.1
Extensions and discoveries........ 12.0 23.2 0.1 2.1 11.2 -- 0.7 21.1
Acquisitions of reserves.......... 8.8 92.1 8.8 92.1 -- -- -- --
Sales of reserves................. -- -- -- -- -- -- -- --
Production........................ (7.7) (26.4) (3.4) (3.3) (3.6) -- (0.7) (23.1)
----- ------ ---- ----- ----- ---- ---- ------
December 31, 1999.................... 116.9 788.1 69.1 583.9 45.9 -- 1.9 204.2
Revisions and other changes....... (6.4) (7.3) (2.0) (2.6) (4.6) -- 0.1 (4.7)
Extensions and discoveries........ 27.7 172.2 20.8 102.0 1.3 7.9 5.5 62.3
Acquisitions of reserves.......... -- -- -- -- -- -- -- --
Sales of reserves................. (24.3) (167.5) -- -- (23.5) -- (0.8) (167.5)
Production........................ (7.3) (17.6) (3.6) (3.9) (3.2) (0.9) (0.5) (12.8)
----- ------ ---- ----- ----- ---- ---- ------
December 31, 2000.................... 106.6 767.9 84.3 679.4 15.9 7.0 6.2 81.5
===== ====== ==== ===== ===== ==== ==== ======
Estimated Proved Developed Reserves(a)
December 31, 1997.................... 45.3 267.8 25.1 29.6 18.5 -- 1.7 238.2
December 31, 1998.................... 50.6 448.8 31.7 251.0 17.5 -- 1.4 197.8
December 31, 1999.................... 74.5 652.7 50.9 460.9 21.8 -- 1.8 191.8
December 31, 2000.................... 94.1 748.2 80.8 679.4 10.8 7.0 2.4 61.8
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(a) The government license in Venezuela is an oil service contract whereby CMS
Oil and Gas is paid a fee per barrel for oil discovered, lifted, and
delivered to Maraven S.A., a subsidiary of Petroleos de Venezuela S.A.
Additionally, CMS Oil and Gas receives a fee for reimbursement of certain
capital expenditures. The volumes presented represent actual production
with respect to which CMS Oil and Gas is paid a per barrel fee.
Properties of certain CMS Oil and Gas subsidiaries are also subject to
liens of creditors of the respective subsidiaries. In 2000, CMS Oil and Gas sold
all of its northern Michigan oil and gas properties. In that same year, it also
sold its working interest in oil reserves located in Ecuador.
MARKETING, SERVICES AND TRADING
CMS MST, formed in 1996 and the surviving entity of a 1997 merger with CMS
Gas Marketing Company formed in 1987, provides gas, oil, and electric marketing,
risk management and energy management services to industrial, commercial,
utility and municipal energy users throughout the United States and abroad. CMS
MST has grown dramatically since its inception. CMS Energy intends to use CMS
MST to enhance performance of CMS Energy assets, such as gas reserves and power
plants. CMS MST markets approximately 614 bcf of natural gas, 37,781 GWh of
electricity, 31 million barrels of crude oil and 9 million barrels of natural
gas liquids. From
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1997 through 2000, CMS MST also performed 350 energy management services
projects. At December 31, 2000, CMS MST had more than 10,611 customers,
transported gas on more than 40 gas pipelines and was active in 39 states and
Canada and Brazil. In 2000, CMS MST's operating revenue was $3.3 billion. For
additional information, see ITEM 7. CMS ENERGY'S MANAGEMENT'S DISCUSSION AND
ANALYSIS -- MARKETING, SERVICES AND TRADING RESULTS OF OPERATIONS.
INTERNATIONAL ENERGY DISTRIBUTION
CMS Electric and Gas, formed in 1996, is involved in purchasing, investing
in and operating gas and electric distribution systems worldwide. In 2000,
operating revenue was $265 million.
INTERNATIONAL ENERGY DISTRIBUTION PROPERTIES: As of December 31, 2000, CMS
Electric and Gas had ownership interest in electric distribution companies as
follows:
LOCATION OWNERSHIP INTEREST CUSTOMERS SERVED SALES
-------- ------------------ ---------------- -----
(%) (APPROX.) (GWH)
Venezuela............................................. 70.00 94,000 816
Argentina............................................. 24.56 235,000 1,225
Brazil................................................ 81.22 146,000 1,125
In January 2000, CMS Electric and Gas sold its interest in Companhia Forca
Luz Cataguazes -- Leopoldina and its subsidiaries in Brazil. In December 2000,
CMS Energy sold approximately one-half of its 48 percent ownership interest in
Empressa Distribuidora de Electricidad de Entre Rios, S.A., an electric
distribution utility serving the province of Entre Rios, Argentina and executed
an agreement to sell the remaining 24.56 percent in 2001.
SALES BETWEEN BUSINESS SEGMENTS
CMS Energy's sales between business segments for the years ended December
31 were as follows:
YEARS ENDED DECEMBER 31 2000 1999 1998
----------------------- ---- ---- ----
Oil and Gas Exploration and Production...................... $ 24 $ 45 $ 64
Natural Gas Transmission.................................... 177 69 9
Marketing, Services and Trading............................. 176 73 68
CMS ENERGY, CONSUMERS AND PANHANDLE REGULATION
CMS Energy is a public utility holding company that is exempt from
registration under PUHCA. CMS Energy, Consumers, Panhandle and their
subsidiaries are subject to regulation by various federal, state, local and
foreign governmental agencies, including those specifically described below.
MICHIGAN PUBLIC SERVICE COMMISSION
Consumers is subject to the jurisdiction of the MPSC, which regulates
public utilities in Michigan with respect to retail utility rates, accounting,
utility services, certain facilities and various other matters. The MPSC also
has, or will have, rate jurisdiction over several limited partnerships in which
CMS Gas Transmission has ownership interests. These partnerships own, or will
own, and operate intrastate gas transmission pipelines.
The Attorney General, ABATE, and the MPSC staff typically intervene in MPSC
electric and gas related proceedings concerning Consumers and intervened in the
proceeding described below. For many years, almost every significant MPSC order
affecting Consumers has been appealed. Certain appeals from the MPSC orders are
pending in the Court of Appeals and the Michigan Supreme Court.
RATE PROCEEDINGS: In 1996, the MPSC issued orders that established the
electric authorized rate of return on common equity at 12.25 percent and the gas
authorized rate of return on common equity at 11.6 percent.
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MPSC REGULATORY AND MICHIGAN LEGISLATIVE CHANGES: State regulation of the
retail electric and gas utility businesses is in the process of undergoing
significant changes. In 2000, the Michigan Legislature enacted the Customer
Choice Act. By 2002, the Customer Choice Act will permit all Consumers' electric
customers to choose their electric energy supplier. The enactment of the
Customer Choice Act imposed rate cuts, rate freezes and rate caps. For a
description and additional information regarding the Customer Choice Act, see
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA -- NOTE 5 TO CMS ENERGY'S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, and ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA -- NOTE 2 TO CONSUMERS' NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS.
As a result of regulatory changes in the natural gas industry, Consumers
transports the natural gas commodity that is sold to some customers by
competitors like gas producers, marketers and others. In 1998, Consumers'
implemented a statewide three-year experimental gas customer choice pilot
program eventually allowing up to 300,000 residential, commercial and industrial
retail gas sales customers to choose their gas supplier. The program froze the
rates Consumers' is permitted to charge for the service of distributing gas to
its customers through March 31, 2001.
Beginning April 1, 2001, Consumers will establish a permanent gas customer
choice program that will allow up to 600,000 of Consumers' gas customers to
participate in the permanent gas customer choice program. By 2003, all of
Consumers' gas customers will be eligible to select an alternative gas commodity
supplier. Also on April 1, 2001, Consumers will return to a GCR mechanism that
will allow it to recover from its customers all prudently incurred costs to
purchase the natural gas commodity and transport it to Consumers' facilities.
For additional information on gas customer choice programs see ITEM 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA -- NOTE 5 TO CMS ENERGY'S NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, and ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA -- NOTE 2 TO CONSUMERS' NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS.
FEDERAL ENERGY REGULATORY COMMISSION
FERC has limited rate jurisdiction over several independent power plants in
which CMS Generation has ownership interests. FERC also has more comprehensive
jurisdiction over Michigan Gas Storage, Panhandle Eastern Pipe Line, Pan Gas
Storage, Trunkline, Trunkline LNG and Sea Robin as natural gas companies within
the meaning of the Natural Gas Act. FERC jurisdiction relates, among other
things, to the acquisition, operation and disposal of assets and facilities and
to the service provided and rates charged. Some of Consumers' gas business is
also subject to regulation by FERC, including a blanket transportation tariff
pursuant to which Consumers can transport gas in interstate commerce.
FERC has authority to regulate rates and charges for transportation or
storage of natural gas in interstate commerce or sold by a natural gas company
in interstate commerce for resale. FERC also has authority over the construction
and operation of pipeline and related facilities utilized in the transportation
and sale of natural gas in interstate commerce, including the extension,
enlargement of or abandonment of service using such facilities. Panhandle
Eastern Pipe Line, Trunkline Gas Company, Sea Robin, Trunkline LNG, Michigan Gas
Storage and Pan Gas Storage hold certificates of public convenience and
necessity issued by the FERC, authorizing them to construct and operate the
pipelines, facilities and properties now in operation for which such
certificates are required, and to transport and store natural gas in interstate
commerce.
FERC also regulates certain operation aspects of Consumers' electric
operations including compliance with FERC accounting rules; transmission of
electric energy; wholesale rates; transfers of certain facilities; corporate
mergers and issuance of securities.
The Federal Power Act grants independent power producers and electricity
marketers "direct access" to the interstate electric transmission systems owned
by electric utilities, and all electric utilities are required to offer
transmission services to all market participants on a non-discriminatory basis
under tariffs approved by the FERC. For a discussion of the effect of certain
FERC orders on Consumers, see ITEM 7. CMS ENERGY'S MANAGEMENT'S DISCUSSION AND
ANALYSIS -- OUTLOOK -- CONSUMERS' ELECTRIC BUSINESS OUTLOOK and ITEM 7.
CONSUMERS' MANAGEMENT'S DISCUSSION AND ANALYSIS --
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OUTLOOK -- ELECTRIC UTILITY OUTLOOK . For a discussion of the effect of certain
FERC orders on Panhandle see ITEM 7. PANHANDLE'S MANAGEMENT'S DISCUSSION AND
ANALYSIS -- OTHER MATTERS and ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA -- NOTE 3 TO PANHANDLE'S NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
NUCLEAR REGULATORY COMMISSION
Under the Atomic Energy Act of 1954, as amended, and the Energy
Reorganization Act of 1974, Consumers is subject to the jurisdiction of the NRC
with respect to the design, construction, operation and decommissioning of its
nuclear power plants. Consumers is also subject to NRC jurisdiction with respect
to certain other uses of nuclear material. These and other matters concerning
Consumers' nuclear plants are more fully discussed in ITEM 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA -- NOTES 2 AND 5 TO CMS ENERGY'S CONSOLIDATED
FINANCIAL STATEMENTS, and ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA -- NOTES 1 AND 2 TO CONSUMERS' CONSOLIDATED FINANCIAL STATEMENTS.
OTHER REGULATION
The Secretary of Energy regulates the importation and exportation of
natural gas and has delegated various aspects of this jurisdiction to the Office
of Fossil Fuels of the DOE.
Panhandle is also subject to the Natural Gas Pipeline Safety Act of 1968,
which regulates gas pipeline safety requirements, and to the Hazardous Liquid
Pipeline Safety Act of 1979, which regulates oil and petroleum pipelines.
CMS ENERGY, CONSUMERS AND PANHANDLE ENVIRONMENTAL COMPLIANCE
CMS Energy, Consumers and Panhandle and their subsidiaries are subject to
various federal, state and local regulations for environmental quality,
including air and water quality, waste management, zoning and other matters.
Management believes that the responsible administration of CMS Energy's,
Consumers' and Panhandle's energy resources includes reasonable programs for the
protection and enhancement of the environment. For additional information
concerning environmental matters, see ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA -- NOTE 5 OF CMS ENERGY'S NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS and ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA -- NOTE 2 OF
CONSUMERS' NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. For additional
information on Panhandle's environmental matters, see ITEM 7. PANHANDLE'S
MANAGEMENT'S DISCUSSION AND ANALYSIS -- OTHER ENVIRONMENTAL MATTERS and ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA -- NOTE 10 OF PANHANDLE'S NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
Consumers installed and is currently installing modern emission controls at
its electric generating plants and converted electric generating units to burn
cleaner fuels. Consumers expects that the cost of future environmental
compliance, especially compliance with clean air laws, will be significant as a
result of EPA regulations regarding nitrogen oxide and particulate-related
emissions. These regulations will require Consumers to make significant capital
expenditures. For the preliminary estimates of these capital expenditures to
reduce nitrogen oxide-related emissions see ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA -- NOTE 5 OF CMS ENERGY'S NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS -- and NOTE 2 OF CONSUMERS' NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS -- Consumers' Electric Utility Contingencies -- Electric
Environmental Matters -- Cost of Environmental Law Compliance.
Consumers is in the process of closing older ash disposal areas at two
plants. Construction, operation, and closure of a modern solid waste disposal
area for ash can be expensive, due to the imposition of stricter federal and
state requirements. In order to significantly reduce the closure costs,
Consumers has worked with others to use bottom ash and fly ash as part of
temporary and final cover for ash disposal areas in place of native materials
where such use is compatible with environmental standards. To reduce disposal
volumes, Consumers sells coal ash for use as a filler for asphalt, for
incorporation into concrete products, and for other environmentally
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compatible uses. The EPA has announced an intention to develop new nationwide
standards for ash disposal areas. Consumers intends to work through industry
groups to help ensure that any such regulations that may be issued will require
the minimum cost consistent with protection of the environment. In 2000, capital
expenditures by Consumers for environmental protection additions were $103
million. Consumers estimates 2001 expenditures for this program at $181 million.
Consumers has PCB in some of its electrical equipment, as do most electric
utilities. During routine maintenance activities, Consumers identified PCB as a
component in certain paint, grout and sealant materials at the Ludington Pumped
Storage facility. Consumers removed and replaced part of the PCB material.
Consumers proposed a plan to the EPA to deal with the remaining materials and is
waiting on a response from the EPA.
Certain environmental regulations affecting CMS Energy, Consumers and
Panhandle include, but are not limited to, the Clean Air Act Amendments of 1990
and Superfund. Superfund can require any individual or entity that may have
owned or operated a disposal site, as well as transporters or generators of
hazardous substances that were sent to such site, to share in remediation costs
for the site.
Consumers', CMS Energy's and Panhandle's current insurance coverages do not
extend to certain environmental clean-up costs, such as claims for air
pollution, some past PCB contamination and for some long-term storage or
disposal of pollutants.
For discussion of environmental matters involving Panhandle, including
possible liability and capital costs, see ITEM 7. PANHANDLE'S MANAGEMENT'S
DISCUSSION AND ANALYSIS -- OTHER ENVIRONMENTAL MATTERS and ITEM 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA -- NOTE 10 OF PANHANDLE'S NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS. Panhandle does not anticipate that compliance
with federal, state and local provisions regulating the discharge of materials
into the environment, or otherwise protecting the environment will have a
material adverse effect on the competitive position, consolidated results of
operations or financial position of Panhandle.
CMS ENERGY, CONSUMERS AND PANHANDLE COMPETITION
ELECTRIC COMPETITION
Consumers' electric utility business experiences competition, actual and
potential, from many sources, both in the wholesale and retail markets, and in
electric generation, electric delivery, and retail services.
In the wholesale electricity markets, Consumers competes with other
wholesale suppliers, marketers and brokers. Electric competition in the
wholesale markets increased significantly since 1996 due to FERC Order 888.
However, wholesale for retail transactions by Consumers generated an immaterial
amount of Consumers' 2000 revenues from electric operations. Consumers does not
believe future loss of wholesale for retail sales to be significant. In most
instances, the customers will continue to be transmission customers even if they
cease to be generation customers.
A significant increase in retail electric competition is now possible with
the passage of the Customer Choice Act and the availability of retail direct
access. The Customer Choice Act requires Consumers to open up to 750 MW of its
electric customer power supply requirement to competition by the end of 2001.
The Consumer Choice Act gives all customers the right to choose their own
electric supplier after January 1, 2002.
In addition to retail electric customer choice, Consumers also has
competition or potential competition from: 1) the threat of customers relocating
outside Consumers' service territory; 2) the possibility of municipalities
owning or operating competing electric delivery systems; 3) customer
self-generation; and 4) adjacent municipal utilities that extend lines to
customers near service territory boundaries. Consumers addresses this
competition primarily through offering rate discounts, providing additional
services and insistence upon compliance with MPSC rules.
Consumers offers non-commodity retail services to electric customers in an
effort to offset costs. Consumers faces competition from many sources, including
energy management services companies, other utilities, contractors, and retail
merchandisers.
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CMS Energy's non-utility electric subsidiaries primarily face competition
from other marketers, brokers, financial management firms, energy management
firms, and other utilities through the marketing services and trading business
segment; and from other generators, marketers, brokers, and price of power on
the wholesale market through the independent power production business segment.
For additional information concerning electric competition, see ITEM 7. CMS
ENERGY'S MANAGEMENT'S DISCUSSION AND ANALYSIS -- OUTLOOK -- CONSUMERS' ELECTRIC
UTILITY OUTLOOK and ITEM 7. CONSUMERS MANAGEMENT'S DISCUSSION AND ANALYSIS --
OUTLOOK -- ELECTRIC BUSINESS OUTLOOK.
GAS COMPETITION
Competition has existed for several years, and is likely to increase, in
various aspects of Consumers' gas business. Competition traditionally comes from
alternate fuels and energy sources, such as propane, oil, and electricity.
Increasingly, competition comes from other suppliers of the natural gas
commodity.
Changes in regulation have resulted in increased competition from other
sellers of natural gas for sale of the gas commodity to Consumers' customers. As
a result of the regulatory changes that separated (unbundled) the transportation
and storage of natural gas from the sale of natural gas by interstate pipelines
and Michigan gas distributors, Consumers offers unbundled services
(transportation and some storage) to its larger end-use customers. Additionally,
to prepare for the unbundled retail market, Consumers is conducting an
experimental gas customer choice program that, through March 2001, allows
300,000 residential, commercial, and industrial retail gas sales customers to
choose an alternative gas supplier in direct competition with Consumers as a
supplier of the gas commodity. In late 2000, Consumers received MPSC
authorization to implement a permanent gas customer choice pilot program
beginning April 1, 2001. This permanent program will allow all gas customers to
select an alternative gas supplier by 2003.
CMS Energy's non-utility gas subsidiaries face significant competition from
other gas pipeline companies, gas producers, gas storage companies, brokers and
marketers and competition from other fuels such as oil and coal.
For additional information concerning gas competition, see Panhandle
Competition below, ITEM 7. CMS ENERGY'S MANAGEMENT DISCUSSION AND
ANALYSIS -- OUTLOOK, ITEM 7. CONSUMERS' MANAGEMENT'S DISCUSSION AND
ANALYSIS -- OUTLOOK and ITEM 7. PANHANDLE'S MANAGEMENT'S DISCUSSION AND
ANALYSIS -- OUTLOOK.
PANHANDLE COMPETITION
Panhandle's interstate pipelines compete with other interstate and
intrastate pipeline companies in the transportation and storage of natural gas.
The principal elements of competition among pipelines are rates, terms of
service and flexibility and reliability of service. Panhandle competes directly
with ANR Pipeline Company, Natural Gas Pipeline Company of America, Texas Gas
Transmission Corporation, Northern Border Pipeline Company, Alliance Pipeline
and Northern Natural Gas Company in the Midwest market area.
Natural gas competes with other forms of energy available to Panhandle's
customers and end-users, including electricity, coal and fuel oils. The primary
competitive factor is price. Changes in the availability or price of natural gas
and other forms of energy, the level of business activity, conservation,
legislation and governmental regulations, the capability to convert to
alternative fuels, and other factors, including weather, affect the demand for
natural gas in the areas served by Panhandle.
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EMPLOYEES
CMS ENERGY
As of December 31, 2000, CMS Energy and its subsidiaries, including
Consumers and Panhandle, had 11,652 full-time equivalent employees of whom
11,599 are full-time employees and 53 full-time equivalent employees associated
with the part-time work force. Included in the total are 3,939 employees who are
covered by union contracts.
CONSUMERS
As of December 31, 2000, Consumers and its subsidiaries had 8,755 full-time
equivalent employees of whom 8,704 are full-time employees and 51 full-time
equivalent employees associated with the part-time work force. Included in the
total are 3,663 full-time operating, maintenance and construction employees of
Consumers who are represented by the Union. Consumers and the Union negotiated a
collective bargaining agreement that became effective as of June 1, 2000. By its
terms, it will continue in full force and effect until June 1, 2005.
PANHANDLE
At December 31, 2000, Panhandle had 1,105 full-time equivalent employees.
Of these employees, 250 were represented by the Paper, Allied - Industrial
Chemical and Energy Workers International Union, AFL-CIO, CLC.
CMS ENERGY, CONSUMERS AND PANHANDLE FORWARD-LOOKING STATEMENTS CAUTIONARY
FACTORS AND UNCERTAINTIES.
INTERNATIONAL OPERATIONS
CMS Energy, through certain of its Enterprises subsidiaries, has made
substantial international investments in approximately 20 countries. These
international investments in electric generating facilities, oil and gas
exploration, production and processing facilities, natural gas pipelines and
electric distribution systems face a number of risks inherent in acquiring,
developing and owning these types of facilities. CMS Energy believes that its
subsidiaries maintain traditional insurance, similar to comparable companies in
the same line of business, for the various risk exposures including political
risk from possible nationalization or expropriation and inability to convert
currency, incidental to CMS Energy's respective businesses.
Although CMS Energy maintains insurance for various risks, CMS Energy is
exposed to some risks that include local political and economic factors over
which it has no control. CMS Energy, through its Enterprises subsidiaries, may
incur risk exposures such as changes in foreign governmental and regulatory
policies (including changes in industrial regulation and control and changes in
taxation), changing political conditions and international monetary
fluctuations. Particularly, international investments of the type CMS Energy is
making are subject to the risk that they may be expropriated or that the
required agreements, licenses, permits and other approvals may be changed or
terminated in violation of their terms. Also, the local foreign currency may be
devalued or the conversion of the currency may be restricted or prohibited or
other actions, such as increases in taxes, royalties or import duties, may be
taken which adversely affect the value and the recovery of our investment. In
some of these cases, the investment may have to be abandoned or disposed of at a
loss. These factors could significantly adversely affect the financial results
of the affected subsidiary and, in turn, CMS Energy's growth plans for
Enterprises' international investments and CMS Energy's financial position and
results of operations.
UNCERTAINTIES
Specific uncertainties are described in ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA -- NOTE 5 OF CMS ENERGY'S NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS, NOTE 2 OF CONSUMERS' NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, and
NOTE 3 and NOTE 10 OF PANHANDLE'S NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
Certain risks are described in ITEM 7. CMS ENERGY'S MANAGEMENT'S DISCUSSION AND
ANALYSIS -- MARKET RISK INFORMATION and ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA -- NOTE 10 OF CMS ENERGY'S NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS and in ITEM 7. CONSUMERS' MANAGEMENT'S DISCUSSION AND
ANALYSIS -- DERIVATIVES AND HEDGES.
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The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements to encourage such disclosures without the
threat of litigation, providing those statements are identified as
forward-looking and are accompanied by meaningful, cautionary statements
identifying important factors that could cause the actual results to differ
materially from those projected in the statement. Forward-looking statements
give our expectations or forecasts of future events. You can identify these
statements by the fact that they do not relate strictly to historical or current
facts. Forward-looking statements have been and will be made in this Form 10-K
and in our other written documents (such as press releases, visual
presentations, and securities disclosure documents) and oral presentations (such
as analyst conference calls). Such statements are based on management's beliefs
as well as assumptions made by and information currently available to
management. When used in our documents or oral presentations, we intend the
words "anticipate", "believe", "estimate", "expect", "forecast", "intend",
"objective", "plan", "possible", "potential", "project" "projection" and
variations of such words and similar expressions to target forward-looking
statements that involve risk and uncertainty.
Any or all of our forward-looking statements in oral or written statements
or in other publications may turn out to be wrong. They can be affected by
inaccurate assumptions or by known or unknown risks and uncertainties. Many such
factors will be important in determining our actual future results.
Consequently, we cannot guarantee any forward-looking statement.
In addition to any assumptions and other factors referred to specifically
in connection with such forward-looking statements, there are numerous factors
that could cause our actual results to differ materially from those contemplated
in any forward-looking statements. Such factors include our inability to predict
and/or control:
- Sale of assets in accordance with plans;
- Achievement of operating synergies and revenue enhancement;
- Capital and financial market conditions, including current price of our
common stock, interest rates and availability of financing, market
perceptions of the energy industry, our company, or any of our
subsidiaries, our, or any of our subsidiaries', securities ratings, and
currency exchange controls;
- Factors affecting utility and diversified energy operations such as
unusual weather conditions, catastrophic weather-related damage,
unscheduled generation outages, maintenance or repairs, unanticipated
changes to fossil fuel, nuclear fuel or gas supply costs or availability
due to higher demand, shortages, transportation problems or other
developments, environmental incidents, or electric transmission or gas
pipeline system constraints;
- International, national, regional and local economic, competitive and
regulatory conditions and developments, particularly the trade, monetary,
fiscal, taxation and environmental policies of governments, agencies and
similar organizations in geographic areas where we have a financial
interest;
- Adverse regulatory or legal decisions, including environmental laws and
regulations, the manner and terms of implementation of the Customer
Choice Act; the pace of implementation and provisions for deregulation of
the natural gas industry, whether by legislative or regulatory action;
- Federal regulation of electric sales and transmission of electricity that
grants independent power producers and electricity marketers and other
utilities "direct access" to the interstate electric transmission systems
owned by electric utilities, creating opportunity for competitors to
market electricity to our wholesale customers;
- Energy markets, including 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;
- The increased competition caused by FERC approval of new pipeline and
pipeline expansion projects that transport large additional volumes of
natural gas to the Midwestern United States from Canada, which could
reduce volumes of gas transported by our natural gas transmission
businesses or cause them to lower rates in order to meet competition;
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- Potential disruption, expropriation or interruption of facilities or
operations due to accidents or political events and the ability to get or
maintain insurance coverage for such events;
- Nuclear power plant performance, decommissioning, policies, procedures,
incidents, and regulation, including the availability of spent nuclear
fuel storage;
- Technological developments in energy production, delivery and usage that
may result in competitive disadvantages and create the potential for
impairment of existing assets;
- Financial or regulatory accounting principles or policies imposed by the
FASB, the SEC, the FERC, the MPSC and similar entities with regulatory
oversight;
- Cost and other effects of legal and administrative proceedings,
settlements, investigations and claims;
- The development or operation of projects in which our subsidiaries have a
minority interest;
- Other uncertainties, which are difficult to predict and many of which are
beyond our control; and
- Other business or investment considerations that may be disclosed from
time to time in CMS Energy's, Consumers' or Panhandle's SEC filings or in
other publicly disseminated written documents.
CMS Energy, Consumers, Panhandle and their affiliates undertake no
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. The foregoing review of
factors pursuant to the Private Securities Litigation Reform Act should not be
construed as exhaustive or as any admission regarding the adequacy of our
disclosures prior to the effective date of the Act. Certain risk factors are
detailed from time to time in our various public filings. You are advised,
however to consult any further disclosures we make on related subjects in our
reports to the SEC. In particular, you should read the discussion in the section
entitled "Forward-Looking Statements" in our most recent reports to the SEC on
Form 10-Q or Form 8-K filed subsequent to this Form 10-K.
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EXECUTIVE OFFICERS
As of March 1, 2001
CMS ENERGY
NAME AGE POSITION PERIOD
---- --- -------- ------
William T. McCormick, Jr............. 56 Chairman of the Board, President and Chief
Executive Officer of CMS Energy 2000-Present
Chairman of the Board and President of
Consumers 2000-Present
Chairman of the Board, President and Chief
Executive Officer of Enterprises 2000-Present
Chairman of the Board and Chief Executive
Officer of CMS Energy 1987-2000
Chairman of the Board of Enterprises 1987-2000
Chairman of the Board of Consumers 1985-2000
Alan M. Wright....................... 55 Executive Vice President, Chief Financial
Officer and Chief Administrative Officer of
CMS Energy 2000-Present
Executive Vice President, Chief Financial
Officer and Chief Administrative Officer
of Consumers 2000-Present
Executive Vice President and Chief
Financial Officer of Enterprises 2000-Present
Senior Vice President and Chief Financial
Officer of CMS Energy 1998-2000
Senior Vice President and Chief Financial
Officer of Enterprises 1998-2000
Senior Vice President, Chief Financial
Officer and Treasurer of Enterprises 1994-1998
Senior Vice President, Chief Financial
Officer and Treasurer of CMS Energy 1994-1998
Senior Vice President and Chief Financial
Officer of Consumers 1993-2000
David W. Joos........................ 47 Executive Vice President and Chief
Operating Officer -- Electric of CMS Energy 2000-Present
Executive Vice President and Chief
Operating Officer -- Electric of
Enterprises 2000-Present
President and Chief Executive
Officer -- Electric of Consumers 1997-Present
Executive Vice President and Chief
Operating Officer -- Electric of
Consumers 1994-1997
William J. Haener.................... 59 Chairman of the Board -- Panhandle Eastern
Pipe Line 2001-Present
Executive Vice President and Chief
Operating Officer -- Gas of CMS Energy 2000-Present
Executive Vice President and Chief
Operating Officer -- Gas of Enterprises 2000-Present
Senior Vice President of Enterprises 1998-2000
President and Chief Executive Officer of
CMS Gas Transmission 1994-Present
Rodger A. Kershner................... 52 Senior Vice President and General Counsel
of CMS Energy 1996-Present
Senior Vice President of Enterprises 1999-Present
Senior Vice President and General Counsel
of Enterprises 1996-1999
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NAME AGE POSITION PERIOD
---- --- -------- ------
John W. Clark........................ 56 Senior Vice President of CMS Energy 1987-Present
Senior Vice President of Consumers 1985-Present
Preston D. Hopper.................... 50 Senior Vice President, Chief Accounting
Officer and Controller of CMS Energy 1996-Present
Senior Vice President and Chief Accounting
Officer of Enterprises 1997-Present
Senior Vice President and Controller of
Enterprises 1996-1997
Vice President, Controller and Chief
Accounting Officer of CMS Energy 1992-1996
Vice President and Controller of
Enterprises 1992-1996
Rodney E. Boulanger.................. 60 Senior Vice President of Enterprises 1996-Present
President and Chief Executive Officer of
CMS Generation 1995-Present
Carl L. English...................... 54 President and Chief Executive
Officer -- Gas of Consumers 2000-Present
Vice President of Consumers 1990-2000
James W. Cook........................ 60 Senior Vice President of CMS Energy 1995-Present
Senior Vice President of Enterprises 1994-Present
Doris F. Galvin...................... 46 Senior Vice President of Enterprises 1999-Present
Vice President and Treasurer of CMS Energy 1998-1999
Vice President and Treasurer of Enterprises 1998-1999
Vice President and Treasurer of Consumers 1993-1999
Frank Johnson........................ 53 President and Chief Executive Officer of
CMS Electric and Gas 2000-present
Vice President and Chief Operating Officer
of CMS Electric and Gas 2000
Vice President of CMS Electric and Gas 1996-2000
Bradley W. Fischer................... 54 President and Chief Executive Officer of
CMS Oil and Gas 1998-Present
Vice President of CMS Oil and Gas 1997-1998
*Christopher A. Helms................ 46 President and Chief Executive Officer of
Panhandle Eastern Pipe Line 2000-Present
President and Chief Operating Officer of
Panhandle Eastern Pipe Line 1999-2000
**Tamela W. Pallas................... 43 President and Chief Operating Officer of
CMS MST 1999-Present
***David Presley..................... 47 Vice President of CMS Gas Transmission 1999-Present
President of CMS Field Services, Inc. 1998-Present
- -------------------------
* Mr. Helms has served as President and Chief Operating Officer of Panhandle
Eastern Pipe Line since March 1999. From 1993 through March 1999, Mr. Helms
served as Director of Corporate Development and Vice President of Corporate
Affairs of Duke Energy Corporation.
** Ms. Pallas has served as President and Chief Operating Officer of CMS MST
since November 1999. From 1997 until November 1999, Ms. Pallas served as
Senior Vice President of Reliant Energy. From 1992 until 1997, Ms. Pallas
was employed by Basis Energy as a Senior Vice President.
*** Mr. Presley was the founder and President of Heritage Gas Services from 1995
through October 1998.
The present term of office of each of the executive officers extends to the
first meeting of the Board of Directors after the next annual election of
Directors of CMS Energy (scheduled to be held on May 25, 2001).
There are no family relationships among executive officers and directors of
CMS Energy.
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CONSUMERS
NAME AGE POSITION PERIOD
---- --- -------- ------
William T. McCormick, Jr............. 56 See the information under CMS Energy's
Executive Officers section above.
Alan M. Wright....................... 55 See the information under CMS Energy's
Executive Officers section above.
William J. Haener.................... 59 See the information under CMS Energy's
Executive Officers section above.
David W. Joos........................ 47 See the information under CMS Energy's
Executive Officers section above.
John W. Clark........................ 56 See the information under CMS Energy's
Executive Officers section above.
Dennis DaPra......................... 58 Senior Vice President and Controller of
Consumers 2001-Present
Vice President and Controller of
Consumers 1991-2001
Kenneth C. Emery..................... 53 Senior Vice President of Consumers 2000-Present
Vice President of Consumers 1996-2000
Carl L. English...................... 54 See the information under CMS Energy's
Executive Officers section above.
Robert A. Fenech..................... 53 Senior Vic