WEBVTT 00:00:00.000 --> 00:00:02.240 Welcome back to the Deep Dive, the place where 00:00:02.240 --> 00:00:04.639 we take these, you know, really complex organizations, 00:00:05.139 --> 00:00:08.119 dense reports, sprawling histories, and we just 00:00:08.119 --> 00:00:10.359 we distill them into the essential knowledge 00:00:10.359 --> 00:00:13.519 you need to be truly well informed. Today, we're 00:00:13.519 --> 00:00:16.260 peeling back the layers on CMS Energy, a massive 00:00:16.260 --> 00:00:18.980 entity that in many ways literally built the 00:00:18.980 --> 00:00:22.149 infrastructure backbone of an entire state. And 00:00:22.149 --> 00:00:24.410 we have a phenomenal stack of sources for this 00:00:24.410 --> 00:00:26.329 one. I mean, truly, we're looking at everything 00:00:26.329 --> 00:00:29.089 from, you know, the original blueprints of these 00:00:29.089 --> 00:00:32.109 pioneering technological achievements back in 00:00:32.109 --> 00:00:35.229 the early 1900s, all the way to modern day integrated 00:00:35.229 --> 00:00:38.149 resource plans. Financial data, corporate scrutiny. 00:00:38.369 --> 00:00:41.030 Intense corporate scrutiny. Yeah. It's the perfect 00:00:41.030 --> 00:00:43.369 blend, really, for the learner who wants to understand 00:00:43.369 --> 00:00:46.450 not just what a major utility does today, but 00:00:46.450 --> 00:00:49.429 why is history sort of dictates its current climate 00:00:49.429 --> 00:00:51.640 mandates and financial maneuvers. Our mission 00:00:51.640 --> 00:00:54.479 today is, it's pretty comprehensive. We want 00:00:54.479 --> 00:00:57.100 to unpack this major US utility company, tracing 00:00:57.100 --> 00:00:59.719 its history from its surprisingly distant founding 00:00:59.719 --> 00:01:03.619 139 years ago. I mean, back when electric power 00:01:03.619 --> 00:01:06.019 was a novelty. Total novelty. Right up to their 00:01:06.019 --> 00:01:09.000 massive modern commitments to wind, solar and 00:01:09.000 --> 00:01:11.780 grid storage. And I think the core tension we're 00:01:11.780 --> 00:01:13.620 exploring is how a company that was built on 00:01:13.620 --> 00:01:16.540 pioneering tech and public service navigates 00:01:16.540 --> 00:01:19.900 the 21st century demands of, you know, a clean 00:01:19.900 --> 00:01:22.799 energy transition and intense corporate accountability. 00:01:23.079 --> 00:01:26.439 And that tension is, it's just fundamental because 00:01:26.439 --> 00:01:29.060 of the sheer scale we're talking about. CMS Energy 00:01:29.060 --> 00:01:32.560 is a holding company. And its primary focus is 00:01:32.560 --> 00:01:34.939 utility operations in Michigan. And that's through 00:01:34.939 --> 00:01:37.400 its principal subsidiary, Consumers Energy. And 00:01:37.400 --> 00:01:40.329 this isn't a niche player. Not at all. Our sources 00:01:40.329 --> 00:01:42.890 confirm that Consumers Energy serves over 6 million 00:01:42.890 --> 00:01:45.650 of the state's 10 million residents. That is 00:01:45.650 --> 00:01:48.030 a truly phenomenal reach and responsibility. 00:01:48.349 --> 00:01:50.890 When you realize that, that two -thirds of the 00:01:50.890 --> 00:01:53.129 population of Michigan is dependent on the reliability, 00:01:53.469 --> 00:01:55.650 the affordability, the sustainability of this 00:01:55.650 --> 00:01:58.430 one entity, the context just shifts entirely. 00:01:58.769 --> 00:02:00.590 It does. It's not just a business anymore. It's 00:02:00.590 --> 00:02:02.799 a public trust. And what's fascinating here is 00:02:02.799 --> 00:02:05.319 just the sheer administrative, financial, and 00:02:05.319 --> 00:02:09.120 physical scale involved in maintaining that kind 00:02:09.120 --> 00:02:12.000 of public necessity while simultaneously transitioning 00:02:12.000 --> 00:02:14.199 away from the very power sources that sustain 00:02:14.199 --> 00:02:16.039 them for a century. Okay, let's unpack this. 00:02:16.120 --> 00:02:18.659 Let's start with the modern scale and structure, 00:02:18.879 --> 00:02:21.699 the who and how big. So let's establish that 00:02:21.699 --> 00:02:24.199 modern identity first. We're talking about the 00:02:24.199 --> 00:02:27.479 CMS Energy Corporation. It's a publicly traded 00:02:27.479 --> 00:02:30.939 company on the NYSE, part of the S &P 500, headquartered 00:02:30.939 --> 00:02:34.580 in Jackson, Michigan, at One Energy Plaza. When 00:02:34.580 --> 00:02:37.280 investors look at CMS, what are they primarily 00:02:37.280 --> 00:02:39.629 buying into? They are buying into stability. 00:02:39.909 --> 00:02:42.110 I mean, primarily it's due to the regulated nature 00:02:42.110 --> 00:02:44.810 of the utility business. CMS Energy is the parent 00:02:44.810 --> 00:02:46.990 company dealing in two absolute essential products, 00:02:47.229 --> 00:02:49.710 electricity and natural gas. But as you said, 00:02:49.770 --> 00:02:52.250 the core operational engine is consumers energy, 00:02:52.469 --> 00:02:54.810 the principal subsidiary that has operated since 00:02:54.810 --> 00:02:58.129 1886. And the fact that is a regulated utility, 00:02:58.310 --> 00:03:00.509 that is the single most important financial detail 00:03:00.509 --> 00:03:03.870 to grasp. That concept regulated utility is so 00:03:03.870 --> 00:03:06.550 crucial for our learner audience. Can you break 00:03:06.550 --> 00:03:08.509 that down? What does that mean? regulatory environment 00:03:08.509 --> 00:03:11.810 actually mean for a company of this size? It 00:03:11.810 --> 00:03:13.889 means they operate under what's often called 00:03:13.889 --> 00:03:17.289 the regulatory compact. So in short, the government 00:03:17.289 --> 00:03:21.050 grants consumers energy a monopoly over a specific 00:03:21.050 --> 00:03:24.020 service territory. in this case, serving those 00:03:24.020 --> 00:03:26.099 6 million Michigan residents. Okay, so they have 00:03:26.099 --> 00:03:28.439 a guaranteed customer base. A guaranteed monopoly. 00:03:28.860 --> 00:03:31.319 And in exchange for that, the utility agrees 00:03:31.319 --> 00:03:34.240 to deliver reliable, safe service, and critically, 00:03:34.539 --> 00:03:37.300 their profits and the rates they can charge customers 00:03:37.300 --> 00:03:39.800 are strictly overseen and approved by the Michigan 00:03:39.800 --> 00:03:42.259 Public Service Commission. So they're guaranteed 00:03:42.259 --> 00:03:44.599 a certain rate of return, but only if they invest 00:03:44.599 --> 00:03:46.319 in the infrastructure and maintain reliability. 00:03:46.560 --> 00:03:48.520 They can't just hike rates whenever they want. 00:03:48.699 --> 00:03:51.009 Exactly. They generate revenue based on their 00:03:51.009 --> 00:03:54.009 approved rate base, which is really just the 00:03:54.009 --> 00:03:56.349 total value of the physical assets they've invested 00:03:56.349 --> 00:03:58.770 in and that are deemed useful to customers. So 00:03:58.770 --> 00:04:01.110 we're talking power plants, transmission lines. 00:04:01.229 --> 00:04:03.870 Power plants, transmission lines, smart meters, 00:04:03.969 --> 00:04:06.330 you name it. And that financial structure explains 00:04:06.330 --> 00:04:10.729 why utilities, unlike, say, tech companies, often 00:04:10.729 --> 00:04:13.229 have these massive asset valuations but relatively 00:04:13.229 --> 00:04:15.990 stable, predictable income streams. Let's use 00:04:15.990 --> 00:04:19.410 the actual 2024 financial beta we have to kind 00:04:19.410 --> 00:04:22.350 of contextualize this massive scale. What does 00:04:22.350 --> 00:04:24.540 this look like on the balance sheet? Well, looking 00:04:24.540 --> 00:04:27.060 at the 2024 snapshot, the company reported revenue 00:04:27.060 --> 00:04:30.600 standing at U .S. $7 .52 billion. Seven and a 00:04:30.600 --> 00:04:33.000 half billion. From that, they achieved an operating 00:04:33.000 --> 00:04:36.439 income of U .S. $1 .49 billion. And that then 00:04:36.439 --> 00:04:38.779 translated into a net income of an even U .S. 00:04:38.779 --> 00:04:41.199 $1. billion. Hitting that billion dollar net 00:04:41.199 --> 00:04:43.639 income mark, that gives a really clear sense 00:04:43.639 --> 00:04:45.279 of the financial weight they carry. But when 00:04:45.279 --> 00:04:47.259 we look at the total assets, that rate base you 00:04:47.259 --> 00:04:49.740 mentioned, that figure is just immense. It is. 00:04:49.800 --> 00:04:53.240 Total assets stood at U .S. $35 .9 billion. in 00:04:53.240 --> 00:04:55.779 2024. And this isn't cash flow. This is physical 00:04:55.779 --> 00:04:58.000 infrastructure. It represents the value of their 00:04:58.000 --> 00:05:00.680 entire system. Natural gas pipelines stretching 00:05:00.680 --> 00:05:03.180 across the state, massive underground storage 00:05:03.180 --> 00:05:05.720 facilities, the remaining coal fleet, nuclear 00:05:05.720 --> 00:05:07.740 decommissioning funds, and of course all the 00:05:07.740 --> 00:05:10.660 new wind and solar farms. It is the physical 00:05:10.660 --> 00:05:13.160 spine of the state's energy infrastructure. All 00:05:13.160 --> 00:05:16.980 managed by... what was it, about 8 ,300 employees? 00:05:17.500 --> 00:05:22.319 8 ,324 employees, yeah. That $35 .9 billion asset 00:05:22.319 --> 00:05:25.100 valuation really drives home that idea of the 00:05:25.100 --> 00:05:27.980 public trust they hold. I mean, maintaining and 00:05:27.980 --> 00:05:30.540 upgrading that enormous physical network is just 00:05:30.540 --> 00:05:32.980 an endless job, especially during a massive transition 00:05:32.980 --> 00:05:35.839 like this. It is. And this necessity for constant 00:05:35.839 --> 00:05:39.019 investment and upgrade, it brings us to the increasingly 00:05:39.019 --> 00:05:41.500 crucial non -utility arm of the company, which 00:05:41.500 --> 00:05:43.660 provides a really key strategic outlet for... 00:05:43.689 --> 00:05:45.670 growth outside of that regulated environment. 00:05:45.930 --> 00:05:47.509 And this is the part of the company that went 00:05:47.509 --> 00:05:49.629 through a major pivot and rebranding recently, 00:05:49.689 --> 00:05:52.209 moving away from what used to be called CMS Enterprises. 00:05:52.269 --> 00:05:54.870 Yes, the creation and focus on North Star Clean 00:05:54.870 --> 00:05:57.829 Energy. On November 1st, 2022, CMS Enterprises 00:05:57.829 --> 00:06:00.029 officially changed its name. And the sources 00:06:00.029 --> 00:06:01.610 are pretty clear that this was done to signal 00:06:01.610 --> 00:06:04.050 a very specific strategic intent. Which was? 00:06:04.269 --> 00:06:06.649 To reflect its focus on serving more corporate 00:06:06.649 --> 00:06:10.170 clients. So think major data centers or large 00:06:10.170 --> 00:06:12.370 manufacturers who have their own sustainability 00:06:12.370 --> 00:06:15.350 mandates. And engaging in domestic independent 00:06:15.350 --> 00:06:18.389 power production and natural gas projects that 00:06:18.389 --> 00:06:20.839 are not tied to the Michigan rate base. That's 00:06:20.839 --> 00:06:23.420 such a critical distinction. Consumer's energy 00:06:23.420 --> 00:06:25.879 has to serve every resident in its territory 00:06:25.879 --> 00:06:29.220 at regulated rates. Northstar, on the other hand, 00:06:29.319 --> 00:06:31.259 can go out and seek higher margin specialized 00:06:31.259 --> 00:06:35.060 projects globally or domestically. Exactly. Dealing 00:06:35.060 --> 00:06:37.360 directly with big corporate customers who need, 00:06:37.480 --> 00:06:39.459 for example, power purchase agreements for new 00:06:39.459 --> 00:06:42.220 solar farms. Right. Northstar allows CMS Energy 00:06:42.220 --> 00:06:44.920 to pursue competitive market growth. If a large 00:06:44.920 --> 00:06:47.459 corporation in an estate wants a custom -built 00:06:47.459 --> 00:06:50.620 solar array to offset its carbon footprint, Northstar 00:06:50.620 --> 00:06:53.220 can design, finance, and operate that asset. 00:06:53.399 --> 00:06:56.120 That's growth the regulated utility simply cannot 00:06:56.120 --> 00:06:58.699 achieve, since consumers' energy's mandate is 00:06:58.699 --> 00:07:00.819 so strictly tied to serving Michigan ratepayers. 00:07:01.319 --> 00:07:04.040 So this non -regulated arm offers higher growth 00:07:04.040 --> 00:07:06.199 potential, and that sort of balances the stability 00:07:06.199 --> 00:07:08.579 of the regulated side. That's the idea. So the 00:07:08.579 --> 00:07:11.100 structure is actually pretty sophisticated. You've 00:07:11.100 --> 00:07:13.800 got a stable, regulated foundation in consumers' 00:07:13.939 --> 00:07:16.300 energy, providing essential services and steady 00:07:16.300 --> 00:07:18.980 returns, while this high -growth, competitive 00:07:18.980 --> 00:07:21.860 market arm, North Star Clean Energy, seeks out 00:07:21.860 --> 00:07:24.519 new opportunities in the rapidly expanding clean 00:07:24.519 --> 00:07:26.579 energy space. That's the modern picture, yeah. 00:07:27.079 --> 00:07:29.560 Deeply entrenched in Michigan utility service, 00:07:29.660 --> 00:07:32.180 but with a very clear strategic pivot toward 00:07:32.180 --> 00:07:35.879 high -growth, non -utility clean energy. But 00:07:35.879 --> 00:07:37.819 we can't really appreciate the complexity of 00:07:37.819 --> 00:07:39.720 today without understanding the origin story. 00:07:39.899 --> 00:07:42.339 We have to go back to a time when electric power 00:07:42.339 --> 00:07:46.199 itself was still a wild new frontier. And here's 00:07:46.199 --> 00:07:48.279 where we see the origins of that pioneering spirit. 00:07:48.600 --> 00:07:51.319 So the story of this massive corporation begins 00:07:51.319 --> 00:07:54.480 not with multi -billion dollar asset valuations 00:07:54.480 --> 00:07:56.740 or international corporate clients, but with 00:07:56.740 --> 00:07:59.319 a very simple, very localized ambition back in 00:07:59.319 --> 00:08:02.420 1886. It truly started from a local entrepreneurial 00:08:02.420 --> 00:08:05.149 need. The foundational moment was when... Two 00:08:05.149 --> 00:08:07.370 men, William Augustine Foote and Samuel Jarvis, 00:08:07.470 --> 00:08:09.870 approached officials in Jackson, Michigan, and 00:08:09.870 --> 00:08:12.209 their proposal was simple. Illuminate Jackson's 00:08:12.209 --> 00:08:14.709 downtown area with electric arc lights. Downtown 00:08:14.709 --> 00:08:17.829 illumination? I mean, that's a major technological 00:08:17.829 --> 00:08:20.370 upgrade from gaslight for sure, but it's certainly 00:08:20.370 --> 00:08:23.509 not a regional power grid. Not even close. Their 00:08:23.509 --> 00:08:26.350 initial efforts led to the formation of the Jackson 00:08:26.350 --> 00:08:30.529 Electric Light Works in 1888. But Foote and Jarvis? 00:08:31.230 --> 00:08:33.690 They understood the core challenge of early electrification. 00:08:33.990 --> 00:08:36.429 Power has to be generated, and then it has to 00:08:36.429 --> 00:08:38.549 be distributed. So they quickly moved to secure, 00:08:38.610 --> 00:08:41.269 reliable generation. Which in Michigan meant 00:08:41.269 --> 00:08:43.509 tapping into the rivers. Exactly. Hydropower. 00:08:43.809 --> 00:08:46.409 Their first major step into generation really 00:08:46.409 --> 00:08:48.690 defined their early strategy. And what was that? 00:08:49.049 --> 00:08:51.230 It was just a year after forming the Jackson 00:08:51.230 --> 00:08:54.090 Electric Lightworks. In 1889, they built an early 00:08:54.090 --> 00:08:56.509 hydro plant project at the Trowbridge Dam on 00:08:56.509 --> 00:08:59.200 the Kalamazoo River in Allegan. But crucially, 00:08:59.320 --> 00:09:01.480 Foote recognized that the future wasn't just 00:09:01.480 --> 00:09:03.799 in running one small plant. It was in connecting 00:09:03.799 --> 00:09:06.039 many small plants. So he immediately shifted 00:09:06.039 --> 00:09:09.220 into consolidation mode. Immediately. Foote began 00:09:09.220 --> 00:09:11.600 rapidly consolidating small power companies all 00:09:11.600 --> 00:09:13.919 across the region, acquiring local competitors, 00:09:14.259 --> 00:09:16.940 centralizing their operations. And this strategy 00:09:16.940 --> 00:09:18.980 eventually led to the formation of the Commonwealth 00:09:18.980 --> 00:09:22.080 Power Company. This foresight moving from a local 00:09:22.080 --> 00:09:24.759 light works to a regional power company was just. 00:09:25.320 --> 00:09:27.460 It was revolutionary at the time. In this early 00:09:27.460 --> 00:09:31.399 focus on hydro and consolidation, it led to what 00:09:31.399 --> 00:09:33.580 I would call a genuinely world -changing aha 00:09:33.580 --> 00:09:36.659 moment for the energy industry globally. And 00:09:36.659 --> 00:09:38.960 it originated right here with this company's 00:09:38.960 --> 00:09:41.279 founders. This is the moment to remember. The 00:09:41.279 --> 00:09:44.120 Croton Hydro Project on the Muskegon River, which 00:09:44.120 --> 00:09:47.379 Foote and Jarvis built in 1907, it wasn't just 00:09:47.379 --> 00:09:49.179 about more generating capacity. It was about 00:09:49.179 --> 00:09:51.809 transmission technology. Okay, tell us why the 00:09:51.809 --> 00:09:54.090 Croton Project was such a global milestone. What 00:09:54.090 --> 00:09:56.269 was the technological barrier they smashed through? 00:09:56.470 --> 00:09:58.950 The crucial detail is that the Croton Hydro Project 00:09:58.950 --> 00:10:01.669 was the first project in the world capable of 00:10:01.669 --> 00:10:04.909 transmitting 110 ,000 volts of electricity. 110 00:10:04.909 --> 00:10:08.090 ,000 volts. Before this, transmitting power over 00:10:08.090 --> 00:10:10.590 long distances was just incredibly inefficient 00:10:10.590 --> 00:10:13.809 due to energy loss. It forced cities to rely 00:10:13.809 --> 00:10:16.950 on local, often very polluting, power generation. 00:10:17.480 --> 00:10:22.000 110 kilovolts, 110 kilov. Explain the strategic 00:10:22.000 --> 00:10:24.879 implication of that specific number. Why did 00:10:24.879 --> 00:10:27.879 it matter so much? Well, it allowed for the commercial 00:10:27.879 --> 00:10:30.480 birth of the modern centralized utility model. 00:10:31.019 --> 00:10:33.340 Before 110 kilovee, you couldn't efficiently 00:10:33.340 --> 00:10:36.059 power a distant city from a large -scale, cost 00:10:36.059 --> 00:10:39.100 -effective hydro plant. The moment Foote perfected 00:10:39.100 --> 00:10:42.179 110 kilovee transmission, he instantly gained 00:10:42.179 --> 00:10:44.220 a massive competitive advantage. He could build 00:10:44.220 --> 00:10:46.620 big plants anywhere. He could build massive power 00:10:46.620 --> 00:10:49.379 stations in remote, cheap locations like on the 00:10:49.379 --> 00:10:51.860 Croton River, and then efficiently transmit that 00:10:51.860 --> 00:10:54.720 power up to 100 miles away to major consumption 00:10:54.720 --> 00:10:57.429 centers like Grand Rapids or Jackson. It just 00:10:57.429 --> 00:10:59.870 fundamentally shifted the economics of power. 00:10:59.970 --> 00:11:01.950 So it wasn't just a technical upgrade. It enabled 00:11:01.950 --> 00:11:03.789 the financial strategy of the modern utility 00:11:03.789 --> 00:11:06.049 building large, efficient, centralized plants 00:11:06.049 --> 00:11:08.690 and delivering power across these vast surface 00:11:08.690 --> 00:11:10.429 territories. You got it. It was the birth of 00:11:10.429 --> 00:11:12.309 the energy monopoly, really, built on technological 00:11:12.309 --> 00:11:14.820 superiority. So this is the strategic insight 00:11:14.820 --> 00:11:17.840 then. Foote's company wasn't just building dams. 00:11:17.840 --> 00:11:20.440 They were pioneering the technology that allowed 00:11:20.440 --> 00:11:23.139 for the regional integrated power grid itself. 00:11:23.460 --> 00:11:26.080 And that vision laid the groundwork for their 00:11:26.080 --> 00:11:28.360 position as the dominant utility in Michigan. 00:11:28.519 --> 00:11:31.519 It absolutely did. But that kind of rapid high 00:11:31.519 --> 00:11:33.960 capital expansion driven by that technological 00:11:33.960 --> 00:11:37.200 leadership, it requires equally massive amounts 00:11:37.200 --> 00:11:39.860 of capital. Which brings us to the next pivotal 00:11:39.860 --> 00:11:44.529 moment. In 1920. Right. By 1920, to finance not 00:11:44.529 --> 00:11:46.450 just operational maintenance, but the aggressive 00:11:46.450 --> 00:11:48.710 expansion into other energy and power generation 00:11:48.710 --> 00:11:51.610 sectors, which utilities constantly require. 00:11:52.190 --> 00:11:54.649 Foote and Jarvis offered preferred shares of 00:11:54.649 --> 00:11:56.330 the Commonwealth Power Company to the public. 00:11:56.470 --> 00:11:58.490 So this was the moment they formalized that transition 00:11:58.490 --> 00:12:01.789 from a pioneering regional infrastructure builder 00:12:01.789 --> 00:12:05.129 into a publicly financed corporate entity ready 00:12:05.129 --> 00:12:07.210 to tackle the immense industrial growth of the 00:12:07.210 --> 00:12:09.389 20th century. Precisely. They started with basic 00:12:09.389 --> 00:12:11.950 arc lights, conquered hydropower, established 00:12:11.950 --> 00:12:13.710 a global first and high voltage transmission. 00:12:13.929 --> 00:12:16.669 And then by 1920, they were publicly capitalized. 00:12:16.769 --> 00:12:19.529 That set the stage for decades of large scale 00:12:19.529 --> 00:12:21.940 asset accumulation. Which brings us directly 00:12:21.940 --> 00:12:24.340 into the period where they had to diversify beyond 00:12:24.340 --> 00:12:27.980 just hydro and early fossil fuels. The mid -20th 00:12:27.980 --> 00:12:30.679 century brought new challenges. I mean, the explosive 00:12:30.679 --> 00:12:33.519 growth of industry and population required immense, 00:12:33.659 --> 00:12:36.639 consistent baseload power. And that led this 00:12:36.639 --> 00:12:38.879 company, like many others, straight into the 00:12:38.879 --> 00:12:42.019 nuclear era. The pivot was. It was decisive. 00:12:42.360 --> 00:12:45.779 In 1961, Consumers Energy announced plans for 00:12:45.779 --> 00:12:48.779 Michigan's very first nuclear power plant. Big 00:12:48.779 --> 00:12:51.710 rock point. located up in Charlevoix. A huge 00:12:51.710 --> 00:12:54.289 step. It was a clear, strategic shift toward 00:12:54.289 --> 00:12:56.830 embracing what was, at the time, the most advanced 00:12:56.830 --> 00:12:58.950 form of baseload power generation available. 00:12:59.210 --> 00:13:01.149 It really signified their commitment to keeping 00:13:01.149 --> 00:13:03.590 pace with surging industrial demand. And Big 00:13:03.590 --> 00:13:05.690 Rock Point was followed by an even larger commitment 00:13:05.690 --> 00:13:07.690 to nuclear power about a decade later, right? 00:13:07.789 --> 00:13:10.230 Correct. We also had the Palisades Nuclear Generating 00:13:10.230 --> 00:13:12.230 Station, which is situated right on Lake Michigan. 00:13:12.529 --> 00:13:15.129 This facility was a major asset. It began production 00:13:15.129 --> 00:13:17.649 in December of 1971. And it was a workhorse. 00:13:17.909 --> 00:13:20.549 Oh, absolutely. At its peak it was designed to 00:13:20.549 --> 00:13:23.090 serve the daily needs of about 400 ,000 people. 00:13:23.549 --> 00:13:25.669 It was a real linchpin of their generation portfolio 00:13:25.669 --> 00:13:28.509 for decades, and it demonstrated the necessity 00:13:28.509 --> 00:13:31.990 of having diverse power sources to manage that 00:13:31.990 --> 00:13:33.850 statewide demand. And as we mentioned earlier, 00:13:34.009 --> 00:13:35.889 the postscript on Palisades is important because 00:13:35.889 --> 00:13:38.309 it shows the ongoing management of these massive 00:13:38.309 --> 00:13:40.929 assets. Yeah, CMS Energy owned the Palisades 00:13:40.929 --> 00:13:43.470 plant until 2006 when they sold it to Energy. 00:13:43.669 --> 00:13:46.429 And selling a major generation asset like a nuclear 00:13:46.429 --> 00:13:48.889 plant, that's a significant corporate decision. 00:13:49.389 --> 00:13:51.169 It's usually tied to risk management, regulatory 00:13:51.169 --> 00:13:54.490 costs, or a strategic refocusing on other forms 00:13:54.490 --> 00:13:56.789 of generation. Which sort of foreshadows the 00:13:56.789 --> 00:13:59.629 later transition away from centralized baseload. 00:13:59.649 --> 00:14:02.269 It does. Now, alongside these massive nuclear 00:14:02.269 --> 00:14:04.289 investments, they were also innovating heavily 00:14:04.289 --> 00:14:08.350 in natural gas, which is, I mean, vital for residential 00:14:08.350 --> 00:14:10.769 heating and industrial use in a cold state like 00:14:10.769 --> 00:14:13.129 Michigan. This often gets overshadowed by the 00:14:13.129 --> 00:14:15.009 big power plants. It's easy to forget about the 00:14:15.009 --> 00:14:18.070 gas side. It is, but their natural gas strategy 00:14:18.070 --> 00:14:21.429 has been incredibly resilient. A key innovation 00:14:21.429 --> 00:14:25.350 happened way back in 1946 when the company formed 00:14:25.350 --> 00:14:27.309 a strategic partnership with the Panhandle Company. 00:14:27.840 --> 00:14:31.519 And they had this genius idea of converting former 00:14:31.519 --> 00:14:34.220 natural gas fields, which are essentially just 00:14:34.220 --> 00:14:37.500 large underground geological formations, into 00:14:37.500 --> 00:14:40.340 massive underground natural gas storage areas. 00:14:40.620 --> 00:14:43.159 That's a brilliant way to stabilize supply in 00:14:43.159 --> 00:14:46.080 a market with such seasonal demand. It's crucial 00:14:46.080 --> 00:14:49.299 for resilience. Michigan's gas demand peaks violently 00:14:49.299 --> 00:14:51.899 in the winter. So by storing massive volumes 00:14:51.899 --> 00:14:54.139 of gas during the summer, when demand is low 00:14:54.139 --> 00:14:56.470 and prices are cheaper, They can ensure continuous 00:14:56.470 --> 00:14:59.070 affordable supply during those cold snaps. It's 00:14:59.070 --> 00:15:01.190 basically a hedge against market volatility and 00:15:01.190 --> 00:15:03.190 supply chain shocks. That's exactly what it is. 00:15:03.309 --> 00:15:05.590 And then in the 1970s, they took gas innovation 00:15:05.590 --> 00:15:07.830 one step further, almost becoming a petroleum 00:15:07.830 --> 00:15:10.509 manufacturer themselves. This is the truly surprising 00:15:10.509 --> 00:15:13.370 piece of their history. It really is. In 1971, 00:15:13.590 --> 00:15:15.490 the company announced plans for a synthetic gas 00:15:15.490 --> 00:15:17.710 reforming plant. And the whole point was to ensure 00:15:17.710 --> 00:15:20.110 heat for Michigan homes, regardless of, you know, 00:15:20.110 --> 00:15:22.690 external oil and gas politics. So what was the 00:15:22.690 --> 00:15:25.120 technical marvel here? Our sources are explicit. 00:15:25.639 --> 00:15:27.980 This plant was the first of its kind in North 00:15:27.980 --> 00:15:30.399 America to produce pipeline -quality synthetic 00:15:30.399 --> 00:15:33.519 gas. And they did this by chemically converting 00:15:33.519 --> 00:15:36.879 impure liquid petroleum, which is generally easier 00:15:36.879 --> 00:15:39.419 to source and transport than natural gas, into 00:15:39.419 --> 00:15:42.159 usable high -grade synthetic gas. The kind you 00:15:42.159 --> 00:15:44.740 could just pipe directly to homes? The kind suitable 00:15:44.740 --> 00:15:47.360 for residential pipelines, yeah. So they were 00:15:47.360 --> 00:15:49.399 not just transporting and storing gas. They were 00:15:49.399 --> 00:15:51.899 actively pioneering the technology to manufacture 00:15:51.899 --> 00:15:55.100 a key energy source on a massive commercial scale 00:15:55.100 --> 00:15:58.960 in the early 1970s. It just highlights this deep, 00:15:58.980 --> 00:16:01.580 ongoing corporate commitment to energy security 00:16:01.580 --> 00:16:04.360 and technological independence. It shows a consistent 00:16:04.360 --> 00:16:06.620 pattern, doesn't it? When they're faced with 00:16:06.620 --> 00:16:08.580 a structural challenge, whether it's a long distance 00:16:08.580 --> 00:16:11.639 transmission in 1907 or securing fuel in 1971, 00:16:12.019 --> 00:16:14.519 they just lean into pioneering technical solutions. 00:16:14.620 --> 00:16:17.940 Every time. And this era of diversification and 00:16:17.940 --> 00:16:20.740 massive asset growth, it necessitated a corporate 00:16:20.740 --> 00:16:23.000 overhaul, which led to the creation of the current 00:16:23.000 --> 00:16:24.980 holding company structure we see today. And that 00:16:24.980 --> 00:16:28.559 was formalized in 1987. That's right. CMS Energy 00:16:28.559 --> 00:16:31.269 was formed as the parent company. It absorbed 00:16:31.269 --> 00:16:33.809 the utility business, which was then called Consumers 00:16:33.809 --> 00:16:36.590 Power, and the diversified non -utility investment 00:16:36.590 --> 00:16:39.809 arm, CMS Enterprises. And this reorganization 00:16:39.809 --> 00:16:42.149 was instrumental in managing the complexity of 00:16:42.149 --> 00:16:44.649 all these diverse assets, from nuclear plants 00:16:44.649 --> 00:16:47.389 to synthetic gas producers. And they officially 00:16:47.389 --> 00:16:50.710 became CMS Energy, publicly traded later that 00:16:50.710 --> 00:16:54.590 year. October 23, 1987. CMS Energy officially 00:16:54.590 --> 00:16:56.889 became a publicly owned company listed on the 00:16:56.889 --> 00:17:00.960 NYSE. And then a decade later, in 1997, they 00:17:00.960 --> 00:17:03.700 finalized the branding by changing the subsidiary 00:17:03.700 --> 00:17:06.680 name from Consumers Power to Consumers Energy, 00:17:06.940 --> 00:17:09.180 the name that has 6 million customers today. 00:17:09.359 --> 00:17:11.180 It's important to remember, too, that as the 00:17:11.180 --> 00:17:13.380 physical assets grew, so did the digital needs. 00:17:13.599 --> 00:17:15.799 They were also technological pioneers in the 00:17:15.799 --> 00:17:17.900 customer service space. They really were. The 00:17:17.900 --> 00:17:20.160 late 1990s saw the firm become one of the first 00:17:20.160 --> 00:17:22.299 utility companies to introduce an online billing 00:17:22.299 --> 00:17:24.430 system. I know that sounds mundane today, but 00:17:24.430 --> 00:17:26.890 back then, managing millions of accounts online 00:17:26.890 --> 00:17:29.950 was a major logistical and IT achievement. It 00:17:29.950 --> 00:17:31.509 further cemented their role as an infrastructure 00:17:31.509 --> 00:17:36.490 leader, both physical and digital. but interesting 00:17:36.490 --> 00:17:39.190 diversions in the early 2000s, where they kind 00:17:39.190 --> 00:17:41.710 of explored opportunities outside their core 00:17:41.710 --> 00:17:44.809 mission before refocusing. Yeah, the sources 00:17:44.809 --> 00:17:46.609 show they cast a pretty wide net for a while. 00:17:46.710 --> 00:17:49.470 An oil exploration agreement in 2001 for the 00:17:49.470 --> 00:17:51.869 Dismin Block of the Red Sea in Eritrea. Wow. 00:17:51.990 --> 00:17:55.029 And the founding of Interbank USA in 2002, moving 00:17:55.029 --> 00:17:57.390 into the financial sector by providing home improvement 00:17:57.390 --> 00:18:00.029 loans. But these non -core assets were eventually 00:18:00.029 --> 00:18:02.829 shed, right? They were. The oil exploration was 00:18:02.829 --> 00:18:05.130 transient, and the financial venture, Interbank... 00:18:05.130 --> 00:18:07.329 Bank USA was successfully sold to Regions Bank 00:18:07.329 --> 00:18:10.990 in 2021. And this cycle of acquisition, management, 00:18:11.130 --> 00:18:14.109 and strategic divestment is, it's typical of 00:18:14.109 --> 00:18:16.410 large corporations, but it clearly indicates 00:18:16.410 --> 00:18:18.809 a strategic narrowing and refocusing on the core 00:18:18.809 --> 00:18:20.930 utility mission and the clean energy transition. 00:18:21.190 --> 00:18:23.950 Which is our next and perhaps most critical area 00:18:23.950 --> 00:18:26.869 of focus. So if the 20th century was about building 00:18:26.869 --> 00:18:30.650 centralized power hydro nuclear coal, The modern 00:18:30.650 --> 00:18:32.930 era is defined by this massive, intentional, 00:18:33.049 --> 00:18:35.109 and very expensive pivot toward decentralized 00:18:35.109 --> 00:18:37.470 renewables and sustainability. And this started 00:18:37.470 --> 00:18:39.789 with a major statement of intent. It did. The 00:18:39.789 --> 00:18:43.970 year 2007 is pivotal here. CMS Energy announced 00:18:43.970 --> 00:18:47.869 plans to invest a staggering $6 billion in Michigan's 00:18:47.869 --> 00:18:50.220 energy future. This wasn't just a promise. This 00:18:50.220 --> 00:18:52.140 was a signal to regulators, to shareholders, 00:18:52.380 --> 00:18:54.880 and to the public that they were committing generational 00:18:54.880 --> 00:18:57.619 capital to support new power plant technology 00:18:57.619 --> 00:19:01.000 and identify new cleaner energy sources. $6 billion 00:19:01.000 --> 00:19:03.900 is not a small investment, even for a utility 00:19:03.900 --> 00:19:07.299 with, what, $35 billion in assets? What were 00:19:07.299 --> 00:19:09.319 the primary drivers for that colossal pledge? 00:19:09.660 --> 00:19:12.200 It was multifaceted, but fundamentally driven 00:19:12.200 --> 00:19:14.779 by two things. regulatory pressure to reduce 00:19:14.779 --> 00:19:17.720 carbon emissions, and the aging expense of maintenance 00:19:17.720 --> 00:19:20.299 required for their existing coal fleet. That 00:19:20.299 --> 00:19:22.940 capital pledge was necessary to proactively transition 00:19:22.940 --> 00:19:25.720 away from coal generation, replace that capacity 00:19:25.720 --> 00:19:28.119 with renewables, and harden the grid infrastructure. 00:19:28.420 --> 00:19:30.539 And the most immediate tangible result of that 00:19:30.539 --> 00:19:33.279 pledge was a significant expansion into utility 00:19:33.279 --> 00:19:35.809 -scale wind power. That's right. The sources 00:19:35.809 --> 00:19:37.670 really highlight the Crosswinds Energy Park, 00:19:37.849 --> 00:19:41.109 which Consumers Energy opened in 2014 in Tuscola 00:19:41.109 --> 00:19:43.089 County, Michigan. This is a clear demonstration 00:19:43.089 --> 00:19:45.309 of their capital at work. It was big. It had 00:19:45.309 --> 00:19:48.269 a substantial total generating capacity of 105 00:19:48.269 --> 00:19:52.190 megawatts, utilizing 62. I think it was 1 .79 00:19:52.190 --> 00:19:55.269 kilowatt. wind turbine engines supplied by GE. 00:19:55.470 --> 00:19:58.009 That's real scale. And by 2015, they were already 00:19:58.009 --> 00:20:00.289 seeing a measurable shift in their overall energy 00:20:00.289 --> 00:20:04.849 mix. Indeed. By 2015, a verifiable 9 % of CMS 00:20:04.849 --> 00:20:07.630 Energy's total power generation came from renewable 00:20:07.630 --> 00:20:10.019 energy sources. And to give that some context, 00:20:10.180 --> 00:20:13.019 while 9 % might sound small, for a company that 00:20:13.019 --> 00:20:15.759 had relied on coal and nuclear for decades, that 00:20:15.759 --> 00:20:18.240 rapid shift represented a massive internal commitment 00:20:18.240 --> 00:20:20.819 and engineering effort to integrate these intermittent 00:20:20.819 --> 00:20:23.920 sources into a reliable grid. But the shift didn't 00:20:23.920 --> 00:20:26.319 stop at wind. The real depth of their modern 00:20:26.319 --> 00:20:28.700 commitment is reflected in their integrated resource 00:20:28.700 --> 00:20:31.720 plan, the IRP. This is basically the playbook 00:20:31.720 --> 00:20:34.180 for the future of the utility. The IRP is absolutely 00:20:34.180 --> 00:20:36.380 essential context for any learner looking at 00:20:36.380 --> 00:20:38.829 a modern utility. It's a 20 -year roadmap that 00:20:38.829 --> 00:20:41.250 a regulated utility submits to state regulators 00:20:41.250 --> 00:20:43.750 detailing how they plan to meet forecasted energy 00:20:43.750 --> 00:20:46.609 demand affordably and reliably while also meeting 00:20:46.609 --> 00:20:49.250 clean energy mandates. And CMS Energy's IRP is 00:20:49.250 --> 00:20:51.690 incredibly aggressive. Aggressive in what way? 00:20:51.750 --> 00:20:53.690 What are their key targets for the next couple 00:20:53.690 --> 00:20:56.390 of decades? Well, their plan centers on completely 00:20:56.390 --> 00:20:58.910 retiring their remaining coal plants, which, 00:20:58.950 --> 00:21:01.829 remember, were the workhorses of their 20th century 00:21:01.829 --> 00:21:06.079 portfolio. By 2025. That's soon. By 2025. That 00:21:06.079 --> 00:21:08.859 is a massive undertaking, and it necessitates 00:21:08.859 --> 00:21:12.380 a colossal influx of new clean generation. To 00:21:12.380 --> 00:21:15.079 that end, they're targeting the addition of over 00:21:15.079 --> 00:21:19.140 8 ,000 megawatts of solar power by 2040. 8 ,000 00:21:19.140 --> 00:21:21.500 megawatts of solar. That's a monumental build 00:21:21.500 --> 00:21:23.140 -out. What does that require in terms of land 00:21:23.140 --> 00:21:25.740 connection and... Most importantly, storage. 00:21:26.079 --> 00:21:28.339 It requires immense land acquisition and planning, 00:21:28.440 --> 00:21:30.880 but you hit on it. Storage is the true technical 00:21:30.880 --> 00:21:33.220 challenge. Solar and wind are intermittent, right? 00:21:33.299 --> 00:21:35.019 Right. They only generate when the sun shines 00:21:35.019 --> 00:21:37.039 or the wind blows. Right. So to maintain reliability 00:21:37.039 --> 00:21:40.119 after retiring reliable 2047 coal and nuclear 00:21:40.119 --> 00:21:42.759 plants, you need sophisticated storage solutions. 00:21:43.000 --> 00:21:45.359 And the IRP calls for significant investment 00:21:45.359 --> 00:21:48.039 in battery energy storage systems aiming to deploy 00:21:48.039 --> 00:21:50.559 thousands of megawatts of storage capacity. So 00:21:50.559 --> 00:21:52.920 that $6 billion investment announced back in 00:21:52.920 --> 00:21:55.900 2007 wasn't just for a few wind farms. It was 00:21:55.900 --> 00:21:58.500 really the down payment on replacing nearly a 00:21:58.500 --> 00:22:01.380 century of fossil fuel infrastructure with a 00:22:01.380 --> 00:22:04.400 completely new distributed and digitized grid 00:22:04.400 --> 00:22:07.319 that can handle intermittent power. That is the 00:22:07.319 --> 00:22:10.000 ultimate strategic implication. And we have to 00:22:10.000 --> 00:22:11.759 connect this back to that dual corporate structure 00:22:11.759 --> 00:22:14.259 we talked about. Consumers energy handles the 00:22:14.259 --> 00:22:17.119 bulk of this IRP mandate, building the solar, 00:22:17.259 --> 00:22:20.299 the storage and the transmission upgrades that 00:22:20.299 --> 00:22:22.480 the six million Michigan residents need. While 00:22:22.480 --> 00:22:24.740 North Star Clean Energy is capitalizing on the 00:22:24.740 --> 00:22:27.680 broader market trend. Exactly. North Star targets 00:22:27.680 --> 00:22:29.680 the competitive clean energy market, which is 00:22:29.680 --> 00:22:32.380 also booming. They utilize the same internal 00:22:32.380 --> 00:22:35.259 expertise, designing, building, and operating 00:22:35.259 --> 00:22:37.980 large renewable facilities. But they offer those 00:22:37.980 --> 00:22:39.920 services commercially to large corporate clients 00:22:39.920 --> 00:22:41.980 who want clean energy without waiting for the 00:22:41.980 --> 00:22:44.640 regulated utility process. Which allows CMS Energy 00:22:44.640 --> 00:22:47.180 to monetize the green transition on two distinct 00:22:47.180 --> 00:22:49.359 fronts. Mandated public service and competitive 00:22:49.359 --> 00:22:53.329 growth. Yeah. And this shift. It reflects a profound 00:22:53.329 --> 00:22:55.950 change in how they manage risk, doesn't it? They're 00:22:55.950 --> 00:22:58.289 moving away from these centralized high -risk 00:22:58.289 --> 00:23:01.390 assets like nuclear and coal, which have massive 00:23:01.390 --> 00:23:03.450 decommissioning costs and environmental liabilities, 00:23:03.890 --> 00:23:07.269 toward more distributed modular assets like solar 00:23:07.269 --> 00:23:09.470 and storage. It's a very calculated move. I mean, 00:23:09.509 --> 00:23:12.269 decommissioning nuclear plants and managing coal 00:23:12.269 --> 00:23:15.049 ash sites are expensive multi -decade burdens. 00:23:15.329 --> 00:23:18.690 By shifting capital toward wind and solar, they 00:23:18.690 --> 00:23:21.529 are investing in assets with... lower operational 00:23:21.529 --> 00:23:24.910 environmental risk, and often clearer regulatory 00:23:24.910 --> 00:23:27.390 paths for cost recovery through the rate base. 00:23:27.549 --> 00:23:29.730 That's a modern business model focused so heavily 00:23:29.730 --> 00:23:32.109 on capital deployment for the green shift. But 00:23:32.109 --> 00:23:35.009 when a corporation is this expansive, this pioneering, 00:23:35.009 --> 00:23:37.369 and this deeply intertwined with public life, 00:23:37.549 --> 00:23:39.930 they are constantly under a spotlight, which 00:23:39.930 --> 00:23:41.769 brings us to the necessary balance sheet, the 00:23:41.769 --> 00:23:44.470 awards, and the intense scrutiny. When you manage 00:23:44.470 --> 00:23:47.670 an asset base of $35 .9 billion in the public 00:23:47.670 --> 00:23:50.859 interest, Every single dollar and every decision 00:23:50.859 --> 00:23:53.380 comes with a spotlight. And it's just essential 00:23:53.380 --> 00:23:55.400 to look at the full spectrum of their corporate 00:23:55.400 --> 00:23:57.980 performance, the successes and the criticisms 00:23:57.980 --> 00:24:00.799 to understand their public identity. So let's 00:24:00.799 --> 00:24:02.980 start with the recognition side, the accolades 00:24:02.980 --> 00:24:04.960 that show they are meeting their mandate for 00:24:04.960 --> 00:24:07.579 efficiency and reliability. Their efforts in 00:24:07.579 --> 00:24:09.980 sustainability and efficiency have received major 00:24:09.980 --> 00:24:12.769 recognition. Consumers Energy was named Energy 00:24:12.769 --> 00:24:16.029 Star Partner of the Year for Excellence in Sustainable 00:24:16.029 --> 00:24:18.650 Energy Efficiency Programs, and they got that 00:24:18.650 --> 00:24:22.049 award in both 2014 and 2015. And that's important 00:24:22.049 --> 00:24:24.069 because it's not just about generating power 00:24:24.069 --> 00:24:26.410 cleanly, but about helping customers use less 00:24:26.410 --> 00:24:28.829 of it in the first place. Precisely. That partnership 00:24:28.829 --> 00:24:31.470 with customers on efficiency directly reduces 00:24:31.470 --> 00:24:33.789 the need for the utility to build costly new 00:24:33.789 --> 00:24:36.470 power plants, which ultimately benefits ratepayers. 00:24:37.089 --> 00:24:39.569 Beyond that, they received major recognition 00:24:39.569 --> 00:24:41.720 on the financial front. which pleases shareholders. 00:24:42.000 --> 00:24:44.940 Of course. CMS Energy received the Edison Electric 00:24:44.940 --> 00:24:48.180 Institute's Index Award in 2014 for achieving 00:24:48.180 --> 00:24:50.740 the top cumulative shareholder return in the 00:24:50.740 --> 00:24:53.839 small cap category. This confirms they were successfully 00:24:53.839 --> 00:24:56.539 navigating this capital -intensive energy transition 00:24:56.539 --> 00:24:58.799 while still delivering sector -leading value 00:24:58.799 --> 00:25:01.299 to their investors. And perhaps the most vital 00:25:01.299 --> 00:25:03.559 recognition they received relates to their core 00:25:03.559 --> 00:25:05.680 purpose, just keeping the grid running, especially 00:25:05.680 --> 00:25:08.460 during emergencies. That speaks directly to the 00:25:08.460 --> 00:25:11.490 resilience mandate. They received the 2015 Emergency 00:25:11.490 --> 00:25:13.730 Recovery Award for their comprehensive electricity 00:25:13.730 --> 00:25:16.230 restoration efforts following that devastating 00:25:16.230 --> 00:25:20.589 December 2013 North American storm complex. And 00:25:20.589 --> 00:25:22.890 this showcases the fundamental expectation of 00:25:22.890 --> 00:25:25.630 a utility, the ability to respond rapidly, restore 00:25:25.630 --> 00:25:28.589 service, and manage a widespread crisis. So moving 00:25:28.589 --> 00:25:30.730 beyond direct utility performance, they also 00:25:30.730 --> 00:25:33.230 show a deep commitment to environmental stewardship 00:25:33.230 --> 00:25:35.329 of the land they operate on, which is, I mean, 00:25:35.349 --> 00:25:37.569 it's crucial for utilities who own these vast 00:25:37.569 --> 00:25:41.250 tracts of property. It is. By 2007, we find that 00:25:41.250 --> 00:25:43.769 all of their power facilities received the Clean 00:25:43.769 --> 00:25:46.329 Corporate Citizen Award from the Michigan Department 00:25:46.329 --> 00:25:49.539 of Environmental Quality. And this award demands 00:25:49.539 --> 00:25:52.119 really high standards for environmental compliance 00:25:52.119 --> 00:25:54.660 and pollution prevention. How across all their 00:25:54.660 --> 00:25:57.380 sites. All operational sites. They also actively 00:25:57.380 --> 00:25:59.940 joined the Wildlife Habitat Council and received 00:25:59.940 --> 00:26:02.200 compliance certificates for their robust environmental 00:26:02.200 --> 00:26:04.799 education programs. So we have a company that's 00:26:04.799 --> 00:26:07.319 top tier in efficiency, highly reliable in a 00:26:07.319 --> 00:26:09.740 crisis, recognized for environmental stewardship, 00:26:10.079 --> 00:26:13.180 and they also maintain a significant philanthropic 00:26:13.180 --> 00:26:15.680 presence. The philanthropic work is a core part 00:26:15.680 --> 00:26:18.359 of their social license to operate. They support 00:26:18.359 --> 00:26:20.599 numerous research, educational, and cultural 00:26:20.599 --> 00:26:23.400 institutes throughout Michigan. And most notably, 00:26:23.559 --> 00:26:26.000 they received the William Booth Award in 2013 00:26:26.000 --> 00:26:29.400 from the Salvation Army, specifically recognizing 00:26:29.400 --> 00:26:31.319 their leadership in the PeopleCare Assistance 00:26:31.319 --> 00:26:33.859 Program. And the PeopleCare Program is critical. 00:26:34.140 --> 00:26:36.579 It provides direct financial aid to vulnerable 00:26:36.579 --> 00:26:39.359 customers who struggle to pay for essential heat 00:26:39.359 --> 00:26:41.859 and electricity so it's fulfilling a necessary 00:26:41.859 --> 00:26:44.539 social function. They also focus on building 00:26:44.539 --> 00:26:47.750 local talent. Absolutely. They participate in 00:26:47.750 --> 00:26:49.890 extensive internship and cooperative education 00:26:49.890 --> 00:26:53.170 programs specifically designed to build career 00:26:53.170 --> 00:26:55.529 opportunities and retain talent within Michigan, 00:26:55.730 --> 00:26:58.450 linking their long -term workforce needs to local 00:26:58.450 --> 00:27:01.119 community development. So this overwhelming positive 00:27:01.119 --> 00:27:03.839 corporate social responsibility profile, the 00:27:03.839 --> 00:27:06.160 awards, the recovery, the philanthropy, that's 00:27:06.160 --> 00:27:09.099 one narrative. However, as a large corporation 00:27:09.099 --> 00:27:12.180 operating under this regulatory compact, every 00:27:12.180 --> 00:27:14.519 financial decision is scrutinized through a critical 00:27:14.519 --> 00:27:17.319 lens. And we must now turn to the critical context 00:27:17.319 --> 00:27:20.220 provided by nonpartisan watchdog groups. And 00:27:20.220 --> 00:27:21.880 this is where we bring in the findings from the 00:27:21.880 --> 00:27:24.619 nonpartisan organization public campaign. They 00:27:24.619 --> 00:27:26.940 were released in December 2011, and they focused 00:27:26.940 --> 00:27:29.579 on CMS Energy's financial strategies. during 00:27:29.579 --> 00:27:32.599 the 2008 to 2010 period. And it offers essential 00:27:32.599 --> 00:27:35.480 context on that tension between shareholder maximization 00:27:35.480 --> 00:27:37.980 and public service. Okay, and what did that report 00:27:37.980 --> 00:27:40.119 find concerning the company's spending on political 00:27:40.119 --> 00:27:42.759 influence relative to its tax burden? Well, the 00:27:42.759 --> 00:27:44.880 organization highlighted a significant disparity. 00:27:45.359 --> 00:27:48.559 During that 2008 -2010 period, CMS Energy was 00:27:48.559 --> 00:27:52.019 criticized for spending $3 .48 million on lobbying 00:27:52.019 --> 00:27:55.099 Congress. But crucially, the criticism noted 00:27:55.099 --> 00:27:58.160 that during that same three -year window, the 00:27:58.160 --> 00:28:00.579 company was reported to have received $29 million 00:28:00.579 --> 00:28:04.829 in tax rebates. That's a huge delta. So $3 .48 00:28:04.829 --> 00:28:07.829 million spent on lobbying, resulting in a net 00:28:07.829 --> 00:28:10.849 positive tax benefit of $29 million. And this 00:28:10.849 --> 00:28:12.390 occurred while they were clearly profitable. 00:28:12.670 --> 00:28:14.890 That's the core of the criticism. The company 00:28:14.890 --> 00:28:17.130 was reporting substantial financial health, achieving 00:28:17.130 --> 00:28:21.109 a profit of $415 million during that 2008 -2010 00:28:21.109 --> 00:28:23.730 window. And the implication for the public is 00:28:23.730 --> 00:28:25.490 that the company was using sophisticated tax 00:28:25.490 --> 00:28:28.029 strategies and lobbying efforts to minimize its 00:28:28.029 --> 00:28:30.269 federal tax contributions, effectively receiving 00:28:30.269 --> 00:28:32.390 a subsidy, even while earning hundreds of millions 00:28:32.390 --> 00:28:34.609 in profit within a regulated low -risk market. 00:28:34.750 --> 00:28:36.670 And this ties back directly to that regulatory 00:28:36.670 --> 00:28:39.309 compact. Since their guaranteed revenue comes 00:28:39.309 --> 00:28:41.769 from ratepayers, any financial maneuver that 00:28:41.769 --> 00:28:43.809 reduces their tax burden is viewed with intense 00:28:43.809 --> 00:28:45.990 scrutiny because it raises questions about how 00:28:45.990 --> 00:28:47.750 much of those tax savings are passed on to the 00:28:47.750 --> 00:28:51.099 customer versus the shareholder. Precisely. And 00:28:51.099 --> 00:28:53.859 the criticism extended beyond just tax strategies 00:28:53.859 --> 00:28:56.579 and lobbying. It also focused sharply on executive 00:28:56.579 --> 00:28:59.000 compensation. What were the findings regarding 00:28:59.000 --> 00:29:01.690 executive pay during that period? The public 00:29:01.690 --> 00:29:04.190 campaign report highlighted that over that same 00:29:04.190 --> 00:29:07.490 2008 -2010 time frame, the total compensation 00:29:07.490 --> 00:29:09.950 for the company's top five executives increased 00:29:09.950 --> 00:29:14.269 dramatically. It rose by a staggering 79%. 79%. 00:29:14.269 --> 00:29:17.369 In 2010 alone, their total combined compensation 00:29:17.369 --> 00:29:21.670 reached $900 .4 million. A near 80 % increase 00:29:21.670 --> 00:29:24.289 in executive compensation, coinciding with millions 00:29:24.289 --> 00:29:27.089 in tax rebates and substantial profits. I mean, 00:29:27.089 --> 00:29:28.829 this figure demands closer inspection because 00:29:28.829 --> 00:29:31.200 in a regulated industry, pay is often... to performance 00:29:31.200 --> 00:29:33.480 metrics approved by regulators, but the scale 00:29:33.480 --> 00:29:34.920 of that increase is what drew the spotlight. 00:29:35.160 --> 00:29:37.900 And this juxtaposition creates that necessary 00:29:37.900 --> 00:29:40.500 corporate tension we have to address. How does 00:29:40.500 --> 00:29:43.240 a massive public service provider balance these 00:29:43.240 --> 00:29:46.799 essential, highly praised public services, emergency 00:29:46.799 --> 00:29:49.720 recovery, environmental compliance, deep community 00:29:49.720 --> 00:29:52.619 aid, with aggressive internal goals of maximizing 00:29:52.619 --> 00:29:55.240 shareholder and executive value? Because both 00:29:55.240 --> 00:29:57.630 of those narratives are true. and both shape 00:29:57.630 --> 00:30:00.230 the modern identity of CMS Energy. It just illustrates 00:30:00.230 --> 00:30:03.250 the tightrope walk that any major utility undertakes. 00:30:03.289 --> 00:30:05.210 They have to satisfy the government regulator 00:30:05.210 --> 00:30:07.430 demanding reliability and affordability, the 00:30:07.430 --> 00:30:09.609 customers demanding low rates and clean energy, 00:30:09.750 --> 00:30:12.089 and the shareholders demanding sector -leading 00:30:12.089 --> 00:30:14.509 returns and executive compensation that reflects 00:30:14.509 --> 00:30:17.430 success. It's a very difficult balance. What 00:30:17.430 --> 00:30:19.809 a profound and detailed look at a company that 00:30:19.809 --> 00:30:22.069 is often just seen as, you know, the entity on 00:30:22.069 --> 00:30:24.190 a monthly bill. If we step back and summarize 00:30:24.190 --> 00:30:26.089 the key takeaways, we've tracked a company that 00:30:26.089 --> 00:30:29.109 started in 1886 focused on basic electric arc 00:30:29.109 --> 00:30:31.670 lights in Jackson. And that founding spirit of 00:30:31.670 --> 00:30:34.309 innovation led them to become a global utility 00:30:34.309 --> 00:30:37.390 giant by pioneering technology. They were the 00:30:37.390 --> 00:30:39.289 first in the world to transmit electricity at 00:30:39.289 --> 00:30:43.390 110 kilovolts at the Croton Dam in 1907. They 00:30:43.390 --> 00:30:45.809 successfully embraced every 20th century energy 00:30:45.809 --> 00:30:48.289 shift from early nuclear power to developing 00:30:48.289 --> 00:30:50.569 sophisticated underground natural gas storage, 00:30:50.750 --> 00:30:53.730 even manufacturing synthetic gas in the 1970s. 00:30:54.000 --> 00:30:56.279 And now in the modern era, they've made this 00:30:56.279 --> 00:30:58.720 deliberate massive commitment that six billion 00:30:58.720 --> 00:31:00.740 dollar pledge to the clean energy transition. 00:31:01.000 --> 00:31:03.460 And it's all codified in their integrated resource 00:31:03.460 --> 00:31:06.259 plan. This plan mandates the retirement of their 00:31:06.259 --> 00:31:08.400 entire coal fleet and the deployment of eight 00:31:08.400 --> 00:31:10.619 thousand megawatts of solar and thousands of 00:31:10.619 --> 00:31:13.220 megawatts of battery storage. Right. And meanwhile, 00:31:13.400 --> 00:31:15.819 they strategically use their non -regulated arm, 00:31:15.980 --> 00:31:18.180 North Star Clean Energy, to capture growth in 00:31:18.180 --> 00:31:19.859 the corporate clean energy market outside of 00:31:19.859 --> 00:31:22.559 Michigan. And so the deep dive reveals this dynamic. 00:31:23.339 --> 00:31:25.500 constantly evolving utility that's navigating 00:31:25.500 --> 00:31:28.660 a minefield of conflicting pressures. They have 00:31:28.660 --> 00:31:31.140 to manage the necessity of public service connecting 00:31:31.140 --> 00:31:34.279 six million residents with reliable power while 00:31:34.279 --> 00:31:36.779 simultaneously directing immense capital toward 00:31:36.779 --> 00:31:39.980 these rapid technological shifts. And this pursuit 00:31:39.980 --> 00:31:42.579 of public good is constantly scrutinized by the 00:31:42.579 --> 00:31:45.180 financial realities of maximizing profit, which 00:31:45.180 --> 00:31:47.500 leads to that inevitable tension regarding lobbying 00:31:47.500 --> 00:31:49.900 and compensation structures versus ratepayer 00:31:49.900 --> 00:31:52.779 concerns. It's the full complex picture. of a 00:31:52.779 --> 00:31:54.640 corporation that hasn't just shaped the physical 00:31:54.640 --> 00:31:56.859 landscape, but has driven technological innovation 00:31:56.859 --> 00:31:59.380 for over a century. Which brings us to our final 00:31:59.380 --> 00:32:01.859 provocative thought for you to consider. We've 00:32:01.859 --> 00:32:04.619 seen CMS Energy's historical role as a pioneer 00:32:04.619 --> 00:32:07.559 in these foundational energy technologies. The 00:32:07.559 --> 00:32:10.799 110 kilvee system, synthetic gas, early nuclear. 00:32:11.000 --> 00:32:13.539 Now their massive financial and technical resources 00:32:13.539 --> 00:32:16.839 are committed to solar, wind, and basic battery 00:32:16.839 --> 00:32:19.880 storage. As the global energy landscape faces 00:32:19.880 --> 00:32:22.450 the next truly disruptive technology, whether 00:32:22.450 --> 00:32:24.710 that's widespread commercial hydrogen fuel cells, 00:32:24.970 --> 00:32:27.490 advanced high -capacity superconducting transmission, 00:32:27.730 --> 00:32:29.910 or the wide -scale deployment of small modular 00:32:29.910 --> 00:32:32.549 nuclear reactors. How swiftly and aggressively 00:32:32.549 --> 00:32:34.529 will the constant pressure of public utility 00:32:34.529 --> 00:32:37.769 needs compel companies like CMS Energy to pivot 00:32:37.769 --> 00:32:39.930 their billions in capital to embrace that next 00:32:39.930 --> 00:32:42.150 great technological leap? The journey continues. 00:32:42.309 --> 00:32:44.170 Thank you for joining us for this deep dive into 00:32:44.170 --> 00:32:45.930 CMS Energy. We'll see you next time.