<PAGE>   1
                                                                    EXHIBIT 4(j)




                      ====================================


                          THIRD SUPPLEMENTAL INDENTURE

                                     between

                            CONSUMERS ENERGY COMPANY

                                       and

                              THE BANK OF NEW YORK

                          Dated as of           , 1999


                      ====================================


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                                TABLE OF CONTENTS
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<CAPTION>

                                                                                                              Page
                                                                                                              ----

                                                              ARTICLE I.
                                                             DEFINITIONS

<S>                                                                                                              <C>
SECTION 1.1.      Definition of Terms.............................................................................2


                                                            ARTICLE II.
                                             GENERAL TERMS AND CONDITIONS OF THE NOTES

SECTION 2.1.      Designation and Principal Amount................................................................3
SECTION 2.2.      Maturity........................................................................................3
SECTION 2.3.      Form and Payment................................................................................3
SECTION 2.4.      Global Note.....................................................................................3
SECTION 2.5.      Interest........................................................................................4


                                                             ARTICLE III.
                                                       REDEMPTION OF THE NOTES

SECTION 3.1.      Special Event Redemption........................................................................5
SECTION 3.2.      Optional Redemption by Issuer...................................................................5
SECTION 3.3.      No Sinking Fund.................................................................................6


                                                             ARTICLE IV.
                                                 EXTENSION OF INTEREST PAYMENT PERIOD

SECTION 4.1.      Extension of Interest Payment Period............................................................6
SECTION 4.2.      Notice of Extension.............................................................................6


                                                              ARTICLE V.
                                                               EXPENSES

SECTION 5.1.      Payment of Expenses.............................................................................7
SECTION 5.2.      Payment Upon Resignation or Removal.............................................................7


                                                             ARTICLE VI.
                                                            SUBORDINATION

SECTION 6.1.      Agreement to Subordinate........................................................................7


                                                             ARTICLE VII.
                                                     COVENANT TO LIST ON EXCHANGE
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<TABLE>


<S>                                                                                                              <C>
SECTION 7.1.      Listing on an Exchange..........................................................................8

                                                            ARTICLE VIII.
                                                            FORM OF NOTES

SECTION 8.1.      Form of Note....................................................................................8


                                                             ARTICLE IX.
                                                       ORIGINAL ISSUE OF NOTES

SECTION 9.1.      Original Issue of Notes........................................................................12


                                                              ARTICLE X.
                                                            MISCELLANEOUS

SECTION 10.1      Provisions of Indenture for the Sole Benefit of Parties and Holders of Trust Securities........13
SECTION 10.2      Ratification of Indenture......................................................................13
SECTION 10.3.     Trustee Not Responsible for Recitals...........................................................13
SECTION 10.4.     Governing Law..................................................................................13
SECTION 10.5.     Separability...................................................................................13
SECTION 10.6.     Counterparts...................................................................................13
</TABLE>




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          THIRD SUPPLEMENTAL INDENTURE, dated as of           , 1999, (the
"Third Supplemental Indenture"), between Consumers Energy Company, a Michigan
Corporation (the "Issuer"), and The Bank of New York, as trustee (the "Trustee")
under the Indenture dated as of January 1, 1996 between the Issuer and the
Trustee (the "Indenture").

            WHEREAS, the Issuer executed and delivered the Indenture to the
Trustee to provide for the future issuance of the Issuer's Securities to be
issued from time to time in one or more series as might be determined by the
Issuer under the Indenture, in an unlimited aggregate principal amount which may
be authenticated and delivered as provided in the Indenture; and

            WHEREAS, Section 2.3 of the Indenture permits the terms of any
series of Securities to be established in an indenture supplemental to the
Indenture; and

            WHEREAS, Section 8.1(d) of the Indenture provided that a
supplemental indenture may be entered into without the consent of any Holders of
Securities to supplement certain provisions of the Indenture; and

            WHEREAS, Section 8.1(e) of the Indenture provides that a
supplemental indenture may be entered into by the Issuer and the Trustee without
the consent of any Holders of the Securities to establish the form and terms of
the Securities of any series; and

            WHEREAS, pursuant to the terms of the Indenture, the Issuer desires
to provide for the establishment of a new series of its Securities to be known
as its     % Subordinated Deferrable Interest Notes due       (the "Notes"), the
form and substance of such Notes and the terms, provisions and conditions
thereof to be set forth as provided in the Indenture and this Third Supplemental
Indenture; and

            WHEREAS, Consumers Energy Company Financing III, a Delaware
statutory business trust (the "Trust"), has offered to the public $      million
aggregate liquidation amount of its     % Trust Originated Preferred Securities
(the "Preferred Securities"), representing undivided beneficial interests in the
assets of the Trust and proposes to invest the proceeds from such offering,
together with the proceeds of the issuance and sale by the Trust to the Issuer
of $        aggregate liquidation amount of its      % Trust Originated Common
Securities (together the ATrust Securities), in $         aggregate principal
amount of the Notes; and

            WHEREAS, the Issuer wishes to supplement Section 13.2 of the
Indenture with respect to the Notes and the Preferred Securities; and

            WHEREAS, the Issuer has requested that the Trustee execute and
deliver this Third Supplemental Indenture and all requirements necessary to make
this Third Supplemental Indenture a valid instrument in accordance with its
terms, and to make the Notes, when executed by the Issuer and authenticated and
delivered by the Trustee, the valid obligations of the Issuer, have been
performed, and the execution and delivery of this Third Supplemental Indenture
has been duly authorized in all respects.

            NOW THEREFORE, in consideration of the purchase and acceptance of
the Notes by the Holders thereof, and for the purpose of setting forth, as
provided in the Indenture, the form and substance of the Notes and the terms,
provisions and conditions thereof, the Issuer covenants and agrees with the
Trustee as follows:


                                       1


<PAGE>   5


                                   ARTICLE I.
                                   DEFINITIONS

SECTION 1.1.    Definition of Terms.

            Unless the context otherwise requires:

            (a) a term defined in the Indenture has the same meaning when used
in this Third Supplemental Indenture;

            (b) a term defined anywhere in this Third Supplemental Indenture has
the same meaning throughout;

            (c)   the singular includes the plural and vice versa;

            (d) a reference to a Section or Article is to a Section or Article
of this Third Supplemental Indenture;

            (e) headings are for convenience of reference only and do not affect
interpretation;

            (f) the following terms have the meanings given to them in the
Declaration: (i) Clearing Agency; (ii) Delaware Trustee; (iii) Redemption Tax
Opinion; (iv) No Recognition Opinion; (v) Preferred Security Certificate; (vi)
Property Trustee; (vii) Regular Trustees; (viii) Special Event; (ix) Tax Event;
(x) Underwriting Agreement; (xi) Investment Company Event; and (xii)
Distribution;

            (g) the following terms have the meanings given to them in this
Section 1.1(g):

            "Additional Interest" shall have the meaning set forth in Section
2.5.

            "Compounded Interest" shall have the meaning set forth in Section
4.1.

            "Coupon Rate" shall have the meaning set forth in Section 2.5.

            "Declaration" means the Amended and Restated Declaration of Trust of
Consumers Energy Company Financing III, a Delaware statutory business trust,
dated as of September 4, 1997.

            "Deferred Interest" shall have the meaning set forth in Section 4.1.

            "Dissolution Event" means that, as a result of the occurrence and
continuation of a Special Event, the Trust is to be dissolved in accordance with
the Declaration, and the Notes held by the Property Trustee are to be
distributed to the holders of the Trust Securities issued by the Trust pro rata
in accordance with the Declaration.

            "Extended Interest Payment Period" shall have the meaning set forth
in Section 4.1.

            "Global Note" shall have the meaning set forth in Section 2.4.

            "Non Book-Entry Preferred Securities" shall have the meaning set
forth in Section 2.4.

            "Optional Redemption Price" shall have the meaning set forth in
Section 3.2.


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<PAGE>   6


                                   ARTICLE II.
                    GENERAL TERMS AND CONDITIONS OF THE NOTES

SECTION 2.1.      Designation and Principal Amount.

            There is hereby authorized and established a series of unsecured
Securities designated the "    % Subordinated Deferrable Interest Notes due
     ", limited in aggregate principal amount to $         , (except as
contemplated in Section 2(f)(2) of the Indenture).

SECTION 2.2.      Maturity.

            The Maturity Date of the Notes is           , 1999.

SECTION 2.3.      Form and Payment.

            The Notes shall be issued in fully registered form without interest
coupons. Principal and interest on the Notes issued in certificated form will be
payable, the transfer of such Notes will be registrable and such Notes will be
exchangeable for Notes bearing identical terms and provisions, at the office or
agency of the Trustee in the Borough of Manhattan, the City of New York;
provided, however, that payment of interest may be made at the option of the
Issuer by check mailed to the Holder at such address as shall appear in the
Security Register or by wire transfer to an account maintained by the Holder.
Notwithstanding the foregoing, so long as the Holder of any Notes is the
Property Trustee, the payment of the principal of and interest (including
Compounded Interest and Additional Interest, if any) on such Notes held by the
Property Trustee will be made at such place and to such account as may be
designated by the Property Trustee.

SECTION 2.4.      Global Note.

            (a)  In connection with a Dissolution Event,

                  (i) the Notes may be presented to the Trustee by the Property
      Trustee in exchange for a global Note in an aggregate principal amount
      equal to the aggregate principal amount of all outstanding Notes (a
      "Global Note"), to be registered in the name of the Clearing Agency, or
      its nominee, and delivered by the Trustee to the Clearing Agency for
      crediting to the accounts of its participants pursuant to the instructions
      of the Regular Trustees and the Clearing Agency will act as Depository for
      the Notes. The Issuer upon any such presentation, shall execute a Global
      Note in such aggregate principal amount and deliver the same to the
      Trustee for authentication and delivery in accordance with the Indenture
      and this Third Supplemental Indenture. Payments on the Notes issued as a
      Global Note will be made to the Depositary; and

                  (ii) if any Preferred Securities are held in non book-entry
      certificated form, the Notes may be presented to the Trustee by the
      Property Trustee and any Preferred Security Certificate which represents
      Preferred Securities other than Preferred Securities held by the Clearing
      Agency or its nominee ("Non Book-Entry Preferred Securities") will be
      deemed to represent beneficial interests in Notes presented to the Trustee
      by the Property Trustee having an aggregate principal amount equal to the
      aggregate liquidation amount of the Non Book-Entry Preferred Securities
      until such Preferred Security Certificates are presented to the Security
      Registrar for transfer or reissuance at which time such Preferred Security
      Certificates will be canceled and a Note, registered in the name of the
      holder of the Preferred Security Certificate or the transferee of the
      holder of such Preferred Security Certificate, as the case may be, with an
      aggregate principal amount equal to the aggregate liquidation amount of
      the Preferred Security Certificate canceled, will be executed by the
      Issuer and delivered to the Trustee for authentication and delivery in
      accordance with the Indenture and this Third Supplemental Indenture.




                                       3

<PAGE>   7


            (b) Except as provided in (c) below, a Global Note may be
transferred, in whole but not in part, only to another nominee of the
Depositary, or to a successor Depositary selected or approved by the Issuer or
to a nominee of such successor Depositary.

            (c) If at any time the Depositary notifies the Issuer that it is
unwilling or unable to continue as Depositary or if at any time the Depositary
for such series shall no longer be registered or in good standing under the
Securities Exchange Act of 1934, as amended, or other applicable statute or
regulation, and a successor Depositary for such series is not appointed by the
Issuer within 90 days after the Issuer receives such notice or becomes aware of
such condition, as the case may be, the Issuer will execute, and, subject to
Section 2.8 of the Indenture, the Trustee, upon written notice from the Issuer,
will authenticate and deliver the Notes in definitive registered form, in
authorized denominations, and in an aggregate principal amount equal to the
principal amount of the Global Note in exchange for such Global Note. In
addition, the Issuer may at any time determine that the Notes shall no longer be
represented by a Global Note. In such event the Issuer will execute, and subject
to Section 2.8 of the Indenture, the Trustee, upon receipt of an Officers'
Certificate evidencing such determination by the Issuer, will authenticate and
deliver the Notes in definitive registered form, in authorized denominations,
and in an aggregate principal amount equal to the principal amount of the Global
Note in exchange for such Global Note. Upon the exchange of the Global Note for
such Notes in definitive registered form, in authorized denominations, the
Global Note shall be canceled by the Trustee. Such Notes in definitive
registered form issued in exchange for the Global Note shall be registered in
such names and in such authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. The Trustee shall deliver such Notes to the Depositary for
delivery to the Persons in whose names such Notes are so registered.

SECTION 2.5.    Interest.

            (a) Each Note will bear interest at the rate of      % per annum
(the "Coupon Rate") from the original date of issuance until the principal
thereof becomes due and payable, and on any overdue principal and (to the extent
that payment of such interest is enforceable under applicable law) on any
overdue installment of interest, at the Coupon Rate, compounded quarterly,
payable (subject to the provisions of Article IV) quarterly in arrears on March
31, June 30, September 30 and December 31 of each year (each, an "Interest
Payment Date," commencing on                 ), to the Person in whose name such
Note or any predecessor Note is registered, at the close of business on the
regular record date for such interest installment, which, in respect of any
Notes of which the Property Trustee is the Holder or a Global Note, shall be the
close of business on the Business Day next preceding that Interest Payment Date.
Notwithstanding the foregoing sentence, if the Preferred Securities are no
longer in book-entry only form or, except if the Notes are held by the Property
Trustee, the Notes are not represented by a Global Note, the regular record date
for such interest installment shall be the fifteenth day of the month in which
the applicable Interest Payment Date occurs.

            (b) The amount of interest payable for any period will be computed
on the basis of a 360-day year of twelve 30-day months. Except as provided in
the following sentence, the amount of interest payable for any period shorter
than a full quarterly period for which interest is computed, will be computed on
the basis of the actual number of days elapsed in such a 90-day period. In the
event that any date on which interest is payable on the Notes is not a Business
Day, then payment of interest payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.

            (c) If, at any time while the Property Trustee is the Holder of any
Notes, the Trust or the Property Trustee is required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then, in any
case, the Issuer will pay as additional interest ("Additional Interest") on the
Notes held by the Property Trustee, such additional amounts as shall be required
so that the net amounts received and retained by the Trust and the Property
Trustee after paying such



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<PAGE>   8


taxes, duties, assessments or other governmental charges will be equal to the
amounts the Trust and the Property Trustee would have received had no such
taxes, duties, assessments or other governmental charges been imposed.


                                  ARTICLE III.
                             REDEMPTION OF THE NOTES

SECTION 3.1.    Special Event Redemption.

            If (a) a Tax Event has occurred and is continuing and (i) the Issuer
has received a Redemption Tax Opinion, or (ii) The Regular Trustees shall have
been informed by tax counsel that a No Recognition Opinion cannot be delivered
to the Trust, or (b) an Investment Company Event has occurred and is continuing,
then, notwithstanding Section 3.2(a) but subject to Section 3.2(b) and Article
Eleven of the Indenture, the Issuer shall have the right upon not less than 30
days' nor more than 60 days' notice to the Holders of the Notes to redeem the
Notes, in whole or in part, for cash within 90 days' following the occurrence of
such Special Event (the "90 Day Period") at a redemption price equal to 100% of
the principal amount to be redeemed plus any accrued and unpaid interest thereon
to the date of such redemption (the "Redemption Price"), provided that if at the
time there is available to the Issuer or the Trust the opportunity to eliminate,
within the 90 Day Period, the Special Event by taking some ministerial action
("Ministerial Action"), such as filing a form or making an election, or pursuing
some other similar reasonable measure which has no adverse effect on the Issuer,
the Trust or the Holders of the Trust Securities issued by the Trust, the Issuer
shall pursue such Ministerial Action in lieu of redemption, and, provided,
further, that the Issuer shall have no right to redeem the Notes while the Trust
is pursuing any Ministerial Action pursuant to its obligations under the
Declaration. The Redemption Price shall be paid prior to 12:00 noon, New York
time, on the date of such redemption or such earlier time as the Issuer
determines, and the Issuer shall deposit with the Trustee an amount sufficient
to pay the Redemption Price by 10:00 a.m., New York time, on the date such
Redemption Price is to be paid.

SECTION 3.2.    Optional Redemption by Issuer.

            (a) Subject to the provisions of Section 3.2(b) and to the
provisions of Article Eleven of the Indenture, the Issuer shall have the right
to redeem the Notes, in whole or in part, from time to time, on or after
            ,        , at a redemption price equal to 100% of the principal
amount to be redeemed plus any accrued and unpaid interest thereon to the date
of such redemption (the "Optional Redemption Price"). Any redemption pursuant to
this paragraph will be made upon not less than 30 days' nor more than 60 days'
notice to the Holder of the Notes, at the Optional Redemption Price. If the
Notes are only partially redeemed pursuant to this Section 3.2, the Notes will
be redeemed on a pro rata basis provided that if at the time of redemption the
Notes are registered as a Global Note, the Depository shall determine, in
accordance with its procedures, the principal amount of such Notes held by each
Holder of Notes to be redeemed. The Optional Redemption Price shall be paid
prior to 12:00 noon, New York time, on the date of such redemption or at such
earlier time as the Issuer determines and the Issuer shall deposit with the
Trustee an amount sufficient to pay the Optional Redemption Price by 10:00 a.m.,
New York time, on the date such Optional Redemption Price is to be paid.

            (b) If a partial redemption of the Notes would result in the
delisting of the Preferred Securities from any national securities exchange or
other organization on which the Preferred Securities are then listed, the Issuer
shall not be permitted to effect such partial redemption and may only redeem the
Notes in whole.

SECTION 3.3.    No Sinking Fund.

            The Notes are not entitled to the benefit of any sinking fund.


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                                   ARTICLE IV.
                      EXTENSION OF INTEREST PAYMENT PERIOD

SECTION 4.1.    Extension of Interest Payment Period.

            The Issuer shall have the right, at any time and from time to time
during the term of the Notes, to defer payments of interest by extending the
interest payment period of such Notes for a period not exceeding 20 consecutive
quarters (the "Extended Interest Payment Period"), during which Extended
Interest Payment Period no interest shall be due and payable; provided that no
Extended Interest Payment Period may extend beyond the Maturity Date. To the
extent permitted by applicable law, interest, the payment of which has been
deferred because of the extension of the interest payment period pursuant to
this Section 4.1, will bear interest thereon at the Coupon Rate compounded
quarterly for each quarter of the Extended Interest Payment Period ("Compounded
Interest"). At the end of the Extended Interest Payment Period, the Issuer shall
pay all interest accrued and unpaid on the Notes, including any Additional
Interest and Compounded Interest (together, "Deferred Interest") that shall be
payable to the Holders of the Notes in whose names the Notes are registered in
the Security Register on the First record date after the end of the Extended
Interest Payment Period. Prior to the termination of any Extended Interest
Payment Period, the Issuer may further extend such period, provided that such
period together with all such further extensions thereof shall not exceed 20
consecutive quarters. Upon the termination of any Extended Interest Payment
Period and upon the payment of all Deferred Interest then due, the Issuer may
commence a new Extended Interest Payment Period, subject to the foregoing
requirements. No interest shall be due and payable during an Extended Interest
Payment Period, except at the end thereof, but the Issuer may prepay at any time
all or any portion of the interest accrued during an Extended Interest Payment
Period.

            The limitations set forth in Section 3.5 of the Indenture shall
apply during any Extended Interest Payment Period.

SECTION 4.2.    Notice of Extension.

            (a) If the Property Trustee is the only registered Holder of the
Notes at the time the Issuer elects an Extended Interest Payment Period, the
Issuer shall give written notice to the Regular Trustees, the Property Trustee
and the Trustee of its election of such Extended Interest Payment Period one
Business Day before the earlier of (i) the next succeeding date on which
Distributions on the Trust Securities issued by the Trust are payable, or (ii)
the date the Trust is required to give notice of the record date, or the date
such Distributions are payable, to the New York Stock Exchange or other
applicable self-regulatory organization or to holders of the Preferred
Securities, but in any event at least one Business Day before such record date.

            (b) If the Property Trustee is not the only Holder of the Notes at
the time the Issuer elects an Extended Interest Payment Period, the Issuer shall
give the Holders of the Notes and the Trustee written notice of its election of
such Extended Interest Payment Period ten Business Days before the earlier of
(i) the next succeeding Interest Payment Date, or (ii) the date the Issuer is
required to give notice of the record or payment date of such interest payment
to the New York Stock Exchange or other applicable self-regulatory organization
or to Holders of the Notes, but in any event at least 2 Business Days before
such record date.

            (c) The quarter in which any notice is given pursuant to paragraphs
(a) or (b) of this Section 4.2 shall be counted as one of the 20 quarters
permitted in the maximum Extended Interest Payment Period permitted under
Section 4.1.





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<PAGE>   10


                                   ARTICLE V.
                                    EXPENSES

SECTION 5.1.    Payment of Expenses.

            In connection with the offering, sale and issuance of the Notes to
the Property Trustee and in connection with the sale of the Trust Securities by
the Trust, the Issuer, in its capacity as borrower with respect to the Notes,
shall:

            (a) pay all costs and expenses relating to the offering, sale and
issuance of the Notes, including commissions to the underwriters payable
pursuant to the Underwriting Agreement and the Pricing Agreements, and
compensation of the Trustee under the Indenture in accordance with the
provisions of Section 6.6 of the Indenture;

            (b) pay all costs and expenses of the Trust (including, but not
limited to, costs and expenses relating to the organization of the Trust, the
offering, sale and issuance of the Trust Securities (including commissions to
the underwriters in connection therewith), the fees and expenses of the Property
Trustee and the Delaware Trustee, the costs and expenses relating to the
operation of the Trust, including without limitation, costs and expenses of
accountants, attorneys, statistical or bookkeeping services, expenses for
printing and engraving and computing or accounting equipment, paying agent(s),
registrar(s), transfer agent(s), duplicating, travel and telephone and other
telecommunications expenses and costs and expenses incurred in connection with
the acquisition, financing, and disposition of Trust assets);

            (c) be primarily liable for any indemnification obligations arising
with respect to the Declaration; and

            (d) pay any and all taxes (other than United States withholding
taxes attributable to the Trust or its assets) and all liabilities, costs and
expenses with respect to such taxes of the Trust.

SECTION 5.2.    Payment Upon Resignation or Removal.

            Upon termination of this Third Supplemental Indenture or the
Indenture or the removal or resignation of the Trustee pursuant to Section 6.10
of the Indenture, the Issuer shall pay to the Trustee all amounts accrued to the
date of such termination, removal or resignation. Upon termination of the
Declaration or the removal or resignation of the Delaware Trustee or the
Property Trustee, as the case may be, pursuant to Section 5.6 of the
Declaration, the Issuer shall pay to the Delaware Trustee or the Property
Trustee, as the case may be, all amounts accrued to the date of such
termination, removal or resignation.


                                   ARTICLE VI.
                                  SUBORDINATION

SECTION 6.1.    Agreement to Subordinate.

            The Issuer covenants and agrees, and each Holder of Notes issued
hereunder, by such Holder's acceptance thereof likewise covenants and agrees,
that pursuant to Section 2.3(f)(9) of the Indenture all Notes shall be issued as
Subordinated Securities subject to the provisions of Article Twelve of the
Indenture and this Article VI; and each Holder of a Note by its acceptance
thereof accepts and agrees to be bound by such provisions.


                                       7

<PAGE>   11


                                  ARTICLE VII.
                          COVENANT TO LIST ON EXCHANGE

SECTION 7.1.      Listing on an Exchange.

            In connection with the distribution of the Notes to the holders of
the Preferred Securities upon a Dissolution Event, the Issuer will use its best
efforts to list such Notes on the New York Stock Exchange or on such other
exchange as the Preferred Securities are then listed.


                                  ARTICLE VIII.
                                  FORM OF NOTES

SECTION 8.1.      Form of Note.

            The Notes and the Trustee's Certificate of Authentication to be
endorsed thereon are to be substantially in the following forms and the Notes
shall have such additional terms as may be set forth in such form:

                             (FORM OF FACE OF NOTE)

            [IF THE NOTE IS TO BE A GLOBAL NOTES, INSERT - This Note is a Global
Note within the meaning of the Indenture hereinafter referred to and is
registered in the name of a Depositary or a nominee of a Depositary. This Note
is exchangeable for Notes registered in the name of a person other than the
Depositary or its nominee only in the limited circumstances described in the
Indenture, and no transfer of this Note (other than a transfer of this Note as a
whole by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary) may be
registered except in limited circumstances.

            Unless this Note is presented by an authorized representative of The
Depository Trust Company (55 Water Street, New York, New York) to the issuer or
its agent for registration of transfer, exchange or payment, and any Note issued
is registered in the name of Cede & Co. or such other name as requested by an
authorized representative of The Depository Trust Company and any payment hereon
is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co.,
has an interest herein.]

No.
       $


CUSIP NO.


                            CONSUMERS ENERGY COMPANY

                      % SUBORDINATED DEFERRABLE INTEREST NOTES
                                  DUE


            Consumers Energy Company, a Michigan corporation (the "Issuer",
which term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to         , or
registered assigns, the principal sum of             Dollars ($             ) on
      ,     , and to pay interest on said principal sum from             , 19,
or from the most recent interest payment date (each such date, an "Interest
Payment Date") to which interest has been paid or duly provided for, quarterly



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<PAGE>   12



(subject to deferral as set forth herein) in arrears on March 31, June 30,
September 30 and December 31 of each year commencing            at the rate of
    % per annum until the principal hereof shall have become due and payable,
and on any overdue principal and premium, if any, and (without duplication and
to the extent that payment of such interest is enforceable under applicable law)
on any overdue installment of interest at the same rate per annum compounded
quarterly. The amount of interest payable on any Interest Payment Date shall be
computed on the basis of a 360-day year of twelve 30-day months. In the event
that any date on which interest is payable on this Note is not a Business Day,
then payment of interest payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date. The interest installment so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture,
be paid to the person in whose name this Note (or one or more Predecessor
Securities, as defined in said Indenture) is registered at the close of business
on the regular record date for such interest installment, which shall be the
close of business on the Business Day next preceding such Interest Payment Date.
[IF PURSUANT TO THE PROVISIONS OF THE INDENTURE THE NOTES ARE NO LONGER
REPRESENTED BY A GLOBAL NOTE -- which shall be the close of business on the 15th
day of the month in which such Interest Payment Date occurs.] If and to the
extent the Issuer shall default in the payment of the interest due on such
Interest Payment Date, interest shall be paid to the person in whose name this
Note is registered at the close of business on a subsequent record date (which
shall not be less than five Business Days prior to the date of payment of such
defaulted interest) established by notice given by mail by or on behalf of the
Issuer to the Holder of this Note not less than 15 days preceding such
subsequent Record Date. The principal of (and premium, if any) and the interest
on this Note shall be payable at the office or agency of the Trustee in the
Borough of Manhattan, the City of New York maintained for that purpose in any
coin or currency of the United States of America that at the time is legal
tender for payment of public and private debts; provided, however, that payment
of interest may be made at the option of the Issuer by check mailed to the
registered Holder at such address as shall appear in the Security Register or by
wire transfer to an account maintained by the Holder. Notwithstanding the
foregoing, so long as the Holder of this Note is the Property Trustee, the
payment of the principal of (and premium, if any) and interest on this Note will
be made at such place and to such account as may be designated by the Property
Trustee.

            The indebtedness evidenced by this Note is, to the extent provided
in the Indenture, subordinate and junior in right of payment to the prior
payment in full of all Senior Indebtedness, and this Note is issued subject to
the provisions of the Indenture with respect thereto. Each Holder of this Note,
by accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his or her behalf to take such action as
may be necessary or appropriate to acknowledge or effectuate the subordination
so provided and (c) appoints the Trustee his or her attorney-in-fact for any and
all such purposes. Each Holder hereof, by his or her acceptance hereof, hereby
waives all notice of the acceptance of the subordination provisions contained
herein and in the Indenture by each holder of Senior Indebtedness, whether now
outstanding or hereafter incurred, and waives reliance by each such holder upon
said provisions.

            This Note shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by or on behalf of
the Trustee.

            The provisions of this Note are continued on the reverse side hereof
and such continued provisions shall for all purposes have the same effect as
though fully set forth at this place.




                                       9

<PAGE>   13


            IN WITNESS WHEREOF, the Issuer has caused this instrument to be
executed.

Dated

                                      Consumers Energy Company

[Seal]                                By:
                                      Name:
                                      Title


Attest:

By:
Name:
Title:



                     (FORM OF CERTIFICATE OF AUTHENTICATION)

                          CERTIFICATE OF AUTHENTICATION

            This is one of the Securities of the series of Securities described
in the within-mentioned Indenture.

[                    ]

                                                      --------------------------
                                                      as Trustee

                                                      By
                                                         Authorized Signatory



                            (FORM OF REVERSE OF NOTE)

            This Note is one of a duly authorized series of Securities of the
Issuer (herein sometimes referred to as the "Notes"), specified in the
Indenture, all issued or to be issued in one or more series under and pursuant
to an Indenture dated as of January 1, 1996, duly executed and delivered between
the Issuer and The Bank of New York, a New York banking corporation, as Trustee
(the "Trustee"), as supplemented by certain supplemental indentures, including
the Third Supplemental Indenture dated as of        , 1999, between the Issuer
and the Trustee (the Indenture as so supplemented, the "Indenture"), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Issuer and the Holders of the Notes.
By the terms of the Indenture, the Notes are issuable in series that may vary as
to amount, date of maturity, rate of interest and in other respects as provided
in the Indenture. This series of Notes is limited in aggregate principal amount
as specified in said Third Supplemental Indenture.

            The Issuer shall have the right to redeem this Note at the option of
the Issuer, without premium or penalty, in whole or in part at any time on or
after           ,       , or at any time in certain circumstances upon the
occurrence of a Special Event, at a redemption price equal to 100% of the
principal amount plus any accrued but




                                       10

<PAGE>   14


unpaid interest, to the date of such redemption. Any redemption pursuant to this
paragraph will be made upon not less than 30 days nor more than 60 days' notice.
If the Notes are only partially redeemed by the Issuer pursuant to an Optional
Redemption, the Notes will be redeemed pro rata.

            In the event of redemption of this Note in part only, a new Note or
Notes of this series for the unredeemed portion hereof will be issued in the
name of the Holder hereof upon the cancellation hereof.

            In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Notes may be declared,
and upon such declaration shall become, due and payable, in the manner, with the
effect and subject to the conditions provided in the Indenture.

            The Indenture contains provisions permitting the Issuer and the
Trustee, with the consent of the Holders of not less than a majority in
aggregate principal amount of the Notes and other Indenture securities of each
series affected at the time Outstanding and affected (voting as one class), as
defined in the Indenture, to execute supplemental indentures for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of the Indenture or of any supplemental indenture or of modifying in
any manner the rights of the Holders of the Notes; provided, however, that the
Company and the Trustee may not, without the consent of the Holder of each Note
then Outstanding and affected thereby: (a) change the time of payment of the
principal (or any installment) of any Note, or reduce the principal amount
thereof, or reduce the rate or change the time of payment of interest thereon,
or impair the right to institute suit for the enforcement of any payment on any
Note when due or (b) reduce the percentage in principal amount of the Notes, the
consent of whose Holders is required for any such modification or for any waiver
provided for in the Indenture. The Indenture also contains provisions providing
that prior to the acceleration of the maturity of any Note or other securities
outstanding under the Indenture, the Holders of a majority in aggregate
principal amount of Notes of and other Securities Outstanding under the
Indenture with respect to which a default or/an Event of Default shall have
occurred and be continuing (voting as one class) may on behalf of the Holders of
all such affected Securities (including the Notes) waive any past default and
its consequences, except a default or an Event of Default in respect of a
covenant or provision of the Indenture or of any Note or other Security which
cannot be modified or amended without the consent of the Holder of each Note or
other Security affected. Any such consent or waiver by the registered Holder of
this Note (unless revoked as provided in the Indenture) shall be conclusive and
binding upon such Holder and upon all future Holders and owners of this Note and
of any Note issued in exchange herefor or in place hereof (whether by
registration of transfer or otherwise), irrespective of whether or not any
notation of such consent or waiver is made upon this Note.

            No reference herein to the Indenture and no provision of this Note
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and premium, if any, and
interest on this Note at the time and place and at the rate and in the money
herein prescribed.

            The Issuer shall have the right at any time during the term of the
Notes and from time to time to extend the interest payment period of such Notes
for up to 20 consecutive quarters (an "Extended Interest Payment Period"), at
the end of which period the Issuer shall pay all interest then accrued and
unpaid (together with interest thereon at the rate specified for the Notes to
the extent that payment of such interest is enforceable under applicable law).
Before the termination of any such Extended Interest Payment Period, the Issuer
may further extend such Extended Interest Payment Period, provided that such
Extended Interest Payment Period together with all such further extensions
thereof shall not exceed 20 consecutive quarters. At the termination of any such
Extended Interest Payment Period and upon the payment of all accrued and unpaid
interest and any additional amounts then due, the Issuer may commence a new
Extended Interest Payment Period.

            As provided in the Indenture and subject to certain limitations
therein set forth, this Note is transferable by the registered Holder hereof on
the Security Register of the Issuer, upon surrender of this Note for
registration of transfer at the office or agency of the Trustee in the City and
State of New York accompanied by a written instrument or instruments of transfer
in form satisfactory to the Issuer or the Trustee duly executed by the
registered Holder




                                       11

<PAGE>   15


hereof or his attorney duly authorized in writing, and thereupon one or more new
Notes of authorized denominations and for the same aggregate principal amount
and series will be issued to the designated transferee or transferees. No
service charge will be made for any such transfer, but the Issuer may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in relation thereto.

            Prior to due presentment for registration of transfer of this Note,
the Issuer, the Trustee, any paying agent and the Security Registrar may deem
and treat the registered holder hereof as the absolute owner hereof (whether or
not this Note shall be overdue and notwithstanding any notice of ownership or
writing hereon made by anyone other than the Security Registrar) for the purpose
of receiving payment of or on account of the principal hereof and premium, if
any, and interest due hereon and for all other purposes, and neither the Issuer
nor the Trustee nor any paying agent nor any Security Registrar shall be
affected by any notice to the contrary.

            No recourse shall be had for the payment of the principal of or the
interest on this Note, or for any claim based hereon, or otherwise in respect
hereof, or based on or in respect of the Indenture, against any incorporator,
stockholder, officer or director, past, present or future, as such, of the
Issuer or of any predecessor or successor corporation, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise, all such liability being, by the acceptance hereof and as
part of the consideration for the issuance hereof, expressly waived and
released.

            Notes of this series so issued are issuable only in registered form
without coupons in denominations of $25 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations herein and therein
set forth, Notes of this series so issued are exchangeable for a like aggregate
principal amount of Notes of this series in authorized denominations, as
requested by the Holder surrendering the same.

            All terms used in this Note that are defined in the Indenture shall
have the meanings assigned to them in the Indenture.


                              [END OF FORM OF NOTE]

                                   ARTICLE IX.
                             ORIGINAL ISSUE OF NOTES

SECTION 9.1.                Original Issue of Notes.

            Notes in the aggregate principal amount of $             may, upon
execution of this Third Supplemental Indenture, be executed by the Issuer and
delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and deliver said Notes to or upon the written order of the Issuer,
in accordance with Section 2.4 of the Indenture.





                                       12

<PAGE>   16


                                   ARTICLE X.
                                  MISCELLANEOUS

SECTION 10.1   Provisions of Indenture for the Sole Benefit of Parties and
Holders of Trust Securities.


            Notwithstanding Section 13.2 of the Indenture, for so long as any
Trust Securities remain outstanding, the Issuer=s obligations under the
Indenture and this Third Supplemental Indenture will also be for the benefit of
the holders of the Trust Securities, and the Issuer acknowledges and agrees that
such holders will be entitled to enforce certain payment obligations under the
Notes directly against the Issuer to the extent provided in the Declaration.

SECTION 10.2   Ratification of Indenture.

            The Indenture, as supplemented by this Third Supplemental Indenture,
is in all respects ratified and confirmed, and this Third Supplemental Indenture
shall be deemed part of the Indenture in the manner and to the extent herein and
therein provided.

SECTION 10.3.  Trustee Not Responsible for Recitals.

            The recitals herein contained are made by the Issuer and not by the
Trustee, and the Trustee assumes no responsibility for the correctness thereof.
The Trustee makes no representation as to the validity or sufficiency of this
Third Supplemental Indenture.

SECTION 10.4.  Governing Law.

            This Third Supplemental Indenture and each Note shall be deemed to
be a contract made under the internal laws of the State of Michigan, and for all
purposes shall be construed in accordance with the laws of said State, provided,
however, that the rights, duties and obligations of the Trustee are governed and
construed in accordance with the laws of the State of New York.

SECTION 10.5.  Separability.

            In case any one or more of the provisions contained in this Third
Supplemental Indenture or in the Notes shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Third
Supplemental Indenture or of the Notes, but this Third Supplemental Indenture
and the Notes shall be construed as if such invalid or illegal or unenforceable
provision had never been contained herein or therein.

SECTION 10.6.  Counterparts.

            This Third Supplemental Indenture may be executed in any number of
counterparts each of which shall be an original, but such counterparts shall
together constitute but one and the same instrument.




                                       13
<PAGE>   17


            IN WITNESS WHEREOF, the parties hereto have caused this Third
Supplemental Indenture to be duly executed on the date or dates indicated in the
acknowledgments and as of the day and year first above written.

                                           Consumers Energy Company


                                           By:
                                              ----------------------------------
                                                  Name:
                                                  Title:


[Seal]
Attest:


By:
   ---------------------


                                           The Bank of New York, as Trustee


                                           By:
                                              ----------------------------------
                                                 Name:
                                                 Title:




                                       14

<PAGE>   18



STATE OF MICHIGAN      )
                       )ss.
COUNTY OF WAYNE        )


      On the             day of           , 1999, before me personally came Alan
M. Wright, to me known, who, being by me duly sworn, did depose and say that he
resides at Ann Arbor, Michigan; that he is Senior Vice President and Chief
Financial Officer of Consumers Energy Company, one of the corporations described
in and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate; that it
was so affixed by authority of the Board of Directors of said corporation; and
that he signed his name thereto by like authority.


[Notarial Seal]


-------------------------------------------------------------

Notary Public,                       County,
              ---------------------          -----------------
My Commission Expires:


















                                       15